Exhibit 2.4
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AGREEMENT FOR PURCHASE
AND SALE OF ASSETS
by and among
HARRIS CHAPMAN,
an Florida corporation;
and
RICHARD E. KRISTENSEN,
the sole stockholder thereof;
and
TIER TECHNOLOGIES, INC.,
a California corporation;
Dated as of March 25, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS 1..................................................... 1
ARTICLE 2 PURCHASE AND SALE OF ASSETS........................................ 6
2.1 Purchase and Sale of Assets............................................ 6
2.2 Seller's Liabilities................................................... 7
2.3 Consents; Assignments.................................................. 7
2.4 Purchase Price and Payment............................................. 8
2.5 Continuing Business Profit Center...................................... 9
2.6 Payments in Advance or Arrears; Collection on Receivables.............. 11
2.7 Allocation............................................................. 11
2.8 Entitlements........................................................... 11
2.9 Sales Taxes............................................................ 12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER........................................................ 12
3.1 Organization and Authority............................................. 12
3.2 Absence of Conflicts................................................... 12
3.3 Power and Authority.................................................... 13
3.4 Financial Statements; Forecasts........................................ 14
3.5 Title to Property; Encumbrances........................................ 14
3.6 Receivables and Payables............................................... 14
3.7 Intangible Assets...................................................... 14
3.8 Insurance.............................................................. 15
3.9 Employees and Labor Matters; Contractors............................... 16
3.10 Litigation............................................................. 16
3.11 Income and Other Taxes................................................. 16
3.12 Employee Benefit Matters............................................... 17
3.13 No Undisclosed Liabilities............................................. 18
3.14 Permits, Licenses, Etc................................................. 18
3.15 Consents............................................................... 18
3.16 Contracts.............................................................. 18
3.17 Compliance with Law.................................................... 19
3.18 Absence of Certain Changes............................................. 19
3.19 Warranties............................................................. 19
i.
Table of Contents
Page
3.20 Affiliations........................................................... 19
3.21 Brokers' Fees.......................................................... 19
3.22 Solvency, Etc.......................................................... 20
3.23 Year 2000.............................................................. 20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER........................ 21
4.1 Organization and Good Standing......................................... 21
4.2 Absence of Conflicts................................................... 21
4.3 Power and Authority.................................................... 21
4.4 Brokers' Fees.......................................................... 21
4.5 Disclosure; Survival................................................... 22
ARTICLE 5 COVENANTS OF SELLER................................................ 22
5.1 Access................................................................. 22
5.2 Obtaining Approvals.................................................... 22
5.3 Tax Assessments and Audits............................................. 22
5.4 Schedules.............................................................. 23
5.5 Satisfaction of Conditions Precedent................................... 23
5.6 Handling of Prior Claims............................................... 23
ARTICLE 6 COVENANTS OF PURCHASER............................................. 23
6.1 Compliance with Legal Requirements..................................... 23
6.2 Obtaining Approvals.................................................... 23
6.3 Satisfaction of Conditions Precedent................................... 23
ARTICLE 7 CONDUCT OF BUSINESS PENDING CLOSING DATE........................... 24
7.1 Good Standing.......................................................... 24
7.2 Ordinary Course........................................................ 24
7.3 Accounting............................................................. 24
7.4 Indebtedness........................................................... 24
7.5 Compliance with Legal Requirements..................................... 24
7.6 Competing Offers; Merger or Liquidation................................ 24
7.7 Disposition of Assets.................................................. 25
7.8 Discharge.............................................................. 25
7.9 Modification or Breach of Agreements; New Agreements................... 25
ii.
Table of Content
Page
7.10 Inconsistent Action................................................... 25
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING DATE............................... 25
8.1 Conditions of Purchaser............................................... 25
8.2 Conditions of Seller.................................................. 27
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER.................................. 28
9.1 Termination........................................................... 28
9.2 Effect................................................................ 28
9.3 Amendment and Waiver.................................................. 28
ARTICLE 10 POST-CLOSING MATTERS............................................... 29
10.1 Non-Compete, Non-Solicitation and Trade Secrets....................... 29
10.2 Indemnification....................................................... 30
10.3 Arbitration........................................................... 33
10.4 Additional Financial Reporting........................................ 33
10.5 Record Maintenance.................................................... 33
10.6 Business Name License................................................. 34
ARTICLE 11 GENERAL............................................................ 34
11.1 Complete Agreement.................................................... 34
11.2 Expenses.............................................................. 34
11.3 Further Action........................................................ 34
11.4 Notices............................................................... 34
11.5 Publicity............................................................. 35
11.6 Injunctive Relief; Indemnification.................................... 35
11.7 Attorneys' Fees....................................................... 36
11.8 Construction of Agreement............................................. 36
11.9 Severability.......................................................... 36
11.10 Assignment; Successors and Assigns.................................... 36
11.11 Time of Essence....................................................... 36
11.12 No Obligations to Third Parties....................................... 36
11.13 Governing Law......................................................... 36
11.14 Counterparts.......................................................... 37
iii.
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This Agreement for Purchase and Sale of Assets (the "Agreement") is
made as of the 25/th/ day of March, 2000, by and among Harris Chapman., a
Florida corporation ("Seller"), Richard E. Kristensen, the sole shareholder of
Seller (the "Shareholder") and Tier Technologies, Inc., a California corporation
("Purchaser" or "Tier").
Recitals
A. Seller is a management services firm.
B. Seller intends to sell and Purchaser intends to purchase the
business of Seller as it relates to management consulting.
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby mutually covenant and
agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms have the following
respective meanings:
Action has the meaning ascribed thereto in Section 3.10 or Section
10.2 hereof as required by context.
Acquisition means the transaction contemplated by this Agreement.
Balance Sheet has the meaning ascribed thereto in Section 3.4 hereof.
Business means the management consulting business of Seller.
Business Assets means all the assets used in or forming part of the
Business and includes, but is not limited to:
(a) the Client Contracts;
(b) the Business Records;
(c) the Intellectual Property Rights;
(d) the Intangible Assets;
(e) the Proposals; and
(f) Work in Progress.
The term Business Assets shall not include the Excluded Assets.
1.
Business Day means a day on which banks are open for business in San
Francisco, California.
Business Records means all records in relation to the Business,
including the following:
(a) correspondence with Clients in relation to Client Contracts;
(b) customer lists for the Business for the three years prior to
the Effective Date;
(c) supplier lists for the Business for the three years prior to
the Effective Date;
(d) records of Client Contracts and Proposals;
(e) records of Receivables, including history of payments
thereon;
(f) computer programs, databases and software used in the
Business;
(g) originals or copies of ledgers, journals and books of
account for the Business;
(h) information on the marketing of any services provided in the
Business;
(i) results of research carried out for or by, and other know-
how used in, the Business; and
(j) all other documents and records in respect of the Business
or the Business Assets.
Clients means all the clients of Seller in relation to the Business
including those set forth in Schedule 1.1(a) hereto.
Client Contracts means all the contracts in relation to the Business
between the Seller and Clients listed on Schedule 1.1(b) hereto including, on a
contract by contract basis, all existing accounts and account information and a
schedule of all Deferred Revenue, Receivables and Work in Progress as of the day
immediately preceding the Effective Date.
Client Novation Agreements means agreements in substantially the form of
Exhibit 1.1(a) hereto.
Closing Date means March 31, 2000, or such other date as the parties may
agree.
Closing Payment means the amount set forth in Section 2.4, a portion of
which shall be placed in escrow pursuant to Section 2.4.
Code means the Internal Revenue Code.
2.
Continuing Business means the activities of Purchaser on and after the
Effective Date arising out of or employing the Business Assets and the SCA
Business Assets.
Continuing Business Profit Center has the meaning provided in Section
2.5(a).
Contract Year means a period of twelve (12) consecutive calendar months
ending, in the case of the First Contract Year, on the date immediately
preceding the first anniversary of the Effective Date, in the case of the Second
Contract Year, on the date immediately preceding the second anniversary of the
Effective Date, in the case of the Third Contract Year, on the date immediately
preceding the third anniversary of the Effective Date.
Copyrights means all the copyrights of the Seller in relation to the
Business, including those set forth in Schedule 1.1(c) hereto.
Damages has the meaning set forth in Section 10.2(a) hereto.
Deferred Revenue means any prepayment for services in relation to the
Business to be performed on or after the Effective Date.
EBT means the earnings before income taxes of the Continuing Business and
before (i) any goodwill amortization charges arising on Purchaser's books from
purchase accounting treatment of the Acquisition, and (ii) any cost of capital
financial charges related exclusively to the Acquisition. For purposes of
calculating EBT, Purchaser may charge a corporate overhead allocation to the
Continuing Business, but in no case will the Purchaser be entitled to make this
overhead allocation if general and administrative expenses (excluding
nonbillable wages and including the overhead allocation) will exceed 15% of
total revenue of the Continuing Business.
Effective Date means March 1, 2000, or such other date as the parties may
agree.
Employees means the employees of Seller in relation to the Business as set
forth in Schedule 3.9 hereto.
Escrow Agent means Imperial Bank.
Escrow Cash has the meaning ascribed thereto in Section 2.4(b) hereto.
Escrow Agreement means an agreement between and among the Escrow Agent and
the Parties hereto in substantially the form of Exhibit 1.1(b) hereto.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Assets means the following assets of the Seller:
(a) cash, including, but not limited to, funds held with any
bank or financial institution to the credit of Seller and any cash on hand and
payments in transit to Seller, in each case, on the day preceding the Effective
Date;
3.
(b) any other contracts of Seller not specifically assigned to
or assumed by Purchaser hereunder; and
(c) all other assets of Seller related to Seller's other
business (other than any assets specifically identified as Business Assets).
First Level Performance Targets means the performance targets referred to
in Section 2.4(g)(i) hereof.
GAAP means United States generally accepted accounting principles applied
on a consistent basis from period to period.
Goodwill means the goodwill in respect of the Business and includes the
exclusive right for Purchaser to represent itself as carrying on the Business as
the successor of Seller.
Governmental Agency means any government or governmental, semi-
governmental, administrative, fiscal or judicial body, department, commission,
authority, tribunal, agency or entity in any part of the world.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Immediately Available Funds means cash or certified or official bank check
or bank wire.
Intangible Assets means, collectively, all Business Assets other than such
assets as constitute real or tangible personal property.
Intellectual Property Rights means the rights and interests of the Seller
in:
(a) all patents, Trademarks, trade names, service marks, trade
dress, domain names and Copyrights and any renewal rights therefor, mask works,
schematics, software, firmware, technology, manufacturing processes, supplier
lists, customer lists, trade secrets, know-how, moral rights and applications
and registrations for any of the foregoing;
(b) all documents, records and files relating to design, end
user documentation, manufacturing, quality control, sales, marketing or customer
support for all intellectual property of the type described in clause (a) above;
and
(c) all license and similar rights in any third party product or
any third party intellectual property of the types described in clauses (a) and
(b) above;
that are owned or held by Seller and that are being or have been used or are
currently under development for use in the Business as it has been, is currently
or is currently planned to be conducted.
Liens means any liens, mortgages, charges, security interests, claims,
liabilities, restrictions, easements and encumbrances of any kind or nature
whatsoever.
4.
Material Adverse Effect has the meaning ascribed thereto in Section 3.10
hereof.
Month means calendar month.
Payables means all the accounts payable and accrued liabilities of Seller
arising out of the activities of Seller as would be represented in due course as
of the date immediately preceding the Effective Date by journal entry or
otherwise as appropriate, whether or not yet so recorded.
Permits means all zoning and other franchises, licenses, permits (including
conditional use and other similar permits), certificates, authorizations, rights
and other approvals of governmental bodies, agencies and instrumentalities
thereof necessary to conduct the Business as currently conducted.
Permitted Liens means those Liens described on Schedule 1.1(d).
Person means any natural person, corporation, business trust, association,
partnership, limited liability company, joint venture, governmental entity or
other entity.
Post-Closing Payment means the amount set forth in Section 2.4(b), a
portion of which shall be placed in escrow pursuant to Section 2.4(b).
Prior Claim has the meaning ascribed thereto in Section 5.6 hereof.
Properties means the properties leased under the Property Leases.
Proposal means all proposals for customer relationships, including those
set forth in Schedule 1.1(e) hereto.
Receivables means all trade accounts receivable arising out of (and all
notes and other evidence of indebtedness of and rights to receive payments with
respect to) services provided by the Continuing Business on and after the
Effective Date whether or not recorded in the accounting records of Seller.
Revenue means revenue (net of discounts) earned by the Continuing Business
for services in accordance with GAAP applied on a consistent basis excluding any
reimbursed expenses.
SCA means The SCA Group, Inc., an Illinois corporation.
SCA Asset Purchase Agreement means that certain Agreement for Purchase and
Sales of Assets dated as of March 9, 2000 by and among Purchaser, SCA and George
Stout, the sole shareholder of SCA.
SCA Business Assets means the assets to be acquired by Purchaser pursuant
to that certain Agreements for Purchase and Sale of Assets dated as of March 9,
2000 by and among Purchaser, SCA and George Stout, the sole shareholder of SCA.
5.
SCA Key Employee Contracts means the contracts for the employment by the
Purchaser of the Key Employees in substantially the form of Exhibit 1.1(d)
hereto.
SCA Key Employees means George R. Stout, Richard E. Kristensen, Michael S.
Steele, R. J. Bartholomew, Roger Giesey, Veronica A. Dunleavy, Thomas Greedy,
Deni Elwood, Donald W. Keene and David Schmidt.
SEC means the U.S. Securities and Exchange Commission.
Second Level Performance Targets means the performance targets referred to
in Section 2.4(b)(ii) hereof.
Securities Act means the Securities Act of 1933, as amended.
Shareholder means Richard Kristensen.
Tax or Taxes means any tax, levy, charge, fee, deduction or withholding
which is assessed, levied, imposed or collected by any Governmental Agency and
includes, but is not limited to, any interest, fine, penalty, charge, fee or
other amount imposed in respect of the above, whether in the nature of an
income, property, sales or use tax.
Tier means Tier Technologies, Inc., a California corporation.
Trademarks means all the trademarks and service marks of the Business,
including those set forth in Schedule 1.1(f) hereto.
Work in Progress means all (i) work done by the Continuing Business and
(ii) work done by Seller and associated with the Business prior to the Effective
Date but not yet billed as of the Closing Date.
ARTICLE 2
Purchase and Sale of Assets
2.1 Purchase and Sale of Assets.
(a) Subject to the terms and conditions set forth herein, on the
Closing Date, Seller shall sell, convey, assign, transfer and deliver to
Purchaser, or cause to be sold, conveyed, assigned and delivered to Purchaser,
and Purchaser shall purchase from Seller, free and clear of all liabilities and
Liens, all Seller's right, title and interest in and to the Business Assets. All
such transactions shall be consummated at a closing beginning at 9:00 a.m. on
the Closing Date at the offices of Cooley Godward llp, 4365 Executive Drive, San
Diego, California or such other place and time as mutually agreed by the
parties.
(b) Seller shall at the closing (and thereafter as may be reasonably
requested by Purchaser and at no additional cost to Purchaser) deliver all
instruments of assignment, transfer and conveyance necessary to vest Purchaser
with good title to the Business Assets as
6.
contemplated hereby and shall assist Purchaser in registering such assignments,
where appropriate, with the Patent and Trademark Office and the Copyright
Office.
(c) Purchaser shall, provided that closing occurs, be deemed to have
assumed effective managerial and operational control of the Continuing Business
as of the Effective Date, and credit and responsibility for the various items of
revenue and expense of the Continuing Business accruing after the Effective Date
shall be deemed for all purposes and in all respects to belong to Purchaser.
2.2 Seller's Liabilities. Except as specifically otherwise undertaken by
Purchaser with respect to contracts and leases specifically assigned to and
accepted by Purchaser from and after the Effective Date, Purchaser shall not
assume or have any responsibility for any debt, liability, obligation or
commitment of any nature, whether now or hereafter existing, absolute,
contingent or otherwise, known or unknown, relating to Seller, the Business
Assets or the Business, including, without limitation, for: (i) any liability of
Seller for any Tax with respect to the Business Assets or the Business
associated with the operation of the Business prior to the Effective Date and
for failure to appropriately report and withhold employee income tax prior to
the Closing Date; (ii) any liability of Seller to third parties resulting from
the negotiation of this Agreement and the consummation of the transactions
contemplated hereby; (iii) Payables; (iv) the Excluded Assets; (v) any liability
of Seller or Shareholder to any former shareholder of the Seller; and (vi) any
employee, Consultant or independent contractor liabilities associated with the
operation of the Business prior to the Effective Date.
2.3 Consents; Assignments.
(a) Seller, Shareholder and Purchaser shall use their respective
commercially reasonable efforts to obtain any consent, approval or amendment
required to novate and/or assign the Property Leases, Client Contracts,
Contractor Contracts, Assets Leases, Contracts and other rights, licenses or
contracts of any nature whatsoever constituting Business Assets; provided,
however, that, except for filing and other administrative charges, Purchaser
shall not be obligated to pay any consideration therefor to third parties from
whom consents, approvals and amendments are requested.
(b) In the event that the Seller is unable to obtain any such
required consent, approval or amendment, or if any attempted assignment would be
ineffective or would adversely affect the rights of Seller with respect to any
Business Asset so that Purchaser would not in fact receive all Seller's rights
with respect to such Business Asset, Purchaser may, at its election, cause
Seller to take all necessary action as permitted under the terms of the
underlying agreements in order to arrange to the extent possible for Purchaser
to obtain the benefits and assume the obligations with respect to such
agreements in accordance with this Agreement, including sub-contracting,
sublicensing or subleasing to Purchaser.
(c) Seller shall, without further consideration, remit within two (2)
business days of its receipt thereof to Purchaser all monies, rights and other
considerations received by Seller, along with all vendor and other invoices for
monies due, in respect to Purchaser's performance of obligations with respect to
the Business. In addition, Purchaser shall indemnify Seller against all losses,
costs, payments, liabilities, charges and expenses incurred by Seller with
7.
respect to such obligations after Purchaser has assumed performance thereof.
Purchaser shall remit to Seller (or pay directly) all amounts due under
contracts to third parties.
(d) If and when any such consent shall be obtained or such agreement,
lease, license or other right shall otherwise become assignable or able to be
novated, Seller shall promptly assign and novate all its rights and obligations
thereunder to Purchaser without payment of further consideration. Purchaser
shall, without the payment of any further consideration therefor, assume such
rights and obligations and Seller shall be relieved of any and all liability
with respect thereto. None of the provisions of this Section shall be construed
so as to deprive Purchaser of its right pursuant to Section 8.1 hereof to
require consents and novations in appropriate cases as a condition to its
obligation to consummate the transactions contemplated hereby.
2.4 Purchase Price and Payment. Subject to the terms and conditions of
this Agreement, the aggregate purchase price to be paid by Purchaser to Seller
for the Business Assets shall be computed and paid as follows:
(a) Five Hundred Thousand Dollars ($500,000) (the "Closing Payment").
On the Closing Date, Purchaser shall pay the Closing Payment in Immediately
Available Funds (i) first, to deposit with the Escrow Agent Fifteen Thousand
Dollars ($15,000) of the Closing Payment, and (ii) second, to pay the remainder
of the Closing Payment.
(b) Five Hundred Fifty Thousand Dollars ($550,000) (the "Post-Closing
Payment") payable on the date that is one hundred twenty (120) days following
the Closing. On the date that is one hundred twenty (120) days following the
Closing Date, Purchaser shall pay the Post-Closing Payment in Immediately
Available Funds (i) first to deposit with the Escrow Agent Fifteen Thousand
Dollars ($15,000) of the Post-Closing Payment (this $15,000 deposit, together
with the cash deposited with the Escrow Agent at the time of Closing is referred
to herein as the "Escrow Cash"), and (ii) to pay the remainder of the Post-
Closing Payment to the Seller. Escrow Agent shall hold the Escrow Cash in an
interest-bearing escrow account and shall disburse funds therefrom in accordance
with the Escrow Agreement. Seller acknowledges that its legal and beneficial
interests in the Escrow Cash are subject to the terms of this Agreement and the
Escrow Agreement.
(c) Six Hundred Thousand Dollars ($600,000) in Immediately Available
Funds payable in installments of Fifty Thousand Dollars ($50,000) on a quarterly
basis over three years from the Closing Date in arrears.
(d) One Hundred Thirty-Three Thousand Dollars ($133,000) in
Immediately Available Funds payable on the date that is ninety (90) days
following the end of the First Contract Year.
(e) One Hundred Thirty-Three Thousand Dollars ($133,000) in
Immediately Available Funds payable on the date that is ninety (90) days
following the end of the Second Contract Year.
8.
(f) One Hundred Thirty-Three Thousand Dollars ($133,000) in
Immediately Available Funds payable on the date that is ninety (90) days
following the end of the Third Contract Year.
(g) The following contingent amounts payable if Purchaser, as it
conducts the Continuing Business, attains:
(i) the First Level Performance Targets, such amounts set
forth in Schedule 2.4(g)(i) hereto; and
(ii) the Second Level Performance Targets, such amounts set
forth in Schedule 2.4(g)(ii) hereto.
Within ninety (90) days following the end of each of the First Contract Year,
the Second Contract Year and the Third Contract Year, Purchaser shall pay to
Seller in Immediately Available Funds any amounts due to Seller in accordance
with Sections 2.4(g)(i) and 2.4(g)(ii) hereof.
2.5 Continuing Business Profit Center. During the period beginning on the
Effective Date and ending on the third anniversary of the Effective Date, the
Purchaser agrees with Seller as follows:
(a) Purchaser shall account for the Continuing Business as a separate
profit center (the "Continuing Business Profit Center").
(b) The primary duties and responsibilities (at least 75% of their
work time) of the SCA Key Employees as employees or consultants to Purchaser or
any affiliate of Purchaser shall be the management or operation of the
Continuing Business Profit Center.
(c) Within 180 days of the Closing Date, Purchaser and Richard E.
Kristensen, George R. Stout and Michael S. Steele shall use commercially
reasonable efforts to agree upon a business plan for the Continuing Business
Profit Center (the "Business Plan"). Thereafter, so long as one or more SCA Key
Employees remains an employee of Purchaser, the SCA Key Employees shall have
reasonable autonomy to operate the Continuing Business Profit Center in
accordance with the Business Plan and the SCA Key Employee Contracts. In the
event that the Continuing Business Profit Center (i) fails to meet a quarterly
revenue target set forth in the Projections by 10% or more for two consecutive
quarters, or (ii) generates a loss for any quarter, Purchaser shall have the
right to amend the Business Plan in its sole discretion.
(d) Prior to the adoption of the Business Plan, Purchaser shall
provide adequate funding to the Continuing Business Profit Center to permit it
to operate in a manner consistent with the Projections. After the adoption of
the Business Plan, Purchaser shall provide funding to the Continuing Business
Profit Center in accordance with the Business Plan.
(e) Purchaser shall not take any action which materially adversely
affects the ongoing viability of the Continuing Business Profit Center, unless
the Continuing Business Profit
9.
Center (i) fails to meet a quarterly revenue target set forth in the Projections
by 10% or more for two consecutive quarters, or (ii) generates a loss for any
quarter.
(f) In the event that Purchaser breaches its obligations set forth in
Section 2.6(e) or in the event of a Change of Control (as defined below) of
Purchaser, the First Level Performance Targets for the year in which such event
occurs and the remaining Contract Years shall be deemed achieved for purposes of
Section 2.4(g)(i) and the payments shall be made on the schedule set forth in
Section 2.4(g)(i). For purposes of this Section 2.5(f), "Change of Control"
shall mean (i) the acquisition of the Purchaser by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
Purchaser); or (ii) a sale of all or substantially all of the assets of the
Purchaser; unless the Purchaser shareholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Company's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity.
(g) In order to facilitate the calculation of the Revenue and EBT of
the Continuing Business, the Purchaser shall maintain adequate accounting
records for the Continuing Business Profit Center that permit calculation of the
Revenue and EBT of the Continuing Business, such records and calculations to be
made available for review at the end of the relevant Contract Year.
(h) Within forty-five (45) days after the end of each fiscal quarter
(other than the quarter ended September 30) of Purchaser or within ninety (90)
days after the end of the quarter ended September 30, but in no event earlier
than a public release of earnings data for Purchaser for such quarter, Purchaser
shall provide to Seller at the address set forth in Section 11.4 hereto a
statement of unaudited Revenues and EBT that specifies in reasonable detail the
components of Cost of Revenue (the "Quarterly Statement") for the Continuing
Business Profit Center for the quarter then ended. Such Quarterly Statement
represents preliminary information and shall be subject to adjustment.
(i) Purchaser shall prepare and furnish to Seller as soon as
available and in any case within sixty (60) days after the end of each Contract
Year a certificate of the Chief Financial Officer of Purchaser certifying as to
the Revenue and EBT of the Continuing Business Profit Center for such Contract
Year.
(j) The calculation set forth in 2.5(i) above shall be binding on the
Seller unless Seller gives written notice to the Purchaser of a disputed amount
within twenty (20) Business Days after the delivery of the relevant calculation
in which case the provisions of Section 10.3 hereof shall apply. In the event
that Purchaser's independent auditors require an audit adjustment that impacts
the Revenue and EBT calculations for a particular Contract Year subsequent to
the payment by Purchaser of amounts pursuant to Section 2.4(g), such that Seller
should not have been entitled to payment under Section 2.4(g), Purchaser shall
notify Seller in writing of such overpayment. Within thirty (30) days of receipt
of such written notice, Seller shall pay Purchaser the amount of such
overpayment. If Seller fails to pay Purchaser the amount
10.
of such overpayment, Purchaser shall have the right to seek indemnification for
the amount of such overpayment pursuant to Section 10.2.
2.6 Payments in Advance or Arrears; Collection on Receivables.
(a) On the Closing Date:
(i) the Purchaser must pay to the Seller, promptly upon receipt
of adequate supporting documentation, (A) any payments in advance made by the
Seller for goods or services to be supplied to the Continuing Business in the
ordinary course of ordinary business after the Effective Date to the benefit of
Purchaser; and (B) any other payments in advance made by the Seller in respect
of the Continuing Business in the ordinary course of ordinary business, the
benefit of which is received by the Continuing Business after the Effective
Date; and
(ii) the Seller must pay to the Purchaser, promptly upon receipt
of adequate supporting documentation, any payments in advance received by the
Seller for goods or services to be supplied in respect of the Continuing
Business after the Effective Date.
(b) If the Purchaser makes:
(i) any payment in arrears for goods or services supplied to the
Business before the Effective Date; or
(ii) any other payment in arrears in respect of the Business
where the benefit was received or the liability was incurred by the Business
before the Effective Date, then the Seller must reimburse the Purchaser promptly
after the Seller receives evidence of payment.
2.7 Allocation. Within sixty (60) days of the Closing Date, the Purchaser
shall propose an allocation of the purchase price of the Business Assets and the
other rights conveyed hereunder among the Business Assets as set forth in the
Effective Date Balance Sheet, to then be agreed upon by the parties within sixty
(60) days following the Closing Date. Such allocation shall be adopted for all
purposes related to the sale of the Business Assets hereunder, and neither
Seller nor Purchaser shall file a tax return or otherwise take a position for
tax purposes, or otherwise, inconsistent with this allocation. Any consideration
becoming due after the Closing Date shall be allocated among the Business Assets
in the same proportions as consideration is allocated to them in said schedule
subject to the fair market value limitations of Section 1060 of the Internal
Revenue Code as they relate to the classes of Business Assets.
2.8 Entitlements. During the period between the date hereof and the
Closing Date, Purchaser shall have the right to conduct an investigation of the
Business Assets and the Business for the purpose of analyzing the Continuing
Business. Seller agrees that the rights granted to Purchaser herein and the
results of Purchaser's inspection shall not relieve Seller of any obligations
Seller may have under any other provisions of this Agreement or under other
documents, instruments or agreements entered into concurrently herewith or
contemplated hereby, or implied by law, nor shall they constitute a waiver by
Purchaser of the right to enforce any of the same.
11.
2.9 Sales Taxes. The parties hereto acknowledge and agree that, while they
will use their best efforts lawfully to avoid imposition of such taxes,
including (as shall be mutually agreeable to Purchaser and Seller) use of the
load & go or remote telecommunications means for delivery of any source code
included in the Business Assets, any and all sales taxes arising out of the
transfer of the Business Assets from Seller to Purchaser shall be payable by
Seller. As used in this Section:
(a) The term "load & go" means that Seller shall transfer the source
code by directly installing a copy thereof on Purchaser's computer. Such
installation would be accomplished by Seller travelling to Purchaser's place of
business and transferring the source code from Seller's portable storage, for
example, floppy disk or CD-ROM, media to Purchaser's computer's permanent
storage media, for example, a fixed drive. Seller shall not deliver any tangible
personal property to Purchaser as a result of the installation.
(b) The term "remote telecommunications" means that Seller shall
transfer the source code by remote telecommunications, for example, via modem,
from Seller's place of business to Purchaser's designated location. Seller shall
not deliver any tangible personal property to Purchaser as a result of such
installation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and Shareholder, jointly
and severally, hereby represents and warrants to Purchaser as follows:
3.1 Organization and Authority.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of its state of organization and has full corporate
power and authority to own and lease the Business Assets and to carry on the
Business as and where the Business Assets are now owned or leased and the
Business is now conducted.
(b) Shareholder (i) has full legal right, power and authority to
enter into this Agreement and the other agreements contemplated hereby to which
he or she is a party and (ii) has duly and validly executed this Agreement and
such other agreements contemplated by this Agreement to which Shareholder is a
party.
(c) Shareholder is the only holder of shares of the capital stock of
Seller.
3.2 Absence of Conflicts.
(a) Neither the execution and delivery of this Agreement and the
other agreements contemplated hereby to which it is a party by Seller, nor the
compliance by Seller with the terms and conditions hereof and thereof or the
consummation by Seller of the
12.
transactions contemplated hereby and thereby will (i) conflict with any of the
terms, conditions or provisions of the certificate of incorporation of Seller,
(ii) violate any provision of, or require any consent, authorization or approval
under, any law or administrative regulation or any judicial, administrative or
arbitration order, award, judgment, writ, injunction or decree applicable to
Seller, the Business Assets or the Business, or any governmental permit or
license issued to Seller, (iii) violate or be in conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval (other than those
required to be obtained which have been, or prior to the Closing Date will be,
duly obtained by Seller as set forth in Schedule 3.2 hereto) under, any term or
------------
provision of any lease, agreement or instrument to which Seller is a party or by
which it or the Business Assets are bound, (iv) result in the creation of any
Lien upon any of the Business Assets, (v) give to any other Person, any rights
or interests (including rights of purchase, termination or cancellation) under
any lease, agreement or instrument or (vi) otherwise adversely affect the
contractual or other legal rights or privileges of Seller.
(b) Neither the execution, delivery or performance of this Agreement
or any other agreement contemplated hereby to which Shareholder is a party nor
consummation of the transactions contemplated hereby or thereby will require, on
the part of Shareholder, any consent, approval, authorization or other order of,
or any filing with, any governmental entity or under any contract, agreement or
commitment to which Shareholder is party or by which his property is bound.
3.3 Power and Authority.
(a) Each of Seller and Shareholder has full power and authority to
execute, deliver and carry out all the terms and provisions of this Agreement
and the other agreements contemplated hereby to which he, she or it is a party
and to perform his, her or its obligations hereunder and thereunder. On or prior
to the Closing Date, each of Seller and Shareholder shall have taken, or caused
to have been taken, all necessary action to authorize his, her or its execution,
delivery and performance of this Agreement and such other agreements and the
consummation of the transactions contemplated hereby and thereby.
(b) This Agreement constitutes, and upon the execution and delivery
by each of Seller and Shareholder of the other agreements among the parties
referred to herein and each instrument and certificate delivered by each of
Seller and Shareholder pursuant hereto, such agreements, instruments and
certificates shall constitute, the legal, valid and binding obligations of each
of Seller and Shareholder, enforceable against each of Seller and Shareholder in
accordance with their respective terms, except as such obligations and
enforceability are limited by bankruptcy, insolvency and other similar laws of
general application affecting the enforcement of creditors' rights and by
equitable principles.
(c) Neither Seller nor Shareholder is subject to any restriction of
any kind or character, which prohibits Seller or Shareholder from entering into
this Agreement or would prevent or impede its performance of or compliance with
all or any part of this Agreement or the consummation of the transactions
contemplated hereby which will not be waived by the Closing Date.
13.
3.4 Financial Statements; Forecasts.
(a) Schedule 3.4(a) hereof contains a schedule of historical and
future costs associated with all Client Contracts (the "Contract Cost
Schedule"). The amounts set forth in the Contract Cost Schedule are accurate in
all material respects and have been prepared in accordance with the books and
records of the Seller.
(b) Schedule 3.4(b) hereto contains true and complete copies of
---------------
projections for the operation of the Continuing Business Profit Center on a
monthly basis through the third Contract Year (the "Projections") and a
reconciliation of actual income statements to pro forma income statements (the
"Reconciliation"). The Projections are reasonable and have been prepared with
due care and on a reasonable basis. In preparing the Projections, Seller has not
materially misrepresented any fact that Seller knows. The Reconciliation is
true, complete and accurate in all material respects.
3.5 Title to Property; Encumbrances.
(a) Seller has, and immediately prior to the Closing Date will have,
good, merchantable and valid title to all the Business Assets. Schedule 3.5(a)
---------------
hereto lists all third parties whose consents to assignments of Intangible
Assets constituting Business Assets is or may be required in order to perfect
such assignments.
(b) There are no existing agreements pursuant to which any person has
an option to acquire any interest in any Business Asset. Seller has complete and
unrestricted power and right to sell, assign, convey and deliver the Business
Assets to Purchaser as contemplated hereby. Upon Closing, Purchaser will receive
good and marketable title to all of the Business Assets, free and clear of all
Liens other than Permitted Liens.
3.6 Receivables and Payables. Receivables of Seller that are reflected on
Schedule 1.1(b) or have arisen after the Effective Date: (i) have arisen from
bona fide transactions in the ordinary course of business; (ii) are not subject
to any defense, offset or counterclaim; and (iii) are collectible, net of any
allowance for doubtful accounts, except where the failure to collect any such
Receivables would not, in the aggregate, have a Material Adverse Effect.
Payables of Seller that are reflected on the Balance Sheet or have arisen since
the Balance Sheet Date have arisen from bona fide transactions in the ordinary
course of business wherein the goods or services received by Seller constituted
fair value for the debts incurred. Schedule 3.6 hereto contains a true and
------------
complete aging of each Receivable and Payable as of the Balance Sheet Date.
3.7 Intangible Assets.
(a) Schedule 3.7(a) hereto contains: a true and complete list of (i)
---------------
all Intangible Assets used in or constituting a part of the Business and any
applications and registrations with respect to same; (ii) the general types of
hardware products and tools, software products and tools and services that are
currently published, offered or under development by the Business; and (iii) all
licenses, sublicenses and similar agreements to which the Business is a party
and pursuant to which the Business or any other person or entity is authorized
to use any
14.
intellectual property. The disclosures described in clause (iii) above include
the identities of the parties to the relevant agreements, a description of the
nature and subject matter thereof and the applicable royalty or summary of any
formula or procedure for determining such royalty. Except as described in
Schedule 3.7(a), Seller is not obligated or under any liability whatever to make
any payments by way of royalties, fees or otherwise to any owner or licensor of,
or other claimant to, any Intangible Asset with respect to the use thereof in
the conduct of the Business or otherwise. The use by Seller or, to Seller's and
Shareholder's best knowledge, its customers of Seller's Intellectual Property
Rights with respect to the Business does not infringe any copyright, patent,
trade secret, trademark, service mark, trade name, firm name, logo, trade dress,
mask work, moral right or other intellectual property right, right of privacy or
right in personal data of any person, and no claim challenging the validity,
effectiveness or ownership by Seller of any of its intellectual property has
been asserted or threatened by any person.
(b) Except as described in Schedule 3.7(b) hereto, Seller owns and
---------------
has the unrestricted right to use all its Intellectual Property Rights and the
other Intangible Assets required for or incident to the operation of the
Business, free and clear of any right, equity or claim of others. Seller has
taken reasonable security measures to protect the secrecy, confidentiality and
value of all Intellectual Property Rights. Seller has secured from (i) all
parties who have created any portion of, or otherwise have any rights in or to,
Seller's Intellectual Property Rights, valid and enforceable written assignments
of any such work or other right to Seller and (ii) all employees and third
parties with whom Seller has shared proprietary information, written agreements
to keep such information confidential.
(c) Schedule 3.7(c) hereto contains a true and complete list and
---------------
description of all licenses of or rights to proprietary information granted to
Seller by others or to others by Seller. Except as described in Schedule
3.7(c), Seller has not sold, transferred, assigned, licensed or subjected to any
right, Lien, encumbrance or claim of others any Intangible Assets or any
interest therein. There are no known claims or demands of any person pertaining
to, or any proceedings that are pending or, to Seller's and Shareholder's best
knowledge, threatened, which challenge the rights of Seller in respect of any
Intangible Assets. Seller is not aware of any third party that is infringing
upon or violating any of the Intangible Assets.
3.8 Insurance. Schedule 3.8 hereto lists the insurance policies
------------
currently carried by Seller. Such policies provide such coverage against risk of
loss, with respect to the Business and the Business Assets of Seller, and in
such amounts as are customary for companies of established reputation engaged in
the same or similar business as the Business and similarly situated. True and
complete copies of all such policies have been made available to Purchaser for
inspection. There is no claim pending under any of such policies as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or in respect of which such underwriters have reserved their rights.
All premiums payable under all such policies have been timely paid and Seller
has otherwise complied with the terms and conditions of all such policies as
necessary to maintain the effectiveness of same. Such policies of insurance (or
other policies providing substantially similar insurance coverage) have been in
effect since before December 31, 1998, and remain in full force and effect.
15.
3.9 Employees and Labor Matters; Contractors.
(a) Schedule 3.9 hereto contains a true and complete list of all
------------
Employees of Seller and the current annual salary for each such Employee.
(b) None of such employees is subject to any collective bargaining
agreement to which Seller is a party or is bound. Seller is in material
compliance with all federal and state laws respecting employment and employment
practices and has not engaged in any unfair labor practice. Schedule 3.9 sets
forth with respect to the Business: (i) a statement describing all employee
benefits that are enforceable obligations of Seller; (ii) a list of all
Employees of Seller related to the Business who have employment contracts,
whether oral or written, or loan or other agreements with Seller, true and
complete copies of which have heretofore been delivered to Purchaser; and (iii)
a list of all written employee benefit plans or agreements of Seller, true and
complete copies of which have heretofore been delivered to Purchaser. There is
not occurring or, to Seller's and Shareholder's best knowledge, threatened any
strike, slow down, picket, work stoppage or other concerted action by any union
or other group of Employees or other persons against Seller or the Business. No
union or other labor organization has attempted to organize any of the Employees
of Seller related to the Business. No worker's compensation or similar claim
relating to or involving Seller or the Business has been filed or is threatened.
Seller has made (or scheduled as a Payable hereunder) all payments due to
employees through and including the date immediately preceding the Closing Date.
3.10 Litigation. Except as set forth on Schedule 3.10 hereto, there is no
-------------
legal action, suit, arbitration or other legal, administrative or governmental
investigation, inquiry or proceeding (whether federal, state, local or foreign)
(each, an "Action") pending or, to Seller's and Shareholder's best knowledge,
------
threatened against or affecting Seller or any of its shareholders, officers,
directors or employees, the Business or the Business Assets. To Seller's and
Shareholder's best knowledge, there is no basis for the institution of any
Action against Seller or any of its shareholders, officers, directors or
Employees, the Business or the Business Assets which, if decided adversely,
would have a material adverse effect on Seller, on the financial condition,
properties, profitability, prospects or operations of the Business or on
Seller's ability to consummate the transactions contemplated herein (a "Material
--------
Adverse Effect"). Except as set forth on Schedule 3.10, Seller is not in
- - - - - --------------
default with respect to any order, writ, judgment, injunction, decree,
determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign) with respect to the
Business.
3.11 Income and Other Taxes. All federal, state, local and other Tax
returns (including estimated tax returns) required to be filed by Seller to date
have been timely, completely and accurately prepared and filed, and all Taxes
shown to be due thereon in connection with the Business or the Business Assets
have been timely paid or deposited. Seller has not requested any extension of
time within which to file any tax return, which tax return has not since been
filed. Purchaser has heretofore been furnished by Seller with true, correct and
complete copies of each tax return of Seller with respect to the past three
taxable years, and of all reports of, and communications from, any governmental
entities relating to such period concerning deficiencies, adjustments or
changes. Seller has no liabilities for any Taxes for any taxable period ending
prior to or coincident with the Closing Date that is or could become a lien on
any Business Assets. Neither Seller nor any shareholder or director or officer
(or employee
16.
responsible for tax matters) of Seller expects any authority to assess any
additional Tax for any period for which tax returns have been filed. There is no
dispute or claim concerning any liability for Tax of Seller either (i) claimed
or raised by any authority in writing or (ii) as to which Seller or any
shareholder or director or officer (or employee responsible for tax matters) of
Seller or Shareholder has knowledge based upon personal contact with any agent
of such authority. Seller has delivered to Purchaser correct and complete copies
of all federal income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by Seller. Seller has not waived any
statute of limitations in respect of any Tax or agreed to any extension of time
with respect to a Tax assessment or deficiency.
3.12 Employee Benefit Matters.
(a) Schedule 3.12 hereto sets forth (i) each written and material
-------------
unwritten plan, program, policy or other arrangement, providing for severance,
termination pay, equity-based awards, fringe benefits or other employee
benefits, whether formal or informal, and whether funded or unfunded, including,
without limitation, each "employee benefit plan" within the meaning of Section
3(3) of ERISA sponsored, maintained, contributed to, or required to be
contributed to, for the benefit of, or with respect to any current or former
employee, consultant, independent contractor, agent or principal of the Seller
with respect to the Business (each, an "Affected Employee" and each such plan,
-----------------
program, policy or arrangement, an "Affected Employee Plan"), and (ii) each
----------------------
material employment, severance, termination, consulting or similar agreement
(except consulting agreements which can be terminated with 30 days or less
notice without liability) between the Seller and any Affected Employee or with
respect to which the Seller has any liabilities or obligations (each, an
"Affected Employee Agreement"). Seller shall provide Purchaser with current,
- - - - - ----------------------------
accurate and complete copies of all documents embodying each material Affected
Employee Plan and each Affected Employee Agreement.
(b) At no time has Seller or any member of its Controlled Group
contributed to or been required to contribute to, or incurred any withdrawal
liability (within the meaning of Section 4201 of ERISA) to any "multi employer
plan" (within the meaning of Section 3(37) of ERISA). Neither any Seller nor any
member of the Controlled Group presently sponsors, maintains, contributes to or
is required to contribute to, or has since 1990 sponsored, maintained,
contributed to or been required to contribute to, a "defined benefit plan"
(within the meaning of Section 3(35) of ERISA) or any plan subject to Section
412 of the Code (each, a "Controlled Group Plan"). Each Affected Employee Plan
---------------------
is and has been operated in compliance with the terms of such plan and with all
applicable laws, including, without limitation, ERISA and the Code, and each
Seller has performed all material obligations required to be performed by it
under each Affected Employee Plan. Neither any Seller nor any member of a
Controlled Group has incurred any liability under Title IV of ERISA to the
Pension Benefit Guaranty Corporation (the "PBGC") in connection with any
----
Controlled Group Plan which liability has not been fully paid prior to the date
hereof, other than liability for premiums due the PBGC, which premiums have been
or will be paid when due, and no steps have been taken by the plan sponsor or,
to Seller's and Shareholder's best knowledge, by the PBGC to terminate any
Controlled Group Plan and no reportable event (within the meaning of Section
4043 of ERISA) and no event described in Section 4062 or 4063 of ERISA has
occurred with respect to any Controlled Group Plan. Each Affected Employee Plan
intended to be tax qualified under Sections 401(a) and 501(a) of the Code is so
qualified. No Seller has any plan or commitment, whether legally binding or not,
to
17.
establish any material new employee benefit or compensation plan, program,
policy, practice or arrangement or to modify or terminate in any material
respect any existing Affected Employee Plan (and has not communicated to any
Affected Employee any intention to do so). There are no actions, proceedings,
arbitrations, suits or claims pending or threatened, against any Affected
Employee Plan, Seller or any plan fiduciary with respect to any Affected
Employee Plan (other than routine benefit claims) and no Affected Employee Plan
is under audit or investigation by the Internal Revenue Service, the Department
of Labor or the PBGC.
3.13 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet, (ii) as set forth on Schedule 3.13 hereto or
-------------
(iii) for current liabilities incurred since January 31, 2000 in the usual and
ordinary course of business, as of the date hereof, Seller has no liabilities,
whether accrued, absolute, contingent or otherwise, whether due or to become due
and whether the amounts thereof are readily ascertainable or not, or any
unrealized or anticipated losses from any commitments of a contractual nature,
including Taxes, with respect to or based upon transactions or events occurring
at or prior to the Closing Date.
3.14 Permits, Licenses, Etc. Seller possesses, and is operating in
compliance with all Permits. Schedule 3.14 hereto contains a true and complete
-------------
list of all Permits. Each Permit has been lawfully and validly issued, and no
proceeding is pending or threatened involving or potentially involving the
revocation, suspension or limitation of any Permit.
3.15 Consents. All consents, authorizations and approvals of any court,
arbitrator or any other person to or as a result of the consummation of the
transactions contemplated by this Agreement or that are necessary or convenient
in connection with the Business as currently conducted and as proposed to be
conducted, or for which the failure to obtain the same might have, individually
or in the aggregate, a Material Adverse Effect, have been obtained by Seller,
except as described in Schedule 3.15 hereto. Except as set forth on Schedule
-------------
3.15, all consents, authorizations and approvals described in Schedule 3.15 will
have been duly obtained prior to the Closing Date, and written evidence of such
consents, authorizations and approvals shall have been provided to Purchaser.
3.16 Contracts.
(a) Except for the Client Contracts there is no material contract,
agreement, lease, permit, commitment, arrangement or other instrument to which
Seller is a party which is necessary or convenient to conduct the Business as
presently conducted and as proposed to be conducted, or that otherwise affects
the Business in any way. Neither Seller nor, to the best knowledge of Seller
and Shareholder, any other party is in breach of any material contract. Neither
Seller nor Shareholder is aware of any grounds for modification, termination,
rescission, avoidance or repudiation of any material contract by any party
thereto.
(b) Each Client Contract is valid and binding and enforceable in
accordance with its terms. No event has occurred and neither Seller nor
Shareholder is aware of any matter or thing, which might reasonably be expected
to cause any Client Contract to be modified or terminated. Seller has
satisfactorily performed all its obligations under each Client Contract and has
not provided any services that did not comply in all material respects with all
applicable laws, regulations, standards and customer specifications or that was
not in accordance with
18.
any representation, condition, warranty or contractual term, express or implied,
given in relation to it. Set forth on Schedule 1.1(b) hereto with respect to
each Client Contract that contains a cap on time and material costs is a
calculation as of the most recent practicable date of (i) the amount of billings
to date under such contract and (ii) the maximum allowable billings.
3.17 Compliance with Law. The Business has not been conducted and is not
being conducted, and Seller is not nor has been, in material violation of, nor
received any notice of any alleged material violation of, or any citation for
noncompliance with, any applicable federal, state or local statute, law, rule,
regulation, ordinance, permit, order, decree of, or other lawful obligation
imposed by, any court or governmental authority or instrumentality. Seller has
made all required registrations and filings with all applicable federal, state
and local government authorities relating to the Business as currently conducted
and as proposed to be conducted. All such registrations, filings and
submissions were in compliance with all material legal requirements and other
requirements when filed, no material deficiencies have been asserted by any such
applicable governmental entities with respect to such registrations, filings or
submissions, and no facts or circumstances exist which would indicate that a
material deficiency may be asserted by any such authority with respect to any
such registration, filing or submission.
3.18 Absence of Certain Changes. Since January 31, 2000, there has been no
material adverse change in the financial condition, properties, profitability,
prospects or operations of the Business.
3.19 Warranties. Schedule 3.19 hereto contains an accurate summary of (a)
-------------
all warranties granted or made by Seller with respect to any service rendered by
Seller in connection with the Business and (b) each warranty claim in the past
three years relating to any service rendered by Seller in connection with the
Business. No officer, director, employee or agent of Seller has made any
warranty, oral or written, on behalf of Seller or Seller's services inconsistent
with the statements set forth on Schedule 3.19. There are no service liability
or service warranty claims pending or threatened against Seller, and no facts or
circumstances exist that could provide a basis for such a claim. Seller has not
sold or provided any service in connection with the Business which did not
comply in all material respects with all applicable laws and regulations and
customer specifications in force as of the date that such service was provided.
3.20 Affiliations. Except as set forth on Schedule 3.20 hereto, neither
-------------
Seller nor any officer, director or employee of Seller or any associate or
affiliate of Seller or any of such persons has, directly or indirectly, (a) an
interest in any corporation, partnership or other person that (i) furnishes or
sells, or proposes to furnish or sell, services or products that are furnished
or sold by Seller or (ii) purchases from or sells or furnishes, or proposes to
purchase from or sell or furnish, to Seller any goods or services, or (b) a
beneficial interest in any contract or agreement to which Seller is a party or
by which it or any Business Assets or the Business are bound or affected, except
as contemplated by this Agreement.
3.21 Brokers' Fees. No broker or finder has been employed by or on behalf
of Seller or Shareholder in connection with this Agreement or the transactions
contemplated hereby, and, other than relevant agency agreements which are solely
the responsibility of Seller, neither Seller nor Shareholder has entered into
any agreement or understanding of any kind with any person or
19.
entity for the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby.
3.22 Solvency, Etc.
(a) The sale, assignment and transfer of Business Assets contemplated
hereby is not intended by Seller to hinder, delay or defraud any person to which
Seller is or may become, on or after the Closing Date, indebted.
(b) The purchase price for the Business Assets represents fair value
for the Business Assets from a financial point of view.
(c) After giving effect to the transactions contemplated hereunder,
(i) Seller will be solvent in the sense that the fair saleable value of its
remaining marketable assets will exceed the value of its liabilities and (ii)
Seller will not have unreasonably small capital to engage in its existing or
contemplated businesses.
3.23 Year 2000. Any reprogramming required to permit the proper functioning
in and following the year 2000 of the Business's computer systems and equipment
containing embedded microchips, and the testing of all such systems and
equipment, as so reprogrammed, has been completed. The reasonably foreseeable
consequences of year 2000 to the Business, including, without limitation,
reprogramming errors, products and services provided by the Business, will not
have a Material Adverse Effect.
3.24 Disclosure; Survival.
(a) No representation or warranty of Seller or Shareholder in this
Agreement, nor any statement, certificate, schedule or exhibit hereto furnished
or to be furnished by or on behalf of the Seller or Shareholder pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
(b) All representations and warranties of Seller and Shareholder are
true, correct and complete in all material respects as of the date hereof, will
be true, correct and complete as of the Closing Date and will survive the
Closing Date and consummation of the transactions contemplated hereby through
the end of the third Contract Year, except for the representations and
warranties made in Section 3.11 which shall survive for the maximum period
provided by law.
20.
ARTICLE 4
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Purchaser (a) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization and (b) has full corporate power and authority to own its assets
and to carry on its businesses as and where such assets are now owned and such
businesses are now conducted, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
4.2 Absence of Conflicts. Neither the execution and delivery of this
Agreement by Purchaser, compliance by Purchaser with the terms and conditions
hereof nor the consummation by Purchaser of the transactions contemplated hereby
will (a) conflict with any of the terms, conditions or provisions of the
articles of incorporation of Purchaser, (b) violate any provision of, or require
any consent, authorization or approval under, any law or administrative
regulation or any judicial, administrative or arbitration order, award,
judgment, writ, injunction or decree applicable to, or any governmental permit
or license issued to, Purchaser or (c) conflict with or result in a breach of or
require any consent, authorization or approval (other than those required to be
obtained which have been, or prior to the Closing Date will be, duly obtained by
Purchaser) under, any indenture, mortgage, lien, lease, agreement or instrument
to which Purchaser is a party or by which it is bound.
4.3 Power and Authority.
(a) Purchaser has full power and authority to execute, deliver and
carry out all the terms and provisions of this Agreement and the other
instruments required hereby to be delivered by it and to perform its obligations
hereunder and thereunder. On or prior to the Closing Date, Purchaser shall have
taken, or caused to have been taken, all necessary action to authorize
Purchaser's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby.
(b) This Agreement constitutes, and upon the execution and delivery
by Purchaser of the other agreements among the parties referred to herein and
each instrument and certificate delivered by Purchaser pursuant hereto, such
agreements, instruments and certificates shall constitute, the legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their respective terms, except as such obligations and enforceability are
limited by bankruptcy, insolvency and other similar laws of general application
affecting the enforcement of creditors' rights and by equitable principles.
4.4 Brokers' Fees. No broker, finder or similar agent has been employed by
or on behalf of Purchaser in connection with this Agreement or the transactions
contemplated hereby, and Purchaser has not entered into any agreement or
understanding of any kind with any person or entity for the payment of any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
21.
4.5 Disclosure; Survival.
(a) No representation or warranty of Purchaser in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of the Seller or Shareholder pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
(b) All representations and warranties of Purchaser are true, correct
and complete as of the date hereof, will be true, correct and complete as of the
Closing Date and will survive the Closing Date and consummation of the
transactions contemplated hereby through the end of the Third Contract Year.
ARTICLE 5
Covenants of Seller
During the period commencing on the date hereof and continuing through the
Closing Date except for Section 5.8 which continues through the First Contract
Year, Seller agrees (except as expressly otherwise contemplated by this
Agreement or to the extent that Purchaser shall otherwise consent in writing)
that:
5.1 Access. Seller shall permit, and shall cause its shareholders,
officers, directors, key employees and advisers to permit, Purchaser and its
accountants, counsel, other representatives and agents and lenders access during
normal business hours to the books and records, facilities, key personnel,
customers, suppliers, independent accountants and counsel, as reasonably
requested by Purchaser or its representatives in connection with their due
diligence review of Seller and its affairs and operations and, during such
period, shall furnish promptly to Purchaser, without request, a copy of each
report, notice and other document filed or received by, or on behalf of, Seller
pursuant to the requirements of applicable regulatory law and, upon request, all
other information pertaining to the Business or the Business Assets. Purchaser
shall conduct such review so as to minimize any interference with the normal
conduct of the Business.
5.2 Obtaining Approvals. Seller shall use its commercially reasonable
efforts to obtain (and to cooperate with Purchaser in obtaining) any (i)
consent, authorization or approval of, or exemption by, any governmental body or
agency or instrumentality thereof required to be obtained or made by Seller in
connection with the transactions contemplated by this Agreement, and (ii)
consent to, and authorization or approval of any other person or entity to or
required as a result of, consummation of the transactions contemplated hereby.
5.3 Tax Assessments and Audits. Seller shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
operations of the Business for periods ending on or after the Closing Date.
22.
5.4 Schedules. Seller shall deliver to Purchaser prior to the Closing
Date a written statement clearly and specifically disclosing as of the Closing
Date any materially untrue statement in this Agreement or any Schedule hereto
(or supplement thereto) or document furnished pursuant hereto, or any omission
to state any material fact required to make the statements herein or therein
contained complete and not misleading, promptly upon the discovery of such
untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however, that
the disclosure of such untrue statement or omission shall not prevent Purchaser
from terminating this Agreement pursuant to Section 9.1(b) hereof.
5.5 Satisfaction of Conditions Precedent. Seller and Shareholder shall
use their best efforts to bring about the satisfaction of the conditions
precedent to Closing Date set forth in Sections 8.1 and 8.2 of this Agreement.
5.6 Handling of Prior Claims. Seller covenants and agrees to handle and
resolve all claims, actions and suits brought by any person which relate to or
arise out of the operation of the Business prior to the Effective Date (each, a
"Prior Claim"), and shall cause its insurers to handle and resolve all Prior
Claims, in each case, in a manner consistent with the historical policies and
practices of Seller. Schedule 5.6 hereto lists all such Prior Claims as of the
------------
Effective Date. Seller shall deliver monthly reports describing the status of
each Prior Claim to Purchaser until all Prior Claims have been finally resolved.
ARTICLE 6
Covenants of Purchaser
During the period commencing on the date hereof and continuing through the
Closing Date, except for Sections 6.4 and 6.5 which shall continue through the
First Contract Year, Purchaser agrees (except as expressly otherwise
contemplated by this Agreement or to the extent that Seller shall otherwise
consent in writing) that:
6.1 Compliance with Legal Requirements. Purchaser shall comply promptly
with all requirements that applicable law may impose upon it with respect to the
transactions contemplated by this Agreement, and shall cooperate promptly with,
and furnish information to, Seller in connection with any such requirements
imposed upon Seller or upon any of its affiliates in connection therewith or
herewith.
6.2 Obtaining Approvals. Purchaser shall use commercially reasonable best
efforts to obtain any consent, authorization or approval of, or exemption by,
any governmental body or agency or instrumentality thereof, or other person,
required to be obtained or made by Purchaser in connection with the transactions
contemplated by this Agreement.
6.3 Satisfaction of Conditions Precedent. Purchaser shall use its
commercially reasonable efforts to bring about the satisfaction of the
conditions precedent to Closing Date set forth in Section 8.2 of this Agreement.
23.
ARTICLE 7
Conduct of Business Pending Closing Date
During the period commencing on the date hereof and continuing through the
Closing Date, Seller agrees (except as expressly otherwise contemplated by this
Agreement or to the extent that Purchaser shall otherwise consent in writing)
that:
7.1 Good Standing. Seller shall remain in good standing in its state of
organization and in all jurisdictions where it is qualified to do business.
7.2 Ordinary Course. Seller shall conduct the Business in, and only in,
the usual, regular and ordinary course in the same manner as heretofore
conducted and use its best efforts to preserve intact its current business
organization, and to preserve its relationships with Clients, suppliers and
others having business dealings with the Business to the end that its goodwill
and ongoing business of the Business shall be unimpaired at the Closing Date.
Seller shall maintain the Business Assets in good condition and repair.
7.3 Accounting. Seller shall not make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates theretofore adopted by it for the Business.
Seller shall maintain its books, records and accounts for the Business on a
consistent basis.
7.4 Indebtedness. Seller shall not incur any indebtedness or cause or
permit any Liens to be placed on the Business or the Business Assets.
7.5 Compliance with Legal Requirements. Seller shall comply promptly with
all requirements that applicable law may impose upon it and its operations and
with respect to the transactions contemplated by this Agreement, and shall
cooperate promptly with, and furnish information to, Purchaser in connection
with any such requirements imposed upon Purchaser, or upon any of its
affiliates, in connection therewith or herewith.
7.6 Competing Offers; Merger or Liquidation. During the period commencing
on the date hereof and terminating on April 30, 2000, Seller shall not: (a)
solicit, initiate, or participate in any discussions or negotiations with, or
encourage the submission of bids, offers or proposals by (or commence
negotiations with or provide any information to), any person (other than
Purchaser) with respect to an acquisition of any of the Business Assets or the
Business or (b) provide any non-public information concerning the Business
Assets or the Business to any person (other than Purchaser). Seller shall
immediately notify Purchaser of, and shall disclose to Purchaser all details of,
any inquiries, discussions or negotiations after the date hereof of the nature
prohibited in this Section. Seller shall refrain during such period from
engaging, directly or indirectly, any broker, financial adviser or other
consultant on a basis which might provide such broker, financial adviser or
consultant with an incentive to initiate or encourage proposals or offers from
other parties with respect to the Business or the Business Assets or any
interest therein and from commencing any proceeding to merge, consolidate or
liquidate or dissolve or obligating itself to do so in violation of this
Section.
24.
7.7 Disposition of Assets. Seller shall not sell, transfer, license,
lease or otherwise dispose of, or suffer or cause the encumbrance by any Lien
upon, any of the Business Assets, tangible or intangible, or any interest
therein, except for sales of Work in Progress in the usual and ordinary course
of business and except Liens existing on the date hereof.
7.8 Discharge. Seller shall not cancel, compromise, release or discharge
any claim upon or against any person or waive any right of material value
included in the Business Assets except, in any case, in the ordinary course of
the Business and consistent with past practice.
7.9 Modification or Breach of Agreements; New Agreements. Seller shall
not terminate or modify, or commit or cause or suffer to be committed any act
that will result in breach or violation of any term of or (with or without
notice or passage of time, or both) constitute a default under or otherwise give
any person a basis for nonperformance under, any indenture, mortgage, deed of
trust, loan or credit agreement, lease, license or Client Contract, or other
agreement, instrument, arrangement or understanding, written or oral, disclosed
in this Agreement or the Schedules hereto which are a part of the Business
Assets. Seller shall refrain from becoming a party to any contract or
commitment in connection with the Business other than in the usual and ordinary
course of the Business or as contemplated hereby. Seller shall cause the
Business to meet all its contractual obligations in accordance with their
respective terms.
7.10 Inconsistent Action. Seller shall not take any action that would
cause any of its representations or warranties in this Agreement to be untrue,
incorrect, incomplete or misleading.
ARTICLE 8
Conditions Precedent to Closing Date
8.1 Conditions of Purchaser. Notwithstanding any other provision of this
Agreement, the obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, at or prior
to the Closing Date, of each of the following conditions precedent. If
Purchaser terminates this Agreement prior to the Closing Date because any such
condition is not so satisfied, Purchaser shall have no liability hereunder
except as otherwise set forth in Article 9 hereof. Purchaser may unilaterally
waive any of the following conditions precedent to Purchaser's obligations;
provided, any such waiver shall be effective only if the same is in writing,
signed by Purchaser and delivered to Seller at or prior to the Closing Date:
(a) There shall not have been instituted or pending or threatened any
action, suit or proceeding by or before any court, arbitrator or governmental
agency challenging Purchaser's acquisition of the Business Assets or the
Business, or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated hereby or seeking damages in connection therewith.
(b) The representations and warranties of Seller in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and Seller shall have
complied with all covenants and agreements and satisfied all conditions to be
performed or satisfied by Seller on or prior to the Closing Date.
25.
(c) Any approval, consent or waiting period required by any
governmental agency or authority necessary or material to the consummation of
the transactions contemplated hereby shall have been obtained or expired, as the
case may be, including, without limitation, any applicable waiting period under
the HSR Act.
(d) Purchaser shall have received a certificate of Seller
substantially in the form attached hereto as Exhibit 8.1(d).
(e) Purchaser shall have received from Arnstein & Lehr, special
counsel to Seller, a written legal opinion dated the Closing Date in the form
attached hereto as Exhibit 8.1(e).
(f) Seller and Escrow Agent shall each have executed the Escrow
Agreement.
(g) The Board of Directors of Seller shall have approved this
Agreement and the material terms of the transactions contemplated hereby.
(h) Seller's Shareholder shall have approved this Agreement and the
material terms of the transactions contemplated hereby.
(i) All Liens, other than Permitted Liens, on any of the Business
Assets shall have been released.
(j) All Business Assets, including the Business Records, shall be
delivered to Purchaser.
(k) Purchaser shall have received novations of all Client Contracts
(in the form of Client Novation Agreements).
(l) All necessary consents, approvals and authorizations from third
parties, including, without limitation, from the non-Seller parties to all
Client Contracts, whether or not required pursuant to the terms of such
instruments, to the assignments contemplated hereby shall have been obtained
notwithstanding Purchaser's right under Section 2.3 hereof to require Seller to
cooperate with it in obtaining the benefit of any such instrument absent
assignment.
(m) Seller shall have executed and delivered to Purchaser a bill of
sale (the "Bill of Sale") substantially in the form attached as Exhibit 8.1(m)
hereto.
(n) Seller shall have executed, acknowledged before a notary and
delivered to Purchaser an assignment of the Intangible Assets (the "Assignment
of Intangibles") substantially in the form attached as Exhibit 8.1(n) hereto.
(o) All proceedings taken by Seller and all instruments executed and
delivered by Seller on or prior to the Closing Date in connection with the
transactions herein contemplated shall be reasonably satisfactory to Purchaser
and its counsel.
(p) The closing pursuant to the SCA Asset Purchase Agreement shall
occur on the Closing Date.
26.
8.2 Conditions of Seller. Notwithstanding any other provision of this
Agreement, the obligations of Seller to consummate the transactions contemplated
by this Agreement shall be subject to satisfaction, at or prior to the Closing
Date, of each of the following conditions precedent, and if Seller terminates
this Agreement prior to the Closing Date because any such condition is not so
satisfied, Seller shall have no liability hereunder except as otherwise set
forth in Article 9 hereto. Seller may unilaterally waive any of the following
conditions precedent to Seller's obligations; provided, any such waiver shall be
effective only if the same is in writing, signed by Seller and delivered to
Purchaser at or prior to the Closing Date:
(a) There shall not have been instituted or pending or threatened any
action, suit or proceeding by or before any court, arbitrator or governmental
agency challenging Purchaser's acquisition of the Business Assets or the
Business, or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated hereby or seeking damages in connection therewith.
(b) The representations and warranties of Purchaser in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and Purchaser shall have
complied with all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied on or prior to the Closing Date.
(c) Seller shall have received a certificate of Purchaser
substantially in the form attached hereto as Exhibit 8.2(c).
(d) Any approval, consent or waiting period required by any
governmental agency or authority necessary to consummate the transactions
contemplated hereby shall have been obtained or expired, as the case may be,
including, without limitation, any applicable waiting period under the HSR Act.
(e) All proceedings taken by Purchaser and all instruments executed
and delivered by Purchaser on or prior to the Closing Date in connection with
the transactions herein contemplated shall be reasonably satisfactory to Seller
and its counsel.
(f) Seller shall have received from Cooley Godward LLP, Purchaser's
counsel, a written legal opinion dated the Closing Date in the form attached
hereto as Exhibit 8.2(f).
(g) The closing pursuant to the SCA Asset Purchase Agreement shall
occur on the Closing Date.
(h) Purchaser and Escrow Agent shall each have executed the Escrow
Agreement.
27.
ARTICLE 9
Termination, Amendment and Waiver
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date by written notice from the terminating party, delivered in
accordance with Section 11.4 hereof, specifying the reason therefor:
(a) by mutual agreement of the parties hereto;
(b) by Purchaser if (i) any schedule to this Agreement is not
satisfactory to Purchaser, (ii) any condition precedent to the Closing set forth
in Section 8.1 of this Agreement has not been met on or before April 30, 2000
(as such date may be extended by agreement of Purchaser) or (iii) the Closing
Date has not occurred on or before April 30, 2000 (as such date may be extended
by agreement of Purchaser) for any reason other than a material default by
Purchaser in its obligations hereunder; and
(c) by Seller if (i) any condition precedent to the Closing set forth
in Section 8.2 of this Agreement has not been met on or before April 30, 2000
(as such date may be extended by agreement by Seller) or (ii) the Closing Date
has not occurred on or before April 30, 2000 (as such date may be extended by
agreement by Seller) for any reason other than a material default by any Seller
in its obligations hereunder.
9.2 Effect.
(a) In the event of termination of this Agreement as provided in
Section 9.1, then this Agreement shall forthwith become void and there shall be
no liability hereunder on the part of any party hereto, or any officer,
director, employee, agent or representative of any party hereto or any person
who "controls" a party hereto within the meaning of the Securities Act, except
that the agreements with respect to expenses and publicity contained in Sections
11.2 and 11.5 hereof, respectively, shall survive termination of this Agreement.
(b) In the event of any breach or default by Seller under the terms
of this Agreement, Purchaser shall have the right to terminate this Agreement.
(c) In the event of any breach or default by Purchaser under the
terms of this Agreement, Seller shall have the right to terminate this
Agreement.
9.3 Amendment and Waiver. This Agreement may be amended at any time only
by a written instrument executed by Purchaser, Shareholder and Seller. Any
amendment effected pursuant to this Section shall be binding upon the parties
hereto. Compliance with or performance under any term, provision or condition
of this Agreement may only be waived in writing by Purchaser, if the waiver of
the term, provision or condition of this Agreement is sought against Purchaser,
or by Seller or Shareholder, if the waiver of the term, provision or condition
of this Agreement is sought against Seller or Shareholder.
28.
ARTICLE 10
Post-Closing Matters
10.1 Non-Compete, Non-Solicitation and Trade Secrets.
(a) General. In order that the Purchaser may have and enjoy the full
benefit of the Business, and in order to protect the value and utility to the
Purchaser of the Business Assets, each of Seller and Shareholder hereby
severally covenant with the Purchaser that (x) they will not at any time
disclose to any person whatsoever, other than the Purchaser, any trade secrets,
know-how, technology, processes, formulas, computer programs, customer names or
identities, or other confidential or proprietary business information used in or
associated with the Business at the Closing or within eighteen (18) calendar
months prior thereto and (y) for a period of up to the end of twenty-four (24)
months subsequent to the fourth anniversary of the Effective Date, they will
not, directly or indirectly, as a stockholder, partner, officer, director,
employee, associate, owner, creditor, manager, adviser, consultant, agent or
otherwise:
(i) Non-Competition. Carry on or engage in with any Person
engaged in, in any territory in which the Business is carried on as of the date
of the Agreement, any activity that is in competition with the Business as
carried on at the date of this Agreement or at any time within eighteen (18)
calendar months prior thereto;
(ii) Non-Solicitation. Seek in competition with the Business as
carried on at the date of this Agreement to procure orders from or do business
with or procure directly or indirectly any other person to procure orders from
or do business with any person who has been a customer of the Business at any
time during the period of eighteen (18) calendar months prior to the date of
this Agreement;
(iii) Hiring Away Employees. In connection with any business
competing with the Business carried on at the date of this Agreement, engage or
employ or solicit or contact with a view to the engagement or employment by any
person, any employee or any person who has been an employee, officer or agent of
the Business in the eighteen (18) calendar months prior to the date of this
Agreement;
(iv) Goodwill. Do or say anything which is harmful to the
reputation of the Business or which may lead any person to cease to deal with
the Business on substantially equivalent terms to those previously offered or at
all;
(v) Non-Disclosure. Disclose to any other person or use for
any other purpose other than the evaluation of Revenue and EBT relating to the
Performance Targets, the Quarterly Statements and any other like information
provided to Seller.
(b) Breach of Covenants. Each of Seller and Shareholder agree that if
it, he or she commits or threatens to commit a breach of any of the covenants
and agreements contained in this Section, Purchaser shall have the right to seek
and obtain all appropriate injunctive and other equitable remedies therefor, in
addition to any other rights and remedies that may be
29.
available at law, it being acknowledged and agreed that any such breach would
cause irreparable injury to Purchaser and that money damages would not provide
an adequate remedy therefor.
(c) Severability of Covenants. It is agreed between the parties that
while the restrictions set out in this Section 10.1 are considered fair and
reasonable in geographical and temporal scope and in all other respects, if it
should be found that any of the restrictions be unreasonable under circumstances
then existing and if by deleting part of the wording or substituting a shorter
period of time or different geographical limit or a more restricted range of
activities for the periods of time, geographical limits or ranges of activities
set out in this Section 10.1 would not be unenforceable then there shall be
substituted such next less extensive period and/or limit and/or activity or such
deletions shall be made as shall render this Section 10.1 valid and enforceable.
10.2 Indemnification.
(a) Seller and Shareholder, jointly and severally, hereby covenants
and agrees to defend, indemnify and save and hold harmless Purchaser, together
with its officers, directors, employees, shareholders, members, attorneys and
representatives and each person who controls Purchaser within the meaning of the
Securities Act, from and against any loss, cost, expense, liability, claim or
legal damages (each, an "Action") (including, without limitation, reasonable
fees and disbursements of counsel and accountants and other costs and expenses
incident to any actual or threatened claim, suit, action or proceeding and all
costs of investigation) (collectively, the "Damages") arising out of or
resulting from: (i) any inaccuracy in or breach of any representation, warranty,
covenant or agreement made by Seller or Shareholder in this Agreement or in any
writing delivered pursuant to this Agreement or at the Closing Date (regardless
of whether such breach is deemed "material"); (ii) Seller's or Shareholder's
failure to perform or observe fully any covenant, agreement or provision
required to be performed or observed by it pursuant to this Agreement; (iii)
liabilities of Seller or Shareholder, whether arising before or after the
Effective Date, that are not expressly assumed by the Purchaser pursuant to this
Agreement; (iv) any claims of third parties claiming compensation, commissions
or expenses for services as a Broker, finder or agent based upon obligations
incurred by Seller or Shareholder; (v) any actual or threatened Action arising
out of or resulting from the conduct of Seller, Shareholder or Seller's
operations on or prior to the Effective Date; (vi) any actual or threatened
Action arising from any warranties granted or made by Seller to a third party;
and (vii) any liabilities arising from failure to comply with any provision of
any bulk sales or bulk transfer statutes of Florida.
(b) Purchaser covenants and agrees to indemnify and save and hold
harmless Seller, together with its officers, directors, employees, Shareholder,
members, attorneys and representatives and each person who controls Seller
within the meaning of the Securities Act, from and against any Damages arising
out of or resulting from: (i) any inaccuracy in or breach of any representation,
warranty, covenant or agreement made by Purchaser in this Agreement or in any
writing delivered pursuant to this Agreement or at the Closing Date; (ii)
Purchaser's failure to perform or observe any covenant, agreement or condition
required to be performed or observed by it pursuant to this Agreement; (iii) any
claims of third parties claiming compensation, commissions or expenses for
services as a Broker or finder based upon
30.
obligations incurred by Purchaser; or (iv) any actual or threatened Action
arising out of or resulting from the conduct of the Business or its operations
after the Closing Date.
(c) In the event that any indemnified party is made a defendant in or
party to any action, suit, proceeding or claim, judicial or administrative,
instituted by any third party for Damages (any such third party action, suit,
proceeding or claim being referred to as a "Claim"), the indemnified party
(referred to in this subsection as the "Notifying Party") shall give notice
thereof to the indemnifying party as soon as practicable and in any event within
thirty (30) days after the indemnified party receives notice thereof. The
failure to give such notice shall not affect whether an indemnifying party is
liable for reimbursement unless such failure has resulted in the loss of
material substantive rights with respect to the indemnifying party's ability to
defend such Claim; provided, that the indemnifying party (i) has a reasonable
basis for concluding that such defense may be successful, (ii) diligently
contests and defends such Claim and (iii) acknowledges in writing that it is
obligated to provide indemnification with respect to such Claim. Notice of the
intention so to contest and defend shall be given by the indemnifying party to
the Notifying Party within twenty (20) business days after the Notifying Party's
notice of such Claim (but, in all events, at least ten (10) business days prior
to the date that an answer to such Claim is due to be filed). Such contest and
defense shall be conducted by reputable attorneys employed by the indemnifying
party and approved by the Notifying Party (which approval shall not be
unreasonably withheld). The Notifying Party shall be entitled, at its own cost
and expense (which expense shall not constitute Damages unless the Notifying
Party reasonably determines that the indemnifying party is not adequately
representing or, because of a conflict of interest, may not adequately
represent, the interests of the indemnified parties, and has provided the
indemnifying party with notice of such determination, and only to the extent
that such expenses are reasonable), to participate in such contest and defense
and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the indemnifying party in the conduct of such defense. Neither
the Notifying Party nor the indemnifying party may concede, settle or compromise
any Claim without the consent of the other party, which consent will not be
unreasonably withheld or delayed in light of all factors of importance to such
party. Notwithstanding the foregoing, if the indemnifying party fails to
acknowledge in writing its obligation to provide indemnification in respect of
such Claim, to assume the defense thereof with counsel reasonably satisfactory
to the Notifying Party or to diligently contest and defend such Claim, then the
Notifying Party alone shall be entitled to contest, defend and settle such Claim
in the first instance (in which case, all expenses incurred in connection
therewith shall constitute Damages) and, only if the Notifying Party chooses not
to contest, defend or settle such Claim, the indemnifying party shall then have
the right to contest and defend (but not settle) such Claim.
(d) In the event any indemnified party shall have a claim against any
indemnifying party that does not involve a Claim, the indemnified party shall
deliver a notice of such claim with reasonable promptness to the indemnifying
party. The failure to give such notice shall not affect whether an indemnifying
party is liable for reimbursement unless such failure has resulted in the loss
of substantive rights with respect to the indemnifying party's ability to defend
such claim, and then only to the extent of such loss. If the indemnifying party
notifies the indemnified party that it does not dispute the claim described in
such notice or fails
31.
to notify the indemnified party within thirty (30) days after delivery of such
notice by the indemnified party whether the indemnifying party disputes the
claim described in such notice, the Damages in the amount specified in the
indemnified party's notice shall be conclusively deemed a liability of the
indemnifying party and the indemnifying party shall pay the amount of such
Damages to the indemnified party on demand.
(e) Any claim for indemnity under this Section shall be delivered in
writing to the indemnifying party and set forth with reasonable specificity as
to the amount claimed and the underlying facts supporting such claim. The
indemnifying party shall have thirty (30) days to accept or dispute such claim.
If the indemnifying party disputes such claim, the indemnified party and the
indemnifying party shall, during the thirty (30) days following receipt of
notice of such dispute, negotiate in good faith to resolve their differences
with respect to such claim. If the parties are unable to resolve their
differences with respect to such claim, the matter shall be submitted to
arbitration pursuant to Section 10.3. If the indemnifying party does not
dispute such claim or the parties resolve their differences with respect to a
claim, the indemnified party shall by the entitled to the amount of such claim.
(f) The foregoing indemnification provisions are in addition to, and
not in derogation of, any statutory, equitable or common-law remedy any party
may have for breach of representation, warranty, covenant or agreement.
(g) The indemnification obligation of any party hereunder shall be
adjusted to take into account the amount of any net insurance proceeds recovered
by the party seeking indemnification hereunder with respect to any Claim.
(h) There shall be no obligation on the part of Seller and
Shareholder, on the one hand, and Purchaser, on the other hand, to provide
indemnification hereunder unless the aggregate amount of Damages suffered by
Seller and Shareholder or Purchaser, as the case may be, exceeds Fifteen
Thousand Dollars ($15,000), in which case the first Fifteen Thousand Dollars
($15,000) of damages is recoverable.
(i) In pursuing any claim for indemnification hereunder, Purchaser
shall be entitled to all its remedies under law and equity. In the event
Purchaser provides notice of a claim to Seller under Section 10.2(e) within 10
days prior to the payment date of any payment becoming due under Section 2.4,
Purchaser shall have the right to set-off the amount of such claim against any
payments becoming due under Section 2.4 hereof to Seller under the terms hereof.
To the extent Purchaser sets-off a claim pursuant to the preceding sentence and
such claim is later determined to have been invalid in arbitration, Purchaser
shall pay Seller the set-off amount plus accrued interest (at the applicable
federal rate) for the period of time during which Purchaser retained the set-off
amount. Notwithstanding the foregoing, in pursuing any claim for indemnification
hereunder, Purchaser shall first proceed against the Escrow Cash under the terms
of the Escrow Agreement.
(j) The aggregate amount of Damages recoverable by Seller or
Purchaser, as the case may be, shall not exceed the aggregate purchase price for
the Business Assets as computed in accordance with Section 2.4 hereof.
Purchaser's right to indemnification pursuant to this Section 10.2 shall
terminate on the last day of the third Contract Year; provided, however,
32.
that any claims for indemnification made by Purchaser prior to such date will
survive until such claims shall be fully and finally resolved.
10.3 Arbitration.
(a) In the event of any controversy or claim arising out of or
relating to any provision of this Agreement, the parties shall try to settle
their differences amicably between themselves. Any unresolved disputes arising
between the parties relating to, arising out of or in any way connected with
this Agreement or any term or condition hereof, or the performance by either
party of its obligations hereunder, whether before or after termination of this
Agreement, shall be finally resolved by binding arbitration. Whenever a party
shall decide to institute arbitration proceedings, it shall give written notice
to that effect to the other party. The arbitration shall be held in Phoenix,
Arizona according to the rules of the American Arbitration Association ("AAA")
applicable to matters of this nature.
(b) The arbitration shall be conducted before a single arbitrator
pursuant to the rules of the AAA. The arbitrator shall be selected by the joint
agreement of Purchaser and Seller, but if they do not so agree within twenty
(20) days after the date of the notice referred to above, the selection shall be
made pursuant to the rules maintained by the AAA. The arbitrator shall apply the
law set forth in Section 11.13. Any arbitrator eligible to conduct the
arbitration must agree to render his or her opinion within thirty (30) days of
the final arbitration hearing. The arbitrator shall have the authority to grant
injunctive relief and specific performance, and to allocate between the parties
the costs of arbitration in such equitable manner as he or she determines;
provided, however, that each party shall bear its own costs and attorney's and
witness' fees. Notwithstanding the terms of this Section 10.3, a party shall
also have the right to obtain prior to the arbitrator rendering the arbitration
decision, provisional remedies including injunctive relief or specific
performance from a court having jurisdiction thereof. The arbitrator will, upon
the request of either party, issue a written opinion of the findings of fact and
conclusions of law and shall deliver a copy to each of the parties. Decisions of
the arbitrator shall be final and binding on all of the parties. Judgment on the
award so rendered may be entered in any court having jurisdiction thereof.
10.4 Additional Financial Reporting. Seller shall cooperate with Purchaser
with respect to the timely preparation of any audited historical and pro forma
financial statements of Purchaser, the Business or Seller as may be required
under the rules of the SEC or The Nasdaq Stock Market in connection with the
transactions contemplated hereby. Such cooperation shall include, by way of
example and not limitation, execution of management and legal representation
letters to the auditors.
10.5 Record Maintenance. Seller and Purchaser shall each maintain its
business records in the manner and for periods of time required under applicable
contractual, regulatory and statutory requirements and on not less than five (5)
days prior notice in each instance, shall make them reasonably available to each
other in connection with regulatory, audit, tax return or other reasonable
purposes.
33.
10.6 Business Name License. Seller hereby grants Purchaser a non-
exclusive, non-transferable license to use the name "Harris Chapman" solely in
connection with the Continuing Business for a period of twenty (20) years.
ARTICLE 11
General
11.1 Complete Agreement. This Agreement, including the exhibits and
schedules hereto constitutes the entire agreement and supersedes all other prior
and contemporaneous agreements and undertakings, both written and oral, between
the parties hereto with regard to the subject matter hereof. This Agreement (a)
is not intended to confer upon any person any rights or remedies hereunder or
with respect to the subject matter hereof except as specifically provided in
this Agreement; (b) except for assignment by Purchaser of its rights hereunder
to an affiliate, shall not be assigned by any party hereto without the consent
of the other parties, except the right to receive money hereunder; and (c) may
be executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which counterparts shall together constitute a single
agreement. Facsimile signatures shall be fully binding and effective for all
purposes as if they were original signatures.
11.2 Expenses. All costs and expenses, other than those described in
Section 10.2 hereof, including, but not limited to, legal, accounting,
investment banking (if any) and other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby and the negotiation
and execution hereof shall be paid by the party or parties incurring the same.
Notwithstanding the foregoing, Purchaser shall pay all pre-merger notification
filing fees payable under the HSR Act, if any.
11.3 Further Action. Seller shall, from time to time after the Closing
Date, at Purchaser's request and without further consideration, execute and
deliver such other instruments of conveyance, assignment and transfer and take
such other actions as Purchaser reasonably may require to more effectively
convey, transfer to and invest in Purchaser, and to put Purchaser in possession
of, all the Business Assets. Seller hereby irrevocably appoints Purchaser as
its attorney in fact to execute and deliver such instruments necessary or
convenient to convey, transfer and invest in Purchaser, and to put Purchase in
possession of, all the Business Assets.
11.4 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been
received five (5) Business Days after having been deposited in the United States
mail and enclosed in a registered or certified post-paid envelope or one (1)
day after having been sent by overnight courier on a Business Day, or otherwise
at the open of business on the next succeeding Business Day; when scanned by
telegraphic communications equipment of the sending party on a Business Day, or
otherwise at the open of business on the next succeeding Business Day; or when
personally delivered on a Business Day or otherwise at the open of business on
the next succeeding Business Day; and, in each case, addressed to the respective
parties at the addresses stated below, or to such other changed addresses that
the parties may have fixed by notice in accordance herewith.
34.
If to Seller: Harris Chapman
__________________
__________________
__________________
Telephone: __________________
Facsimile: __________________
with a copy to: Arnstein & Lehr
515 North Flager, Suite 600
West Palm Beach, FL 33401-4321
Attn: Randell C. Doane, Esq.
Telephone: (561) 833-9800
Facsimile: __________________
If to Shareholder: Richard Kristensen
__________________
Telephone: __________________
Facsimile: __________________
If to Purchaser: Tier Technologies, Inc.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: James L. Bildner,
Chief Executive Officer
Telephone: (925) 937-3950
Facsimile: (925) 937-3902
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attention: D. Bradley Peck, Esq.
Telephone: (858) 550-6012
Facsimile: (858) 453-3555
11.5 Publicity. Without the prior consent of the other party, no party
shall, and each party shall cause its directors, officers, shareholders,
members, employees, representatives and agents not to, make any public statement
or press release with respect to the transactions contemplated by this Agreement
or otherwise disclose to any Person the existence, terms, content or effect of
this Agreement; provided, however, that if a disclosure is required by law, the
party required to make such disclosure shall be permitted to make such
disclosure but shall make a good faith effort to consult with the other parties
hereto before making the required disclosure.
11.6 Injunctive Relief; Indemnification. Any party (a) may bring a claim
seeking specific performance by way of injunctive relief before a court of
competent jurisdiction to
35.
enforce the provisions of this Agreement, (b) seeking to enforce a claim for
indemnification may bring any claim of indemnification which is not resolved
within the thirty (30) day period provided in Section 10.2(e) hereof before a
court of competent jurisdiction and (c) in the event of any breach by another
party of Section 10.1 hereof may seek injunctive relief from a court of
competent jurisdiction to restrain any such breach.
11.7 Attorneys' Fees. If any litigation or arbitration shall ensue
between the parties concerning the interpretation of or performance under this
Agreement, the prevailing party shall recover from the losing party or parties
its reasonable attorneys' and other fees as fixed by the court or arbitrator.
11.8 Construction of Agreement. Any captions to, or headings of, the
paragraphs of this Agreement are solely for the convenience of the parties
hereto, are not a part of this Agreement and shall not be used for the
interpretation of this Agreement. Where the context so requires, words used in
any gender shall be deemed to include other genders, and the singular number
shall include the plural and vice versa. The Recitals appearing at the beginning
of this Agreement, and the Exhibits and Schedules attached hereto, are hereby
incorporated into and are deemed to constitute a part of the operative text of
this Agreement. Each party hereto and such party's counsel have had the full
opportunity to review and comment upon, and have reviewed and commented upon,
this Agreement, and any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply in the interpretation
of this Agreement or any Exhibits or Schedules attached hereto.
11.9 Severability. Each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be effective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.10 Assignment; Successors and Assigns. This Agreement may not be
assigned by any party without the prior written consent of the other parties.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Any purported assignment in
violation of this Section shall be void and of no effect.
11.11 Time of Essence. Time is of the essence of each and every term,
condition, obligation, and provision hereof. All references herein to a
particular time of day shall be deemed to refer to Pacific Standard Time.
11.12 No Obligations to Third Parties. Except as otherwise expressly
provided herein, the execution and delivery of this Agreement shall not be
deemed to confer any rights upon, nor obligate any of the parties hereto to, any
person or entity other than the parties hereto.
11.13 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to any
principles or statutes of conflicts of laws.
36.
11.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when copies hereof, which, when taken together, bear the signatures of all the
other parties shall be delivered to each of the parties hereto.
37.
In Witness Whereof, each of the parties hereto has executed this Agreement,
or has caused this Agreement to be executed on its behalf by a representative
duly authorized, all as of the date first above set forth.
PURCHASER:
Tier Technologies, Inc.
By:_________________________________
Name:_______________________________
Its:________________________________
SELLER:
Harris Chapman
By:_________________________________
Name:_______________________________
Its:________________________________
SHAREHOLDER:
____________________________________
Richard E. Kristensen
EXHIBITS
EXHIBIT 1.1(a) Form of Client Novation Agreement
EXHIBIT 1.1(b) Form of Escrow Agreement
EXHIBIT 8.1(d) Form of Certificate of Seller
EXHIBIT 8.1(e) Form of Seller Legal Opinion
EXHIBIT 8.1(m) Form of Bill of Sale
EXHIBIT 8.1(n) Form of Assignment of Intangibles
EXHIBIT 8.2(c) Form of Certificate of Purchaser
EXHIBIT 8.2(f) Form of Purchaser Legal Opinion
SCHEDULES
Schedule Subject
1.1(a) Clients
1.1(b) Client Contracts
1.1(c) Copyrights
1.1(d) Permitted Liens
1.1(e) Proposals
1.1(f) Trademarks
2.4(g)(i) First Performance Targets
2.4(g)(ii) Second Performance Targets
3.2 Required Consents for Agreement
3.4(a) Financial Statements and Contract Cost Schedule
3.4(b) Projections and Reconciliation
3.5(a) Required Consents for Intangible Assets
3.6 Receivables and Payables
3.7(a) Intangible Assets
3.7(b) Rights of Others in Intangible Assets
3.7(c) Licenses or Rights to Proprietary Information; Exceptions
3.8 Insurance
3.9 Employee and Labor Matters
3.10 Litigation
3.12 Employee Benefit Matters
3.13 Liabilities
3.14 Permits
3.15 Consents
3.19 Warranties
3.20 Affiliations
5.6 Prior Claims
Exhibit 1.1(A)
[Form of Client Novation Agreement]
__________________
__________________
__________________
Dear _________________:
I am very pleased and excited to inform you that Tier Technologies, Inc.
(NASDAQ: TIER) ("Tier"), has entered into an agreement with Harris Chapman
("Harris") to purchase substantially all of Harris's business. This purchase is
expected to close on or about March 31, 2000.
Tier will continue to operate the business under the name of Harris. In
addition, most of the Harris team will continue to be part of the business.
__________ will continue to be your point of contact for work performed on your
project. There should be no change in the way in which services will be
delivered to you under the current project(s).
Tier will, if you agree, assume all obligations of Harris under the current
Agreement between you and Harris. This agreement shall only become effective
upon the closing of the above-referenced purchase. Accordingly, effective upon
closing:
. Tier will continue to perform all the services performed by Harris;
. Tier will assume all the obligations of Harris under the Agreement(s)
arising on or after the date of the purchase transaction described above;
. the ongoing relationship will be between you and Tier and you will remit
invoice payments directly to Tier.
By signing below and consenting to the changes set forth above, your signature
will be deemed to certify the following:
1) A true and correct copy of the Agreement(s) or Accepted Proposal is/are
attached hereto as Exhibit A, and it represents the entire agreement
between Harris and [Client]. [If no written agreement exists, attach a
summary of verbal agreement]
2) The Agreement(s) is/are in full force and effect and has/have not been
modified, amended, altered, supplemented or terminated.
3) To the best of [Client]'s knowledge, there are no breaches or defaults by
[Client] or Harris under the Agreement(s) and, to the best of [Client]'s
knowledge, no events or conditions have occurred which, with the giving of
notice or the passage of time, or both, would constitute such a breach or
default by [Client] or Harris.
1.
4) The total agreed upon Agreement(s) amount is $________. Invoiced amounts
for the project to date are $________. Current outstanding invoices are
$_______.
5) [Client] hereby acknowledges that Tier shall have no liability for, and
[Client] agrees to not allege or assert any claims against Tier for
liability of Harris arising prior to the date of closing of the purchase
transaction described above.
6) As of the date hereof, [Client] has no claims against Harris relating to or
arising from the Agreement(s) or the services provided by Harris
7) To the best of [Client's] knowledge, Harris has no defenses, counterclaims
or right to setoff against [Client] under the Agreement(s).
If you agree to the changes set forth above, please so indicate by signing both
copies of this letter in the place indicated below, return them both to me, and
upon signature by Tier, I will return one of the fully executed copies to you.
Please call me at ___________ if you have any questions.
I look forward to continuing our relationship with you.
Sincerely:
The Harris Group, Inc.
___________________________
Understood and Agreed to:
For and on behalf of:
___________________________
By:________________________
Title:_____________________
For and on behalf of Tier Technologies, Inc.
By:___________________________ Dated:___________________________
Title:________________________
2.
Exhibit 1.1(B)
ESCROW AGREEMENT
This Escrow Agreement, dated as of March 31, 2000 (the "Closing Date"),
among Tier Technologies, Inc., a California corporation ("Buyer"), Harris
Chapman ("Seller"), Richard E. Kristensen, an individual resident in the State
of Florida ("Kristensen"), and Imperial Bank, as escrow holder ("Escrow
Holder").
This is the Escrow Agreement referred to in the Agreement for Purchase and
Sale of Assets dated March 25, 2000 (the "Asset Purchase Agreement") among
Buyer, Seller and Kristensen. Capitalized terms used in this agreement without
definition shall have the respective meanings given to them in the Asset
Purchase Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. Establishment Of Escrow
(a) As of the date of this Agreement, Buyer is depositing with Escrow
Holder an amount equal to $15,000 in immediately available funds. Escrow Holder
acknowledges receipt thereof.
(b) Within 120 days after the date of this Agreement, Buyer will deposit
with Escrow Holder an additional amount equal to $15,000 in immediately
available funds (this amount together with the amount referenced in Section
1(a), as increased by any earnings thereon and as reduced by any disbursements,
amounts withdrawn under Section 5(j), or losses on investments, the "Escrow
Fund").
(c) Escrow Holder hereby agrees to act as Escrow Holder and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment Of Funds
The Escrow Fund shall be maintained in a money market deposit account with
Escrow Holder.
3. Claims
(a) From time to time on or before March 31, 2001 [one year anniversary of
closing], Buyer may give notice (a "Notice") to Seller and Escrow Holder
specifying in reasonable detail the nature and dollar amount of any claim (a
"Claim") it may have under Section 10 of the Asset Purchase Agreement; Buyer may
make more than one claim with respect to any underlying state of facts. If
Seller gives notice to Buyer and Escrow Holder disputing any Claim (a "Counter
Notice") within 30 days following receipt by Escrow Holder of the Notice
regarding such Claim, such Claim shall be resolved as provided in Section 3(c).
If no Counter Notice is received by Escrow Holder within such 30-day period,
then the dollar amount of damages claimed by Buyer as set forth in its Notice
shall be deemed established for purposes of this Escrow Agreement and the Asset
Purchase Agreement and, at the end of such 30-day period, Escrow Holder shall
pay to Buyer the dollar amount claimed in the Notice from (and only to the
extent of) the Escrow Fund.
1.
Escrow Holder shall not inquire into or consider whether a Claim complies
with the requirements of the Asset Purchase Agreement.
(b) The final determination of a disputed claim asserted hereunder shall
be made in accordance with the provisions for settlement of disputes contained
in paragraph 3(c) hereof and shall be evidenced by the documentation referred to
therein.
(c) Any dispute that may arise under this Escrow Agreement, other than
disputes involving the responsibilities of the Escrow Holder under this Escrow
Agreement, shall be settled by the mutual agreement of the parties to such
dispute (evidenced by appropriate instructions in writing to the Escrow Holder
signed by all of the parties to such dispute) or by a binding and final
arbitration award, such arbitration to be conducted in accordance with the
provisions of the Asset Purchase Agreement. The Escrow Holder shall be under no
duty to institute or defend any such proceedings and none of the costs and
expenses in any such proceedings shall be borne by the Escrow Holder. Prior to
the settlement of any dispute as provided in this paragraph, the Escrow Holder
is authorized and directed to retain in its possession, without liability to
anyone, that portion of the Escrow Fund that is the subject of or involved in
the dispute.
4. Termination Of Escrow
On March 31, 2001 [one year anniversary of closing], Escrow Holder shall
pay and distribute the then amount of Escrow Fund to Seller, unless (i) any
Claims are then pending, in which case an amount equal to one hundred thirty
percent (130%) of the aggregate dollar amount of such Claims (as shown in the
Notices of such Claims) shall be retained by Escrow Holder in the Escrow Fund
(and the balance paid to Seller in such proportions) or (ii) Buyer has given
notice to Seller and Escrow Holder specifying in reasonable detail the nature of
any other claim it may have under Section 10 of the Asset Purchase Agreement
with respect to which it is unable to specify the amount of Damages, in which
case the entire Escrow Fund shall be retained by Escrow Holder, in either case
until it receives joint written instructions of Buyer and Seller or a final non-
appealable order of a court of competent jurisdiction as contemplated by Section
3(b).
5. Duties Of Escrow Holder
(a) Escrow Holder shall not be under any duty to give the Escrow Fund held
by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder shall not earn or
accrue interest.
(b) Escrow Holder shall not be liable, except for its own gross negligence
or willful misconduct and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Holder, the other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Holder (and any successor Escrow Holder) from and against any
and all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the foregoing, Escrow Holder shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any delays (not
2.
resulting from its gross negligence or willful misconduct) in the investment or
reinvestment of the Escrow Fund, or any loss of interest incident to any such
delays.
(c) Escrow Holder shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Holder may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Holder may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Holder on behalf of that party unless written
notice to the contrary is delivered to Escrow Holder.
(d) Escrow Holder may act pursuant to the advice of counsel with respect
to any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
(e) Escrow Holder does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and having only possession
thereof. Any payments of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United States taxes. The
parties hereto will provide Escrow Holder with appropriate Internal Revenue
Service Forms W-9 for tax identification number certification, or non-resident
alien certifications. This Section 5(e) and Section 5(b) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Holder.
(f) Escrow Holder makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Holder shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(h) Escrow Holder (and any successor Escrow Holder) may at any time resign
as such by delivering the Escrow Fund to any successor Escrow Holder jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Holder shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
resignation of Escrow Holder will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Holder has not
received a designation of a successor Escrow Holder, Escrow Holder's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Holder or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
(i) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Holder is in doubt as to what action it should
take hereunder, Escrow Holder shall be entitled to retain the Escrow Fund until
Escrow Holder shall have received (i) a final non-
3.
appealable order of a court of competent jurisdiction directing delivery of the
Escrow Fund or (ii) a written agreement executed by the other parties hereto
directing delivery of the Escrow Fund, in which event Escrow Holder shall
disburse the Escrow Fund in accordance with such order or agreement. Any court
order shall be accompanied by a legal opinion by counsel for the presenting
party satisfactory to Escrow Holder to the effect that the order is final and
non-appealable. Escrow Holder shall act on such court order and legal opinion
without further question.
(j) Buyer and Seller shall pay Escrow Holder compensation for the services
to be rendered by Escrow Holder hereunder in the amount of $1,500 at the time of
execution of this Agreement and agree to reimburse Escrow Holder for all
reasonable expenses, disbursements and advances incurred or made by Escrow
Holder in performance of its duties hereunder (including reasonable fees,
expenses and disbursements of its counsel). In addition, Escrow Holder will
collect a transaction fee of $25.00 for each incoming deposit and outgoing
debit, whether by check or wire. Any such compensation and reimbursement to
which Escrow Holder is entitled shall be borne 50% by Buyer and 50% by Seller.
Any fees or expenses of Escrow Holder or its counsel that are not paid as
provided for herein may be taken from any property held by Escrow Holder
hereunder.
(k) No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material) that
mentions Escrow Holder's name or the rights, powers, or duties of Escrow Holder
shall be issued by the other parties hereto or on such parties' behalf unless
Escrow Holder shall first have given its specific written consent thereto.
(l) The other parties hereto authorize Escrow Holder, for any securities
held hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, the
Depositary Trust Company and the Federal Reserve Book Entry System.
6. Limited Responsibility
This Agreement expressly sets forth all the duties of Escrow Holder with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Holder. Escrow
Holder shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
7. Notices
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
4.
Seller: Harris Chapman
1021 Diamond Head Way
Palm Beach Gardens, FL 33418
Attn: Richard E. Kristensen
Telephone: (561) 694-6661
Facsimile: (561) 627-6411
with a copy to: Richard E. Kristensen
1021 Diamond Head Way
Palm Beach Gardens, FL 33418
Telephone: (561) 694-6661
Facsimile: (561) 627-6411
with a copy to: Arnstein & Lehr
515 North Flagler Drive, Suite 600
West Palm Beach, FL 33401-4321
Attn: Randell C. Doane, Esq.
Telephone: (561) 833-9800
Facsimile: (561) 655-5551
Buyer: Tier Technologies, Inc.
1350 Treat Boulevard, Suite 250
Walnut Creek, CA 94596
Attn: James L. Bildner,
Chief Executive Officer
Telephone: (925) 937-3950
Facsimile: (925) 937-3902
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attention: D. Bradley Peck, Esq.
Telephone: (858) 550-6000
Facsimile: (858) 453-3555
Escrow Holder: Imperial Bank
701 "B" Street, Suite 600
San Diego, CA 92108
Attention: Mary Ellen Munyon, Vice
President
Facsimile: (619) 239-3738
8. Jurisdiction; Service Of Process
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of California, County of San Francisco, or,
if it has or can acquire jurisdiction, in the United States District Court for
the Northern District of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or
5.
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
9. Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
10. Section Headings
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
11. Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12. Exclusive Agreement And Modification
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Buyer, the
Seller and the Escrow Holder.
13. Governing Law
This Agreement shall be governed by the laws of the State of California,
without regard to conflicts of law principles.
6.
In Witness Whereof, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
Tier Technologies, Inc.
By:_______________________________
Name:_____________________________
Its:______________________________
SELLER:
Harris Chapman
By:_______________________________
Name:_____________________________
Its:______________________________
__________________________________
Richard E. Kristensen
Exhibit 8.1(d)
COMPLIANCE CERTIFICATE
This Certificate is delivered with reference to Section 8.1(d) of that
certain Agreement for Purchase and Sale of Assets (the "Purchase Agreement")
dated as of March 25, 2000 among Harris Chapman, a Florida corporation (the
"Seller"), Tier Technologies, Inc., a California corporation ("Tier"), and
Richard E. Kristensen, the sole shareholder of the Seller ("Shareholder").
Unless otherwise defined herein, capitalized terms used but not defined herein
have the respective meanings given to them in the Purchase Agreement.
The undersigned, in his capacity as both President of the Seller and
as an individual, hereby certifies as follows:
1. The representations and warranties of the Seller and Shareholder contained
in the Purchase Agreement are true and correct in all material respects as
of the Closing Date with the same effect as if made on the Closing Date.
2. All of the covenants and agreements that the Seller and/or Shareholder are
required to perform or satisfy at or prior to the Closing Date have been
performed or satisfied.
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1.
In Witness Whereof, the undersigned have executed this Certificate as of
March 31, 2000.
Harris Chapman
By:___________________________________
Richard E. Kristensen
President
______________________________________
Richard E. Kristensen
Exhibit 8.1(e)
Form of Opinion - Harris Chapman
1. Harris Chapman ("Seller") is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Florida.
2. Seller has all requisite power to own, lease and operate its
properties and assets and conduct its business as it is currently being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties or assets owned of record or leased by it makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the condition (financial or otherwise),
results of operations, assets or business of Seller.
3. All necessary corporate actions on the part of Seller, its Board of
Directors and its stockholders for the authorization, execution and performance
of the Purchase Agreement and the Escrow Agreement (collectively the
"Agreements") and the transactions contemplated therein have been taken. The
Agreements have been duly and validly authorized, executed and delivered by
Seller and each constitutes a legal, valid and binding agreement of Seller
enforceable against Seller in accordance with their terms, except as rights to
indemnity under Section 10 of the Purchase Agreement may be limited by
applicable laws and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
4. To our knowledge, there are no encumbrances in effect against the
Business Assets except those described in the Disclosure Schedules to the
Purchase Agreement. To our knowledge, the transfer and assignment of the
Business Assets pursuant to the Agreements is not subject to any right of first
refusal, right of first offer or other similar right of any party that has not
been effectively waived.
5. The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated thereby will not result in a
violation of, or constitute a default under, (i) Seller's Articles of
Incorporation or Bylaws, (ii) any Client Contract, or (iii) any governmental
statute, rule or regulation applicable to Seller.
6. Except as set forth on Schedule __ to the Purchase Agreement, there is
no action, proceeding or investigation pending or overtly threatened against
Seller before any court or administrative agency that questions the validity of
the Agreements, the transfer of the Business Assets or the assignment or
assumption of the Assumed Liabilities or that might result, either individually
or in the aggregate, in any adverse effect on the Business Assets, Assumed
Liabilities or on the condition (financial or otherwise), results of operations,
assets or business of Seller.
7. All consents, approvals, authorizations, orders of and filings,
registrations and qualifications with any regulatory authority or governmental
body required for the consummation by Seller of the transactions contemplated by
the Agreements have been made or obtained, except where the failure to obtain
any such consents, approval, authorization or order
of, or make any such filing, registration or qualification would not have any
adverse effect on the Business Assets, Assumed Liabilities or on the condition
(financial or otherwise), results of operations, assets or business of Seller.
Seller shall render no opinion with respect to approvals required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
2.
Exhibit 8.1(M)
BILL OF SALE
This Bill of Sale is executed and delivered as of ______________, 2000 by
Harris Chapman, a Florida corporation ("Seller"), in favor of Tier Technologies,
Inc., a California corporation ("Buyer").
Recitals
Buyer and Seller have entered into that certain Asset Purchase Agreement
dated March ___, 2000 (the "Purchase Agreement") pursuant to which, among other
things, Seller has agreed to transfer and assign the Business Assets (as such
terms are defined in the Purchase Agreement) to Buyer subject to the terms and
conditions set forth in the Purchase Agreement. All capitalized terms not
defined herein shall have the same meanings as set forth in the Purchase
Agreement.
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller hereby sells, conveys,
transfers, assigns and delivers to Buyer all of its right, title and interest in
and to the Business Assets free and clear of all liabilities and Liens. Seller,
at any time at or after the date hereof, will execute, acknowledge and deliver
any further deeds, assignments, conveyances and other assurances, documents, and
instruments of transfer reasonably requested by Buyer and will take any other
action consistent with the terms of the Purchase Agreement and this Bill of Sale
that may reasonably be requested by Buyer for the purpose of assigning,
transferring, granting, conveying and confirming to Buyer, or reducing to
Buyer's possession, any or all of the Business Assets.
Effective as of the Closing, Seller hereby irrevocably nominates,
constitutes and appoints Buyer the true and lawful attorney-in-fact of Seller,
with full power of substitution, and hereby authorizes Buyer, in the name and on
behalf of Seller, to execute, deliver, acknowledge, certify, file and record (in
the name of Seller or otherwise) any deeds, assignments, conveyances,
instruments or other documents, and to institute and prosecute (in the name of
Seller or otherwise) any action or proceeding that Buyer may in its sole
discretion deem appropriate, in each case for the purpose of (i) collecting,
asserting, enforcing or perfecting any claim, right, title or interest of any
kind that is included in or relates in any way to any of the Business Assets, or
(ii) defending or compromising any arbitration suit, litigation, or proceeding
relating in any way to any of the Business Assets. The foregoing powers are and
shall be coupled with an interest and shall be irrevocable and shall survive the
liquidation and dissolution of Seller.
This Bill of Sale is subject to, and shall be construed in accordance with,
the Purchase Agreement, and in the event of a conflict between the provisions of
this Bill of Sale and the provisions of the Purchase Agreement (insofar as such
provisions relate to the rights and
obligations of Buyer, on the one hand, and Seller, on the other hand), the
provisions of the Purchase Agreement shall prevail.
In Witness Whereof, this Bill of Sale has been executed by a duly
authorized officer of Seller as of the day and year first above written.
Harris Chapman
By:_______________________________
Name:_____________________________
Title:____________________________
2.
Exhibit 8.1(n)
Form of
Assignment of Intangibles
THIS ASSIGNMENT OF INTANGIBLES is effective as of 31/st/ of March, 2000 by
Harris Chapman, a Florida corporation ("Assignor"), in favor of Tier
Technologies, Inc., a California corporation ("Assignee"), pursuant to that
certain Agreement for Purchase and Sales of Assets dated as of March 25, 2000,
by and among Assignor as Seller, the Shareholders of Seller and Assignee as
Buyer (the "Asset Purchase Agreement").
FOR VALUE RECEIVED, Assignor hereby grants, conveys, transfers and assigns
to Assignee all of Assignor's right, title and interest in, to and under the
Intangible Assets (as defined in the Asset Purchase Agreement). Notwithstanding
anything contained herein to the contrary, the Intangible Assets being assigned
pursuant to this Assignment of Intangibles shall not include intangible property
used by or arising from the Excluded Assets.
Assignor hereby covenants that it will, at any time and from time to time
upon written request therefor, execute and deliver to Assignee, its nominees,
successors and/or assigns, any new or confirmatory instruments and do and
perform any other acts which Assignee, its nominees, successors and/or assigns,
may reasonably request in order to fully assign and transfer to and vest in
Assignee, its nominees, successors and/or assigns, and protect its and/or their
rights, title and interest in and enjoyment of, all of the Intangible Assets, or
to enable Assignee, its nominees, successors and/or assigns, to realize upon or
otherwise enjoy the same.
Assignor hereby agrees to indemnify, defend, protect and hold harmless
Assignee from and against any and all liability, loss, cost, damage and expense
(including, without limitation, attorneys' and paralegals' fees and costs)
relating to Assignor's obligations with respect to the Intangible Property
arising prior to the date hereof. Assignee hereby assumes and agrees to perform
or cause to be performed Assignor's obligations, if any, under the Intangible
Assets from and after the date of this instrument.
Assignee hereby accepts the foregoing Assignment of Intangibles and agrees
to assume, fulfill, perform and discharge all the various commitments,
obligations and liabilities of Assignor under and by virtue of the Intangible
Assets hereby assigned, which arise on or after the effective date hereof, and
does hereby agree to defend, indemnify and hold harmless Assignor from any
liability damages and causes of action, expenses and attorneys' fees incurred by
Assignor by reason of the failure of Assignee after the effective date hereof to
fulfill, perform and discharge all of the various commitments, obligations and
liabilities of Assignee under and by virtue of the Intangible Assets assigned
hereunder which arise on or after the date hereof.
Terms not defined in this Assignment of Intangibles, shall have the meaning
ascribed to them in the Asset Purchase Agreement.
1.
This Assignment of Intangibles shall be governed by, and construed under
the laws of the State of California.
The provisions of this Assignment of Intangibles shall be binding upon and
inure to the benefit of Assignor, Assignee and their successors and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Intangibles as of the date first above written.
ASSIGNOR:
Harris Chapman
By: _____________________________
Name: ____________________________
Title: ___________________________
ASSIGNEE:
Tier Technologies, Inc.
By: _____________________________
Name: ____________________________
Title: ___________________________
2.
Exhibit 8.2(c)
TIER TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
This Certificate is delivered with reference to Section 8.2(c) of that
certain Agreement for Purchase and Sale of Assets (the "Purchase Agreement")
dated as of March 25, 2000 among Tier Technologies, Inc., a California
corporation (the "Purchaser"), Harris Chapman, a Florida corporation ("HC"), and
Richard E. Kristensen, the sole shareholder of HC ("Shareholder"). Unless
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Purchase Agreement.
The undersigned, as the Chief Executive Officer and the Chief Financial
Officer of the Purchaser, hereby certify as follows:
1. The representations and warranties of the Purchaser contained in the
Purchase Agreement are true and correct in all material respects as of the
Closing Date with the same effect as if made on the Closing Date.
2. All of the covenants and agreements that the Purchaser is required to
perform or satisfy at or prior to the Closing Date have been performed or
satisfied.
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1
In Witness Whereof, the undersigned have executed this Certificate as of
March 31, 2000.
Tier Technologies, Inc.
By:
___________________________________
James L. Bildner,
President and Chief Executive
Officer
Tier Technologies, Inc
By:
___________________________________
Laura DePole,
Chief Financial Officer
Exhibit 8.2(f)
Form of Opinion - Tier Technologies, Inc.
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California.
2. Seller has all requisite power to own, lease and operate its
properties and assets and conduct its business as it is currently being
conducted and is duly qualified to do business and is in good standing in
California and Illinois.
3. All necessary corporate actions on the part of the Company, its Board
of Directors and its shareholders for the authorization, execution and
performance of the Purchase Agreement and the Escrow Agreement (collectively the
"Agreements") and the transactions contemplated therein have been taken. The
Agreements have been duly and validly authorized, executed and delivered by the
Company and each constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as rights
to indemnity under Section 10 of the Purchase Agreement may be limited by
applicable laws and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
4. The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated thereby will not result in a
violation of, or constitute a default under, (i) the Company's Restated Articles
of Incorporation or Bylaws, (ii) of any contract filed as an exhibit to any of
the Company's filings with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, or (ii) any governmental
statute, rule or regulation applicable to the Company.
5. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreements or that
might result, either individually or in the aggregate, in any adverse effect on
the condition (financial or otherwise), results of operations, assets or
business of the Company.
6. All consents, approvals, authorizations, orders of and filings,
registrations and qualifications with any regulatory authority or governmental
body required for the consummation by the Company of the transactions
contemplated by the Agreement have been made or obtained, except where the
failure to obtain any such consents, approval, authorization or order of, or
make any such filing, registration or qualification would not have any material
adverse effect on the condition (financial or otherwise), results of operations,
assets or business of the Company.