ASSET PURCHASE AGREEMENT
by and among
Outsourcing Solutions Inc.,
Pacific Software Consulting, LLC
Pacific Software Consulting, Inc.,
and
Edward F. Lambert
Dated April 30, 2001
TABLE OF CONTENTS
ASSET PURCHASE AGREEMENT
SECTION PAGE
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ARTICLE I DEFINITIONS.........................................................1
Affiliate.................................................................1
Affiliated Group..........................................................1
Agreement.................................................................1
Arbiter...................................................................1
Assets....................................................................1
Assignment and Assumption Agreement.......................................1
Assumed Liabilities.......................................................2
Bill of Sale..............................................................2
Business..................................................................2
Buyer.....................................................................2
Buyer Indemnified Persons.................................................2
Closing...................................................................2
Closing Balance Sheet.....................................................2
Closing Date..............................................................2
Closing Financial Statements..............................................2
Closing Review............................................................2
Closing Statement.........................................................2
Code......................................................................2
Confidential Information..................................................2
Contract..................................................................2
Court.....................................................................2
Covenant Not to Compete...................................................3
Current Assets............................................................3
Current Liabilities.......................................................3
Dispute Period............................................................3
Dollars...................................................................3
Effective Time............................................................3
Employment Agreement......................................................3
Environmental Laws........................................................3
ERISA.....................................................................3
Excluded Assets...........................................................3
Final Payment.............................................................3
Financial Statements......................................................3
GAAP......................................................................3
Government................................................................3
Hazardous Materials.......................................................3
Indemnified Losses........................................................4
Indemnified Party.........................................................4
Indemnifying Party........................................................4
Initial Payment...........................................................4
Intellectual Property.....................................................4
Interim Balance Sheet.....................................................4
Interim Statements........................................................4
IRCA......................................................................4
Law.......................................................................4
Liabilities...............................................................4
Lien......................................................................4
Losses....................................................................4
Net Worth.................................................................5
Net Worth Target..........................................................5
Notice of Dispute.........................................................5
OSI.......................................................................5
Ordinary Course...........................................................5
Party.....................................................................5
Patentable Property Purchase Agreement....................................5
Person....................................................................5
Plan......................................................................5
Property..................................................................5
Purchased Assets..........................................................5
Restricted Period.........................................................5
Returns...................................................................6
Seller....................................................................6
Seller Indemnified Persons................................................6
Shareholder...............................................................6
Shareholder Patentable Property...........................................6
Tax Affiliate.............................................................6
Taxes.....................................................................6
Third Person..............................................................6
Third Person Claim........................................................6
Trade Names...............................................................6
ARTICLE II PURCHASE AND SALE OF ASSETS........................................6
2.1 Assets to be Purchased..............................................6
2.2 Assumed Liabilities.................................................6
2.3 Consideration.......................................................7
2.4 Post-Closing Adjustments to the Initial Payment.....................7
2.5 Allocation of Consideration.........................................8
2.6 Closing.............................................................8
2.7 Deliveries of Seller at the Closing.................................8
2.8 Deliveries of Buyer at the Closing..................................8
2.9 The Closing Balance Sheet and the Closing Statement.................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER...........9
3.1 Corporate Existence and Power of Seller.............................9
3.2 Approval and Enforceability of Agreement...........................10
3.3 Financial Statements...............................................10
3.4 Events Subsequent to December 31, 1999.............................10
3.5 Assets in Possession of Others.....................................11
3.6 Accounts and Notes Receivable......................................11
3.7 Undisclosed Liabilities............................................12
3.8 Taxes..............................................................12
3.9 Real Property - Owned..............................................13
3.10 Personal Property - Owned..........................................13
3.11 Real and Personal Property - Leased from Seller....................13
3.12 Real and Personal Property - Leased to Seller......................13
3.13 Intellectual Property..............................................13
3.14 Necessary Property and Transfer of Assets..........................14
3.15 Use and Condition of Property......................................14
3.16 Licenses and Permits...............................................14
3.17 Contracts--Disclosure..............................................15
3.18 Customer Contracts.................................................16
3.19 Contracts--Validity, Etc...........................................16
3.20 No Breach of Law or Governing Document.............................16
3.21 Litigation and Arbitration.........................................17
3.22 Directors, Officers, Employees and Consultants.....................17
3.23 Indebtedness to and from Directors, Officers and Others............17
3.24 Outside Financial Interests........................................17
3.25 Payments, Compensation and Perquisites of Agents
and Employees....................................................18
3.26 Labor Contracts....................................................18
3.27 Employee Benefit Plans.............................................18
3.28 Overtime, Back Wages, Vacation and Minimum Wages...................18
3.29 Discrimination, Workers Compensation and
Occupational Safety and Health...................................18
3.30 Alien Employment Eligibility.......................................19
3.31 Labor Disputes; Unfair Labor Practices.............................19
3.32 Insurance Policies.................................................19
3.33 Guarantees.........................................................19
3.34 Environmental Matters..............................................19
3.35 Broker's Fees......................................................20
3.36 Foreign Assets and Operations......................................20
3.37 Service Warranties and Guarantees..................................21
3.38 Books and Records..................................................21
3.39 Truthfulness.......................................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................21
4.1 Corporate Existence of Buyer.......................................21
4.2 Approval of Agreement..............................................21
4.3 No Breach of Articles or Indentures................................22
4.4 Broker's Fees......................................................22
ARTICLE V COVENANTS CONCERNING SELLER.........................................22
5.1 Operation of the Business..........................................22
5.2 Preservation of Business...........................................23
5.3 Insurance and Maintenance of Property..............................24
5.4 Full Access........................................................24
5.5 Books, Records and Financial Statements............................24
5.6 Governmental Filings...............................................24
5.7 Tax Matters........................................................24
ARTICLE VI OTHER AGREEMENTS...................................................25
6.1 Change of Seller's Name............................................25
6.2 Seller's Employees.................................................25
ARTICLE VII COVENANT NOT TO COMPETE...........................................26
7.1 Covenant Not to Compete............................................26
7.2 Employees..........................................................26
7.3 Confidentiality....................................................26
7.4 Remedies...........................................................27
7.5 Permitted Exceptions...............................................27
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS................................27
8.1 Representations and Warranties of
Seller and Shareholder...........................................27
8.2 Approval by Buyer's Board..........................................28
8.3 Performance of this Agreement......................................28
8.4 No Material Adverse Change and No
Extraordinary Distributions......................................28
8.5 Certificate of Seller and Shareholder..............................28
8.6 Employment Agreements..............................................28
8.7 Financial Review...................................................28
8.8 No Lawsuits........................................................28
8.9 No Restrictions....................................................28
8.10 Consents...........................................................29
8.11 Releases...........................................................29
8.12 Documents..........................................................29
8.13 Due Diligence......................................................29
8.14 Employees and Independent Contractors..............................29
8.15 Closing Patentable Property Purchase Agreement.....................29
8.16 Further Assurances.................................................29
ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS.................................30
9.1 Representations and Warranties of Buyer and OSI....................30
9.2 Performance of this Agreement......................................30
9.3 Certificate of Buyer...............................................30
9.4 Employment Agreements..............................................30
9.5 Payment of Initial Payment.........................................30
9.6 No Lawsuits........................................................30
9.7 Documents..........................................................30
9.8 Closing Patentable Property Purchase Agreement.....................31
9.9 Further Assurances.................................................31
ARTICLE X INDEMNIFICATION.....................................................31
10.1 Survival of Representations and Warranties.........................31
10.2 Seller's Indemnification...........................................32
10.3 Buyer's Indemnification............................................33
10.4 Notice of Claim....................................................34
10.5 Right to Contest Claims of Third Persons...........................34
10.6 Set-Off Rights.....................................................35
ARTICLE XI MISCELLANEOUS......................................................35
11.1 Assignment; Binding Agreement......................................35
11.2 Termination of Agreement...........................................36
11.3 Manner and Effect of Termination...................................36
11.4 Non-Disclosure of Information......................................36
11.5 Bulk Sales.........................................................36
11.6 Remedies...........................................................37
11.7 Entire Agreement and Modification..................................37
11.8 Severability.......................................................37
11.9 Counterparts.......................................................37
11.10 Headings; Interpretation...........................................37
11.11 Choice of Forum and Governing Law..................................37
11.12 Payment of Fees and Expenses.......................................37
11.13 Notices............................................................38
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 30th day
of April, 2001, by and among, on one hand, Outsourcing Solutions Inc., a
Delaware corporation ("OSI") and Pacific Software Consulting, LLC, a Delaware
limited liability company owned by OSI ("Buyer"), and on the other hand, Pacific
Software Consulting, Inc., a California corporation ("Seller") and Edward F.
Lambert ("Shareholder"). Certain defined terms are set forth in Article I.
RECITALS
A. Buyer desires to purchase from Seller the Purchased Assets and to
assume the Assumed Liabilities, on the following terms and conditions;
B. Seller desires to sell to Buyer the Purchased Assets and to assign to
Buyer the Assumed Liabilities, on the following terms and conditions; and
C. Simultaneously with the Closing, Buyer will purchase certain
intellectual property from Shareholder pursuant to the Patentable Property
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person referred to. In this definition, "control" means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, by contract, or
otherwise.
"Affiliated Group" has the meaning set forth in Section 1504 of the Code.
"Agreement" has the meaning set forth in the Preamble.
"Arbiter" means the individual appointed under Section 2.9(c).
(a) "Assets" has the meaning set forth in Schedule 2.1.
"Assignment and Assumption Agreement" means the form of instrument set
forth as Exhibit A.
"Assumed Liabilities" means Liabilities of Seller to the extent they are
incurred in the Ordinary Course of the Business and to the extent they are:
(a) Liabilities that are quantified on the Closing Balance Sheet and
the Closing Statement; or
(b) executory obligations arising from the Business which are
specifically set forth on Schedule 1.1(a) hereto to the extent such obligations
are to be performed after the Effective Time and are accompanied by a correlated
duty of performance or payment on the part of the other party(s) thereto.
"Bill of Sale" means the form of instrument set forth as Exhibit B.
"Business" means the business and operations of Seller including without
limitation the business generally conducted under the trade name "Pacific
Software Consulting, Inc."
"Buyer" has the meaning set forth in the Preamble.
"Buyer Indemnified Persons" has the meaning set forth in Section 10.2(a).
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Balance Sheet" has the meaning set forth in Section 2.9(a).
"Closing Date" means April 30, 2001 or, if the conditions to the
Closing are not by then satisfied, on such date within three business days
following satisfaction of such conditions (other than conditions to be satisfied
at the Closing according to the terms thereof).
"Closing Financial Statements" means the Closing Balance Sheet and the
Closing Statement prepared pursuant to Section 2.9(a).
"Closing Review" has the meaning set forth in Section 2.9(a).
"Closing Statement" has the meaning set forth in Section 2.9(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in Section 7.3.
"Contract" means any contract, agreement, arrangement, understanding,
lease, indenture, evidence of indebtedness, binding commitment or instrument,
purchase order or offer, written or oral, entered into or made by or on behalf
of Seller, or to which Seller is a party or by which it or its property is
bound.
"Court" means any court, grand jury, administrative or regulatory
body, Government agency, arbitration or mediation panel or similar body.
"Covenant Not to Compete" means the obligations of Seller and
Shareholder under Article VII.
"Current Assets" shall be determined in accordance with GAAP and shall
mean (a) accounts receivable (less an allowance for doubtful accounts) and (b)
prepaid expenses and supplies.
"Current Liabilities" shall be determined in accordance with GAAP and
shall mean accounts payable and accrued expenses.
"Dispute Period" has the meaning set forth in Section 2.9(b).
"Dollars" or "$" means United States Dollars.
"Effective Time" means as of 11:59 p.m. on April 30, 2001.
"Employment Agreement" means the form of employment and
non-competition agreement set forth as Exhibit C.
"Environmental Laws" has the meaning set forth in Section 3.34(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the Assets identified in Schedule 1.1(b).
"Final Payment" means the Initial Payment as adjusted pursuant to
Section 2.4(a).
"Financial Statements" means the 2000 Financial Statements, 1999
Financial Statements and the 1998 Financial Statements. "2000 Financial
Statements" means Seller's balance sheet at December 31, 2000 and the related
statements of income and retained earnings and combined statements of cash flows
for the 12 month period then ended, together with any notes or schedules
thereto. "1999 Financial Statements" means Seller's balance sheet at December
31, 1999 and the related statements of income and retained earnings and combined
statements of cash flows for the 12 month period then ended, together with any
notes or schedules thereto. "1998 Financial Statements" means Seller's balance
sheet at December 31, 1998 and the related statements of income and retained
earnings and combined statements of cash flows for the 12 month period then
ended, together with any notes or schedules thereto.
"GAAP" means U.S. generally accepted accounting principles.
"Government" means the United States of America, any other nation or
sovereign state, any federal, bilateral or multilateral governmental authority,
any state, possession, territory, county, district, municipality, city or other
governmental unit or subdivision, and any branch, agency, or judicial body of
any of the foregoing.
"Hazardous Materials" has the meaning set forth in Section 3.34(e).
"Indemnified Losses" has the meaning set forth in Section 10.2(a).
"Indemnified Party" has the meaning set forth in Section 10.4.
"Indemnifying Party" has the meaning set forth in Section 10.4.
"Initial Payment" means Twenty Eight Thousand Seven Hundred Fifty
Dollars ($28,750).
"Intellectual Property" means all of the following (in whatever form
or medium) which are used, owned by or licensed to Seller: (a) patents and
patent applications, (b) copyrights and registrations thereof, (c) mask works
and registrations and applications for registration thereof, (d) computer
software (whether in source code or object code), data and documentation, (e)
trade secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, works-for-hire, firmware,
programs, know-how, manufacturing and productions processes and techniques,
research and development information, inventions, discoveries, projections,
analyses, market studies, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans, proprietary
prospect lists, and customer and supplier lists and information, (f) trademarks,
service marks, trade names, corporate names, domain names and applications and
registrations therefor and (g) other proprietary rights relating to any of the
foregoing.
"Interim Balance Sheet" means the balance sheet at March 31, 2001
included in the Interim Statements.
"Interim Statements" means the Interim Balance Sheet and the related
statements of income and retained earnings and statements of cash flows of
Seller for the three month period then ended, together with any notes or
schedules thereto.
"IRCA" means the Immigration Reform and Control Act of 1986, and the
rules and regulations thereunder.
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order or injunction of any Government,
quasi-governmental authority or Court, and includes rules or regulations of any
regulatory or self-regulatory authority compliance with which is required by
law.
"Liabilities" means all liabilities and/or obligations, whether or not
required to be reflected on the financial statements of a business.
"Lien" means any lien, security interest, mortgage, option, lease,
tenancy, occupancy, covenant, condition, easement, agreement, hypothecation,
restriction, pledge, charge, claim or other encumbrance of every kind and
nature.
"Losses" has the meaning set forth in Section 10.2(a).
"Net Worth" means Seller's Current Assets minus Current Liabilities,
calculated in accordance with historical accounting practices of Seller applied
on a consistent basis.
"Net Worth Target" has the meaning set forth in Section 2.4(a).
"Notice of Dispute" means a notice to Buyer delivered pursuant to
Section 2.9, specifying in reasonable detail all points of disagreement with the
Closing Balance Sheet and the Closing Statement.
"OSI" has the meaning set forth in the Preamble.
"Ordinary Course" means, with respect to the Business, only the
ordinary course of commercial operations customarily engaged in by such Business
consistent with past practices, and specifically does not include (a) activity
(i) involving the purchase or sale of a business or of any product line or
business unit, (ii) involving modification or adoption of any Plan or (iii)
which requires approval by the board of directors or shareholders of an entity
engaged in a business or (b) the incurrence of any Liability for any tort or any
breach or violation of or default under any Contract or any Law.
"Party" means any of Buyer and OSI, or Seller and Shareholder, and
"Parties" means all of them.
"Patentable Property Purchase Agreement" means the Patentable Property
Purchase Agreement, dated the date hereof, among OSI, Buyer, and Edward F.
Lambert, as seller.
"Person" means any natural person; any corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, company or other legal entity; and any Government.
"Plan" means any agreement, arrangement, plan or policy, qualified or
non-qualified, whether or not considered legally binding, that involves (a) any
pension, retirement, profit sharing, deferred compensation, bonus, stock option,
stock purchase, phantom stock, health, welfare or incentive plan; or (b) welfare
or "fringe" benefits, including without limitation any voluntary employees'
beneficiary associations or related trusts, vacation, severance, disability,
medical, hospitalization, dental, life and other insurance, tuition, company
car, club dues, income tax preparation, sick leave, maternity, paternity or
family leave, child care or other benefits; or (c) any employment, consulting,
engagement or retainer agreement or arrangement.
"Property" has the meaning set forth in Section 3.34(a).
"Purchased Assets" means the Assets set forth in Schedule 2.1,
excluding the Excluded Assets.
"Restricted Period" has the meaning set forth in Section 7.1(a).
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by Seller or other Tax Affiliate of Seller in connection with
the Business, and all information returns (e.g., Form W-2, Form 1099) and
reports relating to Taxes or Plans. Any one of the foregoing Returns may be
referred to sometimes as a "Return."
"Seller" has the meaning set forth in the Preamble.
"Seller Indemnified Persons" has the meaning set forth in Section
10.3(a).
"Shareholder" has the meaning set forth in the Preamble.
"Shareholder Patentable Property" means the Intellectual Property
purchased from Edward F. Lambert pursuant to the Patentable Property Purchase
Agreement simultaneously with the Closing under this Agreement.
"Tax Affiliate" means any member of an Affiliated Group of which
Seller is or was a member, or any member of a combined or unitary group of which
Seller is or was a member.
"Taxes" means all taxes, charges, fees, levies or other like
assessments imposed or assessed by any Government, including without limitation
income, gross receipts, profits, windfall profit, employment (including Social
Security, state pension plans and unemployment insurance), withholding, payroll,
franchise, gross receipts, sales, use, transfer, stamp, occupation, real or
personal property, ad valorem, value added, premium and excise taxes; Pension
Benefit Guaranty Corporation premiums and any other like Government charges; and
shall include all penalties, fines, assessments, additions to tax and interest
resulting from, attributable to, or incurred in connection with such Taxes or
any contest or dispute thereof. Any one of the foregoing Taxes may be referred
to sometimes as a "Tax."
"Third Person" has the meaning set forth in Section 10.5.
"Third Person Claim" has the meaning set forth in Section 10.5.
"Trade Names" has the meaning set forth in Section 3.13.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased. Subject to the terms and conditions hereof, on
the Closing Date and as of the Effective Time, Seller agrees to sell to Buyer,
free and clear of all Liens, all right, title and interest of Seller to and in
all of the Purchased Assets. The allocation of the consideration for the
Purchased Assets is set forth on Schedule 2.1.
2.2 Assumed Liabilities.
(a) Subject to the terms and conditions hereof, on the Closing Date
and as of the Effective Time, Buyer agrees to assume only the Assumed
Liabilities.
(b) Notwithstanding the foregoing, if the assignment or transfer of
any obligation or instrument would cause a breach thereof and if a required
consent to such assignment or transfer has not been obtained, then, at Buyer's
election and in its sole discretion, and subject to Buyer's right to require
strict compliance with Section 8.10 hereof, such obligation or instrument shall
not be assigned or transferred to Buyer, but Buyer shall act as agent for Seller
in order to obtain for Buyer the benefits under such obligation or instrument.
(c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED IN THIS SECTION
2.2, NEITHER BUYER NOR ANY AFFILIATE OF BUYER ASSUMES OR AGREES TO BECOME LIABLE
FOR OR SUCCESSOR TO ANY LIABILITIES OR OBLIGATIONS WHATSOEVER, LIQUIDATED OR
UNLIQUIDATED, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE, WHETHER OF SELLER, ANY
AFFILIATE OF SELLER, ANY PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE
BUSINESS. NO OTHER STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER
STATEMENT, WRITTEN OR ORAL, ACTION OR FAILURE TO ACT INCLUDES OR CONSTITUTES ANY
SUCH ASSUMPTION OR AGREEMENT, AND ANY STATEMENT TO THE CONTRARY BY ANY PERSON IS
UNAUTHORIZED AND HEREBY DISCLAIMED.
2.3 Consideration. The consideration for the Purchased Assets shall be the
aggregate of (a) the Final Payment and (b) the amount of the Assumed
Liabilities.
2.4 Post-Closing Adjustments to the Initial Payment.
(a) To the extent the Net Worth is greater than $1 (the "Net Worth
Target"), the Initial Payment shall (on a post-closing basis pursuant to Section
2.4(b)) be increased on a dollar-for-dollar basis by an amount equal to such
excess. To the extent the Net Worth is less than the Net Worth Target, the
Initial Payment shall (on a post-closing basis pursuant to Section 2.4(b)) be
decreased on a dollar-for-dollar basis by an amount equal to such deficit. The
Initial Payment as so adjusted is hereinafter referred to as the "Final
Payment." The Net Worth and the Final Payment shall be determined based on the
Closing Balance Sheet and the Closing Statement (as finally determined under
Section 2.9).
(b) Not more than 5 business days after final determination of the
Final Payment, (i) Buyer shall pay to Seller the amount, if any, by which the
Final Payment exceeds the Initial Payment or (ii) Seller shall pay to Buyer the
amount, if any, by which the Final Payment is less than the Initial Payment. Any
payment or distribution from Buyer or Seller so required to be made shall be by
wire transfer of immediately available funds and shall bear interest from the
Closing Date through the date of payment at the prime lending rate of Bank of
America from time to time prevailing.
2.5 Allocation of Consideration. The consideration provided for in Section
2.3 shall be allocated among the Purchased Assets, the Assumed Liabilities and
Covenant Not to Compete as provided in Schedule 2.5 hereto, or as mutually
agreed to in writing by the Parties after the determination of the Final
Payment. Such allocation shall be prepared in accordance with Section 1060 of
the Code.
2.6 Closing. The Closing shall take place at 10:00 a.m. on the Closing
Date or such other time as the Parties agree at the offices of Bryan Cave LLP,
211 N. Broadway, One Metropolitan Square, Suite 3600, St. Louis, Missouri 63102.
2.7 Deliveries of Seller at the Closing. At the Closing, subject to the
conditions to Seller's obligations in Article IX, Seller shall execute and
deliver or cause to be delivered the documents identified in Article VIII.
2.8 Deliveries of Buyer at the Closing. At the Closing, subject to the
conditions to the Buyer's obligations in Article VIII, Buyer shall (a) execute
and deliver or cause to be delivered the documents identified in Article IX and
(b) transfer the Initial Payment by wire transfer of immediately-available funds
to an account or accounts designated by Seller not less than two business days
before the Closing Date.
2.9 The Closing Balance Sheet and the Closing Statement..
(a) Beginning on or after the Closing Date and as of the Effective
Time, Buyer shall conduct a review and examination of the Purchased Assets and
Assumed Liabilities (the "Closing Review") at Buyer's sole cost and expense.
Seller, at its sole cost and expense, may have a representative review all final
work papers in connection with the Closing Review. On the basis of such Closing
Review, Buyer shall prepare a balance sheet as of the Effective Time ("Closing
Balance Sheet") and a statement of net assets as of the Effective Time (the
"Closing Statement"), reflecting the book value, as of the Effective Time, of
the Purchased Assets less the Assumed Liabilities, in accordance with the
principles and procedures as outlined on Schedule 2.9(a) applied consistently
with the accounting policies and procedures followed in preparing the Financial
Statements. The Closing Balance Sheet and the Closing Statement are herein
referred to as the "Closing Financial Statements." Buyer shall deliver the
Closing Financial Statements to Seller not later than 60 calendar days after the
Closing Date.
(b) If Seller disputes the Closing Financial Statements as delivered
by Buyer, then not more than 20 calendar days after the date Seller receives the
Closing Financial Statements (the "Dispute Period") Seller shall provide Buyer a
Notice of Dispute. If during the Dispute Period Seller fails to deliver a Notice
of Dispute, the Closing Financial Statements shall be deemed final and binding
at the end of the Dispute Period.
(c) Upon receipt of the Notice of Dispute within the Dispute Period,
Buyer shall promptly consult with Seller with respect to Seller's specified
points of disagreement in an effort to resolve the dispute. If any such dispute
cannot be resolved by Buyer and Seller within 20 calendar days after Buyer
receives the Notice of Dispute, they shall refer the dispute to a partner in
Ernst & Young LLP, certified public accountants (the "Arbiter"), as an
arbitrator to finally determine, as soon as practicable, and in any event within
30 calendar days after such reference, all points of disagreement with respect
to the Closing Financial Statements. If Ernst & Young LLP is the auditor for OSI
and its subsidiaries (or is providing a material amount of consulting services
to OSI and its subsidiaries) at the time of the dispute, the Parties will
mutually agree upon another nationally recognized accounting firm to serve as
Arbiter. For purposes of such arbitration, each Party shall submit proposed
Closing Financial Statements; Buyer's proposals need not be identical to the
Closing Financial Statements delivered pursuant to Section 2.9(a). The Arbiter
shall apply the terms of this Section 2.9, and shall otherwise conduct the
arbitration under such procedures as the Parties may agree or, failing such
agreement, under the Commercial Rules of the American Arbitration Association.
The fees and expenses of the arbitration and the Arbiter incurred in connection
with the arbitration of the Closing Financial Statements shall be allocated, to
the extent practical, between the Parties by the Arbiter in proportion to the
extent either Party did not prevail on items in dispute in the Closing Financial
Statements; provided, that such fees and expenses shall not include, so long as
a Party complies with the procedures of this Section 2.9, the other Party's
outside counsel or accounting fees. All determinations by the Arbiter shall be
final, conclusive and binding with respect to the Closing Financial Statements
and the allocation of arbitration fees and expenses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
Each of Seller and Shareholder, jointly and severally, hereby makes the
following representations and warranties, each of which Seller and Shareholder
represent and warrant is true and correct on the date hereof and shall be true
and correct on the Closing Date and each of which shall survive the Closing Date
and the transactions contemplated hereby pursuant to Section 10.1.
3.1 Corporate Existence and Power of Seller.
(a) True and complete copies of the articles of incorporation and
bylaws and all amendments thereto of Seller, have been delivered to Buyer.
Seller is a corporation duly organized, validly existing and in good standing
under the Laws of the state of its incorporation.
(b) Seller has the corporate power and authority to own and use its
Assets and to transact the business in which it is engaged, holds all
franchises, licenses, permits necessary and required therefor, is duly licensed
or qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such license or qualification is required. Seller has
the corporate power to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. Seller has no
direct or indirect subsidiaries or other entity in which it has a controlling
interest nor does Seller have any direct or indirect ownership or beneficial
interest in any other entity or enterprise.
3.2 Approval and Enforceability of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of Seller. At the Closing, Seller
will deliver to Buyer correct and complete copies of the resolutions of Seller,
certified by its secretary, giving authorization and approval of the
transactions contemplated hereby. Such resolutions shall not have been altered,
amended or revoked. Seller has full authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Shareholder has the full power, legal right
and capacity to enter into and deliver this Agreement, to perform his
obligations hereunder and to consummate the transactions contemplated hereby.
(b) Assuming due execution and delivery hereof by Buyer, this
Agreement is the legal, valid and binding obligation of Seller and Shareholder,
enforceable against each of Seller and Shareholder according to its terms except
that (i) such enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limiting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the Court before
which any proceeding therefor may be brought.
3.3 Financial Statements. Attached as Schedule 3.3 hereto are the Financial
Statements and the Interim Statements. The Financial Statements and Interim
Statements were derived from the books and records of the Business and (a) are
true, complete and correct in all material respects, (b) present fairly in all
material respects the financial position, results of operations and cash flows
of the Business at the dates and for the periods indicated, (c) have been
prepared in accordance with GAAP applied on a basis consistent with previous
periods, and (d) do not include any untrue statement of a material fact required
to be stated or reflected therein or omit to state or reflect any material fact
necessary to make any statements therein not misleading.
3.4 Events Subsequent to December 31, 1999. Since December 31, 1999,
except as set forth on Schedule 3.4, there has been no:
(a) change in the business, condition (financial or otherwise) or
operations of Seller other than changes in the Ordinary Course, which
individually or in the aggregate has been materially adverse to the Business;
(b) loss or threatened loss of a material customer Contract;
(c) damage, destruction or loss, whether covered by insurance or not,
affecting any Purchased Asset;
(d) declaration, setting aside or payment of any dividend or any
distribution (in cash or in kind) with respect to any securities of Seller;
(e) increase in or commitment to increase compensation, benefits or
other remuneration to or for the benefit of any shareholder, member, partner,
director, officer, employee or agent of Seller, or, in connection with the
Business, any other Person or any benefits granted under any Plan with or for
the benefit of any such shareholder, member, partner, director, officer,
employee, agent or Person;
(f) transaction entered into or carried out by Seller other than in
the Ordinary Course of the Business;
(g) borrowing or incurrence of any indebtedness, contingent or other,
by or on behalf of Seller, or any endorsement, assumption or guarantee of
payment or performance of any indebtedness or Liability of any other Person or
entity by Seller;
(h) change made by Seller in its Tax or financial accounting or any
Tax election;
(i) grant of any Lien with respect to the Purchased Assets;
(j) transfer of any Assets other than arm's length sales, leases or
dispositions in the Ordinary Course of the Business;
(k) modification or termination (other than a termination due to
expiration) of any Contract or any material term thereof;
(l) lease or acquisition of any capital assets included in the
Purchased Assets with a value greater than $10,000 per item;
(m) loan or advance to any Person; or
(n) commitment or agreement by Seller to do any of the foregoing
items (d) through (m).
3.5 Assets in Possession of Others. Seller does not hold title to or
ownership of any Assets in the possession of Persons other than Seller.
3.6 Accounts and Notes Receivable. All accounts and notes receivable of
Seller as of the Effective Date shall be reflected on the Closing Financial
Statements, and shall be (a) valid, genuine and subsisting, (b) arose or will
have arisen in the Ordinary Course of the Business, (c) subject to no defenses,
set-offs, counterclaims, or Lien, and (d) except to the extent of any reserve
for bad debt allowances on the Closing Financial Statements, current and fully
collectible. All accounts or notes receivable of Seller in existence on the
Closing Date will be paid in full, net of applicable reserves, on or before 60
calendar days after the Closing Date. Any accounts or notes receivable with
respect to which Buyer makes a claim for indemnification under Article X and has
received full consideration from Seller for such accounts or notes receivable
will be transferred to Seller.
3.7 Undisclosed Liabilities. Seller has no Liabilities whatsoever, known
or unknown, asserted or unasserted, liquidated or unliquidated, accrued,
absolute, contingent or otherwise, and, there is no basis for any claim against
Seller for any such Liability except (a) to the extent set forth on the Closing
Financial Statements, (b) to the extent set forth on Schedule 3.7, or (c)
Liabilities incurred in the Ordinary Course of the Business, none of which will,
or could, have a material adverse effect upon the business, condition (financial
or otherwise) or operations of the Business.
3.8 Taxes.
(a) All Tax and information Returns required to be filed by Seller on
or prior to the Closing Date with respect to Taxes have been or will be timely
filed.
(b) All amounts shown on each of such Returns have been paid or will
be paid when due.
(c) Any Taxes which are to be assumed by Buyer in respect of the
Purchased Assets which as of the Effective Time are not yet due and owing will
be adequately reflected on the Closing Balance Sheet as a reserve for Taxes.
(d) There are no grounds for the assertion or assessment of any Taxes
against Seller, the Purchased Assets or the Business other than those reflected
or reserved against on the Closing Balance Sheet.
(e) Neither the Purchased Assets nor the Business are and will not be
encumbered by any Liens arising out of any unpaid Taxes and there are no grounds
for the assertion or assessment of any Liens against the Purchased Assets or the
Business in respect of any Taxes.
(f) The transactions contemplated by this Agreement will not give
rise to (i) the creation of any Liens against the Purchased Assets or the
Business in respect of any Taxes or (ii) the assertion of any additional Taxes
against the Purchased Assets or the Business.
(g) There is no action or proceeding or unresolved claim for
assessment or collection, pending or threatened, by, or present or expected
dispute with, any Government authority for assessment or collection from Seller
of any Taxes of any nature affecting the Purchased Assets or the Business.
(h) There is no extension or waiver of the period for assertion of
any Taxes against Seller affecting the Purchased Assets or the Business.
(i) Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code.
(j) None of the Purchased Assets or Assumed Liabilities are subject
to, or constitute, a safe harbor lease within the meaning of Section 168(f)(8)
of the Code prior to its repeal.
(k) None of the Purchased Assets have been financed with, or directly
or indirectly secures, any industrial revenue bonds or debt, the interest on
which is tax exempt under Section 103(a) of the Code.
(l) None of the Purchased Assets or Assumed Liabilities will
constitute a partnership, joint venture, or other arrangement or contract that
could be treated as a partnership for federal income tax purposes.
(m) None of the Purchased Assets consist of stock in a subsidiary of
Seller.
(n) None of the Purchased Assets are tax-exempt use property within
the meaning of Section 168(h) of the Code.
(o) None of the Purchased Assets are subject to a tax indemnification
agreement.
3.9 Real Property - Owned. Seller has no interest in, or any right or
obligation to acquire any interest in, any parcel of real
property.
3.10 Personal Property - Owned. Except as set forth on Schedule 3.10
hereto, Seller has good and marketable title to all of the personal property
included in the Purchased Assets, free and clear of all Liens, and there exists
no restriction on the use or transfer of such property.
3.11 Personal Property - Leased from Seller. There is no lease under which
Seller is the lessor or sublessor of any personal property.
3.12 Real and Personal Property - Leased to Seller. There is no lease under
which Seller is the lessee of any real property. There is no lease under which
Seller is the lessee of any personal property.
3.13 Intellectual Property.
(a) Except for the trade names listed on Schedule 3.13 ("Trade
Names"), Seller does not own any Intellectual Property. Other than the
Shareholder Patentable Property and the Trade Names, Seller does not use any
Intellectual Property in connection with the Business.
(b) Seller represents and warrants as follows: (i) there has been no
claim made against Seller asserting the invalidity, misuse or unenforceability
of any of the Trade Names or challenging Seller's right to use or ownership of
any of the Trade Names, and there are no grounds for any such claim or
challenge; (ii) Seller is not aware of any infringement or misappropriation of
any of the Trade Names or of any facts raising a likelihood of infringement or
misappropriation; (iii) the conduct of the Business has not infringed or
misappropriated, and does not infringe or misappropriate, any intellectual
property or proprietary right of any other entity; and (iv) to the knowledge of
Seller and Shareholder, the consummation of the transactions contemplated by
this Agreement will not alter or impair Buyer's right to use any of the Trade
Names.
3.14 Necessary Property and Transfer of Assets. The Purchased Assets, the
Assumed Liabilities and the Shareholder Patentable Property constitute all the
property and property rights now used, useful or necessary for the conduct of
the Business in the manner and to the extent presently conducted by Seller.
Except as set forth on Schedule 3.14 hereto, no consent is necessary to, and
there exists no restriction on, the transfer of any of the Purchased Assets or
the assignment of the Assumed Liabilities to Buyer. There exists no condition,
restriction or reservation affecting the title to or utility of the Purchased
Assets or Assumed Liabilities which would prevent Buyer from occupying or
utilizing the Purchased Assets or enforcing the rights under the Assumed
Liabilities, or any part thereof, to the same full extent that Seller might
continue to do so if the sale and transfer contemplated hereby did not take
place. Upon the Closing, good and marketable title to the Purchased Assets and
the rights under the Assumed Liabilities shall be vested in Buyer free and clear
of all taxes and Liens.
3.15 Use and Condition of Property.
(a) All of the Purchased Assets are in good operating condition and
repair (normal wear and tear excepted) as required for their use in the Business
as presently conducted, and conform to all applicable Laws. No notice of any
violation of any Law relating to any of the Purchased Assets has been received
by Seller except such as have been fully complied with. All improvements located
on, and the use presently being made of all real property included in, the
Purchased Assets or leased pursuant to the Assumed Liabilities comply with all
applicable zoning and building code ordinances and all applicable fire,
environmental, occupational safety and health standards and similar standards
established by Law, and the same use thereof by Buyer will not result in any
violation of any such code, ordinance or standard. There is no pending, proposed
or threatened change in any such code, ordinance or standard which would
adversely affect the Business or the use of the Purchased Assets.
(b) There is no pending, proposed or threatened condemnation
proceeding or similar action affecting the Purchased Assets or with respect to
any streets or public amenities appurtenant thereto or in the vicinity thereof
which would adversely affect the Business or the use of the Purchased Assets.
3.16 Licenses and Permits. Set forth on Schedule 3.16 hereto is a
description of each license or permit required for the conduct of the Business
and a list of where licenses or permits may be required together with the name
of the Government agency or entity issuing such license or permit. The licenses
and permits set forth on Schedule 3.16 are valid and in full force and effect.
Except as noted on Schedule 3.16, such licenses and permits are freely
transferable by Seller, and upon the Closing, Buyer will have all right, title
and interest of the holder thereof.
3.17 Contracts--Disclosure. Except as set forth in Schedule 3.17 there is
not outstanding:
(a) Any single Contract providing for an expenditure by Seller in
excess of $10,000 over the remaining life of such Contract for the purchase of
any real property, machinery, equipment or other items which are in the nature
of capital investment.
(b) Any single Contract providing for an expenditure by Seller in
excess of $10,000 for the purchase of raw materials, supplies, component parts
or any other items or services.
(c) Any Contract to sell products or to provide services to third
Persons which (a) is at a price which would result in a net loss on the sale of
such products or providing of such services or (b) is pursuant to terms or
conditions which Seller cannot reasonably expect to satisfy or fulfill in their
entirety, or (d) involves more than $10,000.
(d) Any Contract for materials, supplies, component parts or other
items or services in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the current reasonable
market price.
(e) Any revocable or irrevocable guaranty, indemnity or power of
attorney.
(f) Any evidence of indebtedness, loan agreement, indenture,
promissory note, letter of credit, foreign exchange contract, conditional sales
agreement or other similar type of agreement.
(g) Any Contract which involves (i) a sharing of profits, (ii) future
payments of $10,000 or more per annum to other Persons, or (ii) any joint
venture, partnership or similar arrangement.
(h) Any Contract involving any sales agency, sales representation,
distributorship or franchise.
(i) Any Contract containing covenants expressly limiting the freedom
of Seller to compete in any line of business or with any Person or in any area.
(j) Any Contract not made in the Ordinary Course of the Business.
(k) Any other material Contract which is not cancelable without
penalty on 30 calendar days' notice or less and which is not set forth on
another Schedule.
3.18 Customer Contracts. Seller has previously delivered to OSI a true,
correct and complete copy of all customer service contracts, to which Seller is
a party (a "Customer Contract"). Schedule 3.18 sets forth all Customer Contracts
of Seller, including the expiration date, and the outstanding payments due to
Seller under each Customer Contract. Except as set forth in Schedule 3.18,
Seller is not a party to any customer contract. On the Closing Date, Schedule
3.18 shall set forth all Customer Contracts of Seller as of the Closing Date.
There are no retainers or prepayments required or paid under any Customer
Contract as of the date hereof. Except as provided in any Customer Contract,
there are no obligations of Seller, in writing or otherwise, to perform any
material services. Customer Contracts are entered into in the Ordinary Course on
a project by project basis, are performed and terminated in accordance with
their terms and may be modified, renewed or extended based upon mutual
agreement.
3.19 Contracts--Validity, Etc.
(a) Each Contract, including each Customer Contract, is a valid and
binding obligation of the parties thereto, enforceable in accordance with its
terms and in full force and effect.
(b) Seller is not, and to the knowledge of Seller and Shareholder
the other party to each Contract, including each Customer Contract, is not, in
breach or violation thereof or default under any Contract. To the knowledge of
Seller and Shareholder, no event has occurred which, through the passage of time
or the giving of notice, or both, would constitute, or result in, a breach or
violation of or default under any Contract, including a Customer Contract, or
would cause the acceleration of any obligation of any party thereto or the
creation of a Lien upon any Purchased Asset. Except for the consents referred to
on Schedule 3.19, neither the execution of this Agreement nor the Closing of the
transactions contemplated hereby does or will constitute or result in, a breach
or violation of or default under any Contract, including a Customer Contract, or
would cause the acceleration of any obligation of any party thereto or the
creation of a Lien upon any Purchased Asset. No obligations under any Contract,
including a Customer Contract, will result in a loss to Buyer or would result in
a loss to Seller, assuming it had continued the Business. Neither Seller nor
Shareholder has any knowledge or information of any facts indicating, nor any
other reason to believe, that any party to a Customer Contract has intent to
terminate such Customer Contract or to materially diminish the terms of such
Customer Contract or that any party to a Customer Contract will not continue to
be a customer of the Business after the Closing in accordance with the terms of
such Customer Contract.
(c) Each Contract, including each Customer Contract, will be duly
assigned to Buyer on the Closing Date and upon such assignment, Buyer will
acquire all right, title and interest of Seller in and to such Contract and will
be substituted for Seller under the terms of such Contract. Except as set forth
on Schedule 3.19, no consent is required for such assignment.
3.20 No Breach of Law or Governing Document. Seller has complied with and
is not in default under or in breach or violation of, (a) any applicable Law of
any Government body (including, without limitation, the Fair Debt Collection
Practices Act and any state or local counterpart or equivalent), (b) any
franchise or license, or (c) any provision of its articles of incorporation or
bylaws. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereunder does or will constitute or result in any
such default, breach or violation. No government permits or consents are
necessary to effect the transactions contemplated hereby.
3.21 Litigation and Arbitration. There is no suit, claim, action or
proceeding now pending or threatened before any Court, nor or there any grounds
therefor, to which Seller is a party or which may result in any Order,
Liability, or other determination which will, or could, have any adverse effect
upon any Purchased Asset or upon the business, condition (financial or
otherwise) or operations of the Business. No such Order has been entered against
Seller, nor has any such Liability been incurred which has, or could have, such
effect. There is no claim, action or proceeding now pending or threatened before
any Court which will, or could, prevent or hamper the consummation of the
transactions contemplated by this Agreement.
3.22 Directors, Officers, Employees and Consultants. Set forth on Schedule
3.22 hereto is a complete list of:
(a) all directors of Seller;
(b) all officers (with office held) of Seller;
(c) all employees of Seller; and
(d) all consultants to Seller;
together, in each case, with the current rate of compensation payable to each.
Attached to Schedule 3.22 is a true, correct and complete copy of the standard
form employment agreement of Seller. Except as set forth on Schedule 3.22,
Seller is not a party to any employment agreement which has terms that vary in
any respect from the terms set forth in the standard form of employment
agreement attached hereto in Schedule 3.22.
3.23 Indebtedness to and from Directors, Officers and Others. Seller is not
indebted to any director, officer, employee or agent of Seller except for
amounts due as normal salaries, wages and bonuses and in reimbursement of
ordinary expenses on a current basis and no shareholder, director, officer,
employee or agent of Seller is indebted to Seller.
3.24 Outside Financial Interests. No director or officer of Seller nor the
owner of more than 5% of the capital stock of Seller has any direct or indirect
financial interest in any competitor with or supplier or customer of Seller;
provided, however, that for this purpose ownership of corporate securities
having no more than 2% of the outstanding voting power of any competitor,
supplier or customer for which securities are listed on any national securities
exchange or authorized for quotation on the Automated Quotations System of the
National Association of Securities Dealers, Inc. shall not be deemed to be such
a financial interest provided such Person has no other connection or
relationship with such competitor, supplier or customer.
3.25 Payments, Compensation and Perquisites of Agents and Employees. All
payments to agents, consultants and others made by Seller in connection with the
Business have been in payment of bona fide fees and commissions and not as
bribes, illegal or improper payments. Seller has properly and accurately
reflected on its books and records all compensation paid to and perquisites
provided to or on behalf of its consultants, agents and employees. Such
compensation and perquisites have been properly and accurately disclosed in the
Financial Statements and Interim Statements and other public or private reports,
records or filings of Seller, to the extent required by Law.
3.26 Labor Contracts. Seller is not a party to any union collective
bargaining, works council, joint or multi-employer association, employee
committee or similar Contract. There are no negotiations, demands or proposals
which are pending or which have been made which concern matters now covered, or
that would be covered, by the type of Contracts listed in this Section.
3.27 Employee Benefit Plans. Seller has never been a party to, does not
maintain and is not required to contribute to, nor has Seller ever maintained or
been required to contribute to an "employee benefit plan" as defined in Section
3(3) of ERISA. Seller has never been a party to, does not maintain and is not
required to contribute to, nor has Seller ever maintained or been required to
contribute to a Plan. There are no Liabilities related to or that could arise
from any Plan that will pass to Buyer as result of the transactions contemplated
hereby.
3.28 Overtime, Back Wages, Vacation and Minimum Wages. No present or former
employee of Seller has (or within the last two years has had) any claim against
Seller (whether under any Law, Contract or otherwise) on account of or for (a)
wages or salary (excluding current bonus, accruals and amounts accruing under
pension and profit-sharing Plans) for any period other than the current payroll
period, (b) vacation, time off or pay in lieu of vacation or time off, other
than that earned in respect of the current fiscal year or (c) any violation of
any statute, ordinance or regulation relating to minimum wages or maximum hours
of work.
3.29 Discrimination, Workers Compensation and Occupational Safety and
Health. No Person or party (including, but not limited to, any Government) has
(or within the last two years has had) any claim, notice of claim, charge,
lawsuit or basis thereof, against Seller arising out of any Law relating to
discrimination in employment or employment practices or occupational safety and
health standards, and no such claim, notice of claim, charge of lawsuit is
pending or threatened against Seller. Seller has not received any notice from
any Person alleging a violation of any such Law or occupational safety or health
standards. Seller has no outstanding Contracts or obligations to indemnify any
Person for violation of the Laws and standards set forth in this Section. Seller
has filed EEO-1 reports and affirmative action plans with appropriate Government
agencies. There are no pending workers compensation claims involving Seller.
Seller has delivered to Buyer a true, correct and complete list of all workers
compensation claims made.
3.30 Alien Employment Eligibility. With respect to each Person employed by
Seller on or after May 1, 1987, and who actually commenced such employment on or
after November 6, 1986, (a) Seller hired such Person in compliance with the IRCA
and (b) Seller has complied with all recordkeeping and other regulatory
requirements under IRCA.
3.31 Labor Disputes; Unfair Labor Practices. There is neither pending nor
threatened, any labor dispute, strike or work stoppage which affects or which
may affect the Business, and Seller is not currently covered by any injunction
issued by any Court. Neither Seller nor any of its agents, representatives or
employees, has committed any unfair labor practice as defined in the National
Labor Relations Act of 1947, as amended. There is not now pending or threatened
any charge or complaint against Seller by the National Labor Relations Board,
any state or local labor or employment agency or any representative thereof, and
the execution of this Agreement and the consummation of the transactions
contemplated hereunder will not result in any such charge or complaint, nor is
there pending or threatened any grievance or arbitration under any labor or
employment Contract. No right of representation by a labor organization exists
respecting the employees of Seller, nor is there pending a representation
election. No collective bargaining Contract is currently being negotiated and no
organizing effort is currently being made with respect to the employees of
Seller. Seller has no ongoing or future Liabilities under any settlement
Contract or consent decree with respect to labor matters.
3.32 Insurance Policies. Set forth on Schedule 3.32 hereto is a list of all
insurance policies and bonds in force covering or relating to the Purchased
Assets or the Business, including without limitation all properties, operations
or personnel of Seller.
3.33 Guarantees. Seller is not a guarantor, indemnitor, surety or
accommodation party or otherwise liable for any indebtedness of any other
Person, firm or corporation, except as endorser of checks received and deposited
in the Ordinary Course.
3.34 Environmental Matters.
(a) Seller's use of the real property used in connection with the
Business ("Property") complies and has at all times complied with, and does not
cause, has not caused, and will not cause Liability to be incurred by Seller
under any Laws, including without limitation the codes, licenses and permits of
all Governments relating to the protection of health, safety or the environment,
including by way of illustration and not by way of limitation: the Clean Air
Act; the Federal Water Pollution Control Act; the Resource Conservation and
Liability Act; the Toxic Substance Control Act; the Comprehensive Environmental
Response and Liability Act; the Hazardous Materials Transportation Act; the
Atomic Energy Act; the Emergency Planning and Community Right-to-Know Act; and
the Oil Pollution Prevention Act; and all amendments to each thereto, and all
other applicable environmental Laws (collectively, "Environmental Laws"). Seller
is not in violation and has not violated, in connection with the ownership, use,
maintenance or operation of the Property and the conduct of the Business, of any
Environmental Laws.
(b) There are no past, pending or threatened investigations,
inquiries, notices or other proceedings by any Government entity with respect to
Seller in connection with the actual or alleged violation of, or Liability
arising under, any Environmental Laws with respect to the Property.
(c) Seller has all necessary permits, registrations, approvals,
certificates and licenses relating to the protection of health, safety or the
environment as required by the Environmental Laws. Seller has previously
delivered to Buyer or its representatives true, accurate and complete copies of
any and all such permits, registrations, approvals, certificates and licenses.
(d) There are no Environmental Laws which require any work, repairs,
construction or capital expenditures with respect to the Property, nor has
Seller received any notice of any of the same.
(e) During Seller's occupancy of the Property there has been no
spill, discharge, leak, emission, injection, disposal, dumping, emptying,
escape, leaching, pumping or release of any kind on, beneath or above the
Property or into the environment surrounding or adjoining the Property of any
pollutants, contaminants, hazardous substances, hazardous chemicals, toxic
chemicals, extremely hazardous substances, petroleum products, petroleum
substances, toxic substances, hazardous wastes, infectious wastes, radioactive
materials, asbestos fibers or solid wastes (collectively as "Hazardous
Materials"), including but not limited to those defined in the Environmental
Laws.
(f) During Seller's period of occupancy of the Property there has
been no past, and there is no current or anticipated, storage, disposal, use,
generation, manufacture, refinement, transportation, production or treatment of
any Hazardous Materials at or upon the Property.
(g) Seller knows of no information that any Person, including any
employee, may have any life threatening health condition or long term disability
as a result of the prior use of the Property or as a result of the release of
any Hazardous Materials on the Property or into the environment surrounding the
Property.
(h) No asbestos fibers or materials or polychlorinated biphenyls
(PCBs) are on the Property.
3.35 Broker's Fees. Neither Seller nor Shareholder has retained any broker,
finder or agent or agreed to pay any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this Agreement.
3.36 Foreign Assets and Operations. Seller has no interests in any real
property or tangible or intangible property located outside of the United
States, including any stock, securities or investments in, claims against, or
receivables from any entities or Persons with substantially all their property
or business so located. Seller has not conducted the Business outside the United
States.
3.37 Service Warranties and Guarantees. Set forth on Schedule 3.37 are the
standard forms of service warranties and guarantees used by Seller and copies of
all other outstanding service warranties and guarantees. Except as set forth on
Schedule 3.37, no service warranty or similar claims have been made against
Seller except routine claims as to which, in the aggregate, losses and expenses
in respect thereto have not and will not exceed $5,000. The aggregate loss and
expense attributable to all service, warranty and similar claims now pending or
hereafter asserted with respect to services provided on or prior to the Closing
Date will not exceed the amount reserved therefor on the Closing Balance Sheet.
3.38 Books and Records. The books of account, stock record books and minute
books and other corporate records of Seller are in all material respects
complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected on the
Financial Statements and Interim Statements. The minute books and stock books of
Seller have been made available to Buyer and are correct and complete to the
date hereof.
3.39 Truthfulness. No representation or warranty of Seller or Shareholder
herein and no statement or certificate furnished or to be furnished by or on
behalf of Seller or Shareholder pursuant to this Agreement or in connection with
the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and OSI hereby make the following representations and warranties,
each of which is true and correct on the date hereof and except for changes
expressly permitted by this Agreement, shall be true and correct on the Closing
Date and each of which shall survive the Closing Date and the sale contemplated
hereby pursuant to Section 10.1.
4.1 Corporate Existence of Buyer. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has the power and authority to own and use its
properties and to transact the business in which it is engaged. OSI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. OSI has the corporate power and authority to own and
use its properties and to transact the business in which it is engaged.
4.2 Approval of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by all necessary corporate action of Buyer and OSI, and such authorization and
approval have not been revoked. Pursuant to such authorization and approval,
each of Buyer and OSI has full power and authority to enter into this Agreement,
and to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby.
(b) Assuming due execution and delivery hereof by Seller, this
Agreement is the legal, valid and binding obligation of each Buyer and OSI,
enforceable against each according to its terms except that (i) such enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or limiting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the Court before which any proceeding therefor
may be brought.
(c) Neither Buyer nor OSI is required to obtain any third party
contractual consents to effect the transactions contemplated hereby
4.3 No Breach of Articles or Indentures. The execution of this Agreement
and the consummation of the transactions contemplated hereby have not and will
not constitute or result in the breach of any of the provisions of, or
constitute a default under any material indenture, evidence of indebtedness or
other commitment to which Buyer or OSI is a party or by which either is bound,
which breach or default would have a material adverse effect on OSI and its
subsidiaries, taken as a whole. The execution of this Agreement and the
consummation of the transactions contemplated hereby have not and will not
constitute or result in the breach of any of the provisions of the charter
documents of Buyer or the certificate of incorporation or by-laws of OSI.
4.4 Broker's Fees. Neither Buyer nor OSI has retained any broker, finder
or agent or agreed to pay any brokerage fees, finder's fees or commissions with
respect to the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS CONCERNING SELLER
Seller covenants and agrees with Buyer that, from and after the date of
this Agreement and until the Closing Date, Seller will conduct the Business
subject to the following provisions and limitations:
5.1 Operation of the Business. Without the prior written consent of Buyer,
Seller will not:
(a) Other than in the Ordinary Course, grant any increase in the rate
of pay of any of its employees, grant any increase in the salaries of any
officer, employee or agent, enter into or increase the benefits provided under
any bonus, profit-sharing, incentive compensation, pension, retirement, medical,
hospitalization, life insurance or other insurance plan or plans, or other
contracts or commitments, or in any other way increase in any amount the
benefits or compensation of any such officer, employee or agent.
(b) Enter into any employment Contract or collective bargaining
agreement.
(c) Enter into any Contract or engage in any transaction which is not
in the usual and Ordinary Course or which is inconsistent with past practices.
(d) Sell or dispose of or encumber any Assets not in the usual and
Ordinary Course.
(e) Make, or enter into any Contract for, any capital expenditure or
enter into, modify, amend, or cancel any lease of capital equipment or real
property.
(f) Enter into any Contract, whether for the purchase or sale of
inventory, supplies, other products or services or otherwise other than in the
Ordinary Course.
(g) Create, assume, incur or guarantee any indebtedness other than
(i) in the usual and Ordinary Course of the Business and with a maturity date of
less than one year or (ii) that incurred pursuant to existing Contracts
disclosed in the Schedules delivered pursuant to this Agreement.
(h) Declare or pay any dividend or make any sale of or distribution
in respect of its capital stock or directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock or issue any of its capital stock or
other securities.
(i) Make or institute any unusual method of transacting business or
change any accounting procedures or practices or its financial structure.
(j) Make any amendments to or changes in its articles or certificate
of incorporation or association or bylaws.
(k) Perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material Contract.
(l) Take any action or incur any Liability or obligation which, if
taken or incurred prior to the date of this Agreement, would be required to be
disclosed on any Schedule hereto.
5.2 Preservation of Business. Seller shall carry on the Business
diligently and substantially in the same manner as heretofore conducted and
shall keep its business organizations intact, including keeping available the
services of its present employees and preserving its present relationships with
suppliers and customers and others having business relations with Seller. Seller
shall perform all obligations required to be performed by it under any Contract
or lease.
5.3 Insurance and Maintenance of Property. Seller will cause all the
Purchased Assets and all property owned or leased pursuant to the Assumed
Liabilities to be insured against all ordinary and insurable risks (except in
respect of any leased property where the terms of the lease do not impose on
lessee the obligation to maintain insurance and where the loss of such property
would not materially adversely affect the conduct of the Business) and will
operate, maintain and repair all of such property in a careful, prudent and
efficient manner.
5.4 Full Access. Representatives of Buyer shall have full access at all
reasonable times to all premises, properties, books, records, Contracts, tax
records and documents of Seller relating to the Business, and Seller will
furnish to Buyer any information in respect of the Business as Buyer may from
time to time request. Such examination and investigation by Buyer shall not
affect the warranties and representations of Seller and Shareholder contained in
this Agreement.
5.5 Books, Records and Financial Statements. Seller shall maintain its
books and financial records in accordance with GAAP consistently applied, and on
a basis consistent with the past practices of Seller. Said books and financial
records shall fairly and accurately reflect the operations of the Business.
Seller shall furnish to Buyer promptly, as available, the Financial Statements
and operating reports applicable to the Business since January 1, 1998, all of
which shall be prepared in accordance with GAAP consistently applied and shall
present fairly the financial position and results of operations of the Business
at the dates and for the periods indicated.
5.6 Governmental Filings Seller will cooperate with Buyer in making, as
soon as practicable following the execution hereof, all filings required by any
Government in connection with the transactions contemplated by this Agreement.
All information provided by Seller in connection with such filings will be true,
accurate and complete and will comply with all applicable Laws.
5.7 Tax Matters.
(a) Seller shall pay all applicable sales, use or other similar
transfer Taxes that are, or become, due or payable as a result of the sale,
conveyance, assignment, transfer or delivery of the Purchased Assets hereunder,
whether levied on Buyer, the Purchased Assets or Seller. Seller, in the case of
the Purchased Assets, shall prepare, subject to Buyer's reasonable approval, and
file any Returns required in respect of such Taxes.
(b) All real estate, personal property, ad valorem and any other
local or state Taxes relating to the Purchased Assets or the Business which
shall be accrued but unpaid as of the Effective Time, or which shall be paid as
of the Effective Time but relate in whole or in part to periods after the
Effective Time, shall be prorated to the Effective Time and shall be reflected
on the Closing Balance Sheet. Any such prorated Taxes which may be ultimately
assessed after the Effective Time shall be paid by Seller to Buyer or Buyer to
Seller, as the case may be, within thirty days of such determination.
(c) Seller and Buyer shall report Buyer's purchase of the Purchased
Assets pursuant to Section 1060 of the Code and other applicable Laws in a
consistent manner and shall take no position contrary thereto and file the
appropriate Form 8594, attached as Schedule 5.7 with their respective income tax
returns. To the extent Buyer determines that a Form 1099 should be sent to
Seller, it shall be only on Form 1099-MISC with respect to the Internal Revenue
with no filing being made in Missouri; and, Seller and Buyer shall not take any
contrary income tax positions.
(d) Seller agrees to furnish or cause to be furnished, upon request,
as promptly as practicable, such information and assistance (including access to
books and records) relating to the Purchased Assets and the Assumed Liabilities
as is reasonably necessary for the preparation of any Return for Taxes, claims
for refund or audit or prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment of Taxes paid.
(e) Seller, upon request, shall use its reasonable efforts to provide
or obtain from any taxing authority any certificate or other document necessary
to mitigate, reduce or eliminate any Taxes (including additions thereto or
interest and penalties thereon) that otherwise would be imposed with respect to
the transactions contemplated in this Agreement.
(f) Seller shall furnish to Buyer, as provided in Section 1445(b)(2)
of the Code, an affidavit pursuant to Section 1445(a), stating under penalties
of perjury, Seller's United States taxpayer identification number and that
Seller is not a foreign person.
ARTICLE VI
OTHER AGREEMENTS
6.1 Change of Seller's Name. Within ten business days after the Closing
Date, Seller, in such manner as is reasonably requested by Buyer, shall change
its name to some name other than "Pacific Software Consulting, Inc." or any
variation or abbreviation thereof, and file appropriate notification of its
change of name in all jurisdictions where such notification is required. Seller
will take all steps as may be appropriate to insure to Buyer the continued right
to use the name "Pacific Software Consulting, Inc." and all variants thereof in
connection with Buyer's operation of the Business.
6.2 Seller's Employees. To the extent that Buyer has not entered into
employment agreements or independent contractor agreements as of the Closing,
Seller and Shareholder shall indemnify and hold Buyer Indemnified Persons
harmless from all Liabilities and obligations related to such employees and
independent contractors except for Ordinary Course payroll and related expenses
of such employees and costs and wages of such independent contractors since the
last payroll disbursement date before the Closing Date which will be assumed by
Buyer. It is hereby acknowledged that Buyer is not assuming any Liability
arising from or related to Seller's employees and independent contractors,
except for the payroll and related expenses of employees and costs and wages of
independent contractors since the last payroll disbursement date before the
Closing Date which will be assumed by Buyer. The indemnity set forth in this
Section 6.2 shall be made in accordance with the provisions of Article X hereof,
without regard to the limitations contained in Section 10.2(b).
ARTICLE VII
COVENANT NOT TO COMPETE
7.1 Covenant Not to Compete.
(a) As a further inducement to Buyer to purchase the Purchased Assets
and to assume the Assumed Liabilities, each of Seller and Shareholder agrees
that for the period from the Closing Date until the expiration of six years from
the Closing Date (the "Restricted Period"), each of Seller and Shareholder will
not, directly or indirectly: (i) engage in or in any way own, manage, operate,
control or otherwise advise or assist or be actively connected with any
enterprise which engages in, or otherwise carries on, any business activity in
the United States of America which is in competition with the Business or any
business in which OSI and its subsidiaries are engaged; or (ii) solicit or
accept business from, or provide competitive products or services to, any
customers (whether or not such Persons have done business with Seller once or
more than once) or accounts of Seller (prior to the Closing Date) or Buyer
(after the Closing Date).
(b) It is expressly understood and agreed that although Seller,
Shareholder and Buyer consider the restrictions contained in this Section to be
reasonable in the context in which made, if a final judicial determination is
made that the time, territory, scope or any other restriction contained in this
Section is unreasonable or otherwise unenforceable, neither this Agreement nor
the provisions of this Section shall be rendered void, but shall be deemed
amended to apply as to such maximum scope, time and territory and to such other
extent as such Court may judicially determine or indicate to be reasonable, and
as so modified, the restrictions contained in this Section shall be binding and
enforceable.
7.2 Employees. Each of Seller and Shareholder agrees that during the
Restricted Period neither it nor its successors or assigns will hire any Person
who is or shall be in the employ or service of Seller prior to the Closing Date,
and whom Buyer intends to employ, or seek to entice, induce or in any manner
influence any such employee to leave his or her employment or not accept or
continue in such employment.
7.3 Confidentiality. Each of Seller and Shareholder will not at any time
disclose to any Person other than Buyer or use any "Confidential Information"
(as hereinafter defined) owned, possessed, licensed or used by or relating to
the Business, whether or not such information is embodied in writing or other
physical form. For purposes of this Agreement, the phrase "Confidential
Information" means all trade names, trademarks, service marks, patents and trade
secrets and any and all other information not publicly available which relates
to specific matters concerning the Business, such as, without limiting the
generality of the foregoing, engineering, design, manufacturing, maintenance and
repair information; computer software and programs; component sourcing and
supply information; identities of suppliers, customers and contractors; ___
product distribution information; pricing and compensation policies; sales or
financing procedures or methods; operational methods; strategic plans; internal
financial information; research and development plans and activities; and
acquisition and expansion plans. Each of Seller and Shareholder recognizes and
agrees that all documents and objects containing any Confidential Information,
whether developed by Seller, Shareholder or by someone else for Seller, will
after the Closing Date become the exclusive property of Buyer.
7.4 Remedies. Because the breach or anticipated breach of the restrictive
covenants provided for in this Article VII will result in immediate and
irreparable harm and injury to Buyer, for which it will not have an adequate
remedy at law, each of Seller and Shareholder agrees that Buyer shall be
entitled to relief in equity to temporarily, preliminarily and/or permanently
enjoin such breach or anticipated breach and to seek any and all other legal and
equitable remedies to which Buyer may be entitled. Should such action be taken
and an injunction issued, Buyer shall be entitled to reimbursement of attorneys'
fees and costs incurred.
7.5 Permitted Exceptions. Nothing contained herein shall restrict (A)
Seller and Shareholder from owning two percent (2%) or less of the corporate
securities of any Person in competition with the Business which securities are
listed on any national securities exchange or authorized for quotation on the
Automated Quotations System of the National Association of Securities Dealers,
Inc., if such Person has no other connection or relationship, direct or
indirect, with the issuer of such securities or (B) Shareholder from providing
systems consulting services to non-financial services entities provided such
systems consulting shall not directly or indirectly involve accounts receivable
management.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
8.1 Representations and Warranties of Seller and Shareholder. The
representations and warranties of Seller and Shareholder contained in this
Agreement, including the Schedules hereto, and in the certificates and papers to
be delivered to Buyer pursuant hereto and in connection herewith shall be true
and correct in all material respects on the date hereof and on the Closing Date
(except for changes specifically permitted hereunder) as though such
representations and warranties were made on the Closing Date.
8.2 Approval by Buyer's and OSI's Boards. This Agreement and the
transactions contemplated hereby shall have been approved by or under the
authority of Buyer's and OSI's respective Boards of Directors.
8.3 Performance of this Agreement. Seller and Shareholder shall have duly
performed or complied with all of the obligations to be performed or complied
with by it under the terms of this Agreement on or prior to the Closing Date.
8.4 No Material Adverse Change and No Extraordinary Distributions. There
shall have been no material adverse change, actual or threatened, in the
Business (including the Purchased Assets, the Assumed Liabilities and
relationships with customers), whether or not covered by insurance, as a result
of any cause whatsoever. Between the date of this Agreement and the Closing
Date, there shall have been no extraordinary distribution by Seller, by the
officers of Seller, of any Assets or dividends of the Business.
8.5 Certificate of Seller and Shareholder. Buyer shall have received a
certificate signed by the President of Seller and Shareholder dated as of the
Closing Date and subject to no qualification certifying that the conditions set
forth in Sections 8.1, 8.2, 8.3, 8.4, 8.8, 8.9, 8.10, and 8.11 hereof have been
fully satisfied. Such certificate shall be deemed a representation and warranty
of Seller and Shareholder under this Agreement.
8.6. Employment Agreement. Edward F. Lambert shall have executed and
delivered an Employment Agreement in substantially the form attached hereto as
Exhibit C.
8.7. Financial Review. OSI shall have completed the reviews and
examinations of Seller's financial statements for the year ended December 31,
2000 and the interim period ended March 31, 2001 and Buyer shall be satisfied in
all respects with the results of such reviews.
8.8 No Lawsuits. No suit, action or other proceeding or investigation
shall be threatened or pending before or by any Court or Government concerning
this Agreement or the consummation of the transactions contemplated hereby, or
in connection with any claim against Seller not disclosed on the Schedules
hereto. No Government shall have threatened or directed any request for
information concerning this Agreement, the transactions contemplated hereby or
the consequences or implications of such transactions to Buyer, to Seller, or to
any officer, director, employee or agent of them.
8.9 No Restrictions. There shall exist no conditions, restrictions or
reservations affecting the title to or utility of the Purchased Assets and the
rights under the Assumed Liabilities which would prevent Buyer from occupying
and utilizing the Purchased Assets, or any part thereof, to the same full extent
that Seller might continue to do so if the sale and transfer contemplated hereby
did not take place.
8.10 Consents. All consents and approvals necessary to ensure that Buyer
will continue to have the same full rights in respect to the Purchased Assets
and the Assumed Liabilities as Seller had immediately prior to the consummation
of the transactions contemplated hereunder shall have been obtained.
8.11 Releases. At or prior to the Closing Date, Seller shall have delivered
to Buyer the written release of all Liens relating to the Purchased Assets,
executed by the holder of or parties to each such Lien. The releases shall be
reasonably satisfactory in substance and form to Buyer and its counsel.
8.12 Documents. Buyer shall have received from Seller on the Closing Date:
(a) The Bill of Sale and other appropriate documents conveying to
Buyer good and marketable title to the Purchased Assets, duly executed by
Seller.
(b)The Assignment and Assumption Agreement and other appropriate
assignments, with related consents, if any are so required, duly executed by
Seller.
(c) A certificate of good standing of Seller dated within five days of
the Closing Date, from the Secretary of State of the State of California.
(d) A copy, certified by the Secretary of Seller to be true, complete
and correct as of the Closing Date, of the articles of incorporation and bylaws
of Seller and all resolutions, authorizations, consents, approvals and/or
ratifications of the shareholders and directors of Seller required for the
authorization of Seller to enter into this Agreement and consummate the
transactions contemplated hereunder. Such certificate shall also contain a
certification of the incumbency and genuineness of the signatures of the
officers of Seller executing any document to be delivered to Buyer and shall be
deemed a representation and warranty of Seller and Shareholder under this
Agreement.
8.13 Due Diligence. Buyer shall be satisfied in all respects with the
results of its due diligence review of the Business and its condition, including
without limitation customer, vendor, and other third Person relationships and
environmental, tort, securities, corporate, product liability, employee
benefits, taxation and insurance matters.
8.14 Employees and Independent Contractors. [Intentionally deleted.]
8.15 Closing Patentable Property Purchase Agreement. The transactions
contemplated under the Patentable Property Purchase Agreement shall have been
consummated.
8.16 Further Assurances. Buyer shall have received such further instruments
and documents as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained and the performance of all conditions to the consummation of such
transactions.
ARTICLE IX.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Seller to
waive any one or more of such conditions:
9.1 Representations and Warranties of Buyer and OSI. The representations
and warranties of Buyer and OSI contained in this Agreement, including the
Schedules hereto, and in the certificates and papers to be delivered to Seller
pursuant hereto and in connection herewith shall be true and correct in all
material respects on the date hereof and on the Closing Date (except for changes
specifically permitted hereunder) as though such representations and warranties
were made on the Closing Date.
9.2 Performance of this Agreement. Buyer and OSI shall have duly performed
or complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
9.3 Certificate of Buyer. Seller shall have received a certificate signed
by an officer of Buyer and OSI dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 9.1, 9.2, and
9.6 hereof have been fully satisfied. Such certificate shall be deemed a
representation and warranty of Buyer and OSI hereunder.
9.4 Employment Agreement. Buyer shall have executed and delivered the
Employment Agreement in substantially the form attached hereto as Exhibits C.
9.5 Payment of Initial Payment. On the Closing Date, Seller shall have
received from Buyer the Initial Payment to be delivered under Section 2.8
hereof.
9.6 No Lawsuits. No suit, action or other proceeding or investigation
shall be threatened or pending before or by any Court or Government concerning
this Agreement or the consummation of the transactions contemplated hereby. No
Government shall have threatened or directed any request for information
concerning this Agreement, the transactions contemplated hereby or the
consequences or implications of such transactions to Buyer, to Seller, or to any
officer, director, employee or agent of it.
9.7 Documents. Seller and Shareholder shall have received from Buyer on
the Closing Date:
(a) The Assignment and Assumption Agreement, duly executed by Buyer.
(b) A certificate of good standing of Buyer dated within five days of
the Closing Date, from the Secretary of State of the State of Delaware.
(c) A certificate of good standing of OSI dated within five days of
the Closing Date, from the Secretary of State of Delaware.
(d) A copy, certified by the Secretary of Buyer to be true, complete
and correct as of the Closing Date, of the certificate or articles of
incorporation and bylaws of Buyer and all resolutions, authorizations, consents,
approvals and/or ratifications of the directors of Buyer required for the
authorization of Buyer to enter into this Agreement and consummate the
transactions contemplated hereunder. Such certificate shall also contain a
certification of the incumbency and genuineness of the signatures of the
officers of Buyer executing any document to be delivered to Seller and shall be
deemed a representation and warranty of Buyer under this Agreement.
(e) A copy, certified by the Secretary of OSI to be true, complete
and correct as of the Closing Date, of the certificate of incorporation and
bylaws of OSI and all resolutions, authorizations, consents, approvals and/or
ratifications of the directors of OSI required for the authorization of OSI to
enter into this Agreement and consummate the transactions contemplated
hereunder. Such certificate shall also contain a certification of the incumbency
and genuineness of the signatures of the officers of OSI executing any document
to be delivered to Seller and shall be deemed a representation and warranty of
OSI under this Agreement.
9.8 Closing Patentable Property Purchase Agreement. The transactions
contemplated under the Patentable Property Purchase Agreement shall have been
consummated.
9.9 Further Assurances. Seller shall have received such further instruments
and documents as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained and the performance of all conditions to the consummation of such
transactions.
ARTICLE X.
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations and
warranties of the Parties made in this Agreement or in any exhibit, statement,
Schedule, certificate, instrument or document delivered pursuant hereto shall
survive the Closing and shall remain in effect for a period of three years from
the Closing Date and shall thereupon terminate and be of no further force and
effect; provided, however, that the foregoing shall not apply to representations
and warranties under Sections 3.2, 3.8, 3.13, 3.14, 3.27 and 3.34; and provided,
further, that this shall not prohibit any claim for Indemnified Losses pursuant
to Section 10.2 after such applicable survival period with respect to
Indemnified Losses as to which the Indemnifying Party has received notice in
accordance with this Article X prior to the expiration of such survival period.
The expiration of any representation or warranty made in this Agreement or in
any exhibit, statement, Schedule, certificate, instrument or document delivered
pursuant hereto shall not impair or restrict the rights that any Party could
assert with respect to any and all remedies at law or in equity in the absence
of such representation or warranty. All representations and warranties hereunder
shall be deemed to be material and, except as otherwise specifically provided
herein, relied upon by the Parties with or to whom the same were made,
notwithstanding any investigation or inspection made by or on behalf of such
Party or Parties. which shall survive until the expiration of the applicable
statute of limitations.
10.2 Seller's Indemnification.
(a) Seller and Shareholder hereby jointly and severally agree to hold
Buyer, OSI and the shareholders, directors, officers, employees, Affiliates,
successors, assigns and agents of each of them (collectively, the "Buyer
Indemnified Persons") harmless from, against and in respect of, and waives any
claim for contribution or indemnity with respect to, any and all claims, losses,
damages, Liabilities, expenses or costs ("Losses"), plus reasonable attorneys'
fees and expenses incurred in connection with Losses and/or enforcement of this
Agreement, plus interest from the date incurred through the date of payment at
the prime lending rate plus 2% of Bank of America from time to time prevailing
(in all, "Indemnified Losses") incurred or to be incurred by any of them to the
extent resulting from or arising out of, or alleged to result from or arise out
of:
(i) any breach or violation of the representations and
warranties, of Seller and Shareholder contained in Article III of this
Agreement;
(ii) any breach or violation of the covenants or agreements of
Seller contained in this Agreement, or in any exhibit, statement, Schedule,
certificate, instrument or document delivered pursuant hereto, including the
provisions of this Article X;
(iii) any Liability of Seller not expressly assumed by Buyer
hereunder, without regard to the fact that any indemnifiable matter described in
this subsection (iii) may have been disclosed in the Schedules or in any
documents included or referred to therein or may be otherwise known to Buyer at
the date of this Agreement or on the Closing Date;
(iv) the assertion of any claim by a party to any Contract
assumed by Buyer relating to the performance of such Contract to the extent the
claim relates to the portion of such Contract completed by Seller prior to the
Closing;
(v) the assertion of any claim by any person related to or
arising out of the transactions contemplated in the Agreement of Purchases and
Sale of Stock, dated December 31, 2000 between Shareholder and Edward L. Witt;
(vi) any claim by a present or former employee of Seller
(whether under any Law, Contract or otherwise) on account of or for overtime pay
prior to the Closing Date,
(vii) any claim Buyer may have against Shareholder in connection
with the Patentable Property Purchase Agreement; and
(viii)without being limited by the foregoing subsections (i)
through (vii) and without regard to whether any one or more of the items listed
in this subsection (viii) may be disclosed in the Schedules or otherwise known
to Buyer as of the date of this Agreement or on the Closing Date except to the
extent of the amounts reflected on the Closing Statement:
(A) All Taxes of Seller and Shareholder and Seller's or
Shareholder's Liability for its own Taxes or its Liability, if any (for example,
by reason of transferee Liability or application of Treas. Reg. Section
1.1502-6) for Taxes of others, and fines and penalties and reasonable expenses
(including but not limited to reasonable attorneys' fees and expenses) payable
with respect to or arising out of any claim or assessment for such Taxes against
Buyer or the Purchased Assets, (1) for any taxable period ending on or before
the Effective Time, except to the extent such Taxes are reflected as a Tax
Liability on the Closing Statement of Net Assets, (2) for any taxable period
resulting from a breach of any of the representations or warranties contained in
Section 3.8 hereof, or (3) sustained in a tax period of Buyer ending after the
Effective Time arising out of the settlement or other resolution of a proposed
tax adjustment which relates to a tax period ending on or before the Effective
Time; and
(B) Seller's termination of any of its employees prior to
the Closing Date, except to the extent the amounts of such Losses are reflected
on the Closing Statement.
(b) The Buyer Indemnified Persons shall not be entitled to recover
Indemnified Losses (i) pursuant to Section 10.2(a)(i) (other than for a breach
of a representation and warranty in Section 3.2, Section 3.6, Section 3.8,
Section 3.14, Section 3.27 and Section 10.2(a)(iv)) unless such Indemnified
Losses exceed $50,000 in the aggregate, but upon reaching such amount, from the
first dollar to the full extent of all Indemnified Losses; or (ii) to the extent
such Indemnified Losses exceed the aggregate consideration paid for (i)the
Purchased Assets as contemplated under Section 2.3 of this Agreement and (ii)
the Shareholder Patentable Property as contemplated under Section 2.3 of the
Patentable Property Purchase Agreement, once Seller or Shareholder has made
payments to or on behalf of Buyer Indemnified Persons with respect to such
Indemnified Losses in such amount.
10.3 Buyer's Indemnification.
(a) Buyer and OSI hereby agree to hold Seller, Shareholder and their
shareholders, directors, officers, employees, Affiliates, successors, assigns
and agents of each of them (collectively, the "Seller Indemnified Persons")
harmless from, against and in respect of, and waives any claim for contribution
or indemnity with respect to, any and all Indemnified Losses incurred or to be
incurred by any of them, to the extent resulting from or arising out of, or
alleged to result from or arise out of: (i) any breach or violation of the
representations, warranties, covenants and agreements of Buyer and OSI contained
in this Agreement, or in any exhibit, statement, Schedule, certificate,
instrument or document delivered pursuant hereto, including the provisions of
this Article X; or (ii) any Liability of Buyer with respect to the Assumed
Liabilities.
(b) The Seller Indemnified Persons shall not be entitled to recover
Indemnified Losses for a breach of a representation or warranty of Buyer or OSI
contained in this Agreement unless such Indemnified Losses exceed $50,000 in the
aggregate, but upon reaching such amount, from the first dollar to the full
extent of all Losses.
10.4 Notice of Claim. In the event that Buyer seeks indemnification on
behalf of a Buyer Indemnified Person, or Seller seeks indemnification on behalf
of a Seller Indemnified Person, such Party seeking indemnification (the
"Indemnified Party") shall give written notice to the other Party (the
"Indemnifying Party") specifying the facts constituting the basis for such claim
and the amount, to the extent known, of the claim asserted. With respect to
claims other than Third Person Claims, the Indemnifying Party shall have 20
calendar days after the Indemnified Party provides notice to the Indemnifying
Party to make such investigation of the claim as the Indemnifying Party deems
necessary or desirable. For purposes of such investigation, the claimant agrees
to make available to the Indemnifying Party or its authorized representative(s)
the information relied upon by the claimant to substantiate the claim. If the
Indemnified Party and the Indemnifying Party agree at or prior to the expiration
of such 20 day period (or any mutually agreed upon extension thereof) to the
validity and amount of such claim, the Indemnifying Party shall pay the amount
of such claim not more than 10 calendar days after agreement. If the Indemnified
Party and the Indemnifying Party do no agree within such period (or any mutually
agreed upon extension thereof), the Indemnified Party may seek any available
legal remedy.
10.5 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) ("Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a Person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest or settle the claim alleged by such Third Person (a "Third Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third Person Claim within 20 calendar days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnify and assume the defense of any
such Third Person Claim, (a) the Indemnified Party may defend against such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
action, with its own counsel at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such Third Person Claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by clear and convincing
evidence that conduct of the Indemnified Party in the defense and/or settlement
of such Third Person Claim constituted gross negligence or willful misconduct.
The Parties shall make available to each other all relevant information in their
possession relating to any such Third Person Claim and shall cooperate in the
defense thereof.
10.6 Set-Off Rights. Subject to complying with the procedures of Sections
10.4 and/or 10.5, Buyer or OSI shall have the right to seek, in their sole
discretion, satisfaction of Indemnified Losses: (a) from Seller or Shareholder
or (b) by offsetting Indemnified Losses against any payments due under any
"Earn-Out" payment which may be due to pursuant to Section 2.8 of the Patentable
Property Purchase Agreement.
ARTICLE XI.
MISCELLANEOUS
11.1 Assignment; Binding Agreement.
(a) This Agreement and all or any part of Buyer's rights and
obligations hereunder may be assigned by Buyer at any time to any one or more
Affiliates of Buyer. Buyer shall cause such Affiliate(s) to perform any of
Buyer's obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of Seller's rights or obligations
hereunder may be assigned by Seller without Buyer's prior written consent.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and to their respective successors and permitted
assigns.
11.2 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) By mutual consent of Buyer and Seller.
(b) By either Buyer or Seller if the Closing shall not have occurred
on or before May 31, 2001, or such other date, if any, as Buyer and Seller shall
agree upon.
(c) By Buyer if:
(i) Either Buyer's or OSI's Board of Directors declines to
approve this Agreement and the transaction contemplated hereby, or
(ii) Buyer determines, in its sole discretion, that the
transaction contemplated hereby has become inadvisable or impractical (A) as a
result of Buyer's investigation of the Business prior to the Closing or (B) by
reason of the institution or threat by any Person, Governmental or otherwise, of
any litigation, investigation or proceeding (it being understood and agreed
that, without limiting the generality of the foregoing, a written request by
Government authorities for information with respect to the proposed transactions
may be deemed to be a threat of litigation, investigation or proceedings).
11.3 Manner and Effect of Termination.
(a) Any action by Seller to terminate this Agreement and the
transactions contemplated hereby, as provided in Section 11.2 hereof, shall be
taken by its Board of Directors. Any such action by Buyer shall be taken by its
Chairman of the Board, its President or any appropriately authorized officer.
(b) If this Agreement is terminated pursuant to Section 11.2 hereof
without fault of either Party or breach of this Agreement, all obligations of
Seller and Buyer hereunder shall terminate, without Liability of Seller to Buyer
or of Buyer to Seller. In such event, each Party hereto shall pay all legal and
other costs and expenses incurred by such Party in connection with this
Agreement and the transactions contemplated hereby.
(c) Nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any Party to any and all remedies at law or in
equity in the event of a breach of or default under this Agreement.
11.4 Non-Disclosure of Information. Without the prior written consent of
Buyer, Seller will not disclose or reveal to any third Person any confidential,
non-public or commercially valuable information (a) concerning Buyer to which
Seller was exposed in connection with this Agreement or (b) concerning the
Business.
11.5 Bulk Sales. Buyer hereby waives compliance with any applicable State
Uniform Commercial Code or other statutory provisions governing bulk sales.
Seller agrees to indemnify, defend and hold harmless Buyer from any and all
loss, cost or expenses, resulting from the assertion of claims made against the
Purchased Assets sold hereunder or against Buyer by creditors of Seller under
any bulk sales Law with respect to Liabilities of Seller not assumed by Buyer
hereunder, such indemnity to be in accordance with the provisions of Article X
hereof, without regard to the limitations contained in Section 10.2(b).
11.6 Remedies. Nothing contained herein is intended to or shall be
construed to limit the remedies which either Party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
11.7 Entire Agreement and Modification. This Agreement, including the
Schedules and Exhibits attached hereto and the documents to be delivered
pursuant hereto, constitutes the entire agreement between the Parties. No
changes of, modifications of, amendments to, or additions to this Agreement
shall be valid unless the same shall be in writing and signed by all Parties
hereto.
11.8 Severability. If any provision of this Agreement shall be determined
to be contrary to Law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
11.9 Counterparts. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed and thereafter transmitted by telecopier, and the telecopier receipt
shall constitute an original.
11.10 Headings; Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
Both Parties have participated substantially in the negotiation of this
Agreement, and each Party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be construed against
the draftsman.
11.11 Choice of Forum and Governing Law. In light of the parties' interests
in ensuring that disputes regarding the interpretation, validity and
enforceability of this Agreement are resolved on a uniform basis, and the
execution of, and the making of, this Agreement in Missouri, the parties agree
that: (a) any litigation involving any noncompliance with or breach of this
Agreement, or regarding the interpretation, validity and/or enforceability of
this Agreement, shall be filed and conducted in the state or federal courts in
St. Louis, Missouri; and (b) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without regard for any
conflict of law principles.
11.12 Payment of Fees and Expenses. Each Party hereto shall pay all fees
and expenses incurred by such Party incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, including the fees of counsel, accountants and other
experts of such Party and any finder's or brokerage fees incurred by such Party.
11.13 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (a) personally, (b) by registered or certified
mail, postage prepaid, (c) by facsimile transmission (with a copy confirmed by
mail) or (d) by overnight delivery service and addressed as set forth below:
(a) If to Buyer or OSI:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, MO 63017
Attention: President and CEO
Fax: (314) 576-1867
copy to (which shall not constitute notice):
Bryan Cave LLP
One Metropolitan Square
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Attention: Peter D. Van Cleve
Fax: (314) 259-2020
(b) If to Seller and Shareholder:
Pacific Software Consulting, Inc.
254 6th Street
Seal Beach, California 90740
Attention: Edward F. Lambert
copy to (which shall not constitute notice):
Cheadle & Garrett
4041 Macarthur Boulevard
Newport Beach, CA 92660
Attention: C. Tucker Cheadle
Fax: (949) 833-1292
Any such notice shall be effective upon receipt. Any Party may change the
address to which notices are to be addressed by giving the other Party notice in
the manner herein set forth.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES HERETO.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, on the
day and year first above written.
PACIFIC SOFTWARE CONSULTING, INC.
By:/s/ Edward F. Lambert
-----------------------
Name: Edward F. Lambert
Title: President
/s/ Edward F. Lambert
- --------------------------
Edward F. Lambert
OUTSOURCING SOLUTIONS INC.
By:/s/ Gary L. Weller
-----------------------
Name: Gary L. Weller
-------------------
Title: EVP-CFO
-------------------
PACIFIC SOFTWARE CONSULTING, LLC
By:/s/ Eric R. Fencl
-----------------------
Name: Eric R. Fencl
-------------------
Title: Secretary
-------------------
TABLE OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of Employment Agreement for Edward F. Lambert
Schedules
Schedule 1.1(a) Assumed Liabilities
Schedule 1.1(b) Excluded Assets
Schedule 2.1 Allocation of Consideration
Schedule 2.9(a) Closing Financial Statements Principles
and Procedures
Schedule 3.3 Financial Statements
Schedule 3.4 Events Subsequent to December 31, 1999
Schedule 3.7 Undisclosed Liabilities
Schedule 3.10 Personal Property - Owned
Schedule 3.13 Trade Names
Schedule 3.14 Necessary Property and Transfer of
Purchased Assets
Schedule 3.16 Licenses and Permits
Schedule 3.17 Contracts - Disclosure
Schedule 3.18 Customer Contracts
Schedule 3.19 Contracts - Validity
Schedule 3.22 Directors, Officers, Employees and Consultants
Schedule 3.32 Insurance Policies
Schedule 3.37 Service Warranties and Guarantees
PATENTABLE PROPERTY PURCHASE AGREEMENT
by and among
Outsourcing Solutions Inc.,
Pacific Software Consulting, LLC,
and
Edward F. Lambert,
Dated April 30, 2001
TABLE OF CONTENTS
PATENTABLE PROPERTY PURCHASE AGREEMENT
SECTION PAGE
- ------- ----
ARTICLE I DEFINITIONS.........................................................1
Affiliate.................................................................1
Affiliated Group..........................................................1
Agreement.................................................................1
Arbiter...................................................................1
Asset Purchase Agreement..................................................1
Business..................................................................1
Buyer.....................................................................2
Buyer Indemnified Persons.................................................2
Closing...................................................................2
Closing Date..............................................................2
Closing Payment...........................................................2
Confidential Information..................................................2
Contract..................................................................2
Court.....................................................................2
Covenant Not to Compete...................................................2
Dollars...................................................................2
Earnings..................................................................2
Earn-Out Payments.........................................................2
EBITDA....................................................................2
Effective Time............................................................2
Employment Agreements.....................................................2
First Earn-Out Payment....................................................2
First Payment Period......................................................2
Government................................................................2
Indemnified Losses........................................................3
Indemnified Party.........................................................3
Indemnifying Party........................................................3
Intellectual Property.....................................................3
Law.......................................................................3
Liabilities...............................................................3
Lien......................................................................3
Losses....................................................................3
OSI.......................................................................3
Ordinary Course...........................................................3
Party.....................................................................4
Patentable Property.......................................................4
Person....................................................................4
Plan......................................................................4
Purchased Assets..........................................................4
Restricted Period.........................................................4
Returns...................................................................4
Second Earn-Out Payment...................................................4
Second Payment Period.....................................................4
Seller....................................................................4
Seller Indemnified Persons................................................4
Tax Affiliate.............................................................4
Taxes.....................................................................4
Third Person..............................................................5
Third Person Claim........................................................5
ARTICLE II PURCHASE AND SALE OF ASSETS........................................5
2.1 Assets to be Purchased..............................................5
2.2 No Assumed Liabilities..............................................5
2.3 Consideration.......................................................5
2.4 Allocation of Consideration.........................................5
2.5 Closing.............................................................5
2.6 Deliveries of Seller at the Closing.................................5
2.7 Deliveries of Buyer at the Closing..................................6
2.8 Earn-Out Payments...................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...........................9
3.1 Corporate Existence and Power of Company............................9
3.2 Approval and Enforceability of Agreement............................9
3.3 Undisclosed Liabilities.............................................9
3.4 Intellectual Property..............................................10
3.5 Necessary Property and Transfer of Assets..........................10
3.6 Notice of Violation................................................11
3.7 No Breach of Law or Governing Document.............................11
3.8 Litigation and Arbitration.........................................11
3.9 Broker's Fees......................................................11
3.10 Truthfulness.......................................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................11
4.1 Corporate Existence of Buyer.......................................11
4.2 Approval of Agreement..............................................12
4.3 No Breach of Articles or Indentures................................12
4.4 Broker's Fees......................................................12
ARTICLE V COVENANTS CONCERNING SELLER.........................................12
5.1 Operation of the Business..........................................13
5.2 Preservation of Business...........................................13
5.3 Full Access........................................................13
5.4 Governmental Filings...............................................13
ARTICLE VI OTHER AGREEMENTS...................................................13
6.1 Tax Matters........................................................13
ARTICLE VII COVENANT NOT TO COMPETE...........................................14
7.1 Covenant Not to Compete............................................14
7.2 Employees..........................................................15
7.3 Confidentiality....................................................15
7.4 Remedies...........................................................15
7.5 Permitted Exceptions...............................................15
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS................................16
8.1 Representations and Warranties of Seller...........................16
8.2 Approval by Buyer's Board..........................................16
8.3 Performance of this Agreement......................................16
8.4 No Material Adverse Change and No Extraordinary Distributions......16
8.5 Certificate of Seller..............................................16
8.6 Employment Agreements..............................................16
8.7 No Lawsuits........................................................16
8.8 No Restrictions....................................................17
8.9 Consents...........................................................17
8.10 Releases...........................................................17
8.11 Documents..........................................................17
8.12 Closing Asset Purchase Agreement...................................17
8.13 Further Assurances.................................................17
ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS.................................17
9.1 Representations and Warranties of Buyer and OSI....................17
9.2 Performance of this Agreement......................................18
9.3 Certificate of Buyer...............................................18
9.4 Payment of Closing Payment.........................................18
9.5 No Lawsuits........................................................18
9.6 Documents..........................................................18
9.7 Closing Asset Purchase Agreement...................................19
9.8 Further Assurances.................................................19
ARTICLE X INDEMNIFICATION.....................................................19
10.1 Survival of Representations and Warranties.........................19
10.2 Seller's Indemnification...........................................19
10.3 Buyer's Indemnification............................................20
10.4 Notice of Claim....................................................21
10.5 Right to Contest Claims of Third Persons...........................21
10.6 Set-Off Rights.....................................................22
ARTICLE XI MISCELLANEOUS......................................................22
11.1 Assignment; Binding Agreement......................................22
11.2 Termination of Agreement...........................................22
11.3 Manner and Effect of Termination...................................23
11.4 Non-Disclosure of Information......................................23
11.5 Bulk Sales.........................................................23
11.6 Remedies...........................................................23
11.7 Entire Agreement and Modification..................................24
11.8 Severability.......................................................24
11.9 Counterparts.......................................................24
11.10 Headings; Interpretation...........................................24
11.11 Choice of Forum and Governing Law..................................24
11.12 Payment of Fees and Expenses.......................................24
11.13 Notices............................................................24
PATENTABLE PROPERTY PURCHASE AGREEMENT
THIS PATENTABLE PROPERTY PURCHASE AGREEMENT (the "Agreement") is made as of
this 30th day of April, 2001, by and among, on one hand, Outsourcing Solutions
Inc., a Delaware corporation ("OSI") and Pacific Software Consulting, LLC, a
Delaware limited liability company owned by OSI ("Buyer"), and on the other
hand, Edward F. Lambert ("Seller"). Certain defined terms are set forth in
Article I.
RECITALS
A. Buyer desires to purchase from Seller the Patentable Property on the
following terms and conditions;
B. Seller desires to sell to Buyer the Patentable Property on the
following terms and conditions; and
C. Simultaneously with the Closing, Buyer will purchase certain assets
from Pacific Software Consulting, Inc., a California corporation ("Company"),
pursuant to the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Person referred to. In this definition, "control" means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of securities, by contract, or
otherwise.
"Affiliated Group" has the meaning set forth in Section 1504 of the Code.
"Agreement" has the meaning set forth in the Preamble.
"Arbiter" means the individual appointed under Section 2.8(c).
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated the
date hereof, among OSI, Buyer, Pacific Software Consulting, Inc., as seller, and
Edward F. Lambert, shareholder.
"Business" means the business and operations of Company including without
limitation the business generally conducted under the trade name "Pacific
Software Consulting, Inc."
"Buyer" has the meaning set forth in the Preamble.
"Buyer Indemnified Persons" has the meaning set forth in Section 10.2(a).
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Date" means April 30, 2001 or, if the conditions to the Closing
are not by then satisfied, on such date within three business days following
satisfaction of such conditions (other than conditions to be satisfied at the
Closing according to the terms thereof).
"Closing Payment" means Three Million Nine Hundred Seventy One Thousand Two
Hundred Fifty Dollars ($3,971,250).
"Confidential Information" has the meaning set forth in Section 7.3.
"Contract" means any contract, agreement, arrangement, understanding,
lease, indenture, evidence of indebtedness, binding commitment or instrument,
purchase order or offer, written or oral, entered into or made by or on behalf
of Company, or to which Company is a party or by which it or its property is
bound.
"Court" means any court, grand jury, administrative or regulatory body,
Government agency, arbitration or mediation panel or similar body.
"Covenant Not to Compete" means the obligations of Seller under Article
VII.
"Dollars" or "$" means United States Dollars.
"Earnings" shall mean earnings of Buyer for purposes of calculating the
Earn-Out Payments (and, in the case of the First Payment Period, earnings of the
Company from January 1, 2001 until the Effective Time).
"Earn-Out Payments" has the meaning set forth in Section 2.8(d).
"EBITDA" has the meaning set forth in Section 2.8(a).
"Effective Time" means as of 11:59 p.m. on April 30, 2001.
"Employment Agreement" means the form of employment and non-competition
agreement set forth as Exhibit C to the Asset Purchase Agreement.
"First Earn-Out Payment" has the meaning set forth in Section 2.8(a).
"First Payment Period" has the meaning set forth in Section 2.8(a).
"Government" means the United States of America, any other nation or
sovereign state, any federal, bilateral or multilateral governmental authority,
any state, possession, territory, county, district, municipality, city or other
governmental unit or subdivision, and any branch, agency, or judicial body of
any of the foregoing.
"Indemnified Losses" has the meaning set forth in Section 10.2(a).
"Indemnified Party" has the meaning set forth in Section 10.4.
"Indemnifying Party" has the meaning set forth in Section 10.4.
"Intellectual Property" means all of the following (in whatever form or
medium) which are used, owned by or licensed to Seller in connection with the
Business: (a) patents and patent applications, (b) copyrights and registrations
thereof, (c) mask works and registrations and applications for registration
thereof, (d) computer software (whether in source code or object code), data and
documentation, (e) trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice,
works-for-hire, firmware, programs, know-how, manufacturing and productions
processes and techniques, research and development information, inventions,
discoveries, projections, analyses, market studies, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans, proprietary prospect lists, and customer and supplier lists
and information, (f) trademarks, service marks, trade names, corporate names,
domain names and applications and registrations therefor and (g) other
proprietary rights relating to any of the foregoing.
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order or injunction of any Government,
quasi-governmental authority or Court, and includes rules or regulations of any
regulatory or self-regulatory authority compliance with which is required by
law.
"Liabilities" means all liabilities and/or obligations, whether or not
required to be reflected on the financial statements of a business.
"Lien" means any lien, security interest, mortgage, option, lease, tenancy,
occupancy, covenant, condition, easement, agreement, hypothecation, restriction,
pledge, charge, claim or other encumbrance of every kind and nature.
"Losses" has the meaning set forth in Section 10.2(a).
"OSI" has the meaning set forth in the Preamble.
"Ordinary Course" means, with respect to the Business, only the ordinary
course of commercial operations customarily engaged in by such Business
consistent with past practices, and specifically does not include (a) activity
(i) involving the purchase or sale of a business or of any product line or
business unit, (ii) involving modification or adoption of any Plan or (iii)
which requires approval by the board of directors or shareholders of an entity
engaged in a business or (b) the incurrence of any Liability for any tort or any
breach or violation of or default under any Contract or any Law.
"Party" means any of Buyer, OSI or Seller and "Parties" means all of them.
"Patentable Property" means the Intellectual Property set forth on Schedule
3.4, all of which shall be transferred to Buyer pursuant to this Agreement.
"Person" means any natural person; any corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
company or other legal entity; and any Government.
"Plan" means any agreement, arrangement, plan or policy, qualified or
non-qualified, whether or not considered legally binding, that involves (a) any
pension, retirement, profit sharing, deferred compensation, bonus, stock option,
stock purchase, phantom stock, health, welfare or incentive plan; or (b) welfare
or "fringe" benefits, including without limitation any voluntary employees'
beneficiary associations or related trusts, vacation, severance, disability,
medical, hospitalization, dental, life and other insurance, tuition, company
car, club dues, income tax preparation, sick leave, maternity, paternity or
family leave, child care or other benefits; or (c) any employment, consulting,
engagement or retainer agreement or arrangement.
"Purchased Assets" has the meaning set forth in Asset Purchase Agreement.
"Restricted Period" has the meaning set forth in Section 7.1(a).
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by Seller or other Tax Affiliate of Seller in connection with
the Business, and all information returns (e.g., Form W-2, Form 1099) and
reports relating to Taxes or Plans. Any one of the foregoing Returns may be
referred to sometimes as a "Return."
"Second Earn-Out Payment" has the meaning set forth in Section 2.8(b).
"Second Payment Period" has the meaning set forth in Section 2.8(b).
"Seller" has the meaning set forth in the Preamble.
"Seller Indemnified Persons" has the meaning set forth in Section 10.3(a).
"Tax Affiliate" means any member of an Affiliated Group of which Seller is
or was a member, or any member of a combined or unitary group of which Seller is
or was a member.
"Taxes" means all taxes, charges, fees, levies or other like assessments
imposed or assessed by any Government, including without limitation income,
gross receipts, profits, windfall profit, employment (including Social Security,
state pension plans and unemployment insurance), withholding, payroll,
franchise, gross receipts, sales, use, transfer, stamp, occupation, real or
personal property, ad valorem, value added, premium and excise taxes; Pension
Benefit Guaranty Corporation premiums and any other like Government charges; and
shall include all penalties, fines, assessments, additions to tax and interest
resulting from, attributable to, or incurred in connection with such Taxes or
any contest or dispute thereof. Any one of the foregoing Taxes may be referred
to sometimes as a "Tax."
"Third Person" has the meaning set forth in Section 10.5.
"Third Person Claim" has the meaning set forth in Section 10.5.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased. Subject to the terms and conditions hereof,
on the Closing Date and as of the Effective Time, Seller agrees to sell to
Buyer, free and clear of all Liens, all right, title and interest of Seller to
and in all of the Patentable Property.
2.2 No Assumed Liabilities. PURSUANT TO THIS AGREEMENT, NEITHER BUYER NOR
ANY AFFILIATE OF BUYER ASSUMES OR AGREES TO BECOME LIABLE FOR OR SUCCESSOR TO
ANY LIABILITIES OR OBLIGATIONS WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR
UNKNOWN, CONTINGENT OR OTHERWISE, WHETHER OF SELLER, ANY AFFILIATE OF SELLER,
ANY PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE BUSINESS. NO OTHER
STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER STATEMENT, WRITTEN OR
ORAL, ACTION OR FAILURE TO ACT INCLUDES OR CONSTITUTES ANY SUCH ASSUMPTION OR
AGREEMENT, AND ANY STATEMENT TO THE CONTRARY BY ANY PERSON IS UNAUTHORIZED AND
HEREBY DISCLAIMED.
2.3 Consideration. The consideration for the Patentable Property shall be
the aggregate of (a) the Closing Payment and (b) the Earn-Out Payments, if any,
contingent upon the productivity and use of such property provided for in
Section 2.8.
2.4 Allocation of Consideration. The consideration provided for in Section
2.3 shall be allocated among the Patentable Property and Covenant Not to Compete
as provided in Schedule 2.4 hereto. Such allocation shall be prepared in
accordance with Section 1060 of the Code.
2.5 Closing. The Closing shall take place at 10:00 a.m. on the Closing
Date or such other time as the Parties agree at the offices of Bryan Cave LLP,
211 N. Broadway, One Metropolitan Square, Suite 3600, St. Louis, Missouri 63102.
2.6 Deliveries of Seller at the Closing. At the Closing, subject to the
conditions to Seller's obligations in Article IX, Seller shall execute and
deliver or cause to be delivered the documents identified in Article VIII.
2.7 Deliveries of Buyer at the Closing. At the Closing, subject to the
conditions to the Buyer's obligations in Article VIII, Buyer shall (a) execute
and deliver or cause to be delivered the documents identified in Article IX and
(b) transfer the Closing Payment by wire transfer of immediately-available funds
to an account or accounts designated by Seller not less than two business days
before the Closing Date.
2.8 Earn-Out Payments.
(a) If the Company and Buyer achieve Earnings before interest
expense, Taxes, depreciation and amortization, each item determined in
accordance with GAAP consistently applied ("EBITDA"), in excess of $1,500,000,
for the period beginning as of the first day January 2001 and continuing for 12
full months thereafter (the "First Payment Period") (that is, the aggregate of
(i) EBITDA for the Company from January 1, 2001 until the Effective Time and
(ii) EBITDA for Buyer from the Effective Time until December 31, 2001), Buyer
will pay Seller in cash the amount set forth opposite the EBITDA obtained by
Company and Buyer for the First Payment Period in the following table (the
"First Earn-Out Payment"):
Category EBITDA for the First Payment Period First Earn-Out Payment
- -------- ----------------------------------- ----------------------
I $1,500,001 - $2,500,000 Two (2) times the amount
by which the EBITDA exceeds
$1,500,000 (for amounts up
to $2,500,000 of EBITDA)
II Equals or exceeds $2,500,001 One (1) times the amount
by which the EBITDA exceeds
$2,500,000, plus the amount
determined for Category I
(b) If Buyer achieves EBITDA in excess of $1,000,000, for the period
beginning as of the first day January 2002 and continuing for 6 full months
thereafter (the "Second Payment Period"), Buyer will pay Seller in cash the
amount set forth opposite the EBITDA obtained by Buyer for the Second Payment
Period in the following table (the "Second Earn-Out Payment"):
Category EBITDA for the Second Payment Period Second Earn-Out Payment
- -------- ------------------------------------ -----------------------
I $1,000,001 - $2,000,000 Two and one half (2.5) times
the amount by which the EBITDA
exceeds $1,000,000 (for amounts
up to $2,000,000 of EBITDA)
II Equals or exceeds $2,000,001 One (1) times the amount by
which the EBITDA exceeds
$2,000,000, plus the amount
determined for Category I
(c) Earnings shall be determined for purposes of this Agreement with
the earn-out principles and procedures set forth on Schedule 2.8.
(d) To the extent OSI determines an First or Second Earn-Out Payment
(collectively, the First Earn-Out Payment and the Second Earn-Out Payment are
the "Earn-Out Payments" and individually, an "Earn-Out Payment") is due to
Seller, Buyer will pay (and OSI will cause Buyer to pay) to Seller a preliminary
payment of such Earn-Out Payment due pursuant to Section 2.8(a) or 2.8(b) on the
date Buyer submits its preliminary determination to Seller pursuant to Section
2.8(e). Buyer shall pay any additional payments required pursuant to Section
2.8(a) or 2.8(b) promptly following the final and binding determination,
pursuant to this Agreement, of the applicable Earn-Out Payment for the
applicable Payment Period. To the extent the amount of any Earn-Out Payment is
less than the preliminary payment previously paid for the applicable Payment
Period, Seller shall refund the amount in excess to Buyer promptly following the
final and binding determination, pursuant to this Agreement, of the applicable
Earn-Out Payment.
(e) The determination of the amount of the applicable Earn-Out
Payment shall be determined by OSI promptly after the completion of the
applicable Payment Period based on the financial statements of Buyer for the
applicable Payment Period (and, in the case of the First Payment Period, the
financial statements of the Company from January 1, 2001 through the Effective
Time). The determination of the amount of any Earn-Out Payment shall be
submitted to Seller within 60 calendar days after end of the applicable Payment
Period. After such submission and upon request of Seller, OSI will provide
Seller with reasonable access to its records relating to the determination of
the amount of the applicable Earn-Out Payment. If Seller does not object to the
determination by OSI of the applicable Earn-Out Payment by written notice of
objection (the "Notice of Objection") delivered to OSI within 20 calendar days
after receipt by Seller of such determination, the proposed Earn-Out Payment
shall be deemed final and binding. If Seller delivers a Notice of Objection to
the determination of an Earn-Out Payment within the appropriate time period,
such Notice of Objection to describe in reasonable detail Seller's proposed
adjustments to the proposed determination of the applicable Earn-Out Payment,
Seller and OSI shall negotiate in good faith to resolve any differences. During
such negotiation, Seller shall have the right to demand an audit and examination
of the applicable financial statements of Buyer, which shall be conducted at
OSI's sole cost and expense. Such audit shall be conducted as soon as
practicable after written demand by Seller and, upon completion, delivered to
Seller ("Audit Delivery Date"). If after 15 calendar days following such notice
any of the Audit Delivery Date (or, if Seller waives or fails to exercise the
right to cause an audit to be conducted, 30 calendar days after delivery of the
Notice of Objection) have not been resolved (the "Disputed Matters"), then such
Disputed Matters shall be submitted to arbitration in Chicago, Illinois. A
partner in Ernst & Young LLP, certified public accountants (the "Arbiter") shall
consider only the Disputed Matters, and the arbitration shall be conducted in
accordance with the Commercial Rules of the American Arbitration Association
then in effect. If Ernst & Young LLP is the auditor for OSI and its subsidiaries
(or is providing a material amount of consulting services to OSI and its
subsidiaries) at the time of the dispute, the Parties will mutually agree upon
another nationally recognized accounting firm to serve as Arbiter. The Arbiter
shall act promptly to resolve all Disputed Matters and its decision with respect
to all Disputed Matters shall be final and binding upon the Parties hereto and
shall not be appealable to any court. The Arbiter shall render an opinion in
writing setting forth the basis of its decision on the Disputed Matters. Each
Party shall pay all costs and expenses incurred by such Party incident to the
arbitration, provided the costs and expenses of the Arbiter shall be shared
equally by Seller and OSI. Any portion of an Earn-Out Payment that is affected
by the Disputed Matter shall not be distributed until the resolution of the
Disputed Matter, and upon such resolution any increase in the applicable
Earn-Out Payment shall be distributed to Seller, or any decrease in the
applicable Earn-Out Payment shall be repaid to OSI by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties, each of
which Seller represents and warrants is true and correct on the date hereof and
shall be true and correct on the Closing Date and each of which shall survive
the Closing Date and the transactions contemplated hereby pursuant to Section
10.1.
3.1 Corporate Existence and Power of Company.
(a) Company is a corporation duly organized, validly existing and in
good standing under the Laws of the state of its incorporation.
(b) Company has the corporate power and authority to own and use its
assets and to transact the business in which it is engaged, holds all
franchises, licenses, permits necessary and required therefor, is duly licensed
or qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such license or qualification is required. Company has
the corporate power to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
3.2 Approval and Enforceability of Agreement.
(a) Seller has the full power, legal right and capacity to enter into
and deliver this Agreement, to perform his obligations hereunder and to
consummate the transactions contemplated hereby.
(b) Assuming due execution and delivery hereof by Buyer, this
Agreement is the legal, valid and binding obligation of Seller, enforceable
against Seller according to its terms except that (i) such enforcement may be
limited by or subject to any bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the Court before which any proceeding therefor may be brought.
3.3 Undisclosed Liabilities. In connection with the Business and the
Patentable Property, Seller has no Liabilities whatsoever, known or unknown,
asserted or unasserted, liquidated or unliquidated, accrued, absolute,
contingent or otherwise, and, there is no basis for any claim against Seller for
any such Liability except to the extent set forth on Schedule 3.3.
3.4 Intellectual Property.
(a) Seller does not own or use any Intellectual Property other than
the Patentable Property. Schedule 3.4 contains a true and accurate description
of the Patentable Property in the form of a draft business method patent
application (the "Application"). There are no all licenses or other rights
granted by any Seller to any third party with respect to any item of the
Patentable Property.
(b) Seller represents and warrants as follows: (i) the Patentable
Property along with the related goodwill and the Trade Names (as defined in the
Asset Purchase Agreement) encompasses all proprietary rights necessary or
desirable for the conduct of the Business as presently conducted or proposed to
be conducted (in each case free and clear of all Liens); (ii) Seller has good
and marketable title to the Patentable Property free and clear of all Liens and,
to Seller's knowledge, Seller has taken all actions necessary to maintain and
protect the Patentable Property; (iii) there has been no claim made against
Seller or Company asserting the invalidity, misuse or unenforceability of the
Patentable Property or challenging Seller's right to use or ownership of the
Patentable Property, and there are no grounds for any such claim or challenge;
(iv) Seller is not aware of any infringement or misappropriation of the
Patentable Property or of any facts raising a likelihood of infringement or
misappropriation; (v) Seller's use of the Patentable Property has not infringed
or misappropriated, and does not infringe or misappropriate, any intellectual
property or proprietary right of any other entity; (vi) no loss of the
Patentable Property is threatened, pending or reasonably foreseeable; and (vii)
the consummation of the transactions contemplated by this Agreement will not
alter, impair or extinguish the Patentable Property.
3.5 Necessary Property and Transfer of Assets. The Purchased Assets, the
Assumed Liabilities (as defined in the Asset Purchase Agreement) and the
Patentable Property constitute all the property and property rights now used,
useful or necessary for the conduct of the Business in the manner and to the
extent presently conducted by the Company and Seller. No consent is necessary
to, and there exists no restriction on, the transfer of the Patentable Property
to Buyer. There exists no condition, restriction or reservation affecting the
title to or utility of the Patentable Property which would prevent Buyer from
utilizing the Patentable Property, or any part thereof, to the same full extent
that Seller might continue to do so if the sale and transfer contemplated hereby
did not take place. Upon the Closing, good and marketable title to the
Patentable Property shall be vested in Buyer free and clear of all taxes and
Liens. Seller does not represent and warrant, or provide any other assurance,
that the patent application will result in the issuance of a business method
patent in accord with the patent application; and, if such patent is issued,
that it will be enforceable in accord with its terms. After the Closing, Buyer
shall, in its sole discretion, determine whether and in what form to file the
Application with the U.S. Patent and Trademark Office ("PTO") and, if it so
determines to file the Application with the PTO, Buyer be responsible for any
prosecution and related fees and costs incurred by Buyer in connection with such
filing. Seller understands that, if it so determines to file the Application
with the PTO, such business method patent may not ultimately issue with the
result that Buyer may have to rely solely on such other rights as may be
available under applicable state and federal law.
3.6 Notice of Violation. No notice of any violation of any Law relating
to the Patentable Property has been received by Seller.
3.7 No Breach of Law or Governing Document. In connection with the
Patentable Property, Seller has complied with and is not in default under or in
breach or violation of, (a) any applicable Law of any Government body or (b) any
franchise or license. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereunder does or will constitute
or result in any such default, breach or violation. No government permits or
consents are necessary to effect the transactions contemplated hereby.
3.8 Litigation and Arbitration. There is no suit, claim, action or
proceeding now pending or threatened before any Court, nor or there any grounds
therefor, to which Seller is a party or which may result in any Order,
Liability, or other determination which will, or could, have any adverse effect
upon the Patentable Property or upon the business, condition (financial or
otherwise) or operations of the Business. No such Order has been entered against
Seller, nor has any such Liability been incurred which has, or could have, such
effect. There is no claim, action or proceeding now pending or threatened before
any Court which will, or could, prevent or hamper the consummation of the
transactions contemplated by this Agreement.
3.9 Broker's Fees. Neither Seller nor Company has retained any broker,
finder or agent or agreed to pay any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this Agreement.
3.10 Truthfulness. No representation or warranty of Seller herein and no
statement or certificate furnished or to be furnished by or on behalf of Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and OSI hereby make the following representations and warranties,
each of which is true and correct on the date hereof and except for changes
expressly permitted by this Agreement, shall be true and correct on the Closing
Date and each of which shall survive the Closing Date and the sale contemplated
hereby pursuant to Section 10.1.
4.1 Corporate Existence of Buyer. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has the power and authority to own and use its
properties and to transact the business in which it is engaged. OSI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. OSI has the corporate power and authority to own and
use its properties and to transact the business in which it is engaged.
4.2 Approval of Agreement.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by all necessary corporate action of Buyer and OSI, and such authorization and
approval have not been revoked. Pursuant to such authorization and approval,
each of Buyer and OSI has full power and authority to enter into this Agreement,
and to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby.
(b) Assuming due execution and delivery hereof by Seller, this
Agreement is the legal, valid and binding obligation of each Buyer and OSI,
enforceable against each according to its terms except that (i) such enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or limiting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the Court before which any proceeding therefor
may be brought.
(c) Neither Buyer nor OSI is required to obtain any third party
contractual consents to effect the transactions contemplated hereby
4.3 No Breach of Articles or Indentures. The execution of this Agreement
and the consummation of the transactions contemplated hereby have not and will
not constitute or result in the breach of any of the provisions of, or
constitute a default under any material indenture, evidence of indebtedness or
other commitment to which Buyer or OSI is a party or by which either is bound,
which breach or default would have a material adverse effect on OSI and its
subsidiaries, taken as a whole. The execution of this Agreement and the
consummation of the transactions contemplated hereby have not and will not
constitute or result in the breach of any of the provisions of the charter
documents of Buyer or the certificate of incorporation or by-laws of OSI.
4.4 Broker's Fees. Neither Buyer nor OSI has retained any broker, finder or
agent or agreed to pay any brokerage fees, finder's fees or commissions with
respect to the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS CONCERNING SELLER
Seller covenants and agrees with Buyer that:
5.1 Operation of the Business. Without the prior written consent of Buyer,
Seller will not:
(a) Enter into any Contract or engage in any transaction related to
the Patentable Property.
(b) Sell or dispose of or encumber any Patentable Property.
(c) Take any action or incur any Liability or obligation which, if
taken or incurred prior to the date of this Agreement, would be required to be
disclosed on any Schedule hereto.
5.2 Preservation of Business. Company shall carry on the Business
diligently and substantially in the same manner as heretofore conducted.
5.3 Full Access. Representatives of Buyer shall have full access at all
reasonable times to all premises, properties, books, records, Contracts, tax
records and documents of Seller relating to the Patentable Property, and Seller
will furnish to Buyer any information in respect of the Patentable Property as
Buyer may from time to time request. Such examination and investigation by Buyer
shall not affect the warranties and representations of Seller contained in this
Agreement.
5.4 Governmental Filings Seller will cooperate with Buyer in making, as
soon as practicable following the execution hereof, all filings required by any
Government in connection with the transactions contemplated by this Agreement.
All information provided by Seller in connection with such filings will be true,
accurate and complete and will comply with all applicable Laws.
ARTICLE VI
OTHER AGREEMENTS
6.1 Tax Matters.
(a) Seller shall pay all applicable sales, use or other similar
transfer Taxes that are, or become, due or payable as a result of the sale,
conveyance, assignment, transfer or delivery of the Patentable Property
hereunder, whether levied on Buyer, the Patentable Property or Seller. Seller,
in the case of the Patentable Property, shall prepare, subject to Buyer's
reasonable approval, and file any Returns required in respect of such Taxes.
(b) All personal property, ad valorem and any other local or state
Taxes relating to the Patentable Property or the Business which shall be accrued
but unpaid as of the Effective Time, or which shall be paid as of the Effective
Time but relate in whole or in part to periods after the Effective Time, shall
be prorated to the Effective Time and shall be reflected on the Closing Balance
Sheet. Any such prorated Taxes which may be ultimately assessed after the
Effective Time shall be paid by Seller to Buyer or Buyer to Seller, as the case
may be, within thirty days of such determination.
(c) Seller and Buyer shall allocate Buyer's purchase of the
Patentable Property pursuant to Section 1060 of the Code and other applicable
Laws in a consistent manner and shall take no position contrary thereto and file
the appropriate Form 8594, attached as Schedule 6.1 with their respective income
tax returns. To the extent Buyer determines that a Form 1099 should be sent to
Seller, it shall be only on Form 1099-B with respect to the Internal Revenue
with no filing being made in Missouri; and, Seller and Buyer shall not take any
contrary income tax positions. If the classes for Form 8594 are changed then the
consideration shall be allocated as required for such new classes.
(d) Seller agrees to furnish or cause to be furnished, upon request,
as promptly as practicable, such information and assistance (including access to
books and records) relating to the Patentable Property as is reasonably
necessary for the preparation of any Return for Taxes, claims for refund or
audit or prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment of Taxes paid.
(e) Seller, upon request, shall use its reasonable efforts to provide
or obtain from any taxing authority any certificate or other document necessary
to mitigate, reduce or eliminate any Taxes (including additions thereto or
interest and penalties thereon) that otherwise would be imposed with respect to
the transactions contemplated in this Agreement.
ARTICLE VII
COVENANT NOT TO COMPETE
7.1 Covenant Not to Compete.
(a) As a further inducement to Buyer to purchase the Patentable
Property and to enter into the transactions contemplated under the Asset
Purchase Agreement, Seller agrees that for the period from the Closing Date
until the expiration of six years from the Closing Date (the "Restricted
Period"), Seller will not, directly or indirectly: (i) engage in or in any way
own, manage, operate, control or otherwise advise or assist or be actively
connected with any enterprise which engages in, or otherwise carries on, any
business activity in the United States of America which is in competition with
the Business or any business in which OSI and its subsidiaries are engaged; or
(ii) solicit or accept business from, or provide competitive products or
services to, any customers (whether or not such Persons have done business with
Company once or more than once) or accounts of Company (prior to the Closing
Date) or Buyer (after the Closing Date).
(b) It is expressly understood and agreed that although Seller and
Buyer consider the restrictions contained in this Section to be reasonable in
the context in which made, if a final judicial determination is made that the
time, territory, scope or any other restriction contained in this Section is
unreasonable or otherwise unenforceable, neither this Agreement nor the
provisions of this Section shall be rendered void, but shall be deemed amended
to apply as to such maximum scope, time and territory and to such other extent
as such Court may judicially determine or indicate to be reasonable, and as so
modified, the restrictions contained in this Section shall be binding and
enforceable.
7.2 Employees. Seller agrees that during the Restricted Period neither it
nor its successors or assigns will hire any Person who is or shall be in the
employ or service of Company prior to the Closing Date, and whom Buyer intends
to employ, or seek to entice, induce or in any manner influence any such
employee to leave his or her employment or not accept or continue in such
employment.
7.3 Confidentiality. Seller will not at any time disclose to any Person
other than Buyer or use any "Confidential Information" (as hereinafter defined)
owned, possessed, licensed or used by or relating to the Business, whether or
not such information is embodied in writing or other physical form. For purposes
of this Agreement, the phrase "Confidential Information" means all trade names,
trademarks, service marks, patents and trade secrets and any and all other
information not publicly available which relates to specific matters concerning
the Business, such as, without limiting the generality of the foregoing,
engineering, design, manufacturing, maintenance and repair information; computer
software and programs; component sourcing and supply information; identities of
suppliers, customers and contractors; product distribution information; pricing
and compensation policies; sales or financing procedures or methods; operational
methods; strategic plans; internal financial information; research and
development plans and activities; and acquisition and expansion plans. Seller
recognizes and agrees that all documents and objects containing any Confidential
Information, whether developed by Seller, Company or by someone else for Seller,
will after the Closing Date become the exclusive property of Buyer.
7.4 Remedies. Because the breach or anticipated breach of the restrictive
covenants provided for in this Article VII will result in immediate and
irreparable harm and injury to Buyer, for which it will not have an adequate
remedy at law, Seller agrees that Buyer shall be entitled to relief in equity to
temporarily, preliminarily and/or permanently enjoin such breach or anticipated
breach and to seek any and all other legal and equitable remedies to which Buyer
may be entitled. Should such action be taken and an injunction issued, Buyer
shall be entitled to reimbursement of attorneys' fees and costs incurred.
7.5 Permitted Exceptions. Nothing contained herein shall restrict Seller
from (A) owning two percent (2%) or less of the corporate securities of any
Person in competition with the Business which securities are listed on any
national securities exchange or authorized for quotation on the Automated
Quotations System of the National Association of Securities Dealers, Inc., if
such Person has no other connection or relationship, direct or indirect, with
the issuer of such securities or (B) providing systems consulting services to
non-financial services entities provided such systems consulting shall not
directly or indirectly involve accounts receivable management..
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
8.1 Representations and Warranties of Seller . The representations and
warranties of Seller contained in this Agreement, including the Schedules
hereto, and in the certificates and papers to be delivered to Buyer pursuant
hereto and in connection herewith shall be true and correct in all material
respects on the date hereof and on the Closing Date (except for changes
specifically permitted hereunder) as though such representations and warranties
were made on the Closing Date.
8.2 Approval by Buyer's and OSI's Boards. This Agreement and the
transactions contemplated hereby shall have been approved by or under the
authority of Buyer's and OSI's respective Boards of Directors.
8.3 Performance of this Agreement. Seller shall have duly performed or
complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
8.4 No Material Adverse Change and No Extraordinary Distributions. There
shall have been no material adverse change, actual or threatened, in the
Business (including the Patentable Property), whether or not covered by
insurance, as a result of any cause whatsoever.
8.5 Certificate of Seller . Buyer shall have received a certificate signed
by Seller dated as of the Closing Date and subject to no qualification
certifying that the conditions set forth in Sections 8.1, 8.2, 8.3, 8.4, 8.7,
8.8, 8.9, and 8.10 hereof have been fully satisfied. Such certificate shall be
deemed a representation and warranty of Seller under this Agreement.
8.6 Employment Agreement. Edward F. Lambert shall have executed and
delivered an Employment Agreement in substantially the form attached as Exhibit
C to the Asset Purchase Agreement.
8.7. No Lawsuits. No suit, action or other proceeding or investigation
shall be threatened or pending before or by any Court or Government concerning
this Agreement or the consummation of the transactions contemplated hereby, or
in connection with any claim against Seller not disclosed on the Schedules
hereto. No Government shall have threatened or directed any request for
information concerning this Agreement, the transactions contemplated hereby or
the consequences or implications of such transactions to Buyer, to Seller, or to
any officer, director, employee or agent of them.
8.8 No Restrictions. There shall exist no conditions, restrictions or
reservations affecting the title to or utility of the Patentable Property which
would prevent Buyer from occupying and utilizing the Patentable Property, or any
part thereof, to the same full extent that Seller might continue to do so if the
sale and transfer contemplated hereby did not take place.
8.9 Consents. All consents and approvals necessary to ensure that Buyer
will continue to have the same full rights in respect to the Patentable Property
as Seller had immediately prior to the consummation of the transactions
contemplated hereunder shall have been obtained.
8.10 Releases. At or prior to the Closing Date, Seller shall have delivered
to Buyer the written release of all Liens relating to the Patentable Property,
executed by the holder of or parties to each such Lien. The releases shall be
reasonably satisfactory in substance and form to Buyer and its counsel.
8.11 Documents. Buyer shall have received from Seller on the Closing Date
the Assignment to Buyer of the Patentable Property in the form of Exhibit A
hereto, duly executed by Seller.
8.12 Closing Asset Purchase Agreement. The transactions contemplated under
the Asset Purchase Agreement shall have been consummated.
8.13 Further Assurances. Buyer shall have received such further instruments
and documents as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained and the performance of all conditions to the consummation of such
transactions.
ARTICLE IX.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Seller to
waive any one or more of such conditions:
9.1 Representations and Warranties of Buyer and OSI. The representations
and warranties of Buyer and OSI contained in this Agreement, including the
Schedules hereto, and in the certificates and papers to be delivered to Seller
pursuant hereto and in connection herewith shall be true and correct in all
material respects on the date hereof and on the Closing Date (except for changes
specifically permitted hereunder) as though such representations and warranties
were made on the Closing Date.
9.2 Performance of this Agreement. Buyer and OSI shall have duly performed
or complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
9.3 Certificate of Buyer. Seller shall have received a certificate signed
by an officer of Buyer and OSI dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 9.1, 9.2, and
9.5 hereof have been fully satisfied. Such certificate shall be deemed a
representation and warranty of Buyer and OSI hereunder.
9.4 Payment of Closing Payment. On the Closing Date, Seller shall have
received from Buyer the Closing Payment to be delivered under Section 2.6
hereof.
9.5 No Lawsuits. No suit, action or other proceeding or investigation
shall be threatened or pending before or by any Court or Government concerning
this Agreement or the consummation of the transactions contemplated hereby. No
Government shall have threatened or directed any request for information
concerning this Agreement, the transactions contemplated hereby or the
consequences or implications of such transactions to Buyer, to Seller, or to any
officer, director, employee or agent of it.
9.6 Documents. Seller shall have received from Buyer on the Closing Date:
(a) A certificate of good standing of Buyer dated within five days of
the Closing Date, from the Secretary of State of the State of Delaware.
(b) A certificate of good standing of OSI dated within five days of
the Closing Date, from the Secretary of State of Delaware.
(c) A copy, certified by the Secretary of Buyer to be true, complete
and correct as of the Closing Date, of the certificate or articles of
incorporation and bylaws of Buyer and all resolutions, authorizations, consents,
approvals and/or ratifications of the directors of Buyer required for the
authorization of Buyer to enter into this Agreement and consummate the
transactions contemplated hereunder. Such certificate shall also contain a
certification of the incumbency and genuineness of the signatures of the
officers of Buyer executing any document to be delivered to Seller and shall be
deemed a representation and warranty of Buyer under this Agreement.
(d) A copy, certified by the Secretary of OSI to be true, complete
and correct as of the Closing Date, of the certificate of incorporation and
bylaws of OSI and all resolutions, authorizations, consents, approvals and/or
ratifications of the directors of OSI required for the authorization of OSI to
enter into this Agreement and consummate the transactions contemplated
hereunder. Such certificate shall also contain a certification of the incumbency
and genuineness of the signatures of the officers of OSI executing any document
to be delivered to Seller and shall be deemed a representation and warranty of
OSI under this Agreement.
9.7 Closing Asset Purchase Agreement. The transactions contemplated under
the Asset Purchase Agreement shall have been consummated.
9.8 Further Assurances. Seller shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE X.
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations and
warranties of the Parties made in this Agreement or in any exhibit, statement,
Schedule, certificate, instrument or document delivered pursuant hereto shall
survive the Closing and shall remain in effect for a period of three years from
the Closing Date and shall thereupon terminate and be of no further force and
effect; provided, however, that the foregoing shall not apply to representations
and warranties under Sections 3.2, 3.4 and 3.5; and provided, further, that this
shall not prohibit any claim for Indemnified Losses pursuant to Section 10.2
after such applicable survival period with respect to Indemnified Losses as to
which the Indemnifying Party has received notice in accordance with this Article
X prior to the expiration of such survival period. The expiration of any
representation or warranty made in this Agreement or in any exhibit, statement,
Schedule, certificate, instrument or document delivered pursuant hereto shall
not impair or restrict the rights that any Party could assert with respect to
any and all remedies at law or in equity in the absence of such representation
or warranty. All representations and warranties hereunder shall be deemed to be
material and, except as otherwise specifically provided herein, relied upon by
the Parties with or to whom the same were made, notwithstanding any
investigation or inspection made by or on behalf of such Party or Parties. which
shall survive until the expiration of the applicable statute of limitations.
10.2 Seller's Indemnification.
(a) Seller agrees to hold Buyer, OSI and the shareholders, directors,
officers, employees, Affiliates, successors, assigns and agents of each of them
(collectively, the "Buyer Indemnified Persons") harmless from, against and in
respect of, and waives any claim for contribution or indemnity with respect to,
any and all claims, losses, damages, Liabilities, expenses or costs ("Losses"),
plus reasonable attorneys' fees and expenses incurred in connection with Losses
and/or enforcement of this Agreement, plus interest from the date incurred
through the date of payment at the prime lending rate plus 2% of Bank of America
from time to time prevailing (in all, "Indemnified Losses") incurred or to be
incurred by any of them to the extent resulting from or arising out of, or
alleged to result from or arise out of:
(i) any breach or violation of the representations and
warranties, of Seller contained in Article III of this Agreement;
(ii) any breach or violation of the covenants or agreements of
Seller contained in this Agreement, or in any exhibit, statement, Schedule,
certificate, instrument or document delivered pursuant hereto, including the
provisions of this Article X;
(iii) any Liability of Seller, without regard to the fact that
any indemnifiable matter described in this subsection (iii) may have been
disclosed in the Schedules or in any documents included or referred to therein
or may be otherwise known to Buyer at the date of this Agreement or on the
Closing Date;
(iv) the assertion of any claim by any person related to or
arising out of the transactions contemplated in the Agreement of Purchases and
Sale of Stock, dated December 31, 2000 between Seller and Edward L. Witt;
(v) any claim Buyer may have against Company or Seller in
connection with the Asset Purchase Agreement; and
(vi) without being limited by the foregoing subsections (i)
through (v) and without regard to whether any one or more of the items listed in
this subsection (vi) may be disclosed in the Schedules or otherwise known to
Buyer as of the date of this Agreement or on the Closing Date: all Taxes of
Seller and Seller's Liability for its own Taxes or its Liability, if any (for
example, by reason of transferee Liability or application of Treas. Reg. Section
1.1502-6) for Taxes of others, and fines and penalties and reasonable expenses
(including but not limited to reasonable attorneys' fees and expenses) payable
with respect to or arising out of any claim or assessment for such Taxes against
Buyer or the Patentable Property, (1) for any taxable period ending on or before
the Effective Time or (2) sustained in a tax period of Buyer ending after the
Effective Time arising out of the settlement or other resolution of a proposed
tax adjustment which relates to a tax period ending on or before the Effective
Time.
(b) The Buyer Indemnified Persons shall not be entitled to recover
Indemnified Losses to the extent such Indemnified Losses exceed the aggregate
consideration paid for (i) the Patentable Property as contemplated under Section
2.3 of this Agreement and (ii) the Purchased Assets as contemplated under
Section 2.3 of the Asset Purchase Agreement, once Seller has made payments to or
on behalf of Buyer Indemnified Persons with respect to such Indemnified Losses
in such amount.
10.3 Buyer's Indemnification. Buyer and OSI hereby agree to hold Seller and
his Affiliates, successors, assigns and agents of each of them (collectively,
the "Seller Indemnified Persons") harmless from, against and in respect of, and
waives any claim for contribution or indemnity with respect to, any and all
Indemnified Losses incurred or to be incurred by any of them, to the extent
resulting from or arising out of, or alleged to result from or arise out of: (i)
any breach or violation of the representations, warranties, covenants and
agreements of Buyer and OSI contained in this Agreement, or in any exhibit,
statement, Schedule, certificate, instrument or document delivered pursuant
hereto, including the provisions of this Article X and (ii) any default in
making payment in which case Seller may pursue any remedies with Buyer and OSI
concurrently without first exhausting any remedies against Buyer.
10.4 Notice of Claim. In the event that Buyer seeks indemnification on
behalf of a Buyer Indemnified Person, or Seller seeks indemnification on behalf
of a Seller Indemnified Person, such Party seeking indemnification (the
"Indemnified Party") shall give written notice to the other Party (the
"Indemnifying Party") specifying the facts constituting the basis for such claim
and the amount, to the extent known, of the claim asserted. With respect to
claims other than Third Person Claims, the Indemnifying Party shall have 20
calendar days after the Indemnified Party provides notice to the Indemnifying
Party to make such investigation of the claim as the Indemnifying Party deems
necessary or desirable. For purposes of such investigation, the claimant agrees
to make available to the Indemnifying Party or its authorized representative(s)
the information relied upon by the claimant to substantiate the claim. If the
Indemnified Party and the Indemnifying Party agree at or prior to the expiration
of such 20 day period (or any mutually agreed upon extension thereof) to the
validity and amount of such claim, the Indemnifying Party shall pay the amount
of such claim not more than 10 calendar days after agreement. If the Indemnified
Party and the Indemnifying Party do no agree within such period (or any mutually
agreed upon extension thereof), the Indemnified Party may seek any available
legal remedy.
10.5 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) ("Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a Person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest or settle the claim alleged by such Third Person (a "Third Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third Person Claim within 20 calendar days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnify and assume the defense of any
such Third Person Claim, (a) the Indemnified Party may defend against such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
action, with its own counsel at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such Third Person Claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by clear and convincing
evidence that conduct of the Indemnified Party in the defense and/or settlement
of such Third Person Claim constituted gross negligence or willful misconduct.
The Parties shall make available to each other all relevant information in their
possession relating to any such Third Person Claim and shall cooperate in the
defense thereof.
10.6 Set-Off Rights. Subject to complying with the procedures of Sections
10.4 and/or 10.5, Buyer or OSI shall have the right to seek, in their sole
discretion, satisfaction of Indemnified Losses: (a) from Seller or (b) by
offsetting Indemnified Losses against any payments due under any Earn-Out
Payments which may be due to Seller pursuant to Section 2.8.
ARTICLE XI.
MISCELLANEOUS
11.1 Assignment; Binding Agreement.
(a) This Agreement and all or any part of Buyer's rights and
obligations hereunder may be assigned by Buyer at any time to any one or more
Affiliates of Buyer. Buyer shall cause such Affiliate(s) to perform any of
Buyer's obligations hereunder which are assigned to such Affiliate(s).
(b) Neither this Agreement nor any of Seller's rights or obligations
hereunder may be assigned by Seller without Buyer's prior written consent.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and to their respective successors and permitted
assigns.
11.2 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) By mutual consent of Buyer and Seller.
(b) By either Buyer or Seller if the Closing shall not have occurred
on or before May 31, 2001, or such other date, if any, as Buyer and Seller shall
agree upon.
(c) By Buyer if:
(i) Either Buyer's or OSI's Board of Directors declines to
approve this Agreement and the transaction contemplated hereby, or
(ii) Buyer determines, in its sole discretion, that the
transaction contemplated hereby has become inadvisable or impractical (A) as a
result of Buyer's investigation of the Business prior to the Closing or (B) by
reason of the institution or threat by any Person, Governmental or otherwise, of
any litigation, investigation or proceeding (it being understood and agreed
that, without limiting the generality of the foregoing, a written request by
Government authorities for information with respect to the proposed transactions
may be deemed to be a threat of litigation, investigation or proceedings).
11.3 Manner and Effect of Termination.
(a) Any action by Buyer to terminate this Agreement and the
transactions contemplated hereby, as provided in Section 11.2 hereof, shall be
taken by its Chairman of the Board, its President or any appropriately
authorized officer.
(b) If this Agreement is terminated pursuant to Section 11.2 hereof
without fault of either Party or breach of this Agreement, all obligations of
Seller and Buyer hereunder shall terminate, without Liability of Seller to Buyer
or of Buyer to Seller. In such event, each Party hereto shall pay all legal and
other costs and expenses incurred by such Party in connection with this
Agreement and the transactions contemplated hereby.
(c) Nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any Party to any and all remedies at law or in
equity in the event of a breach of or default under this Agreement.
11.4 Non-Disclosure of Information. Without the prior written consent of
Buyer, Seller will not disclose or reveal to any third Person any confidential,
non-public or commercially valuable information (a) concerning Buyer to which
Seller was exposed in connection with this Agreement or (b) concerning the
Business.
11.5 Bulk Sales. Buyer hereby waives compliance with any applicable State
Uniform Commercial Code or other statutory provisions governing bulk sales.
Seller agrees to indemnify, defend and hold harmless Buyer from any and all
loss, cost or expenses, resulting from the assertion of claims made against the
Patentable Property sold hereunder, such indemnity to be in accordance with the
provisions of Article X hereof, without regard to the limitations contained in
Section 10.2(b).
11.6 Remedies. Nothing contained herein is intended to or shall be
construed to limit the remedies which either Party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
11.7 Entire Agreement and Modification. This Agreement, including the
Schedules and Exhibits attached hereto and the documents to be delivered
pursuant hereto, constitutes the entire agreement between the Parties. No
changes of, modifications of, amendments to, or additions to this Agreement
shall be valid unless the same shall be in writing and signed by all Parties
hereto.
11.8 Severability. If any provision of this Agreement shall be determined
to be contrary to Law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
11.9 Counterparts. This Agreement may be executed in one or more identical
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed and thereafter transmitted by telecopier, and the telecopier receipt
shall constitute an original.
11.10 Headings; Interpretation. The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
Both Parties have participated substantially in the negotiation of this
Agreement, and each Party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be construed against
the draftsman.
11.11 Choice of Forum and Governing Law. In light of the parties' interests
in ensuring that disputes regarding the interpretation, validity and
enforceability of this Agreement are resolved on a uniform basis, and the
execution of, and the making of, this Agreement in Missouri, the parties agree
that: (a) any litigation involving any noncompliance with or breach of this
Agreement, or regarding the interpretation, validity and/or enforceability of
this Agreement, shall be filed and conducted in the state or federal courts in
St. Louis, Missouri; and (b) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without regard for any
conflict of law principles.
11.12 Payment of Fees and Expenses. Each Party hereto shall pay all fees
and expenses incurred by such Party incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, including the fees of counsel, accountants and other
experts of such Party and any finder's or brokerage fees incurred by such Party.
11.13 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (a) personally, (b) by registered or certified
mail, postage prepaid, (c) by facsimile transmission (with a copy confirmed by
mail) or (d) by overnight delivery service and addressed as set forth below:
(a) If to Buyer or OSI:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 350
Chesterfield, MO 63017
Attention: President and CEO
Fax: (314) 576-1867
copy to (which shall not constitute notice):
Bryan Cave LLP
One Metropolitan Square
211 N. Broadway, Suite 3600
St. Louis, MO 63102
Attention: Peter D. Van Cleve
Fax: (314) 259-2020
(b) If to Seller:
Edward F. Lambert
254 6th Street
Seal Beach, California 90740
copy to (which shall not constitute notice):
Cheadle & Garrett
4041 Macarthur Boulevard
Newport Beach, CA 92660
Attention: C. Tucker Cheadle
Fax: (949) 833-1292
Any such notice shall be effective upon receipt. Any Party may change the
address to which notices are to be addressed by giving the other Party notice in
the manner herein set forth.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES HERETO.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, on the
day and year first above written.
/s/ Edward F. Lambert
- --------------------------
Edward F. Lambert
OUTSOURCING SOLUTIONS INC.
By:/s/ Gary L. Weller
-----------------------
Name: Gary L. Weller
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Title: EVP & CFO
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PACIFIC SOFTWARE CONSULTING, LLC
By:/s/ Eric R. Fencl
-----------------------
Name: Eric R. Fencl
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Title: Secretary
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TABLE OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A Form of Assignment of Patentable Property
Schedules
Schedule 2.4 Allocation of Consideration
Schedule 2.8 Earn-Out Principles and Procedures
Schedule 3.3 Undisclosed Liabilities
Schedule 3.4 Patentable Property