Asset Purchase Agreement - Exult Inc. and Gunn Partners Inc.
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ASSET PURCHASE AGREEMENT
BY AND AMONG
EXULT, INC.,
GUNN PARTNERS INC.,
THE SHAREHOLDERS OF GUNN PARTNERS, INC.
AND
MICHAEL GIBSON
DATED AS OF NOVEMBER 22, 1999
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF ASSETS..................................................1
1.1 Purchased Assets.............................................................1
1.2 Excluded Assets..............................................................2
ARTICLE II PURCHASE PRICE; ASSUMED LIABILITIES..........................................2
2.1 Purchase Price...............................................................2
2.2 Assumed Liabilities..........................................................3
2.3 Excluded Liabilities.........................................................3
2.4 No Expansion of Third Party Rights...........................................4
2.5 Allocation...................................................................4
ARTICLE III CLOSING......................................................................4
3.1 Time and Place...............................................................4
3.2 Procedure at the Closing.....................................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EXULT......................................5
4.1 Corporate Status.............................................................5
4.2 Corporate Power and Authority................................................5
4.3 Enforceability...............................................................6
4.4 Capitalization of Exult......................................................6
4.5 No Violation.................................................................6
4.6 No Commissions...............................................................6
4.7 Financial Statements.........................................................7
4.8 Changes Since the Exult Balance Sheet........................................7
4.9 Litigation...................................................................7
4.10 Compliance with Laws.........................................................7
4.11 Employee Benefit Plans.......................................................7
4.12 Tax Matters..................................................................7
4.13 Clients; Client Contracts....................................................7
4.14 Third-Party Transactions.....................................................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS...........8
5.1 Corporate Status.............................................................8
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5.2 Power and Authority..........................................................8
5.3 Enforceability...............................................................8
5.4 Shareholders; Capitalization of the Company..................................8
5.5 No Violation.................................................................9
5.6 No Commissions...............................................................9
5.7 Financial Statements.........................................................9
5.8 Changes Since the Current Balance Sheet.....................................10
5.9 Litigation..................................................................10
5.10 Environmental Matters.......................................................10
5.11 Good Title, Adequacy and Condition..........................................13
5.12 Compliance with Laws........................................................13
5.13 Labor and Employment Matters................................................13
5.14 Employee Benefit Plans......................................................14
5.15 Tax Matters.................................................................15
5.16 Insurance...................................................................15
5.17 [Intentionally Omitted].....................................................15
5.18 Licenses and Permits........................................................15
5.19 Client Lists; Assigned Contracts............................................16
5.20 Real Estate.................................................................16
5.21 Intellectual Property.......................................................16
5.22 Material Contracts..........................................................16
5.23 [Intentionally Omitted].....................................................17
5.24 Indebtedness and Liabilities of the Company.................................17
5.25 Employees...................................................................17
5.26 Business Relations..........................................................17
5.27 The Data Protection Act.....................................................17
ARTICLE VI CONDUCT OF BUSINESS PENDING THE CLOSING.....................................18
6.1 Conduct of Business by the Company Pending the Closing......................18
ARTICLE VII CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES.............................18
7.1 Further Assurances..........................................................18
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7.2 Confidentiality; Publicity..................................................19
7.3 No Other Discussions........................................................19
7.4 Access to Information.......................................................19
7.5 Covenant not to Compete.....................................................19
7.6 UK Covenant not to Compete..................................................22
7.7 Assigned Contracts and Consents.............................................23
7.8 Use of Name.................................................................23
7.9 GPI Payables Reserve........................................................23
7.10 Payment Default; Non-Exclusive License......................................24
7.11 Agreement to Cooperate; Sales Tax Exemption.................................24
7.12 Employment; Stock Options; Employee Benefit Matters.........................25
7.13 Closing Conditions..........................................................26
7.14 Business Failure of Exult...................................................26
7.15 Gunn Database...............................................................26
7.16 Right of First Offer........................................................26
7.17 Financial Statements........................................................27
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF EXULT......................................27
8.1 [Intentionally Omitted].....................................................28
8.2 [Intentionally Omitted].....................................................28
8.3 Corporate Certificate.......................................................28
8.4 Delivery of Purchased Assets................................................28
8.5 Legal Opinion...............................................................28
8.6 No Adverse Litigation.......................................................28
8.7 Third Party Consents........................................................28
8.8 Employment Matters..........................................................28
8.9 Board Approval..............................................................28
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS...........29
9.1 [Intentionally Omitted].....................................................29
9.2 [Intentionally Omitted].....................................................29
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9.3 Corporate Certificate.......................................................29
9.4 Legal Opinion...............................................................29
9.5 Employment Matters..........................................................29
9.6 Delivery of Closing Date Payment............................................29
9.7 No Order or Injunction......................................................29
9.8 Board Approval..............................................................29
ARTICLE X INDEMNIFICATION.............................................................29
10.1 Agreement by the Company and the Shareholders to Indemnify..................29
10.2 Agreement by Exult to Indemnify.............................................31
10.3 Survival of the Representations and Warranties..............................31
10.4 Set off Against the Held Back Amount........................................31
10.5 Delivery of the Held Back Amount............................................32
10.6 No Bar......................................................................32
ARTICLE XI DEFINITIONS.................................................................32
11.1 Defined.....................................................................32
ARTICLE XII TERMINATION.................................................................35
12.1 Termination.................................................................35
12.2 Effect of Termination.......................................................35
ARTICLE XIII GENERAL PROVISIONS..........................................................35
13.1 Notices.....................................................................35
13.2 Entire Agreement; No Third Party Beneficiaries..............................36
13.3 Expenses....................................................................36
13.4 Amendment; Waiver; Binding Effect; Assignment...............................36
13.5 Counterparts................................................................37
13.6 Governing Law; Venue; Waiver of Jury........................................37
13.7 Severability................................................................37
13.8 Arm's Length Negotiations...................................................37
13.9 Construction................................................................38
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LIST OF EXHIBITS AND SCHEDULES
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EXHIBIT A BILL OF SALE AND ASSIGNMENT
EXHIBIT B ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 7.12(a) EMPLOYEE AGREEMENTS
EXHIBIT 7.12(b) EMPLOYEE AGREEMENTS
EXHBIIT 8.5 LEGAL OPINIONS OF ECKERT SEAMANS CHERIN & MELLOTT
EXHIBIT 9.4 LEGAL OPINIONS OF MCDERMOTT, WILL & EMERY
SCHEDULE 1.1(a) TANGIBLE PERSONAL PROPERTY
SCHEDULE 1.1(b) ASSIGNED CONTRACTS
SCHEDULE 1.1(f) INTELLECTUAL PROPERTY
SCHEDULE 1.1(g) LICENSES AND PERMITS
SCHEDULE 1.2 EXCLUDED ASSETS
SCHEDULE 4.4 CAPITALIZATION OF EXULT
SCHEDULE 4.7 FINANCIAL STATEMENTS
SCHEDULE 4.8 CHANGES SINCE THE EXULT BALANCE SHEET
SCHEDULE 4.11 EMPLOYEE BENEFIT PLANS
SCHEDULE 4.14 THIRD-PARTY TRANSACTIONS
SCHEDULE 5.1 CORPORATE STATUS
SCHEDULE 5.7 FINANCIAL STATEMENTS
SCHEDULE 5.10 ENVIRONMENTAL MATTERS
SCHEDULE 5.14 EMPLOYEE BENEFIT PLANS
SCHEDULE 5.15 TAX MATTERS
SCHEDULE 5.16 INSURANCE POLICIES
SCHEDULE 5.19 CLIENT LISTS; ASSIGNED CONTRACTS
SCHEDULE 5.20 REAL ESTATE
SCHEDULE 5.21 INTELLECTUAL PROPERTY
SCHEDULE 5.22 MATERIAL CONTRACTS
SCHEDULE 5.24 INDEBTEDNESS AND LIABILITIES OF THE COMPANY
SCHEDULE 5.25 EMPLOYEES
SCHEDULE 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING
SCHEDULE 7.12(a) EMPLOYMENT MATTERS
SCHEDULE 7.12(b) EMPLOYMENT MATTERS
SCHEDULE 7.15 GUNN DATABASE
SCHEDULE 8.7 THIRD PARTY CONSENTS
SCHEDULE 10.1 AGREEMENT BY THE COMPANY AND THE SHAREHOLDERS TO INDEMNIFY
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[EXECUTION COPY]
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November
22, 1999, is entered into by and among EXULT, INC., a Delaware corporation
("EXULT"), GUNN PARTNERS INC., a Delaware corporation (the "COMPANY"), Michael
Gibson, a member of the Company's senior management who is not a shareholder of
the Company but who has agreed to be bound by the terms hereof as if he were a
shareholder of the Company ("GIBSON"), and the shareholders of the Company whose
names are set forth on the signature pages attached hereto (such shareholders,
together with Gibson, being referred to herein collectively, the
"SHAREHOLDERS"). Certain other capitalized terms used herein are defined in
Article XI hereof and throughout this Agreement.
RECITALS
The Company owns and operates a business which specializes in providing
management consulting services in such areas as finance, human resources,
procurement, real estate and facilities management, and environmental health and
safety (the "BUSINESS"). Exult desires to purchase and the Company and the
Shareholders desire to sell, substantially all of the assets, properties and
business of the Company on the terms and subject to the conditions set forth in
this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASED ASSETS. On the terms and subject to the conditions set
forth in this Agreement, at the Closing (as defined in Section 3.1 hereof) the
Company shall sell, convey, transfer, assign and deliver to Exult all of its
right, title and interest in and to all of the assets and properties owned by
the Company and employed or used in connection with the Business of every kind
and description, whether tangible or intangible, wherever located, except for
those assets of the Company which are specifically excluded as provided in
Section 1.2 hereof (collectively, the "PURCHASED ASSETS"), free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever.
Without limiting the generality of the foregoing, the Purchased Assets shall
include (without limitation) the following assets:
(a) Tangible Personal Property. All machinery, equipment,
tools, supplies, leasehold improvements, construction in progress,
furniture and fixtures, trucks, automobiles, vehicles, computer
equipment, computer software and all other tangible
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fixed assets owned by the Company, including (without limitation) those
set forth on SCHEDULE 1.1(A) attached hereto;
(b) Assigned Contracts. All of the contract and non-contract
customer accounts, customer account contracts, franchise contracts,
other rights to provide services to the customers of the Company and
other Contracts relating to the Business, as set forth on SCHEDULE
1.1(B) attached hereto (collectively, the "ASSIGNED CONTRACTS");
(c) [Intentionally Omitted];
(d) Prepayments. All prepaid and deferred items of the
Company, including (without limitation) prepaid rentals, insurance,
taxes and deposits relating to the operations of the Company;
(e) Leasehold Interests. All of the interest of and the rights
and benefits accruing to the Company as lessee under the Leased
Premises (as defined in Section 5.20 hereof) and any leases of
machinery, vehicles, equipment, tools, furniture, fixtures or other
fixed assets;
(f) Intellectual Property. All of the proprietary rights of
the Company, including (without limitation) all trade names, slogans,
processes, operating rights, other licenses (including, without
limitation, all worldwide licenses with respect to all existing patents
and patent applications used in connection with the Business) and
permits and other similar intangible property and rights relating to
the Company, including all right in and to the use of the name "Gunn
Partners Inc." and any substantially similar name or derivative thereof
(collectively, the "INTELLECTUAL PROPERTY"), including (without
limitation) those set forth on SCHEDULE 1.1(F) attached hereto;
(g) Licenses and Permits. To the extent assignable, all
permits, licenses, certificates of authority, franchises,
accreditations, registrations and other authorizations issued or used
in connection with the Business, including (without limitation) those
set forth on SCHEDULE 1.1(G) attached hereto; and
(h) Books, Records and other Assets. All operating data and
records of the Company, including (without limitation) customer lists
and records; credit records; budgets and other similar documents and
records; and all of the Company's telephone and telecopier numbers and
post office boxes.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary set forth
in Section 1.1, the Purchased Assets shall not include those assets specifically
set forth on SCHEDULE 1.2 attached hereto.
ARTICLE II
PURCHASE PRICE; ASSUMED LIABILITIES
2.1 PURCHASE PRICE. As consideration for the Purchased Assets, Exult
agrees, on the terms and subject to the conditions and limitations set forth
herein, to pay to the Company an
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aggregate of Fifteen Million Dollars ($15,000,000) (the "PURCHASE PRICE"), which
amount shall be payable by Exult as follows: (a) on the Closing Date, Exult
shall pay to the Company Five Million Dollars ($5,000,000) of the Purchase Price
in cash by wire transfer of immediately available funds (the "CLOSING DATE
PAYMENT") and (b) subject to set-off and recoupment by Exult in accordance with
the provisions of Article X hereof, (i) within five days following the first
anniversary of the Closing Date, Exult shall pay to the Company Five Million
Dollars ($5,000,000) (the "SECOND INSTALLMENT") and (ii) within five days
following the second anniversary of the Closing Date, Exult shall pay to the
Company $5,000,000 (the "THIRD INSTALLMENT;" the Second Installment and the
Third Installment being referred to herein, collectively, as the "HELD BACK
AMOUNT"). In the event any employee listed on SCHEDULE 5.25 attached hereto
shall cease to be employed by Exult (due to the termination of such employee by
Exult for Cause or the resignation of such employee) prior to the scheduled
payment date of the Second Installment or the Third Installment, as the case may
be, then the Second Installment and the Third Installment, as the case may be,
shall be reduced by the amount of the agreed-upon devaluation of the Business
relating thereto as set forth on SCHEDULE 5.25 attached hereto. It is expressly
understood and agreed that neither a termination by Exult for Cause or a
resignation by a Shareholder or any other employee listed on SCHEDULE 5.25 shall
result in any forfeiture or adjustment of any payment previously received
hereunder.
2.2 ASSUMED LIABILITIES. As of the Closing, Exult shall assume the
future payment and performance of the obligations and other duties of the
Company with respect to the Business under the Assigned Contracts and the Real
Estate Leases to the extent that such obligations and duties accrue after the
Closing Date (the "ASSUMED LIABILITIES").
2.3 EXCLUDED LIABILITIES. Except for the Assumed Liabilities, the
parties hereto expressly agree that Exult shall not assume or otherwise become
liable for, and none of the Purchased Assets shall become subject to any Lien or
claim for, any obligations or liabilities of the Company (the "EXCLUDED
LIABILITIES"), including (without limitation) (a) any liability or obligation
relating to income, franchise, sales, profits, use, license, gross receipts,
excise, single business, occupation, payroll, employment, unemployment, personal
property, gains, stamp, transfer or withholding taxes relating to the ownership
of the Purchased Assets or the operation of the Company prior to the Closing or
to the sale, acquisition, conveyance, transfer and delivery of the Purchased
Assets hereunder, or any part thereof or interest therein, or which arise by
reason of any other transaction contemplated hereby, including (without
limitation) any interest or penalties related thereto; (b) any liability or
obligation relating to any material default under any of the Assumed Liabilities
to the extent such default existed or was caused prior to the Closing; (c) any
liability or obligation, whether arising in tort, contract or from violation of
any law, statute, rule or regulation (including, without limitation, the Council
of the European Communities' Directives No. 77/187 EEC and 98/50/EC (the
"ACQUIRED RIGHTS DIRECTIVES"), the United Kingdom's Transfer of Undertaking
(Protection of Employment) Regulations 1981, as amended ("TUPE"), and any other
enabling or implementing legislation in force from time to time in any European
jurisdiction to which the transfer of the assets, properties and business of the
Company may be subject ("OTHER EUROPEAN TRANSFER OF UNDERTAKINGS LAW") and the
Council of the European Communities' Directive No. 95/46/EEC (the "DATA
PROTECTION DIRECTIVE"), the United Kingdom's Data Protection Act 1998 (the "UK
PROTECTION ACT") and any other enabling or implementing legislation in force
from time to time in any European jurisdiction relating to the collection,
holding, processing or use of Personal Data ("OTHER
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EUROPEAN DATA PROTECTION LAW"); provided that, for the purposes of this
Agreement, "PERSONAL DATA" shall mean data which relate to a living individual
who can be identified from those data or from those data and other information
which is or has been in the Company's possession (including such information and
data relating to the employees listed in SCHEDULES 7.12(A) AND 7.12(B) attached
hereto) and the collection, holding, processing or use of which is subject to
the requirements of the Data Protection Directive, the UK Protection Act and
Other European data protection law) by the Company, or an employee or agent
thereof, that arises out of or results from any act, omission, occurrence or
state of facts prior to the Closing; (d) any liability or obligation of the
Company, or any entity that would be aggregated with the Company under Code
Section 414(b), (c), (m) or (o), with respect to or arising out of any Employee
Benefit Plan and (e) any other liability or obligation of the Company or any
other person or entity, absolute or contingent, known or unknown that is not
expressly agreed to be assumed pursuant to the provisions of Section 2.2 hereof.
2.4 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by Exult of the
Assumed Liabilities, and the transfer thereof by the Company, shall in no way
expand the rights or remedies of any third parties against Exult or the Company,
as compared to the rights and remedies which such third party would have had
against the Company had Exult not assumed such liabilities. Without limiting the
generality of the preceding sentence, the assumption by Exult of the Assumed
Liabilities shall not create any third party beneficiary rights.
2.5 ALLOCATION. The parties agree that the sum of One Hundred Thousand
Dollars ($100,000) shall be allocated to the non-competition obligations set
forth in Section 7.5 and Section 7.6 hereof and that the remaining Purchase
Price shall be allocated among the Purchased Assets to be transferred pursuant
to this Agreement. The parities agree to allocate such remaining portion of the
Purchase Price among the Purchased Assets in a manner consistent with the
requirements set forth in Section 1060 of the Code and the Treasury regulations
promulgated thereunder. Within 90 days after the Closing, Exult shall provide
the Company with a preliminary allocation of the Purchase Price for the
Company's review and approval, which approval shall not be unreasonably withheld
or delayed. In addition, it is agreed that such allocation will be binding on
both parties for federal income tax purposes in connection with this purchase
and sale of the Purchased Assets, and will be consistently reflected by each
party on their respective federal income tax returns. The parties agree to
prepare and timely file all applicable Internal Revenue Service forms, including
Form 8594 (Asset Acquisition Statement), and other governmental forms, to
cooperate with each other in the preparation of such forms and to furnish each
other with a copy of such forms prepared in draft, within a reasonable period
prior to the filing due date thereof.
ARTICLE III
CLOSING
3.1 TIME AND PLACE. The consummation of the transactions contemplated
hereby (the "CLOSING") shall take place as of the date hereof by an exchange of
facsimile pages, with originals to be delivered by overnight courier. The date
on which the Closing occurs shall be referred to herein as the "CLOSING DATE."
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3.2 PROCEDURE AT THE CLOSING. At the Closing, the parties agree that
the following shall occur:
(a) The Company shall have satisfied, or Exult shall have
waived in writing in its sole discretion, each of the conditions set
forth in Article VIII hereof and shall deliver to Exult the documents,
certificates, opinions, consents and letters required by such Article.
(b) Exult shall have satisfied, or the Company shall have
waived in writing in its sole discretion, each of the conditions set
forth in Article IX and shall deliver to the Company the documents,
certificates, opinions, consents and letters required by such Article.
(c) The Company shall deliver to Exult, or its assignee, the
(a) Bill of Sale and Assignment in the form attached hereto as EXHIBIT
A and (b) Assignment and Assumption Agreement in the form attached
hereto as EXHIBIT B, and such other deeds, bills of sale, endorsements,
assignments, releases and other instruments as shall be sufficient to
vest in Exult (or its assignee) good and marketable title to the
Purchased Assets. The Company agrees to execute and deliver to Exult
(or its assignee) from time to time such further and particular
assignments, consents, or other instruments in writing as Exult (or its
assignee) may request as appropriate or desirable to confirm its title
in and to the Purchased Assets. At or prior to the Closing, Exult may,
in its sole and absolute discretion, instruct the Company to transfer
the Purchased Assets to a direct or indirect wholly-owned subsidiary of
Exult.
(d) Exult shall pay to the Company the Closing Date Payment,
except for an amount equal to the Payables Reserve amount (as defined
in Section 7.9 hereof).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXULT
Exult represents and warrants to the Company and the Shareholders that,
as of the date hereof:
4.1 CORPORATE STATUS. Exult is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. Exult Equity Partners, Inc. is a
wholly-owned subsidiary of Exult.
4.2 CORPORATE POWER AND AUTHORITY. Exult has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Exult has
taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby.
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4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by Exult and constitutes a legal, valid and binding obligation of Exult,
enforceable against Exult in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
4.4 CAPITALIZATION OF EXULT. As of the date hereof, the authorized
capital of Exult consists of 25,000,000 shares of common stock, par value
$0.0001 per share ("EXULT COMMON STOCK"), and 5,000,000 shares of preferred
stock, par value $0.0001 per share. As of the date hereof, (a) 1,834,350 shares
of Exult Common Stock are issued and outstanding, (b) (i) 25,000 shares of
Series A Preferred Stock of Exult are issued and outstanding (each share of
Series A Preferred Stock is convertible to 180 shares of Exult Common Stock),
(ii) 1,696,369 shares of Series B Preferred Stock of Exult are issued and
outstanding and (iii) 1,536,964 shares of Series C Preferred Stock of Exult are
issued and outstanding (collectively, "EXULT PREFERRED STOCK"), (c) no shares of
Exult Common Stock or Exult Preferred Stock are held in the treasury of Exult,
(d) 1,042,251 options to purchase Exult Common Stock are issued and outstanding,
(e) 197,159 shares of Exult Common Stock are reserved for issuance upon the
exercise of outstanding warrants to purchase Exult Common Stock and (f)
7,733,333 shares of Exult Common Stock were reserved for issuance upon
conversion of outstanding Exult Preferred Stock. SCHEDULE 4.4 attached hereto
sets forth a list all Persons that hold more than 5% of the issued and
outstanding Exult Common Stock. Assuming the conversion, as of the date hereof,
of all issued and outstanding Exult Preferred Stock and the exercise of all
outstanding warrants and options to purchase Exult Common Stock, 10,807,093
shares of Exult Common Stock would be issued and outstanding.
4.5 NO VIOLATION. The execution and delivery by Exult of this
Agreement, the performance by Exult of its obligations hereunder and the
consummation by Exult of the transactions contemplated hereby, each in
accordance with the terms hereof, will not (a) violate or conflict with the
Certificate of Incorporation or Bylaws of Exult, (b) violate or conflict with
any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or any arbitration award which
is either applicable to, binding upon or enforceable against Exult, (c) conflict
with, result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to refuse to perform under, terminate, amend,
modify, abandon or accelerate, any customer account contract that is applicable
to, binding upon or enforceable against Exult or (d) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person, except, in
the case of clauses (b), (c) and (d) of this Section 4.5, for such matters as
would not have a material adverse effect on Exult or its financial condition,
properties, operations or business (an "EXULT MATERIAL AVERSE EFFECT").
4.6 NO COMMISSIONS. Except with respect to any finder's or broker's or
agent's fees or commissions owed to any consultant or employee of Exult pursuant
to the terms of any contract or agreement, Exult has not incurred any obligation
for any finder's or broker's or agent's fees or commissions or similar
compensation in connection with the transactions contemplated hereby.
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4.7 FINANCIAL STATEMENTS. Exult has delivered to the Company its
un-audited financial statements for the fiscal year ended September 30, 1999,
copies of which are attached to SCHEDULE 4.7 hereto (collectively, the "EXULT
FINANCIAL STATEMENTS"). The balance sheet, dated as of September 30, 1999, of
Exult included in the Exult Financial Statements is referred to herein as the
"EXULT BALANCE SHEET." To Exult's knowledge, the Exult Financial Statements
fairly present the financial position of Exult as of the date of such balance
sheet and the results of operations of Exult for the period covered thereby.
4.8 CHANGES SINCE THE EXULT BALANCE SHEET. Except as set forth on
SCHEDULE 4.8 hereto, since the date of the Exult Balance Sheet, Exult has not
incurred any obligations or liabilities (including any indebtedness) or entered
into any transaction or series of transactions involving in excess of $250,000
in the aggregate, other than in the ordinary course of business consistent with
past practice and except for this Agreement and the transactions contemplated
hereby.
4.9 LITIGATION. There is no action, suit or other legal or
administrative proceeding or governmental investigation pending against Exult,
except for any such action, suit, or proceeding which would not cause an Exult
Material Averse Effect.
4.10 COMPLIANCE WITH LAWS. Exult is and has been in compliance in all
material respects with all laws, regulations and orders applicable to it, its
business and operations (as conducted by it now and in the past) and any other
properties and assets (in each case owned or used by it now or in the past),
except for such noncompliance which would not cause an Exult Material Averse
Effect.
4.11 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.11 attached hereto sets forth a
summary of each Employee Benefit Plan (as defined in Section 5.14 hereof) of
Exult, true and complete copies of which have been furnished by Exult to the
Company.
4.12 TAX MATTERS. With respect to each taxable period of Exult, there
is no material action, suit, taxing authority proceeding, or audit or claim for
refund now in progress, pending or, to the knowledge of Exult, threatened
against or with respect to Exult regarding Taxes. To Exult's knowledge, Exult
has filed all tax returns required by applicable law and has paid all taxes, if
any, reflected thereon to be due and owing to any Governmental Authority, except
where any failure to do so would not result in an Exult Material Adverse Effect.
4.13 CLIENTS; CLIENT CONTRACTS. As of the date hereof, Exult has no
material revenue-producing clients or client contracts.
4.14 THIRD-PARTY TRANSACTIONS. Except as set forth in SCHEDULE 4.14
attached hereto, Exult is not negotiating nor is its board of directors or
senior management team actively discussing (a) any transaction which would
result in an Exult Change of Control (as defined in Section 7.5 hereof), (b) any
sale or transfer of all or substantially all of the Purchased Assets to any
Person not directly or indirectly controlled by Exult or (c) a Material Dilution
Event (as hereinafter defined). It is expressly understood and agreed that this
Section 4.14 (i) is intended to be limited to transactions which could
reasonably be expected to close within five months after the Closing Date and
(ii) is not intended to include the acquisition of the assets, equity
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<PAGE> 14
securities or the business of any Person (a "BUSINESS ACQUISITION") so long as
such Business Acquisition does not result in an Exult Change of Control. For
purposes hereof, the term "MATERIAL DILUTION EVENT" means the issuance of equity
securities of Exult comprising more than 25% of the then issued and outstanding
equity securities of Exult, determined on a fully-diluted basis, in one or a
series of related transactions, other than in connection with (w) a Business
Acquisition, (x) an underwritten public offering, (y) the issuance of equity
securities currently required pursuant to the terms of any agreement between
Exult and a third party, a true and complete copy of which was previously
delivered to the Company or (z) the exercise of previously issued and
outstanding stock options or warrants, or the subsequent issuance or exercise of
equity securities, warrants or options issued after the date hereof, pursuant to
the terms of a stock option plan or agreement, a true and complete copy of which
was previously delivered to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
Each of the Company and the Shareholders, jointly and severally
(subject to the limitations on the individual liability of the Shareholders set
forth in Section 10.1 hereof), represents and warrants to Exult, as of the date
hereof, as to the following:
5.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to own or lease its properties and to
carry on its business as now being conducted. Except as set forth in SCHEDULE
5.1 attached hereto, the Company is not legally qualified to do business as a
foreign corporation in any state and the nature of its properties and the
conduct of its business does not require such qualification.
5.2 POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The Company
has taken all action necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. Each of the Shareholders has the requisite
competence, power and authority to execute and deliver this Agreement, to
perform such Shareholder's obligations hereunder and to consummate the
transactions contemplated hereby.
5.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of the Company and the Shareholders and constitutes the legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
5.4 SHAREHOLDERS; CAPITALIZATION OF THE COMPANY. As of the date hereof,
the Shareholders constitute the holders of all issued and outstanding shares of
capital stock of the
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<PAGE> 15
Company, and (except as provided in the 1995 Amended and Restated Shareholder
Agreement of Gunn Partners Inc. and as provided under applicable securities
laws) the Shareholders own such shares free and clear of all Liens, restrictions
and claims of any kind. There are no outstanding or authorized rights, options,
warrants, convertible securities, subscription rights, conversion rights,
exchange rights or other agreements or commitments of any kind that could
require the Company to issue or sell any amount of its capital stock (or
securities convertible into or exchangeable for any amount of its capital
stock).
5.5 NO VIOLATION. The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby, each in
accordance with the terms hereof, will not (a) violate or conflict with the
Certificate of Incorporation or Bylaws of the Company, (b) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or any arbitration award which
is either applicable to, binding upon or enforceable against the Company, the
Shareholders or the Purchased Assets, (c) conflict with, result in any breach
of, or constitute a default (or an event which would, with the passage of time
or the giving of notice or both, constitute a default) under, or give rise to a
right to refuse to perform under, terminate, amend, modify, abandon or
accelerate, any material Contract (including the Assigned Contracts) which is
applicable to, binding upon or enforceable against the Company, the Shareholders
or the Purchased Assets, (d) result in or require the creation or imposition of
any Lien upon or with respect to any of the Purchased Assets or (e) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person.
5.6 NO COMMISSIONS. The Company and the Shareholders have not incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
5.7 FINANCIAL STATEMENTS. The Company has delivered to Exult the
financial statements of the Company, including the notes thereto, for (a) the
12-month period ended December 31, 1998, which have been reviewed by Vitale
Caturano & Co., P.C. of Boston, Massachusetts and (b) the nine-month period
ended September 30, 1999 (collectively, the "FINANCIAL STATEMENTS"), copies of
which are attached to SCHEDULE 5.7 hereto. The balance sheet dated as of
September 30, 1999, of the Company included in the Financial Statements is
referred to herein as the "CURRENT BALANCE SHEET". The Financial Statements
fairly present the financial position of the Company and the Business as of the
balance sheet date and the results of operations for the periods covered
thereby, and have been prepared in accordance with GAAP consistently applied
throughout the periods indicated. The books and records of the Company relating
to the Business fully and fairly reflect all transactions, properties, assets
and liabilities of the Business. There are no material special or non-recurring
items of income or expense during the periods covered by the Financial
Statements and the balance sheets included in the Financial Statements do not
reflect any write-up or revaluation increasing the book value of any assets,
except as specifically disclosed in the notes thereto. The Financial Statements
reflect all adjustments necessary for a fair presentation of the financial
information contained therein; provided, however, that the Financial Statements
for the period ended September 30, 1999 are subject to normal year-end
adjustments consistent with past practices.
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5.8 CHANGES SINCE THE CURRENT BALANCE SHEET. Since the date of the
Current Balance Sheet, the Company has not (a) paid any bonus to or increased
the rate of compensation of any of its officers, directors or salaried
employees, or amended any other terms of employment of such persons; (b) sold,
leased or transferred any of its properties or assets other than in the ordinary
course of business consistent with past practice; (c) made or obligated itself
to make capital expenditures other than in the ordinary course of business
consistent with past practice; (d) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practice; (e) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions
involving in excess of $10,000 in the aggregate other than in the ordinary
course of business consistent with past practice, except for this Agreement and
the transactions contemplated hereby; (f) made or adopted any change in its
accounting practice or policies; (g) made any adjustment to its books and
records other than in respect of the conduct of its business activities in the
ordinary course consistent with past practice; (h) entered into any transaction
with any Affiliate other than intercompany transactions in the ordinary course
of business consistent with past practice; (i) entered into any employment
agreement; (j) terminated, amended or modified agreements in the aggregate
involving an amount in excess of $10,000 in the aggregate; (k) imposed any
security interest or other Lien on any of the Purchased Assets; (l) delayed
paying any account payable which is due and payable except to the extent being
contested in good faith; (m) made or pledged any charitable contribution; (n)
entered into any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any property, rights or assets other than in the ordinary
course of business; (o) entered into any other transaction or was subject to any
event which had or may have a Material Adverse Effect on the Company, the
Business or the Purchased Assets; (p) engaged in any transaction other than in
the ordinary course of the Business; (q) suffered or incurred any work
interruptions, labor grievances, or claims filed, or any similar event which has
or would have a Material Adverse Effect on the Company, the Business or the
Purchased Assets or (r) agreed to do or authorized any of the foregoing.
5.9 LITIGATION. There is no action, suit, or other legal or
administrative proceeding or governmental investigation pending or, to the
Company's Knowledge, threatened, anticipated or contemplated against, by or
affecting the Company, the Shareholders (in their capacity as shareholders of
the Company) or the Purchased Assets, or which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby and, to
the Company's Knowledge, there is no basis for any of the foregoing. There are
no outstanding orders, decrees, stipulations or agreements issued by any
Governmental Authority in any proceeding or agreed to by the Company or the
Shareholders to which the Company or the Shareholders are or were a party which
have not been complied with in full or which continue to impose any obligations
or which may have a Material Adverse Effect on the Company, the Shareholders or
the Purchased Assets.
5.10 ENVIRONMENTAL MATTERS.
(a) The Company (as defined in clause (g) below) is and has at
all times been in full compliance with all Environmental Laws (as
defined in clause (g) below) governing its business, operations,
properties and assets, including, without limitation: (i) all
requirements relating to the Discharge (as defined in clause (g) below)
and Handling (as defined in clause (g) below) of Hazardous Substances
(as defined in clause
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<PAGE> 17
(g) below); (ii) all requirements relating to notice, record keeping
and reporting; (iii) all requirements relating to obtaining and
maintaining Licenses (as defined in clause (g) below) for the ownership
of its properties and assets and the operation of its business as
presently conducted, including Licenses relating to the Handling and
Discharge of Hazardous Substances; and (iv) all applicable writs,
orders, judgements, injunctions, governmental communications, decrees,
informational requests or demands issued pursuant to, or arising under,
any Environmental Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation
(collectively "NOTICES"), claims, suits, actions, judgments, penalties,
fines, or administrative or judicial investigations or proceedings
pending or threatened against or involving the Company, or its
business, operations, properties, or assets, issued by any Governmental
Authority or third party with respect to any Environmental Laws or
Licenses issued to the Company thereunder in connection with, related
to or arising out of the ownership by the Company of its properties or
assets or the operations of its business, which have not been resolved.
(c) The Company has not Handled or Discharged, nor has it
allowed or arranged for any third party to Handle or Discharge,
Hazardous Substances to, at or upon: (i) any location other than a site
lawfully permitted to receive such Hazardous Substances; (ii) any real
property currently or previously owned or operated by the Company; or
(iii) any site which, pursuant to any Environmental Laws, (x) has been
placed on the National Priorities List or its state equivalent, or (y)
the Environmental Protection Agency or the relevant state agency or
other Governmental Authority has notified the Company that such
Governmental Authority has proposed or is proposing to place on the
National Priorities List or its state equivalent.
(d) SCHEDULE 5.10 attached hereto identifies the operations
and activities, and locations thereof, which have been conducted or are
being conducted by the Company on any real property currently or
previously owned or operated by the Company which have involved the
Handling or Discharge of Hazardous Substances.
(e) The Company does not use, nor has it used, any Above
Ground Storage Tanks (as defined in clause (g) below) or Underground
Storage Tanks (as defined in clause (g) below), and there are not now
nor have there ever been any Underground Storage Tanks beneath any real
property currently or previously owned or operated by the Company that
are required to be registered under applicable Environmental Laws.
(f) SCHEDULE 5.10 identifies (i) all environmental audits,
assessments or occupational health studies undertaken by the Company or
its agents or, to the knowledge of the Company, undertaken by any
Governmental Authority, or any third party, relating to or affecting
the Company or any real property currently or previously owned or
operated by the Company; (ii) the results of any ground, water, soil,
air or asbestos monitoring undertaken by the Company or its agents or,
to the knowledge of the Company, undertaken by any Governmental
Authority or any third party, relating to or affecting the Company or
any real property currently or previously owned or operated by the
Company which indicate the presence of Hazardous Substances at levels
requiring a
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<PAGE> 18
notice or report to be made to a Governmental Authority or in violation
of any applicable Environmental Laws; (iii) all material written
communications between the Company and any Governmental Authority
arising under or related to Environmental Laws; and (iv) all
outstanding citations issued under OSHA, or similar state or local
statutes, laws, ordinances, codes, rules, regulations, orders, rulings,
or decrees, relating to or affecting either the Company or any real
property currently or previously owned or operated by the Company.
(g) For purposes of this Section 5.10, the following terms
shall have the meanings ascribed to them below:
"ABOVE GROUND STORAGE TANK" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing above-ground storage
tanks.
"COMPANY" means, for purposes of this Section 5.10, the
Company and any Affiliates.
"DISCHARGE" means any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be
defined in any Environmental Law, into any medium including, without
limitation, ground water, surface water, soil or air.
"ENVIRONMENTAL LAWS" means all federal, state, regional or
local statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings, and changes or ordinances or judicial or
administrative interpretations thereof, or similar laws of foreign
jurisdictions where the Company conducts business, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or
purport to govern) or relate to pollution, protection of the
environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational
health and safety, as any of these terms are or may be defined in such
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation:
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, 42 U.S.C.ss.9601, et seq. (collectively "CERCLA"); the
Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and subsequent Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C.ss.6901 et seq. (collectively "RCRA"); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C.ss.1801,
et seq.; the Clean Water Act, as amended, 33 U.S.C.ss.1311, et seq.;
the Clean Air Act, as amended (42 U.S.C.ss.7401-7642); the Toxic
Substances Control Act, as amended, 15 U.S.C.ss.2601 et seq.; the
Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C.ss.136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C.ss.11001, et seq. (Title
III of SARA) ("EPCRA"); and the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C.ss.651, et seq. ("OSHA").
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<PAGE> 19
"HANDLE" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may further be
defined in any Environmental Law, of any Hazardous Substances or Waste.
"HAZARDOUS SUBSTANCES" shall be construed broadly to include
any toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, including without
limitation, chemicals, compounds, by-products, petroleum or petroleum
products, and polychlorinated biphenyls, the presence of which requires
investigation or remediation under any Environmental Laws or which are
or become regulated, listed or controlled by, under or pursuant to any
Environmental Laws.
"LICENSES" means all licenses, certificates, permits,
approvals and registrations.
"UNDERGROUND STORAGE TANK" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Underground Storage
Tanks.
5.11 GOOD TITLE, ADEQUACY AND CONDITION. The Company has, and at the
Closing will have, good and marketable title to the Purchased Assets with full
power to sell, transfer and assign the same, free and clear of any Lien, and by
delivery of the Bill of Sale and Assignment, as contemplated by Section 3.2
hereof, the Company will deliver to Exult title to such Purchased Assets free
and clear of any Lien. The Purchased Assets constitute, in the aggregate, all of
the assets and properties necessary for the conduct of the Business in the
manner in which and to the extent to which such business is currently being
conducted. The Purchased Assets are in good operating condition, normal wear and
tear excepted, and have been maintained in accordance with all applicable
specifications and warranties.
5.12 COMPLIANCE WITH LAWS. The Company is and has been in compliance in
all material respects with all laws, regulations and orders applicable to it,
its business and operations (as conducted by it now and in the past), the
Purchased Assets, and any other properties and assets (in each case owned or
used by it now or in the past). The Company is not subject to any Contract
(including the Assigned Contracts), decree or injunction that restricts the
continued operation of the Company or the expansion thereof to other
geographical areas, customers or suppliers, or to other lines of business.
5.13 LABOR AND EMPLOYMENT MATTERS. The Company is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union. The Company has complied in all material respects with all applicable
laws, rules and regulations relating to employment, employment taxes (including,
without limitation, all national, regional and local income taxes, national
insurance contributions and any other forms of charge, levy or deduction in
respect of employees' health and retirement), civil rights and equal employment
opportunities (including, without limitation, to the Civil Rights Act of 1964,
the Fair Labor Standards Act, the Americans with Disabilities Act (and
equivalent or comparable provisions in all other jurisdictions in the Restricted
Territories as defined in Section 7.5 hereof) and the Acquired Rights Directive,
TUPE and Other European transfer of undertakings law, each as amended).
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5.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 5.14 attached hereto sets forth each Employment
Benefit Plan of the Company. With respect to each Employee Benefit Plan
(as defined in clause (d) below) of the Company, (i) each has been
administered in compliance with its terms and with all applicable laws
including, without limitation, ERISA and the Code; (ii) no actions,
suits, claims or disputes (other than routine claims for benefits) are
pending or threatened; (iii) no audits, proceedings, claims or demands
are pending with any Governmental Authority; (iv) all reports, returns
and similar documents required to be filed with any Governmental
Authority or distributed to any plan participant have been duly or
timely filed or distributed; (v) no "prohibited transaction" has
occurred within the meaning of ERISA or the Code; (vi) no such plan
provides medical or dental benefits for any current or former employees
of the Company or its predecessors after termination of employment
other than rights that may be provided by law; (vii) no such plan
obligates the Company to pay separation, severance, termination or
similar benefits as a result of any transaction contemplated by this
Agreement or solely as a result of a "change of control" (as defined in
Section 280G of the Code); (viii) all required or discretionary (in
accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior
to or as of the Closing shall have been made or properly accrued on the
Current Balance Sheet or will be properly accrued on the books and
records of the Company as of the Closing; (ix) no such plan has any
unfunded liabilities which are not reflected on the Current Balance
Sheet or the books and records of the Company; (x) the Company has
complied with the notice and continuation of coverage requirements of
Section 4980B of the Code and the regulations thereunder with respect
to any group health plan within the meaning of Code Section 5000(b)(1);
and (xi) the Company does not participate in, nor has ever participated
in, nor have any withdrawal liability under, ERISA with respect to, a
"multiemployer plan" (as defined in Section 3(37) of ERISA). True and
accurate copies of each Employee Benefit Plan of the Company, together
with the most recent annual reports on Form 5500, all IRS favorable
determination letters and summary plan descriptions for such plans have
been furnished to Exult.
(b) With respect to each Employee Benefit Plan of the Company
intended to qualify under Code Section 401(a) or 403(a), (i) the
Internal Revenue Service has issued a favorable determination letter,
which has not been revoked, that any such plan is tax-qualified and
exempt from federal income tax; (ii) no reportable event (within the
meaning of Section 4043 of ERISA) has occurred; and (iii) the present
value of all liabilities under any such plan will not exceed the
current fair market value of the assets of such plan (determined using
the actuarial assumption used for the most recent actuarial valuation
for such plan).
(c) Exult will not suffer any loss, cost or liability as a
result of any claim that the Company, or any entity that would be
aggregated with the Company under Code Section 414(b), (c), (m) or (o),
has not complied with the provisions of paragraphs (a) and (b) above
with respect to each Employee Benefit Plan maintained by any such
entity.
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<PAGE> 21
(d) For purposes hereof, "EMPLOYEE BENEFIT PLAN" means any:
(i) employee pension benefit plan as defined in Section 3(2) of ERISA;
(ii) multiemployer plan as defined in Section 3(37) of ERISA; (iii)
employee welfare benefit plan as defined in Section 3(1) of ERISA; and
(iv) any stock option, bonus, stock purchase, or insurance plan and any
severance or termination pay plan or policy in which employees, spouses
or dependents participate.
5.15 TAX MATTERS. All Tax Returns required to be filed prior to the
date hereof with respect to the Company or its respective income, properties,
franchises or operations have been timely filed, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all respects. Except as set forth in
SCHEDULE 5.15 attached hereto, all Taxes due and payable by or with respect to
the Company and the Business have been paid or are accrued on the Current
Balance Sheet. The Company has withheld and paid all Taxes to the appropriate
Governmental Authority required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party. With respect to each taxable period of the
Company: (i) no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Taxes has been asserted or assessed by any
taxing authority against the Company; (ii) the Company has not consented to
extend the time in which any Taxes may be assessed or collected by any taxing
authority; (iii) the Company has not requested or been granted an extension of
the time for filing any Tax Return to a date later than the Closing; (iv) there
is no action, suit, taxing authority proceeding, or audit or claim for refund
now in progress, pending or threatened against or with respect to the Company
regarding Taxes; and (v) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the Assets of the Company. No sales or use
tax, non-recurring intangible tax, documentary stamp tax or other excise tax (or
comparable tax imposed by any governmental entity) will be payable by the
Company or Exult by virtue of the transactions contemplated in this Agreement.
The Company has duly and validly filed an election for "S" corporation status
under the Code, and such "S" election has not been revoked or terminated and
neither the Company nor any of the Shareholders has taken any action which would
cause a termination of such "S" election.
5.16 INSURANCE. The Company is covered by valid, outstanding and
enforceable policies of insurance covering the Purchased Assets and Business
under the policies listed on SCHEDULE 5.16 attached hereto (the "INSURANCE
POLICIES"). SCHEDULE 5.16 contains a complete and correct list of all Insurance
Policies and all amendments and riders thereto and reflects the policy number,
terms, identity of insurer, amount and coverage with respect to each such
Insurance Policy. Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. The Company has complied with the
provisions of such Insurance Policies. The Company has not failed to give, in a
timely manner, any notice required under any of the Insurance Policies to
preserve its rights thereunder.
5.17 [INTENTIONALLY OMITTED].
5.18 LICENSES AND PERMITS. The Company possesses all material licenses
and required governmental or official approvals, permits or authorizations
(collectively, the "PERMITS") for its business and operations. All such Permits
are valid and in full force and
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<PAGE> 22
effect, the Company is in compliance in all respects with their requirements,
and no proceeding is pending or threatened to revoke or amend any of them.
5.19 CLIENT LISTS; ASSIGNED CONTRACTS. Set forth in SCHEDULE 1.1(B)
attached hereto is a complete list of (a) all of the clients of the Company and
(b) the Assigned Contracts. Except as set forth in SCHEDULE 5.19 attached
hereto, all of the clients listed on such SCHEDULE 1.1(B) are subject to valid
and enforceable Assigned Contracts. True, correct and complete copies of such
Assigned Contracts have been furnished by the Company to Exult. The Company has
not violated any of the terms or conditions of any of the Assigned Contracts
and, to the Company's Knowledge, all of the covenants to be performed by any
other party thereto have been fully performed and there are no claims for breach
or indemnification or notice of default or termination thereunder.
5.20 REAL ESTATE. As of the date hereof, the Company has no office or
place of business other than as identified on SCHEDULE 5.20 hereto, and the
Company's principal place of business and chief executive offices are indicated
on SCHEDULE 5.20. All locations where the equipment, inventory, chattel paper
and books and records of the Company are located as of the date hereof are fully
identified on SCHEDULE 5.20. SCHEDULE 5.20 sets forth a list of all real estate
leases and other similar agreements (collectively, the "REAL ESTATE LEASES") to
which the Company is a party (copies of which have previously been furnished to
Exult), in each case, setting forth (a) the lessor and lessee party thereto and
the date and term thereof, (b) the street address of the premises covered
thereby and (c) a brief description of such premises (the "LEASED PREMISES").
The Real Estate Leases are in full force and effect and have not been amended,
and the Company is not and, to the Company's Knowledge, no other party thereto
is in default or breach thereunder. No event has occurred which, with the
passage of time or the giving of notice or both, would cause a material breach
of or default under any of such Real Estate Leases. There is no breach or
anticipated breach by any other party to such Real Estate Leases. Each of the
Leased Premises is served by all utilities in such quantity and quality as are
sufficient to satisfy the current normal business activities as conducted
thereat.
5.21 INTELLECTUAL PROPERTY. The Company has full legal right, title and
interest to the Intellectual Property and has not granted any rights in or to
the same to any third party. The use of the Intellectual Property in the
Business as presently conducted does not infringe on any third party's
trademark, trade name, service mark, copyright, patent or license. Except as set
forth on SCHEDULE 5.21 attached hereto, no payments are required for the
continued use of the Intellectual Property. None of the Intellectual Property
has ever been declared invalid or unenforceable, or is the subject of any
pending or threatened action for opposition, cancellation, declaration,
infringement, or invalidity, unenforceability or misappropriation or like claim,
action or proceeding.
5.22 MATERIAL CONTRACTS. The Assigned Contracts listed in SCHEDULE 5.22
attached hereto constitute all of the written and oral Contracts relating to the
Business (including, without limitation, promissory notes, loan agreements and
other evidences of indebtedness) to which the Company is a party or by which any
of its properties relating to the Business are bound with respect to which the
obligations of, or the benefits to be received by, the Company could reasonably
be expected to (a) have a value in excess of $25,000 in any consecutive 12-month
period or (b) extend 90 days beyond the Closing Date (each a "MATERIAL
CONTRACT"). The
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<PAGE> 23
Company has not violated any of the terms or conditions of any Material Contract
or any term or condition which would permit termination or modification of any
Material Contract and, to the Company's Knowledge, all of the covenants to be
performed by any other party thereto have been fully performed, and there are no
claims for breach or indemnification or notice of default or termination under
any Material Contract. No event has occurred which constitutes, or after notice
or the passage of time, or both, would constitute, a default by the Company
under any Material Contract and, to the Company's Knowledge, no such event has
occurred which constitutes or would constitute a default by any other party
thereto. The Company is not subject to any liability or payment resulting from
renegotiation of any material amounts to be paid it under any Material Contract.
5.23 [INTENTIONALLY OMITTED].
5.24 INDEBTEDNESS AND LIABILITIES OF THE COMPANY. Except for payment
obligations relating to trade credit (which shall not be assumed by Exult
hereunder) and the Assumed Liabilities, SCHEDULE 5.24 attached hereto is a true
and complete list of all Indebtedness of the Company and reflects the name and
address of the creditor, lender or lessor to whom, and the agreement, instrument
or other document pursuant to which, such Indebtedness is payable. Except as set
forth on such SCHEDULE 5.24 and the Assumed Liabilities, the Company does not
have any other liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (a) to the extent reflected or taken into account in the
Current Balance Sheet and not heretofore paid or discharged, (b) liabilities
incurred in the ordinary course of business consistent with past practice since
the date of the Current Balance Sheet (none of which relates to breach of
contract, breach of warranty, tort, infringement or violation of law, or which
arose out of any action, suit, claim, governmental investigation or arbitration
proceeding) and (c) normal accruals, reclassifications, and audit adjustments
which would be reflected on an audited financial statement and which could not
be material in the aggregate.
5.25 EMPLOYEES. SCHEDULE 5.25 attached hereto sets forth (a) the names,
addresses, current titles, social security numbers and annual rates of
compensation of the employees of the Business and (b) the projected value to the
Business of having such employee working in the Business as of the scheduled due
date of the Closing Date Payment, the Second Installment and the Third
Installment, respectively.
5.26 BUSINESS RELATIONS. The Company has not received notice, and does
not otherwise have knowledge, that any customer or supplier of the Business will
cease or otherwise refuse to do business with the Business after the Closing in
the same manner as such business was previously conducted with the Business. The
Company has not received any notice of any disruption in the availability of the
services used in the conduct of the Business and is not aware of any facts which
could lead it to believe that the operations of the Business will be subject to
any such disruption.
5.27 THE DATA PROTECTION ACT. The Company is and has been in compliance
with all its obligations under all legislation, regulations and other
requirements having force of law (including, without limitation, codes, orders
and awards) in respect of the collection, holding, processing or use of Personal
Data (including, without limitation, the Data Protection Directive, the UK
Protection Act and Other European data protection law).
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING. The Company
covenants and agrees that, between the date of this Agreement and the Closing
Date, the Business shall be conducted only in, and shall not take any action
except in, the ordinary course of business consistent with past practice. The
Company shall use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its current officers, employees
and consultants, and to preserve its present relationships with customers,
suppliers and other persons with which it has significant business relations. By
way of amplification and not limitation, except as contemplated by this
Agreement, the Company shall not between the date of this Agreement and the
Closing Date, directly or indirectly, do or propose or agree to do any of the
following without the prior written consent of Exult: (a) amend or otherwise
change its certificate of incorporation or bylaws or equivalent organizational
documents; (b) issue or authorize the issuance of, any shares of its capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock or other ownership
interest; (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock; (d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(e) acquire (including, without limitation, for cash, or shares of stock,
property or services, by merger, consolidation or acquisition of stock or
assets) any interest in any corporation, partnership or other business
organization or division thereof; (f) incur any additional indebtedness, create
any Liens on any of its assets or prepay any Indebtedness, other than in the
ordinary course of business consistent with past practices; (g) make any loans
or advances to any person or entity or guarantee the indebtedness of any person
or entity, except in the ordinary course of business consistent with past
practice; (h) sell, dispose of or encumber any of its assets, other than in the
ordinary course of business, consistent with past practice; (i) enter into,
modify or terminate, any Contract, other than in the ordinary course of business
consistent with past practice; (j) except as set forth in SCHEDULE 6.1 attached
hereto, pay any bonus to or increase the compensation or benefits payable or to
become payable to its employees, independent contractors or consultants; (k)
take any action, other than in the ordinary course of business consistent with
past practice, which might result in any the loss of customers, (l) enter into
any material transactions or do, or omit to do, any other things which may have
a material and adverse impact on the Business; or (m) agree, in writing or
otherwise, to take or authorize any of the foregoing actions or any other action
which would make any representation or warranty in Article V hereof untrue or
incorrect.
ARTICLE VII
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
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7.2 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto (other than to the legal and financial
advisors thereof who need to know such information to effectuate the intentions
of this Agreement). No press release or other public announcement related to
this Agreement or the transactions contemplated hereby shall be issued by (a)
the Company or the Shareholders without the prior approval of Mark Hodges on
behalf of Exult or (b) Exult without the prior approval of Jay Ackerman on
behalf of the Company and the Shareholders.
7.3 NO OTHER DISCUSSIONS. The Company, the Shareholders and their
respective Affiliates, employees, agents and representatives will not (a)
initiate, encourage the initiation by others of, or entertain, discussions or
negotiations with third parties or respond to solicitations by third persons
relating to any merger, sale or other disposition of any part of the Business or
the properties of the Company or any of the Purchased Assets (whether by merger,
consolidation, sale of stock, sale of assets, or otherwise) or (b) enter into
any agreement or commitment (whether or not binding) with respect to any of the
foregoing transactions. The Company and the Shareholders will immediately notify
Exult if any third party attempts to initiate any solicitation, discussion or
negotiation with respect to any of the foregoing transactions.
7.4 ACCESS TO INFORMATION. Subject to applicable law and any
contractual obligations to which the Company is subject, the Company shall (a)
afford to Exult and its accountants, counsel, financial advisors and other
representatives (the "EXULT REPRESENTATIVES") full access (during normal
business) to all of its (i) personnel records relating to employees of the
Business whose names are set forth on SCHEDULES 7.12(A) AND 7.12(B) hereto and
(ii) financial and accounting records and correspondence relating to the
Company's fiscal years ended December 31, 1997, 1998 and 1999 and (b) furnish
promptly to Exult photocopies of such items as Exult shall reasonably request.
7.5 COVENANT NOT TO COMPETE. The Company and the Shareholders (except
for Gibson) jointly and severally (subject to the limitations on the individual
liability of the Shareholders and Exult's obligation to exhaust all of the
remedies available to it with respect to any and all Shareholders that breach
this Section 7.5, in each case, as set forth in Section 10.1 hereof), agree not
to do any of the following:
(a) for an initial period commencing on the Closing Date and
terminating on the second anniversary thereof, unless such period shall
be extended in accordance with the terms hereof (such period, as so
extended, being referred to herein as the "CONSULTING NON-COMPETE
PERIOD"), compete with the management consulting services provided by
the GPI Business Unit (as hereinafter defined), any other services
provided by the GPI Business Unit during the 12-month period preceding
the termination of such Shareholder's employment with Exult or any
services the GPI Business Unit shall have contemplated rendering (as
evidenced by substantive internal memoranda) during the 12-month period
preceding the termination such Shareholder's employment with Exult
(collectively, the "CONSULTING BUSINESS") in the United States, the
United Kingdom, Switzerland, France, Australia, New Zealand or Germany
(the "RESTRICTED TERRITORY"), or otherwise solicit, accept or render
management consulting services or provide any
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advice or substantial assistance (whether individually or as a
principal, stockholder, partner, employee or agent of any Person)
relating to the Consulting Business (such competitive activities being
referred to herein as "COMPETITIVE CONSULTING PRACTICES") to any Person
in the Restricted Territory if such Person, directly or indirectly,
competes (or, to Exult's or such Shareholder's knowledge, after due
inquiry, intends to compete or is preparing to compete) with the
Consulting Business in any manner; provided, however, that each
Shareholder shall be subject to (x) a one-year extension of the initial
Consulting Non-Compete Period if such Shareholder shall remain employed
by Exult through the date the Second Installment is paid to the Company
and (y) a two-year extension of the initial Consulting Non-Compete
Period if such Shareholder shall remain employed by Exult through the
date the Third Installment is paid to the Company; provided, further,
that the engagement by Bob Gunn in any leadership development and
executive coaching activities shall not be deemed, in and of itself, to
violate the prohibitions of this clause (a);
(b) for an initial period commencing on the Closing Date and
terminating on the third anniversary thereof, unless such period is
extended in accordance with the terms hereof (such period, as so
extended, being referred to herein as the "BPO NON-COMPETE PERIOD"),
compete with the business process outsourcing services provided by
Exult, any other services provided by Exult during the 12-month period
preceding the termination of such Shareholder's employment with Exult
or any services Exult shall have contemplated rendering (as evidenced
by substantive internal memoranda) during the 12-month period preceding
the termination such Shareholder's employment with Exult (collectively,
the "EXULT BUSINESS") in the Restricted Territory, or otherwise
solicit, accept or render business process outsourcing services or
provide any advice or substantial assistance (whether individually or
as a principal, stockholder, partner, employee or agent of any Person)
relating to the Exult Business to any Person in the Restricted
Territory if such Person, directly or indirectly, competes (or, to
Exult's or such Shareholder's knowledge, after due inquiry, intends to
compete or is preparing to compete) with the Exult Business in any
manner; provided, however, that each Shareholder shall be subject to
(i) a one-year extension of the initial BPO Non-Compete Period if such
Shareholder shall remain employed by Exult through the date the Second
Installment is paid to the Company and (ii) a two-year extension of the
initial BPO Non-Compete Period if such Shareholder shall remain
employed by Exult through the date the Third Installment is paid to the
Company;
(c) during the applicable Consulting Non-Compete Period,
directly or indirectly, (i) induce any Client or Prospective Client (as
such terms are defined below) of the Consulting Business or the Exult
Business to patronize any business which is directly or indirectly in
competition with the Consulting Business or the Exult Business
conducted by Exult or its subsidiaries, successors or assigns
(collectively the "EXULT COMPANIES") in the Restricted Territory; (ii)
canvass, solicit or accept from any Client or Prospective Client of the
Consulting Business or the Exult Business conducted by any of Exult
Companies, any such competitive business in the Restricted Territory;
or (iii) request or advise any Client or Prospective Client of the
Consulting Business or the Exult Business conducted by any of the Exult
Companies in the Restricted Territory to
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withdraw, curtail or cancel any such Client's or Prospective Client's
business with any such Exult Companies;
(d) during the applicable Consulting Non-Compete Period,
directly or indirectly, employ any person who was employed by any Exult
Company during such Consulting Non-Compete Period, or in any manner
seek to induce any employee of any Exult Company to leave his or her
employment with such Exult Company;
(e) except as may be necessary in connection with such
Shareholder's employment with Exult after the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in
such Shareholder's possession any of the Company's proprietary rights
or records acquired hereunder, including (without limitation) any
customer lists; and
(f) for the purposes hereof (i) "CLIENT" shall mean any Person
for which the Company or Exult shall have rendered Consulting Business
services or Exult Business services, as the case may be, during the
applicable Consulting Non-Compete Period or the one-year period
preceding the Closing Date and (ii) "PROSPECTIVE CLIENT" shall mean any
Person (other than a Client) to which the Company or Exult shall have
submitted a written proposal for the provision of Consulting Business
services or Exult Business services, as the case may be, or with which
the Company or Exult shall have entered into substantive discussions
contemplating the rendering of Consulting Business services or Exult
Business services, as the case may be, provided that the Company or
Exult, as the case may be, shall have had or shall have a reasonable
expectation of being retained by such Person to render such services
during the Consulting Non-Compete Period or the one-year period
preceding the Closing Date;
provided, however, that the restrictive covenants contained in clause (a) of
this Section 7.5 shall terminate immediately (1) if Exult shall default in the
payment to the Company when due of the Second Installment or the Third
Installment, and such default shall continue unremedied for 45 or more days, (2)
with respect to any Shareholder, if the employment of such Shareholder is
terminated by Exult other than for Cause, (3) with respect to any Shareholder,
if (a) there is a Business Failure of Exult (as defined in Section 7.14 hereof)
and (b) such Shareholder tenders his or her resignation to Exult within 120 days
of such Business Failure, (4) Exult breaches its obligations under Section 7.16
hereof or (5) with respect to any Shareholder, upon the occurrence of an Exult
Change of Control, if such Shareholder tenders his or her resignation to Exult
within 120 days of the occurrence of such Exult Change of Control (the
occurrence of such events of termination and the satisfaction of such related
conditions being referred to hereinafter, collectively, as "NON-COMPETE
TERMINATION EVENTS"). For the purposes hereof, an "EXULT CHANGE OF CONTROL"
shall mean a transaction, or series of related transactions, in which:
(x) (A) such transaction, or series of related transactions,
result in the stockholders of Exult immediately prior to such
transaction or related transactions owning, in the aggregate, less than
50% of the total combined voting power of the Exult (or, if Exult is
not the surviving corporation in a merger or other consolidation
transaction, less than 50% of the voting securities of the surviving
corporation (or the parent corporation of the surviving corporation
where the surviving corporation is
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wholly-owned by the parent corporation)) or (B) all or substantially
all of Exult's operating assets are sold, transferred or otherwise
disposed of; provided, however, that an underwritten public offering of
Exult Common Stock shall not result in an Exult Change of Control under
this Section 7.5 and
(y) the Person or Persons acquiring such voting power or such
assets, as the case may be, own and operate a business substantially
similar to the Business having annual gross revenues of at least 200%
of the annual gross revenues of the business unit (the "GPI BUSINESS
UNIT") of Exult that will be operated by the current employees of the
Business (as new employees of Exult) after the Closing, measured (in
each case) as of the time of the consummation of such acquisition.
The Company and Shareholders agree and acknowledge that the restrictions
contained in this Section 7.5 are reasonable in scope and duration, and are
necessary to protect Exult Companies. The Company and the Shareholders agree and
acknowledge that any breach of this Section 7.5 will cause irreparable injury to
the Exult Companies and upon any breach or threatened breach of any provision of
this Section 7.5, the Exult Companies shall be entitled to injunctive relief,
specific performance or other equitable relief, without the necessity of posting
bond; provided, however, that this shall in no way limit any other remedies
which the Exult Companies may have as a result of such breach, including the
right to seek monetary damages. Exult, the Company and the Shareholders hereby
agree that Exult may assign, without limitation, the foregoing restrictive
covenants to any successor to Exult.
7.6 UK COVENANT NOT TO COMPETE. Gibson agrees not to do any of the
following:
(a) for an initial period commencing on the Closing Date and
terminating on the second anniversary thereof (the "UK NON-COMPETE
PERIOD"), compete with the management consulting services provided by
the GPI Business Unit as of the Closing (the "UK CONSULTING BUSINESS")
in the United States or the United Kingdom (the "UK RESTRICTED
TERRITORY"), or otherwise engage in any Competitive Consulting
Practices, with respect to any Person in the UK Restricted Territory if
such Person, directly or indirectly, competes with the UK Consulting
Business in any manner;
(b) during the UK Non-Compete Period, directly or indirectly,
(i) induce any Consulting Client (as such term is defined below) to
patronize any business which is directly or indirectly in competition
with the UK Consulting Business conducted by the GPI Business Unit in
the UK Restricted Territory; (ii) canvass, solicit or accept from any
Consulting Client , any such competitive business in the UK Restricted
Territory; or (iii) request or advise any Consulting Client in the UK
Restricted Territory to withdraw, curtail or cancel any such Consulting
Client's business with the GPI Business Unit;
(c) during the UK Non-Compete Period, directly or indirectly,
employ any person who was employed in the GPI Business Unit as an
executive or manager or employed by any Exult Company if such
Shareholder had a close working relationship with such person during
such UK Non-Compete Period, or in any manner seek to induce such
employees of the GPI Business Unit or any Exult Company to leave his or
her employment with the GPI Business Unit or any Exult Company, as the
case may be;
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(d) except as may be necessary in connection with such
Shareholder's employment with Exult after the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in
such Shareholder's possession any of the Company's proprietary rights
or records acquired hereunder, including (without limitation) any
customer lists; and
(e) for the purposes hereof "CONSULTING CLIENT" shall mean any
Person for which the Company shall have rendered Consulting Business
during the one-year period preceding the Closing Date;
provided, however, that the restrictive covenants contained in clause (a) of
this Section 7.6 shall terminate immediately upon the occurrence of any
Non-Compete Termination Event.
Gibson agrees and acknowledges that the restrictions contained in this
Section 7.6 are reasonable in scope and duration, and are necessary to protect
the Exult Companies. Gibson further agrees and acknowledges that any breach of
this Section 7.6 will cause irreparable injury to the Exult Companies and upon
any breach or threatened breach of any provision of this Section 7.6, the Exult
Companies shall be entitled to injunctive relief, specific performance or other
equitable relief, without the necessity of posting bond; provided, however, that
this shall in no way limit any other remedies which the Exult Companies may have
as a result of such breach, including the right to seek monetary damages. Gibson
hereby agrees that Exult may assign, without limitation, the foregoing
restrictive covenants to any successor to Exult.
7.7 ASSIGNED CONTRACTS AND CONSENTS. Prior to the Closing, (a) the
Company shall not terminate or otherwise modify or amend any of the Assigned
Contracts and (b) the Company shall further use its reasonable efforts to obtain
any and all consents and approvals (each a "CONSENT") necessary as a result of
the transactions contemplated hereby to legally transfer the Assigned Contracts
and to keep the Assigned Contracts in full force and effect. In the event that
Exult has not received any such Consent prior to the Closing, the Company shall
use its reasonable best efforts to deliver each such Consent to Exult as
promptly as practicable after the Closing.
7.8 USE OF NAME. The Company shall not use the name "Gunn Partners
Inc." or "Gunn" or the initials "GPI" or any variation thereof in the conduct of
the Company's business, if any, after the Closing Date, unless such use relates
to the operations of the Company's branch office located in Switzerland. The
Company agrees to change its name as soon as practicable (and in any event
within 15 days) after the employees of the Business working in such branch
become employees of Exult pursuant to mutually agreed-upon employment
agreements.
7.9 GPI PAYABLES RESERVE. Exult shall have the right to deduct from the
Closing Date Payment an amount equal to One Hundred Thousand Dollars ($100,000)
as a reserve (the "PAYABLES RESERVE") for payment of any amounts required to be
paid to creditors of the Company subsequent to the Closing Date, which amounts
(a) represent liabilities of the Company relating to or accrued with respect to
the period prior to the Closing Date and (b) which do not constitute Assumed
Liabilities hereunder. On or before May 31, 2000, Exult shall deliver to the
Company a statement showing in reasonable detail any amounts paid by Exult from
the Payables Reserve. If the aggregate of such amounts are less than the
Payables Reserve
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(the "PAYABLES RESERVE BALANCE"), Exult shall pay over to the Company on such
date the Payables Reserve Balance. If the aggregate of the amounts paid by Exult
pursuant to the terms of this Section 7.9 exceeds the Payables Reserve (the
"PAYABLES RESERVE SHORTFALL"), the amount of the Payables Reserve Shortfall
shall be deemed to be Exult Indemnifiable Damages (as defined in Section 10.1
hereof), and Exult may set off against the Held Back Amount the amount of the
Payables Reserve Shortfall in the manner described in Article X hereof or take
any other action or exercise any other remedy available to it by appropriate
legal proceedings to recover such amount.
7.10 PAYMENT DEFAULT; NON-EXCLUSIVE LICENSE. If Exult shall default in
the payment to the Company when due of the Second Installment or the Third
Installment, and such default shall continue unremedied for 45 or more days (a
"PAYMENT DEFAULT"), then, upon receipt of written notice by Exult from the
Company, Exult and its affiliates shall (a) cease any and all use of the names
"Gunn" and "Gunn Partners" and any derivative thereof for any purpose, other
than to collect obligations payable to Exult in such names which arose prior to
such Payment Default, and (b) be deemed, for all purposes, to have granted to
the Company, as of the Closing Date, subject only to the occurrence of a Payment
Default and notice as specified above, (i) an exclusive right and license for
the Company and its assignees to use the names "Gunn" and "Gunn Partners" and
(ii) a non-exclusive right and license for the Company and its assignees to use
and to sublicense all of the other Intellectual Property. Exult shall (and shall
cause its affiliates to) provide the Company with photographic and magnetic
copies of such Intellectual Property as reasonably requested by the Company.
Notwithstanding anything herein to the contrary, Sections 7.5(e) and 7.6 (d)
hereof shall be inapplicable to any Shareholder who terminates his or her
employment with Exult in connection with such Payment Default and such grant.
The Company shall deliver consideration to Exult for such rights and licenses in
an amount equal to the fair market value thereof, as determined by an
independent qualified appraiser selected by Exult and approved by the Company
(which approval shall not be unreasonably withheld or delayed). The amount of
such consideration (x) shall be delivered by the Company to Exult within 30 days
of the delivery by such appraiser to each of Exult and the Company of a written
report reflecting such appraised fair market value and (y) may be set off by
Exult, at the Company's request, against the outstanding amount of the Purchase
Price payable by Exult to the Company at the time of such Payment Default and
any interest accrued thereon at the rates specified herein.
7.11 AGREEMENT TO COOPERATE; SALES TAX EXEMPTION.
(a) Subject to the terms and conditions herein, each of the
parties hereto shall use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate
and make effective the transactions contemplated by this Agreement. The
Company agrees to execute and deliver to Exult (or its assignee) from
time to time such further and particular assignments, consents, or
other instruments in writing as Exult (or its assignee) may request as
appropriate or desirable to confirm its title in and to the Purchased
Assets.
(b) In the event any litigation is commenced by any person or
entity relating to the transactions contemplated by this Agreement,
Exult shall have the right, at its own
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expense, to participate therein, provided that in no event shall the
Company be obligated to provide to Exult any privileged information if
the Company reasonably believes that such action would jeopardize such
privilege.
(c) The Company shall timely complete all forms and timely
make all filings reasonably requested by Exult which are necessary to
secure appropriate sale or use tax exemptions with respect to the
Purchased Assets.
7.12 EMPLOYMENT; STOCK OPTIONS; EMPLOYEE BENEFIT MATTERS.
(a) Exult shall offer employment to each active (as of the
Closing Date) employee of the Business listed on SCHEDULE 7.12(a),
provided that each such employee shall have executed and delivered to
Exult an Employment Agreement, and the Employee Proprietary Information
and Inventions Agreement attached thereto, in the forms attached hereto
as EXHIBIT 7.12(a).
(b) Exult shall offer employment to each active (as of the
Closing Date) employee of the Business listed on SCHEDULE 7.12(b),
provided that each such employee shall have executed and delivered to
Exult an employment letter agreement, and the Employee Proprietary
Information and Inventions Agreement attached thereto, in the forms
attached hereto as EXHIBIT 7.12(b) (the agreements referred to in
clause (a) and clause (b) of this Section 7.12 being referred to
herein, collectively, as "EMPLOYEE AGREEMENTS").
(c) The Company and the Shareholders shall use all reasonable
efforts to cause all of the Employee Agreements to be executed and
delivered on or prior to the Closing.
(d) At the Closing, Exult shall grant to each employee of the
Company whose name is set forth on SCHEDULE 7.12(a) and SCHEDULE
7.12(b) attached hereto an option to purchase the number of shares of
Exult Common Stock set forth opposite such employee's name on such
Schedule, which options (collectively, the "Options") shall vest in
accordance with the terms of Exult's 1999 Stock Option/Stock Issuance
Plan or Exult's 1999 Special Executive Stock Option/Stock Issuance
Plan.
(e) On the Closing Date, the Company shall notify each
employee of the Business whose name is set forth on SCHEDULE 7.12(a)
and SCHEDULE 7.12(b) attached hereto that such employee's employment
with the Company has terminated as of the Closing Date. The Company
shall cause each employee of the Business to be fully vested in his
account balance or accrued benefit in each Employee Benefit Plan that
is a pension benefit plan, regardless of the employee's years of
service. The Company shall be liable for the administration and payment
of all health and welfare liabilities and benefits under the Employee
Benefit Plans with respect to treatment and services rendered to
employees of the Business through the Closing Date. The Company shall
be responsible for satisfying obligations under Section 601 et seq. of
ERISA and Section 4980B of the Code to provide continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, with respect to employees of the
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Business and their dependents with respect to any "qualifying event"
occurring on or before the Closing Date.
(f) Exult shall use the "Alternative Procedure" provided in
Section 5 of Revenue Procedure 96-60 with respect to filing and
furnishing Internal Revenue Service Forms W-2, W-3 and 941 with respect
to transferred employees for the 1999 calendar year. Under such
"Alternative Procedure" (i) the Company and Exult each shall report on
a predecessor-successor basis as set forth in such Revenue Procedure,
(ii) the Company shall be relieved from furnishing Forms W-2 to
employees of the Company that become employees of Exult and (iii) Exult
shall assume the obligations of the Company to furnish such Forms W-2
to such employees for the full 1999 calendar year. Exult shall also use
such similar procedures and make similar elections under state or local
tax laws. Exult shall be responsible for filing and furnishing Internal
Revenue Service Forms W-2, W-3 and 941 for the 1999 calendar year.
(g) If permissible under applicable law and not precluded
under the provisions of Exult's employee benefit plans or programs, the
employees listed on SCHEDULE 5.25 attached hereto shall be given prior
service credit for time spent as employees of the Company for purposes
of eligibility and vesting under such employee benefit plans and
programs.
7.13 CLOSING CONDITIONS. Between the date of this Agreement and the
Closing Date, the parties hereto shall use their reasonable efforts to cause the
conditions specified in Article VIII and Article IX hereof, over which such
parties have control, to be satisfied as soon as reasonably practicable
7.14 BUSINESS FAILURE OF EXULT. If, prior to the second anniversary of
the Closing Date, (a) Exult shall become unable to pay its obligations as they
become due over period of 180 days or more or (b) proceedings shall have begun
regarding the dissolution or bankruptcy of Exult, including (without limitation)
the filing of a petition under any provision of federal bankruptcy law which is
not dismissed within 60 days of such filing (in the case of an involuntary
petition), an assignment for the benefit of creditors or the appointment of a
receiver (each such event, a "BUSINESS FAILURE"), upon the payment by the
Company to Exult of an amount equal to the fair market value of the Intellectual
Property, as determined by a mutually agreed-upon independent qualified
appraiser, the Intellectual Property acquired by Exult hereunder shall be
immediately re-conveyed, transferred and assigned by Exult to the Company. Exult
shall execute and deliver to the Company all appropriate bills of sale and
assignment, consents and such other instruments of transfer and title as are
reasonably necessary to vest the Company with good and marketable title to such
Intellectual Property, free and clear of all Liens.
7.15 GUNN DATABASE. Exult shall adopt and use all reasonable efforts to
follow the policy set forth in SCHEDULE 7.15 attached hereto.
7.16 RIGHT OF FIRST OFFER. For a period commencing on the Closing Date
and terminating on the second anniversary of the Closing Date, the Company (or,
if the Company no longer exists at such time, the Shareholder Representative)
shall have a right of first offer with respect to the sale of all or
substantially all of the GPI Business Unit and the assets and
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properties owned by Exult in connection therewith (collectively, the "GPI
BUSINESS"). Accordingly, before Exult may enter into negotiations with any third
party to sell the GPI Business, Exult shall give written notice of its intent to
sell the GPI Business to the Company or the Shareholder Representative, as the
case may be, whereupon the Company or the Shareholder Representative, as the
case may be, shall have the option to enter into exclusive negotiations with
Exult for a 30-day period to purchase the GPI Business for cash. Such option
must be exercised, if at all, by the Company or the Shareholder Representative,
as the case may be, within ten business days after the delivery of such notice
by the delivery to Exult by the Company or the Shareholder Representative, as
the case may be, of written notice of its intent to exercise such option. Such
notice shall include a statement by the Company or the Shareholder
Representative, as the case may be, of its estimate of the fair market value of
the GPI Business. Upon the receipt by Exult of such notice, the parties shall
enter into good faith negotiations for a period of at least 30 days to determine
the purchase price and other principal terms relating to the proposed sale of
the GPI Business. If the parties do not agree upon a purchase price and the
other principal terms with respect to the proposed sale of the GPI Business
within such 30-day period, Exult shall be free to consummate the sale of the GPI
Business with any third party on financial terms no less favorable than those
offered by the Company or the Shareholder Representative as the case may be. In
the event Exult shall not have consummated the sale of the GPI Business within
one year after the termination of such 30-day period, Exult shall not enter into
negotiations with any third party to sell the GPI Business without first
offering to the Company or the Shareholder Representative, as the case may be,
the opportunity to negotiate to acquire the GPI Business in the manner set forth
above.
7.17 FINANCIAL STATEMENTS. For the period commencing on the Closing
Date and terminating on the earlier to occur of (a) an underwritten initial
public offering of Exult Common Stock or (b) the payment by Exult of the Third
Installment, Exult shall furnish the Shareholder Representative with one copy of
the following:
(i) ANNUAL FINANCIAL STATEMENTS. Exult's comparative
statements of income and cash flow and consolidated balance sheet as of
the end of each fiscal year of Exult as soon as they shall become
available, and in any event within 120 days after the end of each such
fiscal year; and
(ii) QUARTERLY FINANCIAL STATEMENTS. Exult's comparative
statements of income and cash flow and un-audited consolidated balance
sheet as of the end of each fiscal quarter of Exult as soon as they
become available, and in any event within 60 days after the end of each
such fiscal quarter.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF EXULT
The obligations of Exult to effect the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part in
writing by Exult:
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8.1 [INTENTIONALLY OMITTED].
8.2 [INTENTIONALLY OMITTED].
8.3 CORPORATE CERTIFICATE. The Company shall have delivered to Exult
(a) copies of its certificate of incorporation and bylaws as in effect
immediately prior to the Closing Date, (b) copies of resolutions adopted by its
Board of Directors and the Shareholders authorizing the transactions
contemplated by this Agreement and (c) a certificate of good standing issued by
the Secretary of State of the State of Delaware as of a date not more than ten
days prior to the Closing Date, certified in the case of clause (a) and (b) of
this Section 8.3 as of the Closing Date by the Secretary of the Company as being
true, correct and complete.
8.4 DELIVERY OF PURCHASED ASSETS. At the Closing, the Company shall
duly execute and deliver to Exult, or its assignee, the (a) Bill of Sale and
Assignment in the form attached hereto as EXHIBIT A and (b) Assignment and
Assumption Agreement in the form attached hereto as EXHIBIT B, and such other
instruments of transfer of title as are necessary to transfer to Exult (or its
assignee) good and marketable title to the Purchased Assets and shall deliver to
Exult (or its assignee) immediate possession of the Purchased Assets.
8.5 LEGAL OPINION. Exult shall have received legal opinions of Eckert
Seamans Cherin & Mellott, LLC, outside counsel to the Company and the
Shareholders, dated the Closing Date, in substantially the form attached hereto
as EXHIBIT 8.5.
8.6 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of Exult, makes
it inadvisable to proceed with the transactions contemplated hereby.
8.7 THIRD PARTY CONSENTS. All governmental waivers, consents, orders
and approvals legally required for the consummation of the transactions
contemplated hereby, and all consents from lenders and other third parties
required to consummate the transactions contemplated hereby, including (without
limitation) all required consents or approvals of each person that is a party to
a contract or agreement identified in SCHEDULE 8.7 attached hereto shall have
been obtained and be in effect on the Closing Date.
8.8 EMPLOYMENT MATTERS. The Employee Agreements contemplated by Section
7.12 hereof shall have been executed and delivered by (i) all of the employees
of the Business listed on SCHEDULE 7.12(a) attached hereto and (ii) at least 80%
of the employees of the Business listed on SCHEDULE 7.12(b) attached hereto.
8.9 BOARD APPROVAL. The Board of Directors of Exult shall have
authorized and approved this Agreement and the transactions contemplated hereby.
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and the Shareholders to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company and the Shareholders:
9.1 [INTENTIONALLY OMITTED].
9.2 [INTENTIONALLY OMITTED].
9.3 CORPORATE CERTIFICATE. Exult shall have delivered to the Company
(a) copies of its certificate of incorporation and bylaws as in effect
immediately prior to the Closing Date, (b) copies of resolutions adopted by its
Board of Directors authorizing the transactions contemplated by this Agreement
and (c) a certificate of good standing issued by the Secretary of State of the
State of Delaware as of a date not more than ten days prior to the Closing Date,
certified in the case of clause (a) and (b) of this Section 9.3 as of the
Closing Date by the Secretary of Exult as being true, correct and complete.
9.4 LEGAL OPINION. The Company shall have received legal opinions of
McDermott, Will & Emery, outside counsel to Exult, dated the Closing Date, in
substantially the form attached hereto as EXHIBIT 9.4.
9.5 EMPLOYMENT MATTERS. Exult shall have (a) executed and delivered the
Employee Agreements contemplated by Section 7.12 hereof and (b) granted the
Options to the employees of the Company as contemplated by such Section.
9.6 DELIVERY OF CLOSING DATE PAYMENT. At the Closing, Exult shall have
paid the Closing Date Payment to the Company, except for an amount equal to the
Payables Reserve amount.
9.7 NO ORDER OR INJUNCTION. There shall not be pending by or before any
court or other governmental body an order or injunction restraining or
prohibiting the transactions contemplated hereby.
9.8 BOARD APPROVAL. The Board of Directors of the Company shall have
authorized and approved this Agreement and the transactions contemplated hereby.
ARTICLE X
INDEMNIFICATION
10.1 AGREEMENT BY THE COMPANY AND THE SHAREHOLDERS TO INDEMNIFY. Each
of the Company and the Shareholders, jointly and severally (subject to the
limitations on the individual liability of the Shareholders set forth in this
Section 10.1), agrees to protect, defend, indemnify
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and hold Exult harmless from and against the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by Exult
resulting from or arising out of (a) any breach of a representation or warranty
made by the Company or the Shareholders in or pursuant to this Agreement or any
agreement entered into in connection with this Agreement, (b) any breach of the
covenants or agreements of the Company or the Shareholders in this Agreement or
any agreement entered into in connection with this Agreement, (c) any inaccuracy
in any certificate delivered by the Company or the Shareholders pursuant to this
Agreement, (d) the Company's ownership or operation of the Purchased Assets
prior to the Closing, (e) any liability relating to noncompliance with bulk
sales, bulk transfer or similar laws applicable to the transactions contemplated
by this Agreement, (f) any alleged or actual breach of the Acquired Rights
Directive, TUPE and/or Other European transfer of undertakings law or the
application of any such provision, (g) any failure by the Company to obtain any
Consent to the assignment by the Company of any Assigned Contract (including,
without limitation, any loss or additional expense incurred by Exult in
connection with any substitute Contract required to be entered into by Exult on
terms less favorable than the related Assigned Contract as a result of (i) such
failure, (ii) an outright termination of an Assigned Contract by the third party
thereto or (iii) any other affirmative act by any third party to an Assigned
Contract which deprives Exult of the benefit of such Assigned Contract) or (h)
any Excluded Liability (collectively, "EXULT INDEMNIFIABLE DAMAGES"); provided,
however, that Exult shall not be entitled to recover any Exult Indemnifiable
Damages resulting from or arising out of any breach contemplated by clause (a)
above until the aggregate of all Exult Indemnifiable Damages resulting from or
arising out of any such breaches exceeds $75,000, in which case Exult shall be
entitled to recover the full amount of all Exult Indemnifiable Damages;
provided, however, that such $75,000 threshold shall not apply with respect to,
and Exult shall be entitled to the full amount of any Exult Indemnifiable
Damages resulting from, any breach of the terms of Section 5.24 hereof.
Notwithstanding anything to the contrary set forth herein, in no event shall (i)
the Company's aggregate liability under this Article X exceed the Purchase Price
or (ii) the aggregate individual liability of any Shareholder under this Article
X exceed the amount set forth opposite such Shareholder's name in SCHEDULE 10.1
attached hereto, to the extent that such amounts have been disbursed to the
Company by Exult (without regard, however, to whether the Company has
distributed such amounts to the applicable Shareholder, unless all or any
portion of such amounts disbursed to the Company by Exult shall have been
remitted or otherwise paid over to Exult to satisfy a claim for Exult
Indemnifiable Damages under this Article X, in which case the aggregate
individual liability of the Shareholders shall be reduced pro rata based upon
the aggregate amount of such remittance or payment to Exult); provided, however,
that nothing in this last sentence of this Section 10.1 shall be construed in
any way to limit Exult's right to set off against the Held Back Amount any Exult
Indemnifiable Damages for which the Company or the Shareholders may be
responsible under this Agreement.
Notwithstanding anything contained in this Agreement to the contrary,
with respect to any indemnification obligations of the Shareholders hereunder
regarding the breach by any individual Shareholder of Section 7.5 or Section 7.6
hereof, which breach results in Exult Indemnifiable Damages, Exult shall exhaust
all remedies available to it with respect to each individual Shareholder so
breaching such Sections prior to bringing any claim for Exult Indemnifiable
Damages against any non-breaching Shareholder.
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10.2 AGREEMENT BY EXULT TO INDEMNIFY. Exult agrees to protect, defend,
indemnify and hold the Company and the Shareholders harmless from and against
the aggregate of all expenses, losses, costs, deficiencies, liabilities and
damages (including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by the Company and the Shareholders resulting
from or arising out of (a) any breach of a representation or warranty made by
Exult in or pursuant to this Agreement or any agreement entered into in
connection with this Agreement, (b) any breach of the covenants or agreements of
Exult in this Agreement or any agreement entered into in connection with this
Agreement or (c) any inaccuracy in any certificate delivered by Exult pursuant
to this Agreement (collectively, "COMPANY INDEMNIFIABLE DAMAGES"); provided,
however, that the Company and the Shareholders shall not be entitled to any
Company Indemnifiable Damages resulting from or arising out of any breach
contemplated by clause (a) above unless the aggregate of all Company
Indemnifiable Damages resulting from or arising out of any such breaches exceeds
$75,000, in which case the Company and the Shareholders shall be entitled to
recover the full amount of all Company Indemnifiable Damages. Notwithstanding
anything to the contrary set forth herein, in no event shall Exult's aggregate
liability under this Article X exceed the Purchase Price.
10.3 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the parties hereto in this Agreement or
pursuant hereto shall survive until the third anniversary of the Closing Date.
The Company and the Shareholders agree to maintain the existence of the Company
in order to satisfy the indemnification obligations of the Company as set forth
in this Article X through the third anniversary of the Closing Date.
Notwithstanding any knowledge of facts determined or determinable by any party
hereto by investigation, each party hereto shall have the right to fully rely on
the representations, warranties, covenants and agreements of the other parties
hereto in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties hereto in this Agreement is independent of each other
representation, warranty, covenant and agreement.
10.4 SET OFF AGAINST THE HELD BACK AMOUNT. Exult may set off against
and recoup from the Held Back Amount any Exult Indemnifiable Damages for which
the Company or any Shareholder may be responsible pursuant to this Agreement,
subject, however, to the following terms and conditions:
(a) Exult shall give written notice to the Company of any
claim for Exult Indemnifiable Damages or any other damages hereunder,
which notice shall set forth (i) the amount of Exult Indemnifiable
Damages or other loss, damage, cost or expense which Exult claims to
have sustained by reason thereof, and (ii) the basis of the claim
therefor;
(b) Such set off and recoupment shall be effected on the later
to occur of the expiration of ten days from the date of such notice
(the "NOTICE OF CONTEST PERIOD") or, if such claim is contested, the
date the dispute is resolved;
(c) If, prior to the expiration of the Notice of Contest
Period, the Company shall notify Exult in writing of an intention to
dispute the claim and if such dispute is not resolved within 30 days
after expiration of such period, then Exult may take any action or
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exercise any remedy available to it by appropriate legal proceedings to
enforce its rights and remedies hereunder; and
(d) All set-offs and recoupments of Exult Indemnifiable
Damages pursuant to this Section 10.4 shall be treated as adjustments
to the Purchase Price.
10.5 DELIVERY OF THE HELD BACK AMOUNT. Except for (a) amounts deducted
from the Second Installment and the Third Installment, if any, in connection
with terminating employees of the Business as contemplated by Section 2.1 hereof
and (b) any set-off and recouped amounts with respect to any Exult Indemnifiable
Damages pursuant to Section 10.4 hereof, Exult agrees to pay to the Company by
(i) no later than five days following the first anniversary of the Closing Date,
the Second Installment and (ii) no later than five days following the second
anniversary of the Closing Date, the Third Installment, together (in each case)
with interest accrued on the amount actually paid at the rate of 5.7% per annum,
unless (in either case) there then remains unresolved any claim for Exult
Indemnifiable Damages or other damages payable by the Company or the
Shareholders hereunder as to which notice has been given, in which event, any
remaining portion of the Second Installment or the Third Installment (as the
case may be) then due, after such claim shall have been satisfied, shall be
returned to the Company promptly after the time of satisfaction. In the event
that Exult does not pay to the Company the Second Installment or the Third
Installment prior to the expiration of the applicable five-day grace period in
accordance with Section 10.5, interest shall accrue at the rate specified above
plus 2% on such unpaid amounts starting on the termination of each such five-day
grace period and continue until such payments are made.
10.6 NO BAR. If the Held Back Amount is insufficient to set off any
claim for any Exult Indemnifiable Damages hereunder (or has been delivered in
whole or part to the Person(s) entitled to receive such Held Back Amount prior
to the making or resolution of such claim), then Exult may take any action or
exercise any remedy available to it by appropriate legal proceedings to collect
the Exult Indemnifiable Damages. Except for claims premised upon fraud arising
out of intentional, knowing or otherwise willful acts or omissions, in no event
shall Exult be entitled to recover damages against any Shareholder (whether or
not such damages constitute Exult Indemnifiable Damages) in excess of the
limitations on the individual liability of the Shareholders specified in clause
(ii) of Section 10.1 hereof, irrespective of the theory of liability asserted by
Exult or any successor in interest to Exult.
ARTICLE XI
DEFINITIONS
11.1 DEFINED. As used herein, the following terms shall have the
following meanings:
"AFFILIATE" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Securities and
Exchange Act of 1934, as amended and as in effect on the date hereof.
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"CAUSE" means, with respect to any employee of Exult,
termination because of: (a) a conviction of a crime (including
conviction on a nolo contendere plea) involving a felony under federal
or state law, (b) a reasonable determination by Exult that the employee
has committed any material act of dishonesty, fraud or moral turpitude
against Exult, (c) gross negligence by the employee in carrying out his
or her duties as an employee of Exult, (d) a material breach by the
employee of the Employee Agreement between the employee and Exult that
is continuing, or occurs again, after written notice that such breach
constitutes Cause hereunder, (e) any gross misconduct by the employee,
including (without limitation) intoxication on the job,
insubordination, or other misconduct, which could have an adverse
effect on the business, financial condition or operations of Exult that
is continuing, or occurs again, after written notice that such
misconduct constitutes Cause hereunder, (f) the deliberate and
continued refusal by the employee to perform employment duties
contemplated by the Employee Agreement between the employee and Exult
that are reasonably requested by Exult or an Affiliate of Exult after
30 days' written notice of such failure to perform, specifying that
such failure constitutes Cause hereunder (other than as a result of
vacation, illness or injury), provided that if such employee is a
Shareholder and such employment duties shall have been modified by
Exult, such duties are consistent with the status and employment duties
of such employee initially set forth in the Employment Agreement
between such employee and Exult or (g) if the employee is a
Shareholder, the employee's breach of any of the provisions of Section
7.5 hereof (or Section 7.6 hereof with respect to Gibson).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"COMPANY'S KNOWLEDGE" means all matters with respect to which
(a) the Company or any Shareholder has received written notice or (b)
any Shareholder has actual knowledge.
"CONTRACT" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation or other contract, agreement or instrument,
whether written or oral, express or implied.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"INDEBTEDNESS" of any entity means all obligations of such
entity (a) which in accordance with GAAP should be classified upon a
balance sheet of such entity as indebtedness, (b) for borrowed money or
purchase money financing which has been
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incurred in connection with the acquisition of property or services,
including (without limitation) prepayment or early termination
penalties associated with any of the foregoing, (c) secured by any lien
or other charge upon property or assets owned by such entity, even
though such entity has not assumed or become liable for the payment of
such obligations, (d) created or arising under any conditional sale or
other title retention agreement with respect to property acquired by
such entity, whether or not the rights and remedies of the lender or
lessor under such agreement in the event of default are limited to
repossession or sale of the property, and (e) for remaining payments
under any capitalized leases (as defined under GAAP), non-competition
agreements, severance agreements or any other agreements made outside
the ordinary course of business.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation,
any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable law
or any jurisdiction in connection with such mortgage, pledge, security
interest, encumbrance, lien or charge).
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects
which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities,
rights, obligations, operations, business or prospects.
"PERSON" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority or other entity, of
whatever nature.
"SHAREHOLDER REPRESENTATIVE" shall mean, after the dissolution
or winding up of the Company, if any, the person designated by the
Shareholders as the only person authorized to represent the
Shareholders, and the only person with whom Exult shall have any
obligation to deal with, in connection with the various post-Closing
transactions and other Shareholder rights and duties contemplated
hereby. The Shareholders hereby designate Mike Markos as the initial
Shareholder Representative and Jay Ackerman as the alternate
Shareholder Representative and may designate a successor thereto by
written notice to Exult signed by a majority of the Shareholders.
"TAX RETURN" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes; and
"TAXES" means all taxes, fees or other assessments, including
(without limitation) income, excise, property, sales, franchise,
intangible, withholding, social security and unemployment taxes imposed
by any federal, state, local or foreign governmental agency, and any
interest or penalties related thereto.
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ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date: (a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or (b) by Exult in the event of a material breach
by the Company or any Shareholder of any provision of this Agreement; or (c) by
the Company in the event of a material breach by Exult of any provision of this
Agreement.
12.2 EFFECT OF TERMINATION. Except for the provisions of Section 7.2,
Section 13.3 and Article X hereof, which shall survive any termination of this
Agreement, in the event of termination of this Agreement pursuant to Section
12.1, this Agreement shall forthwith become void and of no further force and
effect and the parties hereto shall be released from any and all obligations
hereunder; provided, however, that nothing herein shall relieve any party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid) or guaranteed overnight
delivery to the following addresses (or to such other addresses which such party
shall designate in writing to the other party):
(a) if to Exult:
Exult, Inc.
4 Park Plaza, Suite 350
Irvine, California 92614
Attn: Chief Executive Officer
with a copy to:
McDermott, Will & Emery
2049 Century Park East, 34th Floor
Los Angeles, California 90067
Attn: Mark J. Mihanovic, Esq.
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(b) if to the Company or the Shareholders:
Gunn Partners Inc.
Two South Market Building
Faneuil Hall Marketplace
Boston, Massachusetts 02109
Attn: Mike Markos
with a copy to:
Eckert Seamans Cherin & Mellott, LLC
One International Place, 18th Floor
Boston, Massachusetts 02110
Attn: William F. Miller, Esq.
Notice shall be deemed given on the date delivered (or the date of
refusal of delivery) if sent by overnight delivery or certified or registered
mail.
13.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the Disclosure Schedules and the other the exhibits and schedules
attached hereto) and other documents delivered at the Closing pursuant hereto,
contain the entire understanding of the parties hereto in respect of its subject
matter and supersede all prior agreements and understandings (oral or written)
between or among the parties hereto with respect to such subject matter. The
parties agree that prior drafts of this Agreement shall not be deemed to provide
any evidence as to the meaning of any provision hereof or the intent of the
parties hereto with respect thereto. The Disclosure Schedules and the other
exhibits and schedules attached hereto constitute a part hereof as though set
forth in full above. This Agreement is not intended to confer upon any Person,
other than the parties hereto, any rights or remedies hereunder.
13.3 EXPENSES. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby. The
Company hereby agrees to pay any and all sales, transfer, use and similar taxes
or fees which may become due and owing as a result of the completion of the
transactions contemplated hereby.
13.4 AMENDMENT; WAIVER; BINDING EFFECT; ASSIGNMENT. This Agreement may
not be modified, amended, supplemented, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. The rights and obligations
of this Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Except as expressly provided herein, the
rights and obligations of this Agreement may not be assigned by any party hereto
without the prior written consent of the other parties hereto; provided,
however, that after the Closing Date, Exult may assign its rights and
obligations under this Agreement to a successor in interest, without the written
consent of the Company, provided that (a) such successor assumes the obligations
of Exult hereunder and, unless such assignment is effective automatically as a
matter of law, executes and delivers to the Company and the Shareholder
Representative an agreement to be
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bound by the terms hereof and (b) no such assignment shall release or limit the
obligations of Exult and Exult Equity Partners, Inc. hereunder.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A facsimile signature of any party shall
be considered to have the same binding legal effect as an original signature.
13.6 GOVERNING LAW; VENUE; WAIVER OF JURY. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of California applicable to contracts executed and to be wholly performed
within such State. Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this agreement may be brought against any
of the parties hereto in the courts of the State of California, or in any United
States District Court for the Central District of California if it has or can
acquire jurisdiction, and each of the parties hereto consents to the
jurisdiction of such courts and of the appropriate appellate courts in any such
action or proceeding and waives any objection to venue laid therein. Process in
any action or proceeding referred to in the preceding sentence may be served on
any party anywhere in the world. Each of the parties hereto waives any defense
of inconvenient forum to the maintenance of any action or proceeding so brought.
Nothing in this Section 13.6 shall affect the right of any party hereto to serve
legal process in any other manner permitted by law or at equity. A final
judgment in any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by law or at
equity. Each Shareholder hereby irrevocably waives any right to a trial by jury
in any legal proceedings or to have a jury participate in resolving any disputes
or claims, whether any such proceedings, disputes or claims relate to or arise
in contract, tort or otherwise, whether with respect to this Agreement or any
other documents or instruments delivered in connection with this Agreement or
the transactions contemplated hereby.
13.7 SEVERABILITY. If any word, phrase, sentence, clause, section,
subsection or provision of this Agreement as applied to any party or to any
circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. Except for the provisions of Section 7.6 hereof, if any
provision of this Agreement, or any part thereof, is deemed by a court of
competent jurisdiction to exceed the time, geographic or other limitations
imposed by applicable law, then such provision or such part shall be deemed
reformed to the maximum time or geographic or other limitation (as the case may
be) permitted by applicable law without affecting or rendering invalid or
unenforceable the remaining terms or provisions of this Agreement.
13.8 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing
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this Agreement; and (f) this Agreement is the result of arm's length
negotiations conducted by and among the parties and their respective counsel.
13.9 CONSTRUCTION. The parties hereto agree and acknowledge that they
have jointly participated in the negotiation and drafting of this Agreement. In
the event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. If any party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant. The mere listing (or
inclusion of copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty relates solely to the existence of the document or
other items itself).
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IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first written above.
EXULT, INC.
By:
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Name:
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Title:
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GUNN PARTNERS INC.
By:
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Name:
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Title:
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SHAREHOLDERS:
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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individually
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