SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 11, 2002
Date of report (date of earliest event reported)
QUADRAMED CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21031 52-1992861
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(State or Other (Commission File Number) (IRS Employer
Jurisdiction Identification No.)
of Incorporation)
22 Pelican Way, San Rafael, California, 94901
(Address of Principal Executive Offices)
(415) 482-2100
(Registrant's telephone number, including area code)
ITEM 5. Other Items.
On June 11, 2002, QuadraMed Corporation and its wholly owned subsidiary
QuadraMed Operating Corporation entered into a stock purchase agreement
with Gregory A. Schuenke for the purchase of all of the issued and
outstanding capital stock of Pharmacy Data Systems, Inc., a pharmacy,
nursing, and physician information software business. The purchase price
was equal to $10,700,000 and the transaction closed on June 11, 2002. A
copy of the stock purchase agreement is filed as Exhibit 10.1 to this
Current Report on Form 8-K and the press release announcing the transaction
is filed as Exhibit 99.1.
ITEM 7. Exhibits.
Exhibit No. Description
10.1 Stock Purchase Agreement by and among, QuadraMed
Operating Corporation, as Buyer, Quadramed
Corporation, as Guarantor, and Gregory A. Schuenke,
as Seller, dated June 11, 2002.
99.1 QuadraMed Press Release, dated June 12, 2002
entitled, "QuadraMed Acquires Pharmacy Data Systems."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: June 20, 2002 By: /s/ Michael H. Lanza
-----------------------------------
Michael H. Lanza
Executive Vice President and
Corporate Secretary
EXECUTION COPY
EXHIBIT 10.1
PURCHASE AGREEMENT
FOR THE STOCK OF
PHARMACY DATA SYSTEMS, INC.
dated as of
June 11, 2002
by and among
QUADRAMED OPERATING CORPORATION,
as Buyer,
QUADRAMED CORPORATION,
as Guarantor
and
GREGORY A. SCHUENKE
as Seller
EXECUTION COPY
Table of Contents
ARTICLE 1 DEFINITIONS.............................................................................................5
Section 1.01 Definitions.......................................................................................5
ARTICLE 2 PURCHASE AND SALE......................................................................................10
Section 2.01 Purchase and Sale................................................................................10
Section 2.02 Time and Place of Closing........................................................................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................11
Section 3.01 Organization, Standing and Corporate Power.......................................................11
Section 3.02 Authority; Noncontravention......................................................................11
Section 3.03 Capital Structure; Ownership; Subsidiaries and Investments.......................................12
Section 3.04 Consents and Approvals...........................................................................12
Section 3.05 Financial Statements.............................................................................13
Section 3.06 Absence of Certain Changes or Events; No Undisclosed Material Liabilities........................13
Section 3.07 Material Contracts...............................................................................14
Section 3.08 Real Property; Other Assets......................................................................15
Section 3.09 Software.........................................................................................15
Section 3.10 Intellectual Property............................................................................16
Section 3.11 No Infringement..................................................................................17
Section 3.12 Litigation, etc..................................................................................17
Section 3.13 Compliance with Applicable Laws..................................................................18
Section 3.14 Environmental Laws...............................................................................18
Section 3.15 Taxes............................................................................................18
Section 3.16 Benefit Plans....................................................................................19
Section 3.17 Labor Matters....................................................................................20
Section 3.18 Transactions with Affiliates.....................................................................21
Section 3.19 Absence of Certain Practices.....................................................................21
Section 3.20 Assets Necessary for the Conduct of the Business of the Company..................................21
Section 3.21 Insurance........................................................................................21
Section 3.22 Product Liability................................................................................22
Section 3.23 Outstanding Indebtedness.........................................................................22
Section 3.24 Brokers..........................................................................................22
Section 3.25 Completeness of Disclosure.......................................................................22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................................................................22
Section 4.01 Organization, Standing and Corporate Power.......................................................22
Section 4.02 Authority; Noncontravention......................................................................23
Section 4.03 Consents and Approvals...........................................................................23
Section 4.04 Broker...........................................................................................23
Section 4.05 Litigation.......................................................................................23
Section 4.06 Investigation by Buyer...........................................................................24
ARTICLE 5 COVENANTS OF SELLER....................................................................................24
Section 5.01 Conduct of the Business..........................................................................24
Section 5.02 Access to Information............................................................................27
Section 5.03 Exclusivity......................................................................................27
Section 5.04 Disclosure Supplements...........................................................................27
ARTICLE 6 COVENANTS OF BUYER AND SELLER..........................................................................28
Section 6.01 Commercially Reasonable Efforts; Further Assurances..............................................28
Section 6.02 Public Announcements.............................................................................28
Section 6.03 Notices of Certain Events........................................................................29
Section 6.04 Further Assurances...............................................................................29
Section 6.05 Seller's Automobile..............................................................................29
Section 6.06 Payment and Satisfaction of Fitzsimons Note......................................................29
ARTICLE 7 TAX MATTERS............................................................................................30
Section 7.01 Tax Matters......................................................................................30
Section 7.02 Transfer Taxes...................................................................................33
ARTICLE 8 EMPLOYEE MATTERS.......................................................................................33
Section 8.01 Continuing Employment............................................................................33
Section 8.02 Cooperation......................................................................................34
ARTICLE 9 CONDITIONS TO CLOSING..................................................................................34
Section 9.01 Conditions to Obligations of Buyer and Seller....................................................34
Section 9.02 Conditions to Obligation of Buyer................................................................35
Section 9.03 Conditions to Obligation of Seller...............................................................37
ARTICLE 10 SURVIVAL; INDEMNIFICATION.............................................................................38
Section 10.01 Survival........................................................................................38
Section 10.02 Indemnification.................................................................................38
Section 10.03 Procedures......................................................................................39
Section 10.04 Calculation of Damages..........................................................................40
Section 10.05 Dispute Resolutions.............................................................................40
Section 10.06 Tax Treatment of Indemnification Payments.......................................................41
ARTICLE 11 TERMINATION...........................................................................................41
Section 11.01 Grounds for Termination.........................................................................41
Section 11.02 Effect of Termination...........................................................................42
ARTICLE 12 MISCELLANEOUS.........................................................................................42
Section 12.01 Notices.........................................................................................42
Section 12.02 Amendments and Waivers..........................................................................43
Section 12.03 Expenses........................................................................................44
Section 12.04 Successors and Assigns; Third Party Beneficiaries...............................................44
Section 12.05 Governing Law...................................................................................44
Section 12.06 Jurisdiction....................................................................................44
Section 12.07 Counterparts....................................................................................45
Section 12.08 Entire Agreement................................................................................45
Section 12.09 Captions........................................................................................45
Section 12.10 Severability....................................................................................45
Section 12.11 Specific Performance............................................................................45
Section 12.12 Guaranty........................................................................................45
List of Exhibits
Exhibit Document
A Form of Employment Agreement
B Form of Promissory Note of the Company and Guarantee of Seller
List of Schedules
Schedule 1.1 Knowledge
Schedule 3.06(a) Absence of Certain Changes or Events; No Undisclosed Material Liabilities
Schedule 3.09(a) Software
Schedule 3.09(b) Software
Schedule 3.09(c) Software
Schedule 3.09(d) Software
Schedule 3.09(e) Software
Schedule 3.09(f) Software
Schedule 3.10(a) Intellectual Property
Schedule 3.12 Litigation, etc.
Schedule 3.16(a) Benefit Plans
Schedule 3.16(b) Benefit Plans
Schedule 3.18 Transactions with Affiliates
Schedule 3.21(a) Insurance
Schedule 3.23 Outstanding Indebtedness
Schedule 4.06 Buyer's Investigation
Schedule 5.01 Conduct of the Business
Schedule 8.01(a) Continuing Employees in General
Schedule 8.01(c) Severance Benefits
PURCHASE AGREEMENT
AGREEMENT, dated as of June 11, 2002, by and among
QuadraMed Operating Corporation, a Delaware corporation ("Buyer"), Gregory
A. Schuenke ("Seller") and Quadramed Corporation, solely for the purposes
of the guarantee set forth in Section 12.12 of this Agreement.
W I T N E S S E T H :
WHEREAS, Seller owns beneficially and of record all of
the issued and outstanding capital stock of Pharmacy Data Systems, Inc., a
Wisconsin corporation (the "Company"), consisting of Two Hundred (200)
shares of common stock, no par value per share (the "Shares"); and
WHEREAS, Buyer desires to purchase, and Seller desires to
sell, the Shares.
NOW THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. (a) The following terms, as
used herein, have the following meanings:
"Accounts Receivable" means all accounts, notes and loans
receivable, advances, letters of credit and other rights of the Company to
receive payment.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person.
"Agreement" means this Purchase Agreement.
"Business Day" means any day other than a Saturday,
Sunday or a day on which banks in New York City are authorized or obligated
by applicable law or executive order to close or are otherwise generally
closed.
"Claim" means any lawsuit, claim, action, arbitration,
proceeding (at law or in equity) or investigation.
"Closing Date" means the date of the Closing.
"Closing Statement" means an unaudited balance sheet and
profit and loss statement of the Company as of May 31, 2002, it being
understood that the Closing Statement is being delivered by Seller under
this Agreement for determining whether or not the condition of the
obligation of Buyer set forth in Section 9.02(g) hereof has been satisfied
and not for any other purpose and shall have no other effect under this
Agreement, including, without limitation, any effect on the
representations, warranties and covenant of Seller set forth in this
Agreement, other than as provided in Section 3.06( c) of this Agreement.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"Confidentiality Agreement" means the Confidentiality
Agreement between Buyer and Seller, dated as of August 10, 2001.
"Employees" means the current employees of the Company.
"Employment Agreement" means the employment agreement by
and between Buyer and Seller substantially in the form annexed to this
Agreement as Exhibit A.
"Environmental Laws" means any federal, state or local
law relating to: (i) releases or threatened releases of Hazardous
Substances or materials containing Hazardous Substances; (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii)
otherwise relating to pollution of the environment or the protection of
human health.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended and the rules and regulations promulgated thereunder.
"Governmental Authority" means any national, federal,
regional, state, provincial, municipal, foreign or multinational court or
other governmental or regulatory authority, administrative body or
government, department, board, body, tribunal, instrumentality or
commission of competent jurisdiction.
"Guarantee" means the Guarantee of Seller of the
Promissory Note substantially in the form attached hereto as Exhibit B.
"Hazardous Substance" means: (i) those substances defined
in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and
Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum
products including crude oil and any fractions thereof; (iii) natural gas,
synthetic gas and any mixtures thereof; (iv) radon; (v) any other
contaminant; and (vi) any substance with respect to which any Governmental
Authority requires environmental investigation, monitoring, reporting or
remediation.
"Indebtedness" of any Person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise, of any such
Person: (i) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a
portion thereof), or (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) for the payment of money relating to a capitalized lease
obligation, or (iv) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit; and (b) all
liabilities and obligations of others of the kind described in the
preceding clause (a) and otherwise that such Person has guaranteed or which
are secured by a Lien on any assets or property of such Person.
"Intellectual Property" means any and all (i) U.S. and
foreign trademarks, service marks, trade dress, logos, trade names, brand
names, corporate names, assumed names, business names, and general
intangibles of like nature, together with all goodwill, registrations and
applications related to the foregoing (collectively, the "Trademarks");
(ii) Internet domain names (collectively, the "Domain Names"); (iii) U.S.
and foreign patents, industrial designs, invention disclosures, and any and
all divisions, continuations, continuations-in-part, reissues, continuing
patent applications, reexaminations, and extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention, certificates of
registration and like statutory rights related to the foregoing
(collectively, the "Patents"); (iv) U.S. and foreign copyrights, and all
registrations and applications to register the foregoing (collectively, the
"Copyrights"), (v) all categories of trade secrets as defined in the
Uniform Trade Secrets Act and under corresponding foreign statutory and
common law, including, but not limited to, business, technical and know-how
information (collectively, the "Trade Secrets"); (vi) Software (as defined
below); (vii) rights of publicity and privacy relating to the use of names,
likenesses, voices, signatures and biographical information of real
persons; and (viii) all licenses and agreements pursuant to which the
Company has acquired rights in or to any Trademarks, Domain Names, Patents,
Trade Secrets, technology, know-how, rights of publicity or Copyrights, or
agreements pursuant to which the Company has licensed or transferred the
right to use any of the foregoing, each as owned or used by the Company.
"Inventory" means all inventory of the Company, including
raw materials, work-in-process and finished goods (i) that was procured to
fulfill an open customer order and (ii) for which the vendor or supplier
has been paid by the Company but for which the Company has not invoiced its
customers.
"Knowledge" or words of similar import means actual
knowledge of each of the employees of the Company and the representatives
of Seller set forth on Schedule 1.1 hereto and any information which each
of such employees and representatives should have known upon execution of
this Agreement and at the Closing Date if they exercised prudent business
judgment in the discharge of their duties in connection with the management
and operation of the Company.
"Law" means any federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy or rule of common law, now
or hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or
otherwise, including, without limitation, any judicial or administrative
order, consent, decree or judgment.
"Licensed Software" means all of the computer programs
(including all source code and object code) licensed or otherwise made
available to the Company by another Person, other than any "off-the-shelf"
computer program that is so licensed under a shrink wrap, click wrap, or
similar non-negotiable license.
"Material Adverse Change" means any one or more changes,
events or occurrences which have had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
applicable Person.
"Material Adverse Effect" with respect to any Person
means a material adverse effect on (i) the ability of such Person to
perform its obligations under this Agreement and the Employment Agreement
or to consummate the transactions contemplated hereby or thereby or (ii)
the condition (financial or otherwise), assets, liabilities (actual or
contingent), results of operations, business or prospects of such Person
taken as a whole; provided, however, that a Material Adverse Effect shall
not include (a) conditions affecting the healthcare technology industry
generally, (b) failure by the Company to meet any projections provided to
Buyer with respect to revenues or expenses of the Company, or (c) any
adverse change, event or effect that is cause by conditions affecting the
economy of the United States generally.
"Owned Software" means all of the computer programs
(including all source code and object code) owned by the Company, including
without limitation computer programs in the development or testing phase,
all related engineering specifications, program flow charts, installation
and user manuals, and all know-how relating thereto.
"Permits" means licenses, permits, approvals,
registrations, waivers, exemptions, consents, authorizations and
qualifications under or from any federal, state, local or foreign laws or
Governmental Authorities.
"Permitted Liens" means, collectively (i) Liens for Taxes
or assessments which are not delinquent or are being contested in good
faith by appropriate proceedings; (ii) mechanics', warehousemens',
materialmens', contractors', workmens', repairmens' and carriers' liens,
and other similar Liens arising in the ordinary course for obligations
which are not delinquent; (iii) the ordinary course rights, if any, of
third-party suppliers or other vendors having possession of equipment of
the Company; and (iv) Liens which do not materially impair the current use
or the value of the assets subject to such Liens.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Post-Closing Period" shall mean a Taxable period
beginning after the Closing Date and, with respect to any Straddle Period,
the portion of such Straddle Period that is deemed to begin after the
Closing Date.
"Pre-Closing Period" shall mean any Taxable period ending
on or prior to the Closing Date and, with respect to any Straddle Period,
the portion of such Straddle Period that is deemed to end on and include
the Closing Date.
"Promissory Note" means the promissory note of the
Company in favor of Buyer substantially in the form attached hereto as
Exhibit B.
"Software" means, together, the Licensed Software and the
Owned Software.
"Straddle Period" shall mean a Taxable period of the
Company which begins before the Closing Date and ends after the Closing
Date.
"Tangible Personal Property" means the office equipment,
computer hardware, machinery, office furniture, fixed assets, other
tangible assets and similar items of the Company.
"Taxes" means all taxes, charges, fees, levies or other
assessments, including, without limitation, all income, gross receipts,
excise, property, sales, use, occupation, transfer, license, ad valorem,
gains, profits, gift, estimated, social security, unemployment, disability,
premium, recapture, credit, payroll, withholding, severance, stamp, capital
stock, franchise and other taxes or similar charges of any kind, imposed by
any Governmental Authority, including any interest and penalties on or
additions thereto.
"Tax Return" means any report, return or other
information or document required to be supplied to a taxing authority or
jurisdiction in connection with Taxes, including any amendments thereof and
any schedules thereto.
(b) Each of the following additional terms is defined on
the page set forth opposite such term:
Term Page
Allocation Schedule 27
Balance Sheets 8
Buyer 1
Buyer Indemnitees 32
Buyer Plans 28
Closing 6
Company 1
Company ERISA Plans 14
Company Plans 14
Continuing Employees 28
Copyrights 3
Damages 33
Domain Names 3
Environmental Permits 13
Escrow Agent 7
Escrow Agreement 7
Escrow Shares 7
Financial Statements 8
Fitzsimons Note 17
Fitzsimons Note Amount 24
GAAP 8
Indemnified Party 33
Indemnifying Party 33
Infringe 12
Interim Financial Statements 8
IRS 14
Leased Real Property 10
Liens 10
Material Contracts 9
Patents 3
Permits 13
Purchase Price 6
QuadraMed Operating Corporation Obligations 40
Real Property Leases 10
Seller 1
Seller Indemnitees 33
Shares 1
Statement 25
Termination Date 35
Third Party Claim 33
Trade Secrets 3
Trademarks 3
Vehicle 24
Warranty Breach 33
Year End Financial Statements 8
ARTICLE 2
PURCHASE AND SALE
Section 2.01 Purchase and Sale. (a) Upon the terms and
subject to the conditions of this Agreement, at the Closing, Seller shall
sell, assign, transfer, convey and deliver to Buyer, and Buyer will accept
and purchase from Seller, the Shares, free and clear of all Liens.
(b) The aggregate purchase price (the "Purchase Price")
for the Shares shall be Ten Million Seven Hundred Thousand Dollars
($10,700,000), payable in cash at the Closing.
Section 2.02 Time and Place of Closing. The closing (the
"Closing") of the purchase and sale of the Shares shall take place at such
place as Buyer and Seller shall mutually agree, as soon as reasonably
practicable, but in no event later than two (2) Business Days after
satisfaction or waiver of the conditions set forth in Article 9 (other than
those conditions that by their nature are to be fulfilled at the Closing,
but subject to fulfillment or waiver of such conditions). At the Closing,
the parties shall deliver all funds, documents and instruments required to
be delivered pursuant to Article 9.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically set forth in the Schedules
prepared and signed by Seller and delivered to Buyer simultaneously with
the execution hereof, Seller represents and warrants to Buyer that all of
the statements contained in this Article 3 are true and complete as of the
date of this Agreement, and will also be true and complete as of the
Closing Date as though made on the Closing Date. In the event of any
inconsistency between statements in the body of this Agreement and
statements in the Schedules (excluding exceptions expressly set forth in
the Schedules with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement shall control.
Section 3.01 Organization, Standing and Corporate Power.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Wisconsin and has the requisite
corporate power and authority to carry on its business as now being
conducted. The Company is duly qualified, licensed to do business and is in
good standing in the State of Wisconsin. The failure by the Company, if
any, to be duly qualified or licensed to do business and to be in good
standing in any other jurisdiction will not have a Material Adverse Effect
on the Company.
Section 3.02 Authority; Noncontravention. Seller has the
power and authority to enter into this Agreement and each Ancillary
Agreement and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by Seller, and
assuming this Agreement constitutes the valid and binding obligation of
Buyer, constitutes the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity. The execution and delivery of each of this
Agreement and the Employment Agreement does not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, (i) conflict with any of the
provisions of the certificate of incorporation or bylaws of the Company, in
each case as amended to the date of this Agreement, (ii) result in a
violation or breach of, or constitute a default under, any contract,
agreement or instrument to which Seller or the Company is a party or by
which Seller or the Company or any of their respective assets are bound, or
(iii) contravene any Law applicable to Seller or the Company, which, in the
case of clauses (ii) and (iii) above would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Seller or
the Company.
Section 3.03 Capital Structure; Ownership; Subsidiaries
and Investments. (a) The authorized capital stock of the Company consists
solely of Two Thousand Eight Hundred (2,800) shares of common stock, no par
value per share. As of the date hereof, (A) the Shares are issued and
outstanding and owned beneficially and of record by Seller, and (B) Two
Hundred (200) shares of common stock are held by the Company in its
treasury (the "Escrow Shares") and are subject to that certain Stock Pledge
and Escrow Agreement (the "Escrow Agreement"), dated as of March 3, 1997,
by and between Jack Fitzsimons, the Company, Seller and Dennis Burgy as
escrow agent (the "Escrow Agent"). Except as set forth in the immediately
preceding sentence, as of the date hereof, no shares of capital stock or
other equity securities of the Company were issued, reserved for issuance
or outstanding. As of the Closing, the Escrow Shares will be duly and
validly released from the Escrow Agreement and will immediately thereafter
be canceled and retired in accordance with applicable law. All outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Neither
Seller nor the Company has been or is subject to or bound by or, at or
after the Closing will have or be subject to or bound by, any outstanding
option, warrant, call, subscription or other right (including any
preemptive right), agreement or commitment which (x) obligates the Company
or Seller to issue, sell or transfer, or repurchase, redeem or otherwise
acquire, any shares of the capital stock of the Company (including, without
limitation, the Shares), (y) restricts the transfer of any shares of
capital stock of the Company (including, without limitation, the Shares),
or (z) relates to the voting of any shares of capital stock of the Company
(including, without limitation, the Shares). No bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which shareholders may vote are issued or outstanding.
(b) As of the Closing, the Shares shall constitute all of
the issued and outstanding shares of capital stock of the Company and are
owned of record and beneficially by Seller, free and clear of all Liens.
The consummation of the purchase of the Shares by Buyer pursuant to this
Agreement will convey to Buyer good and marketable title to the Shares,
free and clear of all Liens, except for those arising out of ownership of
the Shares by Buyer.
(c) There is no corporation, partnership, joint venture
or other entity in which the Company directly or indirectly owns any equity
or other ownership interest. There is no outstanding contractual obligation
of the Company to make any investment (in the form of a loan, capital
contribution or otherwise) in or to, or to guarantee the obligations of,
any Person.
Section 3.04 Consents and Approvals. No consent, approval
or authorization of, or declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Seller or the
Company in connection with the execution and delivery of this Agreement and
the Employment Agreement by Seller or the consummation by Seller of the
transactions contemplated hereby and thereby, except for any consents,
approvals, authorizations, filings or notices, the failure to make or
obtain which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Seller or the Company.
Section 3.05 Financial Statements (a) Seller has
delivered to Buyer true, complete and correct copies of the unaudited
income statements, balance sheets and statements of cash flows of the
Company, as of and for the years ended December 31, 2000 and 2001, reviewed
by Seller's independent public accountants (the "Year End Financial
Statements"), unaudited income statements and balance sheets (the "Balance
Sheets") of the Company as of and for the quarter ended March 31, 2002 (the
"Interim Financial Statements" and, collectively with the Year End
Financial Statements, the "Financial Statements"). Except with respect to
(i) accrued vacation liabilities, (ii) accrued commission liabilities,
(iii) accrued tax liabilities and (iv) disclosures related solely to such
items set forth in clauses (i), (ii) and (iii) of this Section 3.05(a),
relating to operations of the Company conducted in periods up to and
including the Closing Date, the Year End Financial Statements present
fairly the financial condition of the Company for the periods therein
specified, and have been prepared from the books and records of the Company
in accordance with generally accepted accounting principles in the United
States ("GAAP"), consistently applied and maintained throughout the periods
indicated in accordance with the Company's past practice. The Interim
Financial Statements presently fairly the financial condition of the
Company for the periods therein specified, and have been prepared from the
books and records of the Company on a consistent basis.
(b) The Inventory consists of a quality and quantity
usable, saleable and marketable in the ordinary course of business within a
reasonable period of time.
(c) All of the current Accounts Receivable have arisen
only from bona fide transactions with independent third parties in the
ordinary course of business consistent with past practice and are current
and collectible net of a 13% allowance for bad debt. Subject to such
allowance, each of the Accounts Receivable will be collected in full,
without any set-off, in the ordinary course of business consistent with
past practice.
Section 3.06 Absence of Certain Changes or Events; No
Undisclosed Material Liabilities. (a) Except as specified in Schedule
3.06(a), since December 31, 2001, the Company has conducted its business
only in the ordinary course consistent with past practice, and there has
not been any (i) any Material Adverse Change; or (ii) any action taken
which would violate the provisions of Section 5.01 of this Agreement,
assuming such restrictions had been applicable from December 31, 2001
through the date hereof.
(b) Except as disclosed in the Balance Sheet included in
the Year End Financial Statements or liabilities incurred since December
31, 2001 in the ordinary course of business consistent with past practice
and of the same type and magnitude as those set forth in the Balance Sheet
as of December 31, 2001, there are no liabilities of the Company of any
kind whatsoever, whether accrued, contingent, absolute, due, to become due,
determined, determinable or otherwise.
(c) Since the date of the Closing Statement, the Company
has not made any distributions or dividends of cash or property to Seller
or any affiliates of Seller. Since the date of the Closing Statement,
Seller has not removed or withdrawn any cash, cash equivalents, marketable
securities or other capital from the Company or any of its accounts, other
than the pay check issued to Seller by the Company in the ordinary course
of business consistent with past practice. Since the date of the Closing
Statement, the Company has not distributed any cash equivalents, marketable
securities or other capital out of the Company and has made cash
disbursements only in the ordinary course of business consistent with past
practice.
Section 3.07 Material Contracts. Seller has delivered to
Buyer and its representatives true, correct and complete copies of all the
following written agreements (and written descriptions of all of the
following oral agreements) (including all amendments, supplements and
modifications thereto) to which the Company is a party or by which it or
any of its assets is bound (collectively, the "Material Contracts"): (i)
any agreement with any current officer or director of the Company; (ii)
licensing, royalty or other agreements pursuant to which the Company
licenses other Persons to use the Software or the other Intellectual
Property and pursuant to which other Persons license the Company to use the
Licensed Software; (iii) any agreement (A) for the sale of any of the
assets of the Company, other than agreements entered into in the ordinary
course of business or (B) for the grant to any Person of any preferential
rights to purchase any of such assets; (iv) any agreement relating to
mortgaging, pledging or otherwise placing a Lien, except for Permitted
Liens, on any assets of the Company; (v) any agreement that restricts the
Company from competing in any line of business or with any Person in any
geographical area or which restricts any other Person from competing with
the Company in any line of business or in any geographical area; (vi) any
agreement that restricts the Company from disclosing any information
concerning or obtained from any other Person or that restricts any other
Person from disclosing any information concerning or obtained from the
Company; (vii) any agreement with respect to the investing of funds and
indentures, credit agreements, security agreements, mortgages, guarantees,
promissory notes and any other agreement relating to the borrowing of
money; (viii) any real property lease or lease for personal property under
which the Company is either lessor or lessee that involves annual payments
or receipts of more than $50,000; (ix) employment, consulting, termination
or severance agreements, collective bargaining agreements, or pension,
profit-sharing, incentive compensation, deferred compensation, stock
purchase, stock option, group insurance, termination pay, severance pay or
retirement plans, arrangements or agreements; (x) any government agreement
or other agreement that involves an annual payment to or by the Company of
more than $50,000; (xi) any agreement relating to the distribution,
marketing or sales of the Company's products; (xii) any agreement under
which the Company has agreed to indemnify or guarantee the obligations of
any Person (except agreements with customers of the Company entered into in
the ordinary course of business) with liability that could reasonably be
likely to exceed $50,000; (xiii) any agreement that is not terminable
without penalty on sixty (60) days or fewer days' notice; and (xiv) all
other agreements, arrangements or instruments entered into outside of the
ordinary course of business or that are material to the Company. All of the
Material Contracts are in full force and effect and are the legal, valid
and binding obligation of the Company and, to Seller's Knowledge, of the
other party thereto, enforceable against the Company and such third party
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). The Company is
not in breach or default in any material respect under any Material
Contract nor, to Seller's Knowledge, is any other party to any Material
Contract in breach or default thereunder in any material respect. No
Material Contract requires the consent or approval of any other party
thereto in connection with any of the transactions contemplated by this
Agreement or the Employment Agreement.
Section 3.08 Real Property; Other Assets. (a) The Company
does not own any real property.
(b) Seller has heretofore made available to Buyer true,
correct and complete copies of all leases, subleases and other agreements
(the "Real Property Leases") under which the Company uses or occupies or
has the right to use or occupy, now or in the future, any real property or
facility (the "Leased Real Property"), including all modifications,
amendments and supplements thereto. (A) The Company has a valid and
subsisting leasehold interest in each parcel of Leased Real Property free
and clear of all pledges, claims, liens, charges, mortgages, conditional
sale or title retention agreements, hypothecations, collateral assignments,
security interests, easements and other encumbrances of any kind or nature
whatsoever ("Liens"), except for Permitted Liens, and each Real Property
Lease is in full force and effect, (B) all rent and other sums and charges
payable by the Company as tenant thereunder are current, (C) no termination
event or condition or uncured default of a material nature on the part of
the Company or, to Seller's Knowledge, the landlord, exists under any Real
Property Lease, (D) the Company is the sole undisputed lessee of each
Leased Real Property, is in actual possession thereof and is entitled to
quiet enjoyment thereof in accordance with the terms of the applicable Real
Property Lease, except for one hundred (100) square feet of the Company's
headquarters which is subleased to the Vision of Hope Ministries, (E) the
Company has not received notice of any condemnation, expropriation or other
proceeding in eminent domain pending, proposed or threatened with respect
to any of the Leased Real Property, and (F) no zoning, health, building,
land use or similar law, code, ordinance, order or regulation has been, or
to Seller's Knowledge, will be violated by the continued use and operation
of the Leased Real Property in the conduct of the Company's business as
presently conducted.
(c) The Tangible Personal Property consists of property
in good working condition and of a quality and quantity usable, saleable
and marketable in the ordinary course of business.
Section 3.09 Software. (a) Schedule 3.09(a) sets forth
under the caption "Owned Software" a true, correct and complete list of all
the Owned Software and under the caption "Licensed Software" a true,
correct and complete list of all of the Licensed Software.
(b) Except as specified in Schedule 3.09(b), the Company
has good, marketable and exclusive title to, and the valid and enforceable
power and unqualified right to sell, license, lease, transfer, use or
otherwise exploit, all versions and releases of the Owned Software and all
intellectual property therein, free and clear of all Liens. The Company is
in actual possession of (i) the source code and object code for each
computer program included in the Owned Software, and (ii) the object code
and, to the extent required for the effective use of the Software as
currently used in the Company's business or as offered or represented to
the Company's business customers or potential customers, the source code,
for each computer program included in the Licensed Software. The Company is
in possession of all other documentation (including without limitation,
with respect to the Owned Software only, all related engineering
specifications, program flow charts, installation and user manuals) and
know-how required for the effective use of the Software as currently used
in the Company's business or as offered or represented to the Company's
customers or potential customers. The Company has such ownership of the
Owned Software and such rights by license or otherwise to use the Licensed
Software as are used and necessary to conduct the Company's business as now
conducted, and as are used in the development, marketing, licensing, sale
or support of the products and the services presently offered by the
Company. Except as specified in Schedule 3.09(b), no Person other than the
Company has any right or interest of any kind or nature in or with respect
to the Owned Software or any portion thereof or any rights to sell,
license, lease, transfer, use or otherwise exploit the Owned Software or
any portion thereof.
(c) Schedule 3.09(c) sets forth a true, correct and
complete list, by computer program, of (i) all Persons other than the
Company that have been provided with the source code or have a right to be
provided with the source code (including any such right that may arise
after the occurrence of any specified event or circumstance, either with or
without the giving of notice or passage of time or both) for any of the
Owned Software, and (ii) all source code escrow agreements relating to any
of the Owned Software (setting forth as to any such escrow agreement the
source code subject thereto and the names of the escrow agent and all other
Persons who are actual or potential beneficiaries of such escrow
agreement), and identifies with specificity all agreements and arrangements
pursuant to which the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby would entitle
any third party or parties to receive possession of the source code for any
of the Owned Software or any related technical documentation. Except as
specified in Schedule 3.09(c), no Person (other than the Company) is in
possession of, or has or has had access to, any source code for any
computer program included in the Owned Software.
(d) Except as specified in Schedule 3.09(d), none of the
sale, license, lease, transfer, use, reproduction, distribution,
modification or other exploitation by the Company, or any of its successors
or assigns of any version or release of any computer program included in
the Software obligates or will obligate the Company or any of its
successors or assigns to pay any royalty, fee or other compensation to any
other Person.
(e) Except as specified in Schedule 3.09(e), the Company
does not market and has not marketed, and has not supported and is not
obligated to support, any Licensed Software.
(f) Except as specified in Schedule 3.09(f), no
agreement, license or other arrangement pertaining to any of the Software
(including without limitation any development, distribution, marketing,
user or maintenance agreement, license or arrangement) to which the Company
is a party will terminate or become terminable by any party thereto as a
result of the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
Section 3.10 Intellectual Property. (a) Schedule 3.10(a)
sets forth a true, correct and complete list of all Intellectual Property
other than Software.
(b) The Intellectual Property includes all of the
intellectual property rights owned or licensed by the Company that are used
or reasonably necessary to conduct the Company's business as it is now
conducted, and includes all of the intellectual property rights owned or
licensed by the Company that are used in the development, marketing,
licensing or support of the Software. Except as specified in Schedule
3.10(b), (i) the Company has good, marketable and exclusive title to, and
the valid and enforceable power and unqualified right to use, the
Intellectual Property free and clear of all Liens and (ii) no Person other
than the Company has any right or interest of any kind or nature in or with
respect to the Intellectual Property or any portion thereof or any rights
to use, market or exploit the Intellectual Property or any portion thereof.
(c) No current or former director, officer, or employee
of the Company (or any predecessor in interest of the Company) will, after
giving effect to the transactions contemplated herein, own or retain any
rights to use any of the Intellectual Property owned by the Company.
(d) The Company takes commercially reasonable measures to
protect the confidentiality of its material trade secrets, know-how or
other confidential information. Seller has delivered to Buyer all written
non-disclosure agreements between the Company and its key Employees as set
forth on Schedule 8.01(a) having access to confidential information.
Section 3.11 No Infringement. (a) To Seller's Knowledge,
neither the existence nor the sale, license, lease, transfer, use,
reproduction, distribution, modification or other exploitation by the
Company, or any of its successors or assigns of any Software or other
Intellectual Property, as such Software or other Intellectual Property, as
the case may be, is or was, or is currently contemplated to be, sold,
licensed, leased, transferred, used or otherwise exploited by such Persons,
does, did or will (i) infringe, whether directly, by inducement,
contributory, vicariously or otherwise ("Infringe"), any patent, trademark,
copyright or other intellectual property right of any other Person, (ii)
constitute a misuse or misappropriation of any trade secret, know-how,
process, proprietary information or other right of any other Person, or
(iii) entitle any other Person to any interest therein, or right to
compensation from the Company, or any of its successors or assigns, by
reason thereof. The Company has not received any complaint, assertion,
threat or allegation or otherwise has notice of any Claim involving either
matters of the type contemplated by the immediately preceding sentence or
otherwise challenging the ownership, use, validity or enforceability of any
Intellectual Property, nor is the Company aware of any facts or
circumstances that could reasonably be expected to give rise to any such
Claim. There are no restrictions on the ability of the Company, or any of
its successors or assigns to sell, license, lease, transfer, use,
reproduce, distribute, modify or otherwise exploit any Software or other
Intellectual Property.
(b) To Seller's Knowledge there has been no Infringement,
misappropriation or other violation of any Software or other Intellectual
Property, and no Claim has been brought by the Company against any third
party.
Section 3.12 Litigation, etc. Except as specified on
Schedule 3.12, (i) there is no Claim pending or, to Seller's Knowledge,
threatened against or affecting the Company by or before any court or other
Governmental Authority, and (ii) the Company is not subject to any
outstanding order, writ, judgment, injunction, decree or arbitration order
or award that, in any such case described in clauses (i) and (ii), has had
or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. There are no Claims pending or,
to Seller's Knowledge, threatened, seeking to prevent, hinder, modify or
challenge the transactions contemplated by this Agreement or the Employment
Agreement.
Section 3.13 Compliance with Applicable Laws. All
federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for the Company to own, lease or operate its
properties and assets and to carry on its business as now conducted have
been obtained or made, and there has occurred no breach or default under
any such Permit, except for the failure to have any Permits or any breaches
or defaults under Permits which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
The Company has complied, and will continue to comply in a timely manner
and in all material respects, with all applicable statutes, laws,
ordinances, rules, regulations, judgments, decrees, orders, writs and
injunctions of any Governmental Authority.
Section 3.14 Environmental Laws. Except as could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company: (i) the Company has not violated
and is not in violation of any Environmental Law; (ii) to Seller's
Knowledge, none of the Leased Real Property (including without limitation
soils and surface and ground waters) is contaminated with any Hazardous
Substance in quantities which require investigation or remediation under
Environmental Laws; (iii) the Company is not liable for any off-site
contamination; (iv) the Company has no liability or remediation obligation
under any Environmental Law; (v) no assets of the Company are subject to
pending or threatened Liens under any Environmental Law; (vi) the Company
has all Permits required under any Environmental Law ("Environmental
Permits"); and (vii) the Company is in compliance with its Environmental
Permits.
Section 3.15 Taxes. (a) The Company has (i) timely filed
(or there have been timely filed on the Company's behalf) all material Tax
Returns, required to be filed by or for it in respect of any Taxes and all
such Tax Returns are true, correct and complete in all material respects
(ii) paid all Taxes shown to be due on such Tax Returns, (iii) established
reserves that are reflected in the Financial Statements and that as so
reflected are adequate for the payment of all Taxes payable by the Company
not yet due and payable, and (iv) timely withheld and paid over to the
proper taxing authorities all Taxes and other amounts required to be so
withheld and paid over.
(b) The Company has not (i) executed or entered into with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement or other document that continues in force and effect beyond the
Closing Date and that extends or has the effect of extending the period for
assessments or collection of any Taxes, (ii) executed or entered into with
the IRS or any other taxing authority any closing agreement or other
similar agreement (nor has the Company received any ruling, technical
advice memorandum or similar determination) affecting the determination of
Taxes required to be shown on any Tax Return not yet filed, (iii) requested
any extension of time to be granted to file after the Closing Date any Tax
Return required by applicable law to be filed by it, or (iv) executed or
filed any power of attorney with respect to Taxes, which power of attorney
will remain in effect beyond the Closing Date.
(c) There is no Tax audit, examination, Claim or
deficiency proposed, pending or threatened in writing against the Company
which, if adversely determined, would result in a Tax Lien on any asset of
the Company or would require Buyer to be liable for any Taxes.
(d) The Company obtains from its customers exemption
numbers related to all sales to customers on which sales Tax was not
collected. All purchases on which sales or use Tax were not paid were
properly exempt from such Taxes.
(e) Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(f) Since July 1988, the Company has always been properly
treated as an S corporation under Section 1361 of the Code and any
applicable provisions of state and local law.
Section 3.16 Benefit Plans. (a) Schedule 3.16(a) sets
forth a correct and complete list of all the employee benefit plans (as
that phrase is defined in Section 3(3) of ERISA) maintained or contributed
to (or to which the Company has any obligation to contribute) for the
benefit of any current or former employee, officer or director of the
Company or any of their Affiliates (the "Company ERISA Plans") and any
other benefit or compensation plan, program or arrangement maintained or
contributed to (or to which the Company has any obligation) for the benefit
of any current or former employee, officer or director of the Company (the
Company ERISA Plans and such other plans being referred to as the "Company
Plans"). Seller has furnished or made available to Buyer and its
representatives a correct and complete copy of, as applicable, (i) every
document pursuant to which each Company Plan is established or operated
(including trust agreements, insurance certificates and any summary plan
descriptions), (ii) a written description of any Company Plan for which
there is no written document, (iii) the three most recent annual reports,
financial statements and actuarial valuations with respect to each Company
Plan and (iv) the most recent IRS determination letter received with
respect to each Company ERISA Plan.
(b) None of the Company ERISA Plans is a "multiemployer
plan" within the meaning of ERISA or a plan that is subject to Title IV of
ERISA.
(c) None of the Company Plans promises or provides
post-retirement health benefits or post-retirement life insurance benefits
to any Person, except as required by Code Section 4980B (COBRA).
(d) None of the Company Plans or any individual
employment or severance agreement provides for payment of a benefit, the
increase of a benefit amount, the payment of a contingent benefit or the
acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement.
(e) The Company does not have an obligation to adopt, and
is not considering the adoption of, any new benefit or compensation plan,
program or arrangement or, except as required by law, the amendment of an
existing Company Plan.
(f) Each Company ERISA Plan intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter from the IRS that it is so qualified and nothing has occurred since
the date of such letter that could reasonably be expected to affect the
qualified status of such Company ERISA Plan.
(g) Each Company Plan has been operated in all material
respects in accordance with its terms and the requirements of all
applicable law, including, without limitation, ERISA and the Code.
(h) The Company has not incurred any direct or indirect
liability under ERISA or the Code in connection with the termination of,
withdrawal from or failure to fund, any Company ERISA Plan or other
retirement plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any such liability.
(i) Neither the Company nor any fiduciary or service
provider with respect to any Company ERISA Plan has engaged in a
transaction with respect to any Company ERISA Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could
subject the Company to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be material.
(j) There are no pending or, to the Knowledge of Seller,
threatened claims by or on behalf of any Company Plan, by any Employee or
beneficiary covered under a Company Plan, or otherwise involving any
Company Plan (other than routine claims for benefits).
(k) All contributions required to be made under the terms
of any Company Plan have been timely made when due.
Section 3.17 Labor Matters. (a) The Company is not a
party to any employment, labor or collective bargaining agreement, and
there are no employment, labor or collective bargaining agreements which
pertain to employees of the Company.
(b) No employees of the Company are represented by any
labor organization and, to Seller's Knowledge, no labor organization or
group of employees of the Company has made a pending demand for recognition
or certification. There are no representation or certification proceedings
or petitions seeking a representation proceeding presently pending or
threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority and, to
Seller's Knowledge, there are no organizing activities involving the
Company pending with any labor organization or group of employees of the
Company.
(c) There are no (i) unfair labor practice charges,
grievances or complaints pending or threatened in writing by or on behalf
of any employee or group of employees of the Company, or (ii) complaints,
charges or Claims against the Company pending, or threatened in writing to
be brought or filed, with any Governmental Authority or arbitrator based
on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment of any individual by the Company.
Section 3.18 Transactions with Affiliates. Schedule 3.18
sets forth a complete and correct list as of the date hereof of all
agreements, arrangements and transactions between any shareholder or any
employee, officer or director of the Company or any of their relatives, on
the one hand, and the Company, on the other hand, other than any at-will
employment arrangements (which are not pursuant to written contract or
agreement) and any arrangement pursuant to any Company Plan.
Section 3.19 Absence of Certain Practices. Neither the
Company nor any director or officer or, to Seller's Knowledge, employee of
the Company, has (1) paid, offered or promised to pay, or authorized the
payment, directly or indirectly, through any other Person, any monies or
anything of value to any Person employed by or acting for or on behalf of
any Person, whether private or governmental, or any government official or
employee of any political party or candidate for political office, in each
case for the purpose of illegally inducing or rewarding any action by any
official favorable to the Company, or (ii) taken any other act that, if
taken by a Person subject to United States law, would violate Section 30A
of the Securities and Exchange Act of 1934. Neither the Company nor any
director or officer nor, to Seller's Knowledge, any employee of the
Company, or any Person acting on its behalf has accepted or received any
unlawful contributions, payments, gifts or expenditures.
Section 3.20 Assets Necessary for the Conduct of the
Business of the Company. The Company has good, valid and marketable title
to all of its properties and assets (real, personal and mixed, tangible and
intangible) necessary to permit the Company to conduct its businesses and
operations as currently conducted. None of the Company's properties or
assets (real, personal and mixed, tangible and intangible) are subject to
any Liens except for Permitted Liens.
Section 3.21 Insurance. (a) Schedule 3.21(a) contains a
complete and correct description of all policies of property, fire and
casualty, product liability, workers' compensation and other forms of
insurance owned or held by the Company or its Affiliates. The coverage
provided under such insurance policies is reasonable in scope and amount in
light of the risks attendant to the operations and activities of the
Company. As of the date of this Agreement, Seller is not aware of any
incurrence or incident that could reasonably be expected to give rise to a
claim for insurance by the Company or any Affiliate of the Company under
any "claims made" insurance policy covering the Company that has not been
reported to the primary carrier (and, if applicable, excess carrier)
issuing any such policy.
(b) The Company and its Affiliates have paid all premiums
due, and have otherwise performed all of their respective obligations,
under the insurance policies of the Company listed on Schedule 3.21(a).
Neither the Company nor any of its Affiliates has received any notice of
cancellation or any other indication that any insurance policy listed on
Schedule 3.21(a) is no longer in full force and effect or will not be
renewed or that the issuer of any such policy is not willing or able to
perform its obligations thereunder.
Section 3.22 Product Liability. There are not presently
pending, or, to the Knowledge of Seller, threatened any civil, criminal or
administrative actions, proceedings, suits, demands, Claims, hearings,
notices of violation or demand letters relating to any alleged material
hazard or alleged material defect in design, manufacture, materials or
workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any product designed,
manufactured, distributed or sold by or on behalf of the Company.
Section 3.23 Outstanding Indebtedness. (a) Except as set
forth on Schedule 3.23, the Company does not have any outstanding
Indebtedness.
(b) As of the date hereof, the outstanding principal
balance of the promissory note of the Company in favor of Jack Fitzsimons
dated March 3, 1997 is $381,714.52 (the "Fitzsimons Note"). The Company is
not, and has never been, in default under the Fitzsimons Note. Upon payment
of the Fitzsimons Note Amount (as defined in Section 6.06 hereof) the
Fitzsimons note shall be retired and canceled and no amounts shall remain,
outstanding or due and owing thereunder.
Section 3.24 Brokers. Except for Coibion & Associates,
Inc., whose fee for financial advisory services shall be paid by Seller, no
broker, investment banker, financial advisor or other Person is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of Seller or the Company.
Section 3.25 Completeness of Disclosure. Seller has not
failed to disclose to Buyer any facts material to the business, results of
operations, assets, liabilities, financial condition or prospects of the
Company. No representation or warranty by Seller contained in this
Agreement and no statement contained in any document (including, without
limitation, the Financial Statements and the Schedules), certificate, or
other writing furnished or to be furnished by Seller to Buyer or any of its
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated herein, contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that all of the
statements contained in this Article 4 are true and complete as of the date
of this Agreement, and will be true and complete as of the Closing Date as
though made on the Closing Date.
Section 4.01 Organization, Standing and Corporate Power.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being
conducted. Buyer is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or
the leasing of its properties makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and to
be in good standing would not have a material adverse effect on the ability
of Buyer to perform its obligations under this Agreement and the Employment
Agreement or consummate the transactions contemplated hereby or thereby.
Section 4.02 Authority; Noncontravention. Buyer has the
requisite corporate power and authority to enter into this Agreement and
the Employment Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of each of this Agreement
and the Employment Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of Buyer, and no other corporate proceedings on the
part of Buyer are necessary to authorize this Agreement or the Employment
Agreement or to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by Buyer and,
assuming this Agreement constitutes a valid and binding obligation of
Seller, constitutes the valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity. The execution and delivery of each of this
Agreement and the Employment Agreement does not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not (i) conflict with any of the
provisions of the certificate of incorporation or bylaws of Buyer, in each
case as amended to the date of this Agreement, (ii) result in a violation
or breach of, or constitute a default under, any contract, agreement or
instrument to which Buyer is a party, or (iii) contravene any Law
applicable to Buyer which, in the case of clauses (ii) and (iii) above,
could reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the ability of Buyer to perform its obligations
under this Agreement and the Employment Agreement or consummate the
transactions contemplated hereby and thereby.
Section 4.03 Consents and Approvals. No consent, approval
or authorization of, or declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Buyer in
connection with the execution and delivery of each of this Agreement and
the Employment Agreement by Buyer or the consummation by Buyer, as the case
may be, of any of the transactions contemplated hereby, except for any
consents, approvals, authorizations, filings or notices the failure of
which to make or obtain which could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the ability
of Buyer to perform its obligations under each of this Agreement and the
Employment Agreement or consummate the transactions contemplated hereby and
thereby.
Section 4.04 Broker. No broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's
financial advisor's or other similar fee or commission in connection with
the transactions contemplated hereby based upon arrangements made by or on
behalf of Buyer.
Section 4.05 Litigation. There are no Claims pending or,
to Buyer's knowledge, threatened, seeking to prevent, hinder, modify or
challenge the transactions contemplated by this Agreement or the Employment
Agreement.
Section 4.06 Investigation by Buyer.(a) Buyer has
conducted its own independent review and analysis of the Company and
acknowledges that Buyer has been provided access to the key management,
properties, premises and records of the Company for such purpose.
(b) Buyer acknowledges that during such review and
analysis and in the documents provided to Buyer from Seller during such
review and analysis delivered and referenced herein, that Company has
described plans for enhancements, fixes and upgrades to the Owned Software
and plans to rewrite the Owned Software using the same development tools as
used for the Company's pcMar and POE software products. Buyer further
acknowledges receipt of the following: (i) documents referenced in the
April 26, 2002 letter from Betsy Reach of Reach & Schwaiger, Ltd.,
Certified Public Accountants, which documents were sent from Seller to
Buyer during Buyer's due diligence; (ii) documents referenced in the May
15, 2002 letter from Betsy Reach of Reach & Schwaiger, Ltd., Certified
Public Accountants, which documents were sent from Seller to Buyer during
Buyer's due diligence; (iii) response time transaction accounts which were
sent via e-mail from Gregory A. Schuenke to Dean Souleles, Chief Technology
Officer for Buyer on May 22, 2002; and (iv) customer contracts described in
the index which was attached to the May 23, 2002 letter from Dennis M.
Burgy, Esq. to Richard Goldfien, Vice President, Finance, for Buyer. Copies
of the documents referred to in paragraphs (i) through (iv) of this
subsection with attached indices are attached to this Agreement as Schedule
4.06. Notwithstanding the foregoing, the acknowledgments set forth in this
Section 4.06(b) shall have no effect on Seller's representations and
warranties contained in Article 3 of this Agreement.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
Section 5.01 Conduct of the Business. From the date
hereof until the Closing Date, except as contemplated by this Agreement,
Seller shall cause the Company to, and the Company shall, act and carry on
its business only in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, use reasonable efforts to
preserve intact its current business organizations, keep available the
services of its current key officers and Employees and preserve the
goodwill of those engaged in material business relationships with the
Company. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, except as disclosed on Schedule 5.01, the
Company will not, and Seller will not permit the Company or its Affiliates,
to:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, securities or other
property) in respect of, any of its outstanding capital stock, (ii) split,
combine or reclassify any of its outstanding capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its outstanding capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of outstanding capital
stock or any rights, warrants or options to acquire any such shares;
(b) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities;
(c) make any material change in the conduct of the
business of the Company or enter into any transaction or commitment
involving in excess of $50,000 individually, or $100,000 in the aggregate,
binding on the Company;
(d) mortgage, lease, sublease, license, pledge or subject
to any Lien (except for Permitted Liens) any of the assets of the Company;
(e) sell, transfer or otherwise dispose of any of the
assets of the Company, except for Inventory sold in the ordinary course of
business, or acquire any assets or rights, except in the ordinary course of
business consistent with past practice;
(f) (i) purchase, lease, or otherwise acquire any assets
or make any capital expenditures or commitments therefor involving the
expenditure of more than $50,000 or (ii) merge or consolidate with,
purchase all or any substantial part of the assets of, or otherwise acquire
any Person;
(g) incur or assume any long-term liabilities or
Indebtedness or, except for current liabilities for trade or business
obligations incurred in connection with the purchase of goods or services
in the ordinary course of business consistent with past practice, incur or
assume any short-term liabilities or Indebtedness; assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations (absolute, accrued,
contingent or otherwise) of any Person; or make any loans, advances or
capital contributions to, or investments in, any Person;
(h) amend in any material respect or terminate any
Material Contract, or make or enter into any new contract or lease, except
in the ordinary course of business consistent with past practice;
(i) engage in any transaction with any Employee or
officer or director of the Company or any Affiliate of the Company outside
the ordinary course of business consistent with past practice;
(j) fail to keep in full force and effect present
insurance policies or other comparable insurance coverages;
(k) change any of the accounting principles of the
Company unless required by GAAP or applicable Law;
(l) transfer or grant any rights or licenses under, or
enter into any settlement regarding the breach or infringement of, any
Intellectual Property, or modify any existing rights with respect thereto
or enter into any licensing or similar agreements or arrangements, except
in the ordinary course of business consistent with past practice;
(m) make any increase in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or pay
or agree or orally promise to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any Employee or
officer or director of the Company, except as required under any Company
Plan in effect as of the date hereof;
(n) adopt, enter into, or amend (except as required to
comply with applicable Laws) any employment, collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, vacation,
severance, deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of any Employee or officer or director of the
Company (whether or not legally binding) or enter into or amend any
existing consulting agreement or arrangement;
(o) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization;
(p) settle or agree to settle any litigation, action or
proceeding other than settlements of any case involving amounts not in
excess of $50,000;
(q) pay, discharge or satisfy any claims or liabilities
(absolute, accrued, asserted or unasserted, contingent or otherwise) other
than in the ordinary course of business and consistent with past practice
of claims or liabilities reflected or reserved against in the Financial
Statements or incurred thereafter in the ordinary course of business and
consistent with past practice;
(r) enter into any agreement, understanding or commitment
that restrains, limits or impedes the Company's ability to compete with or
conduct any business or line of business;
(s) plan, announce, implement or effect any reduction in
force, lay-off, early retirement program, severance program or other
program or effort concerning the termination of employment of Employees;
(t) make any material change in the selling,
distribution, advertising, terms of sale or collection practices (including
any practices, programs or allowances involving rebates or discounts) from
those planned or budgeted, or enter into any practices, programs or
long-term allowances (including any practices, programs or allowances
including rebates or discounts) not previously used during the past twelve
months;
(u) amend the certificate of incorporation, by-laws or
other organizational documents of the Company;
(v) with respect to the Company, settle or compromise any
Tax liability, agree to any adjustment of any Tax attribute or make, revoke
or change any election with respect to Taxes, surrender any right to claim
a refund of Taxes or consent to any extension or waiver of the statute of
limitation period applicable to any Taxes, Tax Return or tax claim, file
any amended Tax Return or enter into any closing agreement with respect to
Taxes;
(w) knowingly take any action which would cause a breach
of any representation set forth in Article 3 hereof; and
(x) take, or agree in writing or otherwise to take, any
of the foregoing actions.
Section 5.02 Access to Information. From the date hereof
until the Closing Date, Seller shall cause the Company to (i) give, and
cause each of its Affiliates to give, Buyer, its counsel, financial
advisors, auditors and other authorized representatives reasonable access
to the offices, employees, agents, representatives, properties, facilities,
books and records of the Company, (ii) furnish, and cause each of its
Affiliates to furnish, to Buyer, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and
other information of the Company as such Persons may reasonably request,
and (iii) instruct the Employees, counsel and financial advisors of the
Company and their Affiliates to cooperate with Buyer in its reasonable
investigation of the Company. Any investigation pursuant to this Section
5.02 shall be conducted in such manner as not to interfere unreasonably
with the conduct of the business of the Company. Seller shall keep Buyer
generally informed as to the affairs of the Company.
Section 5.03 Exclusivity. Recognizing that Buyer 's
investigations of the Company and its businesses, and the negotiation and
drafting of this Agreement and related documents and instruments to be
executed by Buyer in connection herewith, have to date required and will
continue to require Buyer to expend significant time, effort and money, and
to induce Buyer to execute and deliver this Agreement and proceed with the
transactions contemplated hereby, Seller shall not, and shall not permit
the Company or any of its Affiliates, directors, officers, partners,
Employees, representatives, advisors, or agents to, encourage any offers
from, solicit, encourage, initiate, respond to (other than by a bare
statement, without further detail or explanation, that such Person is not
permitted to respond) or continue any discussions with, engage in
discussions or negotiations with or provide any information to, or enter
into any agreements or understandings with, any Person, other than Buyer,
its Affiliates and their respective representatives and agents, concerning
any merger, consolidation, issuance or sale or exchange of shares of
capital stock of the Company, transfer or disposition of any assets of the
Company (other than Inventory in the ordinary course of business consistent
with past practice or the Vehicle pursuant to Section 6.05) or similar
transaction involving or affecting the ownership of the Company or any of
its assets or shares of capital stock.
Section 5.04 Disclosure Supplements. From time to time
prior to the Closing, Seller shall promptly supplement or amend the
Schedules with respect to any matter, condition or occurrence hereafter
arising which, if existing at, or occurring prior to or on, the date of
this Agreement, would have been required to be set forth or described in
the Schedules. No supplement or amendment shall be deemed to cure any
breach of any representation or warranty made in this Agreement or have any
effect on Buyer's indemnification rights provided for in Article 10 hereof,
or have any effect for the purpose of determining the satisfaction of the
conditions set forth in Article 9 hereof or the compliance by Seller with
any covenant set forth herein.
ARTICLE 6
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
Section 6.01 Commercially Reasonable Efforts; Further
Assurances. (a) Subject to the terms and conditions of this Agreement,
Buyer and Seller will use commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, and cooperate with
each other to do, all things necessary or desirable under applicable Laws
and regulations to consummate the transactions contemplated by this
Agreement as promptly as practicable.
(b) Seller and Buyer shall cooperate with one another in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from any third parties, in connection
with the consummation of the transactions contemplated by this Agreement.
Seller and Buyer agree to take all commercially reasonable actions
necessary to obtain any requisite actions, approvals, authorizations,
consents, orders, licenses, permits, qualifications, exemptions or waivers
by any third party or Governmental Authority. If required, each party shall
as promptly as possible, in cooperation with the other, but at its own
expense, file any reports or notifications or furnish information and pay
any fees that may be required to be paid by it under applicable law.
(c) Prior to the Closing, each party shall promptly
consult with other parties hereto with respect to, provide any necessary
information with respect to, and provide other parties (or their respective
counsel) with copies of, all filings made by such party with any
Governmental Authority or any information supplied by such party to a
Governmental Authority in connection with this Agreement and the
transactions contemplated hereby. Each party hereto shall promptly provide
the other parties with copies of any written communication received by such
party from any Governmental Authority regarding this Agreement or any of
the transactions contemplated hereby.
Section 6.02 Public Announcements. Neither Seller nor
Buyer will issue, or permit any of their Affiliates to issue, any press
release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of the other (which consent shall not be unreasonably withheld),
except as may be required by applicable Law or stock exchange or NASDAQ
regulation. Notwithstanding anything in this Section 6.02 to the contrary,
Seller and Buyer will, to the extent reasonably practicable, consult with
each other before issuing, and provide each other the opportunity to review
and comment upon, any such press release or other public statement with
respect to this Agreement and the transactions contemplated hereby if
required by applicable law or stock exchange regulation.
Section 6.03 Notices of Certain Events. From the date
hereof until the Closing Date, Seller and Buyer shall, promptly after
becoming aware of the following, notify the other of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with any of the transactions contemplated by this Agreement;
(b) any notice or other communication from any
Governmental Authority in connection with any of the transactions
contemplated by this Agreement; and
(c) any Claims commenced relating to Seller, the Company
or any of their respective Affiliates, or Buyer that, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.11 and 3.12.
Section 6.04 Further Assurances. At any time after the
Closing Date, Seller and Buyer shall promptly execute, acknowledge and
deliver any other assurances, documents, instruments or conveyances
reasonably requested by Seller or Buyer, as the case may be, or necessary
for Seller or Buyer, as the case may be, to satisfy their respective
obligations hereunder or obtain the benefits contemplated hereby.
Section 6.05 Seller's Automobile. Buyer and Seller
acknowledge that as of the date hereof, the Company owns and makes car loan
payments with respect to one 2001 Lexus RX 300 (the "Vehicle") which Seller
uses. Buyer and Seller agree that Buyer and Seller will cooperate to cause
all of the Company's right, title and interest in the Vehicle to be
transferred to Seller as promptly as practicable following the Closing. As
of the Closing, Seller shall be personally responsible for and assume the
Company's obligation to make car loan payments and Seller shall thereafter
make the car loan payments directly to the relevant financing company.
Seller shall execute appropriate and reasonable guarantees in favor of the
Company to reflect Seller's obligations pursuant to this Section 6.05.
Section 6.06 Payment and Satisfaction of Fitzsimons
Note.(a) Immediately prior to the Closing, Buyer shall loan the Company and
deposit with the Company, by wire transfer of immediately available funds
to an account of the Company designated by Seller at least two (2) Business
Days prior to the Closing Date, an amount equal to the outstanding
principal balance plus any accrued interest of the Fitzsimons Note as set
forth in Section 3.23(b) hereof (the "Fitzsimons Note Amount").
Concurrently with the receipt of the Fitzsimons Note Amount, Seller shall
cause the Company, and the Company shall, execute and deliver to Buyer the
Promissory Note and Seller shall execute and deliver to Buyer the
Guarantee.
(b) Immediately upon receipt of the Fitzsimons Note
Amount and execution and delivery of the Promissory Note and the Guarantee,
Seller shall cause the Company, and the Company shall, pay to Jack
Fitzsimons, by wire transfer of immediately available funds, the Fitzsimons
Note Amount. Immediately following such payment, the Escrow Agent shall
release the Escrow Shares from the Escrow Agreement and deliver them to the
Company. Immediately upon receipt of the Escrow Shares, the Company shall
adopt any and all necessary resolutions to cancel and retire such the
Escrow Shares and Seller, on behalf of the Company, shall mark such shares
as canceled and retired.
ARTICLE 7
TAX MATTERS
Section 7.01 Tax Matters. (a) Seller will file, or cause
to be filed when due, all Tax Returns of the Company that are required to
be filed by or with respect to the Company for taxable years or periods
ending on or before the Closing Date. Buyer shall file, or cause to be
filed, those Tax Returns of the Company that are required to be filed by or
with respect to the Company for taxable years or periods ending after the
Closing Date. All Tax Returns with respect to Pre-Closing Periods shall be
made in accordance with law in all material respects. Seller shall provide
Buyer with a pro forma copy of each Tax Return with respect to a
Pre-Closing Period not later than thirty (30) days prior to its due date
(including all extensions thereto) and Buyer shall review and give
comments, if any, on said Tax Return to Seller not later than fifteen (15)
days before the due date of such Tax Return. Seller will ensure that the
Tax Returns with respect to the Pre-Closing Period shall be filed
subsequent to Seller providing such Tax Returns to the Company.
(b) Seller shall indemnify, pay and hold harmless the
Company, its affiliates and Buyer for all Taxes of, or imposed on or with
respect to, the Company for Pre-Closing Periods and Seller's share of any
Taxes for any Straddle Period as determined pursuant to Section 7.01(c)
below. Buyer will pay, or will cause to be paid, all Taxes of the Company
for all Post-Closing Periods and Buyer's share of any Taxes for any
Straddle Period as determined pursuant to Section 7.01(c) below.
(c) Buyer will prepare and file, or cause to be prepared
and filed, all Tax Returns required to be filed by the Company for Straddle
Periods. Buyer will notify Seller of Buyer's calculation of Seller's share
of the Taxes of the Company for any Straddle Period and provide to Seller a
copy of the Tax Return and the calculation of the split of the Tax
liability for the Straddle Period between Buyer and Seller (the
"Statement") no later than thirty (30) days before the due date for filing
such Tax Return. In the case of a Straddle Period, Taxes for the entire
taxable period shall be allocated to a deemed Pre-Closing Period using an
interim-closing-of-the-books method assuming that the deemed Pre-Closing
Period ended as of the close of business on the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis
shall be apportioned on a per diem basis, real property taxes shall be
allocated in accordance with Section 164(d) of the Code, and allowable tax
deductions attributable to payments made by the Company which amounts are
allocable to Seller shall be allocated to the Pre-Closing Period. Buyer and
Seller will attempt to resolve in good faith any disagreement arising out
of any Straddle Period Tax Return and/or the Statement. If any such dispute
is not resolved, the matter will be resolved in accordance with Section
7.01(k).
(d) Buyer will promptly notify Seller in writing upon
receipt of notice of any pending or threatened federal, state, local, or
foreign Tax audits or assessments of the Company related to a Pre-Closing
Period or Straddle Period. Seller will promptly notify Buyer in writing
upon receipt by Seller of notice of any pending or threatened federal,
state, local, or foreign Tax audits or assessments from any Tax authority
which may affect the Tax liabilities of the Company.
(e) If, after the Closing Date, the Company receives any
refund of Taxes attributable to the Pre-Closing period of the Company for
which Seller is responsible under this Agreement and which is not
recognized as an asset in the closing balance sheet of the Company as of
12:01 a.m. on the Closing Date, the Company shall promptly transfer the
amount of such refund (net of any expenses incurred by Buyer or the Company
in obtaining such refund) to Seller. If, after the Closing Date, Seller
receives any refund of Taxes attributable to the Company for which Seller
is not responsible under this Agreement, Seller shall promptly transfer the
amount of such refund (net of any expenses incurred by Seller in obtaining
such refund) to the Company. The Company shall equitably apportion any
refund or credit with respect to Taxes for any Straddle Period in
accordance with the principles of this Section 7.01.
(f) After the Closing Date, Seller, the Company and Buyer
will cooperate fully, and will cause their respective Affiliates to
cooperate fully, and will provide assistance as may reasonably be
requested, and cause their respective Affiliates to provide assistance as
may reasonably be requested, in connection with the preparation of any Tax
Return, the conduct of any audit or the defense of any litigation or other
proceeding with respect to any Tax liability of the Company for any period
prior to or including the Closing Date, and shall retain, or shall cause to
be retained, for the appropriate period any records or information that may
be relevant to any such Tax Return or audit. However, the Company shall
have sole control over the conduct of any audit or the defense of any
litigation or other proceeding with respect to any Tax liability for the
Pre-Closing or Straddle Periods for which Seller does not indemnify Buyer.
(g) Seller and Buyer will provide Seller, Buyer and the
Company, as the case may be, with the right, at reasonable times and upon
reasonable notice, to have access to, and to copy and use, any records or
information in their possession or in the possession of any of their agents
or affiliates which may be relevant for the taxable period for which the
requesting party is charged with payment responsibility for Taxes under
this Agreement in connection with the preparation of any Tax Returns, the
conduct of any audits, the defense of any litigation by any Tax authority,
the filing of any claim for a refund of Tax or allowance of any Tax credit,
or any judicial or administrative proceedings relating to liability for
Taxes. Without limiting anything to the contrary, Seller shall (A) retain
all books and records, to the extent such books and records are in their
possession or in the possession of any of their agents or Affiliates, with
respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and to the extent notified by Buyer including any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority and (B)
give Buyer reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if Buyer so requests, Seller
shall allow Buyer to take possession of such books and records.
(h) Prior to the Closing: (i) Seller shall cause the
Company to not revoke the Company's election to be taxed as an S
corporation within the meaning of Code sections 1361 and 1362; and (ii)
Seller will not, and will not permit the Company to, take or allow any
action to be taken that would result in the termination of the Company's
status as an S corporation within the meaning of Code section 1361.
(i) Seller and Buyer shall make a joint election for the
Company under Section 338(h)(10) of the Code and under any comparable
provisions of state or local law with respect to the purchase of the
Shares. At Closing, Seller and Buyer shall mutually execute and complete
copies of IRS Form 8023 and any similar state or local forms. If any
changes are required in these forms as a result of information that is
first available after such forms are prepared, the parties will promptly
agree on such changes.
(j) Within sixty (60) days after the Closing Date, Buyer
shall (i) draft a schedule (the "Allocation Schedule") determining the
"Aggregate Deemed Sales Price" and the "Adjusted Grossed Up Basis" (each as
defined under applicable Treasury Regulations) and allocating the Aggregate
Deemed Sales Price and the Adjusted Grossed Up Basis among the assets of
the Company in accordance with Section 338 of the Code and the applicable
Treasury Regulations, and (ii) deliver such Allocation Schedule to Seller.
The Allocation Schedule shall be reasonable and shall be prepared in good
faith. Each of Buyer and Seller (upon Seller's consent to the Allocation
Schedule, which consent shall not be unreasonably withheld or delayed)
shall report the transactions contemplated hereby and file all Tax Returns
in accordance with the Allocation Schedule and shall not take any position
inconsistent therewith.
(k) If the Company, Buyer or Seller disagrees as to any
matters governed by this Section 7.01 of this Agreement, the Company, Buyer
and Seller will promptly consult with each other in an effort to resolve
any such dispute. Any amounts not in dispute will be paid promptly, and any
amount payable upon the resolution of a dispute will be paid to a bank
account designated by the payee. If any such disagreement cannot be
resolved within ten (10) days after the Company, Buyer or Seller asserts in
writing that such dispute cannot be resolved, Seller, the Company and Buyer
will jointly select an independent accounting firm to act as an arbitrator
to resolve the disagreement. If Seller, the Company and Buyer are unable to
agree within five (5) days on the choice of the independent accounting firm
to be appointed, each shall select an independent accounting firm and such
appointees shall be instructed to agree, within five (5) days of their
selection, on an independent accounting firm to act as the arbitrator. The
appointed independent accounting firm's determination will be final and
binding upon the parties and any fees and expenses relating to the
engagement of the independent accounting firm will be shared equally by the
Company and Seller.
(l) Provided that an election is properly made under
Section 338(h)(10) of the Code and each comparable provision of state or
local law with respect to the purchase of the Shares, Buyer shall indemnify
Seller, on an after-Tax basis, from and against the excess, if any, of (i)
the amount of income and franchise taxes required to be paid by Seller or
the Company with respect to the purchase of the Shares with such election
having been made over (ii) the amount of income and franchise taxes that
Seller or the Company would have been required to pay with respect to the
purchase of the Shares had such election not been made.
(m) Notwithstanding any other provision of this Agreement
to the contrary, including Section 7.01(l) hereof, Seller shall be liable
for and shall pay all Taxes imposed on or with respect to the Company
resulting from the Company's change from the cash to accrual accounting
method effective January 1, 2000. Seller shall pay such Taxes
contemporaneously with the payment of Taxes due by Seller for any
Pre-Closing Period pursuant to Section 7.01(b) of this Agreement.
(n) To the extent permitted by the Code and the
regulations thereunder, the amount of any research tax credit under Section
41 of the Code will be allocated to the tax year of the Company that ends
on the Closing Date.
Section 7.02 Transfer Taxes. Notwithstanding any other
provision of this Agreement to the contrary, Seller shall be liable for and
shall pay (a) all transfer (including real property transfer taxes, and
documentary Taxes) and fees imposed with respect to instruments of
conveyance in the transactions contemplated hereby and (b) all sales, use,
gains (including state and local transfer gains taxes), excise and other
transfer or similar Taxes incurred in connection with the transactions
contemplated by this Agreement. Buyer or Seller, as the case may be, shall
execute and deliver to the other at the Closing any certificates or other
documents as the other may reasonably request to perfect any proper
exemption from any such transfer, documentary, sales, gains, excise or use
Tax or otherwise comply with applicable reporting requirements with respect
to such Taxes.
ARTICLE 8
EMPLOYEE MATTERS
Section 8.01 Continuing Employment. (a) Continuing
Employees in General. In accordance with the operation of law, the Company
shall continue to employ the Employees as of the Closing Date; provided,
however, that nothing to the contrary contained herein shall limit the
ability of Buyer to (i) terminate the employment of any Continuing Employee
(as defined below) following the Closing Date and (ii) provide the
Continuing Employees with terms and conditions of employment that are
determined by Buyer in its sole discretion, except as expressly provided
herein. Buyer agrees that, following the Closing Date, it shall communicate
bonus potential and make stock option grants, in accordance with the terms
and conditions of the Buyer's stock option programs, to the key Employees
of the Company listed on Schedule 8.01(a), in consultation with the Chief
Executive Officer of the Company. Those Employees, including key Employees,
who remain employed by the Company as of the Closing Date shall be referred
to herein as the "Continuing Employees," and the parties hereto intend that
there shall be continuity of employment following the Closing with respect
to all Continuing Employees.
(b) Post-Closing Employee Benefits. Following the Closing
Date, Continuing Employees shall be eligible to participate in the employee
benefit plans and all policies and employee fringe benefit programs,
including vacation and sick day policies, maintained by Buyer from time to
time (together "Buyer Plans") in accordance with the terms and conditions
of such Buyer Plans as generally applicable to Buyer's similarly situated
employees; provided, however, that in no event shall Buyer be obligated to
provide any stock option plan or other equity participation for the
Continuing Employees. Each Buyer Plan shall credit the Continuing Employees
for all periods of service that are recognized in the analogous plans of
the Company to the extent permitted under the terms of the applicable Buyer
Plans as of the date hereof, provided that such crediting of service shall
not be given for benefit accrual purposes under any Buyer Plan that is a
defined benefit plan. Continuing Employees also shall be given credit for
any deductible or co-payment amounts paid in respect of the 2002 calendar
year, to the extent that, following the Closing Date, they participate in
any Buyer Plan for which deductibles or co-payments are required. Buyer
also shall cause each Buyer Plan to waive any preexisting condition
restriction or waiting period limitation which would otherwise be
applicable to a Continuing Employee on or after the Closing Date to the
extent that such Continuing Employee had satisfied any similar restriction
or limitation under an analogous Seller plan prior to the Closing Date.
(c) Severance Benefits. During the 12-month period
following the Closing Date, Buyer shall, or shall cause the Company to,
provide the Continuing Employees with the severance benefits provided under
the severance plan in effect for the Employees as of the date hereof, as
disclosed on Schedule 8.01(c).
(d) Treatment of Vacation. With respect to the 2002
calendar year, the Continuing Employees shall be provided with the amount
of vacation time that they would have accrued during such calendar year,
given their length of service and position, under the vacation policy
maintained by the Company as of the date hereof. Beginning in calendar year
2003 and thereafter, the Continuing Employees shall accrue vacation time
under the vacation policy maintained by Buyer, in accordance with each
Continuing Employees' length of service and position; it being understood
that (i) no Continuing Employee shall have more than four (4) weeks of
vacation as an employee of Buyer; and (ii) no Continuing Employee with
three (3) or four (4) weeks of vacation with the Company shall have less
vacation as an employee of Buyer. For purposes of this Section 8.01(d),
each Continuing Employee's length of service shall be determined in
accordance with Section 8.01(b) above.
Section 8.02 Cooperation. Seller shall cooperate with
Buyer as necessary to implement the covenants set forth is this Article 8,
including, without limitation, providing reasonable access to the Employees
and supervisory personnel prior to the Closing Date and providing
information regarding the salary and incentive opportunity applicable to
each Employee at Buyer's request.
ARTICLE 9
CONDITIONS TO CLOSING
Section 9.01 Conditions to Obligations of Buyer and
Seller. The obligations of Buyer and Seller to consummate the Closing are
subject to the satisfaction (or waiver by Buyer and Seller (subject to
applicable Law)) of the following conditions:
(a) No provision of any applicable Law or regulation and
no judgment, injunction, order or decree shall prohibit the consummation of
the Closing; and
(b) There shall not be pending any material Claim by a
Governmental Authority of competent jurisdiction seeking to prohibit the
consummation of the Closing.
Section 9.02 Conditions to Obligation of Buyer. The
obligation of Buyer to consummate the Closing is subject to the
satisfaction (or waiver by Buyer (subject to applicable Law)) of the
following further conditions:
(a) The representations and warranties of Seller
contained in this Agreement which are not qualified by "materiality",
"Material Adverse Effect" or "Material Adverse Change" shall be true and
accurate in all material respects, and the representations and warranties
that are qualified by "materiality", "Material Adverse Effect" or "Material
Adverse Change" shall be true and accurate in all respects, in each case
when made and as of the Closing Date and Seller shall have performed and
complied in all material respects with all obligations, agreements or
covenants required by this Agreement to be performed and complied with by
them prior to the Closing.
(b) There shall not have occurred any Material Adverse
Change (or any development that, insofar as reasonably can be foreseen, is
reasonably likely to result in any Material Adverse Change), with respect
to the Company.
(c) There shall not be pending or threatened any Claim
seeking to restrain or prohibit the execution of this Agreement or seeking
to obtain from Buyer or Seller or any of their respective Affiliates in
connection with this Agreement any material damages, or seeking any other
relief that, following the execution hereof, would materially limit or
restrict the ability of Buyer to own the Shares and continue to conduct the
business of the Company as now conducted.
(d) No provision of any applicable Law and no judgment,
injunction, order or decree shall restrict Buyer's ownership of the Shares
or control of the Company.
(e) There shall not be pending any material litigation
brought by a Governmental Authority of competent jurisdiction seeking to
(i) require Buyer to hold the Company separate, (ii) restrict Buyer's
control of the Company or (iii) require Buyer to divest any asset or
business in connection with the acquisition of the Company.
(f) Seller shall have delivered to Buyer a certificate to
the effect that the conditions set forth in Sections 9.02(a) and 9.02(b)
shall have been satisfied. No exceptions taken in such certificate will
modify Seller's representations, warranties, covenants or arrangements made
or deemed to be made hereunder or have any effect for purposes of Buyer's
closing conditions or indemnity rights under this Agreement.
(g) Seller shall have delivered to Buyer the Closing
Statement and the financial condition of the Company as reflected on the
Closing Statement, shall be, in the reasonable judgment of Buyer,
materially the same or better than the financial condition of the Company
as reflected in the Year End Financial Statements.
(h) Seller shall have delivered to Buyer certificates
representing all of the Shares, accompanied by stock powers duly endorsed
in blank or accompanied by duly executed instruments of transfer and
appropriate signature guarantees, with all necessary transfer tax and other
revenue stamps affixed thereto.
(i) Seller shall have delivered to Buyer a certificate of
the President of the Company certifying the certificate of incorporation
and by-laws and all amendments thereto of the Company.
(j) Seller shall have delivered to Buyer a certificate
certifying the existence and good standing of the Company issued by the
Secretary of State of the State of Wisconsin as of a recent date.
(k) Seller shall have duly executed and delivered to
Buyer the Employment Agreement.
(l) Seller shall have obtained and delivered to Buyer, in
form and substance satisfactory to Buyer, all consents, authorizations,
orders and approvals of (or filings or registrations with) any Governmental
Authority or any other Person attached hereto, required to be obtained or
made prior to the Closing in connection with the execution, delivery and
performance of this Agreement.
(m) Buyer shall have received written opinions of
Kirkpatrick & Lockhart LLP and O'Brien, Anderson, Burgy, Garbowicz & Brown
LLP, counsel to Seller, dated as of the Closing Date, in form and substance
satisfactory to Buyer, covering matters that are customary for opinions of
legal counsel for Seller in transactions similar to the transactions
contemplated hereby.
(n) Seller shall have delivered to Buyer resignations
dated the Closing Date from directors and officers of the Company as
requested in writing by Buyer prior to the Closing Date.
(o) Seller shall have delivered to Buyer the stock books,
stock ledgers, minute books and corporate seals of the Company.
(p) If Seller is transferring an interest in U.S. real
property (as defined in the Code and the U.S. Treasury Regulations), Seller
shall have delivered a certificate substantially in the form set forth in
Section 1.1445-2(b)(2)(iii) of the U.S. Treasury Regulations.
(q) The Escrow Agent shall have delivered to Buyer a
written certificate to the effect that the Escrow shares have been duly and
validly released from the Escrow Agreement pursuant to Section 6(a) of the
Escrow Agreement.
(r) The Fitzsimons Note shall have been paid in full in
accordance with Section 6.06 hereof and Seller shall have caused to be
delivered to Buyer a written acknowledgment, duly executed by Jack
Fitzsimons, reflecting the payment in full of the Fitzsimons Note Amount to
Jack Fitzsimons.
(s) Seller shall have delivered to Buyer copies of
resolutions which cancel and retire the Escrow Shares.
(t) Seller shall have delivered to Buyer the Promissory
Note duly executed by the Company.
(u) Seller shall have duly executed and delivered to
Buyer the Guarantee.
(v) Seller shall have delivered to Buyer all such other
certificates, documents and instruments as Buyer shall reasonably request
in connection with the consummation of the transactions contemplated by
this Agreement.
Section 9.03 Conditions to Obligation of Seller. The
obligation of Seller to consummate the Closing is subject to the
satisfaction (or waiver by Seller (subject to applicable Law)) of the
following further conditions:
(a) The representations and warranties of Buyer contained
in this Agreement which are not qualified by "materiality", "material
adverse effect" or "Material Adverse Change" shall be true and accurate in
all material respects, and the representations and warranties that are
qualified by "materiality", "material adverse effect " or "Material Adverse
Change" shall be true and accurate in all respects, in each case when made
and as of the Closing Date and Buyer shall have performed or complied in
all material respects with any obligation, agreement or covenant required
by the Agreement to be performed or complied with by Buyer prior to the
Closing.
(b) Buyer shall have delivered to Seller a certificate
executed by a duly authorized officer thereof to the effect that the
conditions set forth in Section 9.03(a) have been satisfied.
(c) Buyer shall have delivered to Seller the Purchase
Price in immediately available funds by wire transfer to the account
designated to Buyer by Seller in advance not later than three (3) Business
Days prior to the Closing Date.
(d) Buyer shall have delivered to Seller a certificate of
the Secretary of Buyer certifying the certificate of incorporation and
by-laws and all amendments thereto of Buyer.
(e) Buyer shall have delivered to Seller a certificate
certifying the existence and good standing of Buyer issued by the Secretary
of State of the state of Delaware as of a recent date.
(f) Buyer shall have duly executed and delivered to
Seller the Employment Agreement.
(g) Buyer shall have delivered to Seller all such other
certificates, documents and instruments as Seller shall reasonably request
in connection with the consummation of the transactions contemplated by
this Agreement.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival. The representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall survive until two years after the Closing Date; provided
that (i) the representations and warranties contained in Sections 3.03 and
3.14 shall survive indefinitely, and (ii) the representations and
warranties contained in Sections 3.15 and 3.16 shall survive until their
applicable statutes of limitations have expired. The covenants and
agreements of the parties contained in this Agreement shall survive the
Closing until such time as such covenants or agreements shall terminate or
expire in accordance with their respective terms. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive
the time at which it would otherwise terminate pursuant to the preceding
sentence with respect to the specific claim, if notice of the inaccuracy or
breach thereof giving rise to such right of indemnity shall have been given
to the party against whom such indemnity may be sought prior to such time.
Section 10.02 Indemnification. (a) Subject to the other
provisions of this Article 10, Seller hereby agrees to indemnify Buyer and
its Affiliates and their respective officers, directors, managers,
employees, Affiliates, agents, advisors and representatives (Buyer and such
other entities and Persons are hereinafter collectively referred to as
"Buyer Indemnitees"), against and agrees to hold each of them harmless from
any and all judgments, fines, Claims, costs, damages, losses, penalties,
lost profits, consequential damages, punitive damages, liabilities and
expenses (including, without limitation, expenses of investigation or
remediation, consulting or engineering fees and expenses and attorneys'
fees and expenses) of any nature or kind, known or unknown, fixed, accrued,
absolute or contingent, liquidated or unliquidated ("Damages") incurred or
suffered by any Buyer Indemnitees resulting from or arising out of (i) any
misrepresentation or breach of representation or warranty (each such
misrepresentation and breach, a "Warranty Breach") by Seller, (ii) any
breach of covenant or agreement made or to be performed by Seller pursuant
to this Agreement; provided that with respect to indemnification by Seller
for any Warranty Breach pursuant to this Section 10.02 other than those
contained in Sections 3.03, 3.14, 3.15 and 3.16, (A) Seller shall not be
liable unless the aggregate amount of Damages with respect to such Warranty
Breaches exceeds $250,000 and then Seller shall be liable only to the
extent of such excess and (B) in the absence of fraud on the part of
Seller, Seller's maximum liability for all such Warranty Breaches shall not
exceed the Purchase Price. For the purpose of determining whether any
Warranty Breach has occurred with respect to a claim for indemnification or
for the purposes of measuring Damages with respect to any Warranty Breach,
such representations and warranties shall be deemed to have been made
without any materiality, Material Adverse Effect or Material Adverse Change
qualifications contained therein.
(b) Subject to the other provisions of this Article 10,
Buyer hereby agrees to indemnify Seller and its Affiliates and their
respective officers, directors, managers, employees, Affiliates, agents,
advisors and representatives (Seller and such other entities and Persons
are hereinafter collectively referred to as "Seller Indemnitees"), against
and agrees to hold each of them harmless from any and all Damages incurred
or suffered by Seller Indemnitees resulting from or arising out of (i) any
Warranty Breach by Buyer, or (ii) except with respect to a breach of
Section 7.01(l), any breach of covenant or agreement made or to be
performed by Buyer pursuant to this Agreement; provided that with respect
to indemnification by Buyer for any Warranty Breach pursuant to this
Section 10.02, (A) Buyer shall not be liable unless the aggregate amount of
Damages with respect to such Warranty Breaches exceeds $250,000 and then
Buyer shall be liable only to the extent of such excess and (B) Buyer's
aggregate maximum liability for all such Warranty Breaches shall not exceed
the Purchase Price. For the purpose of determining whether any Warranty
Breach has occurred with respect to a claim for indemnification or for the
purposes of measuring Damages with respect to any Warranty Breach, such
representations and warranties shall be deemed to have been made without
any materiality, material adverse effect or material adverse change
qualifications contained therein.
Section 10.03 Procedures. (a) The party seeking
indemnification under Section 10.02 (the "Indemnified Party") agrees to
give reasonably prompt written notice to the party against whom indemnity
is sought (the "Indemnifying Party") of the assertion or commencement of
any Claim in respect of which indemnity may be sought under Section 10.02
and will provide the Indemnifying Party such information with respect
thereto that the Indemnifying Party may reasonably request. The parties
hereby acknowledge and agree that the failure by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its indemnification obligation under this Agreement except to the extent
that (i) such failure results in a failure of actual notice to the
Indemnifying Party and (ii) such Indemnifying Party is materially
prejudiced as a result of such failure to give notice.
(b) The Indemnifying Party shall be entitled to
participate in the defense of, investigation of, or corrective action
required to be undertaken in response to, any Claim asserted by a third
party, including any Governmental Authority ("Third Party Claim") and,
subject to the limitations set forth in this Section 10.03 or Section
10.04, shall be entitled to control and appoint lead counsel for such
defense, in each case at its expense.
(c) If the Indemnifying Party shall assume the control
and cost of the defense of any Third Party Claim in accordance with the
provisions of this Section 10.03 or Section 10.04, (i) the Indemnifying
Party shall obtain the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld) before entering into any
settlement of such Third Party Claim if the settlement does not provide for
the unconditional written release of the Indemnified Party from any and all
liabilities and obligations with respect to such Third Party Claim or if
the settlement imposes any form of relief other than monetary against the
Indemnified Party for which the Indemnified Party receives indemnification
hereunder and (ii) the Indemnified Party shall be entitled to participate
in the defense of such Third Party Claim and to employ separate counsel of
its choice for such purpose. The fees and expenses of such separate counsel
shall be paid by the Indemnified Party. In the event that the Indemnified
Party shall in good faith determine that the conduct of the defense of any
claim subject to indemnification hereunder or any proposed settlement of
any such claim by the Indemnifying Party might be expected to affect
adversely the ability of Buyer to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any
litigation relating thereto, the Indemnified Party shall have the right at
all times to take over and assume control over the defense, settlement,
negotiations or litigation relating to any such claim at the sole cost of
the Indemnifying Party, provided that if the Indemnified Party does so take
over and assume control, the Indemnified Party shall not settle such claim
or litigation without the written consent of the Indemnifying Party, such
consent not to be unreasonably withheld.
(d) Each party shall cooperate, and cause their
respective Affiliates to cooperate, in the defense or prosecution of any
Third Party Claim (including any counterclaims filed by Seller or Buyer)
and shall provide access to properties and individuals as reasonably
requested and furnish or cause to be furnished records, information and
testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be reasonably requested in connection therewith.
This cooperation shall be provided without cost or expense of the other
party other than reimbursement of out-of-pocket travel or similar expenses
subject to the provisions of Section 10.02.
Each Indemnified Party shall use reasonable efforts to
collect any amounts available under insurance coverage, or from any other
Person alleged to be responsible, for any Damages payable under Section
10.02.
Section 10.04 Calculation of Damages. The amount of any
Damages payable under Section 10.02 by the Indemnifying Party shall be net
of any amounts actually recovered by the Indemnified Party under applicable
insurance policies (but any such offset for amounts so recovered shall be
reduced by the present value of any insurance policy increases to
Indemnified Party relating thereto), from any other third party with
indemnification obligations or from any other Person alleged to be
responsible therefor. If the Indemnified Party receives any amounts under
applicable insurance policies, from any other third party with
indemnification obligations or from any other Person alleged to be
responsible for any Damages, subsequent to an indemnification payment by
the Indemnifying Party, then such Indemnified Party shall promptly
reimburse the Indemnifying Party for any payment made or expense incurred
by such Indemnifying Party in connection with providing such
indemnification payment up to the amount actually received by the
Indemnified Party (but any such offset for amounts so recovered shall be
reduced by the present value of any insurance policy increases to
Indemnified Party relating thereto) and net of any expenses incurred by
such Indemnified Party in collecting such amount.
Section 10.05 Dispute Resolutions. If the parties cannot
resolve any claim for indemnification within 30 days after the notification
of such claim pursuant to Section 10.03, excluding any Third Party Claim,
the parties agree to settle such claim by arbitration in accordance with
the then-prevailing Commercial Arbitration Rules of the American
Arbitration Association, as modified herein. The place of arbitration shall
be Wilmington, Delaware. There shall be three neutral and impartial
arbitrators and each arbitrator shall be a duly admitted and practicing
attorney with at least 10 years experience as an attorney in the field of
commercial law. Seller, on the one hand, and Buyer, on the other hand,
shall each appoint one arbitrator within 15 days after the commencement of
the arbitration and the two arbitrators selected shall select the third
arbitrator within 15 days of their appointment. The arbitrators shall
permit and facilitate such pre-hearing discovery and exchange of documents
and information to which the parties in writing agree or that the
arbitrators determine is relevant to the dispute between the parties and is
appropriate taking into account the needs of the parties and desirability
of making discovery expeditious and cost-effective. Any discovery permitted
hereunder shall be completed within 45 days from the date on which the
respondent(s) communicates its or their answer(s) to the claimant(s). The
arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. ss.ss. 1-16. Judgment upon the award of the arbitrators may be
entered in any court of competent jurisdiction. The decision of the
arbitrators shall be binding and nonappealable.
Section 10.06 Tax Treatment of Indemnification Payments.
Any indemnification payment made pursuant to Article 7 or this Article 10
shall be treated as an adjustment to the Purchase Price for Tax purposes.
ARTICLE 11
TERMINATION
Section 11.01 Grounds for Termination. This Agreement may
be terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by either Seller or Buyer if the Closing shall not
have been consummated on or before June 30, 2002 (the "Termination Date");
provided, however, that the terminating party may not exercise this right
if it or any of its Affiliates is in breach of its obligations under this
Agreement;
(c) by either Seller or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or Governmental Authority having
competent jurisdiction, or any Governmental Authority shall have adopted
any applicable state, federal or foreign law permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby.
(d) by Seller, so long as Seller is not then in breach of
its obligations under this Agreement, upon a breach of any covenant or
agreement on the part of Buyer set forth in this Agreement, or if any
representation or warranty of Buyer shall have been or become untrue, in
each case such that the conditions set forth in Section 9.03(a) would not
be satisfied; provided, however, that if any such breach is curable prior
to the Termination Date by Buyer through the use of its reasonable best
efforts, for so long as Buyer, following written notice with respect to
such breach from Seller, shall be using its reasonable best efforts to cure
such breach, Seller may not terminate this Agreement pursuant to this
Section 11.01(d); or
(e) by Buyer, so long as Buyer is not then in breach of
its obligations under this Agreement, upon a breach of any covenant or
agreement on the part of Seller set forth in this Agreement, or if any
representation or warranty of Seller shall have been or become untrue, in
each case such that the conditions set forth in Section 9.02(a) would not
be satisfied; provided, however, that if any such breach is curable prior
to the Termination Date by Seller through the use of his reasonable best
efforts, for so long as Seller, following written notice with respect to
such breach from Buyer, shall be using his reasonable best efforts to cure
such breach, Buyer may not terminate this Agreement pursuant to this
Section 11.01(e).
The party desiring to terminate this Agreement pursuant
to clauses 11.01(b), 11.01(c), 11.01(d) or 11.01(e) shall give notice of
such termination to the other party. If this Agreement is terminated as
provided herein: (i) upon written request therefor, Buyer will redeliver to
Seller all documents, work papers and other material of Seller or the
Company relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof; and (ii) all filings, applications
and other submissions made shall, to the extent practicable, be withdrawn
from the agency or other Person to which made.
Section 11.02 Effect of Termination. If this Agreement is
terminated as permitted by Section 11.01, such termination shall be without
liability of either party (or any stockholder, director, officer, employee,
Affiliate, agent, consultant or representative of such party) to the other
party to this Agreement; provided that if such termination shall result
from the (i) failure of either Buyer or Seller to fulfill a condition to
the performance of the obligations of the other party, (ii) failure to
perform a covenant or agreement of this Agreement or (iii) breach by either
Buyer or Seller hereto of any representation or warranty contained herein,
such party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure or breach. In the
event of the termination of this Agreement in accordance with Section
11.01, this Agreement shall thereafter become void and have no effect,
except for the obligations of the parties hereto contained in Section 6.02,
this Section 11.02 and Section 12.03.
ARTICLE 12
MISCELLANEOUS
Section 12.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given (i) by personal delivery to the
appropriate address as set forth below (or at such other address for the
party as shall have been previously specified in writing to the other
party), (ii) by reliable overnight courier service (with confirmation) to
the appropriate address as set forth below (or at such other address for
the party as shall have been previously specified in writing to the other
party), or (iii) by facsimile transmission (with confirmation) to the
appropriate facsimile number set forth below (or at such other facsimile
number for the party as shall have been previously specified in writing to
the other party) with follow-up copy by reliable overnight courier service
the next Business Day:
if to Buyer, to:
QuadraMed Corporation
22 Pelican Way
San Rafael, CA 94901
Attention: Mark N. Thomas
Chief Financial Officer
Fax: (415) 455-1463
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Attention: Paul T. Schnell
Fax: (212) 735-2000
if to Seller, to:
Gregory A. Schuenke
1700 Galli Drive
Eagle River, WI 54521
E-mail: gschuenke@aol.com
with a copy to:
O'Brien, Anderson, Burgy, Garbowicz & Brown LLP
Arbutus Court, Post Office Box 639
Eagle River, WI 54521
Attention: Dennis M. Burgy
Fax: (715) 479-3021
and
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Attention: Alan J. Berkeley
Fax: (202) 778-9100
All such notices, requests and other communications shall
be deemed received on the date of receipt by the recipient thereof if
received prior to 5 p.m. in the place of receipt and such day is a Business
Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
Section 12.02 Amendments and Waivers. (a) Any provision
of this Agreement may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed, in the case of an amendment, by
Seller and Buyer, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 12.03 Expenses. Except as otherwise provided in
Section 11.02 hereof, all costs and expenses incurred in connection with
this Agreement, the Employment Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such cost or
expense, except that Seller shall pay all costs and expenses incurred by
Seller or the Company in connection with this Agreement, the Employment
Agreement and the transactions contemplated hereby and thereby, other than
the fees and expenses of Reach & Schwaiger, Ltd. incurred by the Company
prior to the Closing Date which shall be paid by the Company.
Section 12.04 Successors and Assigns; Third Party
Beneficiaries. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided that Seller and Buyer, respectively, may
not assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party, except that
Buyer may assign its right and delegate its duties under this Agreement in
whole or in part to one or more of its Affiliates but no such assignment
shall relieve Buyer of its obligations hereunder. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person or persons any rights, benefits, or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 12.05 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware without regard to principles of conflicts or choice of laws or any
other law that would make the laws of any other jurisdiction other than the
State of Delaware applicable hereto.
Section 12.06 Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. Subject to Section 10.6
herein, each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State
of Delaware and of the United States of America located in Wilmington,
Delaware for any litigation arising out of or relating to this Agreement
and the transactions contemplated hereby (and agrees not to commence any
litigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail
to its respective address shall be effective service of process for any
litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying
of venue of any litigation arising out of this Agreement or the
transactions contemplated hereby in the Delaware Courts and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such litigation brought in any such court has been
brought in an inconvenient forum. Any judgment upon any final award under
this Agreement may be entered in any court of competent jurisdiction.
Section 12.07 Counterparts. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
Section 12.08 Entire Agreement. This Agreement (including
the Schedules and Exhibits hereto), and the documents, agreements,
certificates, and instruments referred to herein and therein, and the
Confidentiality Agreement constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and supersede
all prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter of this Agreement. The
Confidentiality Agreement shall remain in full force and effect after the
execution hereof.
Section 12.09 Captions. The captions herein are included
for convenience of reference only and shall be ignored in the construction
or interpretation hereof.
Section 12.10 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be illegal, invalid, void, unenforceable
or against its regulatory policy, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 12.11 Specific Performance. Seller and Buyer
acknowledge and agree that in the event of any breach of this Agreement,
each non-breaching party would be irreparably and immediately harmed and
could not be made whole by monetary damages. Therefore, each party hereto
agrees to the granting of specific performance of this Agreement and
injunctive or other equitable relief in favor of the other party as a
remedy for any such breach without proof of actual damages. Seller and
Buyer (a) hereby waive, in any action for specific performance, the defense
of adequacy of a remedy at law and any requirement to establish actual
damages or secure or post any bond in connection with any such remedy and
(b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this
Agreement in any action instituted in accordance with this Section 12.11.
The remedy provided for in this Section 12.11 shall not be deemed to be the
exclusive remedy for a party's breach of this Agreement, but shall be in
addition to all other remedies available at law or equity to the other
party.
Section 12.12 Guaranty. QuadraMed Corporation hereby
unconditionally and irrevocably guarantees to Seller the full and timely
payment, performance and observance of all of the terms, covenants and
conditions, whether monetary or non-monetary, to be paid, performed and
observed by Buyer under each and every provision of this Agreement
(collectively, the "QuadraMed Operating Corporation Obligations"). This
Guaranty is an absolute, present, continuing, unlimited and unconditional
guaranty and undertaking of payment, performance and observance of all the
QuadraMed Operating Corporation Obligations, and, without limitation, is in
no way conditioned or contingent upon any effort or attempt by Seller first
to seek performance or payment from QuadraMed Operating Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
QUADRAMED OPERATING CORPORATION
By: /s/ Michael H. Lanza
--------------------------------
Name: Michael H. Lanza
Title: Executive Vice President
QUADRAMED CORPORATION
By: /s/ Lawrence P. English
--------------------------------
Name: Lawrence P. English
Title: Chairman & Chief
Executive Officer
GREGORY A. SCHUENKE
/s/ Gregory A. Schuenke
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EXHIBIT 99.1
QUADRAMED CORPORATION
(Logo)
FOR IMMEDIATE RELEASE CONTACT:
Mark N. Thomas, 415/482-2270 (CFO)
Michael H. Lanza, 415/482-2270 (EVP)
QUADRAMED ACQUIRES PHARMACY DATA SYSTEMS
--Deal Integrates Two KLAS Award Winning Systems--
San Rafael, California, June 12, 2002 - QuadraMed Corporation (Nasdaq:
QMDC) announced today that it has acquired all of the stock of Pharmacy
Data Systems, Inc., (PDS), a widely recognized leader in advanced pharmacy,
nursing, and physician information systems, for approximately $10.7 million
in cash. PDS's operations and employees will be integrated immediately into
QuadraMed and will form the core of the newly created Affinity Pharmacy
Division.
"The acquisition of PDS is a key component of QuadraMed's growth strategy.
We have been evaluating pharmacy systems for some time. With PDS, we have
found a pharmacy system that enables us to immediately augment QuadraMed
Affinity's clinical capabilities and, particularly, our new Computerized
Physician Order Entry product. Further, PDS's client base strengthens our
market position. The transaction will be immediately accretive on a cash
basis by $0.01 per share in 2002," said Lawrence P. English, Chairman and
CEO.
"With PDS's operations and our existing clinical care management products,
QuadraMed Affinity software can administer the entire medication management
process from ordering through dispensing. We are very excited about the
integration of our Affinity product that has won the KLAS award in Acute
Care Registration, Scheduling, and Patient Accounting with the Best in KLAS
pharmacy product," continued English.
Pharmacy Data Systems, Inc., develops and installs advanced pharmacy,
nursing, and physician information systems designed to reduce medication
errors, control costs, and improve patient care. PDS has consistently won
praise from industry groups for its pharmacy system, most recently ranking
number one in the KLAS customer rating survey. Headquartered in Eagle
River, Wisconsin, PDS has installed more than 235 systems, nationally and
internationally.
About QuadraMed
QuadraMed is dedicated to developing information technology and providing
consulting services that help healthcare professionals deliver outstanding
patient care with optimum efficiency. Offering real-world solutions for
every aspect of acute care information management, QuadraMed has four main
product lines: Affinity(R) Healthcare Information System, Quantim(R) Health
Information Management Software and Services, Complysource(R) Compliance
Solutions, and Chancellor(TM) Financial Products and Services. Behind our
products and services are nearly 1000 professionals whose healthcare
experience has earned QuadraMed the trust and loyalty of its many
customers. To find out more about QuadraMed, visit www.quadramed.com.
(more)
Risks Associated With Forward-Looking Statements
Forward-looking statements that are subject to risks and uncertainties are
made in this press release. These statements are based on the beliefs and
assumptions of QuadraMed's management. Forward-looking statements include
information concerning possible or assumed actions, events, or results of
QuadraMed's operations. These statements are not guarantees of performance.
Accordingly, QuadraMed and its management claim safe-harbor for all
forward-looking statements under the Private Securities Litigation Reform
Act of 1995.
For a listing of risks and uncertainties that could cause QuadraMed's
actual results to differ from these forward-looking statements, investors
should refer to QuadraMed's annual report (Form 10K) and subsequent filings
(Form 10Q) filed with the U.S. Securities and Exchange Commission. These
filings can be accessed through the Investor Relations section of
QuadraMed's website, www.quadramed.com. They also may be accessed through
the EDGAR Database section of the U.S. Securities and Exchange Commission
website, www.sec.gov. QuadraMed's EDGAR Central Index Key Number is
0001018833.
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QuadraMed, Affinity, Quantim, and Complysource are registered trademarks of
QuadraMed Corporation. Chancellor is a trademark of QuadraMed Corporation.
All other trademarks and registered trademarks are the properties of their
respective holders.
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