Exhibit 10.15
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RECAPITALIZATION AGREEMENT
by and among
▇▇▇▇▇▇ ITECH HOLDINGS, L.L.C.
("▇▇▇▇▇▇ Holdings")
BUSINESS SOLUTIONS GROUP, INC.
(the "Company")
BSG HOLDINGS, INC.
("BSG Parent")
and
THE STOCKHOLDERS OF BSG HOLDINGS, INC.
(the "Stockholders")
Dated August 11, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS......................................................2
1.1 Definitions........................................................2
ARTICLE II RECAPITALIZATION.................................................7
2.1 Stock Purchase.....................................................7
2.2 Payment of Purchase Price..........................................8
2.3 The Financing......................................................8
2.4 Redemption.........................................................8
2.5 Recapitalization...................................................8
2.6 Closing............................................................8
2.7 Escrow Arrangements................................................8
Financial Condition....................................................9
2.9 Closing Audit......................................................9
2.10 Post-Closing Net Working Capital Adjustment.......................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY, BSG PARENT AND STOCKHOLDERS...................................10
3.1 Capitalization.....................................................10
3.2 No Liens on Shares.................................................11
3.3 Subsidiaries.......................................................11
3.4 Other Rights to Acquire Capital Stock..............................11
3.5 Due Organization...................................................11
3.6 Due Authorization..................................................12
3.7 Financial Statements...............................................12
3.8 Certain Actions....................................................13
3.9 Properties.........................................................14
3.10 Licenses and Permits..............................................14
3.11 Intellectual Property.............................................15
3.12 Compliance with Laws..............................................16
3.13 Insurance.........................................................16
3.14 Employee Benefit Plans............................................16
(a) Employee Welfare Benefit Plans...............................16
(b) Employee Pension Benefit Plans...............................17
(c) Employment and Non-Tax Qualified Deferred
Compensation Arrangements..................................17
3.15 Contracts and Agreements..........................................17
3.16 Claims and Proceedings............................................18
3.17 Taxes.............................................................18
3.18 Personnel.........................................................19
3.19 Business Relations................................................20
3.20 Accounts Receivable; Accounts Payable; Customer Deposits;
Customer Deposits and Deferred Revenues..........................20
(a) Accounts Receivable..........................................20
(b) Accounts Payable.............................................21
(c) Customer Deposits; Customer Deposits and Deferred Revenues...21
3.21 Bank Accounts; Investments........................................21
3.22 Customer Claims...................................................21
3.23 Brokers...........................................................21
3.24 Affiliated Transactions...........................................21
3.25 Funded Indebtedness; Letters of Credit; Undisclosed Liabilities...22
(a) Funded Indebtedness..........................................22
(b) Letters of Credit............................................22
(c) Undisclosed Liabilities......................................22
3.26 Year 2000.........................................................22
3.27 Information Furnished.............................................22
ARTICLE IV ▇▇▇▇▇▇ HOLDINGS' REPRESENTATIONS AND WARRANTIES.................23
4.1 Due Organization of ▇▇▇▇▇▇ Holdings................................23
4.2 Due Authorization..................................................23
4.3 No Brokers.........................................................23
4.4 Investment.........................................................23
4.5 Information Furnished..............................................23
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY, BSG PARENT,
▇▇▇▇▇▇ HOLDINGS AND STOCKHOLDERS.......................................24
5.1 Consents of Others.................................................24
5.2 Stockholders' Efforts..............................................24
5.3 Powers of Attorney.................................................24
5.4 Conduct of Business Pending Closing................................24
5.5 Access Before Closing..............................................25
ARTICLE VI POST-CLOSING COVENANTS...........................................25
6.1 General............................................................25
6.2 Transition.........................................................26
6.3 Confidentiality....................................................26
6.4 Covenant Not to Compete............................................26
6.5 Additional Matters.................................................26
6.6 Litigation Support.................................................27
6.7 Audits.............................................................27
6.8 Minimum Cash as of the Closing.....................................28
6.9 Stock Options......................................................28
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING.....28
7.1 Conditions to ▇▇▇▇▇▇ Holdings' Obligations.........................28
(a) Covenants, Representations and Warranties....................29
(b) Consents.....................................................29
(c) Leases.......................................................29
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(d) Discharge of Indebtedness and Lien; Stockholder Loans........29
(e) Fee..........................................................29
(f) Transfer Taxes...............................................30
(h) Documents to be Delivered by Stockholders;
BSG Parent and the Company.................................30
(iv) Escrow Agreement......................................30
((ii) Opinion of Stockholder's Counsel.....................30
(iii) Certificates.........................................30
(iii) Release..............................................30
(v) Employment Agreements..................................30
(vi) Delivery of Purchased Shares..........................30
(vii) Redemption of Existing Common Stock..................30
(viii) Resignation of Directors............................31
(ix) Termination of Stockholder Agreements.................31
(i) Company Equity Arrangements...............................31
(j) Restated Certificate of Incorporation.....................31
(k) Financing.................................................31
7.2 Conditions to Stockholders', BSG Parent's and the Company's
Obligations...................................................31
(a) Covenants, Representations and Warranties.................31
(b) Consents..................................................31
(c) Documents to be Delivered by ▇▇▇▇▇▇ Holdings..............32
(ii) Escrow Agreement...................................32
(iii) Employment Agreements.............................32
(iii) Certificates......................................32
(iii) Legal Opinion.....................................32
(d) Company Equity Arrangements...............................32
(e) Payments to BSG Parent....................................32
ARTICLE VIII INDEMNIFICATION...............................................32
8.1 Indemnification by BSG Parent and Stockholders.....................32
8.2 Defense of Claims..................................................33
8.3 Escrow Claim.......................................................34
8.4 Tax Audits, Etc....................................................34
8.5 Indemnification of Stockholders, BSG Parent and the Company........34
8.6 Limits on Indemnification..........................................34
ARTICLE IX TERMINATION.....................................................35
9.1 Termination........................................................35
9.2 Effect of Termination..............................................36
ARTICLE X MISCELLANEOUS....................................................36
10.1 Modifications.....................................................36
10.2 Notices...........................................................36
10.3 Counterparts; Facsimile Transmission..............................38
10.4 Expenses..........................................................38
10.5 Binding Effect; Assignment........................................38
10.6 Entire and Sole Agreement.........................................38
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10.7 Governing Law.....................................................38
10.8 Survival of Representations, Warranties and Covenants.............39
10.9 Invalid Provisions................................................39
10.10 Public Announcements.............................................39
10.11 Remedies Cumulative..............................................39
10.12 Third Parties....................................................39
10.13 No Strict Construction...........................................39
10.14 Disclosure Schedule..............................................40
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LIST OF EXHIBITS
Exhibit A Form of Amended and Restated Certificate of Incorporation
Exhibit B Form of Escrow Agreement
Exhibit C Opinion of the Company's and Stockholders' Counsel
Exhibit D Key Employees of the Company
Exhibit E Form of Release
Exhibit F-1 Form of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit F-2 Form of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment
Exhibit F-3 Form of ▇▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement
Exhibit G Stockholders Accounts and Wire Transfer Instructions((S) 2.4)
Exhibit H Ownership of Shares ((S) 3.1)
Exhibit I-1 Articles ((S) 3.5)
Exhibit I-2 Bylaws ((S) 3.5)
Exhibit I-3 Certificate of Incorporation((S) 3.5)
Exhibit I-4 Bylaws ((S) 3.5)
Exhibit I-5 Qualified Jurisdictions ((S) 3.6)
Exhibit J List of Properties ((S) 3.9)
Exhibit K List of Licenses and Permits ((S) 3.10)
Exhibit L List of Intellectual Property ((S) 3.11)
Exhibit M List of Insurance ((S) 3.13)
Exhibit N List of Contracts ((S) 3.15)
Exhibit O List of Personnel ((S) 3.18)
Exhibit P List of Deferred Revenues and Customer Deposits ((S) 3.20)
Exhibit Q List of Bank Accounts and Investments ((S) 3.21)
Exhibit R List of Letters of Credit and Customer Deposits ((S) 3.25(b))
Exhibit S List of Indebtedness ((S) 7.1(d))
Exhibit T Opinion of ▇▇▇▇▇▇ Holdings' Counsel
LIST OF SCHEDULES
Schedule of Leases
Disclosure Schedule
Recapitalization Schedule
Financial Statements
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "Agreement") is entered into as of
August 11, 1999, by and among ▇▇▇▇▇▇ ITECH HOLDINGS, L.L.C., a Delaware limited
liability company ("▇▇▇▇▇▇ Holdings"), BUSINESS SOLUTIONS GROUP, INC., a
Delaware corporation (the "Company") and BSG HOLDINGS, INC., a Georgia
corporation ("BSG Parent"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as trustee of the ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust dated July 24, 1998 and as trustee of
the ▇▇▇▇▇▇ ▇. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust dated July 24, 1998, D. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ as trustee of the ▇▇▇▇▇▇ Family Trust dated May 22, 1995 and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ as trustee of the ▇▇▇▇▇ Family Trust dated November 28, 1998
(collectively, the "Stockholders").
Recitals
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Pursuant to this Agreement, the Company, which is engaged in the business
of providing information technology consulting services in the United States
(the "Business"), will be recapitalized in a series of transactions (the
"Transactions"). The Transactions will occur in the following steps:
A. THE CURRENT CAPITALIZATION OF THE COMPANY
On the date of this Agreement, the Company's capitalization consists of
100,000 shares of common stock, $.01 par value per share (the "Capital Stock").
BSG Parent is the owner of 100,000 shares of Capital Stock, which stock
represents all of the issued and outstanding stock of the Company (the "Existing
Shares"). The Stockholders own 100,000 shares of the capital stock of BSG
Parent, which stock represents all of the issued and outstanding shares of
capital stock of BSG Parent.
B. THE STOCK PURCHASE
▇▇▇▇▇▇ Holdings desires to purchase from BSG Parent and BSG Parent desires
to sell to ▇▇▇▇▇▇ Holdings an aggregate of 58,378.378 shares of Capital Stock
(the "Stock Purchase") for a cash purchase price of $370 per share (an aggregate
purchase price of $21,600,000), subject to adjustment as provided herein.
C. THE FINANCING
Prior to the Closing, it is anticipated that the Company will enter into a
credit agreement or agreements with a financial institution or institutions (the
"Financing") to be arranged by ▇▇▇▇▇▇ Holdings, which Financing shall provide
for a loan or loans to the Company on commercially reasonable terms in
connection with the Transactions in the principal amount of up to approximately
$10,000,000 (the "Financing Proceeds").
D. THE REDEMPTION
At Closing, 27,027.027 shares (the "Redemption Shares") of the Existing
Shares held by BSG Parent will be redeemed by the Company for a purchase price
of $370 per share (an aggregate redemption price of $10,000,000), subject to
adjustment and escrow holdbacks as provided herein (the "Redemption").
E. THE RECAPITALIZATION
Following the Redemption, the Company will recapitalize itself (the
"Recapitalization") by amending and restating its Certificate of Incorporation
to authorize two classes of capital stock, (i) the Common Stock, $.01 par value
(the "Common Stock") and (ii) the Class A Preferred Stock, par value $.01 per
share (the "Preferred Stock"). Pursuant to the Recapitalization, each issued and
outstanding share of Capital Stock will be exchanged for (i) 185 shares of
Common Stock and (ii).3515 shares of Preferred Stock. A chart showing the
details of the Recapitalization is attached as the Recapitalization Schedule
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hereto.
Agreement
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NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
Definitions. In this Agreement, the following terms have the meanings
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specified or referred to in this Section 1.1 and shall be equally applicable to
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both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"AA" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. and its successors.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Audited Closing Financial Statements" has the meaning specified in Section
2.9.
"BSG Parent" has the meaning specified in the first paragraph of this
Agreement.
"Business" has the meaning specified in the first recital of the Agreement.
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"Business Plan" means that certain five-year business plan of the Company
as presented to ▇▇▇▇▇▇ in June 1999. Except as specifically utilized herein with
respect to the Company's Intellectual Property being adequate to be able to
attain the anticipated diversity of the Company's future customer base, no
representation or warranty is hereby made by the Company, BSG Parent or
Stockholders with respect to the Business Plan or the Company's attainment of
its future projections as set forth in the Business Plan.
"Capital Stock" has the meaning specified in Recital A of the Agreement.
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"Closing" means the closing of the Stock Purchase followed by the
Redemption and subsequently the Recapitalization.
"Closing Date" has the meaning specified in Section 2.6.
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"Closing Redemption Price" shall have the meaning assigned to such term in
Section 2.4(a).
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning specified in Recital E of this Agreement.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Confidential Information" means (i) the terms and provisions of this
Agreement and the Transactions and (ii) all confidential information (for
purposes of this Agreement, confidential information shall refer to all
information which is the subject of reasonable efforts by the Company to
maintain its non-public character or to otherwise prevent such information from
becoming widely known) and trade secrets of the Company or its Affiliates
including, without limitation, any of the same comprising the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals. Confidential Information shall
not include any information (a) which is disclosed pursuant to subpoena or other
legal process, (b) which has been publicly disclosed, or (c) which is
subsequently disclosed to any third party not in breach of a confidentiality
agreement.
"Contracts" has the meaning specified in Section 3.15.
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"Court Order" means any judgment, order, award or decree of any foreign,
federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Disclosure Schedule" means the Disclosure Schedule attached to this
Agreement pursuant to which exceptions to BSG Parent's, the Stockholders' and
the Company's specific representations and warranties set forth in Article III
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(and listed on a Section-by-Section basis) are disclosed to ▇▇▇▇▇▇ Holdings
pursuant to said Article III.
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"Encumbrance" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
title or restrictive covenant.
"Environmental and OSHA Obligations" has the meaning specified in Section
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3.12.
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"Equitable Exceptions" shall have the meaning specified in Section 3.6.
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"Equity Agreements" means those certain equity agreements between ▇▇▇▇▇▇
Holdings, the Company, BSG Parent, the Stockholders and certain executives to be
entered into as of the Closing Date, including without limitation, the
Stockholders Agreement and the Registration Rights Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Union National Bank, N.A.
"Escrow Agreement" means the Escrow Agreement to be executed by and among
the Company, BSG Parent, the Stockholders, ▇▇▇▇▇▇ Holdings and the Escrow Agent
in the form of Exhibit B.
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"Escrow Period" has the meaning specified in Section 2.7.
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"Escrow Sum" has the meaning specified in Section 2.7.
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"Existing Shares" has the meaning specified in Recital A of the Agreement.
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"Financial Statements" has the meaning specified in Section 3.7.
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"Financing" has the meaning specified in Recital C of the Agreement.
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"Financing Proceeds" has the meaning specified in Recital C of the
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Agreement.
"Force Majeure" shall mean any failure or delay caused by acts of god,
flood, fire, war or terrorism or any failure or delay caused by a governmental
blockage of all currency transactions between a foreign Governmental Body and
the United States of America.
"Funded Indebtedness" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable in the ordinary course of business; (iv) indebtedness of others
guaranteed by the Company or secured by an Encumbrance on the Company's
property; (v) letters of credit or similar obligations; and (vi) indebtedness of
the Company under extended credit terms of more than 90 days from vendors
provided to the Company.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
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"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body having jurisdiction over the Company,
BSG Parent and/or the Stockholders.
"Governmental Permits" has the meaning specified in Section 3.10.
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"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"Indemnifiable Costs" has the meaning specified in Section 8.1.
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"Indemnified Parties" has the meaning specified in Section 8.1.
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"Independent Accountants" has the meaning specified in Section 2.9.
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"Intellectual Property" shall mean all of the following as they are related
primarily to the Business: (i) patents, patent applications, patent disclosures
and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate
names, logos, slogans and Internet domain names, together with all goodwill
associated with each of the foregoing; (iii) copyrights and copyrightable works;
(iv) registrations, applications and renewals for any of the foregoing; (v)
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, business and marketing plans, and customer and supplier lists and
related information); and (vi) computer software (including but not limited to
data, data bases and documentation).
"Knowledge of the Company" (whether or not capitalized) shall mean actual
knowledge, after reasonable inquiry within the Company to persons with final or
direct responsibility, of the Stockholders and the officers and employees of the
Company. "Knowledge of the Stockholders" (whether or not capitalized) shall mean
actual knowledge of the Stockholders.
"Leases" shall mean the leases set forth on the Schedule of Leases
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attached.
"Material" (whether or not capitalized) shall, where appropriate in context
of its use in making the representations and warranties set forth in Article
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III, be deemed to mean an amount of money greater than $100,000 individually or
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$180,000 in the aggregate.
"Material Adverse Change" or "Material Adverse Effect" means a material
adverse change or effect on the assets, properties, Business, operations,
liabilities or financial condition of the Company and its subsidiaries, taken as
a whole. In determining whether a "Material Adverse Change" or "Material Adverse
Effect" has occurred in the context of the use of such terms in the Company's,
BSG Parent's and Stockholders' representations and warranties set
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forth in Article III, such terms shall refer to the occurrence of any single
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event, or any series of related events, or set of related circumstances, which
results or likely will result in a loss to the Company, in excess of $100,000
per occurrence or $180,000 in the aggregate.
"Minimum Cash Deficit" has the meaning specified in Section 6.8.
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"Net Working Capital" shall equal the Company's total current assets
(including cash and cash equivalents) minus its total current liabilities (other
than interest and the current portion of any indebtedness) including, without
limitation, any cash to accrual liability borne by the Company and any change in
control payments due to employees, subcontractors, vendors or customers as a
result of the transactions contemplated hereby, each as calculated in accordance
with GAAP.
"Net Working Capital Adjustment" has the meaning specified in Section 2.10.
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.ss.ss.651 et
seq., any amendment thereto, and any regulations promulgated thereunder.
"Permitted Distributions" has the meaning specified in Section 3.8.
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"Permitted Exception" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, (c) purchase money security interest liens solely on the property
acquired pursuant to such credit purchase, or (d) other liens or imperfections
on property which are not material in amount or do not materially detract from
the value or the existing use of the property affected by such lien or
imperfection.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"Preferred Stock" has the meaning specified in Recital E of the Agreement.
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"Projected Net Working Capital" means $3,000,000.
"Purchase Price" has the meaning specified in Section 2.1.
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"Purchased Shares" has the meaning specified in Section 2.1.
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"Recapitalization" has the meaning specified in Recital E of the Agreement.
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"Redemption" has the meaning specified in Recital D of the Agreement.
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"Redemption Price" has the meaning specified in Section 2.4.
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"Redemption Shares" has the meaning specified in Recital D of the
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Agreement.
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"Requirements of Laws" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Stock Purchase" has the meaning specified in Recital B of the Agreement.
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"Tax" or "Taxes" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amounts imposed thereon by any Governmental Body.
"Tax Return" means any return, report or similar statement required to be
filed with respect to any Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
"▇▇▇▇▇▇ Holdings" has the meaning specified in the first paragraph of this
Agreement.
"Transactions" has the meaning specified in the beginning of the recitals
of this Agreement.
ARTICLE II
RECAPITALIZATION
2.1. Stock Purchase. On the Closing Date and subject to the terms and
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conditions set forth in this Agreement, BSG Parent shall sell and deliver to
▇▇▇▇▇▇ Holdings an aggregate of 58,378.378 shares of the Capital Stock (the
"Purchased Shares"), free and clear of all Funded Indebtedness and all
Encumbrances, other than Permitted Exceptions and the restrictions imposed by
federal and state securities laws. The total purchase price for the Purchased
Shares (the "Purchase Price") shall be equal to $21,600,000, subject to any
adjustment required to be made pursuant to Section 2.10 below.
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2.2. Payment of Purchase Price. The Purchase Price shall be payable by
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▇▇▇▇▇▇ Holdings at the Closing (as defined in Section 2.6) in cash by wire
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transfer of immediately available funds to BSG Parent's account as specified in
Exhibit G attached hereto.
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2.3. The Financing. On the Closing Date, the Company shall consummate the
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Financing and shall borrow an amount equal to the Financing Proceeds in order to
consummate the Redemption.
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2.4. Redemption. On the Closing Date and subject to the terms and
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conditions set forth in this Agreement, the Company shall redeem the Redemption
Shares from BSG Parent. Subject to the terms of Section 2.7, which provision
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requires certain holdbacks prior to the distribution of such price to BSG
Parent, the Redemption Shares shall be redeemed at a price of $370 per share,
for an aggregate gross redemption price of $10,000,000 (the "Redemption Price").
The Redemption Price shall be payable as follows:
(a) an aggregate of $6,500,000 shall be paid at Closing by wire
transfer of immediately available funds to BSG Parent's account as specified in
Exhibit G hereto (the "Closing Redemption Price"); and
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(b) $3,500,000 shall be paid in cash to the Escrow Agent at Closing
pursuant to Section 2.7 below to serve as the Escrow Sum (as defined below).
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2.5. Recapitalization. Following the Stock Purchase and the Redemption and
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on the Closing Date, the Company shall amend and restate its Certificate of
Incorporation to authorize the issuance of the two classes of the capital stock
(the Common Stock and the Preferred Stock) each having the rights and
preferences set forth in the Company's Amended and Restated Certificate of
Incorporation in substantially the form of Exhibit A attached hereto and as
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necessary to effect the Transactions. Pursuant to such amendment, each share of
Capital Stock issued and outstanding after the Stock Purchase and the Redemption
shall be exchanged for (i) 185 shares of Common Stock and (ii) .3515 shares of
Preferred Stock.
2.6. Closing. The Closing of the Transactions shall take place at 10:00
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a.m., Eastern Time, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇.▇. in Washington, D.C. on August 12, 1999, or on a date mutually agreed to by
the parties (which date shall be as soon as practicable following the date on
which all of the conditions to Closing set forth in Sections 7.1 and 7.2 have
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been satisfied) (the "Closing Date"), with an Effective Date as of August 1,
1999.
2.7. Escrow Arrangements. Pursuant to the Escrow Agreement to be entered
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into among Stockholders, BSG Parent, the Company, ▇▇▇▇▇▇ Holdings and the Escrow
Agent, $3,500,000 of the Redemption Price shall be delivered to the Escrow Agent
at Closing (such monies paid, together with all interest accrued thereon, is
hereinafter referred to as the "Escrow Sum"). The Escrow Sum shall be held
pursuant to the terms of the Escrow Agreement for payment from such Escrow Sum
of the amounts, if any, owing by BSG Parent to ▇▇▇▇▇▇ Holdings or the Company
pursuant to the provisions of the Net Working Capital Adjustment and the
indemnification provisions of Article VIII below. The Escrow Sum shall be
------------
reduced to an amount equal to (i) $1,500,000 (plus any good faith
indemnification or Net Working Capital Adjustment claims then pending against
the Escrow Sum) within five days after the 90th day following the Closing Date
and (ii) $1,000,000 (plus any good faith indemnification or Net Working Capital
Adjustment claims then pending against the Escrow Sum) within five days after
the 120th day following the Closing Date. To the extent claims against the
Escrow Sum are determined in favor of the Stockholders or BSG Holdings, as
appropriate, all amounts reserved against the Escrow Sum in connection with such
claims shall be remitted by the Stockholders or
-8-
BSG Parent, as appropriate, as soon as practicable following any such
determination. On the first anniversary of the Closing Date (such one-year
period being referred to herein as the "Escrow Period"), such remaining portion
of the Escrow Sum not theretofore claimed by or paid to ▇▇▇▇▇▇ Holdings or the
Company in accordance with the terms of the Escrow Agreement and this Agreement
(together with any interest on such remaining portion of the Escrow Sum) shall
be disbursed to BSG Parent. All disbursements at the expiration of the Escrow
Period shall be paid in cash to BSG Parent at its account set forth in Exhibit G
---------
as updated from time to time. Stockholders, BSG Parent, the Company and ▇▇▇▇▇▇
Holdings agree that each will execute and deliver such reasonable instruments
and documents as are furnished by any other party to enable such furnishing
party to receive those portions of the Escrow Sum to which the furnishing party
is entitled under the provisions of the Escrow Agreement and this Agreement.
2.8. Financial Condition. The Company's Net Working Capital at the Closing
-------------------
shall be not less than Projected Net Working Capital and the Company shall
continue to have at least $500,000 in cash and cash equivalents on hand at the
Closing or the Redemption Price payable at Closing will be reduced by the amount
of such deficit(s).
2.9. Closing Audit. Within 120 days following the Closing Date, there shall
-------------
be delivered to ▇▇▇▇▇▇ Holdings and to Stockholders an audit of the Company's
balance sheet as of the Closing Date (the "Audited Closing Financial
Statements"). The Audited Closing Financial Statements shall be audited by AA in
accordance with GAAP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. ("BT&C") shall be afforded a
reasonable opportunity to review the audit results (including any work papers
prepared in connection therewith). BT&C and AA shall mutually agree on the
Audited Closing Financial Statements. The cost of preparing the Audited Closing
Financial Statements shall be paid equally by the Stockholders and ▇▇▇▇▇▇. In
the event that BT&C and AA cannot agree on the Audited Closing Financial
Statements, BT&C and AA shall jointly select and retain an independent "Big
Five" accounting firm (the "Independent Accountants") to review the disputed
matter(s) on the Audited Closing Financial Statements. In conducting such
review, BT&C and AA shall provide the Independent Accountants and BSG Parent
with customary access to the work papers of AA utilized in preparing the Audited
Closing Financial Statements. The final determination of such disputed matter(s)
by the Independent Accountants shall be utilized to determine all adjustments
described in Section 2.10 below and shall be final and binding on the parties
------------
solely for such purposes. The cost of retaining the Independent Accountants
shall be borne equally by the Stockholders and ▇▇▇▇▇▇.
2.10. Post-Closing Net Working Capital Adjustment. The Redemption Price
-------------------------------------------
will be adjusted upward or downward, on a dollar-for-dollar basis, to reflect
the increase or decrease, if any, in Net Working Capital as reflected on the
Audited Closing Financial Statements from the Projected Net Working Capital (the
"Net Working Capital Adjustment"). The Net Working Capital Adjustment shall be
determined by referring to the Audited Closing Financial Statements. In the
event that the Net Working Capital Adjustment results in an increase in the
Redemption Price, then the Company shall pay such amount to BSG Parent and the
Stockholders in immediately available funds within ten (10) business days of
delivery of the Audited Closing Financial Statements as finally determined in
accordance with Section 2.9 above. In the event that the Net Working Capital
-----------
Adjustment results in a decrease in the
-9-
Redemption Price, then the amount of any such decrease shall be payable to the
Company (i) first, from the Escrow Sum in immediately available funds within 15
days of the final determination of the Net Working Capital Adjustment up to an
aggregate amount from the Escrow Sum of $1,000,000 and (ii) second, the balance,
if any, by BSG Parent and the Stockholders in immediately available funds within
15 days of the final determination of the Net Working Capital Adjustment. All
payments required to be paid by BSG Parent, Stockholders or the Escrow Agent
pursuant to this Section 2.10 shall be deemed to be a downward adjustment to the
------------
Redemption Price and shall not be controlled or limited by any provision
contained in Article VIII hereof.
------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, BSG PARENT AND STOCKHOLDERS
Except as set forth on the Disclosure Schedule attached hereto (which
Disclosure Schedule identifies the exception and references the applicable
representation so qualified), the Company, BSG Parent and Stockholders jointly
and severally represent and warrant to ▇▇▇▇▇▇ Holdings that:
3.1. Capitalization. The authorized capital stock of the Company
--------------
immediately prior to Closing consists of 100,000 shares of Capital Stock,
100,000 of which being the Existing Shares are issued and outstanding. All of
the Existing Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Existing Shares are owned of record and beneficially
by BSG Parent. All of the outstanding shares of BSG Parent are owned of record
and beneficially by the Stockholders and the other Stockholders of BSG Parent in
the amounts set forth on Exhibit H hereto. None of the Existing Shares was
---------
issued or will be redeemed under this Agreement in violation of any preemptive
or preferential rights of any Person.
3.2. No Liens on Shares. BSG Parent owns the Existing Shares and the
------------------
Stockholders own all of the BSG Parent's shares, free and clear of any
Encumbrances other than the rights and obligations arising under this Agreement,
and none of the Existing Shares or the BSG Parent shares is subject to any
outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Existing Shares or the BSG Parent shares is
subject to any restriction on transfer thereof except for restrictions imposed
by applicable federal and state securities laws. At Closing pursuant to the
Redemption and the Stock Purchase, BSG Parent will have full corporate power and
authority to convey good and marketable title to the Redemption Shares and the
Purchased Shares, free and clear of any Encumbrances other than the restrictions
imposed by federal and state securities laws.
3.3. Subsidiaries. The Company does not own, directly or indirectly, any
------------
capital stock or ownership interests in any Person. The Stockholders do not own
any capital stock or ownership interests in any other Person engaged in the
Business other than BSG Parent (other than ownership of a publicly-held
corporation of which the Stockholders; or any of them
-10-
own, or has real or contingent rights to own less than five percent of any class
of outstanding securities). BSG Parent does not own any capital stock or
ownership interests in any other Person other than the Company.
3.4. Other Rights to Acquire Capital Stock. Except as set forth in this
-------------------------------------
Agreement in respect of ▇▇▇▇▇▇ Holdings' rights to acquire the Purchased Shares,
there are no authorized or outstanding warrants, options, or rights of any kind
to acquire from the Company any equity or debt securities of the Company, or
securities convertible into or exchangeable for equity or debt securities of the
Company, and there are no shares of capital stock of the Company reserved for
issuance for any purpose nor any contracts, commitments, understandings or
arrangements which require the Company to issue, sell or deliver any additional
shares of its capital stock.
3.5. Due Organization. The Company is now a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own and lease its properties and
assets and to carry on the Business as now conducted. BSG Parent is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Georgia and has full corporate power and authority to own
and lease its properties and assets and to carry on the Business as now
conducted. Complete and correct copies of the Certificate of Incorporation and
Bylaws of the Company and the Articles of Incorporation and Bylaws of BSG
Parent, and all amendments thereto, have been delivered to ▇▇▇▇▇▇ Holdings and
are attached hereto as Exhibits I-1, I-2, I-3 and I-4, respectively. The Company
------------ --- --- ---
is qualified to do business in the State of Delaware and in Georgia and in each
other jurisdiction in which the nature of the Business or the ownership of its
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect. The jurisdictions in which the Company is so qualified are
listed on Exhibit I-5 attached hereto.
-----------
3.6. Due Authorization. The Company, BSG Parent and the Stockholders each
-----------------
have full power and authority to execute, deliver and perform this Agreement and
to carry out the Transactions. The execution, delivery, and performance of this
Agreement and the Transactions have been duly and validly authorized by all
necessary corporate action of the Company and BSG Parent. This Agreement has
been duly and validly executed and delivered by the Company, BSG Parent and
Stockholders and constitutes the valid and binding obligations of the Company,
BSG Parent and Stockholders, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by laws affecting creditors'
rights and debtors' obligations generally, and legal limitations relating to
remedies of specific performance and injunctive and other forms of equitable
relief (the "Equitable Exceptions"). The execution, delivery, and performance of
this Agreement and the Transactions (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the
Company, BSG Parent and Stockholders, do not (a) violate any Requirements of
Laws or any Court Order of any Governmental Body applicable to the Company, BSG
Parent or Stockholders, or their respective property, (b) violate or conflict
with, or permit the cancellation of, or constitute a default under, any Material
agreement to which the Company, BSG Parent or Stockholders are a party, or by
which any of them or any of their respective property is bound, (c) permit the
-11-
acceleration of the maturity of any Material indebtedness of, or indebtedness
secured by the property of, the Company, BSG Parent or Stockholders, (d) violate
or conflict with any provision of the charter or bylaws of the Company or BSG
Parent, or (e) except for filings or approvals under the HSR Act and such
consents, approvals, or registrations as may be required under applicable state
securities laws, require any material consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any Governmental Body or
other third party.
3.7. Financial Statements. The following financial statements of the
--------------------
Company have been delivered to ▇▇▇▇▇▇ Holdings by the Company: unaudited balance
sheet of the Company as of December 31, 1996; audited balance sheets of the
Company for the year ended December 31, 1997 and December 31, 1998; unaudited
balance sheet of the Company as of June 30, 1999; unaudited statement of
operations of the Company for the fiscal years ended December 31, 1996 and
December 31, 1997; audited statement of operations and cash flows of the Company
for the year ended December 31, 1998; and unaudited statement of operations for
the five months ending June 30, 1999 (collectively, the "Financial Statements").
Copies of the Financial Statements are included in the Disclosure Schedule
-------------------
hereto. Other than the unaudited financial statements indicated above, including
the Financial Statements as of and for the six months ending June 30, 1999 (the
"Most Recent Financial Statements"), the Financial Statements have been prepared
in accordance with GAAP and the Most Recent Financial Statements to the
Company's Knowledge have been prepared in accordance with GAAP except as set
forth in Section 3.7 of the Disclosure Schedule. The Financial Statements
(including the notes thereto) have been prepared on a consistent basis
throughout the periods indicated and fairly present the financial position,
results of operations and changes in financial position of the Company as of the
indicated dates and for the indicated periods and are consistent with the books
and records of the Company (which books and records are correct and complete in
all material respects). Since the date of the last of such Financial Statements,
the Company has incurred no Material liabilities required by GAAP to be
reflected on the Company's balance sheet or notes thereto nor any other
obligations (whether absolute, contingent, or otherwise) which are (individually
or in the aggregate) Material (in amount or to the conduct of the Business); and
neither the Company nor Stockholders have Knowledge of any basis for the
assertion of any such Material liability or obligation. Since December 31, 1998,
the Company has not experienced any Material Adverse Change.
3.8. Certain Actions. Since December 31, 1998, the Company has not, except
---------------
as disclosed on any of the Financial Statements or notes thereto: (a) paid or
declared any dividends or distributions, or purchased, redeemed, acquired, or
retired any stock or indebtedness from BSG Parent or any Stockholder (other than
distributions to pay estimated income taxes of the Stockholders associated with
the income of the Company, distributions of the Company's net income for the
fiscal year ended December 31, 1998 and additional distributions by the Company,
all of which shall be deemed to be made on or prior to May 31, 1999 so long as
no Net Working Capital Adjustment of more than $50,000 would occur and at least
the level of Minimum Cash is retained, except, in either case, with the prior
consent of ▇▇▇▇▇▇, which consent will not be unreasonably withheld (collectively
the "Permitted Distributions")); (b) made or agreed to make any loans or
advances or guaranteed or agreed to guarantee any loans or
-12-
advances to any party whatsoever; (c) suffered or permitted any Encumbrance to
arise or be granted or created against or upon any of its assets, real or
personal, tangible or intangible; (d) canceled, waived, or released or agreed to
cancel, waive, or release any of its debts, rights, or claims against third
parties in excess of $10,000 individually or $50,000 in the aggregate; (e) sold,
assigned, pledged, mortgaged, or otherwise transferred, or suffered any Material
damage, destruction, or loss (whether or not covered by insurance) to, any
assets (except in the ordinary course of the Business); (f) amended its
operating agreement or certificate of incorporation; (g) outside the ordinary
course of business, paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (h) made any Material change
in its method of management operation, accounting or reporting of income or
deductions for tax purposes or any change outside the ordinary course of the
Business in the Company's working capital other than Permitted Distributions;
(i) made any Material acquisitions, made any Material capital expenditures,
including, without limitation, replacements of equipment in the ordinary course
of the Business, or entered into commitments therefor, except for capital
expenditures or commitments therefor which do not, in the aggregate, exceed
$50,000; (j) made any investment or commitment therefor in any Person; (k) made
any payment or contracted for the payment of any bonus or other compensation or
personal expenses, other than (A) wages and salaries and business expenses paid
in the ordinary course of the Business, and (B) wage and salary adjustments made
in the ordinary course of the Business for employees who are not officers,
directors, or Stockholders of the Company; (l) made, amended or entered into any
written employment contract with any officers or key employees of the Company
listed on Exhibit D hereto or created or made any Material change in any bonus,
---------
stock option, pension, retirement, profit sharing or other employee benefit plan
or arrangement; (m) made or entered into any Contract greater than the smallest
of the Contracts scheduled in accordance with Section 3.15 of the Disclosure
Schedule; (n) made or entered into any agreement granting any Person any
registration or offer rights in respect of the Company's capital stock; (o)
entered into any non-competition agreement restricting the Company from engaging
in the Business; (p) made or entered into any employment agreement or other
agreement or other arrangement with any officer, director, Stockholder or
Affiliate of the Company; or (q) amended, experienced a termination or received
notice of actual or threatened termination or non-renewal of any Material
contract, agreement, lease, franchise or license to which the Company is a party
that would or could reasonably be expected to have a Material Adverse Effect.
3.9. Properties. Attached hereto as Exhibit J is a list containing a
---------- ---------
description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book or fair market value in excess of
$10,000 as of the date hereof. Except for Permitted Exceptions, such real and
personal properties are free and clear of Encumbrances. Stockholders and the
Company have delivered to ▇▇▇▇▇▇ Holdings copies of all real property leases and
a lien search obtained from the counties where the Company conducts business and
the Georgia Secretary of State office of all UCC liens of record against the
Company's personal property in the State of Georgia. All of the properties and
assets necessary for continued operation of the Business as currently conducted
(including, without limitation, all books, records, computers and computer
software and data processing systems) are owned, leased or licensed by the
Company and are
-13-
reasonably suitable for the purposes for which they are currently being used.
With the exception of used equipment and inventory valued at no more than
$10,000 in the aggregate on the Company's Financial Statements, the physical
properties of the Company, including the real properties leased by the Company,
are in operating condition. Except for Permitted Exceptions, the Company has
title to all such properties and assets. The operation of the properties and
Business of the Company in the manner in which they are now and have been
operated does not violate any zoning ordinances, municipal regulations, or other
Requirements of Laws, except for any such violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Except for
Permitted Exceptions, no restrictive covenants, easements, rights-of-way, or
regulations of record impair the uses of the properties of the Company for the
purposes for which they are now operated. All leases of real or personal
property by the Company are legal, valid, binding, enforceable and in full force
and effect and will not be terminated on or after the Closing Date as a result
of the failure to obtain any consents to the transactions contemplated hereby,
except for the Equitable Exceptions. All facilities leased by the Company have
received all material approvals from any Governmental Body (including
Governmental Permits) required to be obtained by the Company in connection with
the operation of the Business and have been operated and maintained in
accordance with all material Requirements of Laws applicable to the Company as a
lessee thereof. The Company owns no real property.
3.10. Licenses and Permits. Attached hereto as Exhibit K is a list of all
-------------------- ---------
material licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Company from any
Governmental Body (herein collectively called "Governmental Permits"). The
Company has complied in all material respects with the terms and conditions of
all such Governmental Permits, and the Company has not received notification
from any Governmental Body of violation of any such Governmental Permit or the
Requirements of Laws governing the issuance or continued validity thereof. All
of such Governmental Permits are valid and in full force and effect. No
additional Governmental Permits are required from any Governmental Body thereof
in connection with the conduct of the Business which Governmental Permits, if
not obtained, would individually or in the aggregate have a Material Adverse
Effect.
3.11. Intellectual Property. Attached hereto as Exhibit L is a list and a
--------------------- ---------
brief description of all material Intellectual Property owned or utilized by the
Company. The Company has furnished ▇▇▇▇▇▇ Holdings with copies of all material
license agreements (including software licensing agreements) to which the
Company is a party, either as licensor or licensee, with respect to any
Intellectual Property. The Company has legal title to or the right to use all
the Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how utilized in the conduct of the Business as presently
conducted and, the Company has sufficient rights in the Intellectual Property to
permit diversification of the Company's customer base as set forth in the
Business Plan (the "Customer Diversification") without material impediment,
without the payment of any royalty or similar payment, and the Company is not
infringing on any Intellectual Property right of others and neither the Company
nor Stockholders have Knowledge of any infringement by others of any such rights
owned by the Company. The Company has not received notice of any charge, claim,
demand, complaint, action, suit, hearing,
-14-
proceeding or investigation which challenges the Company's ownership or
licensing of any Intellectual Property, the Company's current uses or the
Company's compliance with the terms and conditions of any contracts, licenses,
agreements or Court Orders involving the Intellectual Property. Exhibit L
---------
contains a complete list of filings made with any Governmental Bodies with
regard to the Intellectual Property. All licenses set forth on Exhibit L are
---------
valid and binding obligations of the Company, and to the Knowledge of the
Company the other parties thereto, enforceable against the Company, and to the
Knowledge of the Company the other parties thereto in accordance with their
respective terms, except for the Equitable Exceptions. The Company owns and
possesses all right, title and interest in and to, or has the right to use
pursuant to a valid license, all Intellectual Property necessary for the
operation of the Business of the Company as presently conducted. The Company's
use of each item of the Intellectual Property owned or licensed by Company (i)
will not be terminated as a result of the transactions contemplated hereby; (ii)
does not interfere with the rights of any other Person based on the Company's
current use of such items or the Company's currently proposed use of such items
in order to permit the Customer Diversification without material impediment;
(iii) are in compliance with the material terms and conditions of all license or
other agreements relating to such items; and (iv) does not violate any material
Requirements of Laws or Courts Orders applicable to the Company or, to the
Company's Knowledge, any other party to any material license or other agreement
relating to such Intellectual Property. The Company is not in default (whether
or not after the giving of notice or the lapse of time or both) under any
material license, contract or other agreement relating to any Intellectual
Property.
3.12. Compliance with Laws. The Company has (i) complied in all material
--------------------
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to the Business and has filed with the proper Governmental Bodies all
material statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and is in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, the Solid Waste Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA, the
Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "Environmental and OSHA Obligations") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the Knowledge of the Company and Stockholders, no
such claim is reasonably anticipated) to the effect that the Business fails to
comply, in any respect, with any Requirements of Laws, Governmental Permit or
Environmental and OSHA Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
3.13. Insurance. Attached hereto as Exhibit M is a list of all coverages
--------- ---------
for fire, liability, or other forms of insurance and all fidelity bonds held by
or applicable to the Company. Copies of the binder for all such insurance
policies have been delivered to ▇▇▇▇▇▇ Holdings. The
-15-
insurance maintained by the Company is customary and reasonably adequate for
companies engaged in the Business. To the best of the Company's and
Stockholders' Knowledge, no event relating to the Company has occurred which
will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will not be terminated on or after the Closing Date as a result of the
failure to obtain any consents to the transactions contemplated hereby. The
Company is not in default under any such insurance policies.
3.14. Employee Benefit Plans.
----------------------
(a) Employee Welfare Benefit Plans. Except as set forth on Section
------------------------------ -------
3.14(a) of the Disclosure Schedule, the Company does not maintain or contribute
------- -------------------
to any "employee welfare benefit plan" as such term is defined in Section 3(1)
of ERISA. With respect to each such plan listed in the Disclosure Schedule, (i)
-------------------
the plan is in compliance with ERISA and all other applicable Requirements of
Laws; (ii) the plan has been administered in accordance with its governing
documents; (iii) neither the plan, nor any fiduciary with respect to the plan,
has engaged in any "prohibited transaction" as defined in Section 406 of ERISA
other than any transaction subject to a statutory or administrative exemption;
(iv) except for the processing of routine claims in the ordinary course of
administration, there is no litigation, arbitration or disputed claim
outstanding; and (v) all premiums due on any insurance contract through which
the plan is funded have been paid.
(b) Employee Pension Benefit Plans. Except as set forth in Section
------------------------------ -------
3.14(b) of the Disclosure Schedule, the Company does not maintain or contribute
------- -------------------
to any arrangement that is or may be an "employee pension benefit plan" relating
to employees, as such term is defined in Section 3(2) of ERISA. With respect to
each such plan: (i) the plan is qualified under Section 401(a) of the Code, and
any trust through which the plan is funded meets the requirements to be exempt
from federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA and all other applicable Requirements of Laws;
(iii) the plan has been administered in accordance with its governing documents
as modified by applicable law; (iv) the plan has not suffered an "accumulated
funding deficiency" as defined in Section 412(a) of the Code; (v) the plan has
not engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code other than a transaction subject to statutory or administrative
exemption; (vi) the plan has not been subject to a "reportable event" (as
defined in Section 4043(b) of ERISA), the reporting of which has not been waived
by regulation of the Pension Benefit Guaranty Corporation; (vii) no termination
or partial termination of the plan has occurred within the meaning of Section
411(d)(3) of the Code; (viii) all contributions required to be made to the plan
or under any applicable collective bargaining agreement have been made to or on
behalf of the plan; (ix) there is no material litigation, arbitration or
disputed claim outstanding; (x) all applicable premiums due to the Pension
Benefit Guaranty Corporation for plan termination insurance have been paid in
full on a timely basis; and (xi) a favorable determination letter from the IRS
has been received by the Company with respect to such plan
-16-
stating that such plan is so qualified; and to the Company's knowledge there are
no circumstances which would cause such plan to lose such qualified status.
(c) Employment and Non-Tax Qualified Deferred Compensation
------------------------------------------------------
Arrangements. The Company does not maintain or contribute to any retirement or
------------
deferred or incentive compensation or stock purchase, stock grant or stock
option arrangement entered into between the Company and any current or former
officer, consultant, director or employee of the Company that is not intended to
be and that is not a tax qualified arrangement under Section 401(a) of the Code.
3.15. Contracts and Agreements. Exhibit N hereto contains a list of all
------------------------ ---------
customer contracts, all employment contracts involving annual salaries greater
than $60,000 and all employment contracts with general managers or officers of
the Company. Exhibit N also contains a list of the 30 largest contracts (in
---------
terms of annual payments made or received with respect thereto) to which the
Company is a party or by which the Company or its properties are bound, a list
of any real estate or office building leases involving the Company and a list of
any contract or agreements, if any, prohibiting the Company from freely engaging
in the Business anywhere in the world (collectively, the "Contracts"). The
Company is not and, to the Knowledge of Stockholders and the Company, no other
party thereto is in default (and no event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default by the
Company) under any of the Contracts, and the Company has not waived any right
under any of the Contracts. All of the Contracts to which the Company is a party
are legal, valid, binding, enforceable and in full force and effect and will not
be terminated on or after the Closing Date as a result of the failure to obtain
any consents to the transactions contemplated hereby, except for the Equitable
Exceptions. The Company has not guaranteed any obligations of any other Person.
The Company has no present expectation or intention of not fully performing all
of its obligations under any Contract, the Company has no Knowledge of any
breach or anticipated breach by the other parties to any Contract and the
Company has not received notice of actual or threatened termination or non
renewal of any Contract.
3.16. Claims and Proceedings. There are no claims, actions, suits,
----------------------
proceedings, or investigations pending or, to the Knowledge of the Stockholders
or the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, before or by any court, municipality
or other Governmental Body. To the extent any are disclosed on the Disclosure
Schedule, none of such claims, actions, suits, proceedings, or investigations,
if adversely determined, will individually or in the aggregate result in any
Material Adverse Effect to the Company. The Company has not been and the Company
is not now, subject to any Court Order, stipulation, or consent of or with any
court or Governmental Body. No inquiry, action or proceeding has been instituted
or, to the Knowledge of the Stockholders or the Company, threatened or asserted
against the Stockholders, BSG Parent or the Company to restrain or prohibit the
carrying out of the Transactions or to challenge the validity of the
Transactions or any part thereof or seeking damages on account thereof. To the
Knowledge of the Company and Stockholders there is no basis for any such valid
claim or action.
-17-
3.17. Taxes.
-----
(a) All Federal, foreign, state, county and local and other Taxes due
from the Company on or before the Closing have been paid and all Tax Returns
which are required to be filed by the Company on or before the date hereof have
been filed within the time and in the manner provided by all Requirements of
Laws or extensions were timely filed, and all such Tax Returns are true and
correct and accurately reflect the Tax liabilities of the Company in all
Material respects. No Tax Returns of the Company, BSG Parent or any of the
Stockholders are presently subject to an extension of the time to file. All
Taxes, assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Stockholders or the Company are
aware. For Governmental Bodies with respect to which the Company does not file
Tax Returns, no such Governmental Body has given the Company written
notification that the Company is or may be subject to taxation by that
Governmental Body. The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
Stockholder, creditor, independent contractor or other party. The Company has
properly reflected for tax purposes in accordance with all Requirements of Laws
the status of all independent contractors, consultants and subcontractors. There
are no Tax liens on any of the property or assets of the Company.
(b) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. During the past seven
years, the Company has not and has never been (nor does the Company have any
liability for unpaid Taxes because it once was) a member of an affiliated group
during any part of which return year any corporation other than the Company also
was a member of the affiliated group.
(c) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the sale of the
Purchased Shares or the redemption of the Redemption Shares pursuant to this
Agreement.
(d) The Company and BSG Parent have each made a valid election under
Section 1362 of the Code and any corresponding state or local provisions to be
an S
-18-
corporation within the meaning of Section 1361 of the Code for all taxable years
(or portions thereof) beginning on or after December 31, 1995 with respect to
the Company and since inception with respect to BSG Parent, no such S election
has been terminated (whether voluntarily, involuntarily or inadvertently,
including, without limitation, by taking any action defined in Section 1362(d)
of the Code) since such time. BSG Parent has made a valid election for the
Company to be qualified as a "Qualified Subchapter S subsidiary" under Section
1361 of the Code and applicable state laws effective as of the date that the
Stockholders contributed the stock of the Company to BSG Parent.
(e) The Company will not be required to include any amount in taxable
income or exclude any item of deduction or loss from taxable income for any
taxable period (or portion thereof) ending after the Closing Date (i) as a
result of a change in method of accounting for a taxable period ending on or
prior to the Closing Date: (ii) as a result of the transactions contemplated
hereby, (iii) as a result of any "closing agreement," as described in Code ss.
7121 (or any corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (iv) as a result of any sale
reported on the installment method where such sale occurred on or prior to the
Closing Date, or (v) as a result of any prepaid amount received on or prior to
the Closing Date.
3.18. Personnel. Buyer's have been provided with a list of the names and
---------
annual rates of compensation of the directors and executive officers of the
Company, and of the employees of the Company whose annual rates of compensation
during the calendar year ended December 31, 1998 (including base salary, bonus
and incentive pay) exceed (or by December 31, 1999 are expected to exceed)
$60,000 and the employment agreements, if any, pertaining to such employees.
Exhibit O also summarizes the bonus, profit sharing, percentage compensation,
---------
company automobile, club membership, and other like benefits, if any, paid or
payable to such directors, officers, and employees during the Company's calendar
year ended December 31, 1998 and to the date hereof. The employee relations of
the Company are generally good, there has been no unusual level of employee
departures and there is no pending or, to the Knowledge of Stockholders or the
Company, threatened labor dispute or union organization campaign. None of the
employees of the Company is covered by a collective bargaining agreement. The
Company is in compliance in all material respects with all Requirements of Laws
respecting employment and employment practices, including, without limitation,
the Fair Labor Standards Act of 1938, immigration hiring, terms and conditions
of employment, and wages and hours, and is not engaged in any unfair labor
practices. Neither the Company or Stockholders has Knowledge that any Person
listed on Exhibit D hereto will not agree to remain employed by the Company
---------
after the consummation of the Transactions. There is no unfair labor practice
claim against the Company before the National Labor Relations Board, or any
strike, dispute, slowdown, or stoppage pending or, to the Knowledge of the
Company and Stockholders, threatened against or involving the Company, and none
has previously occurred.
3.19. Business Relations. Neither the Company nor Stockholders has
------------------
Knowledge that any customer, supplier or licensor engaged in doing business with
the Company will cease to do business with the Company after the consummation of
the Transactions as previously conducted with the Company except for any
terminations which will not, in the
-19-
aggregate, result in a Material Adverse Change. Neither the Stockholders nor the
Company has received any notice of cancellation of any Material business
arrangement between any Person and the Company nor do the Company or
Stockholders have Knowledge that the Business will be subject to cancellation of
any such business arrangement.
3.20. Accounts Receivable; Accounts Payable; Customer Deposits; Customer
------------------------------------------------------------------
Revenues and Deferred Revenues.
------------------------------
(a) Accounts Receivable. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company in the Financial
Statements are bona fide and represent amounts validly due for goods sold or
services rendered and, except for non-Material amounts, all such amounts will be
collected in full prior to December 31, 1999. With respect to such accounts,
notes, and loans receivable: (i) all are free and clear of any Encumbrances;
(ii) no claims of offset have been asserted in writing against any of such
accounts, notes, or loans receivable; and (iii) none of the obligors thereto has
given written notice that it will or may refuse to pay the full amount or any
portion thereof. Lists of the Company's accounts receivable as of May 31, 1999
(including any reconciliation to the accounts receivable entry on the balance
sheet included in the Most Recent Financial Statements) have been attached to
the Disclosure Schedule.
(b) Accounts Payable. The aggregate amount of accounts payable
----------------
reflected on the Most Recent Financial Statements are prepared in accordance
with GAAP except as adjusted for in the Net Working Capital Adjustment and,
after giving effect to such adjustment, reflect the accounts payable of the
Company as of May 31, 1999.
(c) Customer Deposits; Customer Revenues and Deferred Revenues.
----------------------------------------------------------
Exhibit P sets forth, as of the date specified therein all deferred revenues as
---------
of such date on an aggregate basis. For the period since December 31, 1998
through May 31, 1999, the Company's actual deposits and revenues from customer
contracts are not less than the Company's deposits and revenues from customer
contracts for the period December 31, 1997 through May 31, 1998.
3.21. Bank Accounts; Investments. Attached hereto as Exhibit Q is a list of
-------------------------- ---------
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith. Exhibit Q also
---------
contains a list of all Material investments by the Company in any funds,
accounts, securities, certificates of deposit or instruments of any Person. All
of such investments are customary in form and amount for reasonably prudent
treasury investments of comparable businesses, none of which involve any type of
derivative, option, hedging or other speculative instrument.
3.22. Customer Claims. No written or oral claims for breach of contract or
---------------
otherwise by any customers (a "Customer Claim") has been made against the
Company since January 1, 1999 which could, individually or in the aggregate,
result in any Material Adverse
-20-
Effect. The level of Customer Claims for the period since December 31, 1998
through the date hereof is consistent (plus or minus 5%) with past practices of
the Company for the comparable period in 1998.
3.23. Brokers. Except for The Geneva Companies, neither the Company, BSG
-------
Parent nor Stockholders have engaged, or caused to be incurred any liability to
any finder, broker, or sales agent in connection with the origin, negotiation,
execution, delivery, or performance of this Agreement or the Transactions.
3.24. Affiliated Transactions. No officer, director, Stockholder (including
-----------------------
the Stockholders and BSG Parent) or Affiliate of the Company or any individual
related by blood or marriage to any such Person, or any entity in which any such
Person owns any beneficial interest, is a party to any agreement, contract,
arrangement or commitment with the Company or engaged in any transaction with
the Company or has any interest in any property used by the Company. No officer,
director, or Stockholder of the Company or BSG Parent has any ownership interest
in any competitor, supplier, or customer of the Company (other than ownership of
securities of a publicly-held corporation or mutual fund of which such Person
owns, or has real or contingent rights to own, less than five percent of any
class of outstanding securities) or any property used in the operation of the
Business.
3.25. Funded Indebtedness; Letters of Credit; Undisclosed Liabilities.
---------------------------------------------------------------
(a) Funded Indebtedness. Other than any Funded Indebtedness which is
-------------------
to be repaid and discharged by Stockholders prior to Closing in accordance with
Section 7.1(d), the Company does not have any Funded Indebtedness.
--------------
(b) Letters of Credit. Other than those listed on Exhibit R, the
----------------- ---------
Company has no letters of credit, performance bonds or similar instruments
issued on or for its account for the benefit of any of its vendors or otherwise.
(c) Undisclosed Liabilities. The Company does not have any Material
-----------------------
liabilities in the aggregate (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected on a corporate balance
sheet or in the notes thereto, except for such liabilities which are accrued or
reserved against in the Financial Statements or disclosed in the notes thereto,
including without limitation any accounts payable or service liabilities of the
Company incurred prior to the Closing Date.
3.26. Year 2000. All of the Material computer software, computer firmware,
---------
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by the Company in the conduct of its business will not
malfunction, will not cease to function, will not generate incorrect data, and
will not produce incorrect results when processing, providing, and/or receiving
(i) date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries, except for any malfunctions or generations of
incorrect data or results that would not individually
-21-
or in the aggregate have a Material Adverse Effect. The Company has not been
engaged in any year 2000 correction consulting work for customers pertaining to
its work product and has received no claim or notice from any customer regarding
the failure of the Company to install computer software that is year 2000
compliant.
3.27. Information Furnished. The Company and Stockholders have made
---------------------
available to ▇▇▇▇▇▇ Holdings true and correct copies of all material corporate
records of the Company and all material agreements, documents, and other items
listed on the Schedules to this Agreement or referred to in Article III of this
-----------
Agreement, and neither this Agreement, the Schedules hereto, nor any written
information, instrument, or document delivered to ▇▇▇▇▇▇ Holdings pursuant to
this Agreement contains any untrue statement of a Material fact or omits any
Material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
ARTICLE IV
▇▇▇▇▇▇ HOLDINGS' REPRESENTATIONS AND WARRANTIES
▇▇▇▇▇▇ Holdings represents and warrant to Stockholders, BSG Parent and the
Company as follows:
4.1. Due Organization of ▇▇▇▇▇▇ Holdings. ▇▇▇▇▇▇ Holdings is a limited
-----------------------------------
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full company power and authority to
execute, deliver and perform this Agreement and to carry out the Transactions.
4.2. Due Authorization. The execution, delivery and performance of
-----------------
this Agreement has been duly authorized by all necessary limited liability
company action by ▇▇▇▇▇▇ Holdings and the Agreement has been duly and validly
executed and delivered by ▇▇▇▇▇▇ Holdings and constitutes the valid and binding
obligation of ▇▇▇▇▇▇ Holdings, enforceable in accordance with its terms, except
for the Equitable Exceptions. The execution, delivery, and performance of this
Agreement and the Escrow Agreement (as well as all other instruments,
agreements, certificates or other documents contemplated hereby) by ▇▇▇▇▇▇
Holdings shall not (a) violate any Requirements of Laws or Court Order of any
Governmental Body applicable to ▇▇▇▇▇▇ Holdings or its property, (b) violate or
conflict with, or permit the cancellation of, or constitute a default under any
agreement to which ▇▇▇▇▇▇ Holdings is a party or by which ▇▇▇▇▇▇ Holdings or its
property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, ▇▇▇▇▇▇
Holdings, (d) violate or conflict with any provision of the Certificate of
Limited Liability Company or Operating Agreement of ▇▇▇▇▇▇ Holdings, or (e)
except for filings or approvals under the HSR Act and such consents, approvals,
or registrations as may be required under applicable state securities laws,
require any consent, approval or authorization of, or notice to, or declaration,
filing or registration with, any Governmental Body or other third party.
-22-
4.3. No Brokers. ▇▇▇▇▇▇ Holdings has not engaged, or caused to be incurred
----------
any liability for which Stockholders or BSG Parent may be liable to any finder,
broker or sales agent in connection with the origin, negotiation, execution,
delivery, or performance of this Agreement or the Transactions.
4.4. Investment. ▇▇▇▇▇▇ Holdings will acquire the Purchased Shares for
----------
investment and for its own account and not with a view to the distribution
thereof.
4.5. Information Furnished. No written information,. instrument or document
---------------------
delivered to the Stockholders, the Company or BSG Parent pursuant to this
agreement contains any untrue statement of a material fact or omits any material
fact necessary to make the statements appearing in the aforementioned items, not
misleading.
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY, BSG PARENT, ▇▇▇▇▇▇ HOLDINGS
AND STOCKHOLDERS
5.1. Consents of Others. Prior to the Closing, the Company, BSG Parent and
------------------
Stockholders shall use their commercially reasonable best efforts to obtain and
to cause the Company to obtain all material authorizations, consents and permits
required of the Company, BSG Parent and Stockholders to permit them to
consummate the Transactions. To the extent required to consummate the
Transactions or to ensure that the Contracts shall not be terminated as a result
of the Closing, Stockholders shall have obtained the written consent or waiver
of any "change of control" type termination rights of any third party to any
Contract. As promptly as practicable after the date hereof, ▇▇▇▇▇▇ Holdings, the
Company and the Stockholders shall make, or shall cause to be made, such filings
as may be required pursuant to the HSR Act with respect to the consummation of
the Transactions.
5.2. Stockholders' Efforts. The Company and Stockholders shall use all
---------------------
commercially reasonable best efforts to cause all conditions for the Closing to
be met.
5.3. Powers of Attorney. The Company and Stockholders shall cause the
------------------
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or tax matters
representation before the IRS or other Governmental Bodies.
5.4. Conduct of Business Pending Closing. From the date of this Agreement
-----------------------------------
to the Closing Date:
(a) Except as otherwise contemplated by this Agreement, or as ▇▇▇▇▇▇
Holdings may otherwise consent to in writing, the Company and Stockholders shall
conduct the Business only in the ordinary course and shall not engage in any
Material transactions or enter
-23-
into any Material transaction which would cause a breach of the representations
and warranties contained in Article III.
-----------
(b) Stockholders and the Company shall use their commercially
reasonable best efforts to cause the Business to preserve substantially intact
its current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance currently
in effect.
(c) Stockholders and the Company shall give prompt notice to ▇▇▇▇▇▇
Holdings of any notice of any Material default received by the Company or the
Business subsequent to the date of this Agreement under any Contract or any
Material Adverse Change occurring prior to the Closing Date in the operation of
the Company or the Business.
(d) Neither the Company, BSG Parent nor the Stockholders, nor any of
their representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any party
other than ▇▇▇▇▇▇ Holdings or its representatives. As used herein, "Acquisition
Proposal" means any proposal other than the Transactions, for (i) any merger or
other business combination involving the Company or the Business, (ii) the
acquisition of the Company or a material equity interest in the Company or a
material portion of its assets, or (iii) the dissolution or liquidation of the
Company.
5.5. Access Before Closing. Prior to the Closing Date, Stockholders and the
---------------------
Company agree that it will give, or cause to be given, to ▇▇▇▇▇▇ Holdings and
its representatives, during normal business hours and at ▇▇▇▇▇▇ Holdings'
expense, reasonable access to the Company's personnel, independent accountants,
officers, agents, employees, assets, properties, titles, contracts, corporate
minute and other books, records, files and documents of the Company with respect
to the Business (including financial, tax basis, budget projections,
accountants' work papers and other information as ▇▇▇▇▇▇ Holdings may reasonably
request) upon 24 hours prior notice. The Stockholders and ▇▇▇▇▇▇ shall mutually
agree on the timing and manner of contact with all third parties, including, but
not limited to, customers, vendors or suppliers, which contact shall not be
unreasonably withheld. ▇▇▇▇▇▇ shall not be given access to any information where
the provision of such information would violate a law or regulation applicable
to the Company.
ARTICLE VI
POST-CLOSING COVENANTS
6.1. General. In case at any time after the Closing any further action is
-------
legally necessary or reasonably desirable (as determined by ▇▇▇▇▇▇ Holdings and
Stockholders) to carry out the purposes of this Agreement, each of the parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other party reasonably may request,
all at the sole cost and expense of the requesting party (unless the requesting
party is entitled to indemnification therefor under Article VIII below). The
------------
Stockholders acknowledge and agree that from and after the Closing, the Company
will be
-24-
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Company, which shall be maintained at
the chief executive office of the Company; provided, however, that Stockholders
shall be entitled to reasonable access to and to make copies of such books and
records at their sole cost and expense and the Company will maintain all of the
same for a period of at least three (3) years after Closing. Thereafter, the
Company will offer such documentation to Stockholders before disposal thereof.
The Sellers further agree to convey all rights to any Intellectual Property
reasonably related to the Business to the Company.
6.2. Transition. For a period of four (4) years following Closing, the
----------
Stockholders will not take any action (or cause any such action to be taken by
another Person) that primarily has the effect of discouraging any vendor,
lessor, licensor, customer, contractor, subcontractor, supplier, or other
business associate of the Company from maintaining the same business relations
with the Company after the Closing as it maintained with the Company prior to
the Closing. For a period of four (4) years following Closing, the Stockholders
will refer all customer inquiries relating to the Business to the Company.
6.3. Confidentiality. The Stockholders will treat and hold in confidence
---------------
and not disclose all Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement or otherwise
for the benefit of the Company or ▇▇▇▇▇▇ Holdings for a period of four (4) years
from the date of this Agreement, and deliver promptly to ▇▇▇▇▇▇ Holdings or
destroy, at the written request and option of ▇▇▇▇▇▇ Holdings, all tangible
embodiments (and all copies) of the Confidential Information which are in their
possession except as otherwise permitted herein. In the event that any
Stockholder is requested or required (by oral question or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar legal proceeding) to disclose any Confidential
Information, such Stockholder will notify the Company and ▇▇▇▇▇▇ Holdings
promptly of the request or requirement.
6.4. Covenant Not to Compete. For and in consideration of the allocation of
-----------------------
$10,000 of the Redemption Price paid to the BSG Parent by the Company, the
individual trustee of each Stockholder (which trustee is also a beneficiary of
such Stockholder), covenants and agrees, for a period of four (4) years from and
after the Closing Date, that he will not, directly or indirectly without the
prior written consent of the Company, for or on behalf of any entity, engage in
any of the activities prohibited by Section 6 of the Employment Agreement with
such Person in the Form of Exhibits F-1, F-2 or F-3 hereto.
------------ --- ---
6.5. Additional Matters.
------------------
(a) The Stockholders shall cause the Company and BSG Parent to file
with the appropriate governmental authorities all Tax Returns required to be
filed by it for any taxable period ending prior to the Closing Date and the
Company and BSG Parent shall remit any Taxes (other than Taxes on income) due in
respect of such Tax Returns. In addition, BSG Parent and Stockholders shall
cause BT&C to prepare a short period tax return for the Company covering the
period January 1, 1999 through the Closing Date. The cost of preparation of such
short period tax return shall be paid for by Stockholders. The Stockholders
shall provide drafts
-25-
of the completed tax returns for the Company to ▇▇▇▇▇▇ Holdings for its review a
reasonable time prior to the filing of such tax returns, and shall permit ▇▇▇▇▇▇
Holdings to comment on such tax returns, and shall make such revisions as are
reasonably requested by ▇▇▇▇▇▇ Holdings prior to filing. Each of ▇▇▇▇▇▇
Holdings, the Stockholders and BSG Parent hereby agree to treat the acquisition
of the capital stock of the Company as a "sale of substantially all of the
assets" of the Company.
(b) ▇▇▇▇▇▇ Holdings and Stockholders recognize that each of them will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by ▇▇▇▇▇▇ Holdings and/or the Company to
the extent such records and information pertain to events occurring on or prior
to the Closing Date; therefore, ▇▇▇▇▇▇ Holdings agrees to cause the Company to
---------
(A) use its commercially reasonable best efforts to properly retain and maintain
such records for a period of six (6) years from the date the Tax Returns for the
year in which the Closing occurs are filed or until the expiration of the
statute of limitations with respect to such year, whichever is later, and (B)
allow each Stockholder and his agents and representatives at times and dates
mutually acceptable to the parties, to inspect, review and make copies of such
records as such other party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at the
requesting party's expense.
(c) Subject to the procedures and limitations set forth in Article
-------
VIII hereof, including the thresholds, deductibles and caps set forth in Section
---- -------
8.6 hereof, the Stockholders and BSG Parent shall be liable for, and shall
---
indemnify and hold ▇▇▇▇▇▇ Holdings and the Company harmless against, (i) any
Taxes or other costs attributable solely to a failure on the part of any
Stockholder to take all actions required of him under Section 6.5(a) and (ii)
--------------
any failure of the Company to obtain any landlord consents to the transactions
contemplated hereby required under the terms of any leases of the Company's real
property.
(d) The Stockholders shall maintain BSG Parent in existence following
the Closing Date for a period of at least one year following the Closing;
provided, however, that at the Company's request, BSG Parent shall change its
name so that "BSG" is removed therefrom.
6.6. Litigation Support. In the event and for so long as any party is
------------------
actively contesting or defending against any claim, suit, action or charge,
complaint, or demand in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, circumstance, status, condition, activity,
practice, occurrence, event, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other parties will
cooperate and make reasonably available themselves or their personnel, as
applicable, and provide such reasonable testimony and access to their books and
records as shall be necessary in connection with the contest or defense.
6.7. Audits. Following the Closing, the Stockholders shall use their best
------
efforts to cause the Company, at the Company's expense, to deliver, or cause to
be delivered, to ▇▇▇▇▇▇ Holdings an unqualified and unmodified audit report of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P. or other
-26-
reputable independent accounting firm on the balance sheet of the Company as of
the Closing Date in connection with the preparation of the Audited Closing
Financial Statements and audited statements of operations and cash flows of the
Company with respect to the period January 1, 1999 through the Closing Date (and
for 1997, to the extent audited financials statements for fiscal year 1997 do
not exist), which report shall be without limitation as to the scope of the
audit. Stockholders, in their capacities as officers and directors of the
Company during such periods, shall provide all management letters, reports or
representations reasonably requested by such auditors in connection with such
audits.
6.8. Minimum Cash as of the Closing. At the Closing, the Company shall
------------------------------
maintain a level of cash and cash equivalents equal to at least $500,000. The
Redemption Price payable at Closing will be reduced by the amount by which the
Company's cash and cash equivalents are less than $500,000 at Closing (the
"Minimum Cash Deficit"). In determining the Net Working Capital Adjustment, the
amount of Minimum Cash Deficit shall be added to the aggregate amount of any
downward Net Working Capital Adjustment (i.e., Net Working Capital is less than
$3,000,000) at Closing for purposes of determining the final Net Working Capital
Adjustment; provided, however, that in no event will a Minimum Cash Deficit
result in any upward Net Working Capital Adjustment.
6.9. Stock Options. Following the Closing, the Company will commit to grant
-------------
stock options to certain employees of the Company mutually agreed upon by ▇▇▇▇▇▇
Holdings and Sellers. 50% of such stock options shall be granted within a
reasonable period of time following the Closing Date and the remaining 50%
balance shall be reserved for future grants to employees of the Company. In the
aggregate, all of such stock options will be exercisable for an estimated
$2,000,000 of the Company's Common Stock valued as of the date of an initial
public offering of the Company or as of the time of a sale of the Company. The
exercise price for such stock options shall be set at a mutually agreed upon
discount to the initial public offering price or sales price of the Company in
the event of a sale of the Company; provided, however, that in no event will
such option exercise price be set (i) at a price that is less than the price per
share paid by ▇▇▇▇▇▇ Holdings for its shares of the Company's capital stock and
(ii) below the fair market value of the Company's Common Stock at the time such
exercise price is set (which date will be as of the Closing Date or after the
Closing Date, as the case may be, but prior to any initial public offering date
or sale date). The terms of such stock options shall generally be for ten years
from the date of grant, subject to customary four year annual vesting
requirements (i.e., 25% vesting per annum), and shall otherwise be on the same
terms and conditions applicable to all stock options granted to key executives
and employees of the Company.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1. Conditions to ▇▇▇▇▇▇ Holdings' Obligations. The obligation of ▇▇▇▇▇▇
------------------------------------------
Holdings under this Agreement to consummate the Closing is subject to the
conditions that:
-27-
(a) Covenants, Representations and Warranties. The Company, BSG Parent
-----------------------------------------
and Stockholders shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
contained in this Agreement to be performed and complied with by each of them
prior to or at the Closing Date. The representations and warranties of the
Company, BSG Parent and Stockholders set forth in this Agreement shall be
accurate in all material respects at and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
(b) Consents. All statutory requirements for the valid consummation by
--------
the Company, BSG Parent and Stockholders of the Transactions shall have been
fulfilled and all authorizations, consents and approvals, including expiration
or early termination of all waiting periods under the HSR Act and those of all
federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation of the
Transactions shall have been obtained in form and substance reasonably
satisfactory to ▇▇▇▇▇▇ Holdings unless such failure could not reasonably be
expected to have a Material Adverse Effect. All approvals of the Boards of
Directors and Stockholders of the Company and BSG Parent necessary for the
consummation of this Agreement and the Transactions shall have been obtained.
(c) Leases. Each of the Leases shall provide that the Company is the
------
lessee and if required under the terms of a given lease, any consent required in
connection with the transactions contemplated by this Agreement shall have been
obtained, and copies of such Leases (and any assignments pursuant to which any
of such Leases have been assigned to the Company prior to the Closing Date)
shall have been provided to ▇▇▇▇▇▇ Holdings.
(d) Discharge of Indebtedness and Liens; Stockholder Loans.
------------------------------------------------------
Stockholders and the Company shall have provided for the payment in full by the
Stockholders of all Funded Indebtedness of the Company at the Closing or the
Purchase Price and the Redemption Price will be reduced proportionately by the
amount of such Funded Indebtedness. Such Funded Indebtedness, if any, as of May
31, 1999, is listed on Exhibit S hereto. Stockholders shall have also provided
---------
for the termination of all Encumbrances of record on the properties of the
Company, except for Permitted Exceptions. All liens or UCC filings against the
Company or Affiliates of the Company which are engaged in the Business, shall
have been terminated as of the Closing. All outstanding loans or other amounts
owed by any Stockholder or BSG Parent to the Company shall have been repaid in
full on or prior to the Closing.
(e) Fee. In consideration of investment banking services provided by
---
▇▇▇▇▇▇ Holdings' Affiliate, ▇▇▇▇▇▇ Management Partners LLC, in connection with
the Transactions, the Company shall pay to ▇▇▇▇▇▇ Management Partners LLC
immediately following the Closing a fee in the amount of $370,000.
(f) Transfer Taxes. Stockholders shall be responsible for all stock
--------------
transfer or gains taxes imposed on Stockholders or BSG Parent incurred in
connection with this Agreement.
-28-
(g) Documents to be Delivered by Stockholders, BSG Parent and the
-------------------------------------------------------------
Company. The following documents shall be delivered at the Closing by
-------
Stockholders, BSG Parent and the Company:
(i) Escrow Agreement. Stockholders, BSG Parent and the
----------------
Company shall have delivered to ▇▇▇▇▇▇ Holdings at the Closing the
duly executed Escrow Agreement in substantially the form attached
hereto as Exhibit B.
(ii) Opinion of Stockholders' Counsel. ▇▇▇▇▇▇ Holdings shall
--------------------------------
have received an opinion of counsel to the Company, BSG Parent and
Stockholders, dated the Closing Date, in substantially the same form
as the form of opinion that is Exhibit C hereto.
(iii) Certificates. ▇▇▇▇▇▇ Holdings shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in a form
mutually agreed upon by ▇▇▇▇▇▇ Holdings and BSG Parent.
(iv) Release. Stockholders and BSG Parent shall have
-------
furnished the Company with a general release of liabilities, excluding
compensation and employee benefits as well as obligations pursuant to
this Agreement, in the form attached as Exhibit E hereto.
(v) Employment Agreements. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall each have duly executed and delivered
Employment Agreements in substantially the same form attached as
Exhibits F-1, F-2 and F-3 hereto, pursuant to which he will be
employed by the Company following the Closing.
(vi) Delivery of Purchased Shares. At the Closing, BSG
----------------------------
Parent shall deliver to ▇▇▇▇▇▇ Holdings the Purchased Shares duly
endorsed for transfer to ▇▇▇▇▇▇ Holdings and free and clear of all
Encumbrances, other than the restrictions imposed by federal and state
securities laws.
(vii) Redemption of Existing Common Stock. BSG Parent shall
-----------------------------------
have delivered the stock certificate(s) representing the Redemption
Shares duly endorsed for transfer to the Company and free and clear of
all Encumbrances, other than the restrictions imposed by federal and
state securities laws.
(viii) Resignation of Directors. The Company shall deliver
------------------------
the written resignations of all directors of the Company effective as
of the Closing.
(ix) Termination of Stockholder Agreements. The Company
-------------------------------------
shall have provided evidence satisfactory to ▇▇▇▇▇▇ Holdings of the
complete
-29-
termination of all Stockholder agreements among the Stockholders, BSG
Parent and/or the Company with respect to the Company or the Existing
Shares.
(h) Company Equity Arrangements. The Equity Agreements shall have been
---------------------------
executed and delivered by the respective parties thereto.
(i) Restated Certificate of Incorporation. At the Closing immediately
-------------------------------------
following the Stock Purchase and the Redemption, the Company's Certificate of
Incorporation shall have been duly amended and restated to include substantially
all of the provisions set forth in Exhibit A attached hereto and shall not have
been further amended or modified.
(j) Financing. The Company shall have obtained the Financing Proceeds
---------
pursuant to the Financing.
7.2. Conditions to Stockholders', BSG Parent's and the Company's
-----------------------------------------------------------
Obligations. The obligation of Stockholders, BSG Parent and the Company under
-----------
this Agreement to consummate the Closing is subject to the conditions that:
(a) Covenants, Representations and Warranties. ▇▇▇▇▇▇ Holdings shall
-----------------------------------------
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by ▇▇▇▇▇▇ Holdings prior to or at the Closing
and the representations and warranties of ▇▇▇▇▇▇ Holdings set forth in Article
-------
IV hereof shall be accurate in all material respects, at and as of the Closing
--
Date, with the same force and effect as though made on and as of the Closing
Date.
(b) Consents. All statutory requirements for the valid consummation by
--------
▇▇▇▇▇▇ Holdings of the Transactions shall have been fulfilled and all
authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and those of all federal,
state, local and foreign governmental agencies and regulatory authorities
required to be obtained in order to permit the consummation by ▇▇▇▇▇▇ Holdings
of the Transactions shall have been obtained unless such failure shall not have
a Material Adverse Effect on the Business.
(c) Documents to be Delivered by ▇▇▇▇▇▇ Holdings. The following
--------------------------------------------
documents shall be delivered at the Closing by ▇▇▇▇▇▇ Holdings:
(i) Escrow Agreement. ▇▇▇▇▇▇ Holdings shall have delivered
----------------
to Stockholders and BSG Parent at the Closing the duly executed Escrow
Agreement.
(ii) Employment Agreements. ▇▇▇▇▇▇ Holdings shall have
---------------------
caused the Company to duly execute and deliver Employment Agreements
with each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
in the same
-30-
form attached as Exhibits F-1, F-2 and F3 hereto, pursuant to which
------------ --- --
such Persons will be employed by the Company following the Closing.
(iii) Certificates. ▇▇▇▇▇▇ Holdings shall have delivered an
------------
officer's certificate and a secretary's certificate of ▇▇▇▇▇▇ Holdings
executed by officers of ▇▇▇▇▇▇ Holdings, dated the Closing Date, in a
form mutually agreed upon by ▇▇▇▇▇▇ Holdings and BSG Parent.
(iv) Legal Opinion. BSG Parent and the Stockholders shall
-------------
have received an opinion of counsel to ▇▇▇▇▇▇ Holdings in the Form of
Exhibit T hereto.
---------
(d) Company Equity Arrangements. The Equity Agreements shall have been
---------------------------
executed and delivered by the respective parties thereto.
(e) Payments to BSG Parent. BSG Parent shall have received (i) the
----------------------
Closing Redemption Price for the Redemption Shares and (ii) the portion of the
Purchase Price payable to BSG Parent at Closing for the Purchased Shares.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by BSG Parent and Stockholders. Except as provided in
----------------------------------------------
Section 8.6, Stockholders and BSG Parent agree to jointly and severally
indemnify and hold harmless ▇▇▇▇▇▇ Holdings and the Company and each officer,
director, and Affiliate of ▇▇▇▇▇▇ Holdings and the Company, including without
limitation any successor of the Company that is an Affiliate of ▇▇▇▇▇▇ Holdings
or any of the Company's lenders as provided in Section 10.5 hereof
------------
(collectively, the "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding)
(collectively, the "Indemnifiable Costs"), which any of the Indemnified Parties
may sustain, or to which any of the Indemnified Parties may be subjected,
arising out of (A) any misrepresentation, breach or default by Stockholders, BSG
Parent or the Company of or under any of the representations, covenants,
agreements or other provisions of this Agreement or any agreement or document
executed in connection herewith; provided, however, that Indemnifiable Costs for
covenants with respect to the Company shall be with respect to pre-Closing
periods only; (B) any downward Net Working Capital Adjustment not paid to the
Company pursuant to a reduction of the Escrow Sum; and (C) the cost of any cash
to accrual liability, if any, borne by the Company and not by BSG Parent or
Stockholders. The determination of whether the Company, on the one hand, or
▇▇▇▇▇▇ Holdings, on the other hand, is entitled to indemnification hereunder
shall be made by such parties in light of the economic impact or loss caused by
the matter which is the subject of the claim of indemnification. By way of
example, a claim of indemnification for breaches of the representation made in
Section 3.17 (Taxes) would impact the Company so that the Company would be
-----------
entitled to indemnification. A
-31-
claim of indemnification based on a breach of Section 3.1 (Capitalization) would
-----------
affect ▇▇▇▇▇▇ Holdings' investment in the Company directly (as opposed to
derivatively), so that ▇▇▇▇▇▇ Holdings would be entitled to indemnification.
8.2. Defense of Claims. If any legal proceeding shall be instituted, or any
-----------------
claim or demand made by a third Person, against any Indemnified Party in respect
of which Stockholders or BSG Parent may be liable hereunder, such Indemnified
Party shall give prompt written notice thereof to Stockholders and, except as
otherwise provided in Section 8.4 below, Stockholders shall have the right to
-----------
defend any litigation, action, suit, demand, or claim for which an Indemnified
Party may seek indemnifications, and such Indemnified Party shall extend
reasonable cooperation in connection with such defense, which shall be at
Stockholders' expense. In the event Stockholders fail or refuse to defend the
same within a reasonable length of time, the Indemnified Parties shall be
entitled to assume the defense thereof, and Stockholders and BSG Parent shall be
jointly and severally liable to repay the Indemnified Parties for all reasonably
incurred Indemnifiable Costs. If Stockholders shall not have the right to assume
the defense of any litigation, action, suit, demand, or claim in accordance with
the preceding sentence, the Indemnified Parties shall, at Stockholders' expense,
have the absolute right to control the defense of such litigation, action, suit,
demand, or claim, but Stockholders shall be entitled, at their own expense, to
participate in such litigation, action, suit, demand, or claim. The party
controlling any defense pursuant to this Section 8.2 shall deliver, or cause to
-----------
be delivered to the other party, copies of all correspondence, pleadings,
motions, briefs, appeals or other written statements relating to or submitted in
connection with the defense of any such litigation, action, suit, demand or
claim, and timely notice of any hearing or other court proceeding relating to
such litigation, action, suit, demand or claim. Notwithstanding the forgoing, in
no event will the party controlling any defense pursuant to this Section 3.2
-----------
settle any litigation, action, suit, demand or claim without the prior written
consent of the non-controlling party, unless such settlement provides for the
unqualified, absolute and complete release of all claims against the
non-controlling party and results in no monetary or equitable liability to the
non-controlling party.
8.3. Escrow Claim. If any claim for indemnification is made by an
------------
Indemnified Party pursuant to this Article VIII prior to the expiration of the
------------
Escrow Period, such Indemnified Party shall first apply to the Escrow Agent
provided in Section 2.7 of this Agreement for reimbursement of such claim in
-----------
accordance with the provisions of the Escrow Agreement provided, however, the
Escrow Sum is not intended to be an exclusive remedy in the event ▇▇▇▇▇▇
Holdings or the Company has indemnification claims hereunder which exceed such
amount.
8.4. Tax Audits, Etc. In the event of an audit of a Tax Return of the
----------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, the Stockholders and the Company
------------
shall jointly control any and all such audits which may result in the assessment
of additional Taxes against the Company and any and all subsequent proceedings
in connection therewith, including appeals. Stockholders and ▇▇▇▇▇▇ Holdings
shall cooperate fully in all matters relating to any such audit or other Tax
proceeding (including according access to all records pertaining thereto), and
will execute and file any and
-32-
all consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, Stockholders shall be
severally responsible for and shall promptly pay all Taxes, interest, and
penalties for which any of the Indemnified Parties shall be entitled to
indemnification.
8.5. Indemnification of Stockholders, BSG Parent and the Company. ▇▇▇▇▇▇
-----------------------------------------------------------
Holdings agrees to indemnify and hold harmless Stockholders, BSG Parent and the
Company and each officer, director, Stockholder or Affiliate of the Company,
from and against any Indemnifiable Costs arising out of any misrepresentation,
breach or default by ▇▇▇▇▇▇ Holdings of or under any of the representations,
covenants, agreements or other provisions of this Agreement or any agreement or
document executed in connection herewith.
8.6. Limits on Indemnification. All Indemnifiable Costs sought by any party
-------------------------
hereunder shall be net of any insurance proceeds received by such Person with
respect to such claim (less the present value of any premium increases occurring
as a result of such claim). Except for any claims for breach of the
representations, warranties and covenants of BSG Parent and the Stockholders
under Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.17 or Article VI hereof (the
------------ --- --- --- --- ---- ----------
indemnification for which shall expire on the expiration of the applicable
statute of limitations or, in the case of covenants in Article VI which have a
----------
specific expiration date, as of such date, and if so made, such claims, and all
Indemnifiable Costs incurred thereafter, shall continue after such date until
finally resolved), the right to make claims for indemnification provided under
this Article VIII shall expire on March 31, 2001 following the Closing Date
------------
(except for any claims for Indemnifiable Costs made prior to such date which
claims shall continue after such date until finally resolved). The Stockholders
and BSG Parent shall not be obligated to pay any amounts for indemnification
under this Article VIII until the aggregate indemnification obligation sought by
------------
▇▇▇▇▇▇ Holdings hereunder exceeds $500,000, whereupon Stockholders and BSG
Parent shall be liable for all amounts for which indemnification may be sought
in excess of the first $200,000 in claims. Notwithstanding the foregoing, in no
event shall the aggregate liability of Stockholders and BSG Parent to ▇▇▇▇▇▇
Holdings for breach of representations and warranties exceed the sum of the
Purchase Price and the Redemption Price, as adjusted pursuant to the terms
hereof; provided, however, that such limitation shall not include and shall not
limit any claims for the breaching of the representations and warranties of the
Stockholders and BSG Parent under Sections 3.1, 3.2, 3.3, 3.4, and 3.6. However
------------ --- --- --- ---
nothing in this Article VIII shall limit ▇▇▇▇▇▇ Holdings or Stockholders in
------------
exercising or securing any remedies provided by applicable statutory or common
law with respect to the fraudulent conduct of Stockholders, BSG Parent or ▇▇▇▇▇▇
Holdings in connection with this Agreement or in the amount of damages that it
can recover from the other in the event that ▇▇▇▇▇▇ Holdings or Stockholders
successfully prove intentional fraud or intentional fraudulent conduct in
connection with this Agreement. Other than as set forth in the preceding
sentence, the indemnification provided for in this Section VIII is intended to
------------
be the exclusive monetary remedy of ▇▇▇▇▇▇ Holdings or Stockholders with regard
to the transactions contemplated by this Agreement.
-33-
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any time prior to the
-----------
Closing:
(a) by the mutual written consent of all parties hereto;
(b) in writing by ▇▇▇▇▇▇ Holdings, if the Company, BSG Parent or any
of the Stockholders has breached in any material respect any representation,
warranty or covenant contained in this Agreement, and in each case such breach
has not been remedied within ten (10) business days after receipt of written
notice specifying such breach and demanding such breach to be remedied; or
(c) in writing by the Stockholders and the Company, if ▇▇▇▇▇▇ Holdings
has breached in any material respect any representation, warranty or covenant
contained in this Agreement, and in each case such breach has not been remedied
within ten (10) business days after receipt of written notice specifying such
breach and demanding such breach to be remedied; or
(d) in writing by either the Company and the Stockholders, on the one
hand, or ▇▇▇▇▇▇ Holdings, on the other hand, in the event the Closing has not
occurred on or before August 31, 1999, unless the failure of such consummation
or the failure to satisfy such condition, as applicable, shall be due to a
breach of any representation or warranty made by the party or parties seeking to
terminate this Agreement or the failure of such party or parties to comply in
all material respects with the agreements and covenants contained herein to be
performed by such party or parties.
9.2. Effect of Termination. If the Transactions are terminated pursuant to
---------------------
Section 9.1 by notice in writing to the non-terminating party or parties, this
-----------
Agreement shall become void and of no further force and effect, except that (a)
such termination shall not relieve (i) any party from its covenants in respect
of confidentiality contained in Section 6.3 and (ii) any party then in breach of
-----------
any representation, warranty, covenant or agreement contained in this Agreement
from liability in respect of such breach and (b) Sections 10.4 and 10.7 shall
------------- ----
survive termination of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. Modifications. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or
-34-
privilege. No waiver of any default on any one occasion shall constitute a
waiver of any subsequent or other default. No single or partial exercise of any
such right, power or privilege shall preclude the further or full exercise
thereof.
10.2. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given when personally delivered,
or 48 hours after deposited in the United States mail, first-class, postage
prepaid, or by facsimile addressed to the respective parties hereto as follows:
▇▇▇▇▇▇ Holdings:
---------------
c/▇ ▇▇▇▇▇▇ Equity Investors IV, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
Empyrean Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
-35-
The Company, BSG Parent or Stockholders:
---------------------------------------
c/o Business Solutions Group, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
10.3. Counterparts; Facsimile Transmission. This Agreement may be executed
------------------------------------
in several counterparts, each of which shall be deemed an original but all of
which counterparts collectively shall constitute one instrument, and in making
proof of this Agreement, it shall never be necessary to produce or account for
more than one such counterpart. Signatures of a party to this Agreement or other
documents executed in connection herewith which are sent to the other parties by
facsimile transmission shall be binding as evidence of acceptance of the terms
hereof or thereof by such signatory party, with originals to be circulated to
the other parties in due course.
10.4. Expenses. Each of the parties hereto will bear all costs, charges and
--------
expenses incurred by such party in connection with this Agreement and the
consummation of the Transactions, provided, however, that Stockholders shall
bear all costs and expenses of (i) any broker involved in this transaction on
behalf of Stockholders, BSG Parent or the Company and (ii) all legal and other
expenses of Stockholders, BSG Parent or the Company with respect to this
Agreement and the Transactions. All costs of ▇▇▇▇▇▇ Holdings shall be borne by
the Company.
10.5. Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company, BSG Parent, ▇▇▇▇▇▇ Holdings and
Stockholders, their heirs, representatives, successors, and permitted assigns,
in accordance with the terms hereof. This Agreement shall not be assignable by
the Company, BSG Parent or Stockholders without the prior written consent of
▇▇▇▇▇▇ Holdings. This Agreement shall be assignable by ▇▇▇▇▇▇
-36-
Holdings and/or the Company to either (a) any lender providing financing to
▇▇▇▇▇▇ Holdings or the Company (but only with respect to ▇▇▇▇▇▇ Holdings' rights
under Article II and Article VIII hereof) or (b) any Affiliate of ▇▇▇▇▇▇
Holdings, provided ▇▇▇▇▇▇ Holdings remain liable, in each case without the prior
written consent of Stockholders. In addition, following the Closing, ▇▇▇▇▇▇
Holdings or the Company may assign any or all of its rights hereunder, without
the consent of the Stockholders, in connection with any sale of all or
substantially all of the assets, capital stock, partnership interests or
business of the Company or ▇▇▇▇▇▇ Holdings (whether effected by sale, exchange,
merger, consolidation or other transaction) and provided the acquiring party
shall assume all of ▇▇▇▇▇▇ Holdings' or the Company's obligations hereunder.
10.6. Entire and Sole Agreement. This Agreement and the other schedules and
-------------------------
agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
10.7. Governing Law. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Delaware, without giving effect to the principles of conflicts of laws
thereof.
10.8. Survival of Representations, Warranties and Covenants. Regardless of
-----------------------------------------------------
any investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties and the related indemnities made hereunder or
pursuant hereto or in connection with the Transactions shall survive the Closing
for a period ending on March 31, 2001, provided (a) the representations and
warranties contained in Section 3.17 of this Agreement, and the related
------------
indemnities, shall survive the Closing until the expiration of the applicable
statutes of limitations for determining or contesting Tax liabilities including
any extension of such periods plus sixty (60) days, (b) the representations,
warranties and covenants contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6 and
------------ --- --- --- ---
6.5(c) of this Agreement, and the related indemnities, shall survive the Closing
------
indefinitely and not expire, (c) all covenants in this Agreement which have an
expiration date contained therein shall expire as of such date and (d) all other
covenants in this Agreement which do not have an expiration date shall expire
upon the expiration of the applicable statutes of limitations.
10.9. Invalid Provisions. If any provision of this Agreement is deemed or
------------------
held to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as similar as possible to
such illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon all parties hereto.
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10.10. Public Announcements. Neither Stockholders, BSG Parent nor the
--------------------
Company (pre-Closing) shall make any public announcement of the Transactions
without the prior written consent of ▇▇▇▇▇▇ Holdings, which consent shall not be
unreasonably withheld.
10.11. Remedies Cumulative. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
10.12. Third Parties. Except as specifically set forth or referred to
-------------
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
10.13. No Strict Construction. The parties hereto have participated jointly
----------------------
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
10.14. Disclosure Schedule. An item disclosed in any part of the Disclosure
-------------------
Schedule attached hereto shall be deemed disclosed in response to other
applicable Disclosure Schedule cross-referenced therein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date and year first above written.
THE COMPANY:
-----------
BUSINESS SOLUTIONS GROUP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
BSG PARENT:
----------
BSG HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
STOCKHOLDERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Trustee as trustee of
the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Trust dated July 24, 1998 and as trustee of
the ▇▇▇▇▇▇ ▇. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust
dated July 24, 1998
/s/ D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇
Family Trust dated May 22, 1995
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustee of the ▇▇▇▇▇
Family Trust dated November 28, 1998
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▇▇▇▇▇▇ HOLDINGS:
▇▇▇▇▇▇ ITECH HOLDINGS, L.L.C.
By: TC Equity Partners, L.L.C.
Its: Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
The Exhibits and Schedules to this Recapitalization Agreement are not included
with this Registration Statement on Form S-1. The Registrant will provide these
Exhibits and Schedules upon the request of the Securities and Exchange
Commission.
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