Exhibit 4.5
PREFERRED STOCK PURCHASE AGREEMENT
by and among
INTEK INFORMATION INC.,
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.,
SQUAM LAKE INVESTORS II, L.P.,
and
▇▇▇▇ & COMPANY, INC.
dated as of February 3, 1997
Table of Contents
Section Page
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I. Issuance and Sale of Securities............................................... 1
1.1. The Purchase........................................................... 1
1.2. The Closing............................................................ 2
II. Representations and Warranties of the Company................................. 3
2.1. Organization and Good Standing; Power and Authority; Qualifications.... 3
2.2. Authorization of the Documents......................................... 4
2.3. Capitalization......................................................... 4
2.4. Authorization and Issuance of Capital Stock............................ 6
2.5. Reservation of Shares.................................................. 6
2.6. Financial Statements................................................... 6
2.7. Absence of Undisclosed Liabilities..................................... 7
2.8. Absence of Material Changes............................................ 7
2.9. No Conflict............................................................ 8
2.10 Agreements............................................................. 9
2.11. Patents, Trademarks, etc............................................... 9
2.12. Equity Investments; Subsidiaries....................................... 10
2.13. Corporate Minute Books................................................. 10
2.14. Suitability............................................................ 10
2.15. Assets................................................................. 10
2.16. Employee Benefit Plans................................................. 11
2.17. Labor Relations; Employees............................................. 14
2.18. Litigation; Orders..................................................... 15
2.19. Compliance with Laws; Permits.......................................... 15
2.20. Offering Exemption..................................................... 15
2.21. Related Transactions................................................... 16
2.22. Disclosure............................................................. 16
2.23. Taxes.................................................................. 16
2.24. Environmental Protection............................................... 18
2.25. Consents............................................................... 20
2.26. Insurance.............................................................. 20
2.27. Brokers................................................................ 21
2.28. Use of Proceeds........................................................ 21
2.29. Previous Issuances Exempt.............................................. 21
2.30. Real Property.......................................................... 21
2.31. Accounts Receivable................................................... 22
2.32. Investment Banking Services........................................... 22
2.33. Registration Rights................................................... 23
III. Representations and Warranties of the Investors.............................. 23
3.1. Investor Representations.............................................. 23
3.2. Representations and Warranties of Beacon.............................. 24
3.3. Representations and Warranties of Bain................................ 24
3.4. Representations and Warranties of SLI................................. 25
IV. Certain Covenants............................................................ 26
4.1. Operation of the Business Prior to Closing............................ 26
4.2. Conduct of Business of the Company Prior to Closing................... 26
4.3. Third Party Consents Prior to Closing................................. 28
4.4. No Negotiation Prior to Closing....................................... 28
4.5. Access to Records Prior to Closing.................................... 29
4.6. Post-Closing Covenants................................................ 29
V. Survival of Representations, Warranties, Agreements and Covenants, etc....... 32
VI. Expenses..................................................................... 32
VII. Indemnification.............................................................. 33
7.1. General Indemnification............................................... 33
7.2. Indemnification Principles............................................ 33
7.3. Claim Notice.......................................................... 34
7.4. Claim Procedure....................................................... 34
VIII. Miscellaneous................................................................ 36
8.1. Remedies.............................................................. 36
8.2. Transfer Taxes........................................................ 36
8.3. Further Assurances.................................................... 37
8.4. Successors and Assigns; Assignment.................................... 37
8.5. Entire Agreement...................................................... 37
8.6. Notices............................................................... 37
8.7. Amendments............................................................ 39
8.8. Counterparts.......................................................... 39
8.9. Headings................................................................. 39
8.10. Nouns and Pronouns....................................................... 39
8.11. Governing Law............................................................ 39
8.12. Severability............................................................. 40
8.13. Knowledge................................................................ 40
8.14. Option Financing......................................................... 40
8.15. Termination.............................................................. 41
Exhibits
A - Legal Opinions
B - Amended and Restated Certificate of Incorporation
C - By-laws
D - Escrow Agreement with ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
E - Shareholders' Agreement
F - Registration Rights Agreements
G - Note
H - Subordination Letter
Index of Defined Terms
Term Section
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Acquired Corporation.............................................. 8.14
ACM............................................................... 2.24
Affiliated Group.................................................. 2.23
Bain.............................................................. Preamble
Bain Entities..................................................... Preamble
Balance Sheet Date................................................ 2.6
Beacon............................................................ Preamble
Claim Notice...................................................... 7.3
Closing........................................................... 1.2
Closing Date...................................................... 1.2
Common Stock...................................................... 2.3
Company........................................................... Preamble
Company Benefit Plan.............................................. 2.16
Company Financial Statements...................................... 2.6
Contract.......................................................... 2.10
Conversion Shares................................................. 2.3
Documents......................................................... 2.1
Employee.......................................................... 2.16
Employee Agreement................................................ 2.16
Encumbrances...................................................... 2.3
Environmental Costs............................................... 2.24
Environmental Laws................................................ 2.24
Environmental Matter.............................................. 2.24
Environmental Permits............................................. 2.24
ERISA............................................................. 2.16
ERISA Affiliate................................................... 2.16
Exchange Act...................................................... 2.21
GAAP.............................................................. 2.6
Hazardous Substances.............................................. 2.24
Investor.......................................................... Preamble
Investor Entity................................................... 11.1
IPO............................................................... 5.10
Leased Real Properties............................................ 2.31
Litigation........................................................ 21.0
Losses............................................................ 7.2
Material Adverse Effect........................................... 2.1
Merger............................................................ 8.14
Merger Agreement.................................................. 8.14
Note.............................................................. 8.14
Owned Real Properties............................................. 2.30
Option............................................................ 8.14
Option Financing.................................................. 8.14
Option Financing Closing Date..................................... 8.14
PCBs.............................................................. 2.24
Pension Plan...................................................... 2.16
Permitted Encumbrances............................................ 2.30
Preferred Stock................................................... 2.3
Purchase.......................................................... 1.1(b)
Purchase Price.................................................... 1.1(b)
Real Properties................................................... 2.30
Registration Rights Agreement..................................... 2.1
Return............................................................ 2.23
Securities Act.................................................... 2.14
Series B Preferred Stock.......................................... Recitals
Shareholders' Agreement........................................... 2.1
SLI............................................................... Preamble
Subsidiary........................................................ 2.12
Subordination Letter.............................................. 8.14
Taxes............................................................. 2.23
Transaction Proposals............................................. 4.4
PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of February 3, 1997, by and among INTEK INFORMATION
INC., a Delaware corporation (the "Company"), THE BEACON GROUP III - FOCUS VALUE
FUND, L.P., a Delaware limited partnership ("Beacon"), SQUAM LAKE INVESTORS II,
L.P., a Delaware limited partnership ("SLI") and ▇▇▇▇ & COMPANY, INC., a
Massachusetts corporation ("Bain"). (Bain and SLI are collectively referred to
herein as the "Bain Entities") (Beacon and the Bain Entities are collectively
referred to herein as the "Investors," and each of them is referred to herein as
"Investor")
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company wishes to sell to Beacon and the Bain Entities, and
Beacon and the Bain Entities wish to purchase from the Company, shares of Series
B Convertible Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock").
ACCORDINGLY, the parties hereto hereby agree as follows:
I. Issuance and Sale of Securities
1.1. The Purchase
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(a) On the date hereof, the Company shall issue the Note (as defined in
Section 8.14) to Beacon in exchange for the payment therefor by Beacon of
$800,000, and each of Eden Financial Group. Inc., Fundmark Investment Company
Services, Inc. and ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇ shall execute and deliver the
Subordination Letter (as defined in Section 8.14) to Beacon. The proceeds to
the Company from the sale of the Note shall be used to purchase an option to
acquire PROTOCALL New Business Specialists, Inc. pursuant to the terms of the
Merger Agreement (as defined in Section 8.14) and to make certain preliminary
payments in connection therewith.
(b) At the Closing (as defined in Section 1.2(a)), (i) Beacon shall
purchase from the Company and the Company shall sell to Beacon 9,615,738 shares
of Series B Preferred Stock, (ii) Bain shall purchase from the Company and the
Company shall sell to Bain 287,191 shares of Series B Preferred Stock and (iii)
SLI shall purchase from the
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Company and the Company shall sell to SLI 287,191 shares of Series B Preferred
Stock (the "Purchase"). The aggregate purchase price (the "Purchase Price") to
be paid (i) by Beacon for the Series B Preferred Stock purchased by it hereunder
is $16,740,999.86, including the amount of principal due under the Note, if any,
that is forgiven by Beacon upon consummation of the Merger (as defined in
Section 8.14) and (ii) by each of Bain and SLI for the Series B Preferred Stock
purchased by them, respectively, hereunder is $499,999.53. The respective
obligations of Beacon, Bain and SLI hereunder are several and not joint.
1.2. The Closing
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(a) The closing of the Purchase (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C. ("CBJ"), ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on a date (the "Closing Date") as soon as practicable following
the satisfaction or waiver of each of the conditions set forth in Sections 5 and
6 (other than those conditions that by their nature are to be fulfilled at the
Closing, but subject to the fulfillment of such conditions).
(b) At the Closing, the Company shall deliver to each of Beacon, Bain and
SLI a certificate or certificates representing the respective shares of Series B
Preferred Stock purchased by them, registered in the name of Beacon, Bain or
SLI, as the case may be. Delivery of such certificates to Beacon, Bain and SLI
shall be made against receipt at the Closing by the Company from each of Beacon,
Bain and SLI of their respective portions of the Purchase Price, which shall be
paid by wire transfers to an account designated at least one business day prior
to the Closing by the Company.
(c) At the Closing, (i) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., counsel to the
Company, shall deliver to the Investors its opinion substantially in the form of
Exhibit A-1 attached hereto, (ii) the ▇▇▇▇▇▇ Law Firm, counsel to Resource
Bancshares Corporation, shall deliver to the Investors its opinion substantially
in the form of Exhibit A-2 attached hereto, (iii) the Company shall deliver to
the Investors copies of the Company's Certified Amended and Restated Certificate
of Incorporation substantially in the form of Exhibit B attached hereto and the
Company's By-Laws substantially in the form of Exhibit C attached hereto, each
certified by the Assistant Secretary of the Company as true, correct and
complete and in effect as of the Closing, and (iv) each of the Investors, the
Company and the other stockholders of the Company shall deliver duly executed
counterparts to the Shareholders' Agreement (as defined in Section 2.1) and the
various Registration Rights Agreements (as defined in Section 2.1) to which they
are parties.
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(d) Simultaneous with the Closing, (i) the Company's warrants number W-1
(issued to ▇'▇▇▇▇▇▇▇) and W-2 (issued to Resource Bancshares Corporation) shall
be canceled and of no further force or effect, and the Company shall deliver to
Beacon evidence satisfactory to Beacon in this regard, and (ii) the Company
shall repurchase from Resource Bancshares Corporation 5,000 shares of the
Company's Series A Preferred Stock, par value of $.001 per share, in exchange
for an aggregate purchase price of $1,741,000.
(e) At the Closing, the Company shall deliver to the Investors a
certificate, dated the Closing Date and executed by the Chief Executive Officer
of the Company, certifying to the effect that (i) each of the representations
and warranties of the Company set forth in this Agreement are accurate in all
material respects on and as of the Closing Date as if made on and as of the
Closing Date and (ii) each of the covenants and obligations that the Company is
obligated to perform or to comply with pursuant to this Agreement at or prior to
the Closing shall have been duly performed and complied with in all material
respects.
(f) Other than (i) the opinion of CB&J to be delivered in connection with
the Option Financing, (ii) the Note and (iii) the Subordination Letter (each of
which shall be delivered to Beacon simultaneously with the execution of this
Agreement and the delivery by Beacon to the Company of the Option Financing),
the certificates, instruments and other documents that are to be delivered at
the Closing pursuant to this Section 1.2 shall be duly executed and delivered to
CB&J on the date hereof and held in escrow by CB&J pursuant to the terms of and
escrow agreement substantially in the form attached hereto as Exhibit F.
(g) At the Closing, the Company shall execute and deliver indemnification
agreements for the benefit of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ that are
in the same form and substance as any indemnification agreements with directors
in effect as of the date hereof.
II. Representations and Warranties of the Company
The Company hereby represents and warrants to the Investors as follows as
of the date hereof and as of the Closing Date:
2.1. Organization and Good Standing; Power and Authority; Qualifications.
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The Company (a) is duly organized, validly existing and in good standing under
the laws
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of its jurisdiction of organization, (b) has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
presently conducted and as proposed to be conducted and (c) has all requisite
power and authority to enter into and carry out the transactions contemplated by
this Agreement, the shareholders' agreement among the Company, Beacon, the Bain
Entities and each and every other holder of equity securities of the Company, in
the form of Exhibit E hereto (the "Shareholders' Agreement") (i) the
registration rights agreement between the Company and Beacon, in the form of
Exhibit E-1 hereto and (ii) the registration rights agreement among the Company,
the Bain Entities and certain other parties, in the form of Exhibit E-2 hereto
(the "Registration Rights Agreements," together with this Agreement, the
Shareholders' Agreement and the Note (as defined in Section 8.14) and the
Subordination Letter (as defined in Section 8.14), the "Documents"). The Company
is qualified to transact business as a foreign corporation in, and is in good
standing under the laws of, those jurisdictions listed on Schedule 2.1, which
jurisdictions constitute all of the jurisdictions wherein the character of the
property owned or leased or the nature of the activities conducted by it makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified and in good standing would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, liabilities, condition (financial
or other) or results of operations of the Company (a "Material Adverse Effect").
2.2. Authorization of the Documents. The execution, delivery and
------------------------------
performance of each of the Documents has been duly authorized by all requisite
corporate action on the part of the Company, and each of the Documents
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except to the extent that
enforceability may be limited by principles of equity, bankruptcy, insolvency or
other similar laws affecting creditors' rights generally. As of the Closing
Date, each holder of issued and outstanding voting shares of the Company has
executed and delivered the Shareholders' Agreement.
2.3. Capitalization
--------------
(a) The authorized capitalization of the Company immediately following
the Purchase will consist of:
(i) Preferred Stock. 20,000,000 shares of Preferred Stock, par
value $.001 per share ("Preferred Stock"), of which (A) 20,000 shares have been
designated Series A Preferred Stock (including the 5,000 shares of Series A
Preferred Stock that will have been repurchased and automatically canceled in
connection with the
4
transactions contemplated by this Agreement), (B) 12,532,248, shares have been
designated Series B Convertible Preferred Stock (the "Series B Preferred Stock")
and (C) 7,447,752 shares of "blank check" preferred stock that have no
designation and none of which have been issued or are outstanding. All of the
shares of Series A Preferred Stock have been validly issued and are outstanding,
fully paid and nonassessable and free and clear of all mortgages, judgments,
claims, liens, security interests, pledges, escrows, charges or other
encumbrances of any kind or character whatsoever ("Encumbrances"). As of the
Closing, (A) 12,053,391 shares of Series B Preferred Stock, comprised of (1)
9,615,738 shares of Series B Preferred Stock issued to Beacon as contemplated by
this Agreement, (2) 287,191 shares of Series B Preferred Stock issued to Bain as
contemplated by this Agreement, and (3) 287,191 shares of Series B Preferred
Stock issued to SLI as contemplated by this Agreement will be validly issued and
outstanding, fully paid and nonassessable and free and clear of all Encumbrances
(except for Encumbrances arising under the Documents), and (B) 1,863,271
authorized shares of Series B Preferred Stock are currently expected to be
issued in connection with the Company's proposed acquisition of another business
after which issuance, all authorized shares of Series B Preferred Stock will be
validly issued, outstanding, fully paid and nonassessable and free and clear of
all Encumbrances.
(ii) Common Stock. 45,000,000 shares of Common Stock, par value
$.001 per share ("Common Stock"), of which 7,428,571 shares have been validly
issued, and are outstanding, fully paid and nonassessable and free and clear of
all Encumbrances.
(b) Schedule 2.3(b) hereto contains a list of (i) all holders of
record of capital stock of the Company, including the number of shares of
capital stock held by each such holder, and (ii) all outstanding warrants,
options, agreements, convertible securities or other commitments pursuant to
which the Company is or may become obligated to issue any shares of the capital
stock or other securities of the Company, which names all persons entitled of
record to receive such shares or other securities, the shares of capital stock
or other securities required to be issued thereunder as of the date hereof and
the price per share, if any, payable with respect to the issuance of any share
of capital stock issuable thereunder. Except as set forth on Schedule 2.3(b),
the Company has no knowledge of the names of any beneficial owners of shares of
capital stock of the Company who are not otherwise holders of record. Except as
set forth on Schedule 2.3(b) or as contemplated by the Documents there is, and
immediately after the Closing there will be, no agreement, restriction or
encumbrance (such as a preemptive or similar right, right of first refusal,
right of first offer, proxy, voting agreement, voting trust, registration rights
agreement, stockholders' agreement, warrant, etc.,) (i) with respect to which
the
5
Company is a party and (ii) with respect to the best knowledge of the Company,
to which the Company is not a party with respect to the purchase, sale or voting
of any shares of capital stock or other securities of the Company pursuant to
any provision of law, the Certificate of Incorporation or By-laws of the
Company, any agreement or otherwise. Except as contemplated by the Documents or
except for the right to vote its shares of capital stock of the Company for the
election of directors, no person has the right to nominate or elect one or more
directors of the Company.
(c) The shares of Common Stock issuable upon conversion of the Series
B Preferred Stock issued to the Investors on the date of the Closing under this
Agreement (the "Conversion Shares") represent, in the aggregate, (i) (prior to
accounting for the issuance of Series B Preferred Stock in connection with the
contemplated acquisition of another business as described in clause (B) of
Subsection 2.3(a)(i) above, the repurchase of 5,000 shares of Series A Preferred
Stock as contemplated in Section 1.2(d) above and any issuance of capital stock
of the Company pursuant to any Stock Option Plan or Employee Stock Purchase
Plan) 47.1% of the outstanding Common Stock of the Company on the date of the
Closing on a fully diluted basis and the voting power of such issued shares will
represent, in the aggregate, 47.1% of the total number of votes able to be cast
on any matter by all voting securities of the Company (other than any matter
that the holders of Series A Preferred Stock are entitled by law to vote on as a
separate class and any matter to be voted on by the holders of shares of Series
B Preferred Stock as a separate class) on the date of the Closing on a fully
diluted basis, and (ii) (after accounting for the issuance of Series B Preferred
Stock in connection with the contemplated acquisition of another business as
described in clause (B) of Subsection 2.3(a)(i) above, the repurchase of 5,000
shares of Series A Preferred Stock as contemplated in Section 1.2(d) above and
the issuance of the maximum number of shares of capital stock of the Company
issuable pursuant to any options or rights then outstanding under any stock
option plan or employee stock purchase plan) 37.1% of the outstanding Common
Stock of the Company on the date of the Closing on a fully diluted basis.
2.4. Authorization and Issuance of Capital Stock. The authorization,
-------------------------------------------
issuance, sale and delivery of the Series B Preferred Stock pursuant to this
Agreement and the authorization, reservation, issuance, sale and delivery of the
Conversion Shares have been duly authorized by all requisite corporate action on
the part of the Company, and when issued, sold and delivered in accordance with
this Agreement, the Series B Preferred Stock and the Conversion Shares will be
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, free and clear of any
Encumbrances, other than Encumbrances, if any, arising as a result of actions
6
taken by any of the Investors, and, except as set forth in the Shareholders'
Agreement, not subject to preemptive or similar rights of the stockholders of
the Company or others. The terms, designations, powers, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of any series of Preferred Stock
of the Company are as stated in the Company's Certificate of Incorporation and
the Documents.
2.5. Reservation of Shares. The Company has reserved a sufficient number
---------------------
of shares of Common Stock for issuance to the Investors upon the conversion of
the Series B Preferred Stock issued to the Investors on the date of the Closing
in accordance with this Agreement.
2.6. Financial Statements. The Company has furnished to the Investors the
--------------------
unaudited statements of income, stockholders' equity and cash flows of the
Company for the period commencing upon the Company's inception through July 31,
1996 and the unaudited balance sheet of the Company as of such date, and the
unaudited balance sheet of the Company as of November 30, 1996 (the "Balance
Sheet Date") and the related unaudited statements of income and cash flows for
the three month period ended November 30, 1996 (all such financial statements,
the "Company Financial Statements"). All such financial statements (i) are in
accordance with the books and records of the Company, (ii) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied (except that such unaudited financial statements do not contain (i) all
of the footnotes required under GAAP or (ii) customary year-end adjustments) and
(iii) fairly and accurately present the financial position of the Company and
its consolidated subsidiaries as of July 31, 1996 and November 30, 1996,
respectively, and the results of its operations and cash flows for the period
commencing upon the Company's inception through July 31, 1996 and for the four
months ended November 30, 1996, respectively.
2.7. Absence of Undisclosed Liabilities. Except as disclosed on Schedule
----------------------------------
2.7, the Company has no liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known, whether due or to
become due and regardless of when asserted) other than (i) liabilities or
obligations reserved against or otherwise disclosed in the Company Financial
Statements, (ii) other liabilities or obligations that were incurred after
November 30, 1996 in the ordinary course of business consistent (in amount and
kind) with past practice (none of which is a liability resulting from breach of
contract, breach of warranty, tort, infringement, claim or lawsuit) and that do
not exceed $10,000 in the aggregate, and (iii) liabilities or obligations under
Contracts
7
listed in the Schedules to this Agreement or under Contracts that are not
required to be disclosed therein (but not liabilities for breaches thereof).
2.8. Absence of Material Changes. Except as set forth on Schedule 2.8,
---------------------------
since November 30, 1996, the Company has conducted its business in the ordinary
course, consistent with past practice and there has not been (a) any Material
Adverse Effect or any event or condition (other than events or conditions
affecting the Company's industry generally and which have been publicly
reported) which could reasonably be expected to have such a Material Adverse
Effect, (b) any waiver or cancellation of any material right of the Company, or
the cancellation of any material debt or claim held by the Company, (c) any
payment, discharge or satisfaction of any claim, liability or obligation of the
Company other than in the ordinary course of business, (d) any Encumbrance upon
the assets of the Company other than any Permitted Encumbrance (as defined in
Section 2.30), (e) any declaration or payment of dividends on, or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any securities of the Company, (f) any issuance of any stock,
bonds or other securities of the Company, (g) any sale, assignment or transfer
of any tangible or intangible assets of the Company except in the ordinary
course of business, (h) any loan by the Company to any officer, director,
employee, consultant or shareholder of the Company (other than advances to such
persons in the ordinary course of business in connection with travel and travel
related expenses), (i) any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the assets, property, financial
condition or results of operations of the Company, (j) any increase, direct or
indirect, in the compensation paid or payable to any officer or director of the
Company or, other than in the ordinary course of business, to any other
employee, consultant or agent of the Company, (k) any change in the accounting
or tax methods, practices or policies, or of any material tax election of the
Company, (l) any indebtedness incurred for borrowed money by the Company other
than in the ordinary course of business, (m) any amendment to or termination of
any material agreement to which the Company is a party other than the expiration
of any such agreement in accordance with its terms, (n) any change of which
either (i) the Company has received notice or (ii) otherwise has knowledge with
respect to the regulation of the Company or its activities by any administrative
agency or governmental body to the extent such change has had or could
reasonably be expected to have a Material Adverse Effect, (o) any material
change in the manner of business or operations of the Company (including,
without limitation, any accelerations or deferral of the payment of accounts
payable or other current liabilities or deferral of the collection of accounts
or notes receivable), (p) any capital expenditures or commitments therefor by
the Company that aggregate in excess of $10,000, (q) except for any amendments
to the Company's certificate of incorporation and by-laws required in connection
with the transactions
8
contemplated by this Agreement, any amendment of the certificate of
incorporation, by-laws or other organizational documents of the Company, (r) any
transaction entered into by the Company other than in the ordinary course of
business or any other material transaction entered into by the Company whether
or not in the ordinary course of business, or (s) any agreement or commitment
(contingent or otherwise) by the Company to do any of the foregoing.
2.9. No Conflict. The execution and delivery by the Company of the
-----------
Documents and the consummation by the Company of the transactions contemplated
hereby and thereby and the compliance by the Company with the provisions hereof
and thereof (including, without limitation, the issuance, sale and delivery by
the Company of the Series B Preferred Stock and the Conversion Shares) will not
(a) (relying, in part, upon the representations and warranties of the Investors
in Article III, where applicable) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to it, or any
of its properties or assets, (b) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute (with due notice or lapse
of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
Encumbrance upon any of its properties or assets under, any Contract to which it
is a party or (c) violate its certificate of incorporation or by-laws or other
organizational documents.
2.10. Agreements
----------
(a) Except as set forth on Schedule 2.10, the Company is not a
party to any contract, agreement, indenture, mortgage, guaranty, lease, license
or understanding, written or oral (a "Contract"), other than any Contract which
(i) pursuant to its terms, has expired, been terminated or fully performed by
the parties, and in each case, under which the Company has no liability,
contingent or otherwise, or (ii) involves monthly payments to or from the
Company (as opposed to an indemnity agreement or similar contract under which
the Company has any contingent liability) which monthly payments do not
aggregate on an annual basis to $10,000 or more, and in each case, is not
material to the business or financial condition of the Company.
(b) Complete copies (or, if oral, full written descriptions) of
all Contracts required to be listed on Schedule 2.10, including all amendments
thereto, have been provided to Beacon. Each of such Contracts is, as of the date
hereof, and will continue to be at and after the Closing, a legal, valid, and
binding obligation of, enforceable against, and in full force and effect
against, the Company and, to the best knowledge of the
9
Company, the other parties thereto. There is no breach, violation or default by
the Company and no event (including, without limitation, the consummation of the
transactions contemplated by the Documents) which, with notice or lapse of time
or both, would (i) constitute a breach, violation or default by the Company
under any such Contract or (ii) give rise to any lien or right of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration against the Company under any such Contract. To the best of the
Company's knowledge, except as set forth on Schedule 2.10, no other party to any
of such Contracts is in arrears in respect of the performance or satisfaction of
the terms and conditions on its part to be performed or satisfied under any of
such Contracts, no waiver or indulgence has been granted by any of the parties
thereto and no party to any of such Contracts has repudiated any provision
thereof.
2.11. Patents, Trademarks, etc. To the Company's best knowledge, the
------------------------
Company owns, possesses or has the right to use pursuant to license, sublicense,
agreement or permission all patents, inventions, trademarks, service marks,
trade names, whether registered or otherwise, together with all goodwill
associated therewith, copyrights, licenses, information, proprietary rights, and
processes necessary for the lawful conduct of its business as now conducted,
without any infringement of or conflict with the rights of others. Except as
set forth in Schedule 2.11, there are no outstanding options, licenses, or
agreements of any kind relating to the foregoing intellectual property rights,
nor is the Company bound by or a party to any options, licenses, or agreements
of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the conduct of the Company's business infringes or
conflicts with the rights of others under patents, trademarks, copyrights and
trade secrets. To the best of the Company's knowledge, except as set forth in
Schedule 2.11, the Company's business as now conducted and as proposed to be
conducted will not infringe or conflict with the rights of others, including
rights under patents, trademarks, copyrights and trade secrets.
2.12. Equity Investments; Subsidiaries. Except as set forth in
--------------------------------
Schedule 2.12, the Company has no Subsidiaries and has never owned, and does not
presently own, directly or indirectly, any capital stock or other proprietary
interest, directly or indirectly, in any company, association, trust,
partnership, joint venture or other entity. For purposes of this Agreement, the
term "Subsidiary" means, with respect to any person, any company, partnership or
other entity (a) of which shares of capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other similar managing body of such company, partnership or other entity are at
the time owned or
10
controlled, directly or indirectly, by such person or (b) the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries by such person.
2.13. Corporate Minute Books. The corporate records of the Company are
----------------------
correct and complete. True and correct copies of all minutes of meetings or
other actions by the directors, stockholders or incorporators of the Company
since its inception has previously been provided to Beacon.
2.14. Suitability. To the best knowledge of the Company, none of the
-----------
events described in Item 401(f) of Regulation S-K under the Securities Act of
1933, as amended (the "Securities Act"), has occurred during the last five years
with respect to any director or officer of the Company.
2.15. Assets
------
(a) The Company has good and marketable title, or a valid
leasehold interest in or contractual right to use, all of its assets and
properties, free and clear of any Encumbrances except (i) as disclosed in
Schedule 2.15(a), (ii) Encumbrances for taxes not yet due and payable, (iii)
Encumbrances set forth on Schedule 2.15(a) for taxes and charges and other
claims, the validity of which the Company is contesting in good faith or (iv)
Permitted Encumbrances. The assets and properties owned by, or leased to, the
Company are sufficient for the conduct of the business and operation of the
Company as presently conducted and as presently proposed to be conducted.
(b) Except as set forth on Schedule 2.15(b), the buildings,
facilities, machinery, equipment, furniture, leasehold and other improvements,
fixtures, vehicles, structures, any related capitalized items and other tangible
property owned by, or leased to the Company, as of the date hereof, (i) are to
the Company's best knowledge without investigation, in good operating condition
and repair (normal wear and tear excepted) and (in the case of buildings or
structures located on the Real Properties (as defined in Section 2.31)) free of
any structural or engineering defects and (ii) to the Company's best knowledge,
are suitable for their current use.
(c) Except as set forth on Schedule 2.15(c), the Company has
not received notice of, and has no knowledge of, any pending, threatened or
contemplated condemnation proceeding or similar taking affecting the assets of
the Company (including the Real Properties).
11
2.16. Employee Benefit Plans
----------------------
(a) Schedule 2.16 hereto contains a true and complete list of
(i) each plan, program, policy, payroll practice, contract, agreement or other
arrangement, or commitment therefore, providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral, and whether or not legally binding, which
is now or previously has been sponsored, maintained, contributed to or required
to be contributed to by the Company or pursuant to which the Company has any
liability, contingent or otherwise, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (each, a "Company Benefit
Plan"); and (ii) each management, employment, bonus, option, equity (or equity
related), severance, consulting, non compete, confidentiality or similar
agreement or contract, pursuant to which the Company has any liability,
contingent or otherwise, between the Company and any current, former or retired
employee, officer, consultant, independent contractor, agent or director of the
Company (an "Employee") (each, an "Employee Agreement"). Except as identified on
Schedule 2.16, neither the Company nor any ERISA Affiliate (as defined in
2.16(b)) currently sponsors, maintains, contributes to, or is required to
contribute to, nor has the Company ever sponsored, maintained, contributed to or
been required to contribute to, or incurred any liability to, (i) any
"multiemployer plan" (as defined in ERISA Section 3(37)) or (ii) any Company
Benefit Plan which provides, or has any liability to provide, life insurance,
medical, severance or other employee welfare benefits to any Employee upon his
or her retirement or termination of employment, except as required by Section
4980B of the Code. Neither the Company nor any of the entities set forth on
Schedule 2.16(a) has or has had any ERISA Affiliates other than the Company or
any of such entities.
(b) An "ERISA Affiliate" is defined as any entity that is (or
at any relevant time was) a member of a "controlled group of corporations" with,
or under "common control" with, or a member of an "affiliated service group"
with, or otherwise required to be aggregated with, the Company or any entity
listed on Schedule 2.16(a) as set forth in Section 414(b), (c), (m) or (o) of
the Code or Section 4001(a)(14) of ERISA.
(c) The Company has provided to Beacon current, accurate and
complete copies of all documents embodying or relating to each Company Benefit
Plan and each Employee Agreement, including all amendments thereto, trust or
funding agreements relating thereto (if any), the two most recent annual reports
(Series 5500 and related schedules) required under ERISA (if any), summary
annual reports, the most recent
12
determination letter (if any) received from the Internal Revenue Service, the
most recent summary plan description (with all material modifications) (if any),
if the Company Benefit Plan is funded, the most recent annual and periodic
accounting of Company Benefit Plan assets, and all material communications to
any Employee or Employees relating to any Company Benefit Plan or Employee
Agreement.
(d) With respect to each Company Benefit Plan (i) the Company
and each ERISA Affiliate has performed all obligations required to be performed
by it under each Company Benefit Plan and Employee Agreement and neither the
Company nor any ERISA Affiliate is in default under or in violation of, any
Company Benefit Plan, (ii) each Company Benefit Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA and the IRC, including without limiting the foregoing, the timely filing
of all required reports, documents and notices, where applicable, with the IRS
and the Department; (iii) each Company Benefit Plan intended to qualify under
Section 401 of the IRC is, and since its inception has been, so qualified and a
determination letter has been issued by the IRS to the effect that each such
Company Benefit Plan is so qualified and that each trust forming a part of any
such Company Benefit Plan is exempt from tax pursuant to Section 501(a) of the
IRC and no circumstances exist which would adversely affect this qualification
or exemption; (iv) no "prohibited transaction," within the meaning of Section
4975 of the IRC or Section 406 of ERISA, has occurred with respect to any
Company Benefit Plan; (v) no action or failure to act and no transaction or
holding of any asset by, or with respect to, any Company Benefit Plan has or,
under currently applicable laws and regulations, may subject the Company or any
ERISA Affiliate or any fiduciary to any tax, penalty or other liability, whether
by way of indemnity or otherwise; (vi) there are no actions, proceedings,
arbitrations, suits or claims pending, or to the best knowledge of the Company
and any ERISA Affiliate, threatened or anticipated (other than routine claims
for benefits) against the Company or any ERISA Affiliate or any administrator,
trustee or other fiduciary of any Company Benefit Plan with respect to any
Company Benefit Plan or Employee Agreement, or against any Company Benefit Plan
or against the assets of any Company Benefit Plan; (vii) no event or transaction
has occurred with respect to any Company Benefit Plan that would result in the
imposition of any tax under Chapter 43 of Subtitle D of the IRC; (viii) each
Company Benefit Plan can be amended, terminated or otherwise discontinued
without liability to the Company or any ERISA Affiliate; (ix) no Company Benefit
Plan is under audit or investigation by the IRS, the Department or the PBGC, and
to the best knowledge of the Company and any ERISA Affiliate, no such audit or
investigation is pending or threatened.
13
(e) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Company
Benefit Plan or Employee Agreement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligations to fund
benefits with respect to any Employee, or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of the Company or
Beacon to amend or terminate any Company Employee Plan and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. Except as set forth in Schedule
2.16(e), no payment or benefit which will or may be made by the Company, Beacon
or any of their respective affiliates with respect to any employee will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(f) With respect to each Company Benefit Plan (other than a
multi-employer plan) which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan"), (i) no steps have been taken
to terminate any Pension Plan now maintained or contributed to, no termination
of any Pension Plan has occurred pursuant to which all liabilities have not been
satisfied in full, no liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate which has not been satisfied in full, and no
event has occurred and no condition exists that could reasonably be expected to
result in the Company or any ERISA Affiliate incurring a liability under Title
IV of ERISA or could constitute grounds for terminating any Pension Plan; (ii)
no proceeding has been initiated by the PBGC to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan; (iii) each Pension Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code, has been maintained in compliance with the minimum funding standards of
ERISA and the Code and no such Pension Plan has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived; (iv) neither the Company or any ERISA Affiliate
has sought nor received a waiver of its funding requirements with respect to any
Pension Plan and all contributions payable with respect to each Pension Plan
have been timely made; (v) no reportable event, within the meaning of Section
4043 of ERISA, and no event described in Section 4062 or 4063 of ERISA, has
occurred with respect to any Pension Plan; and (vi) the present value of all
accrued benefits of each Pension Plan, determined on a plan termination basis
using the actuarial assumptions established by the PBGC as in effect on the date
of determination, does not as of the date hereof and will not as of the Closing
exceed the fair market value of the assets (which for this purpose shall not
include any accrued but unpaid contributions) of such Pension Plan.
14
(g) Immediately following the Closing, the Company will be
primarily engaged, directly or through a Subsidiary or Subsidiaries, in the
production or sale of a product or service other than the investment of capital
within the meaning of Department of Labor Regulation (S) 2510.3-101(c), (d) or
(e).
2.17. Labor Relations; Employees
--------------------------
(a) Schedule 2.17(a) lists all employees of the Company with an
annual salary in excess of $25,000. Except as set forth on Schedule 2.17(a), (i)
the Company is not delinquent in payments to any of its employees, for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed by the date hereof or material amounts required to be
reimbursed by them to the date hereof, (ii) the Company is in material
compliance with all applicable federal, state and local laws, rules and
regulations respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, (iii) the Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, commitment or arrangement with any
labor union, and no labor union has requested or, to the best knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company, (iv) there is no labor strike, dispute, slowdown or stoppage
actually pending, or, to the best knowledge of the Company, threatened against
or involving the Company, and (v) to the best knowledge of the Company, no
salaried key employee has any plans to terminate his or her employment with the
Company. Each of the officers of the Company, each key employee and each other
employee and consultant now employed or retained by the Company who has access
to confidential information of the Company has executed a confidentiality
agreement, and such agreements are in full force and effect.
(b) Except as set forth on Schedule 2.17(b), the Company is not a
party to or bound by any employment contract, deferred compensation agreement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation agreement except for the Management Employment Agreement
with ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇ ("▇'▇▇▇▇▇▇▇") and the written employment agreements to
be entered into with five employees of PROTOCALL New Business Specialists, Inc.
as disclosed to Beacon. To the best knowledge of the Company, there has been no
breach, violation or default by ▇'▇▇▇▇▇▇▇ under such Management Employment
Agreement.
2.18. Litigation; Orders. Except as set forth on Schedule 2.18, there
------------------
is no civil, criminal, administrative or regulatory action, suit, claim, notice,
hearing, inquiry, proceeding or investigation at law or in equity by or before
any court, regulator, arbitrator
15
or similar panel, governmental instrumentality or other agency now pending or,
to the best knowledge of the Company, threatened against the Company or the
assets or the business of the Company. Except as set forth in Schedule 2.18, the
Company is not subject to any order, writ, injunction or decree of any court of
any federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality.
2.19. Compliance with Laws; Permits. Except as provided in Schedule 2.19,
-----------------------------
the Company (a) has complied in all material respects with all federal, state,
local and foreign laws, rules, ordinances, codes, consents, authorizations,
registrations, regulations, decrees, directives, judgments and orders applicable
to it and its business (including, without limitation, the Telephone Consumer
Protection Act of 1991 and the Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994), and (b) has all federal, state, local and foreign
governmental licenses, permits and authorizations necessary in the conduct of
its business as currently conducted (including, without limitation, any state
teleservice industry registration requirements), such licenses, permits and
qualifications are in full force and effect, and no violations (other than
violations notice of which has not been received by the Company) have been
recorded in respect of any such licenses, permits and qualifications, and no
proceeding is pending or, to the best knowledge of the Company, threatened to
revoke or limit any such license, permit or qualification. Schedule 2.19 sets
forth a list of all such licenses, permits and authorizations, and the
expiration dates thereof.
2.20. Offering Exemption. Assuming the accuracy of the representations
------------------
and warranties contained in Section 3 hereof, the offer and sale of the Series B
Preferred Stock to the Investors as contemplated hereby and the issuance and
delivery of the Conversion Shares to the Investors upon the conversion of the
Series B Preferred Stock are each exempt from registration under the Securities
Act and under applicable state securities and "blue sky" laws, each as currently
in effect.
2.21. Related Transactions
--------------------
(a) Except as set forth on Schedule 2.21(a), no current
stockholder, director, officer or employee of the Company, or any "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of any of the foregoing
persons or the Company is presently, or during the past five years has been,
directly or indirectly, a party to any agreement, transaction or series of
similar transactions with the Company, other than in connection with any such
person's duties as a director, officer or employee of the Company.
16
(b) Each ongoing intercompany transaction set forth on Schedule
2.21(a), if any, is on terms that are (i) consistent with the past practice of
the Company and (ii) at least as favorable to the Company as would be available
with independent third parties dealing at arms' length.
2.22. Disclosure. Neither this Agreement nor any certificate, instrument
----------
or written statement furnished or made to the Investors by or on behalf of the
Company in connection with this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact which
the Company has not disclosed to Beacon or its counsel in writing and of which
the Company is aware which materially and adversely affects or which could
reasonably be expected to materially and adversely affect the business,
financial condition, operations, property or affairs of the Company or the
ability of the Company to perform its obligations under the Documents.
2.23. Taxes
-----
(a) Except as set forth on Schedule 2.23(a), (i) the Company (and
for each Affiliated Period, each Affiliated Group of which the Company was a
member) has timely filed all Tax Returns (as such terms are defined below)
required by law to have been filed by it and has timely paid all Taxes required
to be paid by it including, without limitation, any Tax for which a notice of
assessment or demand for payment has been received by the Company (and for each
Affiliated Period, each Affiliated Group of which the Company was a member),
(ii) all Tax Returns filed by the Company (and for each Affiliated Period, each
Affiliated Group of which the Company was a member) were complete and correct in
all material respects and (iii) all amounts required to be collected or withheld
by the Company have been collected or withheld and any such amounts that are
required to be remitted to any taxing authority have been duly remitted. The
accruals and reserves for Taxes in each of the balance sheets referenced in
Section 2.6 are adequate in all material respects to cover any liability of the
Company for Taxes for periods through the dates of such balance sheets. The
accruals and reserves for deferred tax liability in each of the balance sheets
referenced in Section 2.6 are adequate to cover any such liability in accordance
with GAAP. If the Company files its Tax Returns for its taxable year, which
includes the date hereof in conformance with its past practices and tax
reporting, to the best knowledge of the Company, there will be no basis for any
material adverse audit adjustments with respect to the Company under any of the
provisions of the Code, or any provisions of state, local or foreign tax law,
with respect to operations and activities of the Company during the period that
began on March 6, 1996 and ends on the date hereof. "Taxes," for purposes of
this Agreement, means any taxes,
17
assessments, duties, fees, levies, imposts, deductions, withholdings, including,
without limitation, income, gross receipts, ad valorem, value added, excise,
real or personal property, asset, sales, use, license, payroll, transaction,
capital, net worth and franchise taxes, estimated taxes, withholding,
employment, social security, workers compensation, utility, severance,
production, unemployment compensation, occupation, premium, windfall profits,
transfer and gains taxes, or other governmental charges of any nature whatsoever
imposed by any government or taxing authority of any country or political
subdivision of any country and any liabilities with respect thereto, including
any penalties, additions to tax, fines or interest thereon, and includes any
liability of the Company arising under any tax sharing agreement to which the
Company is or has been a party. For purposes of this Agreement, (i) "Affiliated
Group" shall mean any affiliated group within the meaning of Internal Revenue
Code (S) 1504(a) (or any similar group defined under a similar provision of
state, local or foreign law), (ii) Affiliated Period shall mean each taxable
period during which the Company was a member of an Affiliated Group for all or
part of such period, and (iii) "Return" shall mean any report, return,
statement, estimate, declaration, notice, form or other information required to
be supplied to a taxing authority in connection with Taxes.
(b) Schedule 2.23(b) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which the Company (and for each
Affiliated Period, each Affiliated Group of which the Company was a member) has
filed an income, franchise, sales and use tax return. Except as set forth on
Schedule 2.23(b), (i) there is no action, suit, proceeding or claim currently
pending, or to the knowledge of the Company, threatened, regarding any Taxes for
which the Company could be liable, (ii) there are no Tax Returns with respect to
which an audit or examination is in progress or with respect to which a written
notification of intent to audit or examine has been received by the Company (and
for each Affiliated Period, each Affiliated Group of which the Company was a
member) from the IRS or any other taxing authority that relate to Taxes for
which the Company (and for each Affiliated Period, each Affiliated Group of
which the Company was a member) could be liable, (iii) no taxing authority in a
jurisdiction where the Company (and for each Affiliated Period, each Affiliated
Group of which the Company was a member) does not file Tax Returns has made a
claim, assertion or threat that such non-filing entity is or may be subject to
taxation by such jurisdiction, (iv) the Company has not been a member of a
consolidated, combined or unitary group for federal or state income tax
purposes, (v) the Company is not a party to any Tax allocation or sharing
agreement and (vi) the Company does not have any liability for the Taxes of any
person as a transferee or successor or by contract.
18
2.24. Environmental Protection. Except as set forth on Schedule 2.24(a),
------------------------
the Company has been operated at all times, and is, in material compliance with
all applicable Environmental Laws, including all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in all applicable Environmental Laws. Except as set forth
on Schedule 2.24(b), the Company has obtained, is in material compliance with,
and has made all appropriate filings for issuance or renewal of, all permits,
licenses, authorizations, registrations and other governmental consents required
by any applicable Environmental Laws ("Environmental Permits"), including,
without limitation, those regulating the use, storage, treatment,
transportation, release, emission or disposal of Hazardous Substances, and all
such Environmental Permits are in full force and effect. Except as set forth on
Schedule 2.24(c), there are no claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings of which the Company has received notice or otherwise should or has
reason to have knowledge pending or, to the knowledge of the Company, threatened
against the Company, and no requests from any governmental authority to perform
any investigatory or remedial activity have been made to the Company, that are
based on or related to any actual or alleged release of Hazardous Substances or
any other Environmental Matters or the failure to have any required
Environmental Permits. Except as set forth on Schedule 2.24(d), there are no
past or present conditions, events, circumstances, facts, activities, practices,
incidents, actions or omissions of the Company or its predecessors that (i) may
give rise to any liability or other obligation under any past, current or
proposed Environmental Laws that may require the Company to incur any material
Environmental Costs, (ii) may form the basis of any claim, action, suit,
proceeding, hearing, investigation or inquiry against the Company that may
require the Company to incur any material Environmental Costs, or (iii) may
interfere with or prevent continued material compliance by the Company with
Environmental Laws and/or Environmental Permits. Except as set forth on Schedule
2.24(e), to the knowledge of the Company there are no (and have never been any)
underground or aboveground storage tanks, incinerators or surface impoundments
at, on, under, about, or within any Owned Real Property or Leased Real Property.
Except as set forth on Schedule 2.24(f), neither the Company nor any of its
Subsidiaries has received any notice (written or oral) or other communication
that the Company or its Subsidiaries is or may be a potentially responsible
party or otherwise liable in connection with any waste disposal site allegedly
containing, or other location used for the disposal of, any Hazardous
Substances. Schedule 2.24(g) contains a list of all sites or locations used by
or on behalf of the Company or its Subsidiaries for the disposal of any waste
containing Hazardous Substances.
19
For the purposes of this Section 2.24, the following terms shall have the
meanings indicated:
"Environmental Costs" shall mean, without limitation, any actual or
-------------------
potential cleanup costs, remediation, removal, or other response costs
(including without limitation costs to cause the Company, or any of the
Company's properties or assets, to come into compliance with Environmental
Laws), investigation costs (including without limitation fees of consultants,
counsel, and other experts in connection with any environmental investigation,
testing, audits or studies), losses, liabilities or obligations (including
without limitation liabilities or obligations under any lease or other
contract), payments, damages (including without limitation any actual, punitive
or consequential damages under any statutory laws, common law cause of action or
contractual obligations, and any damages (a) of third parties for personal
injury or property damage, or (b) to natural resources), civil or criminal fines
or penalties, judgments, and amounts paid in settlement, arising out of,
relating to, or resulting from any Environmental Matter.
"Environmental Laws" shall mean, without limitation, the Comprehensive
------------------
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et
--
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
----
(S)(S) 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
-- ----
(S)(S) 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 et
-- ---- --
seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S)(S)
---
136 et seq., the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., the Clean Water
-- --- -- ---
Act (Federal Water Pollution Control Act), 33 U.S.C. (S)(S) 1251 et seq., the
-- ---
Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq., the Occupational Safety
-- ---
and Health Act, 29 U.S.C. (S)(S) 641, et seq., the Hazardous Materials
-- ----
Transportation Act, 49 U.S.C. (S)(S) 1801, et seq., as any of the above statutes
-- ----
have been or may be amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other foreign,
federal, state or local law, statute, ordinance, rule or regulation governing
Environmental Matters, as the same have been or may be amended from time to
time, including any common law cause of action providing any right or remedy
relating to Environmental Matters, all indemnity agreements and other
contractual obligations (including without limitation leases, asset purchase
agreements and merger agreements) relating to environmental matters, and all
applicable judicial and administrative decisions, orders, and decrees relating
to Environmental Matters.
"Environmental Matter" shall mean any matter arising out of, relating to,
--------------------
or resulting from pollution, contamination, protection of the environment, human
health or safety, or health or safety of employees, and any matter relating to
emissions, discharges, disseminations, releases or threatened releases of
Hazardous Substances into the air
20
(indoor or outdoor), surface water, groundwater, soil, buildings, facilities,
real or personal property or fixtures, or otherwise arising out of, relating to,
or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, release or threatened release of
Hazardous Substances.
"Hazardous Substances" shall mean any pollutants, contaminants, substances,
--------------------
materials, wastes, constituents, compounds, chemicals, natural or man-made
elements or forces (including, without limitation, petroleum or any by-products
or fractions thereof, any form of natural gas, lead, asbestos or asbestos-
containing materials ("ACM"), building construction materials and debris,
polychlorinated biphenyls ("PCBs") or PCB-containing equipment, radon and other
radioactive elements, electromagnetic field and other types of radiation, sonic
forces, infectious, carcinogenic, mutagenic, or etiologic agents, pesticides,
defoliants, explosives, flammables, corrosives and urea formaldehyde foam
insulation) that are regulated by, or may now or in the future form the basis of
liability under, any Environmental Laws.
2.25. Consents. Except as set forth on Schedule 2.25, and assuming the
--------
accuracy and completeness of the representations and warranties of the Investors
set forth in Article III hereof, no permit, authorization, consent or approval
of or by, or any notification of or filing with, any person (governmental or
private) is required in connection with the execution, delivery and performance
by the Company of the Documents or any documentation relating thereto, the
consummation by the Company of the transactions contemplated hereby or thereby,
or the issuance, sale or delivery to the Investors of the Series B Preferred
Stock and the Conversion Shares.
2.26. Insurance. Substantially all of the assets of the Company that
---------
are of insurable character (including all material assets of the Company that
are of insurable character) are covered by insurance with reputable insurers
against risks of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice and sufficient
in amount to allow it to replace any of its properties which might be damaged or
destroyed. The Company is not in default with respect to its obligations under
any material insurance policy maintained by it. Schedule 2.26 sets forth a list
of all insurance coverage carried by the Company, the carrier and the terms and
amount of coverage. All such policies and other instruments are in full force
and effect and all premiums with respect thereto have been paid. The Company
has not failed to give any notice or present any claim under any such insurance
policy in due and timely fashion or as required by any of such insurance
policies or has not otherwise, through any act, omission or non-disclosure,
jeopardized or impaired full recovery of any claim under
21
such policies, and there are no claims by the Company under any of such policies
to which any insurance company is denying liability or defending under a
reservation of rights or similar clause. The Company has not received notice of
any pending or threatened termination of any of such policies or any premium
increases for the current policy period with respect to any of such policies and
the consummation of the transactions contemplated by this Agreement will not
result in any such termination or premium increase.
2.27. Brokers. Except as set forth on Schedule 2.27, neither the Company
-------
nor any of its officers, directors, employees or stockholders has employed any
broker or finder in connection with the transactions contemplated by this
Agreement.
2.28. Use of Proceeds. Except as set forth on Schedule 2.28 or as
---------------
otherwise expressly contemplated by this Agreement, the Company is not required
pursuant to any Contract or otherwise to apply the proceeds received from the
Investors pursuant to the transactions contemplated hereby in any specified
manner.
2.29. Previous Issuances Exempt. All shares of capital stock and other
-------------------------
securities issued by the Company prior to the Closing have been issued in
transactions exempt from registration under the Securities Act, and all
applicable state securities or "blue sky" laws. The Company has not violated the
Securities Act or any applicable state securities or "blue sky" laws in
connection with the issuance of any shares of capital stock or other securities
prior to the Closing. The Company has not offered any of its capital stock, or
any other securities, for sale to, or solicited any offers to buy any of the
foregoing from the Company, or otherwise approached or negotiated with any other
person in respect thereof, in such a manner as to require registration under the
Securities Act.
2.30. Real Property. Schedule 2.30 lists all real property owned or
-------------
leased by the Company. The Company has title to its owned real properties
(collectively, the "Owned Real Properties") in each case, free and clear of all
imperfections of title and all Encumbrances, except for (a) those consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of such property or irregularities in title thereto
which, individually and in the aggregate, do not materially impair the use of
such property, (b) warehousemen's, mechanics', carriers', landlords',
repairmen's or other similar Encumbrances arising in the ordinary course of
business and securing obligations not yet due and payable, (c) other
Encumbrances which arise in the ordinary course of business and which
individually and in the aggregate do not materially impair its use of such
property or its ability to obtain financing by using such asset as collateral
(encumbrances referenced in clauses (a), (b) and (c), collectively referred to
as
22
the "Permitted Encumbrances") and (d) Encumbrances listed on Schedule 2.31. The
Company has leasehold title to its leased real properties (collectively, the
"Leased Real Properties," together with the Owned Real Properties, the "Real
Properties"), and, in each case, has not taken or failed to take any action that
would result in the creation of any Encumbrance with respect to any Leased Real
Property. To the best knowledge of the Company without investigation, other than
as described on Schedule 2.31, there are no intended public improvements which
will result in any charge being levied against, or in the creation of any
Encumbrances upon, the Leased Real Properties or any portion thereof. To the
best knowledge of the Company without investigation, there are no options,
rights of first refusal, rights of first offer or other similar rights with
respect to the Real Properties. With respect to each lease of Real Property to
which the Company is a party, so long as the Company performs all of its
obligations under such lease for Real Property within applicable notice and
grace periods, (x) the rights of the Company under such lease shall not be
terminated and (y) to the best knowledge of the Company, the Company's
possession of such Real Property and the use and enjoyment thereof shall not be
disturbed by any landlord, overlandlord, mortgagee or other superior party.
Except as set forth on the Schedule 2.30, the Company is not obligated to
purchase any Leased Real Property and no leased Real Property is required to be
accounted for under GAAP as a capitalized lease.
2.31. Accounts Receivable. The accounts receivable and notes receivable
-------------------
reflected on the books and records of the Company were and are bona fide
accounts receivable and notes receivable created in the ordinary and usual
course of business in connection with bona fide transactions and consistent with
past practice.
2.32. Investment Banking Services. Except as set forth in Schedule 2.32,
---------------------------
the Company is not a party to any Contract which grants rights to any third
party with respect to the performance of investment banking services for it,
including, without limitation, with respect to its sale or a public offering,
including an initial public offering, of its securities.
2.33. Registration Rights. Except as required by the Registration Rights
-------------------
Agreement or as set forth on Schedule 2.33, the Company has no obligations with
respect to registration under the Securities Act of any of its currently
outstanding securities or any of its securities which may hereafter be issued.
III. Representations and Warranties of the Investors
23
3.1. Investor Representations. Each Investor severally and not jointly
------------------------
represents and warrants to the Company as follows as of the date hereof and the
Closing Date:
(a) Such Investor (or its advisors) is a sophisticated investor
with sufficient financial experience to assess the risks of investing in the
Company and purchasing Series B Preferred Stock, and is acquiring the Series B
Preferred Stock to be purchased by it under this Agreement for its own account,
for investment and not with a view to the distribution thereof within the
meaning of the Securities Act. Such Investor was not formed for the purpose of
acquiring Series B Preferred Stock or otherwise to invest in the Company.
(b) Such Investor understands that (i) except as provided in the
Registration Rights Agreements, the Series B Preferred Stock has not been, and
that the Conversion Shares will not be, registered under the Securities Act or
any state securities laws, by reason of their issuance by the Company in a
transaction exempt from the registration requirements thereof and (ii) the
Series B Preferred Stock and the Conversion Shares may not be sold unless such
disposition is registered under the Securities Act and applicable state
securities laws or is exempt from registration thereunder.
(c) Such Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Investor) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales only in limited amounts.
(d) Except as set forth on Schedule 3.1(d), such Investor has not
employed any broker or finder in connection with the transactions contemplated
by this Agreement.
(e) Such Investor is an "Accredited Investor" (as defined in Rule
501(a) under the Securities Act).
3.2. Representations and Warranties of Beacon. Beacon represents and
----------------------------------------
warrants to the Company as follows as of the date hereof and the Closing Date:
(a) Beacon is validly existing under the laws of the state of
Delaware, is resident in New York and has all power and authority to enter into
and perform each of the Documents to which it is a party. Each of the Documents
to which it is a party has been duly authorized by all necessary action on the
part of Beacon. Each of the Documents to which it is a party constitutes a valid
and binding agreement of Beacon
24
enforceable against Beacon in accordance with its terms except to the extent
that enforceability may be limited by principles of equity, bankruptcy,
insolvency or other similar laws affecting creditors' rights generally.
(b) The execution, delivery and performance by Beacon of each of
the Documents to which it is a party and the consummation by Beacon of the
transactions contemplated thereby will not (i) violate any provision of law,
statute, rule or regulation, or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body applicable
to it, or any of its properties or assets or (ii) violate its organizational
documents.
(c) No permit, authorization, consent or approval of or by, or any
notification of or filing with, any person (governmental or private) is required
in connection with the execution, delivery and performance by Beacon of each of
the Documents to which it is a party or any documentation relating thereto, or
the consummation by Beacon of the transactions contemplated thereby.
3.3. Representations and Warranties of ▇▇▇▇. ▇▇▇▇ represents and
--------------------------------------
warrants to the Company as follows as of the date hereof and the Closing Date:
(a) ▇▇▇▇ is validly existing under the laws of the state of
Massachusetts, is resident in Massachusetts and has all power and authority to
enter into and perform each of the Documents to which it is a party. Each of the
Documents has been duly authorized by all necessary action on the part of ▇▇▇▇.
Each of the Documents constitutes a valid and binding agreement of ▇▇▇▇
enforceable against ▇▇▇▇ in accordance with its terms except to the extent that
enforceability may be limited by principles of equity, bankruptcy, insolvency or
other similar laws affecting creditors' rights generally.
(b) The execution, delivery and performance by ▇▇▇▇ of each of the
Documents to which it is a party and the consummation by ▇▇▇▇ of the
transactions contemplated thereby will not (i) violate any provision of law,
statute, rule or regulation, or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body applicable
to it, or any of its properties or assets or (ii) violate its organizational
documents.
(c) No permit, authorization, consent or approval of or by, or any
notification of or filing with, any person (governmental or private) is required
in connection with the execution, delivery and performance by ▇▇▇▇ of each of
the
25
Documents to which it is a party or any documentation relating thereto, or the
consummation by ▇▇▇▇ of the transactions contemplated thereby.
(d) ▇▇▇▇ is an institutional buyer as contemplated by Massachusetts
securities laws.
3.4. Representations and Warranties of SLI. SLI represents and warrants
-------------------------------------
to the Company as follows as of the date hereof and the Closing Date:
(a) SLI is validly existing under the laws of the state of
Delaware, is resident in Massachusetts and has all power and authority to enter
into and perform each of the Documents to which it is a party. Each of the
Documents has been duly authorized by all necessary action on the part of SLI.
Each of the Documents constitutes a valid and binding agreement of SLI
enforceable against SLI in accordance with its terms except to the extent that
enforceability may be limited by principles of equity, bankruptcy, insolvency or
other similar laws affecting creditors' rights generally.
(b) The execution, delivery and performance by SLI of each of the
Documents to which it is a party and the consummation by SLI of the transactions
contemplated thereby will not (i) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to it, or any
of its properties or assets or (ii) violate its organizational documents.
(c) No permit, authorization, consent or approval of or by, or any
notification of or filing with, any person (governmental or private) is required
in connection with the execution, delivery and performance by SLI of each of the
Documents to which it is a party or any documentation relating thereto, or the
consummation by SLI of the transactions contemplated thereby.
(d) SLI is an institutional buyer as contemplated by Massachusetts
securities laws.
IV. Certain Covenants
4.1. Operation of the Business Prior to Closing. Between the date of
------------------------------------------
this Agreement and the Closing, unless otherwise agreed in writing by Beacon,
the Company shall:
26
(a) except as otherwise allowed or required pursuant to the terms
of this Agreement, conduct its business and operations only in the ordinary
course in a manner consistent with past practice;
(b) use best efforts to preserve intact its current business
organization, keep available the services of its current officers, employees,
and agents, and maintain the relations and good will with all material
suppliers, customers, licensers, licensees, landlords, trade creditors,
Employees, agents, and others having material business relationships with the
Company;
(c) confer with Beacon concerning operational matters of a material
nature;
(d) maintain in full force and effect the insurance described in
Section 2.26 or insurance providing at least comparable coverage;
(e) maintain all the properties and assets of the business and
operations of the Company in the ordinary course consistent with past practice;
(f) maintain its books and records in the usual, regular and
ordinary manner, on a basis consistent with prior years;
(g) perform and comply with its obligations under all Contracts in
the ordinary course of business, consistent with past practice;
(h) furnish to the Investors copies of all financial statements and
certificates and reports concerning operation of the business, as and when such
financial statements, certificates and reports are delivered to any other person
or entity; and
(i) report periodically to the Investors concerning the status and
operation of the business and operations of the Company.
4.2. Conduct of Business of the Company Prior to Closing. Except as
---------------------------------------------------
contemplated by this Agreement or with the prior written consent of Beacon,
during the period from the date of this Agreement to the Closing, the Company
shall not, without the prior written consent of Beacon:
27
(a) amend its charter or bylaws or comparable organizational
documents or the terms of any of its securities or any agreements relating
thereto;
(b) issue, pledge or sell, or authorize the issuance, pledge or
sale of, additional shares of capital stock or other securities of any class or
series, including, without limitation, securities exchangeable for or
convertible into capital stock of any class or series, or any calls,
commitments, rights, warrants or options to acquire any securities or capital
stock;
(c) declare, set aside, make or pay any dividend or other
distribution, acquire, or propose to redeem or purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock, or any of its other
securities;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock, or any of its other
securities;
(e) except for increases in salary, wages and benefits of officers
(other than executive officers) or employees of the Company in the ordinary
course of business in accordance with past practice, increase the compensation
or benefits payable or to become payable to any Employee, or pay any benefit not
required by any existing plan or arrangement or grant any severance or
termination pay to (except pursuant to existing agreements or policies), or
enter into or amend any Employee Agreement or establish, adopt, enter into, or
amend or fund any payments owing under, or accelerate the vesting of any
benefits under, any Company Benefit Plan, except in each case to the extent
required by applicable law;
(f) acquire, sell, lease or dispose of any assets which are
material to the Company, or enter into any commitment to do any of the foregoing
or enter into any material commitment or transaction;
(g) (i) create, incur, assume or prepay any indebtedness for
borrowed money (including obligations in respect of capital leases) except for
short-term debt in the ordinary course of business consistent with past practice
under existing lines of credit, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person or (iii) make any loans, advances or capital
contributions to, or investments in, or enter into any "keep well" arrangements
or other agreement to maintain the financial condition of, any other person;
28
(h) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(i) pay, discharge or satisfy any claims or liabilities, except for
the payment, discharge or satisfaction of liabilities in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof or waive, release, grant, or transfer any rights of
material value or modify in any material respect any existing Contract, other
than in the ordinary course of business consistent with past practice;
(j) (i) make any material Tax election, (ii) settle or compromise
any material Tax Liability or (iii) extend or waive any statute of limitations
in respect of Taxes;
(k) make or agree to make any capital expenditure in an amount in
excess of $10,000;
(l) mortgage, pledge or subject to any Encumbrance any of its
properties or assets, tangible or intangible;
(m) amend, modify or waive the provisions of any material Contract;
(n) take any action that would cause any of the representations and
warranties contained in Section 2 to be untrue at the date made or any future
date or would result in any of the conditions to the consummation of the
transactions contemplated by the Documents not being fulfilled; or
(o) authorize or agree in writing or otherwise to take any of the
foregoing actions.
4.3. Third Party Consents Prior to Closing. Prior to the Closing, the
-------------------------------------
Company shall use commercially reasonable efforts to obtain all consents
required from third parties which are party to Contracts with the Company to the
transactions contemplated by the Documents.
4.4. No Negotiation Prior to Closing. Until such time, if any, as this
-------------------------------
Agreement is terminated pursuant to Section 7, (except with the written consent
of the Investors) the
29
Company will not and will not permit any of its representatives to, directly or
indirectly, solicit, initiate, or encourage any inquiries, offers or proposals
from, discuss or negotiate with, execute any agreement regarding or provide any
information to, any person (other than the Investors) relating to any
transaction involving an equity investment in the Company, the sale of the
business or operations of the Company or a substantial amount of the property or
assets of the Company, or of any of the capital stock or any other equity
securities of the Company (including by way of an initial public offering), or
any merger, consolidation, business combination, liquidation, recapitalization,
dissolution or similar transaction involving the Company or any other
transaction the consummation of which would or could reasonably be expected to
impede, interfere with, prevent or materially delay the transactions
contemplated by the Documents or which would or could reasonably be expected to
materially dilute the benefits to the Investors of the transactions contemplated
by the Documents (collectively, "Transaction Proposals"). If any such inquiries
or Transaction Proposals are received by, or any such information is requested
from or any such negotiations or discussions are sought to be initiated with the
Company, then the Company will promptly notify the Investors of the nature,
terms and status of the foregoing and the identity of the inquiring party and
provide the Investors with a copy of all written materials provided in
connection with such Transaction Proposal. Until such time, if any, as this
Agreement is terminated pursuant to Section 7 (except with the written consent
of the Investors) the Company will not accept any Transaction Proposal from any
person or entity other than the Investors. This Section 4.4 shall not apply to
any transaction contemplated hereby, including the contemplated sale or issuance
of Series B Preferred Stock as described in Sections 1.1 and 2.3(a)(i), the
repurchase by the Company of 5,000 shares of Series A Preferred Stock from
Resource Bancshares Corporation and the grant of stock options pursuant to the
Company's 1997 Stock Option Plan (including, without limitation, options granted
to management of PROTOCALL New Business Specialists, Inc. in connection with the
acquisition thereof by the Company).
4.5. Access to Records Prior to Closing. During the period commencing on
----------------------------------
the date of this Agreement and continuing through the Closing, the Company shall
(i) afford to Beacon and its representatives full access, during normal business
hours, upon reasonable advance notice, with due regard to its ongoing
operations, to the personnel, properties, contracts, books and records, and
other documents and data of the Company, (ii) furnish Beacon and its
representatives with copies of all such contracts, books and records (including,
but not limited to, Tax Returns), and other existing documents and data as
Beacon and its representatives may reasonably request, and (iii) furnish Beacon
and its representatives such additional financial, operating, and other data and
information as Beacon and its representatives may reasonably request. No
investigation or receipt of
30
information shall affect any representation or warranty of the Company contained
in this Agreement or the conditions to the obligations of the Investors
specified in this Agreement.
4.6 Post-Closing Covenants. From and after the date hereof:
----------------------
(a) Access to Records. Until such time as Beacon and its Affiliates
-----------------
own in the aggregate less than 5% of the outstanding Common Stock of the Company
(for the purposes hereof calculated by including outstanding shares of Series A
Preferred Stock and Series B Preferred Stock on an as-converted basis), the
Company shall afford Beacon and its representatives full access, during normal
business hours, upon reasonable advance notice, with due regard to its ongoing
operations, to the personnel, properties, contracts, books and records, and
other documents and data of the Company.
(b) System of Accounting. The Company shall maintain its books of
--------------------
account and other financial and corporate records in accordance with good
business and accounting practices and the financial condition of the Company.
(c) Maintenance of Corporate Existence, etc. The Company shall
---------------------------------------
maintain in full force and effect its corporate existence, rights, governmental
approvals and franchises and all licenses and other rights to use patents,
processes, trademarks, trade names or copyrights owned or possessed by it and
deemed by it to be material to the conduct of its business.
(d) Compliance with Laws. The Company shall comply in all material
--------------------
respects with all applicable laws, rules, regulations and orders.
(e) Maintenance of Properties and Leases. To the extent they are
------------------------------------
material to the conduct of its business, (i) the Company shall keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all reasonably needful and proper, or
legally required, repairs, renewals, replacements, additions and improvements
thereto; and (ii) the Company shall comply at all times with each provision of
all leases to which it is a party or under which it occupies, or has possession,
of, property.
(f) Insurance. The Company shall keep its assets which are of an
---------
insurable character, if any, insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and other hazards and risks
and liability to
31
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated. The Company shall maintain after the
Closing the directors' and officers' liability insurance described in Section
5.13.
(g) Licenses and Permits. The Company shall use its best efforts to
--------------------
obtain all federal, state, local and foreign governmental licenses, permits and
qualifications material to and necessary in the conduct of business as proposed
to be conducted.
(h) Compliance with Contracts. The Company shall comply with all
-------------------------
material obligations which it incurs pursuant to any contract or agreement,
whether oral or written, express or implied, as such obligations become due,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto.
(i) Confidentiality Agreements. The Company shall use its best
--------------------------
efforts to obtain a confidentiality agreement from its future officers, key
employees and other employees who will have access to confidential information
of the Company upon their employment.
(j) Disclosure of Investment. The Company shall not, directly or
------------------------
indirectly, (i) except as may be necessary or desirable in connection with a
request by a governmental agency, regulatory or supervisory authority or court
or as required by law, disclose the transactions contemplated by the Documents
or any of the terms thereof without the prior consent of the Investors, (ii) use
in advertising or publicity the name of any party hereto, or any partner or
employee of such party hereto or any of its respective affiliates, or any trade
name, trademark, trade device, service ▇▇▇▇, symbol or any abbreviation,
contraction or simulation thereof owned by any party hereto or any of its
respective affiliates, in either case without the prior written consent of such
party or (iii) represent, directly or indirectly, that any product or service
provided by the Company has been approved or endorsed by an Investor without the
prior written consent of such Investor; provided, however, the Company may
-------- -------
orally disclose: (i) that an Investor is a stockholder of the Company and (ii)
the percentage of the outstanding shares of capital stock of the Company held by
such Investor; provided, however, further, that the Company may, subject to
-------- ------- --------
review and consent of an Investor (which consent will not be unreasonably
withheld), disclose information with respect to such Investor's purchase of
Series B Preferred Stock hereunder solely as required to be made in the
Company's
32
financial statements in accordance with GAAP and/or the requirements of the
United States Securities and Exchange Commission.
(k) Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of Series B Preferred Stock hereunder as set forth on Schedule 4.6(k).
(l) Board of Directors. At and after the Closing, the Company shall
------------------
cause the board of directors of the Company to be comprised of the number of
directors as contemplated by the Shareholders' Agreement.
(m) Election of Directors. On the Closing Date, the Company shall
---------------------
cause ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ to be elected to the board of
directors of the Company.
(n) Directors' and Officers' Insurance. The Company shall obtain,
----------------------------------
with financially sound and reputable insurers, directors' and officers'
liability insurance, as soon as reasonably practicable following the Closing and
maintain such insurance in full force and effect thereafter, in the amount of
$3,000,000 per occurrence and $5,000,000 in the aggregate or a binder with
respect to such insurance in form and substance satisfactory to Beacon.
(o) The Merger. The Company shall exercise the Option (as defined
----------
in Section 8.14) and consummate the Merger in accordance with the terms of the
Merger Agreement, simultaneously with the Closing.
V. Survival of Representations, Warranties, Agreements and Covenants, etc.
All representations and warranties in the Documents shall survive the
Closing until the earlier of (i) the fifth anniversary of the date hereof and
(ii) the consummation of a Qualified IPO (as defined in the Shareholders'
Agreement) (except to the extent a Claim Notice (as defined in Section 10.3)
shall have been given prior to such date with respect to a breach of a
representation and warranty, in which case such representation and warranty
shall survive until such claim is resolved and shall in no way be affected by
any investigation or knowledge of the subject matter thereof made by or on
behalf of Beacon; provided, however, (x) the representations and warranties set
-------- -------
forth in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 3.1, 3.2, 3.3, 3.4 and 8.14 and the
final sentence of Section 2.16(a) shall survive the Closing indefinitely and (y)
the representations and warranties set forth in Sections 2.19, 2.20, 2.23, 2.24
and 2.28 shall survive the Closing until the expiration of
33
the applicable statute of limitations (except to the extent a Claim Notice
shall have been given prior to such date with respect to a breach of a
representation and warranty, in which case such representation and warranty
shall survive until such claim is resolved). All agreements contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
VI. Expenses
Each party hereto shall pay all of the costs and expenses incurred by it or
on its behalf in connection with this Agreement and the consummation of the
transactions contemplated hereby; provided that, notwithstanding the foregoing,
--------
the Company shall pay to Beacon an amount in cash equal to the lesser of (i)
100% of Beacon's out of pocket fees and expenses (including, without limitation,
fees and disbursements of Beacon's attorneys, accountants and consultants)
incurred in connection with Beacon's due diligence review of the Company and the
negotiation and execution of the Documents and the transactions contemplated
thereby and (ii) $170,000. Beacon shall deliver to the Company copies of all
due diligence and other reports with respect to the cost of which the Company
has reimbursed Beacon (other than under circumstances that would, upon delivery
of such materials by Beacon, result in a violation or loss of any privilege with
respect to such materials or the information contained therein).
VII. Indemnification
7.1. General Indemnification. The Company shall, on an after Tax basis,
-----------------------
indemnify, defend and hold the Investors, their affiliates, their respective
officers, directors, partners, members, employees, agents, representatives,
successors and assigns (each an "Investor Entity") harmless from and against all
Losses (as defined below) incurred or suffered by an Investor Entity (whether
incurred or suffered directly or indirectly through ownership of Common Stock or
Preferred Stock) arising or resulting from the breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in any certificate or other instrument delivered by the Company
pursuant hereto including, without limitation, the Documents. The Investors,
severally but not jointly, shall, on an after Tax basis, indemnify, defend and
hold the Company, its affiliates, their respective officers, directors,
employees, agents, representatives, successors and assigns harmless from and
against all Losses arising from the breach of any of their respective
representations, warranties, covenants or agreements in this Agreement or in any
certificate or other instrument delivered by them pursuant
34
hereto, including, without limitation, the Documents. All claims for
indemnification for Losses arising in connection with certificates, instruments
or Documents shall be governed by and subject to this Article VII.
7.2. Indemnification Principles. For purposes of this Article VII, (a)
--------------------------
"Losses" shall mean each and all of the following items: claims, losses,
(including, without limitation, losses of earnings of Intek and its Affiliates)
liabilities, obligations, payments, damages (actual, punitive or consequential),
charges, judgments, fines, penalties, amounts paid in settlement, reasonable
costs and expenses (including, without limitation, interest that may be imposed
in connection therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts); and (b) each of the representations and
warranties made by any party in this Agreement or in any certificate or other
instrument delivered pursuant hereto, including, without limitation, the
Documents, shall be deemed to have been made without the inclusion of
limitations or qualifications as to materiality or knowledge such as the words
"material adverse affect," "immaterial," "material," "in all material respects"
and "knowledge," "best knowledge" or "knowingly" or words of similar import.
Any indemnification payment by the Company to an Investor pursuant to this
Article VII shall include an additional amount so that such Investor suffers no
Loss as a result of any diminution in the book value of the stockholder's equity
related to its investment under the Agreement as a result of such
indemnification payment. Any payment by the Company to an Investor pursuant to
this Article VII, shall be treated for federal income tax purposes as an
adjustment to the price paid by such Investor for the Series B Preferred Stock
pursuant to this Agreement.
7.3. Claim Notice. A party seeking indemnification under this Article
------------
VII shall, promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom indemnification is
being sought a claim notice relating to such Loss (a "Claim Notice"). Each Claim
Notice shall specify the nature of the claim, the applicable provision(s) of
this Agreement or other instrument under which the claim for indemnity arises,
and, if possible, the amount or the estimated amount thereof. No failure or
delay in giving a Claim Notice (so long as the same is given prior to expiration
of the representation or warranty upon which the claim is based) and no failure
to include any specific information relating to the claim (such as the amount or
estimated amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation of the
party from whom indemnity is sought except to the extent such party is
materially prejudiced thereby.
35
7.4. Claim Procedure
---------------
(a) Procedure for Indemnification with Respect to Third-Party
---------------------------------------------------------
Claims. If any indemnified party hereunder determines to seek indemnification
------
under this Article VII with respect to Losses resulting from the assertion of
liability by third parties, such indemnified party shall give notice to the
indemnifying party hereunder within 30 days of such indemnified party becoming
aware of any such Losses or of facts upon which any claim for such Losses will
be based; the notice shall set forth such material information with respect
thereto as is then reasonably available to such indemnified party. In case any
such liability is asserted against such indemnified party, and such indemnified
party notifies the indemnifying party thereof, the indemnifying party will be
entitled, if it so elects by written notice delivered to such indemnified party
within 10 days after receiving such indemnified party's notice, to assume the
defense thereof with counsel satisfactory to such indemnified party, in which
case, the indemnifying party will not be liable to the indemnified party under
this Section 7.4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
following sentence or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party. Notwithstanding the foregoing, (i) such indemnified party
shall also have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless such indemnified party shall reasonably determine that there is a
conflict of interest between or among such indemnified party and the
indemnifying party with respect to such claim, in which case the fees and
expenses of such counsel will be borne by the indemnifying party, (ii) such
indemnified party shall not have any obligation to give any notice of any
assertion of liability by a third party unless such assertion is in writing,
(iii) the rights of such indemnified party to be indemnified hereunder in
respect of any Losses that may or do result from the assertion of liability by
third parties shall not be adversely affected by its failure to give notice
pursuant to the foregoing unless, and, if so, only to the extent that, the
indemnifying party is materially prejudiced thereby, and (iv) the indemnifying
party's obligations to such indemnified party under this Article VII shall not
terminate until such indemnified party's claims have been finally satisfied to
such indemnified party's sole satisfaction. In the event that the indemnifying
party, within 10 days after receipt of the aforesaid notice of a claim
hereunder, fails to assume the defense of such indemnified party against such
claim, such indemnified party shall have the right to undertake the defense,
compromise, or settlement of such action on behalf of and for the account,
expense, and risk of the indemnifying party.
36
Notwithstanding anything in this Article VII to the contrary, (i) if there is a
reasonable probability that a claim may materially adversely affect such
indemnified party, such indemnified party shall have the right to participate in
such defense, compromise, or settlement and the indemnifying party shall not,
without such indemnified party's written consent (which consent shall not be
unreasonably withheld), settle or compromise any of such claims, or consent to
entry of any judgment in respect thereof unless such settlement, compromise, or
consent includes as an unconditional term thereof the giving by the claimant or
the plaintiff to such indemnified party a release from all liability in respect
of such claim. With respect to any assertion of liability by a third party that
results in any claim for indemnification hereunder, the parties hereto shall
make available to each other all relevant information in their possession
material to any such assertion.
(b) Procedure For Indemnification with Respect to Non-Third Party
-------------------------------------------------------------
Claims. In the event that an indemnified party asserts the existence of a claim
------
with respect to Losses (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to the indemnifying
party. Such written notice shall state that it is being given pursuant to this
Section 7.4(b), specify the nature and amount of the claim asserted, and
indicate the date on which such assertion shall be deemed accepted and the
amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence). If the indemnifying party, within 30 days
after the mailing of notice by such indemnified party, shall not give written
notice to such indemnified party announcing its intent to contest such assertion
of such indemnified party, such assertion shall be deemed accepted and the
amount of claim shall be deemed a valid claim. In the event, however, that the
indemnifying party contests the assertion of a claim by giving such written
notice to such Indemnified party within said period, then the parties shall act
in good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including attorney fees, if the parties hereto, acting in
good faith, cannot reach agreement with respect to such claim within ten days
after such notice.
VIII. Miscellaneous
8.1. Remedies. In case any one or more of the covenants and/or
--------
agreements set forth in this Agreement shall have been breached by any party
hereto, Beacon, SLI and/or Bain, with respect to a breach by the Company, and
the Company, with respect to a breach by an Investor, may proceed to protect and
enforce its rights either by suit in
37
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Agreement. In addition to
the foregoing, (a) if Intek fails to consummate the Merger (as defined in
Section 8.14) other than due to the wrongful failure of Beacon to consummate the
purchase of Series B Preferred Stock as contemplated hereby, the Investors shall
have the right to rescind the Purchase and, in the event of such rescission, the
Company shall refund the Purchase Price in full, and (b) if the Merger is not
consummated due to a material breach of the Merger Agreement (as defined in
Section 8.14) by PROTOCALL New Business Specialists, Inc., (i) the Company
hereby assigns all of its rights and remedies under the Merger Agreement with
respect to repayment of the Option purchase price, and (ii) the Company's
obligations under the notes shall automatically terminate immediately upon first
discovery of such breach.
8.2. Transfer Taxes. The Company agrees that it will pay, and will hold
--------------
Beacon, SLI and Bain harmless from any and all liability with respect to any
transfer, documentary, stamp or other similar Taxes that may be determined to be
payable in connection with the execution and delivery and performance of this
Agreement, and that it will similarly pay and hold Beacon, SLI or Bain, as
applicable, harmless from all Taxes in respect of the issuance of the Series B
Preferred Stock and the Conversion Shares to Beacon, SLI or Bain, as applicable,
each as contemplated by this Agreement. Notwithstanding the foregoing, the
Company shall have no obligation to pay or hold Beacon, Bain or SLI, as
applicable, harmless with respect to any transfer, documentary, stamp or other
similar Taxes that may be determined to be payable in connection with the
transfer by Beacon, Bain or SLI, as applicable, of shares of Series B Preferred
Stock or Conversion Shares to any other Person.
8.3. Further Assurances. At any time or from time to time after the
------------------
Closing, the Company, on the one hand, and each of Beacon, SLI and Bain, on the
other hand, agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and to take
all such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the transactions contemplated hereby
relating to the Purchase and to otherwise carry out the intent of the parties
hereunder.
38
8.4. Successors and Assigns; Assignment. This Agreement shall bind and
----------------------------------
inure to the benefit of the Company, Beacon, SLI and Bain and the respective
successors, permitted assigns, heirs and personal representatives of the
Company, Beacon, SLI and Bain. In addition, and whether or not any express
assignment has been made, except as otherwise expressly stated in this
Agreement, the provisions of Articles II, IV, VIII, IX, X and XII of this
Agreement that are for Beacon's, SLI's and/or ▇▇▇▇'▇ benefit as a purchaser or
holder of Series B Preferred Stock, are also for the benefit of, and enforceable
by, any subsequent holder of such Series B Preferred Stock and/or Conversion
Shares. Neither this Agreement nor any rights hereunder may be transferred
prior to the Closing Date without the written consent of the Company and Beacon.
8.5. Entire Agreement. This Agreement and the other writings referred to
----------------
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
8.6. Notices. All notices, requests, consents and other communications
-------
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
(a) if to the Company, to:
Intek Information Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: G. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
39
(b) if to Beacon, to:
The Beacon Group III - Focus Value Fund, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Shine, Esq.
(c) if to Bain or SLI, to:
c/o Bain & Company, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Treasurer
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
8.7. Amendments. The terms and provisions of this Agreement may only be
----------
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, pursuant to the written consent of the Company, Beacon, Bain and
SLI.
8.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
40
8.9. Headings. The headings of the sections of this Agreement have been
--------
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
8.10. Nouns and Pronouns. Whenever the context may require, any pronouns
------------------
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and vice
versa.
8.11. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York, the State of Delaware and of the United States
of America, in each case located in the County of New York or the County of New
Castle, Delaware, as applicable, for any action, proceeding or investigation in
any court or before any governmental authority ("Litigation") arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any Litigation relating thereto except in such courts). Each of
the parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York, the
State of Delaware or the United States of America, in each case located in the
County of New York or the County of New Castle, Delaware, as applicable, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum.
8.12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
8.13. Knowledge. As used herein, "knowledge of the Company" and
---------
similar phrases shall mean, in addition to actual knowledge of the Company, (a)
the actual knowledge of any officer, director or key employee of the Company and
(b) with respect to any such Person, knowledge that such Person should have or
could reasonably be inferred to have by virtue of such Person's activities,
circumstances or relationship with the Company and its business.
41
8.14. Option Financing. Subject to the terms and conditions hereof,
----------------
and in reliance upon the representations and warranties and covenants of the
Company herein, in connection with the merger (the "Merger") of a Subsidiary of
------
the Company with PROTOCALL New Business Specialists, Inc. (the "Acquired
--------
Corporation") pursuant to an agreement and plan of reorganization (the "Merger
----------- ------
Agreement") substantially in the form previously delivered to Beacon among the
---------
Company, the Acquired Corporation and the shareholders of the Acquired
Corporation, Beacon hereby agrees to purchase from the Company, and the Company
hereby agrees to sell and issue to Beacon, the Company's promissory note (the
"Note") substantially in the form attached hereto as Exhibit G in exchange for
-----
$800,000 (the "Option Financing"). Payment of the obligations of the Company to
----------------
▇'▇▇▇▇▇▇▇, Fundmark Investment Company Services, Inc. and Eden Financial Group,
Inc. in connection with certain obligations of the Company owed to such parties
shall be subordinated and junior in right of payment to payment of the
obligations of the Company under the Note as set forth in the subordination
letter (the "Subordination Letter") substantially in the form attached hereto as
--------------------
Exhibit H. The Company hereby covenants that the proceeds of the Option
Financing shall only be used to purchase an option and provide merger
consideration in connection with the Merger. In addition to the representations
and warranties of the Company set forth in Section 2, the Company hereby
represents and warrants to Beacon in connection with the Option Financing that
the Merger and the execution, delivery and performance of any agreements or
other documents in connection therewith has been duly authorized by all
requisite corporate action on the part of the Company. The proceeds of the
Option Financing shall be paid to the Company, and the Company shall deliver the
Note duly executed thereby to Beacon, simultaneously with the execution of this
Agreement and the Merger Agreement at such place and time as previously agreed
upon by the Company and Beacon (such time of payment and delivery being referred
to herein as the "Option Financing Closing Date"). Payment shall be made in
-----------------------------
same-day funds by wire transfer to such account or accounts as are specified for
payment by the Company of the cash portion of the merger consideration payable
pursuant to the Merger Agreement against delivery to Beacon of the Note. In
addition to the foregoing, on the Option Financing Closing Date, Beacon shall
have received the Subordination Letter duly executed by the parties thereto.
8.15. Termination. This Agreement may be terminated by written notice
-----------
given prior to the Closing: (a) by Beacon, if the Merger has not been
consummated by February 21, 1997, or such later date as the parties hereto may
agree in writing, (b) by any party hereto, if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply full with such party's obligations under this Agreement) on or before
February 21, 1997, or such later date as the parties hereto may agree in writing
or (c) by the Investors, if a material breach of any of the representations,
42
warranties or covenants of the Company set forth in this Agreement has been
committed between the date hereof and the Closing, and such breach has not been
either waived by Beacon or cured by the Company within 10 days after the
Company's receipt of written notice thereof from Beacon. Termination of this
Agreement pursuant to this Section 8.15 shall terminate all obligations of the
parties hereto except for the obligations under Sections 4.6(j). 8.1, 8.6, 8.11,
8.13 and 8.14 and Articles VI and VII; provided that termination of this
--------
Agreement pursuant to this Section 8.15 (other than clause (b) of this first
sentence of this Section 8.15) shall not relieve a defaulting or breaching party
hereunder from any liability to the other parties hereto resulting from the
default or breach hereunder of such defaulting or breaching party occurring
prior to the date of termination; provided, further, that, so long as any
-----------------
obligations shall remain outstanding under the Note, all representations and
warranties of the Company in Article II and Section 8.14 and all covenants of
the Company in Article IV (including Section 4.6) and Article VIII shall not
terminate and shall remain in full force and effect.
43
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
INTEK INFORMATION INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
Chief Executive Officer and President
THE BEACON GROUP III-FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, LLC, its general partner
By: Focus Value GP, Inc., its member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇ & COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Treasurer
SQUAM LAKE INVESTORS II, L.P.
By: GPI, Inc., its managing general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Treasurer
44