TABLE OF CONTENTS
1. THE MERGER 5
1.1 Delivery and Filing of Articles of Merger 5
1.2 Effective Time of the Merger 5
1.3 Certificate of Incorporation 6
2. CONVERSION OF STOCK 7
2.1 Manner of Conversion 7
3. DELIVERY OF MERGER CONSIDERATION;
CLOSING AND POST-CLOSING ADJUSTMENTS 8
3.1 Delivery of Initial Merger Consideration 8
3.2 Delivery of Subsequent Merger Consideration 8
3.3 Closing Date Adjustments to Merger Consideration 9
3.4 Post-Closing Adjustments to Merger Consideration 9
4. CLOSING 10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS 11
5.1 Due Organization 11
5.2 Authorization 12
5.3 Capital Stock of the COMPANY 12
5.4 Subsidiaries 12
5.5 Financial Statements 12
5.6 Liabilities and Obligations 13
5.7 Accounts and Notes Receivable 13
5.8 Intellectual Property; Permits and Intangibles 14
5.9 Environmental Matters 15
5.10 Personal Property 17
5.11 Significant Customers: Material Contracts
and Commitments 17
5.12 Real Property 19
5.13 Insurance 19
5.14 Compensation: Employment Agreements:
Organized Labor Matters 19
5.15 Employee Plans 20
5.16 Compliance with ERISA 20
5.17 Conformity with Law; Litigation 22
5.18 Taxes 22
5.19 No Violations 25
5.20 Business Conduct 25
5.21 Prohibited Activities 27
5.22 Misrepresentation 27
5.23 Authority; Ownership 27
5.24 No Intention to Dispose of ITP Stock 27
6. REPRESENTATIONS OF ITP AND NEWCO 28
6.1 Due Organization 28
6.2 Authorization 28
6.3 Transaction Not a Breach 28
6.4 Misrepresentation 29
6.5 Capital Stock 29
6.6 Subsidiaries 29
6.7 Conformity with Law; Litigation 29
6.8 Financial Statements 30
6.9 Compensation; Employment Agreements: Organized
Labor Matters 30
7. COVENANTS PRIOR TO CLOSING 31
7.1 Access and Cooperation: Due Diligence 31
7.2 Conduct of Business Pending Closing 31
7.3 Prohibited Activities 32
7.4 No Shop 33
7.5 Termination of Related Party Agreements 34
7.6 Notification of Certain Matters 34
7.7 Amendment of Schedules 34
7.8 Further Assurances 35
7.9 Approval of Merger Agreement 35
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
AND THE COMPANY 35
8.1 Representations and Warranties 36
8.2 Performance of Obligations 36
8.3 No Litigation 36
8.4 Opinion of Counsel 36
8.5 Consents and Approvals 36
8.6 Good Standing Certificates 36
8.7 Secretary's Certificate 37
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO 37
9.1 Representations and Warranties 37
9.2 Performance of Obligations 37
9.3 No Litigation 37
9.4 Secretary's Certificate 37
9.5 No Material Adverse Change 38
9.6 STOCKHOLDERS' Release 38
9.7 Termination of Related Party Agreements 38
9.8 Opinion of Counsel 38
9.9 Consents and Approvals 38
9.10 Good Standing Certificates 38
9.11 Employment Agreements 39
9.12 Stockholders' Agreement 39
9.13 Subordination Agreement 39
9.14 Financing 39
10. COVENANTS AFTER CLOSING 39
10.1 Preparation and Filing of Tax Returns 39
10.2 Subsequent Acquisitions 40
10.3 Stock Options 40
11. INDEMNIFICATION 40
11.1 General Indemnification by the STOCKHOLDERS 40
11.2 Indemnification by ITP 41
11.3 Third Person Claims 41
11.4 Exclusive Remedy 42
11.5 Limitations on Indemnification 42
12. TERMINATION OF AGREEMENT 43
12.1 Termination 43
12.2 Liabilities in Event of Termination 43
13. NONCOMPETITION 43
13.1 Prohibited Activities 43
13.2 Damages 44
13.3 Reasonable Restraint 45
13.4 Severability, Reformation 45
13.5 Independent Covenant 45
13.6 Materiality 45
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF ITP AND NEWCO
ANNEX III MERGER CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF ITP
ANNEX VI FORM OF OPINION OF COUNSEL TO ITP
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
ANNEX IX FORM OF JOINDER AGREEMENT
ANNEX X FORM OF PROMISSORY NOTE
ANNEX XI FORM OF SUBORDINATION AGREEMENT
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (this "Agreement") is made, as of
October 20, 1997, by and among (i) IT PARTNERS, INC., a Delaware corporation
("ITP"), (ii) ITP NO. 4, INC., a Delaware corporation ("NEWCO"), (iii)
FINANCIAL SYSTEMS CONSULTING, INC., a California corporation (the "COMPANY"),
and (iv) CHARLES SCHAEFFER and GARRETT SCHAEFFER (collectively, the
"STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on July 23, 1997,
solely for the purpose of completing the transactions set forth herein, and is
a wholly-owned subsidiary of ITP;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that the COMPANY merge with and
into NEWCO pursuant to this Agreement and the applicable provisions of the
laws of the States of Delaware and California (the "Merger"), and in
furtherance thereof have approved the Merger;
WHEREAS, unless the context otherwise requires, capitalized terms used in
this Agreement or in any schedule attached hereto and not otherwise defined
herein shall have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" means NEWCO and each of the other Delaware
companies wholly-owned by ITP prior to the Closing Date.
"Acquisition Transaction" has the meaning set forth in Section 7.4.
"Affiliate" means any other person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with a person.
"Agent" has the meaning set forth in Section 9.14.
"Articles of Merger" means those Articles or Certificates of Merger with
respect to the Merger substantially in the forms attached as Annex I hereto or
with such changes therein as may be required by applicable state laws.
"Balance Sheet" means the COMPANY's audited August 31, 1997 Balance Sheet
prepared by ITP's independent accountants, Arthur Andersen, L.L.P. and
delivered to the COMPANY.
"Balance Sheet Date" means August 31, 1997.
"Benefit Plan" means any Plan existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by
the COMPANY, any ERISA Affiliate, or any predecessor of any of the foregoing,
under which any employee or former employee of the COMPANY, or any beneficiary
thereof, is covered, is eligible for coverage or has benefit rights.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Debt" means all liabilities of the COMPANY as determined under GAAP
except (i) ordinary course trade payables and (ii) ordinary course accrued
liabilities.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization prepared in accordance with GAAP.
"Effective Time of the Merger" means the time as of which the Merger
becomes effective, which the parties hereto contemplate will occur on the
Closing Date.
"Environmental Requirements" has the meaning set forth in Section 5.9(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person who is, or at any time was, a member
of a controlled group (within the meaning of Section 412(n)(6) of the Code)
that includes, or at any time included, the COMPANY or any predecessor of the
COMPANY.
"Estimated Closing Date Balance Sheet" means a Closing Date balance sheet
for the COMPANY prepared by ITP in accordance with Section 3.3.
"Expiration Date" has the meaning set forth in Section 5(A).
"Final Closing Balance Sheet" means the Closing Date Balance Sheet as
finally determined under "Section 3.3.
"Final Net Asset Value" means Net Asset Value as finally determined under
Section 3.4.
"GAAP" means generally accepted accounting principles of the United
States applied in a manner consistent with the past practices of the COMPANY.
"Governmental Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or judicial
authority, or any public, private or industry regulatory authority, whether
national, Federal, state, local or otherwise.
"Hazardous Materials" has the meaning set forth in Section 5.9(a).
"Intellectual Property" means trademarks, service marks, trade dress,
trade names, patents and copyrights and any registration or application for
any of the foregoing, and any trade secret, invention, discovery, method of
doing business, process, know-how, including but not limited to, training
techniques, training materials, computer software (including source and object
code), databases, technology systems and integration techniques, product
design and product packaging.
"ITP" has the meaning set forth in the first paragraph of this Agreement.
"ITP Charter Documents" has the meaning set forth in Section 6.1.
"ITP Expiration Date" has the meaning set forth in Section 6.
"ITP Stock" means the common stock, par value $.01 per share, of ITP.
"Knowledge," "best of knowledge," "aware', or similar expressions mean
only the actual knowledge of the individual to which the expression is
applicable. When such terms are used in connection with the knowledge of a
corporate entity, such knowledge shall include only the actual knowledge of
the officers or directors of that corporate entity.
"Lien" has the meaning set forth in Section 5.6.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Contract" means any lease, instrument, agreement, license or
permit set forth on Schedule 5.8, 5.9, 5.10, 5.11, 5.12, 5.14 or 5.15 or any
other material agreement to which the COMPANY is a party or by which its
properties are bound.
"Merger" means the merger of the COMPANY with and into NEWCO pursuant to
this Agreement and the applicable provisions of the laws of the States of
Delaware and California.
"Net Asset Value" means the COMPANY's net worth shown in the Estimated
Closing Date Balance Sheet and the Proposed Final Balance Sheet.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of NEWCO.
"Note" has the meaning set forth in Section 2.1 (a).
"NTM EBITDA" means EBITDA for the twelve months following the Closing
Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any natural person, corporation, partnership,
proprietorship, other business organization, trust, union, association or
Governmental Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Proposed Final Closing Balance Sheet" means a Closing Date Balance Sheet
for the COMPANY prepared by ITP in accordance with Section 3.4.
"Relevant Group" has the meaning set forth in Section 5.18(a).
"Returns" has the meaning set forth at the end of Section 5.18.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3(e).
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean NEWCO as the surviving party in the
Merger.
"Tax" or "Taxes" has the meaning set forth at the end of Section 5.18.
"Taxing Authority" has the meaning set forth at the end of Section 5.18.
"Transfer Taxes" has the meaning set forth in Section 1 7.6(c).
"Working Capital Cash Needs" means that amount of cash and cash
equivalents equal to $94,690.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and
filed with the Secretary of State of the State of Delaware and the Secretary
of State of the State of California and stamped receipt copies of each such
filing to be delivered to ITP on or before the Closing Date.
1.2 Effective Time of the Merger. At the Effective Time of the
Merger and subject to the terms and conditions of this Merger and the
applicable provisions of the Delaware General Corporation Law (the "Delaware
Law"), the COMPANY shall be merged with and into NEWCO in accordance with the
Articles of Merger, the separate existence of the COMPANY shall cease and
NEWCO shall be the Surviving Corporation in the Merger. At the Effective Time
of the Merger, the effect of the Merger otherwise shall be as provided in the
applicable provisions of Delaware Law and the law of the State of California.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time of the Merger, all the property, rights, privileges, powers and
franchises of the COMPANY and NEWCO shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the COMPANY and NEWCO shall become
the debts, liabilities and duties of the Surviving Corporation. The Merger
will be effected in a single transaction.
1.3 Certificate of Incorporation. By-Laws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(a) the Certificate of Incorporation of NEWCO then in effect
shall be the Certificate of Incorporation of the Surviving Corporation until
amended as provided by law;
(b) the By-Laws of NEWCO then in effect shall be the By-Laws of
the Surviving Corporation until amended as provided by law;
(c) Charles Schaeffer, Daniel J. Klein and Jamie E. Blech shall
be the directors of the Surviving Corporation until their respective
successors are elected or appointed and qualified in accordance with the terms
the By-Laws of the Surviving Corporation: the Board of Directors of the
Surviving Corporation shall hold office subject to the provisions of the laws
of the State of Delaware and of the Certificate of Incorporation and By-Laws
of the Surviving Corporation; and
(d) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger. In addition, Daniel J. Klein shall be appointed
Chairman of the Board of the Surviving Corporation and Jamie E. Blech shall be
appointed vice president and assistant secretary of the Surviving Corporation,
each such officer to serve, subject to the provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until his or her
successor is duly elected and qualified.
(e) Subject to the provisions of the Stockholders' Agreement
referred to in Section 9.12 hereof and subject to the provisions of the laws
of the State of Delaware, the Company shall use its best efforts to have
Charles Schaeffer nominated and appointed as a director of ITP to serve until
his successor is elected and qualified.
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, ITP and NEWCO. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY, ITP and NEWCO as of the date of this Agreement are as follows:
(a) as of the date of this Agreement, the authorized capital
stock of the COMPANY is as set forth on. Schedule 1.4 hereto;
(b) immediately prior to the Closing Date, the authorized
capital stock of ITP will consist of ten million shares of ITP Stock and two
million shares of preferred stock, par value $.01 per share ("Preferred
Stock"); and
(c) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which 100 shares
are issued and outstanding and beneficially owned by ITP.
2. CONVERSION OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO
Stock, issued and outstanding immediately prior to the Effective Time of the
Merger, respectively, into shares of (x) ITP Stock and (y) common stock of the
Surviving Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(a) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger will be canceled
and extinguished and, by virtue of the Merger and without any action on
the part of the holder thereof, automatically shall be deemed to
represent, with respect to each STOCKHOLDER, (1) the right to receive the
number of shares of ITP Stock set forth on Annex III hereto with respect
to such STOCKHOLDER; (2) the right to receive the amount of cash set
forth on Annex III hereto with respect to such STOCKHOLDER; and (3) the
right to receive a subordinated promissory note (the "Note") issued by
ITP in an amount specified on Annex III hereto with respect to such
STOCKHOLDER and with the terms specified in Annex X hereto and subject to
a Subordination Agreement in the form attached hereto as Annex XI;
(b) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of ITP Stock
or other consideration shall be delivered or paid in exchange therefor;
and
(c) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue of
the Merger and without any action on the part of ITP, automatically be
converted into one fully paid and non-assessable share of common stock of
the Surviving Corporation, which shall constitute all of the issued and
outstanding shares of common stock of the Surviving Corporation
immediately after the Effective Time of the Merger.
All ITP Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding ITP
Stock by reason of the provisions of the Certificate of Incorporation of ITP
or as otherwise provided by the Delaware Law.
3. DELIVERY OF MERGER CONSIDERATION; CLOSING AND POST-CLOSING ADJUSTMENTS
3.1 (a) Delivery of Initial Merger Consideration. At the
Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are
the holders of all outstanding certificates representing shares of COMPANY
Stock, upon surrender of such certificates and subject to the Merger
Consideration Adjustments specified under Sections 3.3 and 3.4 below shall
receive (i) the respective number of shares of ITP Stock set forth on Annex
III-A hereto; (ii) the amount of cash set forth on Annex III-A hereto with
respect to such STOCKHOLDER; and (iii) a Note issued by ITP in an amount
specified on Annex III-A hereto with respect to such STOCKHOLDER and with the
terms specified in Annex X hereto and subject to a Subordination Agreement in
the form attached hereto as Annex XI. The cash payable pursuant to clause (ii)
shall be paid by wire transfer or certified or cashier's check to the
STOCKHOLDERS.
(b) Certificate Delivery. The STOCKHOLDERS shall deliver in
trust to Piper & Marbury L.L.P., counsel to ITP, at the Pre-Closing (as
defined below) the certificates, representing all of the COMPANY Stock, duly
endorsed in blank by the STOCKHOLDERS, or accompanied by stock powers duly
endorsed in blank. The STOCKHOLDERS agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents
of conveyance with respect to such COMPANY Stock or with respect to the stock
powers accompanying any COMPANY Stock. Upon consummation of the transactions
contemplated to occur on the Closing Date, all of such certificates shall be
deemed released by such counsel to ITP without any further action on the part
of such counsel.
3.2 Delivery of Subsequent Merger Consideration. Within 15 months
after the Closing Date the STOCKHOLDERS, upon presentation of financial
statements accompanied by a report of ITP's accountants demonstrating that the
NTM EBITDA exceeds $1,437,500 and subject to the Merger Consideration
Adjustments specified under Sections 3.3 and 3.4 below shall receive (i) the
respective number of shares of ITP Stock set forth on Annex III-B hereto; (ii)
the amount of cash set forth on Annex III-B hereto with respect to such
STOCKHOLDER; and (iii) a Note issued by ITP in an amount specified on Annex
III-B hereto with respect to such STOCKHOLDER and with the terms specified in
Annex X hereto and subject to a Subordination Agreement in the form attached
hereto as Annex XI. The cash payable pursuant to clause (ii) shall be paid by
wire transfer or certified or cashier's check to the STOCKHOLDERS.
3.3 Closing Date Adjustments to Merger Consideration. On the Closing
Date, ITP, with the assistance of the STOCKHOLDERS, will deliver to the
STOCKHOLDERS an Estimated Closing Date Balance Sheet showing (i) estimated
Debt, (ii) Net Asset Value, and (iii) estimated cash and cash equivalents on
hand at the COMPANY, in each case as of the Closing Date. The amount of cash
payable shown on Annex III shall be (x) reduced by an amount equal to any Debt
and (y) increased, or decreased, as the case may be, by the positive or
negative difference between (i) (aa) cash and cash equivalents and (bb)
Working Capital Cash Needs; and (ii) (aa) Net Asset Value and (bb) $354,000
(the "Estimated Net Asset Value at December 31, 1996"). If the net amount of
the adjustment specified in this Section 3.3 results in a reduction in the
Merger Consideration in excess of the cash shown on Annex III, such excess
shall reduce the principal amount of the Notes described under Annex III. Any
increase or decrease in Merger Consideration under this Section 3.3 shall
apply ratably to the STOCKHOLDERS in proportion to their ownership of COMPANY
Stock as shown on Annex IV.
3.4 Post-Closing Adjustments to Merger Consideration.
(a) As promptly as practicable, and in any event not more than
90 days following the Closing Date, ITP, together with its accountants, shall
prepare and deliver to STOCKHOLDERS' accountants a Proposed Final Closing
Balance Sheet prepared on a basis consistent with the Balance Sheet. The
Proposed Final Closing Balance Sheet shall include an evaluation of the actual
amount of the Net Asset Value at December 31, 1996. The Proposed Final Closing
Balance Sheet shall be accompanied by a report of ITP's accountants. The
STOCKHOLDERS and STOCKHOLDERS' accountants shall have the right to consult
during reasonable business hours with appropriate personnel of ITP and ITP's
accountants and to have access to, and to review and make copies of, the work
papers of ITP and ITP's accountants with respect to the preparation of the
Proposed Closing Balance Sheet.
(b) (i) The STOCKHOLDERS may dispute the Proposed Final Closing
Balance Sheet prepared by ITP and ITP's accountants by notice to ITP setting
forth in reasonable detail the amounts in dispute and the basis for such
dispute within 45 days of its receipt of the Proposed Final Closing Balance
Sheet. If the STOCKHOLDERS fail to deliver a notice of objections within such
45-day period, the STOCKHOLDERS shall be deemed to have accepted the Proposed
Final Closing Date Balance Sheet and the Net Asset Value thereon.
(ii) If the amount is in dispute, ITP's accountants and
the STOCKHOLDERS' accountants shall attempt in good faith to resolve such
dispute, and any resolution as to any disputed amounts shall be final, binding
and conclusive. If there is no resolution of any such dispute within 15 days
of the date of receipt by ITP of a written notice of dispute, ITP and the
STOCKHOLDERS shall, within five additional days, retain Coopers & Lybrand,
L.L.P., which firm shall, within 30 days of each submission, resolve such
remaining dispute, and provide written notice of such resolution by facsimile,
confirmed by mail, and such resolution shall be binding and conclusive. Such
resolution shall be within the range of amounts proposed by ITP's accountants
and the amount proposed by the STOCKHOLDERS' accountants as to each disputed
item. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne
by ITP and the STOCKHOLDERS in the proportion that the aggregate amount of
disputed items submitted to Coopers & Lybrand, L.L.P. that is unsuccessfully
disputed by each party (as finally determined by Coopers & Lybrand, L.L.P.)
bears to the total amount of the disputed items as submitted to Coopers &
Lybrand, L.L.P. After resolving the items in dispute, Coopers & Lybrand,
L.L.P. shall prepare and deliver a Final Closing Balance Sheet and a
certification of the Final Net Asset Value thereon.
(c) If the Final Net Asset Value is less than the net amount of
Net Asset Value shown on the Estimated Closing Date Balance Sheet, the
STOCKHOLDERS shall pay to ITP the difference plus interest thereon from the
Closing Date through the date of payment at a rate per annum, which may
fluctuate from time to time, equal to the then prime rate of Citibank. If the
Final Net Asset Value is greater than the net amount of Net Asset Value shown
on the Estimated Closing Date Balance Sheet, ITP shall pay to the STOCKHOLDERS
the difference, plus interest on such amount from the Closing Date through the
date of payment at a rate per annum, equal to the then prime rate of Citibank.
Such payment shall be made in immediately available funds not later than two
business days after the determination of the Final Net Asset Value by written
transfer to a bank account designated by the party entitled to receive the
payment.
4. CLOSING
At or prior to the Pre-Closing (as defined below), the parties shall take
all actions necessary to prepare to (i) effect the Merger (including, if
permitted by applicable state law, the advance filing with the appropriate
state authorities of the Articles of Merger, which shall become effective at
the Effective Time of the Merger) and (ii) effect the conversion and delivery
of shares referred to in Section 2 hereof; provided, that such actions shall
not include the actual completion of the Merger for purposes of this Agreement
or the conversion and delivery of the shares and transmission of funds by wire
referred to in Section 3 hereof, which actions shall only be taken upon the
Closing Date as herein provided. If there is no Closing Date and this
Agreement terminates, ITP hereby covenants and agrees to do all things
required by Delaware Law and all things which counsel for the COMPANY advise
ITP are required by applicable laws of the State of California in order to
rescind any merger or other actions effected by the advance filing of the
Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above (the "Pre-Closing") shall take place
on the date which is mutually agreeable to the COMPANY and ITP (the "Pre-
Closing Date") at the offices of Piper & Marbury L.L.P., Charles Center South,
36 South Charles Street, Baltimore, Maryland 21201, or upon consent of the
parties, via facsimile and overnight courier. On the Closing Date (x) the
Articles of Merger shall be or shall have been filed with the appropriate
state authorities so that they shall be or, as of 11:00 a.m. Eastern Time on
the Closing Date, shall become effective and the Merger shall thereby be
effected, and (y) all transactions contemplated by this Agreement, including
the conversion and delivery of shares, issuance of the Note, and the
transmission of funds by wire pursuant to Section 3 hereof shall occur. The
date on which the actions described in the preceding clauses (x) and (y) occur
shall be referred to as the "Closing Date."
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS
(A) Representations and Warranties of the COMPANY and the
STOCKHOLDERS.
Each of the COMPANY and each of the STOCKHOLDERS jointly and severally
represents and warrants to ITP and NEWCO that all of the following
representations and warranties in this Section 5 are true at the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of the
Pre-Closing and the Closing Date, and that such representations and warranties
shall survive the Closing Date for a period of 18 months (the last day of such
period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.9 and 5.18 hereof shall survive until such
time as the applicable statute of limitations period has run, which shall be
deemed to be the Expiration Date for such purposes. For purposes of this
Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of
its subsidiaries, if any.
5.1 Due Organization. The COMPANY is a corporation duly
incorporated, validly existing and in good standing under the laws of the
state of its incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the manner as
now conducted, to own or hold under lease the properties and assets it now
owns or holds under lease, and to perform all of its obligations under the
Material Contracts; is duly qualified in the jurisdictions listed in Schedule
5.1 and there are no other jurisdictions in which the conduct of the COMPANY's
business or activities or its ownership of assets requires any other
qualification under applicable law, the absence of which would have a
materially adverse effect on the COMPANY's business, condition (financial or
other), properties, business prospects or results of operations taken as a
whole (as used herein with respect to the COMPANY, or with respect to any
other person, a "Material Adverse Effect"). True, complete and correct copies
of the Certificate, Deed, or Articles of Incorporation and By-Laws, each as
amended, of the COMPANY (the "Charter Documents") are all attached to Schedule
5.1. The minute books and stock records of the COMPANY, as heretofore made
available to ITP, are correct and complete in all material respects.
5.2 Authorization. The representatives of the COMPANY executing this
Agreement have the authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement by the COMPANY and performance by the COMPANY of its obligations
under this Agreement and the consummation by the COMPANY of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action in accordance with applicable law and the Articles of Incorporation and
By Laws of the COMPANY on the part of the COMPANY and the STOCKHOLDERS. This
Agreement constitutes the valid and binding obligation of the COMPANY,
enforceable in accordance with its terms.
5.3 Capital Stock of the COMPANY. The entire authorized capital
stock of the COMPANY is as set forth in Schedule 1.4. All of the issued and
outstanding shares of capital stock of the COMPANY are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and, except as set forth on
Schedule 5.3, are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of
every kind. Except as disclosed on Schedule 5.3, there are no outstanding
options, rights (preemptive or otherwise), warrants, calls, convertible
securities or commitments or any other arrangements to which the COMPANY or
the STOCKHOLDERS is a party requiring or restricting issuance, sale or
transfer of any equity securities of the COMPANY or any securities convertible
directly or indirectly into equity securities of the COMPANY, or evidencing
the right to subscribe for any equity securities of the COMPANY, or giving any
person any rights with respect to the capital stock of the COMPANY. Except as
contemplated by this Agreement or disclosed on Schedule 5.3, there are no
voting agreements, voting trusts, other agreements (including cumulative
voting rights), commitments or understandings with respect to the capital
stock of the COMPANY. All of the issued and outstanding shares of capital
stock of the COMPANY have been duly authorized and validly issued, are fully
paid and nonassessable, and are owned of record and beneficially by the
STOCKHOLDERS.
5.4 Subsidiaries. Schedule 5.4 attached hereto lists the name of
each of the COMPANY's subsidiaries and sets forth the number and class of the
authorized capital stock of each of the COMPANY's subsidiaries and the number
of shares of each of the COMPANY's subsidiaries which are issued and
outstanding, all of which shares (except as set forth on Schedule 5.4) are
owned by the COMPANY, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of
every kind. Except as set forth on Schedule 5.4, the COMPANY does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity, nor is the
COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.5 Financial Statements. The COMPANY has delivered to ITP copies of
the following financial statements (collectively, the "Financial Statements"):
(a) Balance Sheets and Income Statements at and for the years
ended December 31,1995 and 1996: and
(b) Balance Sheets and Income Statements at and for the interim
period ended August 31, 1997.
Each of the Financial Statements is consistent with the books and records
of the COMPANY (which, in turn, are accurate and complete in all material
respects) and fairly presents the COMPANY's financial condition, assets and
liabilities as of their respective dates and the results of operations and
cash flows for the periods related thereto in accordance with GAAP,
consistently applied among the periods which are the subject of the Financial
Statements, except unaudited interim financial statements which were or are
subject to normal year-end adjustments which were not and are not expected to
be material in amount and the addition of required footnotes thereto.
5.6 Liabilities and Obligations. The COMPANY's assets, tangible or
intangible, are owned by the COMPANY free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind (each, a "Lien"), except for purchase money security interests
created in the ordinary course of business. The COMPANY has delivered to ITP
an accurate list (which is set forth on Schedule 5.6) as of the Balance Sheet
Date of (i) all liabilities of the COMPANY in excess of $l0,000 which are not
reflected on the balance sheet of the COMPANY at the Balance Sheet Date or
otherwise reflected in the COMPANY Financial Statements at the Balance Sheet
Date and (ii) all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements to which the COMPANY is
a party. Except as set forth on Schedule 5.6, since the Balance Sheet Date the
COMPANY has not incurred any liabilities in excess of $10,000 of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary
course of business.
5.7 Accounts and Notes Receivable. The COMPANY has delivered to ITP
an accurate list (which is set forth on Schedule 5.7) of the accounts and
notes receivable of the COMPANY as of the Balance Sheet Date. Within ten (l0)
days prior to Closing, the COMPANY shall provide ITP (x) an accurate list of
all outstanding receivables obtained subsequent to the Balance Sheet Date and
as of a date which is within ten (l0) calendar days of the Closing Date and
(y) an aging of all such accounts and notes receivable showing amounts due in
30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.7, the accounts, notes and other receivables shown on
Schedule 5.7 and on the A/R Aging Reports are and shall be, and the COMPANY
has no reason to believe that any such account receivable is not or shall not
be, collectible in the amounts shown net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.8 Intellectual Property; Permits and Intangibles.
(a) The COMPANY owns or has valid licenses to all Intellectual
Property required for or otherwise used in connection with the conduct of
its business and the COMPANY has delivered to ITP an accurate list (which
is set forth on Schedule 5.8(a)) of all Intellectual Property owned or
or used by the COMPANY including a list of all licenses and sublicenses
granted by or to the COMPANY with respect to any Intellectual Property.
To the COMPANY's knowledge, each item of Intellectual Property owned by
or licensed to the COMPANY is valid and in full force and effect. Except
as set forth on Schedule 5.8(a), all right, title and interest in and to
each item of Intellectual Property owned by or licensed to the COMPANY is
not subject to any restriction, royalty or fee arrangement or pending or
threatened claim or dispute. To the COMPANY's knowledge, none of the
Intellectual Property owned by or licensed to the COMPANY nor any product
sold or licensed or service provided by the COMPANY, infringes any
Intellectual Property right of any other person or entity and to the
COMPANY's knowledge, no Intellectual Property owned by or licensed to the
COMPANY is infringed upon by any other person or entity.
(b) The COMPANY holds all licenses, franchises, permits and
governmental authorizations the absence of any of which could have a
Material Adverse Effect, and the COMPANY has delivered to ITP an accurate
list and summary description (which is set forth on Schedule 5.8(b)) of
all such licenses, franchises, permits and other governmental
authorizations, including permits, licenses, franchises and certificates
(a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.9). To the COMPANY's knowledge, the licenses,
franchises, permits and other governmental authorizations listed on
Schedules 5.8(b) and 5.9 are valid and in effect, and the COMPANY has not
received any notice that any Governmental Authority intends to cancel,
terminate or not renew any such license, franchise, permit or other
governmental authorization. To the COMPANY's knowledge, the COMPANY has
conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the
licenses, franchises, permits and other governmental authorizations
listed on Schedules 5.8(b) and 5.9 and is not in material violation of
any of the foregoing or of any related regulatory or legal requirements
except where such noncompliance or violation would not have a Material
Adverse Effect. Except as specifically provided in Schedule 5.8(a) or
5.8(b), the transactions contemplated by this Agreement will not (i)
result in the infringement or misappropriation by the COMPANY of any
Intellectual Property right of any other person or entity, or (ii) result
in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the COMPANY by, any licenses, franchises,
permits or government authorizations listed on Schedule 5.8(b) or any
contracts involving the grant to the COMPANY of any rights relating to
the Intellectual Property of any third party.
(c) To the COMPANY's knowledge, the COMPANY's products and
services conform to all material respects with any material applicable
specification, documentation, performance standard, or contractual
commitment by the COMPANY existing with respect thereto, and there are no
unresolved material claims under warranty, contract or otherwise with
respect to the COMPANY's services or products.
5.9 Environmental Matters.
(a) (i) "Environmental Requirements" for purposes of this
Agreement shall mean all applicable federal, state
and local laws, rules, regulations, ordinances and
requirements relating to Hazardous Materials (as
defined below), pollution, or protection of the
environment, health or safety, all as amended or
hereafter amended.
(ii) "Hazardous Materials" for purposes of this
Agreement shall include, without limitation: (A)
hazardous materials, hazardous substances,
extremely hazardous substances, hazardous
chemicals, toxic chemicals, toxic substances,
pollutants, contaminants, solid wastes or
hazardous wastes, as those terms are defined or
used in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. sec.9601
et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. sec. 6901 et seq.("RCRA"),
the Clean Water Act, 33 U.S.C. sec. 1251 et seq.,
the Clean Air Act, 42 U.S.C. sec. 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. sec.
2601 et seq., the Emergency Planning and Community
Right to Know Act, 42 U.S.C. sec. 11001 et seq.,
the Occupational Safety and Health Act, and any
other Environmental Requirements and other terms
of similar import or meaning; (B) petroleum and
petroleum products, including, without limitation,
crude oil or any faction thereof; (C) any
radioactive material, including, without
limitation, any source, special nuclear, or by-
product material as defined in 42 U.S.C. Section
2011 et seq.; and (D) asbestos in any form or
condition.
(b) Except as set forth on Schedule 5.9,
(i) the COMPANY and each of its predecessors and
subsidiaries are and at all times have been in
compliance in all material respects with, and are
not and have not been in violation of or liable
under, all Environmental Requirements;
(ii) the COMPANY and each of its predecessors and
subsidiaries possess all permits, licenses and
certificates required by all Environmental
Requirements, and have filed all notices or
applications required thereby;
(iii) no environmental clearances, approvals or consents
are required under applicable law from any
Governmental Authority or entity in order to
consummate the transactions contemplated in this
Agreement or for the COMPANY to continue
operations after the Closing Date;
(iv) (A) the COMPANY and each of its predecessors
and subsidiaries have not been subject to, or
received any notice of any private, administrative
or judicial claim or action, or notice of any
intended private, administrative or judicial claim
or action or received any request for information
relating to the presence or alleged presence of
Hazardous Materials (1) in, under or upon any real
property currently or formerly owned, leased,
operated or used by (a) the COMPANY or any of its
predecessors or subsidiaries or (b) any other
person that has, at any time, disposed of
Hazardous Materials on behalf of the COMPANY or
any of its predecessors or subsidiaries; or (2)
ever possessed, owned or generated by or on behalf
of the COMPANY or any of its predecessors or
subsidiaries at any location;
(B) there is no basis for any such notice,
claim, action or request; and
(C) there are no pending or, to the knowledge
of the COMPANY and each of its predecessors and
subsidiaries, threatened claims, actions or
proceedings (or notices of potential claims,
actions or proceedings) from any Governmental
Authority or any other entity regarding any matter
relating to health, safety or protection of the
environment against the COMPANY or any of its
predecessors and subsidiaries.
(v) There are and have been no past or present events,
conditions, circumstances, activities, practices,
incidents or actions which materially interfere
with or prevent continued compliance by the
COMPANY or the Surviving Corporation with any
Environmental Requirements, give rise to any legal
obligation or liability, or otherwise form the
basis of any claim, action, suit, proceeding,
hearing or investigation against or involving the
COMPANY or any real property presently or
previously owned or used by the COMPANY under any
Environmental Requirements or related common law
theories:
(vi) No real property currently or formerly owned or
operated by the COMPANY or any of its predecessors
or subsidiaries is or was listed on the National
Priorities List, the CERCLIS or any similar state
or local list of potential or confirmed hazardous
waste sites;
(vii) To the COMPANY's knowledge, no conditions exist on
adjacent properties that threaten the
environmental condition or safety of any property
owned, operated or used by the COMPANY; and
(viii) The COMPANY and its predecessors and subsidiaries
have not released or disposed of any Hazardous
Materials at any property owned or used by the
COMPANY or its predecessors or subsidiaries and,
to the COMPANY's knowledge, no other person has
released or disposed of Hazardous Materials at any
such property.
5.10 Personal Property. The COMPANY has delivered to ITP an accurate
list (which is set forth on Schedule 5.10) of (x) all personal property with a
fair market value in excess of $10,000 which is included (or that will be
included) in "depreciable plant, property and equipment" (or similarly named
line item) on the balance sheet of the COMPANY as of the Balance Sheet Date,
(y) all other personal property owned by the COMPANY with a value individually
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of
personal property, including, in the case of each of (x), (y) and (z), true,
complete and correct copies of all such leases which have been provided to
ITP's counsel. Except as set forth on Schedule 5.10, (i) all personal property
with a value individually in excess of $10,000 used by the COMPANY in its
business is either owned by the COMPANY or leased by the COMPANY pursuant to a
lease included on Schedule 5.10, (ii) all of the personal property listed on
Schedule 5.10 is in good working order and condition, ordinary wear and tear
excepted, and (iii) all leases and agreements included on Schedule 5.10 are in
full force and effect and constitute valid and binding agreements of the
COMPANY, and to the COMPANY's knowledge, of the other parties thereto in
accordance with their respective terms.
5.11 Significant Customers: Material Contracts and Commitments. The
COMPANY has delivered to ITP an accurate list (which is set forth on Schedule
5.11) of all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.11, means a customer
(or person or entity) representing 5% or more of the COMPANY's total annual
revenues as of the Balance Sheet Date. Except to the extent set forth on
Schedule 5.1 1, none of the COMPANY's significant customers has canceled or
substantially reduced or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
Except as listed or described on Schedule 5.11, as of or on the date
hereof, neither the COMPANY is a party to or bound by, nor do there exist any,
Contracts relating to or in any way affecting the operation or ownership of
the COMPANY's business that are of a type described below:
(a) any collective bargaining arrangement with any labor union
or any such agreement currently in negotiation or proposed;
(b) any contract for capital expenditures or the acquisition or
construction of fixed assets for or in respect to real property other than in
the COMPANY's ordinary course of business in excess of $10.000:
(c) any contract with a term in excess of one year for the
purchase, maintenance, acquisition, sale or furnishing of materials, supplies,
merchandise, machinery, equipment, parts or other property or services (except
that the COMPANY need not list any such contract made in the ordinary course
of business) which requires aggregate future payments of greater than $10,000;
(d) any contract relating to the borrowing of money, or the
guaranty of another person's borrowing of money, including, without
limitation, all notes, mortgages, indentures and other obligations, agreements
and other instruments for or relating to any lending or borrowing, including
assumed indebtedness;
(e) any contract granting any person a lien on any of the
assets of the COMPANY, in whole or in part;
(f) any contract granting to any person a first-refusal, first-
offer or similar preferential right to purchase or acquire any of the assets
of the COMPANY's business other than in the ordinary course of business;
(g) any contract under which the COMPANY is
(i) a lessee or sublessee of any machinery, equipment,
vehicle or other tangible personal property or real
property, or
(ii) a lessor of any real property or tangible personal
property owned by the COMPANY.
in either case having an original value in excess of $10,000;
(h) any contract providing for the indemnification of any
officer, director, employee or other person;
(i) any joint venture or partnership contract; and
(j) any other contract with a term in excess of one year,
whether or not made in the ordinary course of business, which involves or may
involve payments in excess of $10,000.
The COMPANY has provided ITP with a true and complete copy of each
written Material Contract, including all amendments or other modifications
thereto. Except as set forth on Schedule 5.11, each Material Contract is a
valid and binding obligation of the COMPANY, enforceable in accordance with
its terms, and is in full force and effect. Except as set forth on Schedule
5.11, the COMPANY has performed in all material respects all obligations
required to be performed by it under each Material Contract and neither the
COMPANY nor, to the knowledge of the COMPANY, any other party to any Material
Contract, is (with or without the lapse of time or the giving of notice or
both) in breach or default in any material respect thereunder; and there
exists no condition which would constitute a breach or default thereunder. The
COMPANY has not been notified that any party to any Material Contract intends
to cancel, terminate, not renew or exercise an option under any Material
Contract, whether in connection with the transactions contemplated hereby or
otherwise.
5.12 Real Property. (a) The COMPANY owns no real property.
(b) Schedule 5.12(b) includes an accurate list of real
property leases to which the COMPANY is a party. Counsel to ITP has
been provided with true, complete and correct copies of all leases and
agreements in respect of such real property leased by the COMPANY. Except
as set forth on Schedule 5.12(b), all of such leases included on Schedule
5.12(b) are in full force and effect and constitute valid and binding
agreements of the COMPANY and, to the COMPANY's knowledge, of the parties
thereto in accordance with their respective terms.
5.13 Insurance. The COMPANY has delivered to ITP:
(a) true and complete copies of all policies of insurance
to which the COMPANY is a party or under which the COMPANY, or any
director of the COMPANY, is or has been covered at any time within two
years preceding the date of this Agreement;
(b) true and complete copies of all pending applications
for policies of insurance; and
(c) any statement by the auditor of the COMPANY's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
5.14 Compensation: Employment Agreements; Organized Labor Matters.
The COMPANY has delivered to ITP an accurate list (which is set forth on
Schedule 5.14) showing all officers, directors and key employees of the
COMPANY, listing all employment agreements with such officers, directors and
key employees and the rate of compensation of each of such persons as of (i)
the Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to
ITP true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.14. Since the Balance Sheet Date, there have been no
increases in the compensation payable or any special bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices. Except as set forth on
Schedule 5.14, there is no, and within the last three years the COMPANY has
not experienced any, strike, picketing, boycott, work stoppage or slowdown,
other labor dispute, union organizational activity, allegation, charge or
complaint of unfair labor practice, employment discrimination or other matters
relating to the employment of labor, pending or, to the COMPANY's knowledge,
threatened against the COMPANY.
5.15 Employee Plans. The COMPANY has delivered to ITP an accurate
schedule (which is set forth on Schedule 5. 15) showing all Benefit Plans,
together with true, complete and correct copies of such Benefit Plans,
agreements and any trusts related thereto, summary plan descriptions thereof,
the last determination letter (if any) issued to each Benefit Plan by the
Internal Revenue Service, and the last three Forms 5500 filed for such Benefit
Plans.
5.16 Compliance with ERISA.
(a) All Benefit Plans that are intended to qualify under
Section 401(a) of the Code are and have been so qualified and have been
determined by the Internal Revenue Service to be so qualified.
(b) Except as disclosed on Schedule 5.16, all reports and other
documents required to be filed with any Governmental Authority or distributed
to plan participants or beneficiaries (including, but not limited to,
actuarial reports, audits or tax returns) have been timely filed or
distributed.
(c) None of the STOCKHOLDERS, any such Benefit Plan, nor the
COMPANY has engaged in any transactions prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA.
(d) No material pending claim or lawsuit has been asserted or
instituted by or against a Benefit Plan, against the assets of a trust under a
Benefit Plan or by or against the plan sponsor, plan administrator, or any
fiduciary of a Benefit Plan (other than routine claims for benefits), and the
COMPANY has no knowledge of any fact which could form the basis for any such
claim or lawsuit.
(e) Each Benefit Plan (including without limitation a Benefit
plan covering retirees or their beneficiaries) may be terminated or amended by
the plan sponsor at any time without the consent of any person covered
thereunder and may be terminated without any liability for benefits accruing
after the date of such termination.
(f) No Benefit Plan has any provisions that would prohibit the
transactions contemplated by this Agreement or give rise to any severance,
termination or other payments or liabilities (including without limitation any
acceleration in benefits vesting or distribution) as a result of the
transactions contemplated by this Agreement.
(g) There have been no terminations, partial terminations or
discontinuance of contributions to any Benefit Plan intended to qualify under
Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service and the Pension Benefit Guaranty Corporation.
(h) All Benefit Plans and the administration thereof are in
substantial compliance with their terms and all applicable provisions of
ERISA, the Code and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and
regulations.
(i) All accrued contribution obligations or the COMPANY with
respect to any Benefit Plan have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the COMPANY as of the Balance
Sheet Date.
(j) The COMPANY further represents that, with respect to
Benefit Plans subject to Title IV of ERISA:
(a) no Benefit Plan has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA and no event has occurred or circumstance exists which may result in an
accumulated funding deficiency as of the last day of the current plan year for
any Benefit Plan;
(b) the benefit liabilities of each Benefit Plan (as
defined in Section 4001(a)(16) of ERISA), calculated using the actuarial
assumptions that would be used by the Pension Benefit Guaranty Corporation in
the event of plan termination, do not exceed the fair market value of plan
assets;
(c) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA and regulations thereunder) with respect
to any Benefit Plan, other than events with respect to which the 30 days'
notice requirement has been waived;
(d) the COMPANY and its ERISA Affiliates have not incurred
liability under Section 4062, 4063 or 4064 of ERISA with respect to any
Benefit Plan;
(e) no circumstances exist pursuant to which the COMPANY
could have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under Title IV
of ERISA or to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory lien to secure payment of any such liability)
with respect to any Benefit Plan now or heretofore maintained or contributed
to by any ERISA Affiliate; and
(f) the COMPANY is not now, nor can it as a result of its
past activities become, liable to the PBGC or to any Benefit Plan that is a
multiemployer employee pension benefit plan as defined in Section 3(37) of
ERISA; and
5.17 Conformity with Law; Litigation. Except as set forth on
Schedule 5.17, the COMPANY has complied with all laws, rules, regulations,
writs, injunctions, decrees, and orders applicable to it or to the operation
of its Business (collectively, "Laws") and has not received any notice of any
alleged claim or threatened claim, violation of, liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability other than, in each case, those not
having a Material Adverse Effect.
Except to the extent set forth on Schedule 5.17 (which shall disclose the
parties to, nature of, and relief sought for each matter disclosed):
(a) There is no suit, action, proceeding, investigation, claim
or order pending or, to the COMPANY's knowledge, threatened against
either the COMPANY or, to the knowledge of the COMPANY, pending or
threatened against any of the officers, directors or employees of the
COMPANY with respect to its business or proposed business activities
which would have a Material Adverse Effect on the COMPANY, or to which
the COMPANY is otherwise a party, before any court, or before any
Governmental Authority (collectively, "Claims").
(b) The COMPANY is not subject to any judgment, order or decree
of any court or Governmental Authority; the COMPANY has not received any
opinion or memorandum from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business. The COMPANY is not engaged in any legal
action to recover monies due it or for damages sustained by it.
5.18 Taxes. Except as set forth on Schedule 5.18:
(a) All Returns required to have been filed by or with respect
to the COMPANY and any affiliated, combined, consolidated, unitary or
similar group of which the COMPANY is or was a member (a "Relevant
Group") with any Taxing Authority have been duly filed, and each such
Return correctly and completely reflects the Tax liability and all other
information required to be reported thereon. All Taxes (whether or not
shown on any Return) owed by the COMPANY, any subsidiary and any member
of a Relevant Group (individually, the "Acquired Party" and
collectively, the "Acquired Parties") have been paid on or prior to the
due date for payment of such Taxes.
(b) To the knowledge of the COMPANY and the STOCKHOLDERS, the
provisions for Taxes due by the COMPANY and any subsidiaries (as opposed
to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for all unpaid Taxes, being current taxes not
yet due and payable, of such Acquired Party.
(c) No Acquired Party is a party to any agreement extending the
time within which to file any Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which an Acquired Party does not
file Returns that it is or may be subject to taxation by that
jurisdiction that is unresolved or if adversely determined would have a
Material Adverse Effect on such Acquired Party.
(d) Each Acquired Party has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, creditor, independent contractor or other
third party.
(e) No Acquired Party expects any Taxing Authority to assess
any additional Taxes against or in respect of it for any past period.
There is no dispute or claim concerning any Tax liability of any
Acquired Party either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to any Acquired Party. No issues have been raised
in any examination by any Taxing Authority with respect to any Acquired
Party which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not so
examined. Schedule 5.18 attached hereto lists all federal, state, local
and foreign income Tax Returns filed by or with respect to any Acquired
Party for all taxable periods ended on or after January 1, 1991,
indicates those Returns, if any, that have been audited, and indicates
those Returns that currently are the subject of audit. Each Acquired
Party has delivered to ITP complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or
agreed to by, such Acquired Party since January 1, 1991.
(f) No Acquired Party has waived any statute of limitations,
the waiver of which remains in effect on the date hereof, in respect of
Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(g) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(h) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(i) None of the assets of any Acquired Party constitutes tax-
exempt bond financed property or tax-exempt use property, within the
meaning of Section 168 of the Code. No Acquired Party is a party to any
"safe harbor lease" that is subject to the provisions of Section 1
68(f)(8) of the Internal Revenue Code as in effect prior to the Tax
Reform Act of 1986, or to any "long-term contract" within the meaning of
Section 460 of the Code.
(j) No Acquired Party is a "consenting corporation" within the
meaning of Section 341 (f)(1) of the Code, or comparable provisions of
any state statutes, and none of the assets of any Acquired Party is
subject to an election under Section 341 (f) of the Code or comparable
provisions of any state statutes.
(k) No Acquired Party is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for
federal income Tax purposes.
(l) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could
give rise to an adjustment under Section 481 of the Code for periods
after the Closing Date.
(m) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and
legally binding agreement with a Taxing Authority relating to Taxes.
(n) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section
6662(d) of the Code.
(o) No Acquired Party has any liability for Taxes of any person
other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(p) Prior to ITP's acquisition of the COMPANY pursuant to this
Agreement, there currently are no limitations on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or
other similar items of any Acquired Party (collectively, the "Tax
Losses") under (i) Section 382 of the Code, (ii) Section 383 of the
Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v)
Section 1.1502-15 and Section 1.1502-15A of the Treasury regulations,
(vi) Section 1.1502-21 and Section 1.1502-21A of the Treasury
regulations or (vii) Sections 1.1502-91 through 1.1502-99 of the
Treasury regulations, in each case as in effect both prior to and
following the Tax Reform Act of 1986.
(q) The fair market value of the assets of the COMPANY as well
as the COMPANY's tax basis in such assets exceeds the sum of its
liabilities, plus the amount of liabilities, if any, to which the assets
are subject.
(r) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 351 (e)(2) of
the Code.
For purposes of this Section 5.19, the following definitions shall
apply:
"Returns" means any returns, reports or statements'(including any
information returns) required to be filed for purposes of a particular Tax
with any Taxing Authority or Governmental Authority.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatsoever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any Governmental Authority, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
5.19 No Violations. The COMPANY is not in violation of any Charter
Document. To the knowledge of the COMPANY, except as set forth on Schedule
5.19, (a) the rights and benefits of the COMPANY under the Material Contracts
will not be adversely affected by the transactions contemplated hereby and (b)
the execution of this Agreement and the performance by the COMPANY and the
STOCKHOLDERS of their obligations hereunder and the consummation by the
COMPANY and the STOCKHOLDERS of the transactions contemplated hereby will not
(i) result in any violation or breach of, or constitute a default under, any
of the terms or provisions of the Material Contracts or the Charter Documents
or (ii) require the consent, approval, waiver of any acceleration, termination
or other right or remedy or action of or by, or make any filing with or give
any notice to, any other party. Except as set forth on Schedule 5.19, none of
the Material Contracts requires notice to, or the consent or approval of, any
Governmental Authority or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any material
right or benefit.
5.20 Business Conduct. Except as set forth on Schedule 5.20, since
August 31, 1997, the COMPANY has conducted its business only in the ordinary
course consistent with past custom and practices and has incurred no
liabilities other than in the ordinary course of business consistent with past
custom and practices. Except as forth on Schedule 5.20, since August 31, 1997,
there has not been any:
(a) Material adverse change in the COMPANY's operations,
condition (financial or otherwise), operating results, assets,
liabilities, employee, customer or supplier relations or business
prospects;
(b) Loan or advance by the COMPANY to any party other than
sales to customers on credit in the ordinary course of business
consistent with past custom and practices;
(c) Declaration, setting aside, or payment of any dividend or
other distribution in respect to the COMPANY's capital stock, any direct
or indirect redemption, purchase, or other acquisition of such stock, or
the payment of principal or interest on any note, bond, debt, instrument
or debt to any Affiliate;
(d) Incurrence of any debts, liabilities or obligations except
current liabilities incurred in connection with or for services rendered
or goods supplied in the ordinary course of business consistent with
past custom and practices, liabilities on account of taxes and
governmental charges but not penalties, interest or fines in respect
thereof, and obligations or liabilities incurred by virtue of the
execution of this Agreement;
(e) Issuance by the COMPANY of any notes, bonds, or other debt
securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
(f) Cancellation, waiver or release by the COMPANY of any
debts, rights or claims, except in each case in the ordinary course of
business consistent with past custom and practices;
(g) Amendment of the COMPANY's Articles or Certificate of
Incorporation or By-Laws;
(h) Amendment or termination of any, Material Contract, other
than expiration of such contract in accordance with its terms;
(i) Change in accounting principles, methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) utilized by the COMPANY;
(j) Sale or assignment by the COMPANY of any tangible assets
other than in the ordinary course of business;
(k) Capital expenditures or commitments therefor by the COMPANY
other than in the ordinary course of business in excess of $10,000 in
the aggregate;
(l) Liens of any asset of the COMPANY other than purchase money
security interests created in the ordinary course of business;
(m) Adoption, amendment or termination of any Benefit Plan;
(n) Increase in the benefits provided under any Benefit Plan;
or
(o) An occurrence or event not included in clauses (a) through
(o) that has or might be expected to have a Material Adverse Effect on
the COMPANY.
5.21 Prohibited Activities. Except as set forth on Schedule 5.21,
the COMPANY has not, between the Balance Sheet Date and the date hereof, taken
any of the actions set forth in Section 7.3.
5.22 Misrepresentation. To the knowledge of the COMPANY and the
STOCKHOLDERS, none of the representations and warranties set forth in this
Agreement, the schedules, certificates, and the other documents furnished by
the COMPANY to ITP pursuant hereto, taken as a whole, contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
(B) Representations and Warranties of the STOCKHOLDERS.
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of the
Pre-Closing and on the Closing Date.
5.23 Authority; Ownership. Each STOCKHOLDER has the full legal
right, power and authority to enter into this Agreement. Each STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY Stock identified
on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.23, such COMPANY Stock is owned free and clear of any and all
Liens, voting trusts and restrictions of every kind
5.24 No Intention to Dispose of ITP Stock. No STOCKHOLDER has any
current plan or intention, or is under any binding commitment or contract to
sell, exchange or otherwise dispose of shares of ITP Stock received pursuant
to Section 3.1.
6. REPRESENTATIONS OF ITP AND NEWCO
ITP and NEWCO jointly and severally represent and warrant to the COMPANY
and the STOCKHOLDERS that all of the following representations and warranties
in this Section 6 are true at the date of this Agreement and, subject to
Section 7.7 hereof, shall be true at the time of the Pre-Closing and on the
Closing Date, and that such representations and warranties shall survive the
Closing Date for a period of 18 months (the "ITP Expiration Date").
6.1 Due Organization. ITP and NEWCO are each corporations duly
incorporated, validly existing and in good standing under the laws of the
state of their incorporation, and are duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of
public authorities to carry on their business in the places and in the manner
as now conducted, to own or hold under lease the properties and assets they
now own or hold under lease, and to perform all of their obligations under any
material agreement to which they are a party by which their properties are
bound; are duly qualified in the jurisdictions listed in Schedule 6.1 and
there are no other jurisdictions in which the conduct of ITP's and NEWCO's
business or activities or their ownership of assets requires any other
qualification under applicable law, the absence of which would have a
Materially Adverse Effect on either ITP's or NEWCO's business. True, complete
and correct copies of the Certificate or Articles of Incorporation and Bylaws,
each as amended, of ITP and NEWCO (the "ITP Charter Documents") are all
attached hereto as Annex II. The minute books and stock records of each of ITP
and NEWCO, as heretofore made available to the COMPANY, are correct and
complete in all material respects.
6.2 Authorization. The respective representatives of ITP and NEWCO
executing this Agreement have the authority to execute and deliver this
Agreement and to bind ITP and NEWCO to perform their respective obligations
hereunder. The execution and delivery of this Agreement by ITP and NEWCO and
the performance by ITP and NEWCO of their respective obligations under this
Agreement and the consummation by ITP and NEWCO of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action by each in accordance with applicable law and the Certificate or
Articles of Incorporation and By-Laws of ITP and NEWCO, as the case may be.
This Agreement constitutes the valid and binding obligation of ITP and NEWCO,
enforceable in accordance with its terms.
6.3 Transaction Not a Breach. Neither the execution and delivery of
this Agreement nor their performance will violate, conflict with, or result in
a breach of any provision of any Law, rule, regulation, order, permit,
judgment, injunction, decree or other decision of any court or other tribunal
or any Governmental Authority binding on ITP or NEWCO or conflict with or
result in the breach of any of the terms, conditions or provisions of the
Certificate or Articles of Incorporation or the By-Laws of ITP or NEWCO or of
any contract, agreement, mortgage or other instrument or obligation of any
nature to which ITP or NEWCO is a party or by which ITP or NEWCO is bound.
6.4 Misrepresentation. To the knowledge of ITP, none of the
representations and warranties set forth in this Agreement or in any of the
certificates, schedules, exhibits, lists, documents, exhibits, or other
instruments delivered, or to be delivered, to the COMPANY as contemplated by
any provision hereof, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
6.5 Capital Stock. The entire authorized capital stock of ITP
consists of ten million shares of ITP Stock and two million shares of
Preferred Stock. Except as disclosed on Schedule 6.5, there are no outstanding
options, rights (preemptive or otherwise), warrants, calls, convertible
securities or commitments or any other arrangements to which ITP is a party
requiring or restricting issuance, sale or transfer of any equity securities
of ITP or any securities convertible directly or indirectly into equity
securities of ITP, or evidencing the right to subscribe for any equity
securities of ITP, or giving any person any rights with respect to the capital
stock of ITP. Except as contemplated by this Agreement or disclosed on
Schedule 6.5, there are no voting agreements, voting trusts, other agreements
(including cumulative voting rights), commitments or understandings with
respect to the ITP Stock.
6.6 Subsidiaries. Schedule 6.6 attached hereto lists the name of
each of ITP's and NEWCO's subsidiaries and sets forth the number and class of
the authorized capital stock of each of ITP's and NEWCO's subsidiaries and the
number of shares of each of ITP's and NEWCO's subsidiaries which are issued
and outstanding prior to the Merger, all of which shares (except as set forth
on Schedule 6.6) are owned by ITP and NEWCO as the case may be, free and clear
of all liens, security interests, pledges, voting trusts, equities,
restrictions, encumbrances and claims of every kind. Except as set forth on
schedule 6.6, ITP and NEWCO do not presently own, of record or beneficially,
or control, directly or directly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation,
association or business entity.
6.7 Conformity with Law; Litigation. Except as set forth on Schedule
6.7, ITP and NEWCO have complied with all Laws, applicable to them or to the
operation of their businesses and have not received any notice of any alleged
claim or threatened claim, violation of, liability or potential responsibility
under, any Law which has not heretofore been cured and for which there is no
remaining liability other than, in each case, those not having a Material
Adverse Effect on the business, condition (financial or other), properties,
business prospects or financial results of ITP or NEWCO, taken as a whole.
Except to the extent set forth on Schedule 6.7 (which shall disclose to
the parties the, nature of, and relief sought for each matter):
(a) There is no suit, action, proceeding, investigation,
claim or order pending or, to the knowledge of ITP and NEWCO, threatened
against either of ITP or NEWCO or, to the knowledge of ITP and NEWCO,
pending or threatened against any of the officers, directors or employees
of ITP or NEWCO with respect to their businesses or proposed business
activities which would have a Material Adverse Effect on ITP or NEWCO, or
to which ITP or NEWCO are otherwise a party, before any court, or before
any Governmental Authority.
(b) ITP and NEWCO are not subject to any judgment, order or
decree of any court or Governmental Authority; ITP and NEWCO have not
received any opinion or memorandum from legal counsel to the effect that
either is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to their businesses. Neither ITP nor
NEWCO are engaged in any legal action to recover monies due it or them
for damages sustained by either of them.
6.8 Financial Statements. ITP has delivered to the COMPANY copies of
the following financial statements (collectively, the "ITP Financial
Statements"):
(a) Balance Sheets, Income Statements, Statements of
Stockholders' Equity, and Statements of Cash Flows at and for the interim
period ended August 31, 1997.
Each of the ITP Financial Statements is consistent with the books and
records of ITP (which, in turn, are accurate and complete in all material
respects) and fairly presents ITP's financial condition, assets and
liabilities as of their respective dates and the results of operations and
cash flows for the periods related thereto in accordance with GAAP,
consistently applied among the periods which are the subject of the ITP
Financial Statements, except unaudited interim financial statements which were
or are subject to normal year-end adjustments which were not and are not
expected to be material in amount and the addition of required footnotes
thereto.
6.9 Compensation; Employment Agreements; Organized Labor Matters.
ITP has delivered to the COMPANY an accurate list (which is set forth on
Schedule 6.9) showing all officers, directors and key employees of ITP and the
two most highly compensated employees of each of ITP's subsidiaries, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation of each of such persons as of the date hereof. Except
as set forth on Schedule 6.9, there is no, and within the last three years ITP
has not experienced any, strike, picketing, boycott, work stoppage or
slowdown, other labor dispute, union organizational activity, allegation,
charge or complaint of unfair labor practice, employment discrimination or
other matters relating to the employment of labor, pending or, to ITP's
knowledge threatened against ITP.
7. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation: Due Diligence.
(a) Between the date of this Agreement and the Closing Date,
the COMPANY will afford to the officers and authorized representatives
of ITP access during business hours to all of the COMPANY's sites,
properties, books and records and will furnish ITP with such additional
financial and operating data and other information as to the business
and properties of the COMPANY as ITP may from time to time reasonably
request. The COMPANY will cooperate with ITP and its representatives,
including ITP's auditors and counsel, in the preparation of any
documents or other material which may be required in connection with the
transactions contemplated by this Agreement. ITP, NEWCO, the
STOCKHOLDERS and the COMPANY will treat all information obtained in
connection with the negotiation and performance of this Agreement or the
due diligence investigations conducted as confidential in accordance
with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date,
ITP will afford to the officers and authorized representatives of the
COMPANY access during business hours to all of ITP's and NEWCO's sites,
properties, books and records and will furnish the COMPANY with such
additional financial and operating data and other information as to the
business and properties of ITP and NEWCO as the COMPANY may from time to
time reasonably request. ITP and NEWCO will cooperate with the COMPANY,
its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with the
transactions contemplated by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance
of this Agreement to be treated as confidential in accordance with the
provisions of Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, except as set forth on
Schedule 7.2:
(a) carry on its business in the ordinary course substantially
as conducted heretofore and not introduce any new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform in all material respects its obligations under
agreements relating to or affecting its assets, properties or rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) maintain and preserve its business organization intact and
use its best efforts to retain its present key employees and
relationships with suppliers, customers and others having business
relations with the COMPANY;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar Governmental Authorities:
(g) maintain present debt and lease instruments in accordance
with their respective terms and not enter into new or amended debt or
lease instruments, provided that debt and/or lease instruments may be
replaced if such replacement instruments are on terms at least as
favorable to the COMPANY as the instruments being replaced; and
(h) except in the ordinary course of business or as required by
law or contractual obligations or other understandings or arrangements
existing on the date hereof, the COMPANY will not (i) increase in any
manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of the employees engaged in
the COMPANY's business, (ii) pay or agree to pay any additional pension,
retirement allowance or other employee benefit to any such employee,
whether past or present, (iii) enter into any new employment, severance,
consulting, or other compensation agreement with any existing employee
engaged in the COMPANY's business, (iv) amend or enter into a new Plan
(except as required by Law) or amend or enter into a new collective
bargaining agreement (except as required by this Agreement), or (v)
engage in any transaction with any Affiliates.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3
between the date hereof and the Closing Date, the COMPANY will not, without
the prior written consent of ITP:
(a) make any change in its Articles or Certificate of
Incorporation or By-Laws;
(b) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its securities
of any kind other than in connection with the exercise of options or
warrants listed on Schedule 5.3;
(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock
or engage in any transaction that will significantly affect the cash
reflected on the balance sheet of the COMPANY as of August 31, 1997.
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is in
the ordinary course of business (consistent with past practice) or
involves an amount not in excess of $10,000;
(e) create, assume or permit to exist any Lien upon any assets
or properties whether now owned or hereafter acquired, except (1) with
respect to purchase money liens incurred in connection with the
acquisition of equipment with an aggregate cost not in excess of $10,000
necessary or desirable for the conduct of the business of the COMPANY,
(2) (A) Liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which adequate reserves
have been established and are being maintained) or (B) material men's,
mechanics', workers', repairmen's, employees' or other like Liens arising
in the ordinary course of business (the liens set forth in clause (2)
being referred to herein as "Statutory Liens"), or (3) Liens set forth on
Schedule 5.6 hereto;
(f) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business;
(g) negotiate for the acquisition of any business or the start-
up of any new business;
(h) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(i) waive any material right or claim of the COMPANY;
(j) commit a material breach of, materially amend or terminate
any Material Contract; or
(k) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. In consideration of the substantial expenditure of
time, effort and expense undertaken by ITP in connection with its due
diligence review and the preparation and execution of this Agreement, the
COMPANY and the STOCKHOLDERS agree that neither they nor their
representatives, agents or employees will, after the execution of this
Agreement until the earlier of (i) the termination of this Agreement or (ii)
the Closing, directly or indirectly, solicit, encourage, negotiate or discuss
with any third party (including by way of furnishing any information
concerning the COMPANY) any acquisition proposal relating to or affecting the
COMPANY or any part of it, or any direct or indirect interests in the COMPANY,
whether by purchase of assets or stock, purchase of interests, merger or other
transaction ("Acquisition Transaction"), and that the COMPANY will promptly
advise ITP of the terms of any communications any of the STOCKHOLDERS or the
COMPANY may receive or become aware of relating to any bid for all or any part
of the COMPANY.
7.5 Termination of Related Party Agreements. The STOCKHOLDERS and
the COMPANY shall terminate (i) any stockholders' agreements, voting
agreements, voting trusts, options, warrants and employment agreements between
the COMPANY and any employee and (ii) any existing agreement between the
COMPANY and any STOCKHOLDER, on or prior to the Closing Date. A list of such
terminated agreements is set forth on Schedule 7.5 and copies of each such
agreement have been provided to counsel for ITP.
7.6 Notification of Certain Matters. Between the date hereof and the
Closing Date the STOCKHOLDERS and the COMPANY shall give prompt notice to ITP
of (i) the occurrence or non-occurrence of any event of which the COMPANY or
the STOCKHOLDERS have knowledge, the occurrence or non-occurrence of which,
would cause any representation or warranty of the COMPANY or the STOCKHOLDERS
contained herein to be untrue or inaccurate in any material respect at or
prior to the Closing and (ii) any material failure of any STOCKHOLDER or the
COMPANY to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. Between the date hereof
and the Closing Date ITP and NEWCO shall give prompt notice to the COMPANY of
(i) the occurrence or nonoccurrence of any event of which ITP or NEWCO have
knowledge, the occurrence or non-occurrence of which, would cause any
representation or warranty of ITP or NEWCO contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of ITP or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.6 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering
such notice, which modification may only be made pursuant to Section 7.7, (ii)
modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 Amendment of Schedules.
(a) Each party hereto agrees that, with respect to the
representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing Date to
supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or
described in the Schedules.
(b) Notwithstanding the foregoing clause (a), no amendment or
supplement to a Schedule prepared by the COMPANY or the STOCKHOLDERS
that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect, individually or cumulatively with any other
events or occurrences, may be made unless ITP consents in writing to
such amendment or supplement; and provided further that no amendment or
supplement to a Schedule prepared by ITP or NEWCO that constitutes or
reflects an event or occurrence that would have a Material Adverse
Effect may be made unless the COMPANY consents in writing to such
amendment or supplement. In the event that the COMPANY or the
STOCKHOLDERS seek to amend or supplement a Schedule pursuant to this
Section 7.7 and ITP does not consent to such amendment or supplement, as
provided above, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(a) hereof. In the event that ITP or
NEWCO seeks to amend or supplement a Schedule pursuant to this Section
7.7 and the COMPANY does not consent to such amendment or supplement, as
provided above, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(a) hereof.
(c) For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth
in Sections 8 and 9 have been fulfilled, the Schedules hereto shall be
deemed to be the Schedules as amended or supplemented pursuant to this
Section 7.7. No party to this Agreement shall be liable to any other
party if this Agreement shall be terminated pursuant to the provisions
of this Section 7.7, except that, notwithstanding anything to the
contrary contained in this Agreement, if the COMPANY or the STOCKHOLDERS
on the one hand, or ITP or NEWCO on the other hand, amends or
supplements a Schedule which results in a termination of this Agreement
and such amendment or supplement arises out of or reflects facts or
circumstances which such party knew about at the time of execution of
this Agreement and knew would result in a termination of this Agreement
or if such amendment or supplement otherwise is proposed in bad faith,
such party shall pay or reimburse ITP or the COMPANY and the
STOCKHOLDERS, as the case may be, for all of the legal, accounting and
other out of pocket costs reasonably incurred in connection with this
Agreement.
7.8 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
convenient to carry out the transactions contemplated hereby.
7.9 Approval of Merger Agreement. Each of the STOCKHOLDERS agrees to
vote all of his shares of the COMPANY Stock in favor of the Merger and all
other transactions contemplated by this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
AND THE COMPANY
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pre-Closing Date and, to the extent specified in
this Section 8, on the Closing Date are subject to the satisfaction or waiver
on or prior to the Pre-Closing Date and/or the Closing Date, as the case may
be, of all of the conditions set forth in this Section 8.
8.1 Representations and Warranties. All representations and
warranties of ITP and NEWCO contained in Section 6 shall be true and correct
in all material respects as of the Pre-Closing Date and the Closing Date as
though such representations and warranties had been made as of such date; and
a certificate to the foregoing effect dated the Pre-Closing Date and the
Closing Date and signed by the President or any Vice President of ITP shall
have been delivered to the COMPANY and the STOCKHOLDERS.
8.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by ITP and
NEWCO on or before each of the Pre-Closing Date and the Closing Date shall
have been duly complied with and performed in all material respects on or
before each of the Pre-Closing Date and the Closing Date, as the case may be;
and certificates to the foregoing effect dated each of the Pre-Closing Date
and the Closing Date and signed by the President or any Vice President of ITP
shall have been delivered to the COMPANY and the STOCKHOLDERS.
8.3 No Litigation. No action or proceeding before a court or any
other Governmental Authority or body shall have been instituted or threatened
to restrain or prohibit the Merger or the transactions contemplated by this
Agreement.
8.4 Opinion of Counsel. The STOCKHOLDERS shall have received an
opinion from counsel for ITP and NEWCO, dated the Pre-Closing Date and
including a statement to the effect that it may be relied upon as of the
Closing Date, substantially in the form annexed hereto as Annex VI
8.5 Consents and Approvals. All necessary consents of and filings
required to be obtained or made by ITP or NEWCO with any Governmental
Authority or agency relating to the consummation of the transactions
contemplated by this Agreement shall have been obtained and made.
8.6 Good Standing Certificates. ITP and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no earlier than 10
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which ITP or NEWCO is authorized to do business,
showing that each of ITP and NEWCO is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
ITP and NEWCO, respectively, for all periods prior to the Closing have been
filed and paid.
8.7 Secretary's Certificate. The COMPANY shall have received a
certificate or certificates, dated the Pre-Closing Date and the Closing Date
and signed by the secretary of ITP and of NEWCO, certifying the truth and
correctness of attached copies of the ITP's and NEWCO's respective
Certificates of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the boards of directors
and, if required, the STOCKHOLDERS of ITP and NEWCO approving ITP's and
NEWCO's entering into this Agreement and the consummation of the transactions
contemplated hereby.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO
The obligations of ITP and NEWCO with respect to actions to be taken on
the Pre-Closing Date and, to the extent specified in this Section 9, on the
Closing Date, are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date and/or the Closing Date, as the case may be, of all of the
conditions set forth in this Section 9.
9.1 Representations and Warranties. All the representations and
warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement
shall be true and correct in all material respects as of the Pre-Closing Date
and the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; and the STOCKHOLDERS shall
have delivered to ITP certificates dated the Pre-Closing Date and the Closing
Date and signed by them to such effect.
9.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before each of the Pre-Closing Date and the
Closing Date shall have been duly performed or complied within all material
respects on or before each of the Pre-Closing Date and the Closing Date, as
the case may be; and the STOCKHOLDERS shall have delivered to ITP certificates
dated the Pre-Closing Date and the Closing Date, respectively, and signed by
them to such effect.
9.3 No Litigation. No action or proceeding before a court or any
other Governmental Authority or body shall have been instituted or threatened
to restrain or prohibit the Merger or the transactions contemplated by this
Agreement and no Governmental Authority or body shall have taken any other
action or made any request of ITP as a result of which the management of ITP
deems it inadvisable to proceed with the transactions hereunder.
9.4 Secretary's Certificate. ITP shall have received a certificate
or certificates, dated each of the Pre-Closing Date and the Closing Date and
signed by the secretary of the COMPANY, certifying the truth and correctness
of attached copies of the COMPANY's Certificate or Articles of Incorporation
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the shareholders approving the
COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.5 No Material Adverse Change. As of the Pre-Closing Date and as of
the Closing Date, no event or circumstance shall have occurred with respect to
the COMPANY which would constitute a Material Adverse Effect, and the COMPANY
shall not have suffered any material loss or damages to any of its properties
or assets whether or not covered by insurance, which change, loss or damage
materially affects or impairs the ability of the COMPANY to conduct its
business.
9.6 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to
ITP an instrument dated the Closing Date releasing the COMPANY from any and
all (i) claims of the STOCKHOLDERS against the COMPANY and ITP and (ii)
obligations of the COMPANY and ITP to the STOCKHOLDERS, except for (x)
continuing obligations to the STOCKHOLDERS relating to their employment by the
COMPANY and (y) obligations arising under this Agreement or the transactions
contemplated hereby
9.7 Termination of Related Party Agreements. All agreements
specified in Section 7.5 hereof shall have been terminated effective prior to
or as of the Closing Date.
9.8 Opinion of Counsel. ITP shall have received an opinion from
counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date and
including a statement to the effect that it may be relied upon as of the
Closing Date, substantially in the form attached hereto as Annex VII.
9.9 Consents and Approvals. All necessary consents of and filings
with any Governmental Authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.19 shall have
been obtained.
9.10 Good Standing Certificates. The COMPANY shall have delivered to
ITP a certificate, dated as of a date no earlier than 10 days prior to the
Pre-Closing Date, duly issued by the appropriate Governmental Authority in the
COMPANY's state of incorporation and, unless waived by ITP, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Closing have been filed and paid.
9.11 Employment Agreements. Each of the STOCKHOLDERS shall have
entered into an employment agreement substantially in the form attached as
Annex VIII hereto.
9.12 Stockholders' Agreement. Each STOCKHOLDER shall have executed a
Joinder Agreement substantially in the form of Annex IX hereto binding them
and all of their shares of ITP Stock received in the Merger to the provisions
of the Stockholders' Agreement of IT Partners, Inc. dated May 29, 1997 (the
"Stockholders' Agreement").
9.13 Subordination Agreement. Each STOCKHOLDER shall have executed a
Subordination Agreement substantially in the form of Annex X hereto.
9.14 Financing. ITP and/or NEWCO, as the case may be, shall have
secured adequate financing to fund the amount of cash set forth on Annex III
under the Intercompany Loan and Security Agreement by and among ITP, NEWCO,
the lenders from time to time, Creditanstalt-Bankverein and Creditanstalt
Corporate Finance, Inc. (the "Agent").
10. COVENANTS AFTER CLOSING
10.1 Preparation and Filing of Tax Returns.
(a) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. Each STOCKHOLDER shall pay or cause to be
paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on
the COMPANY Financial Statements) shown by such Returns to be due.
(b) ITP shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after
the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the receding sentence, each party
required to file Returns pursuant to this Agreement shall bear all costs
of filing such Returns.
(d) Each of the COMPANY, NEWCO, ITP and each STOCKHOLDER hereby
agrees to report the transaction as a tax-free reorganization pursuant
to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
(e) ITP shall be solely responsible for any taxes payable in
respect of the net receivables of the COMPANY existing on the Closing
Date.
10.2 Subsequent Acquisitions. ITP covenants and agrees that it
will not acquire any other companies or all or substantially all of the assets
of any other company through November 30, 1997 if such acquisition would
include the issuance of shares of ITP Common Stock at an assumed price per
share of less than $5.30.
10.3 Stock Options. Subject to the provisions of the Stockholders'
Agreement referred to in Section 9.12 hereof, ITP covenants and agrees that it
will reserve an aggregate of 60,000 shares of its Common Stock for issuance
upon exercise of options granted from time to time to employees of the
Surviving Corporation in the sole and absolute discretion of ITP's Board of
Directors. ITP's Board of Directors will consider the recommendations of the
President of the Surviving Corporation with regard to the employees who should
receive such options.
11. INDEMNIFICATION
The STOCKHOLDERS, ITP and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless ITP, NEWCO, the COMPANY and the Surviving
Corporation at all times, from and after the date of this Agreement until the
Expiration Date, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and
reasonable expenses of investigation) incurred by ITP, NEWCO, the COMPANY or
the Surviving Corporation as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or the COMPANY set forth
herein or on the schedules or certificates delivered in connection herewith,
(ii) any breach of any agreement on the part of the STOCKHOLDERS or the
COMPANY under this Agreement, (iii) any liability under any Federal or state
law or regulation, at common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact relating
to the COMPANY or the STOCKHOLDERS, or arising out of or based upon any
omission or alleged omission by the COMPANY and/or the STOCKHOLDERS to state a
material fact relating to the COMPANY or the STOCKHOLDERS required to be
stated or necessary to make the statements not misleading, or (iv) any Tax
imposed upon the COMPANY, NEWCO or the Surviving Corporation or relating to
any third party or Acquired Party for any period ending on or prior to the
Closing Date, including, in each case, any such Tax arising out of or in
connection with the transactions effected pursuant to this Agreement or any
such Tax for which an Acquired Party may be liable under Section 1.1502-6 of
the Treasury Regulations (or any similar provisions of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
11.2 Indemnification by ITP. ITP covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times
from and after the date of this Agreement until the ITP Expiration Date, from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by
ITP or NEWCO of its representations and warranties set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of ITP or NEWCO under this Agreement, (iii) any
liability under any Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to ITP or NEWCO, or arising out of or
based upon any omission or alleged omission to state a material fact relating
to ITP or NEWCO required to be stated or necessary to make the statements not
misleading, or (iv) any liability associated with Charles Schaeffer's guaranty
of the COMPANY's lease dated April 17, 1997.
11.3 Third Person Claims. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), of
the commencement of any action or proceeding by a Third Person, the
Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying
Party"), give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding. Such notice shall state the nature
and the basis of such claim and a reasonable estimate of the amount thereof.
The Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter so long as the Indemnifying
Party pursues the same in good faith and diligently, provided that the
Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party, such consent not to be unreasonably
withheld or delayed. If the Indemnifying Party undertakes to defend or settle,
it shall promptly notify the Indemnified Party of its intention to do so, and
the Indemnified Party shall cooperate, at the Indemnifying Party's expense,
with the Indemnifying Party and its counsel in the defense thereof and in any
settlement thereof. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement to said Third Person plus all
indemnifiable costs and expenses incurred to date, the Indemnifying Party
shall be relieved of its duty to defend and shall tender the Third Person
claim back to the Indemnified Party, who shall thereafter, at its own expense,
be responsible for the defense and negotiation of such Third Person claim. If
the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails
diligently to pursue such defense, the Indemnified Party may undertake such
defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld or delayed.
11.4 Exclusive Remedy. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in
any action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party, provided that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement or to seek relief for a
breach of any employment agreement with, or any stock option issued by, ITP.
11.5 Limitations on Indemnification. (a) the persons or entities
indemnified pursuant to Section 11.1 or 11.2(i), (ii) (except as it relates to
claims for Initial or Subsequent Merger Consideration) or (iii) shall not
assert any claim other than a Third Person claim for indemnification hereunder
until such time as, and solely to the extent that, the aggregate of all claims
which such persons may have shall exceed $150,000. An amount equal to $150,000
shall be a cumulative deductible against any claim for indemnification
hereunder. No person shall be entitled to indemnification under this Section
11: (i) if and to the extent that such person's claim for indemnification is
directly or indirectly related to a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement; and (ii) unless such claim has been presented to the indemnifying
party with reasonable specificity describing the source, nature and, if
possible to ascertain, the potential amount of such claim and unless such
claim has been presented prior to the applicable Expiration Date or ITP
Expiration Date, as the case may be.
(b) ITP shall have the right, upon written notice, to offset
indemnification amounts due to it pursuant to this Agreement against
payments due to the STOCKHOLDERS under (i) this Agreement (including,
without limitation, the consideration set forth on Annex III hereto)
and/or (ii) any contract contemplated by, or referred to in, this
Agreement.
(c) Except for claims for Initial or Subsequent Merger
Consideration, the indemnification obligations under Section 11.1 shall
be limited, in the aggregate, to $3 million. To the extent amounts are
outstanding under the Notes, claims under Section 11.1 in excess of $1
million shall offset amounts due to the STOCKHOLDERS under the Notes.
The indemnification obligations under Section 11.2 shall be limited, in
the aggregate, to $3 million.
12. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual consent of the boards of directors of ITP and the
COMPANY;
(b) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by ITP (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated
by October 31, 1997, unless the failure of such transactions to be
consummated is due to the willful failure of the party seeking to
terminate this Agreement to perform any of its obligations under this
Agreement to the extent required to be performed by it prior to or on
the Closing Date;
(c) by the STOCKHOLDERS or the COMPANY, on the one hand, or by
ITP, on the other hand, if a material breach or default shall be made by
the other party in the observance or in the due and timely performance
of any of the covenants, agreements or conditions contained herein, and
the curing of such default shall not have been made on or before the
Closing Date; or
(d) pursuant to Section 7.7 hereof.
12.2 Liabilities in Event of Termination. Except as provided in
Section 7.7 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 Prohibited Activities. Provided that there is no Event of
Default (as defined in the Note) by ITP which remains uncured for a period of
thirty (30) days under the Note issued to such STOCKHOLDER pursuant to Article
III hereof, the STOCKHOLDERS will not, for a period of three (3) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other person,
company, partnership, corporation or business of whatever nature:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with ITP or any of the subsidiaries thereof, within
300 miles of where the COMPANY or any of its subsidiaries conducted
business prior to the effectiveness of the Merger (the "Territory");
(b) call upon any person who is, at that time, within the
Territory, an employee of ITP (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of ITP
(including the subsidiaries thereof), provided that each STOCKHOLDER
shall be permitted to call upon and hire any member of his or her
immediate family;
(c) call upon any person or entity which is, at that time, or
which has been, within three (3) years prior to the Closing Date, a
customer of ITP (including the subsidiaries thereof), of the COMPANY
within the Territory for the purpose of soliciting or selling products
or services in direct competition with ITP within the Territory;
(d) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in similar or
incidental businesses or activities, which candidate, to the actual
knowledge of such STOCKHOLDER after due inquiry, was called upon by ITP
(including the subsidiaries thereof) or for which, to the actual
knowledge of such STOCKHOLDER after due inquiry, ITP (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity; or
(e) disclose customers, whether in existence or proposed, of
the COMPANY to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that the
COMPANY has in the past disclosed such information to the public for
valid business reasons or disclosure is specifically required bylaw.
13.2 Damages. Because of the difficulty of measuring economic losses
to ITP as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to ITP for which it
would have no other adequate remedy, each STOCKHOLDER agrees that, in the
event of breach by such STOCKHOLDER, the foregoing covenant may be enforced by
ITP by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable restraint on
the STOCKHOLDERS in light of the activities and business of ITP (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of ITP.
13.4 Severability, Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and this Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
STOCKHOLDER against ITP (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by ITP of such covenants.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree
that this covenants in this Section 13 is a material and substantial part of
this transaction and the consideration for this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that
they, had in the past, currently have, and in the future may have, access to
certain confidential information of the COMPANY and/or ITP, such as
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY's and/or ITP's respective businesses. The
STOCKHOLDERS agree that they will not disclose such confidential information
to any person, firm, corporation, association or other entity for any purpose
or reason whatsoever, except (a) to authorized representatives of ITP who need
to know information in connection with the transactions contemplated hereby,
who have been informed of the confidential nature of such information and who
have agreed to keep such information confidential as provided hereby, (b)
following the Closing, such information may be disclosed by the STOCKHOLDERS
as is required in the course of performing their duties for ITP or the
Surviving Corporation and (c) to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 14.1, unless (i) such information becomes known to the public
generally through no fault of any such STOCKHOLDERS, (ii) disclosure is
required by law or the order of any Governmental Authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), the STOCKHOLDERS shall, if possible, give prior written notice thereof
to ITP and provide ITP with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party. In the event of a breach or threatened breach by any of the
STOCKHOLDERS of the provisions of this Section 14, ITP shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as
prohibiting ITP from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, the
STOCKHOLDERS shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the COMPANY.
14.2 ITP and NEWCO. ITP and NEWCO recognize and acknowledge that
they had in the past, currently have, and in the future may have, access to
certain confidential information of the COMPANY, such as operational policies,
and pricing and cost policies that are valuable, special and unique assets of
the COMPANY's business. ITP and NEWCO agree that, prior to the Closing, or if
the transactions contemplated by this Agreement are not consummated, they will
not disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a)
to the STOCKHOLDERS and to authorized representatives of the COMPANY, and (b)
to counsel, the Agent and the Lenders and other advisers, provided that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2, unless (i) such information becomes known to the public
generally through no fault of ITP or NEWCO, (ii) disclosure is required by law
or the order of any Governmental Authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), ITP and
NEWCO shall, if possible, give prior written notice thereof to the COMPANY and
the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the
opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by ITP or NEWCO of the provisions of this Section, the
COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining
ITP and NEWCO from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the COMPANY and
the STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 14.1 and
14.2, and because of the immediate and irreparable damage that would be caused
for which they would have no other adequate remedy, the parties hereto agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 Survival. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of three (3)
years from the Closing Date.
15. STOCKHOLDERS' AGREEMENT
15.1 Stockholders' Agreement. Each of the STOCKHOLDERS shall have
executed a Joinder Agreement substantially in the form of Annex IX hereto
binding them and all of their shares of ITP Stock received in the Merger to
the provisions of the Stockholders' Agreement. The certificates evidencing the
ITP Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this
Agreement will bear a legend substantially in the form set forth below and
containing such other information as ITP may deem necessary or appropriate:
EXCEPT AS PROVIDED BY THAT CERTAIN STOCKHOLDERS' AGREEMENT, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY FOR INSPECTION, THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of ITP Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been and will not be
registered under the Act and therefore may not be resold without compliance
with the 1933 Act. The ITP Stock to be acquired by the STOCKHOLDERS pursuant
to this Agreement is being acquired solely for their own respective accounts,
for investment purposes only, and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and
represent that none of the shares of ITP Stock issued to the STOCKHOLDERS will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC. All the ITP Stock
shall bear the following legend in addition to the legend required under
Section 15 of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND, IF REQUIRED BY I.T. PARTNERS, INC.,
OPINION OF COUNSEL TO I. T. PARTNERS, INC. STATING THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
16.2 Economic Risk: Sophistication. The STOCKHOLDERS represent and
warrant that they are able to bear the economic risk of an investment in the
ITP Stock acquired pursuant to this Agreement, can afford to sustain a total
loss of such investment and have such knowledge and experience in financial
and business matters that they are capable of evaluating the merits and risks
of the proposed investment in the ITP Stock. The STOCKHOLDERS represent and
warrant that they have had an adequate opportunity to ask questions and
receive answers from the officers of ITP concerning any and all matters
relating to the transactions described herein including, without limitation,
the background and experience of the current and proposed officers and
directors of ITP, business, operations, financial conditions and plans for
ITP, and any plans for additional acquisitions and the like. Each STOCKHOLDER
represents that after taking into consideration the information and advice
provided herein each STOCKHOLDER has the requisite knowledge and experience in
financial and business matters to be capable of evaluating the merits and
risks of this investment.
17. GENERAL
17.1 Cooperation. The COMPANY, the STOCKHOLDERS, ITP and NEWCO,
shall each deliver or cause to be delivered to the other on the Closing Date,
and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The STOCKHOLDERS will cooperate and use their
reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with ITP on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Tax Return filing obligations, actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
17.2 Successors and Assigns. Except that ITP and the Surviving
Corporation may assign the benefits of this Agreement to the Agent, this
Agreement and the rights of the parties hereunder (including, but not limited
to, the right to receive the Subsequent Merger Consideration) may not be
assigned (except by operation of law) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of ITP, and the
heirs and legal representatives of the STOCKHOLDERS.
17.3 Entire Agreement. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
STOCKHOLDERS, the COMPANY, NEWCO and ITP and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the STOCKHOLDERS, the
COMPANY, NEWCO and ITP, acting through their respective officers or trustees,
duly authorized by their respective boards of directors. Any disclosure made
any Schedule delivered pursuant hereto shall be deemed to have been disclosed
for purposes of any other Schedule required hereby, provided that the COMPANY
and the STOCKHOLDERS shall make a good faith effort to cross reference
disclosure. as necessary or advisable, between related Schedules.
17.4 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
17.5 Brokers and Agents. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged
to have been employed by such indemnifying party. Notwithstanding the
foregoing, it is acknowledged and understood that the STOCKHOLDERS retained
the services of The Geneva Companies and will be solely responsible for any
fees, commissions or expenses of that entity.
17.6 Expenses.
(a) Whether or not the transactions herein contemplated shall be
consummated, each of the parties hereto will pay its own fees, expenses
and disbursements and those of its agents, representatives, accountants
and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and expenses
incurred in the performance and compliance with all conditions to be
performed by it under this Agreement.
(b) Each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar
taxes and fees ("Transfer Taxes") imposed in connection with the
transactions contemplated hereby. Each STOCKHOLDER shall file all
necessary documentation and Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he, and not the
COMPANY or ITP, will pay all Taxes due upon receipt of the
consideration payable pursuant to Section 2 hereof, and will assume all
Tax risks and liabilities of such STOCKHOLDER in connection with the
transactions contemplated hereby.
17.7 Notices. All notices or communications required or permitted
hereunder shall be in writing and may be given by depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to ITP, or NEWCO, addressed to them at:
IT Partners, Inc.
9881 Broken Land Parkway, Suite 102
Columbia, Maryland 21046
Attn: Mr. Daniel J. Klein
with copies to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201
Attn: Earl S. Wellschlager, Esquire
(b) If to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex IV, with copies to such counsel, if any,
as is set forth with respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Financial Systems Consulting, Inc.
One World Trade Center
Suite 1980
Long Beach, California 90831
Attn: Mr. Charles Schaeffer, President
with copies to:
Higham, McConnell & Dunning
28202 Cabot Road, Suite 450
Laguna Niguel, California 92677- 1250
Attn: Douglas F. Higham, Esquire
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Maryland, except that matters herein within the
purview of the matters covered by the General Corporation Law of the State of
Delaware shall be governed by such General Corporation Law, in each case
without reference to conflicts of laws principles.
17.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall
it be construed as a waiver of or acquiescence in any such breach or default,
or of any similar breach or default occurring later; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 Time. Time is of the essence with respect to this Agreement.
17.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
17.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of ITP, NEWCO, the COMPANY and STOCKHOLDERS who will
hold or who hold at least 50% of the ITP Stock issued or to be issued to the
STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected
in accordance with this Section 17.14 shall be binding upon each of the
parties hereto, any other person receiving ITP Stock in connection with the
Merger and each future holder of such ITP Stock.
17.15 Attorneys' Fees. In the event of any arbitration or
proceeding arising out of or related to this Agreement, the prevailing party
shall be entitled to recover from the losing party all of its costs and
expenses incurred in connection with such arbitration or proceeding, including
court costs and reasonable attorneys' fees, whether or not such arbitration or
proceeding is prosecuted to judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
IT PARTNERS, INC.
By:
(SEAL)
Name: Daniel J. Klein
Title: President
By:
(SEAL)
Name: Jamie E. Blech
Title: Secretary
ITP NO. 4, INC.
By:
(SEAL)
Name: Daniel J. Klein
Title: Chairman of the Board
By:
(SEAL)
Name: Jamie E. Blech
Title: Assistant Secretary
FINANCIAL SYSTEMS CONSULTING
INC.
By:
(SEAL)
Name:
Title:
By:
(SEAL)
Name:
Title:
STOCKHOLDERS:
(SEAL)
Charles Schaeffer
(SEAL)
Garrett Schaeffer