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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 8, 1999
REALTY INFORMATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-24531
(Commission File No.)
52-2091509
(I.R.S. Employer Identification No.)
7475 Wisconsin Avenue
Bethesda, MD 20814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 215-8300
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Item 2. Acquisition or Disposition of Assets.
On January 8, 1999, Realty Information Group, Inc. (the "Company")
completed the acquisition (the "Acquisition") of LeaseTrend, Inc., a
privately-held Ohio corporation ("LTI-Ohio"), by merging LTI-Ohio into a
newly-formed wholly-owned subsidiary of the Company. At the completion of the
Acquisition, the Company's wholly-owned subsidiary was renamed LeaseTrend, Inc.,
a Delaware corporation ("LTI-Delaware", or collectively with LTI-Ohio, its
predecessor, "LeaseTrend"). LeaseTrend provides building-specific tenant and
property information to the commercial real estate industry and related
industries in the following geographic markets: Charlotte; Cincinnati;
Cleveland; Columbus; Dayton; Denver; Detroit; Ft. Lauderdale; Indianapolis;
Kansas City; Louisville; Miami; Orlando; Pittsburgh; Raleigh-Durham; St. Louis;
Tampa Bay; and West Palm Beach. LeaseTrend serves approximately 300 client firms
and 3000 users.
The shareholders of LTI-Ohio received the following consideration (the
"Consideration") in exchange for 100% of the stock of LTI-Ohio: $4.5 million in
cash and 566,671 shares of the Company's common stock. The Company used cash on
hand, which the Company obtained in its initial public offering in July 1998, to
pay the cash portion of the Consideration. Under the terms of the Acquisition
agreement, the LTI-Ohio shareholders first applied part of the cash portion of
the Consideration to pay in full all of LTI-Ohio's long-term liabilities. The
LTI-Ohio shareholders may not, except under certain limited circumstances,
offer, sell, pledge, or otherwise dispose of the stock portion of the
Consideration for eighteen months following the completion of the Acquisition.
The Consideration was determined by valuing the Company's common stock at $9 per
share, its approximate price in the weeks prior to December 14, 1998, when a
binding letter of intent concerning the Acquisition was executed; the closing
price of the Company's common stock on January 8, 1999, when the Acquisition was
completed, was $18.875. The Consideration was based upon LTI-Ohio's assets
(other than intangible assets) less liabilities (other than long-term
liabilities) being equal as of December 31, 1998 to approximately negative
$772,000 and LTI-Ohio's 1998 revenues being equal to approximately $3.4 million.
The Consideration is subject to adjustment after the Company's independent
auditors complete an audit of LTI-Ohio's financial statements.
No material relationship existed between the Company and the LTI-Ohio
shareholders prior to the Acquisition. As part of the Acquisition, Fred A.
Heitzman III and Gregory Benkert, each of whom was an officer of LTI-Ohio, have
entered into three-year employment contracts with LTI-Delaware and have become
officers of both LTI-Delaware and the Company. The Company has also granted
Messrs. Heitzman and Benkert options to purchase a total of 150,000 shares of
the Company's common stock.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of businesses acquired.
To be filed by amendment on or before March 26, 1999.
(b) Pro forma financial information.
To be filed by amendment on or before March 26, 1999.
(c) Exhibits.
See the appended Index to Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REALTY INFORMATION GROUP, INC.
January 25, 1999 By:/s/ Frank A. Carchedi
-----------------------------
Frank A. Carchedi
Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
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2.1 Acquisition and Reorganization Agreement by and among Realty
Information Group, Inc. and LeaseTrend, Inc. and the Shareholders of
LeaseTrend, Inc. dated January 8, 1999
2.2 Agreement and Plan of Merger between LeaseTrend, Inc. and LTI
Acquisition Corp. dated January 8, 1999
EXHIBIT 2.1
ACQUISITION AND REORGANIZATION AGREEMENT
BY AND AMONG
REALTY INFORMATION GROUP, INC.
AND
LEASETREND, INC.
AND
THE SHAREHOLDERS OF LEASETREND, INC.
DATED JANUARY 8, 1999
TABLE OF CONTENTS
ARTICLE I. ...............................................................1
THE TRANSACTION ...........................................................1
1.1 The Transaction ...................................................1
1.2 Consideration ...................................................2
1.3 Post-Closing Adjustment.............................................2
1.4 Pledged Assets ...................................................5
1.5 Shareholders' Representatives.......................................7
1.6 Accounting Terms ...................................................7
ARTICLE II. ...............................................................8
CLOSING ...........................................................8
2.1 Location and Date...................................................8
2.2 Deliveries ...................................................8
ARTICLE III. ...............................................................8
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS .....................................................8
3.1 Due Organization ...................................................9
3.2 Authorization; Validity.............................................9
3.3 No Conflicts ...................................................9
3.4 Capital Stock of the Company.......................................10
3.5 Transactions in Capital Stock......................................11
3.6 Subsidiaries and Corporate Ownership Interests.....................11
3.7 Complete Copies of Materials.......................................11
3.8 Company Financial Conditions.......................................11
3.9 Financial Statements...............................................11
3.10 Liabilities and Obligations........................................12
3.11 Books and Records..................................................12
3.12 Bank Accounts; Powers of Attorney..................................13
3.13 Accounts and Notes Receivable......................................13
3.14 Permits ..................................................13
3.15 Real Property ..................................................14
3.16 Personal Property..................................................14
3.17 Intellectual Property..............................................15
3.18 Significant Customers; Material Contracts and Commitments..........17
3.19 Predecessor Status; Etc............................................18
3.20 Insurance ..................................................18
3.21 Environmental Matters..............................................19
3.22 Labor and Employment Matters.......................................19
3.23 Employee Benefit Plans.............................................20
3.24 Taxes ..................................................22
3.25 Conformity with Law; Litigation....................................24
3.26 Absence of Claims Against Company..................................25
3.27 Absence of Changes.................................................25
3.28 Disclosure ..................................................27
3.29 Securities Representations.........................................27
3.30 Year 2000 Compliance...............................................27
3.31 No Knowledge of RIG Breaches.......................................28
ARTICLE IV. ..............................................................28
REPRESENTATIONS OF RIG....................................................28
4.1 Due Organization ..................................................28
4.2 Authorization; Validity of Obligations.............................28
4.3 No Conflicts ..................................................28
4.4 Capitalization of RIG and Ownership of RIG Stock...................29
4.5 Financial Statements...............................................29
4.6 Liabilities and Obligations........................................30
4.7 Permits ..................................................30
4.8 Intellectual Property..............................................31
4.9 Environmental Matters..............................................32
4.10 Insurance ..................................................32
4.11 Taxes ..................................................33
4.12 Conformity with Law; Litigation....................................33
4.13 Absence of Changes.................................................34
4.14 Disclosure ..................................................34
4.15 Representations Regarding Newco....................................35
4.16 No Knowledge of LeaseTrend Breaches................................35
ARTICLE V. ..............................................................35
COVENANTS ..........................................................35
5.1 Tax Matters ..................................................35
5.2 Employee Benefit Plans.............................................37
5.3 Related Party Agreements...........................................37
5.4 Cooperation ..................................................37
5.5 Access to Information; Public Disclosure...........................38
5.6 Conduct of Business Pending Closing................................39
5.7 Prohibited Activities..............................................39
5.8 Notification of Certain Matters....................................41
5.9 Sales of RIG Common Stock; Registration Rights.....................42
5.10 Standstill ..................................................44
ARTICLE VI. ..............................................................44
CONDITIONS PRECEDENT TO OBLIGATIONS OF RIG................................44
6.1 Representations and Warranties; Performance of Obligations.........45
6.2 No Litigation ..................................................45
6.3 No Material Adverse Change.........................................45
6.4 Consents and Approvals.............................................45
6.5 Opinion of Counsel.................................................45
6.6 Company Charter Documents..........................................46
6.7 Other Agreements ..................................................46
6.8 Due Diligence Review...............................................46
ARTICLE VII. ..............................................................46
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS
AND THE COMPANY...........................................................46
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7.1 Representations and Warranties; Performance of Obligations.........46
7.2 No Litigation ..................................................47
7.3 Consents and Approvals.............................................47
7.4 Other Agreements ..................................................47
7.5 Opinion of Counsel.................................................47
7.6 Registration ..................................................47
ARTICLE VIII. ..............................................................47
INDEMNIFICATION ........................................................47
8.1 Indemnification by the Shareholders and the Company................47
8.2 Indemnification by RIG.............................................48
8.3 Limitation and Expiration..........................................48
8.4 Indemnification Procedures.........................................50
8.5 Effectiveness of Representations Warranties........................52
8.6 Remedies ..................................................52
8.7 Set Off ..................................................52
8.8 Special Tax Provision..............................................52
ARTICLE IX. ..............................................................52
NONCOMPETITION ..........................................................52
9.1 Prohibited Activities..............................................52
9.2 Confidentiality ..................................................53
9.3 Damages ..................................................54
9.4 Reasonable Restraint...............................................54
9.5 Severability; Reformation..........................................54
9.6 Independent Covenant...............................................55
9.7 Materiality ..................................................55
ARTICLE X. ..............................................................55
GENERAL ..........................................................55
10.1 Termination ..................................................55
10.2 Effect of Termination..............................................56
10.3 Successors and Assigns.............................................57
10.4 Entire Agreement; Amendment; Waiver................................57
10.5 Counterparts ..................................................57
10.6 Brokers and Agents.................................................57
10.7 Expenses ..................................................57
10.8 Notices ..................................................57
10.9 Governing Law ..................................................59
10.10 Severability ..................................................60
10.11 Absence of Third Party Beneficiary Rights..........................60
10.12 Mutual Drafting ..................................................60
10.13 This Agreement ..................................................60
10.14 Further Representations............................................61
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ACQUISITION AND REORGANIZATION AGREEMENT
THIS AGREEMENT (including the Schedules attached hereto) (the "Agreement") is
made and entered into this 8th day of January, 1999, by and among Realty
Information Group, Inc., a Delaware corporation ("RIG"), LeaseTrend, Inc., an
Ohio corporation (the "Company"), Fred A. Heitzman III, Gregory Benkert, and all
shareholders of the Company: Keith Sant, Blue Chip Capital Fund Limited
Partnership, a Delaware limited partnership, and the Heitzman Business Trust and
Benkert Business Trust, both electing small business trusts under Section
1301(e) of the Internal Revenue Code (for purposes of this Agreement, Fred A.
Heitzman III and Gregory Benkert, along with the shareholders of the Company
listed above, each shall be referred to as a "Shareholder" and collectively
shall be referred to as the "Shareholders" and, the Shareholders and the Company
together shall be referred to as the "LeaseTrend Parties").
BACKGROUND
A. RIG was incorporated on February 2, 1998 under the laws of the State of
Delaware for the purpose of acquiring certain commercial real estate information
businesses; and
B. RIG effected an initial public offering of its common stock (the "IPO")
in July 1998 and in connection therewith has registered some of its common
stock, which trades on NASDAQ, with the Securities and Exchange Commission; and
C. The Shareholders are the owners of all of the issued and outstanding
shares of the capital stock of the Company (the "Company Shares"); and
D. The Shareholders, the Company, and RIG deem it advisable and in their
respective best interests that RIG form a wholly-owned subsidiary corporation to
be called LTI Acquisition Corp., a Delaware corporation ("Newco"), and that the
Company be merged with and into Newco in a statutory merger (the "Merger")
whereby the Shareholders of the Company would receive shares of the common stock
of RIG ("RIG Common Stock") plus cash, subject to an adjustment described
herein, and RIG would continue to own all the stock of Newco:
NOW, THEREFORE, in consideration of the promises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I.
THE TRANSACTION
1.1 THE TRANSACTION. Upon the terms and subject to the conditions
hereof, at the Closing (defined below), in exchange for the Consideration
specified in Section 1.2, RIG, the Shareholders, and the Company will cause
the Company to be merged with and into Newco (the "Merger") pursuant to an
Agreement and Plan of Merger between the Company and Newco (the "Newco
Merger Agreement") substantially in the form set forth in Exhibit 1.1. Upon
consummation of the Merger, Newco shall survive and continue as the
successor corporation and the existence of the Company shall cease.
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1.2 CONSIDERATION.
(a) RIG and Newco shall cause to be paid to the Shareholders in
connection with the Merger (i) four million five hundred thousand dollars
($4,500,000.00) in cash; and (ii) five hundred sixty six thousand six
hundred seventy one (566,671) shares of RIG Common Stock, par value $0.01
(collectively, the "Consideration"), which Consideration shall be applied
first to the full and complete payment of all long-term liabilities of the
Company as of the Closing Date, which are itemized on Schedule 1.2(a), and
the balance to the Shareholders as further provided on Schedule 1.2(a). The
Consideration is subject to adjustment pursuant to Section 1.3. All the RIG
Common Stock included in the Consideration shall be validly issued, fully
paid, non-assessable and, as of the Closing, free and clear of all Liens
(other than liens specifically contemplated herein). For the purposes of
this Agreement, "Lien" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer
(other than restrictions imposed by federal and state securities laws), or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the Uniform Commercial Code
or comparable law of any jurisdiction).
(b) The Consideration has been calculated based upon several
factors, including the Company having a Net Worth (defined below) as of
December 31, 1998, or, if the Closing occurs after January 15, 1999, as of
the Closing Date at RIG's option (the "Closing Net Worth") of no less than
a negative Net Worth of $772,000 (the "Net Worth Target"), and the Company
having Revenues (defined below) for the year ending December 31, 1998 (the
"1998 Revenues") within the range of $3.1 million to $3.8 million (the
"Revenue Target"). For purposes of this Agreement, "Net Worth" shall mean
Assets (other than intangible assets, which shall include without
limitation Capitalized Software, Capitalized Data Costs, goodwill,
franchises and intellectual property) less Liabilities (other than the
long-term liabilities listed in Schedule 1.2(a)), and "Revenues" shall mean
the total revenue of the Company in each case determined on an accrual
basis, and in conformity with Generally Accepted Accounting Principles
("GAAP"), excluding changes in GAAP becoming effective on or after January
1, 1999, and applied on a basis consistent with the preparation of the
Company's Most Recent Financials to the extent the Company's Most Recent
Financials were prepared in conformity with GAAP (excluding changes in GAAP
becoming effective on or after January 1, 1999).
1.3 POST-CLOSING ADJUSTMENT. The Consideration shall be subject to
adjustment after the Closing Date as specified in this Section 1.3:
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(a) Within ninety (90) days following the Closing, RIG, at its
own expense, shall cause Ernst & Young LLP ("RIG's Independent Auditors")
to audit the Company's books for the two calendar years preceding December
31, 1998, or, if the Closing occurs after January 15, 1999, as of the
Closing Date at RIG's option, for the purpose of complying with SEC
requirements and to determine the Closing Net Worth and the 1998 Revenues
as provided above (the "Post-Closing Audit"). The Shareholders shall
cooperate and shall use their reasonable efforts to cause the officers and
employees of the Company to cooperate with RIG and RIG's Independent
Auditors after the Closing Date in furnishing information, documents,
evidence and other assistance to RIG's Independent Auditors to facilitate
the completion of the Post-Closing Audit within the aforementioned time
period.
(b) Promptly upon receiving the Post-Closing Audit report from
RIG's Independent Auditors, RIG shall deliver a written notice (the
"Financial Adjustment Notice") to the Shareholders' Representatives, as
defined in Section 1.5, setting forth a determination based on the audited
financial statements of the Closing Net Worth and 1998 Revenue.
(i) If the audited financial statements indicate that the
Closing Net Worth was a negative Net Worth greater than minus $772,000, the
Financial Adjustment Notice shall set forth such variance, and such
increase in negative Net Worth (expressed as a positive number) minus
$100,000 shall, if a positive number, be a tentative consideration
adjustment in RIG's favor.
(ii) If the audited financial statements indicate that the
Closing Net Worth was a negative Net Worth smaller than minus $772,000, or
was a positive Net Worth, the Financial Adjustment Notice shall set forth
such variance, and (A) such decrease in negative Net Worth (expressed as a
positive number), plus (B) any positive Net Worth, minus (C) $100,000,
shall, if a positive number, be a tentative consideration adjustment in
favor of the Shareholders.
(iii) If the audited financial statements indicate that the
1998 Revenues were less than $3.1 million, the Financial Adjustment Notice
shall set forth such variance, and (A) the excess of $3.1 million over the
amount of the 1998 Revenues minus (B) $100,000, multiplied by (C) 2.82
shall, if a positive number, be a tentative consideration adjustment in
RIG's favor.
(iv) If the audited financial statements indicate that the
1998 Revenues were greater than $3.8 million, the Financial Adjustment
Notice shall set forth such variance, and (A) the excess of the 1998
Revenues over $3.8 million (B) minus $100,000, (C) multiplied by 2.82
shall, if a positive number, be a tentative consideration adjustment in
favor of the Shareholders.
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(v) If the sum of the tentative consideration adjustments in
favor of RIG is greater than the sum of the tentative consideration
adjustments in favor of the Shareholders, the difference shall be the
Proposed Consideration Adjustment and shall be in favor of RIG.
(vi) If the sum of the tentative consideration adjustments
in favor of the Shareholders is greater than the sum of the tentative
consideration adjustments in favor of RIG, the difference shall be the
Proposed Consideration Adjustment and shall be in favor of the
Shareholders.
(c) The Shareholders' Representatives shall have thirty (30) days
from the receipt of the Financial Adjustment Notice to notify RIG if the
Shareholders dispute the determination of either the Closing Net Worth or
the 1998 Revenues or both (the "Notice of Dispute"). During such 30-day
period, the Shareholders' Representatives shall be given reasonable access
to the Company's books and records, including the work papers of RIG's
Independent Auditors that RIG's Independent Auditors are permitted to
release with RIG's consent (which RIG will provide) pursuant to such
Auditors' standard policies. If RIG has not received such Notice of Dispute
within such 30-day period, the Proposed Consideration Adjustment shall be
the Final Consideration Adjustment. If, however, the Shareholders'
Representatives have delivered notice of such a dispute to RIG within such
30-day period (which such notice shall state the Shareholders' calculation
of Closing Net Worth and of 1998 Revenues), then KPMG Peat Marwick LLP (or
its successor) (the "Independent Accounting Firm") shall perform any
required procedures on the Company's books, shall review the work papers of
RIG's Independent Auditors, the Financial Adjustment Notice, and the Notice
of Dispute, and shall determine independently the Closing Net Worth and
1998 Revenues. If KPMG Peat Marwick LLP (or its successor) is unable or
unwilling to serve in this capacity, then the Independent Accounting Firm
shall be selected by RIG's Independent Auditors and confirmed by the
Shareholders' Representatives and RIG within three (3) days, unless there
is an actual conflict of interest. The Independent Accounting Firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that (i) were delivered or made available
to RIG's Independent Auditors in connection with the transactions
contemplated hereby, (ii) were used by RIG's Independent Auditors during
the course of the Post-Closing Audit or (iii) consist of supplemental
information supplied by either party to the Independent Accounting Firm.
The Independent Accounting Firm shall make its determination of the Closing
Net Worth and 1998 Revenues, and the amount, if any, by which each of the
Net Worth Target and the Revenue Target respectively exceeds or falls short
of the Closing Net Worth and 1998 Revenues determined by the Independent
Accounting Firm, within thirty (30) days of its selection. The
determination of the Independent Accounting Firm shall be final and binding
on the parties hereto, and upon such determination: (A) the Proposed
Consideration Adjustment shall be modified in accordance with subsection
(b) above and shall become the Final Consideration Adjustment; (B) if in
favor of RIG, RIG shall be entitled to receive from the Shareholders the
Final Consideration Adjustment, which shall be paid by the Shareholders in
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RIG Common Stock, subject to the provisions of Section 8.7 hereof,
provided, however, that the Shareholders may pay in cash any portion of the
Final Consideration Adjustment necessary to preserve the Tax-Advantaged
Status of the Transaction; and (C) if in favor of the Shareholders, the
Shareholders shall be entitled to receive from RIG the Final Consideration
Adjustment, which shall be paid by RIG in cash or in the form of newly
issued shares of RIG Common Stock valued for these purposes at $9.00 per
share, provided, however, that RIG must pay in the form of RIG Common Stock
any portion of the Final Consideration Adjustment necessary to preserve the
Tax-Advantaged Status of the Transaction. To illustrate, if the Final
Consideration Adjustment is in favor of the Shareholders in the amount of
$90,000, RIG will pay such Final Consideration Adjustment to the
Shareholders in the form of 10,000 newly issued shares of RIG's Common
Stock; any fraction of a share resulting from this calculation shall be
rounded up to the next whole share. The costs of the Independent Accounting
Firm shall be borne by the party (either RIG or the Shareholders as a
group) whose determination of the Closing Net Worth was further from the
determination of the Closing Net Worth by the Independent Accounting Firm,
or equally by RIG and the Shareholders in the event that the determination
by the Independent Accounting Firm is equidistant between the determination
of Closing Net Worth by RIG on one hand, and by the Shareholders on the
other. For purposes of this Section 1.3, "Tax-Advantaged Status of the
Transaction" shall mean that the fair market value of the RIG Common Stock
portion of the Consideration equals or exceeds the cash portion of the
Consideration.
1.4 PLEDGED ASSETS.
(a) As collateral security for the payment of any Final
Consideration Adjustment under Section 1.3, or any indemnification
obligations of the Shareholders pursuant to Article VIII, the Shareholders
shall, and by execution hereof do hereby, transfer, pledge and assign to
RIG, for the benefit of RIG, a security interest in the following assets
(the "Pledged Assets"):
(i) each Shareholder's pro rata portion (based on their
percentage share ownership in the Company) of 106,667 shares of the RIG
Common Stock forming part of the Consideration (the "Pledged Shares") and
the certificates and instruments, if any, representing or evidencing each
such Shareholder's Pledged Shares;
(ii) all securities hereafter delivered to such Shareholder
with respect to or in substitution for such Shareholder's Pledged Shares,
all certificates and instruments representing or evidencing such
securities, and all non-cash dividends and other property (other than cash
dividends) at any time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and in the event any
Shareholder receives any such property, such Shareholder shall hold such
property in trust for RIG and shall immediately deliver such property to
RIG to be held hereunder as Pledged Assets; and
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(iii) all non-cash proceeds of all of the foregoing property
and all rights, titles, interests, privileges and preferences appertaining
or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Shareholder's Pledged
Assets issued in his or her name in the transactions contemplated hereby,
shall be delivered to RIG directly by the transfer agent at the Closing,
such certificate bearing no restrictive or cautionary legend other than
those provided for by this Agreement or imprinted by the transfer agent at
RIG's request. Each Shareholder shall, at the Closing, deliver to RIG, for
each such certificate, a stock power duly signed in blank by him or her.
(c) The Shareholders shall be entitled to retain cash proceeds
from, and exercise any voting powers incident to, the Pledged Assets that
are not applied to satisfy any Final Consideration Adjustment pursuant to
Section 1.3 or any indemnification obligation of the Shareholders pursuant
to Article VIII.
(d) Except as necessary to preserve the Tax-Advantaged Status of
the Transaction as provided in Section 1.3(c), the Pledged Assets shall be
available to satisfy any Final Consideration Adjustment pursuant to Section
1.3 and any indemnification obligations of the Shareholders pursuant to
Article VIII until the date that is one (1) year after the Closing (the
"Release Date"). On the Release Date or the first business day thereafter,
RIG shall return or cause to be returned to the Shareholders the Pledged
Assets, less Pledged Assets having an aggregate value equal to the amount
of (i) any settled, finally- determined, or pending claim for a
post-Closing adjustment to the Consideration under Section 1.3, and (ii)
any settled, finally-determined, or pending claim for indemnification made
by any RIG Indemnified Party (as defined in Article VIII). The Pledged
Assets not returned to the Shareholders as provided above shall continue to
be held by RIG as collateral security for performance of the Shareholders'
obligations described in subsection (a) above that remain outstanding. For
purposes of clause (i) of the second preceding sentence, the Pledged Shares
shall be valued at $9.00 per share; and for purposes of clause (ii) of the
second preceding sentence, the Pledged Shares shall be valued at the
average Closing Price of RIG Common Stock on the twenty (20) trading days
immediately preceding the Release Date. "Closing Price" on any trading day
shall mean the closing sale price of RIG Common Stock on NASDAQ (or such
other principal quotation system or national securities exchange on which
the RIG Common Stock is admitted to trading or quoted or listed) or, if not
admitted to trading or quoted or listed on any quotation system or national
securities exchange, the average of the closing bid and asked prices of the
RIG Common Stock on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similarly
generally accepted reporting service, or if not so available in such
manner, as reasonably determined by an independent accounting firm
designated by the parties that has not represented any of the parties
hereto, their affiliates, successors or assigns at any time during the
two-year period immediately preceding the day in question.
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1.5 SHAREHOLDERS' REPRESENTATIVES.
(a) Each Shareholder, by signing this Agreement, designates the
following two Shareholders to be the Shareholders' Representatives for
purposes of this Agreement:
(i) Fred A. Heitzman III, or, in the event that he is unable
or unwilling to serve, Gregory Benkert; and
(ii) Blue Chip Capital Fund Limited Partnership.
(b) The Shareholders shall be bound by any and all actions taken
jointly by the Shareholders' Representatives on their behalf, and RIG shall
be entitled to rely upon any communication or writings that RIG in good
faith believes have been jointly given or executed by the Shareholders'
Representatives. All notices to be sent to all Shareholders pursuant to
this Agreement may be addressed to the Shareholders' Representatives and
any notice so sent shall be deemed notice to all of the Shareholders
hereunder. The Shareholders hereby consent and agree that the Shareholders'
Representatives are authorized to accept notice on behalf of the
Shareholders pursuant hereto.
(c) The Shareholders' Representatives are hereby appointed and
constituted the true and lawful attorney-in-fact of each Shareholder, with
full power in his or her name and on his or her behalf to act according to
the terms of this Agreement in the absolute discretion of the Shareholders'
Representatives; and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by
or deemed advisable in connection with this Agreement. This power of
attorney and all authority hereby conferred is granted subject to the
interest of the other Shareholders hereunder and in consideration of the
mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Shareholder, by operation of law,
whether by such Shareholder's death or any other event.
1.6 ACCOUNTING TERMS. Except as otherwise expressly provided herein
(including in the Schedules), all accounting terms used in this Agreement
shall be interpreted, and all financial statements, Schedules, certificates
and reports as to financial matters required to be delivered hereunder
shall be prepared, in accordance with GAAP as in effect as of December 31,
1998, consistently applied.
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ARTICLE II.
CLOSING
2.1 LOCATION AND DATE. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of RIG's counsel on January 8, 1999, providing that all conditions
to Closing shall have been satisfied or waived, or at such other time and
date as RIG, the Company and the Shareholders may mutually agree, which
date shall be no later than January 30, 1999 and shall be referred to as
the "Closing Date."
2.2 DELIVERIES. The Shareholders shall deliver to RIG the following at
the Closing: (a) stock certificates representing the Company Shares,
accompanied by stock powers duly executed in blank or duly executed
instruments of transfer, in each case with signatures guaranteed by a
national bank or member firm of the New York Stock Exchange, and with all
necessary stock transfer and other documentary stamps attached, and any
other documents that are necessary to transfer and surrender in connection
with the Merger good and marketable title to the Company Shares free and
clear of all Liens; (b) resignations as directors of such directors of the
Company (other than Fred A. Heitzman III) as RIG may request prior to the
Closing Date; and (c) all other documents, certificates, instruments or
writings required to be delivered by the Shareholders or the Company at or
prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith. Against performance by the Shareholders of the
obligations set forth in clause (a) above, RIG shall deliver to the
Shareholders at the Closing (or, if the Merger is not yet effective, upon
the effectiveness of the Merger) the Consideration free and clear of all
Liens (other than Liens specifically contemplated herein) and all
documents, certificates, instruments or writings required to be delivered
by RIG at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS
To induce RIG to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Shareholders,
jointly and severally (unless otherwise provided), represents and warrants
to RIG as follows (for purposes of this Agreement, the phrases "knowledge
of the Shareholders" or the "Shareholders' knowledge," or words of similar
import, mean the knowledge of Fred A. Heitzman III and Gregory Benkert,
including facts of which either, in the reasonably prudent exercise of his
duties as an officer, director and/or stockholder of the Company, should be
aware, and the transactions contemplated by this Agreement include without
limitation the Merger):
-8-
3.1 DUE ORGANIZATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio. The Company is
duly authorized and qualified to do business in all jurisdictions where the
failure to be so authorized or qualified would have a material adverse
effect upon its business or properties. The Company has the power and
authority to own, operate and lease its properties and to carry on its
business in the places and in the manner as now conducted. Schedule 3.l(a)
hereto contains a list of all jurisdictions in which the Company is
authorized or qualified to do business. The Company is in good standing as
a foreign corporation in each jurisdiction in which it is authorized or
qualified to do business.
(b) The Company has delivered to RIG true, complete and correct
copies of the Articles of Incorporation and Code of Regulations of the
Company. Such Articles of Incorporation and Code of Regulations are
collectively referred to as the "Company Charter Documents." The Company is
not in violation of any Company Charter Document. The minute books of the
Company have been made available to RIG (and at Closing shall be delivered,
along with the Company's original stock ledger and corporate seal, if any,
to RIG) and are correct and, except as set forth in Schedule 3.1(b),
complete in all material respects.
(c) Schedule 3.1(c) contains a complete and accurate list of the
directors and officers of the Company.
3.2 AUTHORIZATION; VALIDITY. The Company has all requisite corporate
power and authority to enter into and perform its obligations pursuant to
the terms of this Agreement. The Company has the full legal right,
corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each Shareholder represents severally,
not jointly, that he has the full legal right and authority to enter into
this Agreement and perform the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the performance
by the Company of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of the Company and the
Shareholders and this Agreement has been duly and validly authorized by all
necessary corporate action. Each Shareholder represents severally, not
jointly, that this Agreement is a legal, valid and binding obligation of
the Company and the Shareholder, enforceable in accordance with its terms.
3.3 NO CONFLICTS.
(a) Except as set forth on Schedule 3.3, the execution, delivery
and performance of this Agreement, the consummation of the transactions,
contemplated hereby, and the fulfillment of the terms hereof will not
conflict with, or result in a breach or violation of, any of the Company
Charter Documents;
-9-
(b) Except as set forth on Schedule 3.3, the execution, delivery
and performance of this Agreement, the consummation of the transactions,
contemplated hereby, and the fulfillment of the terms hereof will not
result in termination or any impairment of any permit, license, franchise,
contractual right or other authorization of the Company which would have a
material adverse effect, except for the termination of the Company's
Subchapter S election; or
(c) The Company represents jointly with each Shareholder with
respect to the Company, and each Shareholder represents severally as
applicable, not jointly, that except as set forth on Schedule 3.3, the
execution, delivery and performance of this Agreement, the consummation of
the transactions, contemplated hereby, and the fulfillment of the terms
hereof will not violate any law, order, judgment, rule, regulation, decree
or ordinance to which the Company or such Shareholder is subject or by
which the Company or such Shareholder is bound where such violation would
have a material adverse effect on the business or properties of the
Company.
(d) the Company represents jointly with each Shareholder with
respect to the Company, and each Shareholder represents severally as
applicable, not jointly, that except as set forth on Schedule 3.3, the
execution, delivery and performance of this Agreement, the consummation of
the transactions, contemplated hereby, and the fulfillment of the terms
hereof will not conflict with, or result in a material default (or would
constitute a material default but for any requirement of notice or lapse of
time or both) under any document, agreement or other instrument to which
the Company is a party or by which the Company is bound, or result in the
creation or imposition of any Lien, charge or encumbrance on any of the
Company's properties pursuant to (i) any law or regulation to which the
Company or such Shareholder or any of their respective property is subject,
or (ii) any judgment, order or decree to which the Company or such
Shareholder is bound or any of their respective property is subject;
3.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 1500 shares of common stock (750 voting shares and 750
non-voting shares), no par value, of which 848.7 shares are issued and
outstanding, and no shares of preferred stock. All of the issued and
outstanding Company Shares have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially
by the Shareholders in the amounts set forth in Schedule 3.4 free and clear
of all Liens except as set forth on Schedule 3.4. All of the Company Shares
were offered, issued, sold and delivered by the Company in compliance with
all applicable state and federal laws concerning the issuance and
distribution of securities. Further, none of the Company Shares was issued
in violation of any preemptive rights. Except as set forth on Schedule 3.4,
there are no voting agreements or voting trusts with respect to any of the
Company Shares.
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3.5 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
3.5, no option, warrant, call, subscription right, conversion right or
other contract or commitment of any kind exists of any character, written
or oral, which may obligate the Company to issue, sell or otherwise make
outstanding any Company Shares or other securities issued by the Company.
The Company has no obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any of its equity securities or any interests therein
or to pay any dividend or make any distribution in respect thereof. As a
result of the transactions contemplated herein, all outstanding capital
stock of the Company and rights to acquire capital stock of the Company
shall be surrendered and cancelled.
3.6 SUBSIDIARIES AND CORPORATE OWNERSHIP INTERESTS.
(a) The Company has no subsidiaries.
(b) Except as set forth on Schedule 3.6(b), the Company does not
own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity, nor is
the Company, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
3.7 COMPLETE COPIES OF MATERIALS. The Company has delivered to RIG
true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or
that has been requested by RIG, except for certain contracts for which
representative samples only have been provided to RIG.
3.8 COMPANY FINANCIAL CONDITIONS. [omitted] [sic]
3.9 FINANCIAL STATEMENTS. Schedule 3.9(a) includes true, complete and
correct copies of the Company's unaudited balance sheet as of December 31,
1997, and income statement for the year ended December 31, 1997
(collectively, the "Financials"). Schedule 3.9(b) includes true and correct
copies of the Company's unaudited balance sheet as of November 30, 1998,
and income statement for the Period(s) ending November 30, 1998 (the "Date
of the Most Recent Financials"), which are the most current financial
statements available to the Company and the Shareholders (the "Most Recent
Financials"). To the knowledge of the Shareholders and except as set forth
on Schedules 3.9(a) and (b) respectively, the Financials and the Most
Recent Financials have been prepared in accordance with GAAP consistently
applied, subject to normal year-end adjustments. The balance sheets
included in the Financials and the Most Recent Financials present fairly in
all material respects the financial condition of the Company as of the
dates indicated thereon, and the income statements included in the
Financials and the Most Recent Financials present fairly in all material
respects the results of its operations for the periods indicated thereon.
Since the Date of the Most Recent Financials, there have been no material
changes in the Company's accounting policies.
-11-
3.10 LIABILITIES AND OBLIGATIONS.
(a) To the Shareholders' knowledge, except as set forth on
Schedule 3.10(a), all of the Company's liabilities are current liabilities
and all of the Company's long-term liabilities will be paid in full as of
the Closing Date, and the Company is not liable for or subject to any other
liabilities except for:
(i) those liabilities reflected on the Financials, the Most
Recent Financials and Schedule 3.10(a) and not previously paid or
discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Date of the Most
Recent Financials in the ordinary course of business consistent with past
practice, which liabilities are not, individually or in the aggregate,
material.
(b) Where so requested by RIG in writing, the Company has
delivered to RIG, in the case of those liabilities which are not fixed or
are contested, a reasonable estimate of the maximum amount which may be
payable.
(c) Schedule 3.10(c) includes a summary description of all plans
or projects now in effect or contemplated by the Shareholders involving the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business, to which management
of the Company has made any material expenditure in the two-year period
prior to the date of this Agreement, which if pursued by the Company would
require additional material expenditures of capital.
(d) For purposes of this Section 3.10, the term "liabilities"
shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute,
contingent, mature, unmature or otherwise, fixed or unfixed, liquidated or
unliquidated, secured or unsecured.
3.11 BOOKS AND RECORDS. The Company has made and kept books and
records and accounts, which, in reasonable detail, accurately and fairly
reflect the activities of the Company (except for omissions that are not,
individually or in aggregate, material). The Company has not, in the two
(2) years prior to the Closing Date, engaged in any material transaction,
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maintained any bank account, or used any corporate funds except for such
transactions, bank accounts, and funds which have been and are reflected in
its normally maintained books and records.
3.12 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.12 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
3.13 ACCOUNTS AND NOTES RECEIVABLE. Schedule 3.13 sets forth a
complete and accurate list, as of a date not more than forty-five (45) days
prior to the date hereof, of the accounts and notes receivable of the
Company (including without limitation receivables from and advances to
employees and the Shareholders), which includes an aging of all accounts
and notes receivable showing amounts due in 30-day aging categories
(collectively, the "Accounts Receivable"). All Accounts Receivable
represent valid obligations or renewal service billings arising from sales
actually made or services actually performed or to be performed in the
ordinary course of business. Subject to reserves shown on the Company's
books and records (which reserves are adequate and calculated consistent
with past practice) each of the Accounts Receivable is expected to be
collected in full, without any set-off, within one hundred twenty (120)
days after the day on which it first became due and payable. Except as set
forth on Schedule 3.13, there is no material contest, claim, or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of a material Account Receivable
relating to the amount or validity of such Account Receivable.
3.14 PERMITS. To the Shareholders' knowledge, except as set forth on
Schedule 3.1(a), and excepting any termination of the Company's Subchapter
S election at Closing, the Company owns or holds all licenses, titles,
franchises, permits and other governmental authorizations necessary for the
continued operation of its business as it is currently being conducted (the
"Company Permits"). To the Shareholders' knowledge, and excepting any
termination of the Company's Subchapter S election at Closing, the Company
Permits are valid, and the Company has not received any notice that any
governmental authority intends to modify, cancel, terminate or fail to
renew any Company Permit. No present or former officer, manager, member or
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employee of the Company or any affiliate thereof, or any other person,
firm, corporation or other entity, owns or has any proprietary, financial
or other interest (direct or indirect) in any Company Permits. To the
Shareholders' knowledge, the Company has conducted and is conducting its
business in material compliance with the requirements, standards, criteria
and conditions set forth in the Company Permits and other applicable
orders, approvals, variances, rules and regulations of governmental
authorities and is not in violation of any of the foregoing, and the
transactions contemplated by this Agreement will not result in a default
under, or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company or its successor, by any Company Permit.
3.15 REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights
to access, and rights of way, and all buildings and other improvements
thereon, owned or used by the Company, together with any additions thereto
or replacements thereof.
(b) Schedule 3.15(b) contains a complete and accurate description
of all Real Property (including street address, legal description (where
known), owner, and Company's use thereof) and, to the Shareholders'
knowledge, of all claims, liabilities, security interests, mortgages,
Liens, pledges, conditions, charges, covenants, easements, restrictions,
encroachments, leases, or encumbrances of any nature thereon
("Encumbrances"). The Company does not now own, nor has it ever owned, Real
Property. The Real Property listed on Schedule 3.15 includes all interests
in real property necessary to conduct the business and operations of the
Company.
(c) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the
Company leases from any other party any Real Property, including all
material amendments, renewals, extensions, modifications or supplements to
any of the foregoing or substitutions for any of the foregoing
(collectively, the "Leases") are, to the Shareholders' knowledge, valid and
in full force and effect. The Company has provided RIG with true and
complete copies of all of the Leases, and all material correspondence
received or sent by the Company related thereto, including all
correspondence pursuant to which any party to any of the Leases declared a
default thereunder or provided notice of the exercise of any right or
option granted to such party under such Lease. The Company's interests
under the Leases are free of all Liens. Except as set forth on Schedule
3.15(c), none of the Leases requires the consent or approval of any party
thereto in connection with the consummation of the transactions, including
the Merger, contemplated hereby.
3.16 PERSONAL PROPERTY.
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(a) Schedule 3.16(a) sets forth a complete and accurate list of
all personal property included on the Financials and all other personal
property owned or leased by the Company with a current book value in excess
of $2,500 both: (i) as of the Date of the Most Recent Financials, and (ii)
acquired since the Date of the Most Recent Financials, including in each
case true, complete and correct copies of leases for material equipment.
None of such assets are currently owned by any Shareholder or business or
personal affiliates of any Shareholder or of the Company.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) To the Shareholders' knowledge, all of the property listed on
Schedule 3.16(a) is in good working order and condition, ordinary wear and
tear excepted. All leases set forth on Schedule 3.16(a) are in full force
and effect and constitute valid and binding agreements of the Company. The
Company is not in material breach of any of the leases set forth on
Schedule 3.16(a). All fixed assets used by the Company that are material to
the operation of its business are either owned by the Company or leased
under an agreement listed on Schedule 3.16(a).
3.17 INTELLECTUAL PROPERTY.
(a) The Company is the true and lawful owner of, or is licensed
or to the Shareholders' Knowledge, otherwise possesses legally enforceable
rights to use, the Marks listed on Schedule 3.17(a). Such schedule includes
(i) all of the Marks registered by the Company or any Affiliate thereof in
the United States Patent and Trademark Office ("PTO") or the equivalent
thereof in any state of the United States or in any foreign country, and
(ii) all of the unregistered Marks that the Company now owns or uses in
connection with its business (collectively, the "Company Marks"). Except
with respect to those Marks shown as licensed on Schedule 3.17(a), the
Company owns all of the registered Marks it uses and, to the Shareholders'
knowledge, possesses legally superior rights to any unregistered Marks it
uses. The Marks listed on Schedule 3.17(a) will not cease to be valid
rights of the Company by reason of the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated
hereby. For purposes of this Section 3.17 and Section 4.8, the term "Marks"
shall mean all right, title and interest in and to any United States or
foreign trademarks, service marks and trade names now held by a party
hereto, including any registration or application for registration of any
trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by a party hereto, and any trade dress (including
logos, designs, company names, business names, fictitious names and other
business identifiers) used by a party hereto in the United States or any
foreign country. For purposes of this Section 3.17, an "Affiliate"
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of the Company means any entity that controls, is controlled by, or is
under common control with the Company.
(b) Except as set forth on Schedule 3.17(b), the Company owns, or
to the Shareholders' knowledge, possesses legally enforceable Rights to Use
all Company Copyrights listed on Schedule 3.17(b). For purposes of this
Agreement, "Rights to Use" include legally enforceable rights to use,
display, prepare derivative works of, market, sell, transfer, distribute,
sublicense, copy, reproduce, modify, improve, update, or publish
copyrightable matter, and "Company Copyrights" are all copyrightable matter
material to the Company's business (including but not limited to
proprietary and commercial software, including source code and object code,
data compilations, databases, publications, flow charts, photographs,
images, and graphic designs). The Company has taken no actions to register
or otherwise protect the copyright in the Company Copyrights, with the
exception of displaying the copyright symbol on its screen images and
reports.
(c) Except as listed on Schedule 3.17(c), the Company owns, or to
the Shareholders' knowledge, possesses legally enforceable Rights to Use
all other intellectual property used in connection with the Company's
business (including trade secrets, franchises, or similar rights)
(collectively, "Company Other Rights").
(d) For purposes of this Section 3.17, the Company Marks, Company
Copyrights, and Company Other Rights are referred to collectively herein as
the "Company Intellectual Property." The Company Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Owned Intellectual Property." All other Company Intellectual Property is
referred to herein collectively as "Company Third Party Intellectual
Property." To the knowledge of the Shareholders, except as indicated on
Schedule 3.17(d), the Company has no obligations to compensate any person
in connection with any Company Intellectual Property. Except as indicated
on Schedule 3.17(d) or except in the ordinary course of business, the
Company has not granted to any person any Rights to Use, under license or
otherwise, any Company Intellectual Property, whether requiring the payment
of royalties or not.
(e) The Company is not, nor will it be, as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in material violation of any Company Third Party
Intellectual Property license, sublicense or agreement described in any of
the Schedules to this Section 3.17. No claims with respect to the Company
Owned Intellectual Property or Company Third Party Intellectual Property
are currently pending or, to the knowledge of the Shareholders are
threatened by any person, nor, to the Shareholders' knowledge, do any
grounds for any claims exist: (i) to the effect that the manufacture, sale,
licensing or exercise of Rights to Use any Company product by the Company
infringes on any copyright, patent, trademark, service mark or trade
secret; (ii) against the exercise by the Company of Rights to Use any
trademarks, trade names, trade secrets,
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copyrights, patents, technology, know-how or computer software programs and
applications used in the Company's business as currently conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any
of the Company Owned Intellectual Property or other trade secret material
to the Company; or (iv) challenging the Company's license or the legal
enforceability of the Company's Rights to Use any Company Third Party
Intellectual Property. To the Shareholders' knowledge, there is no
unauthorized use, infringement or misappropriation of any Company Owned
Intellectual Property by any third party. Except as set forth in Schedule
3.17(e), the Company: (x) has not been sued or charged in writing as a
defendant in any claim, suit, action or proceeding which involves a claim
of infringement of any trade secret, patent, trademark, service mark, or
copyright and which has not been finally terminated, or been informed or
notified by any third party that the Company may be engaged in such
infringement; and (y) to the Shareholders' knowledge, has not infringed any
trade secret, patent, trademark, service mark, or copyright of another.
3.18 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) To the Shareholders' knowledge, Schedule 3.18(a) contains a
complete and accurate list of all contracts, commitments, leases,
instruments, agreements, licenses or permits, written or oral, to which the
Company is a party or by which it or its properties are bound (including
without limitation joint venture or partnership agreements, contracts with
any labor organizations, employment agreements, consulting agreements, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, Liens, pledges or other security agreements) (i) to which
the Company and any affiliate of the Company or any officer, director or
stockholder of the Company are parties ("Related Party Agreements"); (ii)
that may give rise to obligations or liabilities exceeding, during the
current term thereof, $5,000, or (iii) that may generate revenues or income
exceeding, during the current term thereof, $20,000, excluding any customer
contracts entered into in the ordinary course of business after December
28, 1998 (collectively with the Related Party Agreements, the "Material
Contracts"). The Company has delivered to RIG true, complete and correct
copies of the Material Contracts, except for certain contracts for which
representative samples only have been provided to RIG.
(b) Except to the extent set forth on Schedule 3.18(b), to the
Shareholders' knowledge, as of December 28, 1998, (i) none of the Company's
customers set forth on Schedule 3.18(a) has canceled or substantially
reduced or is currently threatening to cancel or substantially reduce, any
purchases from the Company, (ii) none of the Company's suppliers has
canceled or substantially reduced or is currently threatening to cancel or
substantially reduce, the supply of products or services to the Company,
(iii) the Company has complied in all material respects with all of its
commitments and obligations and is not in default under any of the Material
Contracts, and no written notice of default has been received with respect
to any of such
-17-
Contracts, and (iv) other than the Related Party Agreements, there are no
Material Contracts that were not negotiated at arm's length. The Company
does not have any material liabilities or amounts payable due to having any
of its products returned by a purchaser thereof except for normal warranty
returns consistent with past history.
(c) To the Shareholders' knowledge, each Material Contract,
except those terminated pursuant to Section 5.6, is a valid and binding
obligation of the Company and is in full force and effect and is not
subject to any default thereunder by any party obligated to the Company
pursuant thereto. The Company will obtain prior to the Closing Date all
necessary consents, waivers and approvals of parties to any Material
Contract that are required in connection with any of the transactions
contemplated hereby, or are required by any governmental agency or other
third party in order that any such Material Contract remain in effect
without modification after the transactions contemplated hereby and without
giving rise to any right to termination, cancellation or acceleration or
loss of any right or benefit ("Requisite Third Party Consents"). All
Requisite Third Party Consents are listed on Schedule 3.18(c).
(d) The outstanding balance on all loans or credit agreements
either (i) between the Company and any person in which any of the
Shareholders owns a material interest, or (ii) guaranteed by the Company
for the benefit of any Person in which any of the Shareholders owns a
material interest, are set forth in Schedule 3.18(d).
3.19 PREDECESSOR STATUS; ETC. Schedule 3.19 sets forth a listing of
all legal names, trade names, fictitious names or other names (including,
without limitation, any names of divisions or operations) of the Company
and all of its predecessor companies during the five-year period
immediately preceding the date hereof, including without limitation the
names of any entities from whom the Company has acquired material assets.
During the five-year period immediately preceding the date hereof, the
Company has operated only under the names set forth on Schedule 3.19 in the
jurisdiction or jurisdictions set forth on Schedule 3.19 and has not been a
subsidiary or division of another corporation or a part of an acquisition
which was later rescinded.
3.20 INSURANCE. Schedule 3.20 sets forth a complete and accurate list,
as of the Date of the Most Recent Financials, of all insurance policies
carried by the Company and all insurance loss runs or workmen's
compensation claims received for the past two (2) policy years. The Company
has delivered to RIG true, complete and correct copies of all current
insurance policies, all of which are in full force and effect. All premiums
due and payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. To the
knowledge of the Shareholders, such policies of insurance are of the type
and in amounts customarily carried by persons conducting businesses similar
to that of the Company. To the
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knowledge of the Shareholders, there have been no threatened terminations
of, or material premium increases with respect to, any of such policies.
3.21 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To the Shareholders' knowledge, other
than as set forth on Schedule 3.21(a), no underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity
or by applicable federal, state, local or other applicable law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as
amended, and the regulations promulgated pursuant to said laws, but
excluding office and janitorial supplies properly and safely maintained (a
"Hazardous Material"), are present in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that
the Company has at any time owned, operated, occupied or leased. Schedule
3.21(a) identifies, to the knowledge of the Shareholders, all underground
and aboveground storage tanks, and the capacity, age, and contents of such
tanks, located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. To the knowledge of the
Shareholders, the Company has not transported, stored, used, manufactured,
disposed of or released, or exposed its employees or others to, Hazardous
Materials in violation of any law in effect on or before the Closing Date,
nor has the Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (collectively, "Company Hazardous
Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or
to the knowledge of the Shareholders, threatened concerning any Hazardous
Material or any Company Hazardous Materials Activity. To the knowledge of
the Shareholders, there are no past or present actions, activities,
circumstances, conditions, events, or incidents that could involve the
Company (or any person or entity whose liability the Company has retained
or assumed, either by contract or operation of law) in any environmental
litigation, or impose upon the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or
operation of law) any environmental liability including, without
limitation, common law tort liability.
3.22 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and
service providers to the Company:
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(a) the Company is and has been in compliance in all material
respects with all applicable laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including without limitation any such laws respecting employment
discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, occupational safety and health
requirements, and unfair labor practices.
(b) there is not now, nor within the past three (3) years has
there been, any unfair labor practice complaint against the Company pending
or, to the Shareholders' knowledge, threatened, before the National Labor
Relations Board or any other comparable authority;
(c) there is not now, nor within the past three (3) years has
there been, any labor strike, slowdown or stoppage actually pending or, to
the Shareholders' knowledge, threatened, against or directly affecting the
Company;
(d) to the Shareholders' knowledge, no labor representation
organization effort exists nor has there been any such activity within the
past three (3) years;
(e) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to the Shareholders'
knowledge, no claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force with respect to the Company or currently being
negotiated by the Company; and
(g) the Company and the Shareholders have a reasonable basis for
believing that all persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
3.23 EMPLOYEE BENEFIT PLANS.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit arrangement,
obligation, custom, or practice, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered,
to present or former directors, employees, agents, or independent
contractors, other than any obligation, arrangement, custom or practice
that is an Employee Benefit Plan, including, without limitation, employment
agreements, severance agreements, executive compensation arrangements,
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incentive programs or arrangements, sick leave, vacation pay, severance pay
policies, plant closing benefits, salary continuation for disability,
consulting, or other compensation arrangements, workers' compensation,
retirement, deferred compensation, bonus, stock option or purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement
or scholarship programs, any plans subject to Section 125 of the Code, and
any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including
all or substantially all) of the assets of any business or portion thereof,
in each case with respect to any present or former employees, directors, or
agents.
(ii) "Company Benefit Arrangement" means any Benefit
Arrangement sponsored or maintained by the Company or with respect to which
the Company has or may have any liability (whether actual, contingent, with
respect to any of its assets or otherwise) as of the Closing Date, in each
case with respect to any present or former directors, employees, agents, or
independent contractors of the Company.
(iii) "Company Plan" means, as of the Closing Date, any
Employee Benefit Plan for which the Company is the "plan sponsor" (as
defined in Section 3(16)(B) of ERISA) or any Employee Benefit Plan
maintained by the Company or to which the Company is obligated to make
payments, in each case with respect to any present or former employees of
the Company.
(iv) "Employee Benefit Plan" has the meaning given in
Section 3(3) of ERISA.
(v) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and all regulations and rules issued thereunder,
or any successor law.
(vi) "ERISA Affiliate" means any person that, together with
the Company, would be or was at any time treated as a single employer under
Section 414 of the Internal Revenue Code or Section 4001 of ERISA and any
general partnership of which the Company is or has been a general partner.
(b) Schedule 3.23(b) contains a complete and accurate list of all
Company Benefit Arrangements, Company Plans, and Employee Benefit Plans
currently or previously maintained by the Company.
(c) Schedule 3.23(c) hereto contains the most recent quarterly
listing of workers' compensation claims and a schedule of workers'
compensation claims of the Company for the last three (3) fiscal years.
(d) Schedule 3.23(d) hereto sets forth an accurate list, as of
the Date of the Most Recent Financials of all employees, officers and
directors of the Company who earned in 1997, or are likely to earn in 1998,
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more than $75,000, and lists all employment agreements with such employees,
officers and directors and the rate of compensation (and the portions
thereof attributable to salary, bonus, and other compensation respectively)
of each such person as of the Date of the Most Recent Financials.
3.24 TAXES.
(a) (i) Except as set forth on Schedule 3.24, the Company has
timely filed all material Tax Returns required to have been filed by it (or
if not timely filed has filed and paid all interest, penalties and other
charges incurred in connection therewith), and all such Tax Returns are
true, correct, and complete in all material respects.
(ii) Except as set forth on Schedule 3.24, the Company has
paid in full all Taxes owed by it, together with any interest, penalties
and other charges in connection therewith, whether or not shown on any Tax
Return.
(iii) The amount of the Company's liability for unpaid Taxes
as of the Date of the Most Recent Financials did not exceed the amount of
the current liability accruals for Taxes (excluding reserves for deferred
Taxes) included in the amounts shown on the balance sheet included in the
Most Recent Financials, and the amount of the Company's liability for
unpaid Taxes for all periods or portions thereof ending on or before the
Closing Date will not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) as such accruals are
reflected on the books and records of the Company on the Closing Date.
(iv) Except as set forth on Schedule 3.24, to the knowledge
of the Shareholders, there are no ongoing examinations or claims against or
with respect to the Company for Taxes, and no notice of any audit,
examination, or claim for Taxes, whether pending or threatened, has been
received by the Company or the Shareholders.
(v) The Company has a taxable year ending on December 31 of
each year and commencing January 1 of each year.
(vi) The Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not
changed in the past five (5) years. The Company has not agreed to, and is
not and will not be required to, make any adjustments under Code Section
481(a) as a result of a change in accounting methods.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
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(viii) Schedule 3.24 contains copies of (A) any Tax
examinations of the Company or the Shareholders with respect to the Company
conducted within the last five (5) years, (B) currently effective
extensions of statutory limitations for the collection or assessment of
Taxes from the Company or the Shareholders with respect to the Company and
(C) the Tax Returns of the Company for the last three (3) fiscal years that
have not previously been delivered to RIG.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company or the Shareholders
relating to or attributable to Taxes (other than Liens for Taxes not yet
due and payable).
(x) To the Shareholders' knowledge, there is no basis for
the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company
or otherwise have a material adverse effect on the Company or its business.
(xi) None of the Company's assets are treated as "tax exempt
use property" within the meaning of Section 168(h) of the Code.
(xii) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount
(or portion thereof) that would not be deductible pursuant to Sections
280G, 404 or 162 of the Code.
(xiii) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xiv) The Company is not, and has not been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under
contract.
(xv) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xvi) To the knowledge of the Shareholders, the Company's
tax basis in its assets for purposes of determining its future
amortization, depreciation and other federal income tax deductions is
accurately reflected on the Company's tax books and records.
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(xvii) The Company has not been a member of an affiliated
group filing a consolidated federal income Tax Return and does not have any
liability for the Taxes of another person 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.
(b) As of the date of its incorporation and at all times
thereafter prior to Closing, the Company has been and continues to be an S
corporation within the meaning of Section 1361(a)(1) of the Code pursuant
to an election filed in accordance with Section 1362(a) and (b) of the Code
and the regulations thereunder. The Company holds no assets the disposition
of which could result in any tax under Section 1374 of the Code.
(c) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
governmental charge, impost or levy (including without limitation income
taxes, franchise taxes, transfer taxes or fees, sales taxes, use taxes,
gross receipts taxes, value added taxes, employment taxes, excise taxes, ad
valorem taxes, property taxes, withholding taxes, payroll taxes, minimum
taxes or windfall profit taxes) together with any related penalties, fines,
additions to tax or interest imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including
any information return), report, statement, schedule, notice, form,
estimate, or declaration of estimated tax relating to or required to be
filed with any governmental authority in connection with the determination,
assessment, collection or payment of any Tax.
3.25 CONFORMITY WITH LAW; LITIGATION.
(a) To the Shareholders' knowledge, the Company is not in
material violation of any law or regulation or any order of any court or
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it.
(b) Except as set forth on Schedule 3.25, there are no actions,
suits or proceedings, pending or, to the knowledge of the Shareholders,
threatened against or affecting the Company at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction
over it and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company or the
Shareholders. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against the Company or against any of its
properties or business.
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3.26 ABSENCE OF CLAIMS AGAINST COMPANY. Except as set forth on
Schedule 3.26, each Shareholder represents severally that it has no claims
against the Company.
3.27 ABSENCE OF CHANGES. Since the Date of the Most Recent Financials,
the Company has conducted its business in the ordinary course and, except
as contemplated herein or as set forth on Schedule 3.27, there has not
been:
(a) any change, by itself or together with other changes, that
has or is likely to have a material adverse effect on, the business,
operations, assets, profits or condition (financial or otherwise) of the
Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by the Company to any of its
officers, directors, Shareholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice, nor has the Company entered into or amended
any Company Benefit Arrangement or Company Plan;
(f) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely
affecting the business of the Company;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person,
including without limitation the Shareholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Shareholders and their affiliates,
provided that the Company may negotiate and adjust bills in the course of
good faith disputes with customers in a manner consistent with past
practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
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property or rights of the Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of business of the Company in the aggregate in
excess of $10,000;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit or other right to which the Company is
a party (x) by the Company or (y) to the knowledge of the Shareholders, by
any other party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or
in the aggregate, exceeding $25,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or
the revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or Lien or other encumbrance on any asset (other
than liens arising under existing lease financing arrangements which are
not material and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non-renewal by the Company of any contract, lease transaction, commitment
or other right or obligation requiring aggregate payments by the Company in
excess of $25,000, except in the ordinary course of business;
(r) any loan by the Company to any person or entity, incurring by
the Company, of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others;
(s) any introduction of any promotional offer, including, without
limitation, discounted and free products or services or reduction of
standard pricing levels for the Company's goods or services with pricing
that is less than 20% below the average pricing for comparable clients; or
(t) negotiation or agreement by the Company, the Shareholders,
or, to the knowledge of the Shareholders, any other officer or employee
thereof to do any of the things described in the preceding clauses (a)
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through (t) (other than negotiations with RIG and its representatives
regarding the transactions contemplated by this Agreement).
3.28 DISCLOSURE. All of the schedules, and all agreements, lists,
documents and other information of any kind contained in the Schedules,
attached thereto, or delivered to RIG as noted herein, and all instruments
or certificates furnished to RIG pursuant hereto or in connection with this
Agreement or the transactions contemplated hereby, are and will be complete
and accurate in all material respects. No representation or warranty by the
Shareholders or the Company contained in this Agreement, in the Schedules
attached hereto or in any certificate furnished or to be furnished by the
Shareholders or the Company to RIG in connection herewith or pursuant
hereto contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to make
any statement contained herein or therein not misleading. There is no fact
known to any Shareholder that has current specific and direct application
to the operation of the Company (other than general economic or industry
conditions or the activities of actual or potential competitors) and that
materially adversely affects or materially adversely threatens, the assets,
business, financial condition, or operations of the Company that has not
been set forth in this Agreement or any Schedule hereto.
3.29 SECURITIES REPRESENTATIONS. Each Shareholder other than Gregory
Benkert, Keith Sant, and Benkert Business Trust represents severally that
he/she/it is an "Accredited Investor" within the meaning of the federal
securities laws. Each Shareholder represents severally that he/she/it has
either directly, and/or through the Company, obtained sufficient
information concerning RIG and its business, present and proposed, to have
made an informed investment decision concerning this Agreement and the
transactions contemplated hereby, and has had an adequate opportunity to
ask questions and receive answers to his or her satisfaction from the
officers of RIG concerning the business, operations and financial condition
of RIG. Each Shareholder represents severally that he/she/it has such
knowledge and experience in business and financial matters as to be capable
of evaluating the merits and risks of an investment in shares of RIG Common
Stock and protecting his/her/its own interest in connection with the
investment in such shares.
3.30 YEAR 2000 COMPLIANCE. Except as listed on Schedule 3.30, the
computer software, hardware, networks and components (the "Computer
System") material to the conduct of the Company's business have been
designed or modified and fully tested in such a manner that they will
generate only valid and correct date-related results, and will be fully
Year 2000 Compliant. "Year 2000 Compliant" means that the Computer System
will, without interruption or manual intervention, continue to operate,
function, calculate, and compute consistently, predictably, and accurately
when used during any year prior to, during, or after the calendar or fiscal
year 2000.
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3.31 NO KNOWLEDGE OF RIG BREACHES. As of the date of this Agreement,
the LeaseTrend Parties have no knowledge that RIG is in material breach of
its representations or warranties under this Agreement.
ARTICLE IV.
REPRESENTATIONS OF RIG
For purposes of this Article IV, "the RIG Business" shall mean the
business of RIG and its subsidiaries (but excluding the transactions contem
plated by this Agreement and any business effectively acquired by RIG as a
result of such transactions).
To induce the Company and the Shareholders to enter into this
Agreement and consummate the transactions contemplated hereby, RIG
represents and warrants to the Company and the Shareholders as follows (for
purposes of this Agreement the phrases "knowledge of RIG" or "RIG's
knowledge," or words of similar import, include the knowledge of Andrew C.
Florance and Michael R. Klein, including facts of which either, in the
reasonably prudent exercise of his duties as an officer, director and/or
beneficial owner of an interest in RIG should be aware):
4.1 DUE ORGANIZATION. RIG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities and to own,
operate and lease its properties and to carry on its business in the places
and in the manner as now conducted. True, complete and correct copies of
the Certificate of Incorporation and the Bylaws, as amended, of RIG
(collectively, the "RIG Charter Documents") have been made available to the
Company. RIG is not in violation of any of the RIG Charter Documents.
4.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of RIG
executing this Agreement have all requisite power and authority to enter
into and bind RIG to the terms of this Agreement. RIG has the full legal
right, power and authority to enter into this Agreement and perform the
transactions contemplated hereby. The execution and delivery of this
Agreement by RIG and the performance by RIG of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of RIG, and this Agreement has been duly and validly authorized
by all necessary action. This Agreement is a legal, valid and binding
obligation of RIG enforceable in accordance with its terms.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby
and the fulfillment of the terms hereof will not:
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(a) conflict with, or result in a breach or violation of the RIG
Charter Documents;
(b) subject to compliance with any agreements between RIG and its
lenders and as indicated in Schedule 4.3(b), conflict with, or result in a
default (or would constitute a default but for a requirement of notice or
lapse of time or both) under any document, agreement or other instrument to
which RIG is a party, or result in the creation or imposition of any Lien,
charge or encumbrance on any properties of RIG pursuant to (i) any law or
regulation to which RIG or any of its property is subject, or (ii) any
judgment, order or decree to which RIG is bound or any of its property is
subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
RIG; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which RIG is subject, or by which RIG is bound.
4.4 CAPITALIZATION OF RIG AND OWNERSHIP OF RIG STOCK. As of the date
of this Agreement: the authorized capital stock of RIG consists of
30,000,000 shares of Common Stock at $0.01 par value and 2,000,000 shares
of Preferred Stock at $0.01 par value; of which 8,771,027 shares of Common
Stock and no shares of Preferred Stock were outstanding. All of the shares
of RIG Common Stock to be issued to the Shareholders in accordance herewith
will be offered, issued, sold and delivered by RIG in compliance with all
applicable state and federal laws concerning the issuance of securities and
free and clear of all Liens except for those expressly contemplated in this
Agreement, and none of such shares was or will be issued in violation of
the preemptive rights of any stockholder of RIG.
4.5 FINANCIAL STATEMENTS.
(a) Schedule 4.5(a) includes true, complete and correct copies of
RIG's audited balance sheets as of December 31, 1995, 1996 and 1997, and
income statements for the years ended December 31, 1995, 1996 and 1997
(collectively, the "RIG Audited Financials"). Except as noted on the
auditors' report accompanying the RIG Audited Financials, the RIG Audited
Financials have been prepared in accordance with GAAP consistently applied.
Each balance sheet included in the RIG Audited Financials presents fairly
the financial condition of RIG as of the date indicated thereon, and each
of the income statements included in the RIG Audited Financials present
fairly the results of its operations for the periods indicated thereon.
Since the date of the most recent RIG Audited Financials, there has been no
material changes in RIG's accounting policies.
(b) Schedule 4.5(b) includes true, complete and correct copies of
RIG's unaudited balance sheets as of September 30, 1998, and unaudited
income statements for the three quarters ended September 30,1998
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(collectively, the "RIG Unaudited Financials"). The RIG Unaudited
Financials have been prepared in accordance with GAAP consistently applied
subject to: (i) normal year-end audit adjustments, which individually or in
the aggregate will not be material; and (ii) the omission of footnote
information. The balance sheet included in the RIG Unaudited Financials
presents fairly the financial condition of RIG as of the date indicated
thereon, and the income statements included in the RIG Unaudited Financials
presents fairly the results of its operations for the period indicated
thereon. Since the date of the most recent RIG Unaudited Financials, there
has been no material change in RIG's accounting policies.
4.6 LIABILITIES AND OBLIGATIONS.
(a) Except as provided on Schedule 4.6(a), to the knowledge of
RIG, RIG is not liable for or subject to any liabilities except for:
(i) those liabilities reflected on financial statements and
not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of
RIG's business consistent with past practice under any contract, commitment
or agreement specifically disclosed on any Schedule to this Agreement or
not required to be disclosed thereon because of the term or amount involved
or otherwise; and
(iii) those liabilities incurred since September 30, 1998 in
the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material.
(b) For purposes of this Section 4.6, the term "liabilities"
shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute,
contingent, mature, unmature or otherwise, fixed or unfixed, liquidated or
unliquidated, secured or unsecured.
4.7 PERMITS. To the knowledge of RIG, RIG owns or holds all licenses,
franchises, permits and other governmental authorizations, including
without limitation permits, titles (including without limitation motor
vehicle titles and current registrations), fuel permits, licenses and
franchises necessary for the continued operation of the RIG Business as it
is currently being conducted ("RIG Permits"). To the knowledge of RIG, the
RIG Permits are valid, and RIG has not received any notice that any
governmental authority intends to modify, cancel, terminate or fail to
renew any RIG Permit. No present or former officer, manager, member or
employee of RIG or any affiliate thereof, or any other person, firm,
corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any RIG Permit. To the knowledge of
RIG, the RIG Business has been conducted and is being conducted in
compliance with the requirements, standards, criteria and conditions set
forth in the RIG Permits and other applicable orders, approvals,
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variances, rules and regulations and is not in violation of any of the
foregoing, and the transactions contemplated by this Agreement will not
result in a default under, or a breach or violation of, or adversely affect
the rights and benefits afforded to the RIG Business, by any RIG Permit.
4.8 INTELLECTUAL PROPERTY.
(a) RIG is the true and lawful owner of, or has legally
enforceable rights to use, under license or otherwise, registered and
unregistered Marks (the "RIG Marks") necessary for the RIG Business as
currently conducted. Except with respect to those RIG Marks which are
licensed to RIG from a third party, RIG owns all of the registered and
unregistered Marks used by the RIG Business. The RIG Marks will not cease
to be valid rights of RIG by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) RIG is the true and lawful owner of, or has legally
enforceable Rights to Use, under license or otherwise, the Patents (the
"RIG Patents") and Copyrights (the "RIG Copyrights") necessary for the RIG
Business as currently conducted.
(c) RIG is the true and lawful owner, under license or otherwise,
to all other rights in trade secrets, franchises or similar rights that are
necessary for the RIG Business as currently conducted (the "RIG Other
Rights").
(d) For purposes of this Section 4.8, the RIG Marks, RIG Patents,
RIG Copyrights, and RIG Other Rights are referred to herein collectively as
the "RIG Intellectual Property." The RIG Intellectual Property owned by RIG
is referred to as the "RIG Owned Intellectual Property". All other RIG
Intellectual Property which RIG has Rights to Use is referred to herein
collectively as the "RIG Third Party Intellectual Property." Except as
indicated on Schedule 4.8(d), RIG has no obligations to compensate any
person in connection with any RIG Intellectual Property. Except as
indicated on Schedule 4.8(d) or except in the ordinary course of business,
RIG has not granted to any person any Rights to Use, under license or
otherwise, any RIG Intellectual Property, whether requiring the payment of
royalties or not.
(e) RIG is not nor will it be, as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder,
in material violation of any RIG Third Party Intellectual Property license,
sublicense or agreement described in any of the schedules to this Section
4.8. No claims with respect to the RIG Owned Intellectual Property or RIG
Third Party Intellectual Property are currently pending or, to the
knowledge of RIG are threatened by any person, nor, to the knowledge of
RIG, do any grounds for any claims exist: (i) to the effect that the
manufacture, sale, licensing or exercise of Rights to Use any RIG product
by RIG infringes on any copyright, patent, trademark, service mark or trade
secret; (ii) against the exercise by RIG
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of Rights to Use any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and
applications used in the RIG Business as currently conducted by RIG; (iii)
challenging the ownership, validity or effectiveness of any of the RIG
Owned Intellectual Property or other trade secret material to the RIG
Business; or (iv) challenging RIG's license or the legal enforceability of
RIG's Rights to Use the RIG Third Party Intellectual Property. RIG: (x) has
not been sued or charged in writing as a defendant in any claim, suit,
action or proceeding which involves a claim of infringement of trade
secrets, any patents, trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or notified by any third
party that RIG may be engaged in such infringement and; (y) has no
knowledge of any infringement liability with respect to, or infringement
by, RIG of any trade secret, patent, trademark, service mark, or copyright
of another.
4.9 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To RIG's knowledge, other than as set
forth on Schedule 4.9(a), no Hazardous Materials are present in, on or
under any property, including the land and the improvements, ground water
and surface water thereof, that RIG has at any time owned, operated,
occupied or leased. Schedule 4.9(a) identifies, to the knowledge of RIG,
all underground and aboveground storage tanks, and the capacity, age, and
contents of such tanks, located on real property owned or leased by RIG.
(b) Hazardous Materials Activities. To RIG's knowledge, RIG has
not transported, stored, used, manufactured, disposed of or released, or
exposed its employees or others to, Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has RIG disposed of,
transported, sold, or manufactured any product containing a Hazardous
Material (collectively, "RIG Hazardous Materials Activities") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or
to the knowledge of RIG, threatened concerning any Hazardous Material or
any RIG Hazardous Materials Activity. To RIG's knowledge, there are no past
or present actions, activities, circumstances, conditions, events, or
incidents that could involve RIG (or any person or entity whose liability
RIG has retained or assumed, either by contract or operation of law) in any
environmental litigation, or impose upon RIG (or any person or entity whose
liability RIG has retained or assumed, either by contract or operation of
law) any environmental liability including, without limitation, common law
tort liability.
4.10 INSURANCE. RIG is the beneficiary of insurance policies of the
type and in amounts customarily carried by persons conducting businesses
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similar to that of the RIG Business. To the knowledge of RIG, there have
been no threatened terminations of, or material premium increases with
respect to, any of such policies. All premiums payable under all such
policies have been paid and RIG is otherwise in full compliance with the
terms of such policies.
4.11 TAXES.
(a) RIG has timely filed all Tax Returns due on or before the
Closing Date, and all such Tax Returns are true, correct, and complete in
all material respects.
(b) RIG has paid in full on a timely basis all Taxes owed by the
RIG Business whether or not shown on any Tax Return.
(c) The amount of RIG's liability for unpaid Taxes as of
September 30, 1998, did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the RIG
Audited Financials, and the amount of RIG's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will
not exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) as such accruals are reflected on
the books and records of RIG on the Closing Date.
(d) RIG has withheld and paid over to the proper governmental
authorities all Taxes required to have been withheld and paid over, and
complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
(e) There are (and as of immediately following the Closing there
will be) no Liens on the assets of RIG relating to or attributable to Taxes
(other than for taxes not yet due and payable).
(f) Except as set forth on Schedule 4.11, to the knowledge of
RIG, there are no ongoing examinations or claims against RIG for Taxes, and
no notice of any audit, examination, or claim for Taxes, whether pending or
threatened, has been received.
(g) To the knowledge of RIG, there is no basis for the assertion
of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the RIG Business or
otherwise have an adverse effect on the RIG Business.
4.12 CONFORMITY WITH LAW; LITIGATION.
(a) To the knowledge of RIG, RIG is not in material violation of
any law or regulation, or any order of any court or federal, state,
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municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it.
(b) Except as set forth on Schedule 4.12(b), there are no
actions, suits or proceedings, pending or, to the knowledge of RIG,
threatened against or affecting RIG at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by RIG. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by a court
or administrative agency or by arbitration) against RIG or against any of
RIG's properties or business.
(c) RIG has timely filed with the Securities and Exchange
Commission ("SEC") all materials and documents required to be filed by it
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
All the materials and documents filed with the SEC by RIG since July 1,
1998 are hereinafter referred to as the "RIG SEC Reports." The RIG SEC
Reports are true and correct in all material respects, including the
financial statements and other financial information contained therein, and
contain no omission of any material fact which would make the statements in
such RIG SEC Reports misleading in light of the circumstances in which such
statements were made. The financial statements included in the RIG SEC
Reports fairly present in all material respects the financial condition and
the results of operations, changes in stockholders' equity and cash flows
of RIG and its subsidiaries as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with
generally accepted accounting principles consistently applied.
4.13 ABSENCE OF CHANGES. Since the date of the RIG Unaudited
Financials, the RIG Business has been conducted in the ordinary course and,
except as contemplated herein or as set forth on Schedule 4.13, there has
not been any change, by itself or together with other changes, that has or
is likely to have a material adverse effect on the business, operations,
properties, assets, profits or condition (financial or otherwise) of RIG.
4.14 DISCLOSURE. All of the schedules, and all agreements, lists,
documents and other information of any kind contained in the Schedules,
attached thereto, or delivered to the Shareholders and the Company as noted
herein, and all instruments or certificates furnished to the Shareholders
and the Company pursuant hereto or in connection with this Agreement or the
transactions contemplated hereby, are and will be complete and accurate in
all material respects. No representation or warranty by RIG contained in
this Agreement, in the Schedules attached hereto or in any certificate
furnished or to be furnished by RIG to the Shareholders and the Company in
connection herewith or pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state any material
fact necessary in order to make any statement contained herein or therein
not misleading.
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4.15 REPRESENTATIONS REGARDING NEWCO.
(a) Due Organization. Newco is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. True, complete and correct copies of the Certificate of
Incorporation and the Bylaws, as amended, of Newco (collectively, the
"Newco Charter Documents") have been made available to the Company. Newco
is not in violation of any of the Newco Charter Documents.
(b) Authorization; Validity of Obligations. The representatives
of RIG executing this Agreement have all requisite power and authority to
enter into and bind Newco to the terms of the Newco Merger Agreement. Newco
has the full legal right, power and authority to enter into the Newco
Merger Agreement and perform the transactions contemplated thereby. The
execution and delivery of the Newco Merger Agreement by Newco and the
performance by Newco of the transactions contemplated therein have been
duly and validly authorized by the Board of Directors of Newco.
(c) No Conflicts. The execution, delivery and performance of the
Newco Merger Agreement, the consummation of the transactions herein
contemplated thereby and the fulfillment of the terms thereof will not
conflict with, or result in a breach or violation of the Newco Charter
Documents;
(d) Capitalization of Newco and Ownership of Newco Stock. As of
the date of this Agreement: the authorized capital stock of Newco consists
of 1000 shares of common stock, par value $1.00, and no shares of preferred
stock; of which 1000 shares of Newco common stock were outstanding and
issued to and owned by RIG.
4.16 NO KNOWLEDGE OF LEASETREND BREACHES. As of the date of this
Agreement, RIG has no knowledge that any LeaseTrend Party is in material
breach of his, her or its representations or warranties under this
Agreement.
ARTICLE V.
COVENANTS
5.1 TAX MATTERS.
The following provisions shall govern the allocation of responsibility
as between the Company, on the one hand, and the Shareholders, on the
other, for certain tax matters following Closing.
(a) Closing of the Books for Tax Purposes. The Company,
Shareholders and RIG acknowledge that the status of the Company as an S
corporation will be terminated at the Closing, and that, in accordance
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with Code Section 1362(e), the Company will (1) have a short taxable year
ending on the close of the day before the Closing Date for which the
Company will be an S corporation, (2) have a short taxable year beginning
on the Closing Date for which the Company will be a C corporation, and (3)
be required to report its taxable income for such short years on the basis
of its normal method of accounting.
(b) Shareholders shall prepare or cause to be prepared and file
or cause to be filed, within the time and in the manner provided by law,
(i) all Tax Returns of the Company for all periods ending on or before the
Closing Date that are due after the Closing Date and (ii) all state and
Federal S corporation income Tax Returns of the Company covering the short
year beginning on January 1, 1999 until the close of the day before the
Closing Date. Shareholders shall pay to the Company on or before the due
date of such Tax Returns the amount of all Taxes shown as due on such Tax
Returns to the extent that such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown
on the Company's books and records as of the Closing Date. Shareholders
will be responsible for, and will pay, all state and federal income taxes
on the income of the Company for the S corporation short year beginning on
January 1, 1999. Such Returns shall be prepared and filed in accordance
with applicable law and in a manner consistent with past practices and
shall be subject to review and approval by RIG. To the extent reasonably
requested by the Shareholders or required by law, RIG and the Company shall
participate in the filing of any Tax Returns filed pursuant to this
paragraph.
(c) RIG shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company for Tax periods which begin
before the Closing Date and end after the Closing Date (except as provided
in Section 5.1(b)(ii)). The Shareholders shall pay to RIG (or, at RIG's
election, to Newco) within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such taxable period ending on
the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown
on the Company's books and records as of the Closing Date. For purposes of
this Section 5.1, in the case of any Taxes that are imposed on a periodic
basis and are payable for a Taxable period that includes (but does not end
on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall: (x) in the case of
any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in
the Taxable period ending on the Closing Date and the denominator of which
is the number of days in the entire Taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date. Any credits relating to a Taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant Taxable period ended on the Closing Date. All determinations
necessary to
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give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.
(d) RIG and its subsidiaries on the one hand and the Shareholders
on the other hand shall (A) cooperate fully, as reasonably requested, in
connection with the preparation and filing of Tax Returns pursuant to this
Section 5.1 and any audit, litigation or other proceeding with respect to
Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to
the Company for all periods ending prior to or including the Closing Date;
and (C) preserve information, records or documents relating Tax matters
pertinent to the Company that is in their possession or under their control
until the expiration of any applicable statute of limitations or extensions
thereof.
(e) The Shareholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Shareholders shall, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration, and other Taxes and fees. If required by
applicable law, RIG will join, and will cause Newco to join, in the
execution of any such Tax Returns and other documentation.
5.2 EMPLOYEE BENEFIT PLANS. If reasonably requested by RIG, the
Company shall terminate any Company Plan or Company Benefit Arrangement
substantially contemporaneously with the Closing. Notwithstanding the
foregoing, with respect to any Company Plan or Company Benefit Arrangement
that is not terminated or merged into an existing RIG plan or benefit
arrangement substantially contemporaneously with the Closing, the
Shareholders shall cooperate (and shall use their reasonable efforts to
cause the officers and employees of the Company that are responsible to
administering any such Company Plan or Company Benefit Arrangement to
cooperate) with RIG on and after the Closing Date in continuing to
administer and maintain such Company Plan or Company Benefit Arrangement in
accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other laws, including applicable federal
and state securities laws, until such time as the Company Plan or Company
Benefit Arrangement are terminated or merged into a RIG plan or benefit
arrangement.
5.3 RELATED PARTY AGREEMENTS. The Company and/or the Shareholders, as
the case may be, shall terminate any Related Party Agreements which RIG
requests the Company or Shareholders to terminate.
5.4 COOPERATION.
(a) The Company, Shareholders and RIG shall each deliver or cause
to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other
may reasonably request for the purpose of carrying out this Agreement. In
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connection therewith, if required, the chairman and vice president of the
Company shall execute any documentation reasonably required by RIG's
Independent Auditors (in connection with such accountant's audit of the
Company) or the Nasdaq National Market.
(b) The Shareholders and the Company shall cooperate and use
their reasonable efforts to have the present officers, directors and
employees of the Company cooperate with RIG on and after the Closing Date
in furnishing information, evidence, testimony and other assistance in
connection with any filing obligations, actions, proceedings, arrangements
or disputes of any nature with respect to matters pertaining to all periods
prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents
and approvals required under this Agreement to effect the transactions
contemplated hereby
5.5 ACCESS TO INFORMATION; PUBLIC DISCLOSURE.
(a) Between the date of this Agreement and the Closing Date, the
Company will provide to the officers and authorized representatives of RIG:
(i) reasonable access to all of the sites, properties, books and records of
the Company, (ii) copies of the Company's unaudited balance sheet and
income statement as of November 30, 1998, on an accrual basis, (iii) as
promptly as reasonable but in any event by January 15, 1999, copies of the
Company's unaudited balance sheet and income statement as of December 31,
1998, on an accrual basis, and (iv) such additional financial and operating
data and other information as to the business and properties of the Company
as RIG may from time to time reasonably request, including without
limitation, access upon reasonable request to the Company's employees,
customers, vendors, suppliers and creditors for due diligence inquiry. No
information or knowledge obtained in any investigation pursuant to this
Section 5.5 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations
of the parties to consummate the transactions contemplated hereby, provided
that RIG shall promptly disclose to the Company and the Shareholders any
information or knowledge it so obtains that would result in a breach of the
Company's or Shareholders' representations and warranties herein.
(b) Upon the execution of this Agreement, neither the Company nor
any Shareholder shall make any disclosure (whether or not in response to an
inquiry) of the subject matter of this Agreement unless previously approved
by RIG in writing. RIG agrees to keep the Company and the Shareholders
apprised in advance of any disclosure of the subject matter of this
Agreement by RIG prior to the Closing, it being understood that RIG will be
required to make disclosure promptly pursuant to the requirements of the
federal securities laws.
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5.6 CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and
the Closing, the Company will (except to the extent approved in writing by
RIG, or except as requested or agreed by RIG in writing):
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating to
or affecting its assets, properties or rights except to the extent
contested in good faith;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and
key employees and maintain its relationships with suppliers, vendors,
customers, creditors and others having business relations with it;
(f) maintain material compliance with all permits, laws, rules
and regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments; and
(h) maintain present salaries, commission levels, and other
compensation for all officers, directors, employees, agents,
representatives and independent contractors, except for ordinary and
customary bonuses and salary increases for employees (other than employees
who are also Shareholders) in accordance with past practice.
5.7 PROHIBITED ACTIVITIES. Between the date hereof and the Closing,
except as provided in Section 5.13, the Company will not, without the prior
written consent of RIG, which consent shall not be unreasonably withheld:
(a) make any change in its Articles of Incorporation or Code of
Regulations, or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind, or authorize
or
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propose any change in its equity capitalization, or issue or authorize the
issuance of any debt securities;
(c) declare or pay any dividend, or make any distribution
(whether in cash, stock or property) in respect of its stock whether now or
hereafter outstanding, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
purchase, redeem or otherwise acquire or retire for value any shares of its
stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business and consistent with
past practice in an amount not to exceed, in the aggregate, $50,000,
including contracts to provide services to customers;
(e) increase the compensation payable or to become payable to any
officer, director, employee, agent, representative or independent
contractor except for ordinary and customary bonuses and salary increases
for employees (other than employees who are also Shareholders) in
accordance with past practice; make any loans or advances; adopt or amend
any Company Plan or Company Benefit Arrangement; grant any severance or
termination pay; or hire any employees other than clerical, secretarial, or
research employees who have annual salaries exceeding, in the aggregate,
$25,000;
(f) create or assume any mortgage, pledge or other Lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose
of any property or equipment except in the ordinary course of business
consistent with past practice in an amount not to exceed, in the aggregate,
$10,000;
(h) except as permitted by Section 5.7(d), acquire or negotiate
for the acquisition of (by merger, consolidation, purchase of a substantial
portion of assets or otherwise) any business or the start-up of any new
business, or otherwise acquire or agree to acquire any assets;
(i) merge or consolidate or negotiate or agree to merge or
consolidate with or into any other corporation;
(j) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
(k) default in the performance of, materially breach or amend or
terminate any material agreement, permit, license or other right;
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(l) enter into any transaction that is: (i) not negotiated at
arm's length with a third party not affiliated with the Company or any
officer, director or Shareholder of the Company, or (ii) outside the
ordinary course of business consistent with past practice, or (iii)
prohibited hereunder;
(m) commence a lawsuit other than for routine collection of
bills;
(n) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with
past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt
any tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any
Tax Return (other than any estimated tax returns, payroll tax returns or
sales tax returns) or any amendment to a Tax Return, enter into any closing
agreement, settle any tax claim or assessment, or consent to any tax claim
or assessment, without the prior written consent of RIG;
(p) change the name of the Company, or operate under or use any
legal name, trade name, fictitious name or other name, other than the names
listed on Schedule 3.19 in the jurisdictions indicated;
(q) introduce any promotional offer, including, without
limitation, discounted and free products or services or reduce standard
pricing levels for the Company's goods or services with pricing that is
less than 10% below the average pricing for comparable clients; or
(r) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 5.7(a) through (q) above, or any action which
would make any of the representations and warranties of the Company and the
Shareholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles VI and VII not being satisfied.
5.8 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other parties hereto of: (a) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing,
and (b) any material failure of any party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such
party hereunder. The delivery of any notice pursuant to this Section 5.8
shall not, without the express written consent of the other parties be
deemed to: (x) modify the representations or warranties hereunder of the
party delivering such notice, (y) modify the conditions set forth in
Articles VI and VII, or (z) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
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5.9 SALES OF RIG COMMON STOCK; REGISTRATION RIGHTS.
(a) Except as expressly contemplated herein, no Shareholder will,
directly or indirectly, offer, sell, contract to sell, pledge or otherwise
dispose or offer to dispose of any RIG Common Stock delivered to the
Shareholders under this Agreement prior to eighteen (18) months after the
Closing Date (the "Lock-up Period"); provided, however: (i) this Paragraph
5.9 shall not prevent the Heitzman Business Trust from transferring any RIG
Common Stock held by it to Fred A. Heitzman III, nor shall it prevent the
Benkert Business Trust from transferring RIG Common Stock to Gregory
Benkert, provided that in the event of such a transfer or transfers, both
Fred A. Heitzman III and Gregory Benkert shall continue to be bound by the
provisions of and entitled to any rights under this Paragraph 5.9 to the
same extent as if they had received the RIG Common Stock directly at
Closing; and (ii) this Paragraph 5.9 shall not prevent Blue Chip Capital
Fund Limited Partnership from transferring some or all RIG Common Stock
held by it to the persons or entities listed as Blue Chip Investors on a
list dated as of January 8, 1999 (the "Blue Chip List"), on file with RIG's
counsel, each of which owns partnership interests in Blue Chip Capital Fund
Limited Partnership as of the date of this Agreement, provided that in the
event of such a transfer or transfers, Blue Chip Capital Fund Limited
Partnership shall provide RIG with an opinion of counsel that each such
transfer violates neither the federal securities laws nor applicable state
securities laws, and provided further that each such transferee shall
execute an agreement with RIG in which the transferee represents and
warrants that he/she/it is an "Accredited Investor" under the securities
law and that makes such transferee bound by the provisions of and entitled
to any rights under this Paragraph 5.9 to the same extent as if he/she/it
had received the RIG Common Stock directly at Closing as a Shareholder
party to this Agreement. Blue Chip Capital Fund Limited Partnership
represents and warrants that the Blue Chip List is an accurate and complete
list of all Investors eligible to receive a transfer of RIG Common Stock
pursuant to this sub-paragraph 5.9(a). In the event of any transfer or
transfers contemplated by this sub-paragraph 5.9(a), RIG shall cause the
stock certificate or certificates to be reissued in the name of the
appropriate person(s) or entity.
(b) The certificate or certificates evidencing the RIG Common
Stock to be delivered to the Shareholders under this Agreement will be
subject to appropriate stop transfer instructions and bear the restrictive
legends described on Schedule 5.9(b). The Pledged Shares shall bear the
restrictive legends described on Schedule 5.9(b).
(c) Whenever RIG proposes to file a registration statement under
the Securities Act of 1933 (the "Securities Act") relating to the sale of
securities by RIG (other than a registration statement related solely to
securities to be offered pursuant to an employee benefit plan) or by
persons other than RIG who have at the date of the Closing demand
registration rights, and such registration is not expected to become
effective until after expiration of the Lock-up Period or will remain
effective, subject to the transfer
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restrictions on the RIG Common Stock, until after expiration of the Lock-up
Period (a "RIG Registration"), RIG will, prior to such filing, give written
notice (the "Piggyback Registration Notice") to each Shareholder of its
intention to do so and the intended method of sale or disposition of the
securities to be registered. Upon the written request of any Shareholder
given within twenty (20) days after RIG provides the Piggyback Registration
Notice, RIG shall use commercially reasonable efforts to cause all
Registrable Securities that RIG has been requested by such Shareholder to
register to be registered under the Securities Act (a "Piggyback
Registration") to the extent necessary to permit their sale or other
disposition in accordance with the intended methods for distribution
specified in the Piggyback Registration Notice; provided that RIG shall
have the right to postpone or withdraw any registration effected pursuant
to this Section in which the Shareholders' shares of RIG Common Stock would
have been otherwise included without obligation to any Shareholder.
(d) In connection with any offering under this Section 5.9
involving an underwriting, RIG shall not be required to include any
Registrable Securities in such offering unless the Shareholders accept the
terms of the underwriting as agreed upon between RIG and the underwriters
selected by it (provided that such terms must be consistent with this
Agreement) and the Shareholders enter into the appropriate underwriting
agreement, and then only in such quantity as will not, in the good faith
and reasonable opinion of the underwriters, jeopardize the success of the
offering by RIG.
(e) If any RIG Registration involves an underwritten offering and
the managing underwriter of such offering shall advise RIG that, in its
view, the number of securities requested to be included in such
Registration exceeds the largest number (the "Section 5.9(e) Number") that
can be sold in an orderly manner in such offering within a price range
acceptable to RIG, RIG shall include in such Registration:
(i) first, all shares that RIG proposes to register for its
own account (the "RIG Securities"); and
(ii) second, to the extent that the number of RIG Securities
is less than the Section 5.9(e) Number, the remaining shares to be included
in such registration shall be allocated on a pro rata basis among all
holders with registration rights that are superior to those of the
Shareholders (the "Prior Holders") who have requested that shares of RIG
common stock be included in such registration, based on the number of
shares of RIG Common Stock then owned by each Selling Prior Holder
requesting inclusion in relation to the number of shares of RIG Common
Stock then owned by all selling Prior Holders requesting inclusion,
provided that no Piggyback Registration rights superior to those of the
Shareholders shall be granted subsequent to the Closing.
(iii) third, to the extent that the number of RIG Securities
is less than the Section 5.9(e) Number, and the number of shares to be sold
by the selling Prior Holders does not amount to so many as to leave no
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room for additional shares to be offered by the Shareholders, the remaining
shares to be included in such registration shall be allocated on a pro rata
basis among all Shareholders who have requested that shares of RIG Common
Stock be included in such registration, based on the number of Registrable
Securities then owned by each Selling Shareholder requesting inclusion in
relation to the number of Registrable Securities then owned by all
Shareholders requesting inclusion.
(iv) For the purposes of this Section 5.9, "Registrable
Securities" means the shares of RIG Common Stock held by Shareholders that
were issued as Consideration under this Agreement, as adjusted by any Final
Consideration Adjustment pursuant to Section 1.3 and any indemnification
obligations of the Shareholders pursuant to Article VIII, and as further
adjusted for any stock split, stock dividend or similar transaction. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a Registration Statement with respect to
the sale of such securities shall have become effective under the
Securities Act and such securities shall have been transferred in
accordance with such Registration Statement, (b) they shall have been sold
as permitted by Rule 144 (or any successor provision) under the Securities
Act, (c) they may be sold as permitted by Rule 144 (or any successor
provision) under the Securities Act without any limitation on an amount of
such securities which may be sold, or (d) they shall have ceased to be
outstanding.
(f) All expenses incurred in connection with any registration
pursuant to this Paragraph 5.9, including all registration and filing fees,
printing expenses, fees and disbursements of counsel for RIG, and expenses
of any special audits incidental to or required by such registration, shall
be borne by RIG; provided that RIG shall not be required to pay fees of
legal counsel for Shareholders, or underwriter's fees, discounts, or
commissions relating to the Registrable Securities..
5.10 STANDSTILL. Upon and after execution of this Agreement until the
Closing Date, RIG on the one hand, and the LeaseTrend Parties on the other,
for themselves and on behalf their respective affiliates, successors and
assigns, agree not to enter into any discussions, negotiations or
agreements to sell, merge or transfer any material amount of their assets
without the prior written consent of the Shareholders' Representatives on
the one hand, or RIG on the other hand.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF RIG
The obligation of RIG to effect the transactions contemplated hereby
is subject to the satisfaction or waiver, at or before the Closing, of the
following conditions and deliveries:
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6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of the Shareholders and the Company
contained in this Agreement shall be true, correct and complete on the date
of this Agreement (except as otherwise provided herein) and, if a Closing
occurs, as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such Closing Date
unless such representations expressly relate to an earlier date or changes
in the matters represented and warranted herein are expressly permitted or
provided herein; all of the terms, covenants, agreements and conditions of
this Agreement to be complied with, performed or satisfied by the Company
and the Shareholders on or before the Closing Date shall have been duly
complied with, performed or satisfied; and, if the Agreement is signed
before Closing, a certificate to the foregoing effects dated the Closing
Date and signed on behalf of the Company and by each of the Shareholders
shall have been delivered to RIG, to be appended hereto after Closing as
Exhibit 6.1.
6.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision
challenging RIG's proposed acquisition of the Company, or limiting or
restricting RIG's conduct or operation of the business of the Company (or
its own business) following the transactions contemplated hereby shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit or proceeding of any nature pending or threatened against RIG or the
Company, their respective properties or any of their officers or directors,
that could materially and adversely affect the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company.
6.3 NO MATERIAL ADVERSE CHANGE. There shall have been no change, by
itself or together with other changes, that has or is likely to have a
material adverse effect on, the business, operations, assets, liabilities,
profits or condition (financial or otherwise) of the Company; taken as a
whole, since the Date of the Most Recent Financials; and, if the Agreement
is signed before Closing, RIG shall have received a certificate signed by
each Shareholder dated the Closing Date to such effect, to be appended
hereto after Closing as Exhibit 6.3.
6.4 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any governmental authority or agency or third party, relating to the
consummation by the Company and the Shareholders of the transactions
contemplated hereby, shall have been obtained and made.
6.5 OPINION OF COUNSEL. RIG shall have received an opinion from
counsel to the Company and the Shareholders, dated the Closing Date, in
form and substance reasonably satisfactory to RIG.
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6.6 COMPANY CHARTER DOCUMENTS. RIG shall have received: (a) a copy of
the Articles of Incorporation of the Company certified by an appropriate
authority in the state of its incorporation, and (b) a copy of the Code of
Regulations of the Company certified by the Secretary of the Company. [Such
documents shall be in form and substance reasonably acceptable to RIG.]
6.7 OTHER AGREEMENTS.
(a) Fred A. Heitzman III shall have entered into an employment
agreement with RIG substantially in form and substance as set forth in
Exhibit 6.7(a).
(b) Gregory Benkert shall have entered into an employment
agreement with RIG substantially in form and substance as set forth in
Exhibit 6.7(b).
6.8 DUE DILIGENCE REVIEW. The Company shall have made such deliveries
of information and documents as are called for hereby or reasonably
requested by RIG to enable it to perform the customary "due diligence"
review. RIG shall be fully satisfied in its sole discretion with the
results of its review of all of the Schedules, whether delivered before or
after the execution hereof, and such deliveries, and its review of, and
other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of
the Company.
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
SHAREHOLDERS AND THE COMPANY
The obligation of the Shareholders and the Company to effect the
transactions contemplated hereby is subject to the satisfaction or waiver,
at or before the Closing, of the following conditions and deliveries:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of RIG contained in this Agreement shall
be true, correct and complete on the date of this Agreement (except as
otherwise provided herein) and, if a Closing occurs, as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such Closing Date unless such representations expressly
relate to an earlier date or changes in the matters represented and
warranted herein are expressly permitted or provided herein; all of the
terms, covenants, agreements and conditions of this Agreement to be
complied with, performed or satisfied by RIG on or before the Closing Date
shall have been duly complied with, performed or satisfied; and, if the
Agreement is signed before Closing, a certificate to the foregoing effects
dated the Closing Date and
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signed by the President or any Vice President of RIG shall have been
delivered to the Company and the Shareholders, to be appended hereto after
Closing as Exhibit 7.1.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision
challenging RIG's proposed acquisition of the Company, or limiting or
restricting RIG's conduct or operation of the business of the Company (or
its own business) following the transactions contemplated hereby shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit or proceeding of any nature pending or threatened against RIG or the
Company, their respective properties or any of their officers or directors,
that could materially and adversely affect the business, assets,
liabilities, financial condition, results of operations or prospects of RIG
and its subsidiaries taken as a whole.
7.3 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any governmental authority or agency or third party relating to the
consummation by RIG of the transactions contemplated herein, shall have
been obtained and made.
7.4 OTHER AGREEMENTS. RIG shall have entered into employment
agreements with Fred A. Heitzman III and Gregory Benkert substantially in
the form attached hereto as Exhibit 6.7(a) and 6.7(b) respectively.
7.5 OPINION OF COUNSEL. The LeaseTrend Parties shall have received an
opinion from counsel to RIG dated the Closing Date, in form and substance
reasonably satisfactory to the LeaseTrend Parties
7.6 REGISTRATION. RIG shall maintain on file with the SEC all filings
required to maintain the registration of the RIG Common Stock that is
currently registered under the Securities Exchange Act of 1934, as amended.
ARTICLE VIII.
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE SHAREHOLDERS AND THE COMPANY. Except for
Keith Sant, who covenants and agrees severally but not jointly under this
Article VII, each Shareholder and, if no Closing occurs, the Company,
jointly and severally, covenants and agrees to indemnify, defend, protect
and hold harmless RIG and its respective officers, directors, employees,
assigns and successors (individually, a "RIG Indemnified Party" and
collectively, "RIG Indemnified Parties") from, against and in respect of
all liabilities, losses, claims, damages, punitive damages, causes of
action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands,
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assessments, adjustments, judgments, settlement payments, deficiencies,
penalties, fines, interest (including interest from the date of such
damages) and costs and expenses (including without limitation reasonable
attorneys' fees and disbursements of every kind, nature and description)
(collectively, "Damages") suffered, sustained, incurred or paid by the RIG
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(a) any breach of any representation or warranty of the
Shareholders or the Company set forth in this Agreement; or
(b) any breach of any covenant or agreement by the Shareholders
or, prior to the Closing, the Company, under this Agreement; or
(c) any untrue statement of a material fact relating to the
Company or the Shareholders that is provided to RIG or its counsel by the
Company or the Shareholders on or prior to the date that is twenty (20)
days after the Closing specifically for inclusion in any SEC filing by RIG,
or any amendment thereof or supplement thereto, or any failure by the
Company or the Shareholders to disclose to RIG or its counsel on or prior
to the date that is twenty (20) days after the Closing, when requested to
do so specifically for inclusion in any such SEC filing by RIG, a material
fact relating to the Company or the Shareholders that, in light of the
circumstances under which such disclosures were made, is required to be
included in an SEC filing or necessary to make the statements therein not
misleading.
8.2 INDEMNIFICATION BY RIG. RIG covenants and agrees to indemnify,
defend, protect and hold harmless the Shareholders and, prior to the
Closing (if any), the Company, and their respective officers, directors,
employees, assigns and successors (individually, a "Shareholder Indemnified
Party" and collectively, "Shareholder Indemnified Parties") from, against
and in respect of all Damages suffered, sustained, incurred or paid by the
Shareholder Indemnified Parties in connection with, resulting from or
arising out of, directly or indirectly:
(a) any breach of any representation or warranty of RIG set forth
in this Agreement; or
(b) any breach of any covenant or agreement by RIG under this
Agreement; or
(c) any untrue statement or alleged untrue statement of a
material fact relating to RIG contained in any SEC filing filed within
twenty (20) days after the Closing, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission
to state therein a material fact relating to RIG required to be stated
therein or necessary to make the statements therein not misleading.
8.3 LIMITATION AND EXPIRATION. Notwithstanding anything herein to the
contrary:
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(a) there shall be no liability for indemnification
(i) under Section 8.1 unless, and solely to the extent that,
the aggregate amount of Damages suffered by the RIG Indemnified Party or
Parties under the applicable provisions exceeds $100,000.00 (the
"Indemnification Threshold"); or
(ii) under Section 8.2 unless, and solely to the extent
that, the aggregate amount of Damages suffered by the LeaseTrend
Indemnified Party or Parties under the applicable provisions exceeds the
Indemnification Threshold;
provided, however, that the Indemnification Thresholds shall not apply to:
(i) Damages arising out of any breaches of the covenants of any LeaseTrend
Party or RIG, as the case may be, set forth in Article V of this Agreement
or representations and warranties made in Sections 3.4 (capital stock of
the Company), 3.5 (transactions in capital stock of the Company), 3.24
(taxes), and 4.4 (capital stock of RIG);
(b) (i) the aggregate amount of the Shareholders' and the
Company's (if any) liability under this Article VIII shall not exceed
$960,000 (the "Shareholders' Cap"), provided, however, that any liability
arising from or in connection with any Final Consideration Adjustment or
the representations and warranties contained in Section 3.8 (financial
condition), Section 3.9 (financial statements) and/or Section 3.24 (taxes)
and the covenants and agreements contained in Section 5.1 (tax matters)
and/or 5.6 (conduct of business pending close) shall not apply towards, nor
be limited by, the Shareholders' Cap; and
(ii) the aggregate amount of RIG's liability under this
Article VIII shall not exceed $960,000 (the "RIG Cap"), provided, however,
that any liability arising from or in connection with any Final
Consideration Adjustment or the representations and warranties contained in
Section 4.5 (financial statements) and/or Section 4.11 (taxes) and the
covenants and agreements contained in Section 5.1 (tax matters) shall not
apply towards, nor be limited by, the RIG Cap;
(c) the indemnification obligations under this Article VIII or in
any certificate or writing furnished in connection herewith shall terminate
on the later of clause (i) or (ii) below:
(i) (1) except as to representations, warranties, and
covenants specified in clause (i)(2) of this Section 8.3(c), the first
anniversary of the Closing, or
(2) with respect to representations and warranties
contained in Sections 3.21 (environmental matters), 3.23 (employee benefit
plans), 3.17 (intellectual property), 3.24 (taxes) and 4.9 (taxes), on (A)
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the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of limitation, five (5)
years after the Closing; or
(ii) the final resolution of claims or demands for
indemnification ("Claims") pending as of the relevant dates described in
clause (i) of this Section 8.3(c) (such claims referred to as "Pending
Claims").
8.4 INDEMNIFICATION PROCEDURES. All Claims under this Article VIII
shall be asserted and resolved as follows:
(a) In the event that any RIG Indemnified Party or Shareholder
Indemnified Party (an "Indemnified Party") has a Claim against any party
obligated to provide indemnification pursuant to Section 8.1 or 8.2 hereof
(the "Indemnifying Party") which does not involve a claim being asserted
against or sought to be collected by a third party, the Indemnified Party
shall with reasonable promptness notify the Indemnifying Party of such
Claim, specifying the nature of such Claim and the amount or the estimated
amount thereof to the extent then feasible (the "Claim Notice"). If the
Indemnifying Party does not notify the Indemnified Party within thirty (30)
days after the date of delivery of the Claim Notice that the Indemnifying
Party disputes such Claim, with a detailed statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability
of the Indemnifying Party hereunder. In case an objection is made in
writing in accordance with this Section 8.4(a), the Indemnified Party shall
respond in a written statement to the objection within fifteen (15) days
and, for sixty (60) days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims
(and, if the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties).
(b) (i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against
an Indemnified Party by a third party (a "Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party.
The Indemnifying Party shall have fifteen (15) days from date of delivery
of the Claim Notice ("the Notice Period") to notify the Indemnified Party:
(A) whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third Party Claim, and, if so, the
basis for such a dispute; and (B) if such party does not dispute liability,
whether or not the Indemnifying Party desires, at the sole cost and expense
of the Indemnifying Party, to defend against the Third Party Claim,
provided that the Indemnified Party is hereby authorized (but not
obligated), prior to and during the Notice Period, to file any motion,
answer or other pleading and to take any other action which the Indemnified
Party shall deem necessary or appropriate to protect the Indemnified
Party's interests.
(ii) In the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that the Indemnifying Party does
not dispute the Indemnifying Party's obligation to indemnify with
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respect to the Third Party Claim and desires to defend the Indemnified
Party against such Third Party Claim, the Indemnifying Party shall do so by
appropriate proceedings, provided that, unless the Indemnified Party
otherwise agrees in writing, the Indemnifying Party may not settle any
Third Party Claim (in whole or in part) if such settlement does not include
a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such
defense or settlement the Indemnified Party may do so at its sole cost and
expense. If the Indemnifying Party elects not to defend the Indemnified
Party against a Third Party Claim, whether by failure of such Indemnifying
Party to give the Indemnified Party timely notice as provided herein or
otherwise, then the Indemnified Party, without waiving any rights against
such Indemnifying Party, may settle or defend against such Third Party
Claim in the Indemnified Party's sole discretion, and the Indemnified Party
shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs
and expenses of the Indemnified Party with respect thereto, including
interest from the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Indemnifying Party, any Third Party Claim seeks material prospective relief
which could have an adverse effect on any Indemnified Party, the
Indemnified Party shall have the right to control or assume (as the case
may be) the defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense
shall be included as part of the indemnification obligations of the
Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
(iv) If the Indemnifying Party is a Shareholder, then any
notice required to be given under this Section 8.4 shall be given to the
Shareholders' Representatives.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a claim, and an Indemnified Party may make a claim
hereunder, for potential or contingent Damages provided the Claim Notice
sets forth the specific basis for any such potential or contingent claim or
demand to the extent then feasible and the Indemnified Party has reasonable
grounds to believe that such claim may be made.
(d) Subject to the provisions of Section 8.3, the Indemnified
Party's failure to give reasonably prompt notice as required by this
Section 8.4 of any claim which may give rise to a right of indemnification
hereunder shall not relieve the Indemnifying Party of any liability which
the Indemnifying Party may have to the Indemnified Party except to the
extent that failure to give such notice materially and adversely prejudiced
the Indemnifying Party.
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8.5 EFFECTIVENESS OF REPRESENTATIONS WARRANTIES. All representations
and warranties made by the Company, the Shareholders, and RIG in or
pursuant to this Agreement or in any document delivered pursuant hereto
shall be deemed to have been made on the date of this Agreement (except as
otherwise provided herein) and, if a Closing occurs, as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such Closing Date unless such representations expressly
relate to an earlier date or changes in matters represented and warranted
herein are expressly permitted or provided herein..
8.6 REMEDIES. Except for any liability based on a finding of fraud,
the exclusive remedy of any party hereto arising by reason of the breach of
any representation or warranty set forth herein or the default in or breach
of any covenant, condition, agreement or undertaking by any other party
hereto shall be limited to the indemnification rights set forth in this
Article VIII.
8.7 SET OFF. Subject only to the limitations of this Article VIII,
indemnification or payment under this Agreement or applicable law, and
except as necessary to preserve the Tax-Advantaged Status of the
Transaction as provided in Section 1.3(c), the RIG Indemnified Parties
shall have the obligation to make recovery first by set-off against Pledged
Assets with respect to: (a) any Final Consideration Adjustment under
Section 1.3 (but only up to 25% of the value of the then existing Pledged
Assets), or (b) any Damages under Section 8.4. To the extent that the
liability of the Shareholders hereunder exceeds the value of the Pledged
Assets, RIG agrees to accept from the Shareholders RIG Common Stock before
seeking the delivery of any other property or cash. For purposes of the
preceding two sentences, the Pledged Shares shall be valued as provided in
Section 1.4(d) above.
8.8 SPECIAL TAX PROVISION. If Newco or RIG receives any Tax refund
attributable to the period prior to the Closing, then the amount of such
refund shall be applied to any indemnification obligation of the
Shareholders or, if prior to Closing, the Company, determined in accordance
with this Article VIII.
ARTICLE IX.
NONCOMPETITION
9.1 PROHIBITED ACTIVITIES. Except for Blue Chip Capital Fund Limited
Partnership, no Shareholder will, for a period of two (2) years following
the Closing Date, for any reason whatsoever, directly or indirectly, for
himself, herself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(a) engage, as an officer, director, shareholder, owner, partner,
member, joint venturer, or in a managerial capacity, whether as an
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employee, independent contractor, consultant or adviser, or as a sales
representative, in any business selling any products or services in direct
competition with RIG, in the United States, Canada or the United Kingdom
(the "Territory");
(b) call upon any person who is, at that time, within the
Territory, an employee of RIG in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the employ of
RIG;
(c) call upon any person who is or entity that is, at that time,
or that has been, within one year prior to that time, a customer of RIG
within the Territory for the purpose of soliciting or selling products or
services in competition with RIG within the Territory; or
(d) call upon any prospective acquisition candidate that was, to
the knowledge of such Shareholder, either called upon by RIG as a
prospective acquisition candidate or was the subject of an acquisition
analysis by RIG. Each Shareholder, to the extent lacking the knowledge
described in the preceding sentence, shall immediately cease all contact
with such prospective acquisition candidate upon being informed that RIG
had called upon such candidate or made an acquisition analysis thereof.
For purposes of this Article IX, the term "RIG" includes all subsidiaries
of RIG (including without limitation Newco and any companies RIG has
resolved to acquire).
9.2 CONFIDENTIALITY.
(a) Each Shareholder, including without limitation Blue Chip
Capital Fund Limited Partnership, recognizes that by reason of his or her
ownership interest in the Company, participation in this Agreement and the
transaction contemplated herein, and, if applicable, his or her employment
by the Company, he or she has acquired or will acquire confidential
information and trade secrets concerning the operation of the Company, the
use or disclosure of which could cause the Company (and after the Merger
Newco) or their respective affiliates or subsidiaries substantial loss and
damages that could not be readily calculated and for which no remedy at law
would be adequate. Accordingly, each Shareholder covenants and agrees with
the Company and RIG that he or she will not for a period of two (2) years
following the Closing Date (or in the case of trade secrets (as defined
under applicable law) for so long as the information remains a trade
secret) except in performance of such Shareholder's obligations to RIG
and/or the Company or with the prior written consent of RIG pursuant to
authority granted by a resolution of the Board of Directors of RIG,
directly or indirectly, disclose any secret or confidential information
that he or she may learn or has learned by reason of his or her ownership
interest in the Company, participation in this Agreement and the
transactions contemplate herein, or, if applicable, his or her employment
by the Company or Newco, or any of their respective affiliates, or use any
such information in a manner detrimental to the interests of the Company,
Newco or
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RIG, unless (i) such information becomes known to the public generally
through no fault of any Shareholder, (ii) disclosure is required by law or
the order of any governmental authority under color of law, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to clause (i),
(ii) or (iii) above, the Shareholder (as applicable) shall give prior
written notice thereof to RIG and provide RIG with the reasonable
opportunity to contest such disclosure and shall cooperate with efforts to
prevent such disclosure. The term "confidential information" includes,
without limitation, information not previously disclosed to the public or
to the trade by the Company's or Newco's or RIG's management with respect
to the Company's, or Newco's, or RIG's, or any of their affiliates' or
subsidiaries', clients, processes, products, facilities, and methods, trade
secrets and other intellectual property, software (excluding commercially
available software), source code, systems, procedures, manuals,
confidential reports, product price lists, customer lists, financial
information (including the revenues, costs, or profits associated with any
of the Company's or Newco's products), research, development, purchasing,
marketing, merchandising, pricing, business plans, prospects, or
opportunities but shall exclude any information already in the public
domain.
(b) The LeaseTrend Parties understand that RIG has an obligation
to disclose the existence and material terms of this Agreement in filings
with the Securities and Exchange Commission.
9.3 DAMAGES. Because of the difficulty of measuring economic losses to
RIG as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to RIG for which it
would have no other adequate remedy, each Shareholder agrees that the
foregoing covenant may be enforced by RIG in the event of breach by such
Shareholder, by injunctions and restraining orders.
9.4 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Article IX impose a reasonable restraint on each
Shareholder in light of the activities and business of RIG on the date of
the execution of this Agreement, assuming the completion of the
transactions contemplated hereby, and the current plans of RIG; but it is
also the intent of RIG and each Shareholder that such covenants be
construed and enforced in accordance with the changing activities and
business of RIG throughout the term of this covenant.
9.5 SEVERABILITY; REFORMATION. The covenants in this Article IX are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
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9.6 INDEPENDENT COVENANT. All of the covenants in this Article IX
shall be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of any
Shareholder against RIG, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by RIG of such covenants.
The parties expressly acknowledge that the terms and conditions of this
Article IX are independent of the terms and conditions of any other
agreements including, but not limited to, any employment agreements entered
into in connection with this Agreement. It is specifically agreed that the
period of two (2) years stated at the beginning of this Article IX during
which the agreements and covenants of each Shareholder made in this Article
IX shall be effective, shall be computed by excluding from such computation
any time during which the Shareholder is found by a court of competent
jurisdiction to have been in violation of any provision of this Article IX.
The covenants contained in Article IX shall not be affected by any breach
of any other provision hereof by any party hereto and shall have no effect
if the transactions contemplated by this Agreement are not consummated.
9.7 MATERIALITY. The Company and each Shareholder hereby agree that
the covenants set forth in this Article IX are a material and substantial
part of the transactions contemplated by this Agreement, supported by
adequate consideration.
ARTICLE X.
GENERAL
10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual consent of the boards of directors of RIG and the
Company; or
(b) by the Shareholders and the Company as a group, on the one
hand, or by RIG, on the other hand, if the Closing shall not have occurred
on or before January 30, 1999; or
(c) by the Shareholders and the Company as a group, on the one
hand, or by RIG, on the other hand, if there is or has been a material
breach, failure to fulfill or default on the part of the other party (with
the Shareholders and the Company deemed to be a single party for this
purpose) of any of the representations and warranties contained herein or
in the due and timely performance and satisfaction of any of the covenants,
agreements or conditions contained herein, and the curing of such default
shall not have been made or shall not reasonably be expected to occur
before the Closing Date; or
(d) by the Shareholders and the Company as a group, on the one
hand, or by RIG, on the other hand, if there shall be a final
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nonappealable order of a federal or state court in effect preventing
consummation of the transactions contemplated hereby; or there shall be any
action taken, or any statute, rule regulation or order enacted, promulgated
or issued or deemed applicable to the transactions contemplated hereby by
any governmental entity which would make the consummation of the
transactions contemplated hereby illegal.
10.2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement pursuant to
Section 10.1 for a Qualifying Purpose (defined below), this Agreement shall
forthwith become ineffective, and no party hereto or any of their officers,
directors or shareholders shall have any liability or obligation hereunder,
and, with respect to such termination for a Qualifying Purpose, the parties
hereby release and covenant and agree not to sue the other parties hereto
for any Damages suffered, sustained or incurred by reason of such
termination provided that the monies in Escrow shall be paid to the
Shareholders or to RIG, as the case may be, in accordance with the terms of
the Escrow Agreement, appended hereto as Exhibit 10.2.
(b) In the event of the termination of this Agreement pursuant to
Section 10.1 for other than a Qualifying Purpose (including, without
limitation, termination by any party for the failure by the other party to
perform its obligations with respect to the Closing), then this Agreement
shall become ineffective except that: (i) the provisions of Articles VIII
and X and Section 9.2 shall remain in full force and effect and survive any
termination of this Agreement and (ii) each party shall remain liable to
the other for such breach of this Agreement prior to its termination.
(c) For purposes of this Section 10.2: (i) a "Qualifying Purpose"
means a breach of the "Qualifying Representations, Warranties or Covenants"
or a "Non-Material Breach"; (ii) "Qualifying Representations, Warranties or
Covenants" means those representations, warranties and/or covenants set
forth in Sections 3.10 (but only to the extent of litigation that was
unknown and not reasonably foreseeable as of the date hereof), 3.16(c) (but
only to the extent relating to ordinary wear and tear), 3.17 (but only to
the extent of litigation that was unknown and not reasonably foreseeable as
of the date hereof), 3.22(g), 3.25(a), 3.27(a), 3.27(m), 3.28, 4.4(a),
4.4(b), 4.6 (but only to the extent of litigation that was unknown and not
reasonably foreseeable as of the date hereof), 4.8 (but only to the extent
of litigation that was unknown and not reasonably foreseeable as of the
date hereof), 4.12(a), 5.6(a), 5.6(b), 5.6(e) and 5.7(k) (provided,
however, Sections 5.6(a), 5.6(b), 5.6(e) and 5.7(k) shall constitute
Qualifying Representations, Warranties or Covenants only to the extent that
the Shareholders had no knowledge of the action(s) giving rise to the claim
of breach); and (iii) a "Non-Material Breach" means any breach of the
representations, warranties, covenants or agreements set forth herein that
could not reasonably be expected, individually or in aggregate, to be
likely to lead to the loss by any or all of RIG, on the one hand, or the
LeaseTrend Parties, on the other, of greater than $100,000.
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10.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and
shall be binding upon and shall inure to the benefit of the parties hereto,
the successors of RIG, and the heirs and legal representatives of the
Shareholders.
10.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth
the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. Each of the Schedules to this Agreement
is incorporated herein by this reference and expressly made a part hereof.
Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement. This Agreement shall not be amended or
modified except by a written instrument duly executed by each of the
parties hereto, or in accordance with Section 9.5. Any extension or waiver
by any party of any provision hereto shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and
all of which counterparts taken together shall constitute but one and the
same instrument.
10.6 BROKERS AND AGENTS. RIG on the one hand, and the LeaseTrend
Parties on the other, each represent and warrant to the other that none of
these parties has employed any broker or agent in connection with the
transactions contemplated by this Agreement, and each of these parties
agree to indemnify the other against all losses, damages or expenses
relating to or arising out of claims for fees or commission of any broker
or agent employed or alleged to have been employed by such party.
10.7 EXPENSES. RIG has and will pay the fees, expenses and
disbursements of RIG's agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement. In
addition, RIG will pay the fees, expenses and disbursements of
Shareholders' counsel, Keating, Muething, & Klekamp, P.L.L., in connection
with the negotiation of this Agreement (not to exceed $20,000). The
Shareholders (and not the Company) have and, except as provided in the
preceding sentence, will pay the fees, expenses and disbursements of the
Shareholders, the Company, and their agents, representatives, financial
advisers, accountants and counsel incurred in connection with the subject
matter of this Agreement.
10.8 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally or
sent by telefax (with confirmation of receipt), by registered or certified
mail, postage prepaid, or by recognized courier service, as follows:
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If to RIG to:
Mr. Andrew Florance, President
Realty Information Group
7475 Wisconsin Avenue
Sixth Floor
Bethesda, Maryland 20814
(Telefax: (301) 718-2444)
with required copies to:
Mr. Michael R. Klein, Chairman
c/o Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
(Telefax: (202) 663-6985)
and
Mr. Michael K. Isenman
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
(Telefax: (202) 828-2195)
If to any Shareholder to:
Fred A. Heitzman III
Lease Trend, Inc.
4700 Duke Drive
Suite 145
Mason, OH 45040
Telefax: (513) 459-7354
and
Blue Chip Capital Fund Limited Partnership
201 East Fifth Street
2000 PNC Center
Cincinnati, OH 45202
with a required copy to:
Mr. Richard D. Siegal
Keating, Muething & Klekamp, P.L.L.
One East Fourth Street
Cincinnati, OH 45202
(Telefax: (513) 574-6457)
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and
Gerald S. Greenberg
Taft, Stettinius & Hollister, LLP
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202-3957
or to such other address as the person to whom notice is to be given may
have specified in a notice duly given to the sender as provided herein.
Such notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so
delivered, telefaxed, mailed or dispatched and, if given by any other
means, shall be deemed given only when actually received by the addressees.
10.9 GOVERNING LAW.
(a) This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of Delaware without
regard to the conflicts of law provisions thereof.
(b) Any disputes arising out of, in connection with or with
respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby ("Disputes") that seek specific performance of any
obligations hereunder or injunctive relief may be adjudicated in any court
of competent civil jurisdiction.
(c) Except as provided in Section 10.9(b), all Disputes shall be
resolved by binding arbitration administered by the American Arbitration
Association ("AAA") and, except as expressly provided in this Agreement,
shall be conducted in accordance with the Expedited Procedures under the
Commercial Arbitration Rules of the AAA, as such rules may be amended from
time to time (the "Rules").
(i) The hearing locale shall be determined in accordance
with the Rules. A single, neutral arbitrator (the "Arbitrator") shall be
appointed by the AAA, within thirty (30) days after an Arbitrated Dispute
is submitted for arbitration under this Section 10.9(c), to preside over
the arbitration and resolve the Dispute. The Arbitrator shall be selected
from the AAA's Commercial Panel, and shall be qualified to practice law in
at least one jurisdiction in the United States and have expertise in the
interpretation of commercial contracts. The parties shall have ten (10)
days to object in writing to the appointment of the Arbitrator, the sole
basis for such objection being an actual conflict of interest. The AAA, in
its sole discretion, shall determine within ten (10) days the validity of
any objection to the appointment of the Arbitrator based on an actual
conflict of interest.
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(ii) The Arbitrator's decision (the "Decision") shall be
binding, and the prevailing party may enforce the Decision in any court of
competent jurisdiction.
(iii) The parties shall use their best efforts to cooperate
with each other in causing the arbitration to be held in as efficient and
expeditious a manner as practicable, including but not limited to,
providing such documents and making available such of their personnel as
the Arbitrator may request, so that the Decision may be reached timely. The
Arbitrator shall take into account the parties' stated goal of expedited
proceedings in determining whether to authorize discovery and, if so, the
scope of permissible discovery and other hearing and pre-hearing
procedures.
(iv) The authority of the Arbitrator shall be limited to
deciding liability for, and the proper amount of, a Claim, and the
Arbitrator shall have no authority to award punitive damages. The
Arbitrator shall have such powers and establish such procedures as are
provided for in the Rules, so long as such powers and procedures are
consistent with this Section 10.9(c) and are necessary to resolve the
Dispute within the time periods specified in this Agreement. The Arbitrator
shall render a Decision within sixty (60) days after being appointed to
serve as Arbitrator, unless the parties otherwise agree in writing or the
Arbitrator makes a finding that a party has carried the burden of showing
good cause for a longer period.
10.10 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the
application of such provision to such person or circumstances in any other
jurisdiction, shall not be affected thereby, and to this end the provisions
of this Agreement shall be severable. The preceding sentence is in addition
to and not in place of the severability provisions in Section 9.5.
10.11 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Except as expressly
contemplated in Paragraph 5.9(a) of this Agreement, no provision of this
Agreement is intended, nor will any provision be interpreted, to provide or
to create any third party beneficiary rights or any other rights of any
kind in any client, customer, affiliate, shareholder, employee or partner
of any party hereto or any other person or entity.
10.12 MUTUAL DRAFTING. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall
not be construed for or against any party hereto.
10.13 THIS AGREEMENT. References to paragraphs, sections or Schedules
are to paragraphs, sections or Schedules to this Agreement. The Schedules
are deemed to be incorporated into this Agreement, and a reference to "this
Agreement," including references such as "herein" and "hereto," includes a
reference to the Schedules, regardless whether the terms
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"Agreement" and "Schedules" are used in the disjunctive in any provision of
this Agreement.
10.14 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement,
with the opportunity to seek advice as to its legal rights from such
counsel. Each party further represents that it is being independently
advised as to the tax consequences of the transactions contemplated by this
Agreement and is not relying on any representation or statements made by
the other party as to such tax consequences.
[EXECUTION PAGE FOLLOWING]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
REALTY INFORMATION GROUP, INC. LEASETREND, INC.
By: /s/ Andrew C. Florance By: /s/ Fred A. Heitzman, III
-------------------------- ----------------------------
Name: Andrew C. Florance Name: Fred A. Heitzman, III
Title: President Title: President
SHAREHOLDERS
/s/ Fred A. Heitzman III
-------------------------------
Fred A. Heitzman III
/s/ Gregory Benkert
-------------------------------
Gregory Benkert
/s/ Keith Sant
-------------------------------
Keith Sant
Blue Chip Capital Fund Limited Partnership
By: /s/ John H. Wyant
-------------------------------
Name: John H. Wyant
General Partner
Heitzman Business Trust
By: /s/ Fred A. Heitzman III
-------------------------------
Fred A. Heitzman III
Trustee
Benkert Business Trust
By: /s/ Gregory Benkert
-------------------------------
Gregory Benkert
Trustee
Schedule 3.30
Year 2000 Compliance Exceptions
(1) LeaseTrend Version 1.1 is Year 2000 Compliant with minor problems. While
the software will function before, after and during the year 2000, two date
fields could be ambiguous to the user. These fields are not significant to
the usage of the software. LeaseTrend Version 2.1 scheduled for release by
March 31, 1999 corrects these problems and is Year 2000 Compliant.
(2) The proper functioning of LeaseTrend software is, in part, dependent upon
LeaseTrend's customers hardware and networks being Year 2000 Compliant.
LeaseTrend has performed no testing of customer hardware or networks.
(3) LeaseTrend is in the process of implementing Year 2000 Compliance Testing
of our internal hardware. We expect that some workstations, servers or
other hardware will require minor upgrades to be Year 2000 Compliant.
(4) LeaseTrend's operations are highly dependent upon electrical service, local
telephone service and long distance telephone service from its vendors.
While extended outages are not expected, LeaseTrend has not performed any
Year 2000 testing related to these vendors. Multiple sources of supply
exist for all other critical supplies and services.
List of Exhibits and Schedules to
ACQUISITION and REORGANIZATION AGREEMENT
by and among
REALTY INFORMATION GROUP, INC.
and
LEASETREND, INC.
and
THE SHAREHOLDERS OF LEASETREND, INC.
dated January 8, 1999
Exhibit 1.1 Merger Agreement (+)
Schedule 1.2(a) LTI Longterm Liabilities (*)
Schedule 3.1(a) LTI Business Authorization (*)
Schedule 3.1(b) LTI Minutes (*)
Schedule 3.1(c) LTI Directors and Officer (*)
Schedule 3.3 LTI Conflicts (*)
Schedule 3.4 LTI Ownership of Capital Stock (*
Schedule 3.5 LTI Restrictions on Capital Stock (*)
Schedule 3.6(b) LTI Corporate Ownership Interests (*)
Schedule 3.9(a) LTI Financials (*)
Schedule 3.9(b) LTI Most Recent Financials (*)
Schedule 3.10(a) LTI Liabilities (*)
Schedule 3.10(c) LTI New Expenditures (*)
Schedule 3.12 LTI Company Accounts (*)
Schedule 3.13 LTI Accounts Receivable (*)
Schedule 3.15(b) LTI Real Property (*)
Schedule 3.15(c) LTI Leases Requiring Consent (*)
Schedule 3.16(a) LTI Personal Property (*)
Schedule 3.17(a) LTI Trademarks (*)
Schedule 3.17(b) LTI Copyrights (*)
Schedule 3.17(c) LTI Trade Secrets (*)
Schedule 3.17(d) LTI Intellectual Property Obligations (*)
Schedule 3.17(e) LTI Intellectual Property Claims (*)
Schedule 3.18(a) LTI Contracts (*)
Schedule 3.18(b) LTI Contract Impairment (*)
Schedule 3.18(c) LTI Third-Party Consents (*)
Schedule 3.18(d) LTI Loans and Credit Agreements (*)
Schedule 3.19 LTI Company Names (*)
Schedule 3.20 LTI Insurance (*)
Schedule 3.21(a) LTI Environmental (*)
Schedule 3.23(b) LTI Benefits (*)
Schedule 3.23(c) LTI Worker's Compensation (*)
Schedule 3.23(d) LTI Highly Compensated Employees (*)
Schedule 3.24 LTI Taxes (*)
Schedule 3.25 LTI Litigation (*)
Schedule 3.26 LTI Claims (*)
Schedule 3.27 LTI Changes (*)
Schedule 3.30 LTI Year 2000 Compliance Schedule 4.3(b) RIG Conflicts (*)
Schedule 4.5(a) RIG Audited Financials (*)
Schedule 4.5(b) RIG Unaudited Financials (*)
Schedule 4.6(a) RIG Liabilities (*)
Schedule 4.8(d) RIG Intellectual Property Obligations (*)
Schedule 4.9(a) RIG Environmental (*)
Schedule 4.11 RIG Taxes (*)
Schedule 4.12(b) RIG Litigation (*)
Schedule 4.13 RIG Changes (*)
Schedule 5.9(b) RIG Stock Restrictions (*)
Exhibit 6.7(a) Employment Agreement for Fred A. Heitzman III (*)
Exhibit 6.7(b) Employment Agreement for Gregory Benkert (*)
Exhibit 10.2 Escrow Agreement (*)
(*) Omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby
agrees to furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
(+) Included as Exhibit 2.2 to this Form 8-K.
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"), dated as of January
8, 1999, between LeaseTrend, Inc., an Ohio corporation with its principal office
in Hamilton County, Ohio, at 4700 Duke Drive, Suite 145, Mason, Ohio 45040
("LeaseTrend"), and LTI Acquisition Corp., a Delaware corporation with its
principal office in Montgomery County, Maryland, at 7475 Wisconsin Avenue, Suite
600, Bethesda, Maryland 20814-9569 ("Newco"). LeaseTrend and Newco are
hereinafter collectively referred to as the "Constituent Corporations."
WHEREAS, LeaseTrend is a corporation duly organized and existing under the
laws of the State of Ohio and has an authorized capital stock of 1500 shares of
common stock, no par value ("LeaseTrend Stock"), of which 849 shares are issued
and outstanding.
WHEREAS Newco is a corporation duly organized and existing under the laws
of the State of Delaware; has an authorized capital stock of 1000 shares of
common stock, $1 par value ("Newco Stock"), of which 100 shares are issued and
outstanding; and is a wholly-owned subsidiary of Realty Information Group, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware ("RIG").
WHEREAS, the respective Boards of Directors of the Constituent Corporations
deem it advisable and in the best interests of the Constituent Corporations and
their shareholders that LeaseTrend be merged with and into Newco, which shall be
the surviving corporation, as authorized by the statutes of the States of
Delaware and Ohio, and that such merger be consummated pursuant to the terms and
conditions hereinafter set forth, and each such Board has duly approved this
Agreement and Plan of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for the purpose of setting forth the terms
of the merger (the "Merger") provided by this Merger Agreement, the mode of
carrying the Merger into effect and such other details as are deemed necessary
or desirable, the parties hereto have agreed and do hereby agree, subject to the
approval or adoption of this Merger Agreement by the requisite vote of the
shareholders of each Constituent Corporation, and subject to the conditions
hereinafter set forth, as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined below), LeaseTrend shall be merged
into Newco. As a result of the Merger, the separate corporate existence of
LeaseTrend (the "Merging Corporation") shall cease and Newco shall continue as
the surviving corporation of the Merger, having its principal office at 4700
Duke Drive, Suite 145, Mason, Ohio 45040 (the "Surviving Corporation"). At the
Effective Time, the Surviving Corporation shall change its name to "LeaseTrend,
Inc."
SECTION 1.02. Effective Time. As soon as reasonably possible following the
approval, adoption, certification, execution, acknowledgment, and delivery of
the Merger Agreement by each of the parties hereto, the parties shall cause the
Merger to be consummated by filing a certificate of merger with the Secretary of
State of Delaware and with the Secretary of State of Ohio. The Merger shall
become effective at such time as the certificate of merger is duly filed with
the Secretary of State of Delaware and the Secretary of State of Ohio (the date
and time of such filing being the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law and Ohio General Corporation Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of LeaseTrend and Newco shall vest in the Surviving Corporation, and
all the debts, liabilities and duties of LeaseTrend and Newco shall become the
debts, liabilities and duties of the Surviving Corporation. The Surviving
Corporation hereby consents to be sued and served with process in the state of
Ohio and the irrevocable appointment of the Secretary of State of the state of
Ohio as its agent to accept service of process in any proceeding in the state of
Ohio to enforce against the Surviving Corporation any obligation of the Merging
Corporation or to enforce the rights of a dissenting shareholder of the Merging
Corporation.
SECTION 1.04. Certificate of Incorporation; By-laws. At the Effective Time,
the Certificate of Incorporation of Newco as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation; provided that the Certificate of Incorporation shall be deemed
amended to change the name of the Surviving Corporation to LeaseTrend, Inc., and
Article I of the Certificate of Incorporation shall be deemed amended to read as
follows:
ARTICLE ONE
THE NAME OF THE CORPORATION IS: LEASETREND, INC.
At the Effective Time, the By-laws of Newco as in effect immediately prior to
the effective Time, shall be the By-Laws of the Surviving Corporation.
SECTION 1.05. Directors and Officers. The directors of Newco immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation. The officers of Newco
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation.
SECTION 1.06. Qualification in the State of Ohio. The Surviving Corporation
desires to transact business in the state of Ohio, and has appointed CT
Corporation System, 441 Vine Street, Cincinnati, OH, 45202 as its statutory
agent with respect to service of process, notice, or demand in such state.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action of the part of LeaseTrend, Newco, or the
holder of any of the following securities:
(a) All shares of LeaseTrend Common Stock issued and outstanding
immediately prior to the Effective Time, excluding any treasury shares held by
LeaseTrend, shall be converted, on a pro rata basis, into the right to receive,
in aggregate, five hundred sixty six thousand six hundred sixty seven
(566,667) shares of fully paid, nonassessable shares of common Stock, par value
$0.01 per share, of RIG ("RIG Common Stock") plus a cash payment of $4,500,000
(collectively, the "Merger Consideration"). On a per share basis, each share of
LeaseTrend Common Stock issued and outstanding immediately prior to the
Effective Time, excluding any Treasury shares held by LeaseTrend, shall be
converted into the right to receive 667.688 shares (the "Common Stock Exchange
Ratio") of RIG Common Stock (such Common Stock Exchange Ratio being determined
by dividing 566,667 shares of RIG Common Stock by the total number of
outstanding shares of LeaseTrend Common Stock issued and outstanding immediately
prior to the Effective Time) plus a cash payment of $5,302.23 (the "Boot
Exchange Ratio") (such Boot Exchange Ratio being determined by dividing
$4,500,000 by the total number of outstanding shares of LeaseTrend Common Stock
issued and outstanding immediately prior to the Effective Time); provided that
such Common Stock Exchange Ratio and Boot Exchange Ratio shall each be modified
as necessary to properly effectuate aggregate conversion into the Merger
Consideration as set forth in this Section.
(b) All shares of LeaseTrend Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such LeaseTrend Stock
shall thereafter represent the right to receive the pro rata share of the Merger
Consideration. The holders of such certificates previously evidencing such
shares of LeaseTrend Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of LeaseTrend Common
Stock, except as otherwise provided herein or by law. Such certificates
previously evidencing shares of LeaseTrend Common Stock shall be exchanged for
certificates evidencing shares of RIG Common Stock issued in consideration
therefor in accordance with the allocation procedures of this Section 2.01 and
upon the surrender of such certificates in accordance with the provisions of
Section 2.02.
(c) Each share of LeaseTrend Common Stock held in the treasury of
LeaseTrend, if any, immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof and no payment shall be made
with respect thereto.
SECTION 2.02. Exchange of Certificates; No Further Rights in LeaseTrend
Common Stock
(a) In exchange for the delivery of certificates for LeaseTrend Common
Stock, each former shareholder of LeaseTrend will receive (i) certificates
evidencing the number of shares of RIG Common Stock delivered in accordance with
Section 2.01 and (ii) a cash payment calculated in accordance with Section 2.01.
(b) All RIG Common Stock issued and cash payments made upon conversion
of LeaseTrend Common Stock in accordance with the terms hereof shall be deemed
to have been issued or paid in full satisfaction of all rights pertaining to
such LeaseTrend Common Stock.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of LeaseTrend shall be closed and there shall be no further
registration of transfers of shares of LeaseTrend Common Stock thereafter on the
records of LeaseTrend. On or after the Effective Time, any certificates
presented for any reason shall be converted into a right to receive the pro rata
share of the Merger Consideration.
ARTICLE III
MISCELLANEOUS PROVISIONS
(a) For the convenience of the parties, any number of counterparts
hereof may be executed, and each such counterpart shall be deemed to be an
original instrument.
(b) It is the intention of the parties that the laws of the State of
Delaware, without regard to the conflict of law provisions thereof, govern the
enforceability and validity of this Merger Agreement, the construction of its
terms, and the interpretation of the rights and duties of the parties.
(c) Nothing in this Merger Agreement shall be deemed to affect any
contractual rights or obligations existing between and among Realty Information
Group, Inc., and the shareholders of LeaseTrend, including without limitation
any such rights or obligations relating to the Merger Consideration.
(d) To the extent permitted by applicable law, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time; provided
that any such amendment must be in writing and signed by the parties hereto in a
manner permissible under the terms of this Merger Agreement.
IN WITNESS WHEREOF, LeaseTrend and Newco have caused this Merger Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
LEASETREND, INC.
By: /s/ Fred A. Heitzman, III
---------------------------
Name: Fred A. Heitzman, III
Title: President
LTI Acquisition Corp.
By: /s/ Andrew C. Florance
---------------------------
Name: Andrew C. Florance
Title: President