Stock Purchase Agreement - Elite Information Group Inc. and Law Manager Inc.
STOCK PURCHASE AGREEMENT
BETWEEN
ELITE INFORMATION GROUP, INC.,
LMI ACQUISITION CORPORATION,
LAW MANAGER, INC.,
NICHOLAS PUSCHAK,
AND
DAVOOD TASHAYYOD
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TABLE OF CONTENTS
PAGE
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ARTICLE I
PURCHASE AND TERMS OF PAYMENT
1.1 The Purchase.........................................................1
1.2 Total Consideration..................................................1
1.3 Base Purchase Price Adjustment.......................................1
1.4 Tax Liability Adjustment.............................................2
1.5 Manner of Payment....................................................2
ARTICLE II
THE CLOSING
2.1 Time and Place of Closing............................................4
2.2 Deliveries by the Company............................................5
2.3 Deliveries by Buyer..................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
3.1 Organization and Standing............................................5
3.2 Authority Relative to this Agreement.................................6
3.3 Consent and Approvals; No Violation..................................6
3.4 Capital Stock........................................................6
3.5 Financial Statements.................................................7
3.6 Undisclosed Liabilities..............................................7
3.7 Absence of Certain Changes or Events.................................7
3.8 Certain Contracts and Arrangements...................................8
3.9 Litigation...........................................................8
3.10 Taxes and Tax Returns................................................8
3.11 Compliance with Applicable Laws......................................9
3.12 Labor Matters........................................................9
3.13 Corporate and Personnel Data; Labor Relations.......................10
3.14 Employee Benefit Plans; ERISA.......................................10
3.15 Title to Assets.....................................................12
3.16 Accounts Receivable.................................................13
3.17 Proprietary Rights..................................................13
3.18 Software............................................................14
3.19 Year 2000...........................................................16
3.20 Insurance...........................................................16
3.21 Transactions with Affiliates........................................17
3.22 Environmental Matters...............................................17
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3.23 Full Disclosure.....................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization........................................................18
4.2 Authority Relative to this Agreement................................18
4.3 Consents and Approvals; No Violation................................18
4.4 Litigation..........................................................18
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Ordinary Conduct....................................................19
5.2 Access to Information...............................................20
5.3 No Solicitation.....................................................20
5.4 Noncompetition by the Sellers.......................................21
5.5 License of Notebook Designer Tool...................................22
5.6 Section 338(h)(10) Election.........................................22
5.7 Rights of Participation in Subsequent Sale of the Company...........22
5.8 Buyer and Seller agree to contribute to a retention bonus pool for
the benefit of Richard Wargo in such amounts and subject to the
terms set forth in Section 5.8 of the Buyer's Disclosure Letter.....23
5.9 Other Actions.......................................................23
5.10 Consummation of Agreement...........................................23
5.11 Publicity...........................................................23
5.12 Sellers' Disclosure Letter..........................................23
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby.................................................24
6.2 Conditions to the Obligations of Company and Sellers to Effect
the Transactions Contemplated Hereby................................24
6.3 Conditions to the Obligations of Buyer to Effect the Transactions
Contemplated Hereby.................................................24
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 Survival of Representations.........................................25
7.2 Sellers' Agreement to Indemnify.....................................26
7.3 Parent's and Buyer's Agreement to Indemnify.........................29
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ARTICLE VIII
TERMINATION
8.1 Termination.........................................................30
8.2 Procedure and Effect of Termination or Failure to Close.............31
ARTICLE IX
GLOSSARY OF DEFINITIONS AND TERMS
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Commissions.........................................................36
10.2 Expenses............................................................36
10.3 Amendment and Modification..........................................36
10.4 Waiver of Compliance; Consents......................................36
10.5 Action by Sellers...................................................36
10.6 Notices.............................................................36
10.7 Assignment..........................................................37
10.8 Guaranty............................................................37
10.9 Governing Law.......................................................38
10.10 Counterparts........................................................38
10.11 Interpretation......................................................38
10.12 Entire Agreement....................................................38
EXHIBITS
Exhibit A Form of Opinion of Counsel to Parent and Buyer
Exhibit B Form of Opinion of Counsel to Sellers and the Company
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of July 7,
2000 (the "Effective Date"), is among ELITE INFORMATION GROUP, INC., a Delaware
corporation ("Parent"), LMI ACQUISITION CORPORATION, a Delaware corporation
("Buyer"), LAW MANAGER, INC., a Pennsylvania corporation ("Company"), and
NICHOLAS PUSCHAK and DAVOOD TASHAYYOD, the shareholders of Company (each a
"Seller" and collectively, the "Sellers").
BACKGROUND STATEMENT
The parties desire that the Sellers sell and that the Buyer purchase
all of the issued and outstanding shares of common stock of the Company, $0.10
par value (the "Shares"), upon the terms and conditions set forth herein.
STATEMENT OF AGREEMENT
In consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND TERMS OF PAYMENT
1.1 THE PURCHASE. Upon the terms and subject to the conditions of this
Agreement, Sellers shall sell and deliver to Buyer and Buyer shall purchase and
accept from Sellers, the Shares in exchange for payment of the Total
Consideration (as defined in SECTION 1.2 below).
1.2 TOTAL CONSIDERATION. Upon the terms and subject to the conditions
contained in this Agreement, and in consideration of the sale of the Shares,
Buyer shall pay to Sellers (i) Eleven Million Dollars ($11,000,000) as adjusted
after Closing as set forth in SECTIONS 1.3 and 1.4 (the "Base Purchase Price")
in the manner set forth in SECTION 1.5(a), plus (ii) an additional Four Million
Dollars ($4,000,000) (the "Additional Purchase Price") in the manner set forth
in SECTION 1.5(C), as adjusted after Closing as set forth in SECTION 1.5(C) (the
"Earnout Amount"), (the sum of the Base Purchase Price and the Earnout Amount,
the "Total Consideration").
1.3 BASE PURCHASE PRICE ADJUSTMENT.
(a) Within 45 days after the Closing Date, Buyer will provide to
Sellers an audited balance sheet of the Company as of the
Closing Date (the balance sheet shall be referred to as the
"Closing Date Balance Sheet") which shall be prepared by
Pricewaterhouse Coopers LLP in accordance with generally
accepted accounting principles.
(b) Buyer shall pay Sellers in the manner set forth in SECTION
1.5(B): (i) an amount equal to the amount of cash shown on the
Closing Date Balance Sheet in excess
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of Four Hundred Forty Thousand Dollars ($440,000) less the sum
of (x) the amount of any Transaction Costs and (y) any current
liabilities reflected on the Closing Date Balance Sheet (the
"Cash Amount"), (ii) an amount equal to that portion of the
accounts receivable shown on the Closing Date Balance Sheet
that are actually collected by Company on or before December
31, 2000 (the "Receivables Amount"), and (iii) two-thirds
(2/3) of any additional taxes incurred by Sellers as a result
of making a Section 338(h)(10) Election (as defined in SECTION
5.6) as determined by Pricewaterhouse Coopers, LLP up to a
maximum of Three Hundred Thousand Dollars ($300,000) (the
"Section 338(h)(10) Amount"). "Transaction Costs" shall mean
any attorney fees, accounting fees, and investment banking
fees incurred by Company in order to consummate the
transactions contemplated hereunder; provided, however,
Transaction Costs shall not include any fees of
Pricewaterhouse Coopers, LLP for the preparation of (i)
audited financial statements of the Company for the fiscal
year ended December 31, 1999 or (ii) the Closing Date Balance
Sheet.
If Sellers reasonably believe that the Closing Date Balance Sheet has
not been prepared in accordance with generally accepted accounting principles,
Sellers shall give written notice to that effect to Buyer within 20 days after
delivery thereof. The notice shall set forth in detail the basis for Sellers'
belief that the Closing Date Balance Sheet has not been properly prepared. If
Buyer and Sellers are unable to resolve the disagreement within 30 days after
delivery of Sellers' written notice, either party may require that the
disagreement be submitted to a mutually agreed-upon certified public accountant
from a nationally recognized accounting firm, whose decision on the proper
application of generally accepted accounting principles shall be final and
binding on both parties. Any costs incurred in resolving such disagreement shall
be borne by Sellers unless the final Closing Date Balance Sheet, as resolved,
varies from the Closing Date Balance Sheet provided by Buyer by more than five
percent (5%), in which case, any costs shall be shared equally by Buyer and
Seller.
The Sellers shall be deemed to have accepted the Closing Date Balance
Sheet on the 20th day after delivery thereof if Sellers do not give Buyer timely
notice of objection by the close of business on such day.
1.4 TAX LIABILITY ADJUSTMENT. The Base Purchase Price shall be reduced,
dollar for dollar, (up to a maximum of One Hundred Fifty Thousand Dollars
($150,000) by an amount equal to the amount of income tax liability incurred but
not paid by Company prior to the Closing Date as a result of the Company's
election to be taxed as an S Corporation (the "Tax Liability Amount").
1.5 MANNER OF PAYMENT.
(a) The Base Purchase Price shall be paid by the Buyer as follows:
(i) Ten Million Eight Hundred Fifty Thousand Dollars
($10,850,000) shall be paid by wire transfer of immediately
available funds to an account or accounts designated by
Sellers (the "Closing Payment");
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(ii) One Hundred Fifty Thousand Dollars less the Tax
Liability Amount shall be paid by wire transfer of immediately
available funds to an account or accounts designated by
Sellers on January 15, 2001; and
(iii) The balance of the Base Purchase Price, if any,
shall be paid as provided in SECTION 1.5(b).
(b) Buyer shall pay Sellers the Cash Amount and the Section
338(h)(10) Amount in immediately available funds, within 15
days after acceptance of the Closing Date Balance Sheet by
Sellers or, in the case of written notice of objection by
Sellers, within 15 days after the Closing Date Balance Sheet
is finally determined as provided herein. Buyer shall pay
Sellers the Receivables Amount on or before January 15, 2001,
in immediately available funds.
(c) Buyer shall pay each Seller his pro rata share of the
Additional Purchase Price based on each Seller's ownership
percentage of the Company prior to Closing (each a "Pro Rata
Share"), by wire transfer of immediately available funds, in
three (3) equal annual installments (each an "Installment" and
collectively, the "Installments"), commencing on the one year
anniversary of the Closing Date; provided, however, in the
event any one or more of Nicholas Puschak, Davood Tashayyod
and Richard Wargo (each a "Key Employee" and collectively, the
"Key Employees") resigns from his employment at the Company,
or a Parent or any Affiliate of Parent which is the successor
or assign of Company, or is terminated by the Company for
"cause" (a "Departing Employee") at any time on or before the
third anniversary of the Closing Date, then (i) any such
Departing Employee who is also a Seller shall not be entitled
to receive his Pro Rata Share of any Installments payable
after termination of such Departing Employee's employment, and
(ii) any Seller who is not a Departing Employee shall remain
entitled to receive his Pro Rata Share of any outstanding
Installments as they become due; provided, however, such
Installments shall be reduced if the Post-Acquisition Business
(as defined in Article IX) fails to meet its Deemed Revenue
targets as set forth in Section 1.5(c) of the Sellers'
Disclosure Letter (the "Target Revenues") for each remaining
year to the extent and in the manner set forth below:
(i) If a Departing Employee's employment with the
Company, the Parent or any Affiliate of Parent which is the
successor or assign of Company terminates (as provided in
SECTION 1.5(c) above) prior to the first anniversary of the
Closing Date, (i) the amount of the Installment due and
payable on the first anniversary of the Closing Date shall be
decreased by a percentage of such Installment equal to the
percentage of any shortfall in Deemed Revenue earned by the
Post-Acquisition Business for the year 2000 as compared to the
Target Revenue for such year; (ii) the amount of the
Installment payable on the second anniversary of the Closing
Date shall be decreased by a percentage of such Installment
equal to the percentage of any shortfall in Deemed Revenue
earned by the Post-Acquisition Business for the year 2001 as
compared to the Target Revenue for such year; and (iii) the
amount of the Installment payable on the third
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anniversary of the Closing Date shall be decreased by a
percentage of such Installment equal to the percentage of any
shortfall in Deemed Revenue earned by the Post-Acquisition
Business for the year 2002 as compared to the Target Revenue
for such year.
(ii) If the Departing Employee's employment with the
Company, the Parent or any Affiliate of Parent which is the
successor or assign of Company terminates (as provided in
SECTION 1.5(c) above) after the first anniversary of the
Closing Date but on or before the second anniversary of the
Closing Date, (i) the amount of the Installment payable on the
second anniversary of the Closing Date shall be decreased by a
percentage of such Installment equal to the percentage of any
shortfall in Deemed Revenue earned by the Post-Acquisition
Business for the year 2001 as compared to the Target Revenue
for such year; and (ii) the amount of the Installment payable
on the third anniversary of the Closing Date shall be
decreased by a percentage of such Installment equal to the
percentage of any shortfall in Deemed Revenue earned by the
Post-Acquisition Business for the year 2002 as compared to the
Target Revenue for such year.
(iii) If the Departing Employee's employment with the
Company, the Parent or any Affiliate of Parent which is the
successor or assign of Company terminates (as provided in
SECTION 1.5(c) above) after the second anniversary of the
Closing Date but on or before the third anniversary of the
Closing Date, the amount of the Installment payable on the
third anniversary of the Closing Date shall be decreased by a
percentage of such Installment equal to the percentage of any
shortfall in Deemed Revenue earned by the Post-Acquisition
Business for the year 2002 as compared to the Target Revenue
for such year.
For purposes of this SECTION 1.5(c), "cause" shall have the meaning
given to it in the Employment Agreements for the Sellers.
(d) Notwithstanding the provisions of SECTION 1.5(c), Buyer shall
accelerate payment of any Earnout Amounts owing to any Sellers
who are not Departing Employees upon the transfer of all or
substantially all of the stock or assets of the Company or the
Post-Acquisition Business (other than any such transfer of the
stock or assets of the Company or the Post-Acquisition
Business that is incident to any merger, consolidation,
business combination, stock or asset sale or similar
transaction involving Parent or any transfer of any portion of
the stock, assets or business of Parent or any of its
subsidiaries other than that represented solely by the stock
or assets of the Company or the Post-Acquisition Business) to
any Person other than an Affiliate of Parent.
ARTICLE II
THE CLOSING
2.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") of the sale
and purchase of the Shares shall take place on or before July 7, 2000 at the
offices of Robinson, Bradshaw &
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Hinson, P.A. in Charlotte, North Carolina, beginning at 10:00 A.M., local time,
or on such other date or at such other time or place as shall be mutually
satisfactory to the parties hereto (the "Closing Date").
2.2 DELIVERIES BY THE COMPANY. At the Closing, Sellers will deliver to
Buyer the following:
(a) All of Sellers' stock certificates representing the Shares,
duly endorsed to Buyer or accompanied by stock powers duly
executed by Sellers in favor of Buyer.
(b) The certificates, consents and other documents contemplated by
SECTION 6.3 hereof.
(c) The Employment Agreements (as defined in SECTION 6.3(f)), duly
executed by the Key Employees.
(d) All other documents, certificates, instruments and writings
required hereunder to be delivered by Sellers, or as may
reasonably be requested by Buyer at or prior to the Closing
Date pursuant to this Agreement.
2.3 DELIVERIES BY BUYER. At the Closing, Parent and Buyer will deliver
to Sellers the following:
(a) Payment of the Closing Payment in accordance with SECTION 1.5.
(b) The certificates and other documents contemplated by SECTION
6.2 hereof.
(c) The Employment Agreements, duly executed by Buyer.
(d) All other documents, certificates, instruments and writings
required hereunder to be delivered by Buyer, or as may
reasonably be requested by Sellers at or prior to the Closing
Date pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
Each of Sellers and Company represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND STANDING. Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation. Company has full corporate power and authority to use its
corporate name and to own, lease or otherwise hold its properties and assets and
to carry on its business as presently conducted. Company is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary. Copies of the articles of incorporation and bylaws of
Company heretofore delivered to Buyer are accurate and complete as of the date
hereof.
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3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Sellers and Company
has the legal right, authority, power and capacity to execute and deliver this
Agreement and to perform its obligations hereunder, and Sellers have the legal
right, authority, power and capacity to sell, transfer and convey the Shares to
Buyer at the Closing. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Company and no other proceedings on the part of Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sellers and Company and constitutes a legal, valid and binding
obligation of each of the Sellers and Company, enforceable against each of them
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting the
rights of creditors generally.
3.3 CONSENT AND APPROVALS; NO VIOLATION. No permit, consent, approval
or authorization of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with any respect of the
execution, delivery and performance of this Agreement. Except as set forth in
Section 3.3 of the Sellers' Disclosure Letter, the execution, delivery and
performance of this Agreement by Sellers and Company will not (a) conflict with
any provision of the Articles of Incorporation or bylaws of Company or any
agreement among shareholders of Company, (b) result in a default (or give rise
to any right of termination, cancellation or acceleration) or result in the
creation of any lien, condition or restriction upon the Shares or any assets of
Company, under or require any consent under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, agreement, lease or other
instrument or obligation to which the Company, or any Seller is a party, (c)
violate any law, statute, rule, regulation, order, writ, injunction or decree of
any federal, state or local governmental authority or agency or result in the
loss of any license or permit which the Company now possesses, or (d) subject
Parent or Buyer to any order or decree of any federal, state or local
governmental authority or agency with which they are not currently obligated to
comply.
3.4 CAPITAL STOCK.
(a) The authorized capital stock of Company consists of 10,000
shares of common stock, $.01 par value, of which 2000 shares
are outstanding. All outstanding shares of capital stock of
Company are duly authorized, validly issued and outstanding
and fully paid and nonassessable, and are held and will be
transferred by Sellers in the amounts set forth in Section 3.4
of the Sellers' Disclosure Letter, free and clear of any
claims, liens, covenants, conditions, pledges, encumbrances,
security interests, options, charges or restrictions of any
kind.
(b) Except as set forth above, there are no shares of capital
stock or other equity securities of Company outstanding. There
are no outstanding, and at Closing there will be no
outstanding, warrants, options, agreements, convertible or
exchangeable securities or other commitments pursuant to which
Company is or may become obligated to issue, sell, purchase,
return or redeem any shares of capital stock or other
securities other than this Agreement, and there are not any
equity securities of Company reserved for issuance for any
purpose. There are no
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agreements, arrangements, proxies or understandings that
restrict or otherwise affect voting or transfer of any of the
capital stock of Company.
(c) Company does not own, directly or indirectly, any capital
stock of or other equity interest in any corporation,
partnership, limited liability company, joint venture or other
entity.
3.5 FINANCIAL STATEMENTS. Company has furnished to Buyer unaudited
balance sheets of Company as of March 31, 2000, December 31, 1999, December 31,
1998 and December 31, 1997 and statements of income of Company for the periods
ending on such dates (collectively, the "Financial Statements"). The Financial
Statements fairly present the results of operations and financial position of
Company for the periods and as of the dates set forth subject to such
adjustments, if any, as may be required to conform the Financial Statements to
the results of the Audited Financial Statements.
3.6 UNDISCLOSED LIABILITIES. Company does not have any obligation or
liability (whether absolute, contingent or otherwise, including without
limitation product liability or warranty obligations), and no acts, omissions or
occurrences have occurred that could result in any obligation or liability
imposed on Company, except liabilities, obligations or contingencies that (a)
are fully accrued or reserved against in the Financial Statements or (b) were
incurred since December 31, 1999 in the ordinary course of business and
consistent with past practices.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.7 of the Sellers' Disclosure Letter since December 31, 1999, there has
not been (a) any declaration or payment of any dividend or other distribution in
respect of the Shares; (b) any adverse change in Company's business or the
results of its operations; (c) any damage, destruction or casualty loss, whether
or not covered by insurance, affecting Company's assets or business; (d) (i) any
increase in the rate or terms of compensation payable to or to become payable to
Company's employees (the "Employees"), except increases occurring in accordance
with Company's customary practices or as required by existing employment
agreements or (ii) any modifications in employee benefits to the Employees; (e)
entry into, termination of (except by reason of the occurrence of a
contractually specified termination date) or amendment to any contract or
commitment or license or permit material to Company's business; (f) any creation
or assumption of any mortgage, pledge, or other lien or encumbrance upon any of
Company's assets; (g) any sale, assignment, lease, transfer or other disposition
of any of Company's assets, except in the ordinary course of business; (h) any
imposition or incurring of any obligation or liability, fixed or contingent,
except in the ordinary course of business; (i) entry into any agreement with
respect to the operation of Company's business pursuant to which the aggregate
annual financial obligation of Company may exceed $10,000, or which is not
terminable by Company without penalty upon 30 days' notice or less; (j) any
commitment to make any purchase for, or sale or license of any equipment,
supplies, Proprietary Rights, Software, or inventories relating to the operation
of Company's business, except in the ordinary course of business; (k) any
commitment in excess of $10,000 for any capital expenditure which Company shall
have any financial obligation to discharge subsequent to Closing; or (l) any
transaction otherwise relating to Company's business not in the ordinary course
of business.
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3.8 CERTAIN CONTRACTS AND ARRANGEMENTS. Section 3.8 of the Sellers'
Disclosure Letter sets forth all Contracts to which Company is a party or by
which it, or its properties or assets are bound. Section 3.8 of the Sellers'
Disclosure Letter also indicates which of such Contracts requires the consent of
a third party in order to continue in full force and effect after Closing
without, as a result of the consummation of the transactions contemplated by
this Agreement, being violated or resulting in a default (or giving rise to any
liens or right of termination, cancellation or acceleration), with or without
notice or the lapse of time. Each of the Contracts to which Company is a party
is a legal, valid and binding obligation of Company, enforceable against Company
(and, to the Knowledge of Company and Sellers, against any other party thereto)
in accordance with its terms, and Company has not given or received any notice
of default, nor do Sellers or Company have Knowledge of any event of default
with respect to any such agreement which is uncured or unremedied.
3.9 LITIGATION. There are no lawsuits, claims or legal, administrative
or arbitration proceedings or investigations pending or against or, to the
Knowledge of Sellers or Company, threatened by or affecting Sellers, Shares,
Company or any of its properties, assets, operations or business.
3.10 TAXES AND TAX RETURNS.
(a) Company has duly and timely filed all Tax Returns (as
hereinafter defined) required to be filed by it and due on or
before the date of this Agreement; all such Tax Returns are
true, correct and complete in all material respects, and
Company has duly paid or made provision on the Financial
Statements, for payment of all Taxes (as hereinafter defined)
which have been incurred or are due to any taxing authorities.
Company has established on the Financial Statements reserves
that are adequate for the payment of all Taxes not yet due and
payable. All amounts required to be paid by Company as
estimated income taxes under Code ss. 6655, and all comparable
provisions of state or local statutes, have been duly paid.
Since December 31, 1999, Company has not incurred any
liability for Taxes, other than in the ordinary course of
business. There are no disputes pending in respect of, or
known claims asserted for, Taxes, nor are there any pending,
or to the Knowledge of Company and Sellers, threatened audits
or investigations or outstanding matters under discussion with
any taxing authorities with respect to the payment of Taxes,
nor has Company given or been requested to give any currently
effective waivers extending the statutory period of limitation
applicable to any Taxes for any period. No issues that have
been raised by any taxing authority in connection with any
Taxes or Tax Returns are of a recurring nature which would
apply to Taxes or Tax Returns after the Closing Date. Neither
Company nor Sellers have Knowledge of any threatened claim or
dispute, or the basis for any such claim or dispute, for past
due Taxes.
(b) There are no liens with respect to Taxes (except for liens for
taxes, assessments or other governmental charges not yet
delinquent) upon any of the properties or assets, real,
personal or mixed, tangible or intangible, of Company.
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(c) There has been withheld or collected from each payment made to
each employee of Company the amount of all Taxes, including
without limitation federal income taxes, Federal Insurance
Contributions Act taxes and state and local income, payroll
and wage taxes, required to be withheld or collected therefrom
through the Closing Date, and the same have been paid to the
proper tax depositories or collecting authorities by the
Closing Date or will be timely paid to the proper tax
authorities thereafter. The Company has not taken any action
not in accordance with its past practices that would have the
effect of deferring any tax liability for Company from any
taxable period ending on or before the Closing Date to any
taxable period after the Closing Date.
(d) Company (i) is not required to include in income any
adjustment pursuant to Code ss. 481(a), and (ii) has not
incurred any liability for Taxes of any other corporation,
partnership, person or other entity under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(e) As of and at all times since July 2, 1986, Company has had on
file with the Internal Revenue Service a valid election under
Section 1362 of the Code. In no year has Company incurred any
tax liability under Sections 1374 or 1375 of the Code.
(f) For purposes of this Agreement, (i) the term "Taxes" shall
mean all taxes, charges, fees, levies or other assessments
(whether federal, state, local or foreign) with respect to
Company or its business, including, without limitation,
income, gross receipts, excise, property, sales, use,
transfer, license, payroll, franchise, ad valorem,
withholding, Social Security and unemployment taxes; and such
term shall include any interest, penalties and additions to
such taxes, charges, fees, levies or other assessments, (ii)
the term "Tax Return" shall mean any report, return or other
information required to be supplied to a taxing authority in
connection with Taxes, and (iii) the term "Code" shall mean
the Internal Revenue Code of 1986, as amended.
3.11 COMPLIANCE WITH APPLICABLE LAWS. The Company (a) is in compliance
with all applicable statutes, laws, ordinances, rules, orders and regulations of
any Governmental Authority or instrumentality, domestic or foreign, including,
but not limited to, any statute, law, ordinance, rule, order, or regulation of
any Governmental Authority pertaining to contractors, subcontractors, or vendors
doing business with such Governmental Authority, (b) possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to hold its assets and carry on its business as presently conducted, and (c)
is not liable for any arrears of wages or any penalties for failure to comply
with any of the foregoing.
3.12 LABOR MATTERS. Company is not a party to any collective bargaining
agreement, and has not recognized or received a demand for recognition of any
collective bargaining representative with respect thereto, and during the past
three (3) years there have been no material labor strikes, disputes or work
stoppages nor, to the Knowledge of Company and Sellers, are any such actions
threatened against Company.
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3.13 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. Section 3.13 of the
Sellers' Disclosure Letter lists the names of, and current salary or wage rates
and total amount of any other bonus, commission, or other compensation paid
since January 1, 1999 for, all the employees of Company who are employed, and
all consultants and independent contractors of Company, as of the date hereof.
The operation of the business of Company has complied with all applicable laws
and regulations relating to the employment of labor, including those related to
wages, hours, collective bargaining, discrimination, equal opportunity and the
payment of Social Security or similar taxes. There are no unfair labor practice
claims or charges pending involving Company relating to the operation of its
business.
3.14 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 3.14 of the Sellers' Disclosure Letter identifies each
employee pension, retirement, profit sharing, bonus,
incentive, deferred compensation, hospitalization, medical,
dental, vacation, insurance, sick pay, disability, severance
or other plan, fund, program, policy, contract or arrangement
that are welfare benefit plans or employee pension benefit
plans (within the meaning of Section 3 of ERISA and the
regulations issued by the Department of Labor) maintained or
contributed to by Company or any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that is a member of a
controlled group of corporations or a trade or business under
common control with Company (within the meaning of Sections
414(b), (c), (m) or (o) of the Code, or Section 4001(a)(14) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (the "Plans"). Neither Company nor any
ERISA Affiliate has ever participated in any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA). Neither
Company nor any ERISA Affiliate is subject to any liability
with respect to its prior participation in, prior
contributions to or prior obligations to contribute to any
such multiemployer plan. Neither Company nor any ERISA
Affiliate has any formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any employee or
terminated employee of Company or any ERISA Affiliate.
b) With respect to each of the Plans, Company has heretofore
delivered to Buyer true and complete copies of each of the
following documents:
(i) the Plan (including all amendments thereto);
(ii) the annual report and actuarial report, if
required under ERISA, with respect to each such Plan for the
last two years;
(iii) the most recent summary plan description,
together with each summary of material modifications, required
under ERISA with respect to such Plan, and all material
written employee communications relating to such Plan;
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(iv) if the Plan is funded through a trust or any
third party funding vehicle, the trust or other funding
agreement (including all amendments thereto) and the latest
financial statements thereof;
(v) all contracts relating to the Plans with respect
to which Company or any ERISA Affiliate may have any
liability, including, without limitation, insurance contracts,
investment management agreements, subscription and
participation agreements and record keeping agreements; and
(vi) the most recent determination letter received
from the Internal Revenue Service with respect to each Plan
that is intended to be qualified under Section 401 of the
Code.
(c) Company and all ERISA Affiliates have paid all premiums (and
interest charges and penalties for late payment if applicable)
due to the Pension Benefit Guaranty Corporation ("PBGC") with
respect to each employee pension plan within the meaning of
Section 3(2) of ERISA (each, a "Pension Benefit Plan")
maintained or contributed to by Company or such ERISA
Affiliate and each plan year thereof for which such premiums
are required. On and after the effective date of ERISA, there
has been no reportable event (as defined in Section 4043 of
ERISA and the PBGC regulations thereunder) with respect to any
Pension Benefit Plan subject to Title IV of ERISA. No
liability under Title IV has been incurred by Company or any
ERISA Affiliate since the effective date of ERISA that has not
been satisfied in full, and no condition exists that presents
a risk to Company of incurring any material liability under
Title IV.
(d) Except as set forth in Section 3.14 of the Sellers' Disclosure
Letter, the fair market value of the assets of each Pension
Benefit Plan required to be funded equals or exceeds the
present value of all benefits (whether or not vested) accrued
to date by all present or former participants or beneficiaries
under such Plan. For this purpose, the assumptions prescribed
by the PBGC for valuing pension plan assets or liabilities
upon plan termination shall be applied to the extent such
assumptions would apply upon termination of each such Plan. To
the extent such assumptions would not apply, the actuarial
assumptions used or required to be used to determine the
funding requirements under a plan shall be applied. No Pension
Benefit Plan has incurred any accumulated funding deficiency
(as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived. Full payment has been made on or
prior to the Closing Date of all amounts which Company or any
ERISA Affiliate is required to pay under the terms of each of
the Plans and applicable law (including any employee salary
deferral contributions described in Section 125 or 401(k) of
the Code). Company and all ERISA Affiliates will make
contributions to the Plans required to be made before the
Closing Date for the current Plan year and for any prior year
through the Closing Date, or if any such contributions are not
before the Closing Date, will make adequate provisions for
reserves therefor.
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(e) Neither Company nor any ERISA Affiliate has engaged in a
transaction with respect to the Plans as a result of which
Company or any ERISA Affiliate could be subject to either a
material liability or material civil penalty assessed pursuant
to Sections 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code. Each of the
Plans has been operated and administered by Company or an
ERISA Affiliate in all material respects in accordance with
applicable laws, including without limitation ERISA and the
Code. There are no material pending or, to the Knowledge of
Company or Sellers, threatened claims by or on behalf of any
of the Plans, by any employee or beneficiary covered under any
such Plan which allege a violation of ERISA or a breach of any
fiduciary duties which would result in a material liability on
the part of Company, any ERISA Affiliate or any Plan.
(f) With respect to each of the Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code,
a favorable determination letter has been received with
respect to all items required to be included therein.
(g) No amounts payable under the Plans or in connection with the
transactions contemplated hereby will fail to be deductible
for federal income tax purposes by virtue of Section 280G of
the Code.
(h) No Plan provides benefits, including without limitation death
or medical benefits (whether or not insured), with respect to
current or former employees beyond retirement or other
termination of service other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement, termination
or disability retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (iii)
deferred compensation benefits accrued as liabilities on the
books of Company or any ERISA Affiliate, (iv) benefits payable
under any welfare plan to employees who become disabled while
employed, (v) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), or (vi) the
Company's severance plan.
(i) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee
or officer of Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement, (ii) accelerate the time
of payment or vesting, or increase the amount of compensation
due any such employee or officer, (other than an acceleration
of the time of payment or vesting which may occur by operation
of law if any or all of the Plans are terminated) or (iii)
result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is
not available.
3.15 TITLE TO ASSETS.
(a) Company is the owner of the assets used by it in connection
with its business (except for Leased Property and Third Party
Software) and has good and marketable title to all such assets
free and clear of all liens, pledges, security
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interests, charges, claims, restrictions or other encumbrances
and defects of title of any nature whatsoever, except as set
forth in Section 3.15(a) of the Sellers' Disclosure Letter.
The rights, properties and other assets currently owned,
leased or licensed by Company include all rights, properties
and other assets necessary to permit it to conduct its
business in the same manner as conducted prior to the date
hereof. Company does not own any real property. The
conditions, restrictions and encumbrances set forth in Section
3.15(a) of the Sellers' Disclosure Letter do not materially
interfere with, or have a material adverse effect on the
operation of Company's business as presently conducted.
(b) Section 3.15(b) of the Sellers' Disclosure Letter sets forth
all depreciable tangible personal property of Company with a
fair market value equal to or greater than five hundred
dollars ($500). All of Company's tangible personal property,
including, but not limited to, furniture, fixtures, buildings,
machinery, tools, vehicles, computers, equipment, and related
assets, are in a good state of repair, reasonable wear and
tear excepted, and are useable by Company for their intended
purposes.
3.16 ACCOUNTS RECEIVABLE. All of Company's accounts receivable
reflected on the Closing Date Balance Sheet (i) represent valid and bona fide
claims, and (ii) were acquired or arose in the ordinary course of business.
3.17 PROPRIETARY RIGHTS.
(a) Ownership and Right to Use. Except as set forth in Section
3.17(a)(i) of the Sellers' Disclosure Letter, Company owns or
has the right to use on a worldwide basis all Proprietary
Rights that Company uses in its business. No Person, other
than the Company has any Proprietary Rights in any product
(including Software) being offered for sale or license by
Company, or any earlier version of any such product
(collectively, the "Products"). Section 3.17(a)(i) of the
Sellers' Disclosure Letter identifies each such Proprietary
Right that is owned by any other Person and used by Company
and identifies the Contract pursuant to which Company uses
such Proprietary Right. Except as set forth in Section
3.17(a)(i) of the Sellers' Disclosure Letter, Company does not
have any obligation to pay any royalty or other fee to any
Person relating to any Proprietary Right owned by that Person.
Company is not under any obligation to any other Person to
register, protect or otherwise take any action with respect to
any Proprietary Right. Company has not entered into any
Contract, other than those Contracts listed in Section
3.17(a)(ii) of the Sellers' Disclosure Letter, that grants any
Person a license in any Proprietary Right or that imposes any
restriction or limitation upon Company relating to its use of
Proprietary Rights.
(b) Marks and Trade Names. Section 3.17(b) of the Sellers'
Disclosure Letter lists each Mark and trade name that has been
used by Company during the last five years, to identify its
goods, services or business and lists each registration that
has been filed or obtained with respect to any Marks. All such
Marks have been in continuous use since the date of their
first use, and Company has the right to use
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each such Mark and trade name within the scope, and in the
geographic area, of its present use. To the Knowledge of
Company and each Seller: (i) no other Person is using a
confusingly similar trade name to describe a business that is
similar to Company's business; (ii) no other Person is using a
confusingly similar Mark to describe products or services that
are similar to the products and services of Company; and (iii)
no other Person is currently using any Mark or trade name in a
manner that would preclude Company from using its Marks and
trade names throughout the United States, Canada, and Europe.
Any trade names and Marks that have been obtained through
transfer or assignment include the associated goodwill.
(c) Patents. Neither Sellers nor Company own or license any Patent
and neither Sellers nor Company have filed any Patent
applications.
(d) Copyrights. Neither Sellers nor Company own any Copyright
registrations and neither Sellers nor Company have filed any
applications for a Copyright registration.
(e) Trade Secrets. Company has taken efforts that are reasonable
under the circumstances to prevent the unauthorized disclosure
to any other Person of such portions of Company's Trade
Secrets as would enable any other Person to compete with
Company within the scope of its business as now conducted and
as presently proposed to be conducted. Each current or former
employee and independent contractor of Company who has had
access to material confidential information of Company during
the last five years has executed or will execute prior to
Closing, a confidentiality agreement obligating that person
not to use any Trade Secrets of Company, except in performing
duties for Company, and not to disclose any such Trade Secrets
to any other Person, and each such confidentiality agreement
was at the time of execution, and remains, enforceable by
Company.
(f) No Infringement. Company has not interfered with, infringed
upon or misappropriated any Proprietary Right of any other
Person. To Sellers' and Company's Knowledge, no Person is
interfering with, infringing upon or misappropriating any
Proprietary Right of Company. No claim has been asserted by
any Person: (i) that such Person has any right, title or
interest in or to any of Company's Copyrights, Patents, Trade
Secrets or Know-how; (ii) that such Person has the right to
use any of Company's Marks or trade names; (iii) to the effect
that any past, present or projected act or omission by Company
infringes any Proprietary Right of such Person; or (iv) that
challenges Company's right to use any of its Proprietary
Rights.
3.18 SOFTWARE.
(a) Ownership and Right to Use. Section 3.18(a) of the Sellers'
Disclosure Letter lists all Company Software and Third Party
Software that Company uses, licenses to any other Person or
otherwise distributes, or has used, licensed to any other
Person, or otherwise distributed during the last five years in
or in connection with
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the business of Company. Section 3.18(a) of the Sellers'
Disclosure Letter also lists each Contract pursuant to which
Company has purchased or licensed any such Third Party
Software, or a copy thereof, from another Person, and Company
and Sellers have delivered to Buyer complete, current, and
accurate copies of all such Contracts. Each Person who
participated in the development of Software has either so
participated as an employee of Company or entered into a
written agreement assigning all rights therein, including the
copyright and moral rights in such Software (including the
related documentation) to Company. There is no Third Party
Software embedded in the Software except as set forth in
Section 3.18(a) of the Sellers' Disclosure Letter. In each
instance in which Company is using, sublicensing or
distributing, or has used, sublicensed or distributed Third
Party Software, or a copy thereof, Company had and has
sufficient rights for such use and to grant such sublicenses
or distribute such Third Party Software and such use,
sublicense or distribution was and is in compliance with and
in no way has breached or is breaching any Contract,
obligation, agreement or license between Company and the owner
or provider of such Third Party Software.
(b) Viruses and Self Help Code. None of the Software nor, to the
Knowledge of Company and Sellers, Third Party Software
includes any instructions, algorithms or code that would cause
such Software (including any component, routine, or subroutine
thereof or other data relating thereto) to maliciously: (i) be
modified or damaged; (ii) modify, damage or delete itself or
cause other Software, programs, routines or subroutines or
data to be modified, damaged or deleted or to modify, damage
or delete themselves; (iii) replicate and propagate itself
throughout other Software, programs, routines or subroutines
or data; (iv) search for and consume memory in computers or
transmit data; (v) usurp the normal operation of computer
facilities; or (vi) alter or place itself within or substitute
itself for any other Software product, including any
component, routine, or subroutine thereof and other data
relating thereto. None of the Software contains any time bomb,
drop dead device, or other software routine designed to
disable the Software with the passage of time, or under the
control or at the direction of any Person other than the user.
(c) Source Code. The Source Code and related documentation for the
Software (including any Third Party Software embedded in the
Software) contain sufficient comments and explanatory notes,
including detailed information in respect of objects used, the
objectives of each module of the Source Code for the Software,
how each module of the Software integrates with each other
module of the Software, and changes made to the Software to
correct errors or to implement updates or modifications, so as
to enable a programmer having average skill and ability in the
technical environment that the Source Code for the Software is
written in, and familiarity, skill and ability working with
software of similar complexity, to understand, maintain and
modify the Source Code for the Software. The Software performs
in all material respects in conformance to the Software Source
Code documentation and the applicable end user and operating
documentation. Except as set forth in Section 3.18(c) of the
Sellers' Disclosure
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Letter, Company has not provided, escrowed, or otherwise
disclosed the Source Code for any Software owned by Company to
any third party.
3.19 YEAR 2000.
(a) No claims have been made or are presently threatened by any
Person in respect of the failure of the Software to be Year
2000 Compliant.
(b) The Software currently offered for sale or license, and all
Software previously sold or licensed with respect to which any
warranty relating to operation or performance is still in
effect and/or Company has continuing maintenance obligations
(including any customizations or enhancements to any of the
foregoing performed by Company for any Person(s)), exclusive
of those modules or versions set forth in Section 3.19 of the
Sellers' Disclosure Letter, is Year 2000 Compliant. To the
knowledge of Sellers and Company, all Third Party Software is
Year 2000 Compliant.
(c) For purposes of this Agreement, the Software will be "Year
2000 Compliant" if:
(i) The functions, calculations and other computing
processes of the Software (collectively "Processes") perform
in a consistent manner and correctly track and account for
dates and passage of time, regardless of the date in time on
which the Processes are actually performed and regardless of
the date on which data were input into the product, whether
before, on or after January 1, 2000 and whether or not the
dates are affected by leap years;
(ii) The Software accepts, calculates, compares,
sorts, extracts, sequences and otherwise processes date inputs
and date values, and returns and displays date values in a
consistent manner and correctly tracks and accounts for dates
and the passage of time, regardless of the dates used, whether
before, on or after January 1, 2000;
(iii) The Software functions without interruptions
caused by the date in time on which the Processes are actually
performed or by the date input to the system, whether before,
on or after January 1, 2000;
(iv) The Software accepts and responds to year input
in a manner that resolves any ambiguities as to century in a
defined and predetermined and appropriate manner; and
(v) The Software stores all dates in an eight digit
format and displays date information in ways that are
unambiguous as to the determination of the century.
3.20 INSURANCE. Section 3.20 of the Sellers' Disclosure Letter lists
all of the material insurance policies maintained by Company as of the date
hereof, and indicates the insurer's name, policy number, expiration date and
amount and type of coverage. All of such policies are
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in full force and effect and are of an amount and type of coverage customarily
maintained by prudent companies similarly situated to Company.
3.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 3.21
of the Sellers' Disclosure Letter, no beneficial owner of the outstanding
Shares, and no officer or director of Company, or any entity in which any of
such persons owns any beneficial interest (other than a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 5% of the stock of which is beneficially
owned by all of such persons), has any agreement, arrangement or understanding
with Company or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the business of Company other than
compensation and benefits as an employee payable in the ordinary course.
3.22 ENVIRONMENTAL MATTERS.
(a) No Environmental Approvals are required for the operation of
the business of Company. All operations of Company conducted
on the Leased Real Property and, to the Knowledge of Company
and Sellers, the Leased Real Property itself, have been and
are now, in compliance with all existing Environmental Laws.
(b) Neither the business of Company, the Leased Real Property nor
any of the assets of Company has been or is now the subject of
any Remedial Order, nor is there any investigation or
evaluation in progress, pending, or to the Knowledge of
Company and Sellers, threatened regarding whether such
Remedial Order is necessary and no circumstances exist that
could result in the issuance of any such Remedial Order with
respect to the business or assets of Company or the Leased
Real Property. Company has never been prosecuted for or
convicted of any offense under any Environmental Laws, nor has
Company been found liable in any proceeding to pay any fine or
judgment to any Person as a result of any Release or
threatened Release of any Hazardous Substance into the
Environment or the breach of any Environmental Law and to the
Knowledge of Company and Sellers, there is no basis for any
such proceeding.
(c) There are no environmental data or studies (including the
results of any environmental audit) with respect to the
business or assets of Company or, to the Knowledge of Company
and Sellers, the Leased Property.
(d) Except for ordinary commercial cleaning, maintenance and
painting products and materials which have been used by the
Company's landlord or its contractor in connection with the
upkeep and maintenance of the Leased Real Property, neither
Company nor Sellers have any knowledge of any Hazardous
Substance in, on or under the Leased Real Property or any
other assets of Company.
(e) None of Company or Sellers has received any notice, request
for information, complaint or order under any Environmental
Law with respect to the Leased Real Property or any other
asset of Company or any property previously owned, leased or
operated by Company.
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3.23 FULL DISCLOSURE. No statement contained in this Agreement or in
any document, certificate or other writing furnished or to be furnished by
Sellers or Company with respect to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact that was necessary, in light of the circumstances under which it was made,
in order to avoid statements herein or therein being misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Parent each represent and warrant to Sellers as follows:
4.1 ORGANIZATION. Parent and Buyer are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware and have the requisite power and authority to own, lease and operate
their properties and to carry on their business as now being conducted, except
where the failure to have such power and authority would not, in the aggregate,
have a material adverse effect on the business, operations or financial
condition of Parent and Buyer collectively.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Buyer has
the power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by Parent and Buyer and no other proceedings on the
part of Parent or Buyer are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and Buyer and constitutes the
legal, valid and binding agreement of each of Parent and Buyer, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting the rights of creditors generally.
4.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in
Section 4.3 of the Buyer's Disclosure Letter, neither the execution, delivery
and performance of this Agreement by Parent or Buyer nor the operation of the
business by Buyer will (a) conflict with or result in any breach of any
provision of the Certificates of Incorporation or bylaws of Parent or Buyer, (b)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, agreement, lease or other instrument or obligation to
which Parent is a party and which is listed as an Exhibit on Parent's most
recent annual report on Form 10-K filed with the Securities Exchange Commission,
or to which Buyer is a party or by which any of Buyer's assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained, or
(c) violate any law, statute, rule, regulation, order, writ, injunction or
decree of any federal, state or local governmental authority or agency which is
applicable to Parent or Buyer or any of their respective assets.
4.4 LITIGATION. There are no legal, administrative, arbitration or
other proceedings or governmental investigations pending or, to the Knowledge of
Parent and Buyer, threatened
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against Parent or Buyer that would give any third party the right to enjoin,
rescind or condition the transactions contemplated hereunder.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 ORDINARY CONDUCT. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing Date, Company and
Sellers will cause the business of Company to be conducted in the ordinary
course in substantially the same manner as presently conducted and will use
their best efforts to preserve their relationships with customers, suppliers and
others with whom they deal and to keep available the services of their officers
and employees. In addition, except as otherwise contemplated by this Agreement
or as set forth in Section 5.1 of the Sellers' Disclosure Letter, Company will
not, and Sellers will not permit Company to do any of the following without the
prior written consent of Buyer:
(a) amend its articles of incorporation or bylaws;
(b) redeem or otherwise acquire any shares of its capital stock or
issue any capital stock or any option, warrant or right
relating thereto or declare or pay any dividend on its capital
stock;
(c) enter into any material contract or commitment relating to the
operation of its business;
(d) adopt or amend in any respect any Plan;
(e) grant to any executive officer or employee any increase in
compensation;
(f) incur any liabilities, obligations or indebtedness or
guarantee any such liabilities, obligations or indebtedness,
other than current liabilities incurred in the ordinary course
of business;
(g) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value;
(h) make any change in any method of accounting or accounting
practice or policy other than those required by generally
accepted accounting principles;
(i) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets or
securities of, any business or any corporation, partnership,
association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets that are
material individually, or in the aggregate, to the business of
Company, taken as a whole;
(j) sell, lease, license, or otherwise dispose of, or agree to
sell, lease, license, or otherwise dispose of, any of its
assets, including, but not limited to any Software
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of Company or Company's Proprietary Rights, except Software
licensed in the ordinary course of business consistent with
past practice;
(k) grant a security interest in, or otherwise pledge as
collateral, any assets of Company;
(l) take, or agree in writing or otherwise to take, any action
which would make any of the representations or warranties of
Sellers or Company contained in this Agreement untrue or
incorrect or would result in any of the conditions set forth
in this agreement not being satisfied; or
(m) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 ACCESS TO INFORMATION.
(a) Between the Effective Date and the Closing Date, Sellers will
and will cause the Company (i) to give Parent and Buyer and
its authorized representatives reasonable access, during
normal business hours and upon reasonable notice, to the
books, records, offices and other facilities and properties of
Company, and (ii) to cause its officers, agents or other
appropriate officials to furnish Parent and Buyer with such
financial and operating data (including accountants' work
papers) and other information with respect to the business
operations of Company including, without limitation,
information relating to Taxes, as Parent and Buyer may from
time to time reasonably request; provided, however, that any
such investigation by Buyer shall be conducted in such a
manner as not to interfere unreasonably with the normal
operations of Company.
(b) Until the Closing, Parent and Buyer (i) will hold, and will
use their best efforts to cause their officers, directors,
employees, lenders, accountants, representatives, agents,
consultants and advisors to hold, in strict confidence all
information (other than such information as may be publicly
available) furnished to Parent or Buyer in connection with the
transactions contemplated by this Agreement as well as all
information concerning Company contained in any analyses,
compilations, studies or other documents prepared by or on
behalf of Parent or Buyer (collectively, the "Information");
and (ii) will not, without the prior written consent of
Company, except as required by law, release or disclose any
Information to any other person, except to Parent's and
Buyer's officers, directors, employees, lenders, accountants,
representatives, agents, consultants and advisors who need to
know the Information in connection with the consummation of
the transactions contemplated by this Agreement. If the
transactions contemplated by this Agreement are not
consummated, the Information, including all analyses,
compilations, studies or other documents prepared by or on
behalf of Parent and Buyer based on the Information, will be
returned to Company or destroyed immediately upon Company's
request therefor.
5.3 NO SOLICITATION. Company and the Sellers will not, and Company will
use its best efforts to cause its officers, directors, employees and agents not
to, directly or indirectly, solicit
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or initiate or encourage any inquiries or the making of any proposal with
respect to or engage in any discussions or negotiations with, or provide any
confidential information or data to, any corporation, partnership, person or
other entity or group concerning any merger, business combination, share
exchange, sale of substantial assets, sale of shares of capital stock or similar
transaction involving Company. Sellers shall notify Buyer if any corporation,
partnership, person or other entity makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
5.4 NONCOMPETITION BY THE SELLERS.
(a) Each Seller agrees that beginning on the Closing Date and for
a period of three (3) years (the "NONCOMPETITION TERM"), such
Seller will not, directly or indirectly, either as principal,
agent, manager, employee, partner, shareholder, director,
officer, consultant or otherwise (i) become engaged or
involved in any business (other than as a less than 5% equity
owner of any corporation traded on any national, international
or regional stock exchange or in the over-the-counter market),
that manufactures, develops, markets, distributes, services or
sells legal case management software or engages in any
business similar thereto; or (ii) induce or attempt to induce
any customer, supplier, employee, consultant, contractor or
agent of Company or any affiliate thereof to reduce,
terminate, restrict or otherwise alter its business
relationship with such Person.
(b) The provisions of SECTION 5.4 shall be limited in scope and
effective only in such geographic areas where Parent is doing
business as of the Closing Date.
(c) If any provision or part of this SECTION 5.4 is held to be
unenforceable because of the duration of such provision or the
geographic area covered thereby, the parties hereto agree to
modify such provision, or that the court making such
determination shall have the power to modify such provision,
to reduce the duration or area of such provision or both, or
to delete specific words or phrases herefrom
("BLUE-PENCILING"), and, in its reduced or blue-penciled form,
such provision shall then be enforceable and shall be
enforced. If either Seller violates any of the restrictive
covenants set forth in this SECTION 5.4, then the time
limitation otherwise applicable to the breaching party shall
be extended for a period of time equal to the period of time
during which such breach or breaches occurred. The parties
intend the above restrictions on competition to be completely
severable and independent, and any invalidity or
unenforceability of any one or more of such restrictions shall
not render invalid or unenforceable any one or more of the
other restrictions.
(d) Each Seller acknowledges that Buyer may have no adequate means
to protect its rights under this SECTION 5.4 other than by
securing an injunction (a court order prohibiting Sellers from
violating this Agreement). Each Seller agrees that Buyer or
Company may enforce this Agreement by obtaining a preliminary
and permanent injunction and any other appropriate equitable
relief in any court of competent jurisdiction. Each Seller
acknowledges that the recovery of damages will not be an
adequate means to redress a breach of this Agreement, but
nothing
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in this SECTION 5.4 shall prohibit Buyer or Company from
pursuing any remedies in addition to injunctive relief,
including recovery of damages.
(e) Each Seller acknowledges and agrees that Parent and Buyer
would not agree either to consummate the transactions under
this Agreement or to enter into this Agreement in the absence
of the covenants made by the Sellers in this SECTION 5.4, and
that such agreements by Parent and Buyer, along with the
payment of the amounts payable hereunder, constitute adequate
and sufficient consideration for the covenants made by Sellers
in this SECTION 5.4.
5.5 LICENSE OF NOTEBOOK DESIGNER TOOL. In the event that the employment
of either of Sellers is terminated by Buyer without cause prior to the third
anniversary of the Closing Date, subject to the terms and conditions of SECTION
5.4, which terms shall apply throughout the duration of any license granted
pursuant to this SECTION 5.5, Buyer agrees to negotiate in good faith with such
Seller regarding the grant to such Seller of a nonexclusive license to use the
Notebook Designer Tool Software on favorable terms pursuant to a licensing
arrangement mutually agreeable to Sellers and Buyer.
5.6 SECTION 338(h)(10) ELECTION. Upon consummation of the transactions
contemplated hereunder, Sellers and Buyer shall join in making a timely election
under Section 338(h)(10) of the Code (a "SECTION 338(h)(10) ELECTION") with
respect to the purchase of the Shares pursuant to this Agreement and shall make
similar elections under state and local law to the fullest extent possible.
Buyer will be responsible for preparing and filing all documents and materials
necessary in connection with making the Section 338(h)(10) Election and any
similar elections under state and local law. For purposes of the Section
338(h)(10) Election, the assets of Company shall be valued as provided by Buyer
in Section 5.6 of the Buyer's Disclosure Letter and the aggregate sale price
shall be determined in accordance with the regulations promulgated under Section
338 of the Code. Sellers, Parent, Buyer and Company will file all tax returns in
a manner consistent with the Section 338(h)(10) Election and the valuation of
the assets determined as provided above.
5.7 RIGHTS OF PARTICIPATION IN SUBSEQUENT SALE OF THE COMPANY. In the
event that Buyer or Parent desires to transfer all or substantially all of the
stock or assets of the Company or the Post-Acquisition Business (other than any
such transfer of the stock or assets of the Company or the Post-Acquisition
Business that is incident to any merger, consolidation, business combination,
stock or asset sale or similar transaction involving Parent or any transfer of
any portion of the stock, assets or business of Parent or any of its
subsidiaries other than that represented solely by the stock or assets of the
Company or the Post-Acquisition Business) to any Person other than an Affiliate
of Parent, Parent shall, to the extent permitted by applicable securities law
(after consultation with counsel), first provide to Sellers a written notice (an
"Offering Notice") of such desire. Sellers shall have the right, which must be
exercised within 10 days following receipt of the Offering Notice, to notify
Parent whether Sellers are interested in making a bona fide offer for the
Post-Acquisition Business. If Sellers so notify Parent, Parent agrees that
Sellers shall be provided similar information, access and opportunity to conduct
due diligence and to submit an offer to acquire the Post-Acquisition Business as
provided to other potentially interested third parties up until the earlier of
such time as Parent enters (a) a letter of intent or other written agreement to
pursue exclusive negotiations with another party or (b) a
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definitive agreement to sell the Post-Acquisition Business. Notwithstanding
anything in this SECTION 5.7 to the contrary, Sellers' rights hereunder shall be
expressly conditioned upon Sellers' good faith cooperation with, and assistance
to, Parent in promoting the possible sale of the Post-Acquisition Business to a
third party, and organizing and responding to due diligence requests with
respect to such sale. All of each Seller's rights under this SECTION 5.7 shall
cease as of the earlier of such time as (a) Seller ceases to be employed by
Parent or any Affiliate of Parent or (b) no amount of the Base Purchase Price or
Additional Purchase Price is owing to any Seller.
5.8 RETENTION POOL.
Buyer and Seller agree to contribute to a retention bonus pool for the
benefit of Richard Wargo in such amounts and subject to the terms set forth in
Section 5.8 of the Buyer's Disclosure Letter.
5.9 OTHER ACTIONS. Sellers, Parent, Company and Buyer hereby agree that
each, at its own expense, shall use its best efforts and shall cooperate fully
with the other in preparing, filing, prosecuting, and taking any other actions
with respect to any applications, requests, or actions that are or may be
reasonable and necessary to obtain the consent of any governmental
instrumentality or any third party or to accomplish the transactions
contemplated by this Agreement.
5.10 CONSUMMATION OF AGREEMENT. Company, Parent, Buyer and Sellers will
each use their best efforts to perform or fulfill all conditions and obligations
to be performed or fulfilled by each of them under this Agreement so that the
transactions contemplated hereby shall be consummated. If any event should occur
that would materially delay or prevent fulfillment of the conditions upon the
obligations of any party hereto to consummate the transactions contemplated by
this Agreement, that party will notify the others of any such event and the
parties will use their respective reasonable, diligent and good faith efforts to
cure or minimize the same as expeditiously as possible.
5.11 PUBLICITY. The parties agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior consent of the other parties, except as such release
or announcement may be required by law or the rules or regulations of any United
States or foreign securities exchange or quotation system, in which case the
party required to make the release or announcement shall allow the other parties
reasonable time to comment on such release or announcement in advance of such
issuance.
5.12 SELLERS' DISCLOSURE LETTER. Company and Sellers shall promptly
notify Buyer (a) of any event, fact or other circumstance arising after the date
hereof that would have caused any section of Sellers' Disclosure Letter to be
untrue or misleading had such event, fact, or circumstance arisen prior to the
delivery of Sellers' Disclosure Letter, and (b) of any occurrence, event or
other circumstance that may reasonably be expected to result in the inability of
Company or Sellers to comply with a condition of Closing, or to materially delay
Company's or Sellers' performance of any such condition.
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ARTICLE VI
CLOSING CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE TRANSACTIONS
CONTEMPLATED HEREBY. The respective obligations of each party to effect the
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions:
No party to this Agreement shall be subject on the Closing
Date to any order, decree or injunction of a court of
competent jurisdiction that enjoins or prohibits the
consummation of this Agreement, nor shall there be pending a
suit or proceeding by any governmental authority that seeks
injunctive or other relief in connection with the transactions
contemplated hereby.
6.2 CONDITIONS TO THE OBLIGATIONS OF COMPANY AND SELLERS TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The obligations of Company and Sellers to
effect the transactions contemplated hereby shall be further subject to the
fulfillment of the following conditions, any one or more of which may be waived
by Sellers:
(a) All representations and warranties of Parent and Buyer
contained in this Agreement shall be true and correct in all
material respects, or if qualified by materiality, in all
respects, as of the date hereof and as of the Closing Date as
though made as of such date. Parent and Buyer shall have
performed and complied in all material respects with all
covenants and agreements contained in this Agreement required
to be performed and complied with by Parent and Buyer at or
prior to the Closing Date. Company shall have received a
certificate to the matters set forth in this subparagraph (a)
signed on behalf of Parent by an authorized officer of Parent,
and signed on behalf of Buyer by an authorized officer of
Buyer.
(b) All documents, if any, required to have been delivered by
Parent or Buyer to Company, at or prior to the Closing Date,
shall have been delivered.
(c) Sellers shall have received from each of Parent and Buyer
copies, certified by the Secretary or an Assistant Secretary,
of each of Parent and Buyer's Articles of Incorporation
(certified by the Secretary of State of Delaware) and bylaws,
together with the resolutions of the Boards of Directors of
Parent and Buyer authorizing the execution, delivery and
performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the
transactions contemplated hereby by Parent and Buyer.
(d) Sellers shall have received an opinion from Robinson, Bradshaw
& Hinson, P.A., counsel to Parent and Buyer, dated as of the
Closing Date and in substantially the form of EXHIBIT A.
6.3 CONDITIONS TO THE OBLIGATIONS OF BUYER TO EFFECT THE TRANSACTIONS
CONTEMPLATED HEREBY. The obligations of Parent and Buyer to effect the
transactions
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contemplated hereby shall be further subject to the fulfillment of the following
conditions, any one or more of which may be waived by Parent and Buyer:
(a) All representations and warranties of Company and Sellers
contained in this Agreement shall be true and correct in all
material respects, or if qualified by materiality, in all
respects, as of the date hereof and as of the Closing Date as
though made as of such date. Company and Sellers shall have
performed and complied in all material respects with all
covenants and agreements contained in this Agreement required
to be performed and complied with by them at or prior to the
Closing Date. Buyer shall have received a certificate to the
matters set forth in this subparagraph (a) signed on behalf of
Company by its chief executive officer.
(b) All documents, if any, required to have been delivered by
Company or Sellers to Buyer, at or prior to the Closing Date,
shall have been delivered.
(c) Buyer shall have received from Sellers copies, certified by
the Secretary or an Assistant Secretary of Company, of
Company's Articles of Incorporation (certified by the
Secretary of State of Pennsylvania) and bylaws, together with
the resolutions of the Board of Directors and Shareholders of
Company authorizing the execution, delivery and performance of
this Agreement and all instruments and documents to be
delivered in connection herewith and the transactions
contemplated hereby by Company.
(d) As of the Closing Date, Buyer shall have received a long-form
certificate of good standing, as of a recent date, as to the
corporate status of Company from its state of incorporation.
(e) Company shall have obtained consents or waivers with respect
to all matters listed in Section 3.3 and Section 3.8 of the
Sellers' Disclosure Letter.
(f) Each of the Key Employees shall have entered into an
employment agreement with Buyer in the form set forth in
Section 6.3 of the Buyer's Disclosure Letter (the "Employment
Agreements").
(g) Buyer shall have received an opinion from Indik & McNamara,
P.C., counsel to Company and Sellers, dated as of the Closing
Date and in substantially the form of EXHIBIT B.
(h) Parent and Buyer shall have received the Audited Financial
Statements.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by the parties in this Agreement shall survive the Closing, but
all claims made by virtue of
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such representations, warranties and agreements shall be made under, and subject
to the limitations set forth in, this ARTICLE VII.
7.2 SELLERS' AGREEMENT TO INDEMNIFY.
(a) INDEMNIFICATION. Subject to the limitations, conditions and
provisions set forth herein, each Seller agrees, jointly and
severally, to indemnify, defend and hold harmless Parent,
Buyer and Company, their respective officers, directors,
employees, agents, subsidiaries, shareholders, and their
successors and assigns (the "Buyer Indemnitees"), against and
in respect of:
(i) Any and all loss, expense, damage or deficiency
resulting from any misrepresentation, breach of warranty, or
other violation of any of the warranties or representations of
Company or any Seller contained in this Agreement or any
documents executed in connection herewith or in connection
with the transactions contemplated hereby, or any certificate
or other instrument furnished to Buyer hereunder;
(ii) Any and all loss, expense, damage or
deficiencies resulting from any breach of any of the covenants
of Company or any Seller contained in this Agreement or any
documents executed in connection herewith or in connection
with the transactions contemplated hereby;
(iii) Any failure to obtain any consent required for
any Contract to continue in full force and effect after
Closing as specified in SECTION 3.8, without regard to whether
Buyer has waived the requirements to obtain any such consent
as a condition to Closing;
(iv) Any loss, expense, damage or deficiencies
resulting from the failure of any Third Party Software to be
Year 2000 Compliant; and
(v) Any and all damages, deficiencies, liabilities,
costs and legal and other expenses incurred (including
reasonable attorneys' fees) in any actions, suits,
proceedings, demands, assessments or judgments arising out of
any of the foregoing or out of enforcement of any rights under
this Agreement.
No indemnification shall be required to be made under SECTION 7.2(a)(i) until
the aggregate amount of the Buyer Indemnitees' damages exceeds $50,000 (the
"Sellers' Basket") and Sellers shall be obligated to indemnify, defend and hold
harmless the Buyer Indemnitees only to the extent that the aggregate amount of
losses, expenses, damages, deficiencies, liabilities, costs and legal and other
expenses exceeds the amount of Sellers' Basket, but in no event in excess of an
aggregate amount equal to the sum of the Base Purchase Price and the Earnout
Amount; provided, however, that the Sellers' Basket shall not apply to any
Claims of the Buyer Indemnitees arising from or related to breaches of any of
the representations and warranties contained in SECTIONS 3.4, 3.10, 3.15, and
3.16 or the covenant contained in SECTION 5.8. Furthermore, indemnification
under SECTION 7.2(a) with respect to any Claim (as defined below) of the Buyer
Indemnitees shall not be required hereunder unless Buyer delivers to Sellers
notice of such Claim (1) within six (6) years from the Closing Date with respect
to a Claim on account
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of any representation set forth in SECTIONS 3.10, 3.17, 3.18 or 3.19, (2) at any
time, without limitation or expiration, with respect to a Claim on account of a
breach of any representation set forth in SECTION 3.4, and within three (3)
years from the Closing Date with respect to all other Claims. Notwithstanding
anything herein to the contrary, none of the foregoing limitations shall apply
in the case of any Claim involving intentional misrepresentation, fraud, or
criminal matters, and the Buyer Indemnitees shall be entitled to the benefit of
such additional time for the delivery of notice of their Claims, as the Buyer
Indemnitees would be afforded for the commencement of the analogous causes of
action under Pennsylvania common law relating to the discovery of causes of
action and the tolling of limitations periods.
(b) CLAIMS.
(i) Within 30 days after receiving written notice
thereof, the Buyer Indemnitees will give Sellers written
notice of any claims, demands, assessments, suits, judgments,
proceedings or other actions (for purposes of this section,
any "Claims") asserted (by third parties, governmental
entities, or otherwise) against or incurred by any Buyer
Indemnitees with respect to which such Buyer Indemnitees
intend to claim indemnification from Sellers pursuant to
SECTION 7.2(a) (without regard to the Sellers' Basket), and
Sellers, except as set forth in SECTION 7.2(b)(iv), will
undertake the response or defense thereof by counsel of its
own choosing, provided that such counsel shall be reasonably
acceptable to Buyer; provided, however, that any failure to so
notify Sellers of any Claims shall relieve Sellers of such
indemnification obligation only to the extent Sellers
demonstrate that the defense of such Claim is materially
prejudiced by the failure to give such notice. The Buyer
Indemnitees may, by counsel, participate in such proceedings,
negotiations or defense at its own expense, but Sellers,
except as set forth in SECTION 7.2(b)(iv), shall retain
control over such proceedings, negotiation or litigation
except as hereinafter set forth. In all such cases, the Buyer
Indemnitees shall give reasonable assistance to Sellers.
(ii) In the event that within 15 days after written
notice of any such Claim, Sellers fail to notify the Buyer
Indemnitees of their intention to respond or defend and to
notify the Buyer Indemnitees of the engagement of counsel
reasonably acceptable to Buyer, the Buyer Indemnitees will
have the right to undertake the defense, compromise or
settlement (subject to SECTION 7.2(b)(iii)) of such Claim for
the account of Sellers, subject to the right of Sellers to
assume the defense, compromise or settlement of such Claim at
any time prior to final settlement, compromise or
determination thereof.
(iii) Without prior written consent of Buyer, Sellers
shall not enter into any settlement of any Claim, or consent
to the entry of any judgment with respect to any Claim.
(iv) Notwithstanding anything set forth herein to the
contrary, Sellers shall have no rights to defend any Claim
relating to Taxes or control any proceedings, negotiations or
litigation related thereto.
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(c) RELEASE OF COMPANY. From and after the Closing Date, Sellers
shall have no rights of contribution against Company with
respect to claims arising under this SECTION 7.2.
(d) RIGHT OF SET-OFF. Upon notice to Sellers specifying in
reasonable detail the basis for such set-off, each of Parent
and Buyer may set-off any amounts to which they may be
entitled from Sellers under this ARTICLE VII or otherwise,
against the Earnout Amount, the Cash Amount, the Receivables
Amount, the Section 338(h)(10) Amount, or any amounts
otherwise payable hereunder to Sellers. Nothing in this
SECTION 7.2(d), however, shall permit Parent or Buyer to
withhold any portion of any Earnout Amount, the Cash Amount,
the Receivables Amount, the Section 338(h)(10) Amount, or any
amount otherwise due and payable in excess of the amount to
which it is claiming a right of set-off in accordance with
this SECTION 7.2(d). If Sellers notify Parent in writing
within 10 days after receipt of Parent's or Buyer's set-off
notice described above that Sellers object to the basis for,
or amount of, such set-off, specifying in reasonable detail
the basis for, and amount of, such objection (each such
dispute, a "Set-Off Dispute"), all parties agree that such
Set-Off Dispute shall be submitted to, and resolved by, an
independent person (the "Arbitrator") mutually agreed by
Sellers and Parent. If Sellers and Parent cannot agree on a
single Arbitrator, then the Set-Off Dispute shall be submitted
to a panel of three Arbitrators, one selected by Sellers, one
selected by Parent, and one by the two Arbitrators so
selected. Any arbitration shall be conducted in Los Angeles,
California, or such other place as the parties may agree, in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The determination of the
Arbitrator(s) shall be made within 30 days of the submission
of the Set-Off Dispute, shall be in accordance with this
Agreement, shall name the Person(s) to whom the funds that are
the subject of the Set-Off Dispute are to be awarded and
specify the amount of funds to be so awarded, shall be set
forth in a written statement delivered to Sellers and Parent,
and shall be final, binding and conclusive as to all parties
hereto. Judgment upon the decision rendered by the
Arbitrator(s) may be entered in any court having jurisdiction
thereof. The Person(s) who are prevailed against in the
resolution of such Set-Off Dispute shall pay the fees and
expenses of the Arbitrator(s); and if one Person does not
prevail on all issues, the fees and expenses shall be
apportioned in such manner as the Arbitrator(s) shall
determine. Any amount owing by any Person as a result of the
resolution of a Set-Off Dispute shall be paid within 10
business days after final determination of such amount. If the
Arbitrator(s) should determine that Parent lacked a good faith
justification for any set off, or, if the Arbitrator(s) should
determine that Parent set off an amount substantially in
excess of any amount that Parent could reasonably have
contended was due to it pursuant to ARTICLE VII hereof, the
Arbitrator may, in its discretion, award interest to the
Sellers at the rate of eight percent (8%) per annum from the
date of such set-off.
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7.3 PARENT'S AND BUYER'S AGREEMENT TO INDEMNIFY.
(a) Subject to the conditions and provisions set forth herein,
Parent and Buyer, jointly and severally, will defend,
indemnify and hold harmless Sellers, their successors and
assigns (the "Seller Indemnitees"), against and in respect of:
(i) Any and all loss, expense, damage or deficiency
resulting from any misrepresentation, breach of warranty, or
other violation of any of the warranties or representations of
Parent or Buyer contained in this Agreement or any documents
executed in connection herewith or in connection with the
transactions contemplated hereby, or any certificate or other
instrument furnished to Sellers hereunder;
(ii) Any and all loss, expense, damage or
deficiencies incurred resulting from any breach of any of the
covenants of Parent or Buyer contained in this Agreement or
any documents executed in connection herewith or in connection
with the transactions contemplated hereby; and
(iii) Any and all damages, deficiencies, liabilities,
costs and legal and other expenses (including reasonable
attorneys' fees) of all actions, suits, proceedings, demands,
assignments or judgments arising out of any of the foregoing
or out of the enforcement of any rights under this Agreement.
No indemnification shall be required to be made under SECTION 7.3(a)(i) until
the aggregate amount of the Seller Indemnitees' damages exceeds $50,000 (the
"Buyer's Basket"), and if the Seller Indemnitees' aggregate damages under
SECTION 7.3(a)(i) exceed the Buyer's Basket, Parent and Buyer, jointly and
severally, shall be obligated to indemnify, defend, and hold harmless the Seller
Indemnitees only to the extent that the aggregate amount of losses, expenses,
damages, deficiencies, liabilities, costs and legal and other expenses exceed
the amount of Buyer's Basket, up to, but in no event in excess of, an aggregate
amount equal to the sum of the Base Purchase Price and the Earnout Amount not
yet paid hereunder. Indemnification with respect to any Claim of the Seller
Indemnitees shall not be required hereunder unless the Seller Indemnitees
deliver to Buyer a notice of such Claim within three years from the Closing
Date. Notwithstanding anything herein to the contrary, none of the foregoing
limitations shall apply in the case of any Claim involving intentional
misrepresentation, fraud, or criminal matters and the Seller Indemnitees shall
be entitled to the benefits of such additional time for the delivery of notice
of their Claims, as the Seller Indemnitees would be afforded for the
commencement of analogous causes of action under Pennsylvania common law
relating to the discovery of causes of action and the tolling of limitations
periods.
(b) CLAIMS.
(i) Within 30 days after receiving written notice
thereof, the Seller Indemnitees will give Buyer written notice
of any Claims asserted against (by third parties, governmental
entities, or otherwise) or incurred by the Seller Indemnitees
with respect to which the Seller Indemnitees intend to claim
indemnification from Buyer, and Buyer will undertake the
response or defense
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thereof by counsel of its own choosing, provided that such
counsel shall be reasonably acceptable to Sellers; provided,
however, that any failure to so notify Buyer and Parent of any
Claims shall relieve Parent and Buyer of such indemnification
obligation only to the extent Parent and Buyer demonstrate
that the defense of such Claim is materially prejudiced by the
failure to give such notice. The Seller Indemnitees may, by
counsel, participate in such proceedings, negotiations or
defense at their own expense, but Buyer shall retain control
over such proceedings, negotiation or litigation except as
hereinafter set forth. In all such cases, the Seller
Indemnitees shall give reasonable assistance to Buyer.
(ii) In the event that within 15 days after written
notice of any such Claim, Buyer fails to notify Sellers of its
intention to respond or defend, the Seller Indemnitees will
(upon further notice to Buyer) have the right to undertake the
defense, compromise or settlement of such Claim for the
account of Buyer, subject to the right of Buyer to assume the
defense, compromise or settlement of such Claim at any time
prior to final settlement, compromise or determination
thereof.
(iii) Without prior written consent of Sellers, Buyer
will not enter into any settlement of any Claim or consent to
the entry of any judgment with respect to any Claim, if (A)
pursuant to, or as a result of such settlement, injunctive or
other equitable relief would be imposed against the Seller
Indemnitees, (B) such settlement would lead to liability or
create any financial or other obligation on the part of the
Seller Indemnitees for which the Seller Indemnitees are not
entitled to indemnification hereunder, (C) such settlement
includes any statement as to admission of fault, culpability
or failure to act by or on behalf of the Seller Indemnitees,
or (D) such settlement does not include an unconditional
release of the Seller Indemnitees from all liability arising
out of such Claim.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. The obligations of the parties hereunder may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:
(a) by mutual written consent of Sellers, Company and Buyer;
(b) by either Sellers or Buyer, if Closing has not taken place on
or before July 21, 2000 (the "Termination Date"); and
(c) by written notice from Sellers to Buyer, or from Buyer to
Sellers, if it becomes certain (for practical purposes) that
any of the conditions to the closing obligations of the party
giving such notice cannot be satisfied on or before the
Termination Date.
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8.2 PROCEDURE AND EFFECT OF TERMINATION OR FAILURE TO CLOSE.
(a) In the event of a termination contemplated hereby by any party
pursuant to SECTION 8.1, prompt written notice thereof shall
be given to the other parties, and the transactions
contemplated hereby shall be abandoned, without further action
by either of the parties hereto. In such event:
(i) None of the parties hereto nor any of their
partners, directors, officers, shareholders, employees,
agents, or affiliates shall have any continuing obligation to
the other party or any of its partners, directors, officers,
shareholders, employees, agents, or affiliates pursuant to
this Agreement, except as stated in ARTICLE VII and in
SECTIONS 5.9, 10.1 and 10.2 hereof, which obligations will
survive the termination of this Agreement; and
(ii) All filings, applications and other submissions
relating to the transactions contemplated herein shall, to the
extent practicable, be withdrawn from the agency or other
person to which made.
Notwithstanding anything to the contrary contained in this Agreement,
if pursuant to the terms of this Agreement, (i) Parent and Buyer or Sellers, as
the case may be, shall have duly satisfied each of the conditions set forth in
ARTICLE VI hereof to be satisfied by them (or in the case of any condition that
is to be satisfied at the Closing, shall have demonstrated a willingness and
ability to satisfy such condition if the Closing were to take place), and the
conditions set forth in SECTION 6.1 have been satisfied, and (ii) the other
party shall nevertheless fail to sell or purchase the Shares, then in that
event, Parent and Buyer or Sellers, as the case may be, shall be entitled to
seek any remedy to which they may be entitled at law or in equity in the event
of a material violation or breach of any agreement, representation or warranty
contained in this Agreement (which remedies shall include, without limitation,
with respect to both Buyer and Sellers, an injunction or injunctions to prevent
breaches of, or to obtain specific performance of any obligation hereunder,
without limiting any monetary damages to which Buyer or Sellers, as the case may
be, shall be entitled).
ARTICLE IX
GLOSSARY OF DEFINITIONS AND TERMS
In addition to the terms that may be defined elsewhere in this
Agreement, the following terms shall have the meanings indicated below when used
in this Agreement as defined terms:
"AFFILIATE" means any corporation or other legal entity: (i) which
directly or indirectly owns or controls more than fifty percent (50%) of the
stock (or other form of ownership interest) entitled to vote for the election of
directors or managers of the specified party to this Agreement; or (ii) which is
directly or indirectly owned or controlled by the specified party to this
Agreement through ownership of more than fifty percent (50%) of the stock (or
other form of ownership interest) normally entitled to vote for the election of
the directors or managers of such other corporation or entity.
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"BUYERS' DISCLOSURE LETTER" means a letter dated the date of the
Agreement delivered by the Parent and Buyer to the Company and Sellers
concurrently with the execution of the Agreement, which, among other things,
shall identify exceptions to the Buyer's representations and warranties
contained in ARTICLE IV .
"CONTRACT" means any legally binding obligation or agreement to which
Company is a party, whether or not reduced to writing, specifically including
any note, bond, mortgage, lease, license and other instrument.
"COPYRIGHT" means the legal right provided by the Copyright Act of
1976, as amended, to the expression contained in any work of authorship fixed in
any tangible medium of expression together with any similar rights arising in
any other country as a result of statute or treaty.
"DEEMED REVENUE" means the actual and imputed revenue derived by the
Post-Acquisition Business after the Closing Date from any and all of the
following sources: (i) all revenue properly recognizable by Parent or its
Affiliates in accordance with generally accepted accounting principles
consistently applied, from the development, licensing or provision of Legal Case
Management Products and Services to, or for the benefit of third parties, (ii)
all revenue properly recognizable by Parent or its Affiliates in accordance with
generally accepted accounting principles consistently applied, from the
licensing or provision of run-time versions of the Notebook Designer Tool
software to, or for the benefit of third parties, (iii) all revenue properly
recognizable by Parent or its Affiliates in accordance with generally accepted
accounting principles consistently applied, and all revenues imputed to Parent
or its Affiliates, as specified below, from or in connection with the licensing
or provision of Legal Case Management Products and Services to, or for the
benefit of third parties by means of any Online Application Service Business;
and (iv) an amount equal to the aggregate imputed fees for all time expended
during any given period by any of the employees or consultants of Company listed
in Section 3.13 of the Sellers' Disclosure Letter, calculated at their regular
hourly rates as of the date hereof, for each hour expended, in connection with
any and all services provided to, or on behalf of, and at the request of, Parent
or any of its Affiliates involving the customization, development, installation,
integration, licensing, marketing, upgrading, provision or support of any
existing or future software products or services of Parent or its Affiliates
other than Legal Case Management Products and Services, including, but not
limited to, time and billing applications. For purposes of determining the
revenues to be imputed to Parent or its Affiliates for purposes of determining
gross annual revenues of the Post-Acquisition Business, when Legal Case
Management Products or Services are bundled with time and billing or other
software applications of Parent or its Affiliates, whether in any conventional
software delivery format or in connection with any Online Application Service
Business, revenues shall be imputed to the Post-Acquisition Business in an
amount to be determined in a reasonable manner by Parent and any Sellers who are
not Departing Employees at the time of such determination.
"ENVIRONMENT" means the environment or natural environment including
air, surface, water, ground water, land surface, soil, subsurface strata, sewer
systems, and the environment in the workplace.
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"ENVIRONMENTAL APPROVALS" means all permits, certificates, licenses,
authorizations, consents, instructions, or directions having the force of law,
registrations, or approvals issued or required by Governmental Authorities
pursuant to Environmental Laws with respect to the operation of the business of
Company or the assets of Company.
"ENVIRONMENTAL LAWS" means any foreign or domestic federal, state or
local law, statute, ordinance, common law rule, regulation, permit, directive,
license, approval, guidance, interpretation, order, or other legal requirement
in any jurisdiction applicable to the condition or conduct of the company,
business or assets in question and relating to the protection of safety, human
health or the environment, including, but not limited to, any requirement
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of materials that are or may constitute a threat to
human safety, health or the environment. Without limiting the foregoing, each of
the following is an Environmental Law with regard to Company and its assets: the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss. 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f, et
seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.),
as such laws have been or are in the future amended or supplemented, and each
similar federal, state or local statute, and each rule and regulation
promulgated under such federal, state and local laws.
"GOVERNMENTAL AUTHORITY" means any nation, union of nations, province,
state, city county or other political subdivision thereof, and any court,
agency, natural person or other entity exercising executive, judicial,
legislative, regulatory or administrative functions of or pertaining to
government.
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance, or dangerous
substance as defined, judicially interpreted or identified in any Environmental
Law including any asbestos or asbestos containing materials, petroleum or
petroleum products and polychlorinated biphenyls.
"KNOW-HOW" means ideas, designs, concepts, compilations of information,
methods, techniques, procedures and processes, whether or not patentable.
"KNOWLEDGE" means, with respect to any particular fact, actual or
constructive knowledge that the fact is true or actual or constructive knowledge
of facts and circumstances that would lead a reasonable person to believe the
fact to be true. A party shall be deemed to have constructive knowledge of those
facts and circumstances relating to any particular matter that would have been
learned through reasonable inquiry and investigation by those employees of that
party with responsibility for the matter.
"LEASED REAL PROPERTY" means any real property leased by Company and
any plants, buildings, structures, fixtures, erections, improvements, easements,
parking amenities, rights of way, spur tracks, or other appurtenances situated
on or forming part of such real property.
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"LEGAL CASE MANAGEMENT PRODUCTS AND SERVICES" means: (i) any and all
lines of business which involve (a) the customization, development,
installation, integration, licensing, upgrading, or provision of legal case
management software products or services offered by Company on the Closing Date,
and any subsequent enhancements, improvements, upgrades, or new releases or
versions thereof, or (b) the provision of such products or services on new
platforms, whether on a stand-alone basis or bundled together with existing or
future time and billing or other products or services of Parent or any of its
Affiliates, whether in any conventional software delivery format or as an Online
Application Service Business, or (c) any support or training services relating
to such software products or services; provided, however, Legal Case Management
Products and Services shall not include (x) any products or services offered by
Parent or its Affiliates as of the Closing Date, (y) any modifications or
improvements to such products and services after the Closing Date, or (z) any
additional products or services developed or purchased by Parent or its
Affiliates after the Closing Date.
"MARK" means any word, name, symbol or device used by a Person to
identify its goods or services, whether or not registered, and any right that
may exist to obtain a registration with respect thereto from any Governmental
Authority and any rights arising under any such application. As used in this
Agreement, the term "Mark" includes trademarks and service marks.
"OBJECT CODE" means the low-level, machine-readable computer code that
enables the computer to execute a program, including intermediate forms of a
computer code derived after partial compilation or assembly.
"ONLINE APPLICATION SERVICE BUSINESS" means any online internet
application service.
"PATENT" means any patent granted by the U.S. Patent and Trademark
Office, or by the comparable agency of any other country, and any renewal
thereof, and any rights arising under any patent application filed with the U.S.
Patent and Trademark Office or the comparable agency of any other country and
any rights that may exist to file any such application.
"PERSON" means an individual, partnership, corporation, limited
liability company, trust, decedent's estate, joint venture, joint stock company,
association, unincorporated organization, Governmental Authority or other
entity.
"POST-ACQUISITION BUSINESS" means: (i) any and all lines of business
conducted by Parent or any of its Affiliates including, but not limited to,
Buyer and Company, at any time after the Closing Date, and on or before the
third anniversary of the Closing Date which involve Legal Case Management
Products and Services; (ii) any and all licensing, provision or use by Parent or
any of its Affiliates of the Notebook Designer Tool software; and (iii) any and
all services provided to, or on behalf of, and at the request of, Parent or any
of its Affiliates by any of the employees or consultants of Company listed in
Section 3.13 of the Sellers' Disclosure Letter, in connection with the
development, marketing, modification, or support of any existing or future
software products or services of Parent or its Affiliates other than Legal Case
Management Products and Services, including, but not limited to, time and
billing applications.
"PROPRIETARY RIGHTS" means copyrights, trademarks, service marks, trade
names, Trade Secrets, Patents (including any rights arising out of patent
applications), design rights, moral
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rights and the right to use ideas, designs, concepts, compilations of
information, methods, techniques, procedures, processes and other Know-how,
whether or not patentable or secret.
"RELEASE" has the meaning prescribed in 42 U.S.C. Section 9601(22) of
the Comprehensive Environmental Response Compensation and Liability Act.
"REMEDIAL ORDER" means any notice, complaint, direction, order, or
sanction delivered, demanded, issued, filed, or imposed by any Governmental
Authority pursuant to any Environmental Laws and includes any order requiring
any remediation, response to, or clean-up of any Hazardous Substance, or
requiring that any Release or any other activity be reduced, modified, or
eliminated.
"SELLERS' DISCLOSURE LETTER" means a letter dated the date of the
Agreement delivered by the Company and Sellers to Parent and Buyer concurrently
with the execution of the Agreement, which, among other things, shall identify
exceptions to the Company's and Seller's representations and warranties
contained in ARTICLE III and certain covenants of the Company and Sellers in
ARTICLE V.
"SOFTWARE" means all computer programs, in Source Code and Object Code
or any other machine-readable form, developed by or on behalf of any Seller or
Company as software products for sale or licensing in connection with the
business of Company or for use in developing or testing such software products,
and the tools used in such development or testing, and all prior versions
thereof and versions under development, including all translations,
compilations, copies and partial copies thereof and all non-literal program
elements, all end user, development and operating documentation related to the
Software, the media on which such computer programs are stored and the related
Source Code documentation.
"SOURCE CODE" means the high-level, non-executable form of a computer
program that (a) is readable by human beings when displayed on a monitor or
printed on paper, regardless of the media on which the computer software is
stored; and (b) must be translated by a process generally known as compiling or
assembly into the Object Code before it can be executed by a computer.
"THIRD PARTY SOFTWARE" means all computer programs, whether in Source
Code or Object Code form, licensed or purchased by any Seller or Company from a
third party for use in connection with developing or testing the Software of
Company, for use as an embedded component in any Software or for subleasing,
sublicensing or distribution in connection with the Software of Company and all
other computer programs, whether in Source Code or Object Code form, that are
distributed by any Seller or Company to customers for use with Software of
Company, and includes such Seller's or Company's rights in and to all end user,
development and operating documentation, the media on which any of the foregoing
is stored, and all upgrades thereto made from time to time.
"TRADE SECRETS" means business or technical information of any Person
including, but not limited to, customer lists and Know-how, that is not
generally known to other Persons who are not subject to an obligation of
nondisclosure and that derives actual or potential commercial value from not
being generally known to other Persons.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 COMMISSIONS. Company and Sellers, on the one hand, and Buyer, on
the other hand, each represent and warrant to the other that no broker, finder
or other person is entitled to any brokerage fees, commissions or finder's fees
in connection with the transactions contemplated hereby by reason of any action
taken by the party making such representation.
10.2 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, except as otherwise provided herein, Buyer will pay all costs and
expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated hereby, and Sellers will pay all costs and expenses
incurred by Sellers or Company in connection with this Agreement and the
transactions contemplated hereby; provided, however, that if the Sellers
terminate the Agreement prior to Closing, for any reason (other than the failure
or unwillingness of Buyer to fulfill any of the conditions to Closing in SECTION
6.2), Sellers shall be liable for 50% of any fees owed to Pricewaterhouse
Coopers LLP for preparation of the audited financial statements of the Company
for the fiscal year ended December 31, 1999.
10.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by written agreement of Company, Sellers, Parent,
and Buyer at any time prior to the Closing with respect to any of the terms
contained herein.
10.4 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section.
10.5 ACTION BY SELLERS. Any act or decision to be made by Sellers in
order to consummate the transactions contemplated hereunder shall require the
unanimous consent of Sellers.
10.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by hand or by facsimile
transmission or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided
that notices of a change of address shall be effective only upon receipt
thereof):
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(a) If to Company or Sellers, to:
Law Manager, Inc.
555 North Lane, Suite 6060
Conshohocken, PA 19428
Attn: Davood Tashayyod
Copies to:
Indik & McNamara, P.C.
100 South Broad Street, Suite 2230
Philadelphia, PA 19110
Attn: Thomas S. McNamara
(b) If to Buyer, to:
Elite Information Group, Inc.
5100 Goldleaf Circle, Suite 100
Los Angeles, CA 90056
Attn: Christopher K. Poole
Chairman and Chief Executive Officer
Copies to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Patrick S. Bryant
10.7 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party nor is any provision
of this Agreement intended to be construed to grant or confer any right to
enforce this Agreement, or any remedy for breach of this Agreement, to or upon
any Person other than the parties hereto, including, but not limited to, any
customer, prospect, supplier, employee, contractor, salesman, agent or
representative of Company, Sellers, Buyer or Parent.
10.8 GUARANTY. Parent hereby irrevocably and unconditionally guarantees
the full and prompt payment and performance of all amounts owing by Buyer and
other obligations of Buyer under this Agreement, subject to the rights and
defenses (including set-off rights) of Buyer under this Agreement, as the same
may be terminated, altered, released, extended, modified or canceled (the
"BUYER'S OBLIGATIONS"). The payment and performance of Buyer's Obligation
guaranteed hereby shall give rise to a separate cause of action and separate
suits that may, but need not, be brought hereunder as each cause of action
arises. The obligations of Parent pursuant to this SECTION 10.8 shall remain in
full force and effect until the Buyer's Obligations have been fully and finally
paid and if, by reason of any bankruptcy, insolvency or other similar proceeding
instituted by or against the Buyer, any such payment is required to be repaid by
Sellers, this
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SECTION 10.8 shall continue to be applicable to the payment of such obligations
to the same extent as though the payment so recovered or repaid had never been
originally made. Unless otherwise agreed to in writing by the parties, this
SECTION 10.8 shall remain in full force and effect throughout the term of
Buyer's Obligations under this Agreement, until all of Buyer's Obligations under
this Agreement have been fully performed in accordance with the terms thereof
and Parent's obligations under this SECTION 10.8 shall not be terminated,
modified, affected or impaired by reason of (a) any alteration, extension,
modification, release or cancellation of any of Buyer's Obligations; (b) any
action which Sellers may take or fail to take against Buyer; (c) any waiver,
indulgence or extension of time which Sellers may grant respecting Buyer's
Obligations; (d) any enforcement of or failure to enforce any of the terms,
covenants or conditions of the Agreement or Buyer's Obligations; (e) any relief
or discharge of Buyer from any of Buyer's Obligations in bankruptcy or similar
proceedings, or by liquidation or dissolution; or (f) the failure to give notice
of any default of Buyer's Obligations or of any modification or extension
thereof or any indulgence granted thereunder; provided, however, that in the
case of subsections (a), (b), (c), (d) and (f), Parent's guarantee obligations
under this SECTION 10.8 shall be terminated, altered, released, extended,
modified or cancelled to the extent Buyer's Obligations are terminated, altered,
released, extended, modified or cancelled. The obligations of Buyer under this
Agreement shall conclusively be deemed to have been created, contracted, or
incurred in reliance upon SECTION 10.8 and all dealings between Sellers and
Buyer shall likewise be conclusively presumed to have been had or consummated in
reliance upon this SECTION 10.8.
10.9 GOVERNING LAW. The execution, interpretation and performance of
this Agreement shall be governed by the internal laws and judicial decisions of
the State of Pennsylvania.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.12 ENTIRE AGREEMENT. This Agreement, including the Exhibits, the
Buyer's Disclosure Letter, the Sellers' Disclosure Letter, and the documents
delivered pursuant to this Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof. The
Exhibits, the Buyer's Disclosure Letter and the Sellers' Disclosure Letter are
an integral part of this Agreement and are incorporated by reference herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, Parent, Buyer, Company and Sellers have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
ELITE INFORMATION GROUP, INC.
By: /s/ Christopher K. Poole
--------------------------------------------
Name: Christopher K. Poole
Title: Chairman and Chief Executive Officer
LMI ACQUISITION CORPORATION
By: /s/ Christopher K. Poole
--------------------------------------------
Name: Christopher K. Poole
Title: Chairman and Chief Executive Officer
LAW MANAGER, INC.
By: /s/ Davood Tashayyod
--------------------------------------------
Name: Davood Tashayyod
Title: Chief Executive Officer
SELLERS:
/s/ Davood Tashayyod
-------------------------------------------------
Davood Tashayyod
/s/ Nicholas Puschak
-------------------------------------------------
Nicholas Puschak
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