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EXHIBIT 10.44
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
EPS SOLUTIONS CORPORATION
"BUYER"
NATIONAL HEALTH CARE RECOVERY SERVICES, L.L.C.
"COMPANY"
AND
THE MEMBERS NAMED HEREIN
"MEMBERS"
MARCH 1, 1999
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TABLE OF CONTENTS
1. Sale and Purchase........................................................................1
1.1 Agreements to Sell and Purchase..............................................1
1.2 Closing......................................................................1
1.3 Purchase Price...............................................................2
2. Representations and Warranties of the Company and the Members............................2
2.1 Organization and Good Standing...............................................2
2.2 Ownership of Seller Interests................................................2
2.3 Authorization of Agreement...................................................3
2.4 Title to Assets..............................................................3
2.5 Financial Condition..........................................................4
2.6 Certain Property of the Company..............................................5
2.7 Year 2000 Compliance.........................................................7
2.8 No Conflict or Violation.....................................................8
2.9 Consents.....................................................................8
2.10 Labor and Employment Matters.................................................8
2.11 Employee Plans...............................................................9
2.12 Litigation..................................................................12
2.13 Certain Agreements..........................................................12
2.14 Compliance with Applicable Law..............................................13
2.15 Licenses....................................................................13
2.16 Accounts Receivable.........................................................14
2.17 Intercompany and Affiliate Transactions; Insider Interests..................14
2.18 Insurance...................................................................15
2.19 Customers...................................................................15
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2.20 No Undisclosed Liabilities..................................................16
2.21 Taxes.......................................................................16
2.22 Indebtedness................................................................18
2.23 Environmental Matters.......................................................18
2.24 Securities Matters..........................................................19
2.25 Buyer and the Consolidation Transactions....................................21
2.26 Banks.......................................................................21
2.27 Powers of Attorneys and Suretyships.........................................22
2.28 Brokers.....................................................................22
2.29 Summary of Certain Considerations...........................................22
2.30 Acknowledgment Regarding Deloitte & Touche LLP..............................22
2.31 Accuracy of Information.....................................................22
3. Representations and Warranties of Buyer.................................................23
3.1 Organization and Corporate Authority........................................23
3.2 No Conflict or Violation....................................................23
3.3 Capitalization..............................................................23
3.4 Notes.......................................................................23
3.5 Litigation..................................................................24
3.6 Accuracy of Information.....................................................24
4. Certain Understandings and Agreements of the Parties....................................24
4.1 Access......................................................................24
4.2 Confidentiality.............................................................24
4.3 Certain Changes and Conduct of Business.....................................25
4.4 Restrictive Covenants.......................................................28
4.5 Cooperation in Litigation...................................................30
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4.6 Tax Matters.................................................................31
4.7 Consolidation Transactions..................................................34
4.8 Supplemental Disclosure.....................................................34
4.9 HSR.........................................................................35
4.10 Competing Proposals.........................................................35
4.11 Bonus Plan..................................................................35
4.12 Best Efforts................................................................36
4.13 Further Assurances..........................................................36
4.14 Notice of Breach............................................................36
5. Survival; Indemnification...............................................................36
5.1 Survival....................................................................36
5.2 Indemnification by the Members..............................................37
5.3 Indemnification by Buyer....................................................37
5.4 Indemnification Procedure...................................................38
5.5 Payment.....................................................................39
5.6 Limitations.................................................................39
6. Conditions to Closing...................................................................40
6.1 Conditions to Obligations of Each Party.....................................40
6.2 Conditions to Obligations of Buyer..........................................41
6.3 Conditions to Obligations of the Members....................................43
7.Miscellaneous............................................................................45
7.1 Termination.................................................................45
7.2 Notices.....................................................................45
7.3 Assignability and Parties in Interest.......................................46
7.4 Governing Law...............................................................46
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7.5 Counterparts................................................................46
7.6 Publicity...................................................................47
7.7 Complete Agreement..........................................................47
7.8 Modifications, Amendments and Waivers.......................................47
7.9 Headings; References........................................................47
7.10 Severability................................................................47
7.11 Investigation...............................................................48
7.12 Expenses of Transactions....................................................48
7.13 Arbitration.................................................................48
7.14 Submission to Jurisdiction..................................................50
7.15 Attorneys' Fees.............................................................51
7.16 Enforcement of the Agreement................................................51
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EXHIBITS
A. Form of Assignment and Assumption Agreement
B. Summary of Certain Considerations
C. Form of Accredited Investor Questionnaire
D. Form of Subordination Agreement
E. Form of Employment Agreement
F. Form of Note
SCHEDULES
1.3 Purchase Price
2 Disclosure Schedule
2.1 Qualifications to do Business
2.5 Financial Schedules
2.6(a) Real Property
2.6(b) Personal Property
2.6(c) Proprietary Rights
2.9 Consents
2.10 Employees
2.11 Employee Plans
2.12 Litigation
2.13 Contracts
2.15 Licenses
2.18 Insurance
2.21(b) Tax Returns
2.21(i) 351 Information
2.22 Indebtedness
2.26 Banks
2.28 Brokers
3.5 Litigation
4.3(a)(i) Permitted Contracts
4.3(a)(xii) Stockholder Distributions
6.2 Employees Signing Employment Agreements
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of March 1, 1999 by and among National Health Care Recovery
Services, L.L.C., a Delaware limited liability company (the "COMPANY"), the
members of the Company listed on the signature page(s) hereof (each such
individual a "MEMBER," and collectively, the "MEMBERS") and EPS Solutions
Corporation, f/k/a ProfitSource Corporation, a Delaware corporation ("Buyer").
A. The Company is engaged in the business of health care cost
recovery services (the "BUSINESS").
B. The Members own 100% of the ownership interests in the Company
(the "SELLER INTERESTS").
C. The Members desire to sell to Buyer, and Buyer desires to
purchase from the Members all of the Seller Interests on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. SALE AND PURCHASE.
1.1 Agreements to Sell and Purchase.
On the Closing Date (as hereinafter defined) each Member shall sell to
Buyer, and Buyer shall purchase from each Member, the Seller Interests set forth
opposite such Member's name on Schedule 1.3, for the purchase price set forth in
Section 1.3. Each Member hereby consents to the transfer of the Seller Interests
to Buyer and to Buyer becoming the sole member of the Company.
1.2 Closing.
The closing of the sale and purchase of the Seller Interests (the "CLOSING")
will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, on a date to be selected by Buyer after all the conditions
set forth in Article 6 have either been satisfied or, in the case of conditions
not satisfied, waived in writing by the party entitled to the benefit of such
conditions (the "CLOSING DATE"). Prior to the Closing Date, Buyer shall provide
written notice (the "CLOSING NOTICE") to the Company and the Members informing
the Company and the Members of the date selected as the anticipated Closing
Date. At the Closing, the Members shall deliver to Buyer or its designees an
Assignment and Assumption
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Agreement in the form of Exhibit A, transferring the Seller Interests being sold
by the Members and each other instrument of transfer Buyer may reasonably
request to vest effectively in Buyer good and valid title to the Seller
Interests, free and clear of any liens, pledges, options, security interest,
trusts, encumbrances or other rights or interests of any person or entity,
together with any taxes, direct or indirect, attributable to such transfer of
the Seller Interests, and Buyer shall thereupon pay to each Member the Purchase
Price described in part (b) of Section 1.3 for such Member's Seller Interests.
Irrespective of the actual Closing Date, the Closing of the transactions
contemplated by this Agreement shall be deemed to have occurred as of March 1,
1999.
1.3 Purchase Price.
The consideration to be paid by Buyer for the Seller Interests (the
"PURCHASE PRICE"), both in the aggregate and to each Member for such Member's
Seller Interests, is described in Schedule 1.3.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS.
Each representation and warranty contained in this Article 2 is
qualified by the disclosures made in the disclosure schedule attached hereto as
Schedule 2 (the "DISCLOSURE SCHEDULE"). This Article 2 and the Disclosure
Schedule shall be read together as an integrated provision. The Company and the
Members, jointly and severally, represent and warrant to Buyer that:
2.1 Organization and Good Standing.
The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to carry on the Business as it is now and has
since its organization been conducted and as proposed to be conducted, and to
own, lease or operate its assets and properties. The Company is duly qualified
to do business and is in good standing in every jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where failure to be
so qualified would not have a material adverse effect on the Business or its
prospects or the Company's assets or financial condition (a "MATERIAL ADVERSE
EFFECT"). Schedule 2.1 lists all of the jurisdictions in which the Company is
qualified to do business. Complete and accurate copies of the articles of
organization and operating agreement of the Company, with all amendments thereto
to the date hereof, have been furnished to Buyer or its representatives.
2.2 Ownership of Seller Interests.
(a) The Seller Interests constitute 100% of the ownership interests of
the Company ("INTERESTS") and are validly issued and fully paid. The Seller
Interests, constitute
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all of the ownership interests of the Company. The Seller Interests owned by
each Member are set forth in part (b) of Schedule 1.3. Neither the Members nor
the Company has granted, issued or agreed to grant or issue any other equity
interests in the Company and there are no outstanding options, warrants, rights
to acquire ownership interests in the Company, subscription rights, securities
that are convertible into or exchangeable for, or any other commitments of any
character relating to, any equity interests of the Company.
(b) Each of the Members has good and valid title to, and sole record and
beneficial ownership of, the Seller Interests owned by such Member, free and
clear of any claims, liens, pledges, options, security interests, trusts
encumbrances or other rights or interests of any person or entity and each
Member has the absolute and unrestricted right, power and authority and capacity
to enter into this Agreement.
(c) All distributions and redemptions made or to be made by the Company
with respect to its equity interests have complied or will comply with
applicable law.
(d) All offers and sales of interests of the Company prior to the date
hereof were exempt from the registration requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), and were registered or qualified under
or exempt from all applicable state securities laws.
(e) The Company does not own, and did not own at any time, directly or
indirectly, either of record or beneficially, any equity interest in any entity,
and does not have the right to acquire any equity interest in any entity.
2.3 Authorization of Agreement.
The Company and the Members have all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and all other agreements and instruments to be executed
by the parties hereto in connection herewith (together with all other documents
to be delivered in connection herewith or therewith, collectively the
"TRANSACTION DOCUMENTS") have (except for Transaction Documents to be executed
and delivered solely by Buyer) been duly and validly approved by the Members of
the Company and no other proceedings on the part of the Company or the Members
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the other Transaction Documents to be
delivered by the Company or any Member have been (or upon execution will have
been) duly executed and delivered by the Company and each Member, have been
effectively authorized by all necessary action, and constitute (or upon
execution will constitute) legal, valid and binding obligations of the Company
and each Member, except as such enforceability may be limited by general
principles of equity and bankruptcy, insolvency, reorganization and moratorium
and other similar laws relating to creditors' rights (the "BANKRUPTCY
EXCEPTION.")
2.4 Title to Assets.
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The Company is the lawful owner of each of its assets, whether real,
personal, mixed, tangible or intangible. All of the Company's assets are
sufficient and adequate to conduct the Business as presently conducted; and are
free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any kind except any
of the following: (i) purchase money security interests in specific items of
equipment each having a value not in excess of $100; (ii) Personal Property
leased pursuant to Personal Property Leases; (iii) liens for taxes not yet
payable; (iv) additional security interests and liens consented to in writing by
Buyer; (v) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent; (vi) liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by liens of the
type described above in clauses (i) or (ii) above, provided that any extension,
renewal or replacement lien is limited to the property encumbered by the
existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase. There are no outstanding agreements,
options or commitments of any nature obligating the Company or any Member to
transfer any of the assets of the Company or rights or interests therein to any
party.
2.5 Financial Condition.
(a) Financial Statements. Schedule 2.5 sets forth the balance sheet of
the Company as of December 31, 1998 and the related statement of operations for
the fiscal year then ended (the "FINANCIAL STATEMENTS"). The Financial
Statements (i) were prepared in accordance with the books and records of the
Company; (ii) were prepared in accordance with generally accepted accounting
principles applicable to partnerships ("GAAP") and were consistently applied;
(iii) fairly present the financial condition and the results of the operations
of the Company as at the relevant dates thereof and for the periods covered
thereby; (iv) to the extent required by GAAP, contain and reflect all necessary
adjustments and accruals for a fair presentation of the financial condition and
the results of the operations of the Company for the periods covered by the
Financial Statements (except that the Financial Statements are subject to
year-end adjustments, the net effect of which will not represent a Material
Adverse Change); (v) to the extent required by GAAP, contain and reflect
adequate provisions for all reasonably anticipated liabilities, contingent or
otherwise, with respect to the period then ended and all prior periods; and (vi)
do not contain any items of a special or nonrecurring nature, except as
expressly stated therein. There have been no changes or modifications of revenue
recognition, cost allocation practices or method of, accounting or other
financial or operational practices or principles except for any such change
required by reason of a concurrent change in GAAP during the periods covered by
the Financial Statements.
(b) Absence of Certain Changes. Since the date of the Financial
Statements there has not been any Material Adverse Change, or any event, action,
or circumstance of the kind described in Section 4.3. For purposes of this
Agreement, a "MATERIAL ADVERSE CHANGE"
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means any event, circumstance, condition, development or occurrence causing,
resulting in, having, or that could reasonably be expected to have, a Material
Adverse Effect.
2.6 Certain Property of the Company.
(a) Real Property. The Company has never owned and does not currently
own any real property. Schedule 2.6(a) lists all real properties leased by the
Company, including a brief description of the operating facilities located
thereon, the annual rent payable thereon, the length of the term, any option to
renew with respect thereto and the notice and other provisions with respect to
termination of rights to the use thereof.
(i) The Company has a valid leasehold in the real properties
shown in Schedule 2.6(a) under written leases (each lease being referred to
herein as a "REAL PROPERTY LEASE," and collectively the "REAL PROPERTY LEASES")
and to the knowledge of the Company or any Member each Real Property Lease is a
valid and binding obligation of each of the other parties thereto, except as
enforceability may be limited by the Bankruptcy Exception.
(ii) The Company is not, and neither the Company nor any Member
has any knowledge that any other party to any Real Property Lease is, in default
with respect to any material term or condition thereof, and no event has
occurred which through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance upon
any asset of the Company.
(iii) To the knowledge of the Company or any Member all of the
buildings, fixtures and other improvements to which the Real Property Leases
relate are in good operating condition and repair, and the operation thereof as
presently conducted is not in violation of any applicable building code, zoning
ordinance or other law or regulation.
(b) Personal Property. Schedule 2.6(b) lists all vehicles, furniture,
fixtures, equipment and other items of tangible personal property owned or
leased by the Company (the "PERSONAL PROPERTY"). All items of Personal Property
are in good operating condition and repair sufficient to enable the Company to
operate the Business as presently conducted. The Company holds valid leases in
all of the Personal Property leased by it, and none of such Personal Property is
subject to any sublease, license or other agreement granting to any person any
right to use such property (each such lease, sublease, license or other
agreement, a "PERSONAL PROPERTY LEASE," and collectively the "PERSONAL PROPERTY
LEASES"). Schedule 2.6(b) provides a description and the location of each item
of Personal Property of the Company, accurately identifies such Personal
Property as owned or leased, and lists each Personal Property Lease. The Company
is not in material breach of or default, and no event has occurred which, with
due notice or lapse of time or both, may constitute such a material breach or
default, under any Personal Property Lease.
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(c) Proprietary Rights.
(i) Schedule 2.6(c) lists all Proprietary Rights (either
registered, applied for, or common law) owned by, registered in the name of,
licensed to, or otherwise used by the Company that are material to the Business.
For purposes of this Agreement "PROPRIETARY RIGHTS" means trademarks and service
marks (registered or unregistered), trade dress, trade names and other names and
slogans embodying business or product goodwill or indications of origin, all
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith, as well as the following: (i) patents,
patentable inventions, discoveries, improvements, ideas, formula, methodology,
processes, technology and computer programs, software and databases (including
source code, object code, development documentation, programming tools,
drawings, specifications and data), and all applications or registrations in any
jurisdiction pertaining to the foregoing, including all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof; (ii) trade
secrets, including confidential and other non-public information, and the right
in any jurisdiction to limit the use or disclosure thereof; (iii) copyrights in
writings, designs, mask works or other works, and registrations or applications
for registration of copyrights in any jurisdiction; (iv) licenses, including,
without limitation, software licenses, immunities, covenants not to ▇▇▇ and the
like relating to any of the foregoing; (v) Internet Web sites, domain names and
registrations or applications for registration thereof; (vi) customer lists;
(vii) books and records describing or used in connection with any of the
foregoing; and (viii) claims or causes of action arising out of or related to
infringement or misappropriation of any of the foregoing.
(ii) The Proprietary Rights, together with the Company's other
assets, are sufficient to operate the Business as presently conducted and
contemplated to be conducted after the Closing. All of the Proprietary Rights
that are material to the Business are owned by the Company free and clear of any
and all liens, security interests, claims, charges and encumbrances or are used
by the Company pursuant to a valid and enforceable license granting rights
sufficiently broad to permit the historical and anticipated uses of the
Proprietary Rights in connection with the conduct of the Business in the manner
presently conducted and to convey such right and authority to Buyer.
(iii) Schedule 2.6(c) lists any licenses, sublicenses or other
agreements pursuant to which the Company grants a license to any person to use
the Proprietary Rights or is a licensee of any of the Proprietary Rights.
(iv) The grants, registrations and applications included in or
applicable to the Proprietary Rights listed on Schedule 2.6(c) have not lapsed,
expired or been abandoned and no application or registration thereof is the
subject of any proceeding before any court, arbitrator, federal, state, local or
foreign government agency, regulatory body, or other governmental authority
(each a "Governmental Entity," and collectively "Governmental Entities") with
authority to bind the Company. There have not been any actions or other judicial
or adversary proceedings involving the Company concerning any of the Proprietary
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Rights, nor to the knowledge of any of the Members, is any such action or
proceeding threatened.
(v) The conduct of the Business does not conflict with valid
patents, trademarks, trade secrets, trade names or other intellectual property
rights of others. To the knowledge of any of the Members, there are no conflicts
with or infringements of any of the Proprietary Rights by any third party.
(vi) The Company is the sole owner of its trade secrets,
including, without limitation, customer lists, formulas, inventions, processes,
computer programs and routines associated, developed or used in connection with
the Business (the "Trade Secrets"), free and clear of any liens, encumbrances,
restrictions, or legal or equitable claims of others, and has taken all
reasonable security measures to protect the secrecy, confidentiality, and value
of the Trade Secrets. Any of the employees of the Company and any other persons
who, either alone or in concert with others, developed, invented, discovered,
derived, programmed or designed the Trade Secrets, or who have knowledge of or
access to information relating to them, have been put on notice and have entered
into agreements that the Trade Secrets are proprietary to the Company and not to
be divulged or misused.
(vii) All the Trade Secrets are presently valid and protectable
and are not part of the public knowledge or literature; and have not been used,
divulged, or appropriated for the benefit of any past or present employees or
other persons, or to the detriment of the Company or the Business.
(viii) The Company has taken all commercially reasonable
precautions necessary to ensure that all Proprietary Rights have been properly
protected and have been kept secret.
Year 2000 Compliance.
All date-related output, calculations or results before, during or after
the calendar year 2000 that are produced or used by any hardware, software
(other than software that is generally available upon payment of a "shrink-wrap"
type license and that has not been customized for use in connection with the
Business), firmware or facilities systems (the "COMPUTER SYSTEMS") owned or used
by the Company and material to the Business are Year 2000 Compliant. For
purposes of this Section, "YEAR 2000 COMPLIANT" means:
(a) all dates receivable by the Computer Systems, as well as
calculations, output and results will (i) include a consistent-length century
indicator of at least two base ten digits, and (ii) have date elements in
interfaces and data storage that will permit specifying the century to eliminate
date ambiguity;
(b) when any date data is represented without a century, either in an
interface or in data storage, the correct century will be unambiguous for all
manipulations involving that data;
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(c) data calculations involving either a single century or multiple
centuries will neither (i) cause an abnormal ending or operation, nor (ii)
generate incorrect results or results inconsistent with output or results from
any other century;
(d) when sorting by date, all records will be sorted in accurate
chronological sequence; and when the date is used as a key, records will be read
and written in accurate chronological sequence; and
(e) leap years will be determined by the following standard: (i) if
dividing the year by 4 yields an integer, it is a leap year, except for years
ending in 00, but (ii) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
2.8 No Conflict or Violation.
The execution, delivery and performance by the Company and the Members
of this Agreement and the other Transaction Documents to be delivered by the
Company or any Member and the consummation of the transactions contemplated
hereby and thereby do not and will not: (i) violate or conflict with any
provision of the charter documents or bylaws of the Company; (ii) violate in any
material respect any provision or requirement of any domestic or foreign,
national, state, or local law, statute, judgment, order, writ, injunction,
decree, award, rule, or regulation of any Governmental Entity applicable to the
Company or the Business; (iii) violate in any material respect, result in a
material breach of, constitute (with due notice or lapse of time or both) a
material default or cause any material obligation, penalty, premium or right of
termination to arise or accrue under any Contract (as hereinafter defined); (iv)
result in the creation or imposition of any material lien, charge or encumbrance
of any kind whatsoever upon any of the properties or assets of the Company; or
(v) result in the cancellation, modification, revocation or suspension of any
material license, permit, certificate, franchise, authorization or approval
issued or granted by any Governmental Entity (each a "LICENSE," and
collectively, the "LICENSES").
2.9 Consents.
Schedule 2.9 lists all consents and notices required to be obtained or
given by or on behalf of the Company or any Member before consummation of the
transactions contemplated by this Agreement in compliance with all applicable
laws, rules, regulations, or orders of any Governmental Entity, or the
provisions of any material Contract, and all such consents have been duly
obtained and are in full force and effect except where the failure to obtain
such consent will not have a Material Adverse Effect.
2.10 Labor and Employment Matters.
Schedule 2.10 lists all employees of the Company, including date of
retention, current title and compensation. There is no employment agreement,
collective bargaining agreement or other labor agreement to which the Company is
a party or by which it is bound. The Company has complied in all material
respects with all applicable laws, rules and regulations
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relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of taxes and other sums as
required by appropriate Governmental Entities and has withheld and paid to the
appropriate Governmental Entities or is holding for payment not yet due to such
Governmental Entities, all amounts required to be withheld from employees of the
Company and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing. There is no unfair labor
practice complaint against the Company pending before the National Labor
Relations Board or any state or local agency; pending labor strike or other
material labor trouble affecting the Company; material labor grievance pending
against the Company; pending representation question respecting the employees of
the Company; pending arbitration proceedings arising out of or under any
collective bargaining agreement to which the Company is a party. For purposes of
this Agreement, "EMPLOYEES" includes employees, independent contractors and
other persons filling similar functions.
2.11 Employee Plans.
(a) All accrued obligations of the Company, whether arising by operation
of law, by contract or past custom, or otherwise, for payments by the Company to
trusts or other funds or to any Governmental Entity, with respect to
unemployment compensation benefits, social security benefits or any other
benefits or obligations, with respect to employment of employees through the
date hereof have been paid or adequate accruals therefor have been made in the
Financial Statements, and adequate accruals for all such obligations will be
made through the Closing Date. All reasonably anticipated obligations of the
Company with respect to employees, whether arising by operation of law, by
contract, by past custom, or otherwise, for salaries, vacation and holiday pay,
sick pay, bonuses and other forms of compensation payable to employees in
respect of the services rendered by any of them prior to the date hereof have
been or will be paid by the Company prior to the Closing Date or adequate
accruals therefor have been made in the Financial Statements, and adequate
accruals for all such obligations will be made through the Closing Date.
(b) Schedule 2.11 lists all bonus, pension, option, security purchase,
benefit, welfare, profit-sharing, deferred compensation, retainer, consulting,
retirement, welfare, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation and other similar fringe or employee
benefit plans, funds, programs or arrangements, whether written or oral, in each
of the foregoing cases which cover, are maintained for the benefit of, or relate
to any or all current or former employees, members, officers or directors of the
Company, and any other entity ("ERISA AFFILIATE") related to the Company under
Section 414(b), (c), (m) and (o) of the Internal Revenue Code of 1986, as
amended (the "CODE") (the "EMPLOYEE PLANS"), together with all accrued
liabilities under such Employee Plans. With respect to each Employee Plan, the
Company has made available to Buyer, to the extent applicable, true and complete
copies of (i) all plan documents, including in the case of any Employee Plan not
set forth in writing, a written description thereof, (ii) the most recent
determination letter received from the Internal Revenue Service (the "IRS"),
(iii) the
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most recent application for determination filed with the IRS, (iv) the latest
actuarial valuations, (v) the latest financial statements, (vi) the three (3)
most recent Form 5500 Annual Reports, including Schedule A and Schedule B
thereto, (vii) all related trust agreements, insurance contracts or other
funding arrangements which implement any of such Employee Plans, (viii) all
Summary Plan Descriptions and summaries of material modifications and all
modifications thereto communicated to employees, and (ix) in the case of stock
options or stock appreciation rights issued under any Employee Plan, a list of
holders, dates of grant, number of shares, exercise price per share and dates
exercisable. Neither the Company nor any ERISA Affiliate of the Company has any
liability or contingent liability with respect to the Employee Plans, nor will
any of the Company's assets be subject to any lien, charge or claim relating to
the obligations of the Company with respect to employees or Employee Plans. No
party to any Employee Plan is in default with respect to any material term or
condition thereof, nor has any event occurred which through the passage of time
or the giving of notice, or both, would constitute a default thereunder or would
cause the acceleration of any obligation of any party thereto.
(c) Each of the Employee Plans, and the administration thereof, is and
has been in compliance with the requirements provided by any and all applicable
statutes, orders or governmental rules or regulations currently in effect,
including, without limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code, and, with respect to each Employee
Plan, there is no violation of any reporting or disclosure requirement imposed
by ERISA or the Code. Each of the Company and its ERISA Affiliates has made full
and timely payment of all amounts required to be contributed under the terms of
each Employee Plan and applicable law or required to be paid as expenses or
benefits under such Employee Plan, and has made adequate provision for reserve
to satisfy contributions and payments not yet made because they are not yet due
under the terms of such Employee Plan. Each Employee Plan that is intended to be
qualified under Section 401(a) of the Code is and has always been so qualified,
and each trust established in connection with any Employee Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code is and has always been so exempt, and either has received a favorable
determination letter with respect to such qualified status from the IRS or has
filed a request for such determination letter with the IRS within the remedial
amendment period. Such determination or qualified status will apply from and
after the effective date of any such Employee Plan. No act or omission has
occurred since the date of the last favorable determination issued with respect
to an Employee Plan which could result in a revocation of the Plan's qualified
status. In accordance with applicable law, each Employee Plan can be amended or
terminated at any time, without consent from any other party and without
liability other than for benefits accrued as of the date of such amendment or
termination.
(d) Neither the Company nor any ERISA Affiliate sponsors or has
sponsored, maintained, contributed to, incurred an obligation to contribute to
or withdrawn from, any Multi-Employer Plan (as defined in Section 4000(a)(3) of
ERISA) or any Multiple Employer Plan (as defined in ERISA Sections 4063 or 4064
or Code Section 413), whether or not terminated, for which any withdrawal or
partial withdrawal liability has been or could be
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incurred, whether or not any such liability has been asserted by or on behalf of
any such plan. Neither the Company nor any ERISA Affiliate sponsors or has ever
sponsored, maintained, contributed to or incurred an obligation to contribute to
any Employee Plan subject to the provisions of Title IV of ERISA.
(e) Buyer has been provided copies of all manuals, brochures,
publications or similar documents of the Company regarding office
administration, personnel matters and hiring, evaluation, supervision, training,
termination and promotion of employees, including, without limitation, all
communications to employees concerning such matters, each of which is an
accurate description of the terms of such plans or policies. The Company has no
affirmative action obligations.
(f) There are no contracts, agreements, plans or arrangements covering
any of the Company's employees with "change of control" or similar provisions.
There is no contract, agreement, plan or arrangement covering the Company or any
employee, that individually or collectively could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code. Neither the Company nor any of its ERISA Affiliates has incurred any
liability under the Worker Adjustment Retraining and Notification Act or any
similar state law relating to employment termination in connection with a mass
layoff, plant closing or similar event, and the transactions contemplated by
this Agreement will not give rise to any such liability.
(g) No Employee Plan has participated in, engaged in or been a party to
any Prohibited Transaction (pursuant to Section 4935 of the Code or Section 406
of ERISA and which is not exempt under Section 4975 of the Code or Section 408
of ERISA) and neither the Company nor any ERISA Affiliate has had asserted
against it any claim for any excise tax or penalty imposed under ERISA or the
Code with respect to any Employee Plan nor, to the knowledge of the Company or
any Stockholder is there any basis for any such claim. No officer, director or
employee of the Company or any of its ERISA Affiliates has committed a material
breach of any responsibilities or obligations imposed upon fiduciaries by Title
I of ERISA with respect to any Employee Plan.
(h) With respect to any Group Health Plan (as defined in Section
5000(b)(1) of the Code) maintained by the Company or any of its ERISA
Affiliates, each of the Company and the ERISA Affiliates have complied in all
material respects to the provisions of Part 6 of Title I of ERISA and Sections
4980B, 9801 and 9802 of the Code. The Company is not obligated to provide health
care or other welfare benefits of any kind to its retired or former employees or
their dependents, or to any person not actively employed by it, pursuant to the
terms of any Employee Plan or pursuant to any agreement or understanding, other
than as required by applicable law.
(i) Other than routine claims for benefits, there is no claim pending or
to the knowledge of the Company or any Member, threatened, involving any
Employee Plan by any person against such Employee Plan, the Company or any of
its ERISA Affiliates. There is no pending or, to the knowledge of the Company or
any Member, threatened, proceeding
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involving any Employee Plan before the IRS, the United States Department of
Labor or any other governmental authority.
2.12 Litigation.
Except as provided in Schedule 2.12, there are no claims, actions,
suits, proceedings, labor disputes or investigations of any nature pending or,
to the knowledge of the Company or any Member, threatened by or against the
Members, the Company, the officers, directors, employees, agents of the Company,
or any of their respective Affiliates involving, affecting or relating to the
Business or any assets, properties or operations of the Company or the
transactions contemplated by this Agreement. Neither the Company nor any of the
Company's assets is subject to any order, writ, judgment, award, injunction or
decree of any Governmental Entity. For purposes of this Agreement, "AFFILIATE"
shall have the meaning ascribed to such term in Rule 405 under the Securities
Act.
2.13 Certain Agreements.
(a) Schedule 2.13 lists all material contracts, agreements, instruments,
licenses, commitments and other arrangements to which the Company is a party or
otherwise relating to or affecting any of its assets, properties or operations,
including, without limitation, all written, or oral, (i) contracts, agreements
and commitments not made in the ordinary course of business, (ii) agency and
brokerage agreements, (iii) service and other customer contracts, (iv)
contracts, loan agreements, letters of credit, repurchase agreements, mortgages,
security agreements, guarantees, pledge agreements, trust indentures, promissory
notes and other documents or arrangements relating to the borrowing of money or
for lines of credit, (v) tax sharing agreements, real property leases or any
subleases relating thereto, personal property leases, any material agreement
relating to Proprietary Rights (including service agreements relating thereto)
and insurance contracts, (vi) agreements and other arrangements for the sale of
any assets, property or rights other than in the ordinary course of business or
for the grant of any options or preferential rights to purchase any assets,
property or rights, (vii) documents granting any power of attorney with respect
to the affairs of the Company, (viii) suretyship contracts, performance bonds,
working capital maintenance or other forms of guaranty agreements, (ix)
contracts or commitments limiting or restraining the Company or any of its
employees or Affiliates from engaging or competing in any lines of business or
with any person or entity, (x) partnership or joint venture agreements, (xi)
agreements relating to the issuance of any securities of the Company or the
granting of any registration rights with respect thereto, and (xii) all
amendments, modifications, extensions or renewals of any of the foregoing (each
a "CONTRACT," and collectively, the "CONTRACTS.")
(b) Each Contract is valid, binding and enforceable against the parties
thereto in accordance with its terms, except as such enforceability may be
limited by the Bankruptcy Exception, and is in full force and effect on the date
hereof. The Company has performed all material obligations required to be
performed by it under, and is not in material default or
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breach of, any Contract, and no event has occurred which, with due notice or
lapse of time or both, would constitute such a material default or breach.
(c) To the knowledge of the Company or any Member, no other party to any
Contract is in material default or breach in respect thereof, and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a material default or breach.
(d) There are no material disputes with any party to any Contract, and
to the knowledge of the Company or any Member, no party to any Contract has
credibly threatened to cancel or terminate any such agreement, whether as a
result of the transactions contemplated by this Agreement or otherwise.
(e) The Company has delivered to Buyer or its representatives true and
complete originals or copies of all the Contracts and a copy of every Material
Notice received by the Company or any Member since January 1, 1996, with respect
to any of the Contracts. For purposes hereof, "MATERIAL NOTICE" means those
notices alleging a material breach of a Contract or intention to terminate or
materially modify a Contract, but does not include routine correspondence.
(f) To the knowledge of the Company or any Member, no party to any
Contract has assigned any of its rights or delegated any of its duties under
such Contract.
2.14 Compliance with Applicable Law.
The operations of the Company are, and have been, conducted in all
material respects in accordance with all applicable laws, regulations, orders
and other requirements of all Governmental Entities having jurisdiction over it
and its assets, properties and operations, including, without limitation, all
such laws, regulations, orders and requirements relating to the Business except
in any case where the failure to so conduct its operations would not have a
Material Adverse Effect. The Company has not received any notice of any material
violation of any such law, regulation, order or other legal requirement, and is
not in material default with respect to any order, writ, judgment, award,
injunction or decree of any Governmental Entity, applicable to the Company or
any of its assets, properties or operations. To the knowledge of the Company or
any Member, there are no proposed changes in any such laws, rules or regulations
(other than laws of general applicability) that would adversely affect the
transactions contemplated by this Agreement or reasonably be expected to have a
Material Adverse Effect.
2.15 Licenses.
(a) Schedule 2.15 lists all material Licenses issued or granted to the
Company, and all pending applications therefor. The Licenses constitute all
material Licenses required, and consents, approvals, authorizations and other
requirements prescribed, by any law, rule
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or regulation which must be obtained or satisfied by the Company, in connection
with the Business or that are necessary for the execution, delivery and
performance by the Company and the Members of this Agreement and the other
Transaction Documents. The Licenses are sufficient and adequate in all material
respects to permit the continued lawful conduct of the Business in the manner
now conducted and the ownership, occupancy and operation of the Company's
properties for its present uses and the execution, delivery and performance of
this Agreement. No jurisdiction in which the Company is not qualified or
licensed as a foreign corporation has demanded or requested that it qualify or
become licensed as a foreign corporation. The Company has delivered to Buyer or
its representatives true and complete copies of all the material Licenses
together with all amendments and modifications thereto.
(b) Each License has been issued to, and duly obtained and fully paid
for by the Company and is valid, in full force and effect, and not subject to
any pending or known threatened administrative or judicial proceeding to
suspend, revoke, cancel or declare such License invalid in any respect. The
Company is not in violation in any material respect of any of the Licenses. The
Licenses have never been suspended, revoked or otherwise terminated, subject to
any fine or penalty, or subject to judicial or administrative review, for any
reason other than the renewal or expiration thereof, nor has any application of
the Company for any License ever been denied.
2.16 Accounts Receivable.
All accounts receivable of the Company (the "ACCOUNTS RECEIVABLE") as of
the date hereof are accurately reflected in Schedule 2.5, which will be updated
at the Closing Date to reflect all Accounts Receivable as of March 1, 1999,
including their aging. All Accounts Receivable as of the date hereof represent,
and all Accounts Receivable as of the Closing Date will represent, valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business that are current and collectible in amounts not
less than the aggregate amount thereof (net of reserves established in
accordance with GAAP applied consistently with prior practice) carried (or to be
carried) on the books of the Company and reflected in the Financial Statements,
and are not and will not be subject to any valid counterclaims or set-offs,
disputes or contingencies.
2.17 Intercompany and Affiliate Transactions; Insider Interests.
(a) Except as set forth on Schedule 2.17, there are no material
transactions, agreements or arrangements of any kind, direct or indirect,
between the Company and any director, officer, employee, Member, relative or
Affiliate of the Company or the Members, including, without limitation, loans,
guarantees or pledges to, by or for the Company or from, to, by or for any of
such persons, that are either (i) currently in effect, or (ii) reflected in the
Company's financial results.
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(b) Except as set forth on Schedule 2.17, no officer, director or Member
of the Company, or any Affiliate of any such person, now has, or within the last
three (3) years had, either directly or indirectly:
(i) an equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity which
furnishes or sells, or during such period furnished or sold, services or
products to the Company, or purchased, or during such period purchased from the
Company, any goods or services, or otherwise does, or during such period did,
business with the Company;
(ii) a beneficial interest in any contract, commitment or
agreement to which the Company is or was a party or under which it was obligated
or bound or to which its properties may be or may have been subject, other than
stock options and other contracts, commitments or agreements between the Company
and such persons in their capacities as employees, officers or directors of the
Company; or
(iii) any rights in or to any of the assets, properties or rights
used by the Company in the ordinary course of business.
2.18 Insurance.
Schedule 2.18 lists all insurance policies of any nature whatsoever
maintained by the Company at any time during the three (3) years prior to the
date of this Agreement and the annual or other premiums payable from the time
thereunder. There are no outstanding requirements or recommendations by any
insurance company that issued any such policy or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
Governmental Entity that require or recommend any changes in the conduct of the
Business, or any repairs or other work to be done on or with respect to any of
the properties or assets of the Company. The Company has not received any notice
or other communication from any such insurance company within the three (3)
years preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of such insurance
policies, and to the knowledge of the Company or any Member, no such
cancellation, amendment or increase of premiums is threatened.
2.19 Customers.
Schedule 2.19 lists the ten (10) largest customers of the Company,
together with revenues to the Company from each such customer during the most
recent complete fiscal year and the current fiscal year to the date hereof, and
the scheduled termination dates of their current contracts with the Company.
None of such customers has given written notice to the Company of an intention
to terminate or materially impair its business relationship with the Company and
neither the Company nor any Stockholder has any knowledge of any event that
would precipitate the impairment, or termination of, or the failure to renew, or
entitle any such customer to terminate, such business relationship.
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2.20 No Undisclosed Liabilities.
Except as and to the extent specifically reflected or reserved against
in the Financial Statements and except as incurred in the ordinary course of
business since the date of the Financial Statements, the Company has no material
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise, and whether due or to become due (including, without limitation,
any liability for taxes and interest, penalties and other charges payable with
respect to any such liability or obligation) and no facts or circumstances exist
which, with notice or the passage of time or both, could reasonably be expected
to result in any material claims against or obligations or liabilities of the
Company.
2.21 Taxes.
(a) For purposes of this Agreement, the following terms shall have the
meanings specified herein:
(i) "PRE-ACQUISITION TAX LIABILITY" means a Tax Liability of the Company
for or with respect to (A) any Pre-Acquisition Taxable Period, or (B) any
Straddle Period to the extent allocable to the period ending on March 1, 1998.
(ii) "PRE-ACQUISITION TAXABLE PERIOD" means a taxable period of the
Company that ends on any day on or before March 1, 1999.
(iii) "STRADDLE PERIOD" means a taxable period of the Company that
includes but does not end on March 1, 1999.
(iv) "TAX" OR "TAXES" means all taxes, including, without limitation,
all net income, gross receipts, sales, use, withholding, payroll, employment,
social security, unemployment, excise and property taxes, plus applicable
penalties and interest thereon.
(v) "TAX LIABILITIES" means all liabilities for Taxes.
(vi) "TAX PROCEEDING" means any audit or other examination, or any
judicial or administrative proceeding, relating to liability for or refunds or
adjustments with respect to Taxes.
(vii) "TAX RETURN" shall mean all reports and returns required to
be filed with respect to Taxes including, but not limited to, Form 1065.
(b) Tax Returns, Tax Payments and Tax Audits. The Company has (i) timely
filed or caused to be timely filed all Tax Returns of the Company required to be
filed as of the date hereof (after giving effect to any extension of time to
file such Tax Returns) and (ii) paid, when due, all Taxes due and payable for
the tax periods relating to such Tax Returns (whether or not reflected on such
Tax Returns). All such previously-filed Tax Returns were
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complete and accurate in all material respects when filed, and as of the date
hereof no additional Tax Liabilities for periods covered by such
previously-filed Tax Returns have been assessed on or proposed to the Company.
With respect to each such Tax Return, Schedule 2.21(b) specifies (A) each such
Tax Return that (1) is currently being audited by a Tax authority, or (2) as to
which the Company has received a written and/or oral notice from a Tax authority
that such Tax authority intends to commence an audit or examination of such Tax
Return, and (B) each such Tax Return as to which the Company has given its
consent to waive or extend the applicable statute of limitations for such Tax
Return or the assessment of Taxes required to be reported thereon. The Company
has either delivered to Buyer or made available for inspection by Buyer or its
representatives or agents complete and correct copies of all Tax audit reports
and statements of Tax deficiencies with respect to any delinquent Tax assessed
against or agreed to by the Company for all taxable periods commencing on or
after January 1, 1993, for which audit reports or statements of deficiencies
have been received by the Company.
(c) All Taxes required to be withheld by the Company, including, but not
limited to, Taxes arising as a result of payments (or amounts allocable) to
foreign or non-resident partners, foreign persons or to employees of the
Company, have been collected and withheld, and have been either paid to the
respective governmental agencies, set aside for such purpose or accrued on the
Company Financial Statements.
(d) Unpaid Taxes. The Pre-Acquisition Tax Liabilities of the Company
(whether imposed before or after Closing and whether imposed upon filing of a
Tax Return or as a result of an audit or examination) which are unpaid as of the
close of business on March 1, 1999 will not exceed the reserves for Tax
Liabilities (excluding book reserves for deferred Taxes established to reflect
timing differences between book and Tax income ) as set forth in the account for
accrued taxes payable account included in the Financial Statements.
(e) Tax Sharing Agreements. The Company is not a party to any
tax-sharing or tax-indemnity agreement and has not otherwise assumed by contract
or otherwise the Tax Liability of any other person.
(f) Section 481 Adjustments. The Company has not agreed, nor is it
required to make, any adjustment under Code Section 481(a) by reason of a change
in accounting method or otherwise.
(g) Foreign Tax Matters. The Seller Interests have not and have never
been United States real property interests as defined in Section 897(g) of the
Code and the regulations thereunder.
(h) No Liens. None of the assets of the Company are subject to any liens
in respect of Taxes (other than for current Taxes not yet due and payable).
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(i) No Closing Agreements. The Company has not executed or entered into
any closing agreement pursuant to Section 7121 of the Code, or any predecessor
provisions thereof, or any similar provision of state Tax law.
(j) Partnership Status. The Company qualifies (and has since the date of
its Formation qualified) and will qualify immediately before the Closing as a
partnership for federal and state income tax purposes, and neither the Company
nor any Member has taken a position contrary to such treatment.
(k) The sum of cash and fair market value of marketable securities (as
defined in Code Section 731(c)) of the Company at the Closing will not exceed
the Members' aggregate tax basis in the Seller Interests.
(l) Section 351. The transfer of the Seller Interests by the Members to
Buyer pursuant to this Agreement is intended to qualify (i) as a transfer of
property to a controlled corporation pursuant to the provisions of Code Section
351 and comparable provisions of applicable state income tax law, and (ii) under
Code Section 351 as part of a transfer by the Members and other persons
transferring property to Buyer who collectively will be in control (as defined
in Section 368(c) of the Code) of Buyer following such transfers. The
information set forth on Schedule 2.21(j) is accurate and may be used by Buyer
for tax filing purposes.
(m) The Company has (or will have) a valid Code Section 754 election in
effect for the Pre-Acquisition Taxable Period.
2.22 Indebtedness.
Schedule 2.22 lists each person or entity that owns any direct or
indirect debt interest (other than accounts payable incurred in the ordinary
course of the Company's business) in the Company (including, without limitation,
any indebtedness for borrowed money, whether or not evidenced by a note or other
written instrument) and a description of each such debt interest.
2.23 Environmental Matters.
Notwithstanding anything to the contrary contained in this Agreement:
(a) The Company and its operations comply and have at all times complied
in all material respects with all applicable laws, regulations and other
requirements of Governmental Entities or duties under the common law relating to
toxic or hazardous substances, wastes, pollution or to the protection of health,
safety or the environment (collectively, "ENVIRONMENTAL LAWS") and have obtained
and maintained in effect all licenses, permits and other authorizations or
registrations (collectively "ENVIRONMENTAL PERMITS") required under all
Environmental Laws and are in material compliance with all such Environmental
Permits.
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(b) The Company has not performed, failed to perform or suffered any act
which could reasonably be expected to give rise to, or has otherwise incurred,
material liability to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq. ("CERCLA"), or any other Environmental Laws, nor has it received notice
of any such liability or any claim therefor.
(c) Other than commonly used products in quantities that would not
reasonably be expected to present a material risk to health, safety or the
environment, no hazardous substance, hazardous waste, contaminant, pollutant or
toxic substance (as such terms are defined in or otherwise subject to any
applicable Environmental Law and collectively referred to herein as "HAZARDOUS
MATERIALS") has been released, placed, disposed of or otherwise come to be
located on, at, beneath or near any of the assets or properties owned or leased
by the Company at any time or any other property in violation of any
Environmental Laws such that the Company could be subject to material liability
under any Environmental Laws.
(d) The Company has not exposed any employee or third party to any
Hazardous Materials or conditions that could subject it to any material
liability under any Environmental Laws.
(e) The Company does not now own or operate, and has never owned or
operated, aboveground or underground storage tanks.
(f) To the knowledge of the Company or any Member, with respect to any
or all of the real properties leased at any time by the Company, there are no
asbestos-containing materials, urea formaldehyde insulation, polychlorinated
biphenyls or lead-based paints present at any such properties.
(g) There are no pending or, to the knowledge of the Company or any
Member, threatened administrative, judicial or regulatory proceedings, or, to
the knowledge of the Company or any Member, any threatened actions or claims, or
any consent decrees or other agreements in effect that relate to environmental
conditions in, on, under, about or related to the Company, its operations or the
real properties leased or owned by the Company at any time.
(h) The Company has delivered to Buyer copies of all written
environmental assessments, audits, studies and other environmental reports in
its possession or reasonably available to it relating to any of the current or
former businesses of the Company or its operations.
2.24 Securities Matters.
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(a) The Members understand that (i) the notes issued by Buyer, and the
offer and sale thereof, have not been registered or qualified under the
Securities Act or any state securities or "Blue Sky" laws, on the ground that
the sale provided for in this Agreement and the issuance of securities hereunder
is exempt from registration and qualification under Sections 4(2) and 18 of the
Securities Act, and (ii) Buyer's reliance on such exemptions is predicated on
the Members' representations set forth herein.
(b) The Members acknowledge that an investment in Buyer involves an
extremely high degree of risk, lack of liquidity and substantial restrictions on
transferability and that the Members may lose their entire investment in the
notes issued by Buyer (the "SECURITIES").
(c) Buyer has made available to the Members or the Members' advisors the
opportunity to obtain information to evaluate the merits and risks of the
investment in the Securities, and the Members have received all information
requested from Buyer. The Members have had an opportunity to ask questions and
receive answers from Buyer regarding the terms and conditions of the offering of
the Securities and the business, properties, plans, prospects, and financial
condition of Buyer and to obtain additional information as the Members have
deemed appropriate for purposes of investing in the Securities pursuant to this
Agreement.
(d) The Members, personally or through advisors, have expertise in
evaluating and investing in private placement transactions of securities of
companies in a similar stage of development to Buyer and have sufficient
knowledge and experience in financial and business matters to assess the
relative merits and risks of an investment in Buyer. In connection with the
purchase of the Securities, the Members have relied solely upon independent
investigations made by the Members, and have consulted their own investment
advisors, counsel and accountants. The Members have adequate means of providing
for current needs and personal contingencies, and have no need for liquidity and
can sustain a complete loss of the investment in the Securities.
(e) The Securities to be issued by Buyer hereunder will be acquired for
the Members' own account, for investment purposes, not as a nominee or agent,
and not with a view to or for sale in connection with any distribution of the
Securities in violation of applicable securities laws.
(f) The Members understand that no federal or state agency has passed
upon the Securities or made any finding or determination as to the fairness of
the investment in the Securities.
(g) Each Member is an "Accredited Investor" as defined in Rule 501(a)
under the Securities Act and has each documented his or her accredited status by
delivery to Buyer of a completed questionnaire in the form of Exhibit B hereto
attesting thereto (the "ACCREDITED INVESTOR QUESTIONNAIRE").
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(h) Neither the Company nor any Member has received any general
solicitation or general advertising concerning the Securities, nor is the
Company or any Member aware of any such solicitation or advertising.
2.25 Buyer and the Consolidation Transactions.
(a) The Members are aware that:
(i) Buyer has recently been organized and has a limited financial
operating history.
(ii) There can be no assurance that any of the Additional
Consolidation Transactions or Further Consolidation Transactions (as defined in
Section 4.7) will occur, that Buyer will be successful in accomplishing the
purpose for which it was formed or that it will ever be profitable. No assurance
can be given regarding (A) whether the companies acquired by Buyer in the
Initial Consolidation Transactions can be successfully integrated and operated,
or (B) what companies, if any, will ultimately be acquired by Buyer. No company
is obligated to participate in the Additional Consolidation Transactions or
Further Consolidation Transactions unless a written agreement to such effect is
entered into by Buyer and such company.
(iii) No assurance can be given that an initial public offering
("IPO") of Buyer's securities will occur. If an IPO does occur, no assurances
can be given as to timing of the IPO or the price at which any shares of Common
Stock would be sold.
(iv) No assurance can be given to the ultimate value of the
Common Stock .
(v) All decisions regarding the Consolidation Transactions, any
IPO, and Buyer's management and operations will be made by Buyer's management,
and certain individuals involved in planning the Consolidation Transactions and
managing the business of Buyer.
(b) The Members acknowledge that no assurances have been made to any
Member with respect to any of the foregoing and no representations, oral or
written, have been made to any Member by Buyer or any of its employees,
representatives or agents concerning the potential value or the Shares issued as
part of the Purchase Price or the prospects of Buyer, except as set forth
herein.
2.26 Banks.
Schedule 2.26 lists the account information at each bank or other
institution at which the Company has a line of credit, check, savings or other
account, certificate of deposit or
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safe deposit box and the names of each person authorized to draw thereon or have
access thereto.
2.27 Powers of Attorneys and Suretyships.
The Company does not have any general or special powers of attorney
outstanding (whether as grantor or grantee thereof) or any obligation or
liability (whether actual, accrued, accruing, contingent or otherwise) as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person or entity, except as endorser or maker
of checks or letters of credit, respectively, endorsed or made in the ordinary
course of business.
2.28 Brokers.
Except as set forth on Schedule 2.28, no broker, finder, investment
banker, or other person is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon arrangements made by or on behalf of the Company or any of the
Members.
2.29 Summary of Certain Considerations.
Each Stockholder acknowledges receipt and understanding of the Summary
of Certain Considerations attached hereto as Exhibit B.
2.30 Acknowledgment Regarding Deloitte & Touche LLP.
As part of the Initial Consolidation Transactions, Buyer purchased the
Integrated Cost Reduction Strategies ("ICRS") business unit of Deloitte & Touche
LLP ("DELOITTE"). The Company and the Members acknowledge, for the benefit of
Deloitte and its Affiliates, that Deloitte is not related to Buyer, that Buyer
and the individuals related to Buyer with whom the Company and the Members have
dealt in connection with the transactions contemplated by the various agreements
of the Company and the Members with Buyer have acted and will act on behalf of
Buyer and not Deloitte or any of Deloitte's Affiliates (as partners, principals,
employees, agents, associates or otherwise). For these purposes, "Affiliates" of
Deloitte include persons controlling, controlled by, or under common control
with Deloitte, including without limitation partners of Deloitte.
2.31 Accuracy of Information.
None of the representations or warranties or information provided and to
be provided by the Company or any Member to Buyer in this Agreement, the
Disclosure Schedule, schedules or exhibits hereto, or in any Accredited Investor
Questionnaire contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary in order to make the
statements and facts contained herein or therein not false or misleading. The
descriptions set forth in the Disclosure Schedule are accurate descriptions
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of the matters disclosed therein. Copies of all documents heretofore or
hereafter delivered or made available to Buyer pursuant hereto were or will be
complete and accurate records of such documents.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to the Members that:
3.1 Organization and Corporate Authority.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the other Transaction
Documents to be executed and delivered by Buyer have been (or upon execution by
Buyer will have been) duly executed and delivered by Buyer, have been
effectively authorized by all necessary action of Buyer, corporate or otherwise,
and constitute (or upon execution will constitute) legal, valid and binding
obligations of Buyer, except as such enforceability may be limited by the
Bankruptcy Exception.
3.2 No Conflict or Violation.
The execution, delivery and performance by Buyer of this Agreement and
the other Transaction Documents to be executed and delivered by Buyer and the
consummation of the transactions contemplated hereby and thereby, do not and
will not: (i) violate or conflict with any provision of the charter documents or
bylaws of Buyer; or (ii) violate in any material respect any provision or
requirement of any domestic or foreign, national, state or local law, statute,
judgment, order, writ, injunction, decree, award, rule, or regulation of any
Governmental Entity applicable to Buyer.
3.3 Capitalization.
The authorized capital stock of Buyer consists of 240,000,000 shares of
common stock, par value $0.001 per share (the "COMMON STOCK") of which
200,000,000 are Series A Common Stock and 40,000,000 are Series B Common Stock,
and 10,000,000 shares of undesignated preferred stock. The Shares, when issued,
sold, and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable. Holders of Series B Common Stock are entitled to elect all the
directors in one of the Buyer's three (3) classes of directors, with the holders
of Series A Common Stock entitled to elect the remaining directors. In all other
respects the Series A and Series B Common Stock are identical.
3.4 Notes.
Any note to be delivered by Buyer as part of the Purchase Price, when
delivered in accordance with the terms of this Agreement, will be duly executed,
and will constitute a
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legal, valid and binding obligation of Buyer, except as such enforceability may
be limited by the Bankruptcy Exception.
3.5 Litigation.
Except as set forth on Schedule 3.5, there are no claims, actions,
suits, or proceedings of any nature pending or, to the knowledge of Buyer,
threatened by or against Buyer, the officers, directors, employees, agents of
Buyer, or any of their respective Affiliates involving, affecting or relating to
any assets, properties or operations of Buyer or any of its Affiliates or the
transactions contemplated by this Agreement. Buyer is not subject to any order,
writ, judgment, award, injunction or decree of any Governmental Entity. From and
after the Closing, Buyer or its Affiliates may be subject to claims, actions,
suits, or proceedings, including as a result of acquisitions by Buyer in the
Additional Consolidation Transactions or Further Consolidation Transactions, and
Buyer makes no representations or warranties about any such claims, actions,
suits or proceedings or the absence thereof.
3.6. Accuracy of Information.
None of the representations or warranties or information provided and to
be provided by Buyer to the Members in this Agreement, the schedules or exhibits
hereto, or in any of the other Transaction Documents delivered by Buyer contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary in order to make the statements and facts
contained herein or therein not false or misleading.
4. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
4.1 Access.
The Company shall afford, to Buyer and Buyer's accountants, counsel and
representatives, full access during normal business hours throughout the period
prior to the Closing Date (or the earlier termination of this Agreement) to all
of the properties, books, Contracts and records of the Company (including,
without limitation, the Company's accounting records, the workpapers of the
Company's independent accountants, and all environmental studies, reports and
other environmental records) and, during such period, shall furnish promptly to
Buyer all information concerning the Company, the Business, the Company's
properties, liabilities and personnel as Buyer may reasonably request.
4.2 Confidentiality.
For purposes hereof, the Company and the Members will keep the matters
contemplated herein and all information provided by Buyer related to Buyer and
the Consolidation Transactions and potential participants therein, including,
without limitation, Deloitte & Touche, LLP, confidential, and will not provide
information about such matters to
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any party or use such information except to the extent necessary to effect the
transactions contemplated hereby. Buyer will keep the matters contemplated
herein and all information provided by the Company and the Members related to
the Company and the Business confidential, and will not provide information
about such matters to any party or use such information except to the extent
necessary to effect the transactions contemplated hereby. Buyer and the Company
shall each cause their respective Affiliates, officers, directors, employees,
agents, and advisors to keep confidential all information received in connection
with the transactions contemplated hereby. The Company and the Members
acknowledge that Buyer may provide information about the Company and the
Business to other participants in the Additional or Further Consolidation
Transactions to the extent necessary to facilitate the Consolidation
Transactions. If this Agreement terminates without consummation of the Closing,
the Company, the Members and Buyer shall, and shall cause their Affiliates to,
each maintain the confidentiality of any information obtained from the other in
connection with the transactions contemplated hereby, the Additional or Further
Consolidation Transactions, and Buyer's business plans (the "INFORMATION"),
other than Information that (i) was in the public domain before the date of this
Agreement or subsequently came into the public domain other than as a result of
disclosure by the party to whom the Information was delivered; or (ii) was
lawfully received by a party from a third party free of any obligation of
confidence of or to such third party; or (iii) was already in the possession of
the party prior to receipt thereof, directly or indirectly, from the other
party; or (iv) is required to be disclosed in a judicial or administrative
proceeding after giving the other party as much advance notice of the
possibility of such disclosure as practicable so that the other party may
attempt to stop such disclosure; or (v) is subsequently and independently
developed by employees of the party to whom the Information was delivered
without reference to the Information. If this Agreement terminates without
consummation of the Closing, Buyer, on the one hand, and the Members and the
Company, on the other, shall return to the other all material containing or
reflecting the Information provided by the other, shall not retain any copies,
extracts, or other reproductions thereof or derived therefrom, and Buyer shall
ensure the return of all such material from all other parties with whom it has
been shared, and shall thereafter refrain from using the Information and shall
maintain its confidentiality pursuant to this Agreement.
4.3 Certain Changes and Conduct of Business.
(a) From and after the date of this Agreement and until the Closing (or
the earlier termination of this Agreement), the Company shall, and the Members
shall cause the Company to, conduct the Company's business solely in the
ordinary course consistent with past practices. Without limiting the generality
of the preceding sentence, except as required or permitted pursuant to the terms
hereof, the Company shall not, and the Members shall cause the Company not to:
(i) make any material change in the conduct of its business and
operations or enter into any transaction other than in the ordinary course of
business consistent with past practices; or terminate or amend any Contract; or
enter into any new contract other than contracts described in Schedule
4.3(a)(i), in any case calling for payments to or by the
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Company in excess of $20,000 over the life of the contract or series of related
contracts, without the prior written consent of Buyer, which may not be
unreasonably withheld;
(ii) make any change in the articles of organization, operating
agreement or other similar documents of the Company, issue any additional
Interests or grant any option, warrant or right to acquire any Interests or
issue any security convertible into or exchangeable for Interests, alter any
term of any of the Interests, or make any change in other ownership interests or
in the capitalization, whether by reason of a reclassification,
recapitalization, exchange, distribution or otherwise;
(iii) (A) incur or assume any indebtedness for borrowed money,
issue any notes, bonds, debentures or other corporate securities or grant any
option, warrant or right to purchase any of the foregoing, (B) issue any
securities convertible or exchangeable for debt securities of the Company, or
(C) issue any options or other rights to acquire directly or indirectly any debt
securities of the Company or any security convertible into or exchangeable for
such debt securities;
(iv) make any sale, assignment, transfer, lease, abandonment or
other conveyance of any of the assets of the Company or any part thereof, except
transactions required pursuant to existing contracts of the Company and
dispositions of inventory or worn out or obsolete equipment for fair or
reasonable value in the ordinary course of business consistent with past
practices;
(v) subject any of the assets of the Company, or any part
thereof, to any lien, security interest, charge, interest or other encumbrance,
or suffer such to be imposed other than such liens, security interests, charges,
interests or other encumbrances as may arise in the ordinary course of business
consistent with past practices;
(vi) acquire any assets or properties, or enter into any other
transaction, other than in the ordinary course of business consistent with past
practices;
(vii) enter into any new (or amend any existing) Employee Plan,
program or arrangement or any employment, severance or consulting agreement, or
grant any increase in the compensation or benefits payable or to become payable
to (A) any officers or executive level employees, or (B) any employees other
than officers or executive level employees, except in accordance with
pre-existing contractual provisions applicable to such non-executive level
employees;
(viii) make or commit to make any capital expenditure in excess
of $25,000 or to invest, advance, loan, pledge or donate any monies to any
customers or other persons or entities or to make any similar commitments with
respect to outstanding bids or proposals;
(ix) sell, transfer, or lease any assets to, or enter into any
agreement or arrangement with, any Member or any Affiliate of the Company or any
Member;
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(x) guarantee any indebtedness for borrowed money or any other
obligation;
(xi) delay payment of payables or accelerate collection of
receivables relative to the Company's historical practices regarding the timing
of such payments and collections;
(xii) declare or make any distributions or other payments to
equity holders, except as set forth on Schedule 4.3(a)(xii);
(xiii) make any change in any revenue recognition or cost
allocation practices or method of accounting or accounting principle, method,
estimate or practice (except for any such change required by reason of a
concurrent change in GAAP), or write down the value of any assets or write-off
as uncollectible any Accounts Receivable except in the ordinary course of
business consistent with past practices;
(xiv) settle, release or forgive any material claim or litigation
or waive any material right;
(xv) take any other action that would cause any of the
representations and warranties made by the Company or any Member herein not to
remain true and correct in all material respects, or that would cause any of the
conditions to the parties' respective obligations to consummate the transactions
contemplated hereby, as set forth in Sections 6.1, 6.2, or 6.3, not to be met;
or
(xvi) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing (or the earlier
termination of this Agreement), the Company shall, and the Members shall cause
it to:
(i) maintain, in all material respects, the assets and properties
of the Company in accordance with present practices and in a condition suitable
for their current use;
(ii) file, when due or required, federal, state, foreign and
other Tax Returns and other reports required to be filed and pay when due all
Taxes, assessments, fees and other charges lawfully levied or assessed against
it, unless the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted;
(iii) continue to conduct the business of the Company in the
ordinary course consistent with past practices;
(iv) continue to maintain existing business relationships with
suppliers and customers except to the extent that such relationships are, at the
same time, judged in good faith to be non-beneficial;
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(v) maintain and comply with all material Licenses;
(vi) comply with all Environmental Laws, and upon receipt of
notice that there exists a violation of any Environmental Law, immediately
notify Buyer in writing;
(vii) keep in full force and effect any insurance policies
comparable in amount and scope to coverage maintained by the Company (or on
behalf of it) on the date hereof; and
(viii) preserve its business organization.
4.4 Restrictive Covenants.
(a) Non-Competition. The Members recognize that the covenants of each
Member contained in this Section 4.4(a) (the "COVENANT NOT TO COMPETE") are an
essential part of this Agreement and the other Transaction Documents and that
but for the agreement of each Member to comply with such covenants Buyer would
not enter into this Agreement or the other Transaction Documents. The Members
acknowledge and agree that the Covenant Not to Compete is necessary to protect
the Business acquired by Buyer, including without limitation, goodwill and the
Proprietary Rights and that irreparable harm and damage will be done to Buyer if
any Member competes with Buyer in any way prohibited by the Covenant Not to
Compete. In addition, the Members acknowledge that the Purchase Price is
consideration for professional relationships and market place reputation
developed by the Company and the Members and the Covenant Not to Compete is
necessary for Buyer to receive the full benefit of this Agreement. After the
Closing, each Member shall not individually, or in concert, directly or
indirectly:
(i) either on its, his, hers or their own account or for any
other person or entity, solicit, induce, attempt to induce, interfere with, or
endeavor to cause (in each case in such a manner that could have a material
adverse effect on the financial condition, prospects or operation of the
Business, the assets of the Company or Buyer or any of its Affiliates) any
customer, which has utilized the services of the Company at any time during the
two (2) year period preceding the Closing Date or whom the Company was engaged
in meaningful negotiations as of the Closing Date (each, a "CUSTOMER"), to
modify, amend, terminate or otherwise alter the terms upon which it acquires
services from Buyer or Buyer's Affiliates, or to acquire from any party other
than Buyer or its Affiliates any services of the kind available from Buyer or
its Affiliates;
(ii) engage or become interested in, as owner, employee, partner,
through equity ownership (not including up to a 1% passive equity interest in a
public company), investment of capital, lending of money or property, rendering
of services, or otherwise, either alone or in association with others, any
business competitive with the Business (including within the definition of the
Business, without limitation, any business of the type
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or types conducted by the Company at any time during the two (2) year period
preceding the Closing Date or under development by the Company on the Closing
Date),
(iii) take any material action intended to advance an interest of
any competitor of the Business, or encourage any other person to make any such
statement or to perform any such act; or
(iv) take any material action intended to cause any Customer or
prospective customer to use the services or purchase the products of any
competitor of the Business.
This Covenant Not to Compete shall be limited, with respect to any
Member, to any county or any other political subdivision of any state of the
United States of America, or of any other country in the world, where such
Member generated revenue or established goodwill at any time during the two (2)
year period preceding the Closing Date. This Covenant Not to Compete shall bind
the Members until December 31, 2002, provided, however, that if the employment
of any Member is terminated by Buyer without Cause or by such Member for Good
Reason (each as defined in such Member's Employment Agreement delivered pursuant
to Section 6.3(c)(iv), and if either (i) a registration statement for an
underwritten IPO of Buyer's equity securities has not been filed by December 31,
1999, or (ii) Buyer fails to consummate a public offering that results in a
public trading market of equity securities of Buyer on a national securities
exchange or the Nasdaq Stock Market by May 15, 2000, then after termination of
such Stockholder's employment with the Company or any of its Affiliates, such
Stockholder will no longer be subject to the covenants contained in Sections
4.4(a)(ii) and (iii), and the covenants in Section 4.4(a)(iv) will not be
breached by any general marketing efforts with which such Stockholder may be
involved that are not targeted specifically at any Customer. The parties hereto
agree that the duration and area for which the Covenant Not to Compete set forth
in this Section 4.4(a) is to be effective are reasonable.
(b) Confidentiality. Notwithstanding the expiration of the Covenant Not
to Compete set forth in Section 4.4(a) each Member shall at all times keep
confidential and shall not disclose to others any Proprietary Rights and shall
not use or permit to be used any Proprietary Rights for any purpose other than
performance of obligations to Buyer.
(c) Non-Diversion. For the period during which the Covenant Not to
Compete binds the Members pursuant to Section 4.4(a) each of the Members shall
not, and shall cause their Affiliates not to, divert or attempt to divert or
take advantage of or attempt to take advantage of any actual or potential
business or opportunities of Buyer or its Affiliates of which any of the Members
become aware as the result of their affiliation with the Business or their
relationship with Buyer or its Affiliates and which relate specifically to the
Business, or any part thereof. This Section 4.4(c) is in addition to and not by
way of limitation of any other duties the Members may have to Buyer or its
Affiliates.
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(d) Non-Recruitment. For the period during which the Covenant Not to
Compete binds the Members pursuant to Section 4.4(a) each of the Members shall
not, and shall cause their Affiliates not to, hire away, or cause any other
person to hire away, any employee of or consultant to Buyer or its Affiliates
(including without limitation persons employed or engaged by Seller before the
Closing Date), or directly or indirectly entice or solicit or seek to induce or
influence any of such employees or consultants to leave their employment or
engagement with Buyer or its Affiliates.
(e) Remedies. The covenants contained in this Section 4.4 impose a
reasonable restraint on the Members in light of the activities and business of
the Company and future plans of Buyer. The Members acknowledge that if they
violate any of the covenants contained in this Section 4.4 (collectively, the
"RESTRICTIVE COVENANTS"), it will be difficult to determine the resulting
damages to Buyer and, in addition to any other remedies Buyer may have, Buyer
shall be entitled to temporary injunctive relief without being required to post
a bond and permanent injunctive relief without the necessity of proving actual
damages. Each Member shall be severally liable to pay all costs, including
reasonable attorneys' fees and expenses, that Buyer may incur in enforcing or
defending, to any extent, any of the Restrictive Covenants breached by such
Member, whether or not litigation is actually commenced and including litigation
of any appeal defended by Buyer where such party succeeds in enforcing any of
the Restrictive Covenants. Buyer may elect to seek one or more remedies at its
discretion on a case by case basis. Failure to seek any or all remedies in one
case shall not restrict Buyer from seeking any remedies in another situation.
Such action by Buyer shall not constitute a waiver of any of its rights.
(f) Severability and Modification of any Unenforceable Covenant. Each of
the Restrictive Covenants will be read and interpreted with every reasonable
inference given to its enforceability. However, if any term, provision or
condition of the Restrictive Covenants is held by a court or arbitrator to be
invalid, void or unenforceable, the remainder of the provisions thereof shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. If a court or arbitrator should determine any of the Restrictive
Covenants are unenforceable because of over-breadth, then the court or
arbitrator shall modify such covenant so as to make it enforceable to the
fullest extent the court or arbitrator deems reasonable and enforceable under
the prevailing circumstances. The Covenant Not to Compete shall be deemed to be
a series of separate covenants, one for each and every county of each and every
state of the United States of America and each and every political subdivision
of each and every country outside the United States of America where the
Covenant Not to Compete is intended to be effective.
4.5 Cooperation in Litigation.
Each party will fully cooperate with the others in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such party relating to or arising out of the
conduct of the Business prior to or after the Closing Date (other than
litigation between Buyer and/or its Affiliates or assignees, on the one hand,
and the Company or any Member and/or their Affiliates or assignees, on the
other,
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arising out of the transactions contemplated by this Agreement). Subject
to the provisions hereof regarding payments by each party of its costs and
payments or attorneys' fees and costs, the party requesting such cooperation
shall pay the out-of-pocket expenses (including reasonable legal fees and
disbursements) of the party providing such cooperation and of its officers,
directors, employees and agents reasonably incurred in connection with providing
such cooperation, but shall not be responsible to reimburse the party providing
such cooperation for such party's time spent in such cooperation or the salaries
or costs of fringe benefits or other similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
4.6 Tax Matters.
(a) Certain Operating Conventions and Procedures.
(i) For all Tax purposes the Closing shall be deemed to occur as of the
close of the Company's business activities on March 1, 1999, and, in the case of
Pre-Acquisition Taxable Periods ending on March 1, 1999, all of the Company's
income, gains and other Tax items attributable to March 1, 1999 shall be
included and reported by the Company in Tax Returns (including federal Form 1065
and any similar state return) of the Company for such Pre-Acquisition Taxable
Periods to be filed following the Closing and all Taxes attributable to the
Company's income, gains or other taxable items for March 1, 1999 shall be
reported on such Tax Returns.
(ii) The allocation of any Tax Liability between the portion of any
Straddle Period ending on March 1, 1999 and the portion of such Straddle Period
after such date shall be made by means of a closing of the books and records of
the Company as of the close of business on March 1, 1999 as if a taxable period
ended as of the close of such date; provided, however, that exemptions,
allowances or deductions that are calculated on an annual basis (including, but
not limited to, depreciation and amortization deductions) shall be allocated
between the period ending on and inclusive of March 1, 1999 (the "PRE-CLOSING
PERIOD") and the period following March 1, 1999 (the "POST-CLOSING PERIOD") in
the proportion which the number of days in each such period bears to the total
number of days in the Straddle Period; and provided further, if as of March 1,
1999 the Company is a partner in any partnership which has a Tax year that does
not end as of March 1, 1999, any tax liability attributable to such
partnership's activities shall be allocated between the Pre-Closing Period and
the Post-Closing Period in the same manner based upon the number of days in each
such period.
(b) Tax Returns Required to Be Filed Prior to the Closing Date. Prior to
the March 1, 1999 the Company (i) shall prepare and file, or cause to be
prepared and filed, all Tax Returns of the Company required to be filed on or
prior to the March 1, 1999 (after
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giving effect to any valid extensions), and (ii) shall pay or cause to be paid
all Taxes shown or reported to be due and payable by the Company on such Tax
Returns.
(c) Tax Returns for Other Pre-Acquisition Taxable Periods.
(i) Buyer shall cause the Company to prepare and file all Tax Returns
required to be filed by the Company for Pre-Acquisition Taxable Periods which
are not required to be filed on or prior to March 1, 1999 (after giving effect
to any valid extensions).
(ii) Members shall be responsible for and shall pay (A) all reasonable
costs and expenses related to the preparation and filing of the Company's Tax
Returns for Pre-Acquisition Taxable Periods described in Section 4.6(c)(i), and
(B) all Taxes shown or reported to be due and payable on such Tax Returns to the
extent not specifically reserved (excluding reserves for deferred taxes) against
in the Financial Statements. Each Member shall pay his or her proportionate
share of such costs, expenses and Tax Liabilities of the Company promptly
following receipt by such Member of a notice from Buyer of Buyer's calculation
of such Member's payment obligation hereunder together with copies of the
relevant Tax Returns and other information supporting Buyer's calculation. If a
Member disputes all or any portion of the payment obligation hereunder as
calculated by Buyer, such Member shall nevertheless promptly pay to Buyer the
amount specified in the notice and any dispute related thereto shall be resolved
pursuant to the arbitration provisions of Section 7.13. Any additional Taxes
attributable to the periods covered by such Tax Returns, whether pursuant to an
amended return or any Tax Proceeding, shall be paid by Members promptly upon
demand therefor by Buyer.
(d) Straddle Period Returns.
(i) The parties acknowledge and agree that the Company may be required,
with respect to certain Taxes for Straddle Periods, to file a full year return
(herein a "STRADDLE PERIOD RETURN") reporting and accounting for such Taxes on
an aggregate basis covering both the Pre-Closing Period and the Post-Closing
Period. The Buyer, at its expense, shall cause the Company to prepare and file
such Straddle Period Returns.
(ii) The Taxes reportable on such Straddle Period Returns that are
attributable to the Pre-Closing Period (herein "PRE-CLOSING TAXES") shall be
determined in accordance with the provisions of Section 4.6(a)(ii). The Members
shall be responsible for and shall pay all Pre-Closing Taxes shown or reported
to be due and payable on such Straddle Period Returns to the extent not
specifically reserved (excluding reserves for deferred taxes) against in the
Financial Statements. Each Member shall pay his or her proportionate share of
Pre-Closing Taxes promptly following receipt by such Member of a notice from
Buyer of Buyer's calculation of such Member's payment obligation hereunder
together with copies of the relevant Tax Returns and other information
supporting Buyer's calculation. If a Member disputes all or any portion of the
payment obligation hereunder as calculated by Buyer, such Member shall
nevertheless promptly pay to Buyer the amount specified in the notice and any
dispute related thereto shall be resolved pursuant to the arbitration provisions
of
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Section 7.13. Any additional Taxes attributable to the Pre-Closing Periods
covered by such Tax Returns, whether pursuant to an amended return or any Tax
Proceeding, shall be paid by Members promptly upon demand therefor by Buyer.
(e) Tax Proceedings.
(i) Buyer shall, upon receipt of notice thereof by Company, notify the
Members of any written communication from a Tax authority with respect to any
pending Tax Proceeding involving a Pre-Acquisition Tax Liability. Buyer shall
include with such notification a copy of the written communication so received
by Company.
(ii) The Buyer shall have responsibility and authority to represent the
interests of the Company in any Tax Proceeding relating to Pre-Acquisition
Taxable Periods and Straddle Periods and to employ counsel of its choice in
connection therewith; provided, however, that Members shall be permitted to
participate in any such Tax Proceedings and all hearings related thereto at the
expense of the Members; and provided further, that, without the prior written
consent of the Members, which shall not be unreasonably withheld, the Buyer
shall not agree to settle or compromise any such Tax Proceeding and/or any
Pre-Acquisition Tax Liability issue arising therein if such settlement can
reasonably be expected to result in a material increase in the Pre-Acquisition
Tax Liabilities for which the Members are responsible hereunder, provided,
however, the consent of the Members to such settlement or compromise shall not
be required hereunder if the failure to settle or compromise the Tax Proceeding
or an issue arising therein can reasonably be expected to result in an adverse
effect on the Company following the Closing. The Members, promptly upon demand
from the Buyer, shall pay the reasonable costs and expenses, including attorney
fees, incurred by Buyer in connection with any such Tax Proceedings, provided,
however, in any Tax Proceeding related to a Straddle Period which involves Tax
Liabilities for which Members are responsible hereunder and Tax Liabilities
attributable to the Post-Closing Period for which Members are not responsible,
the Buyer, on the one hand, and the Members, on the other hand, shall jointly
bear the costs and expenses thereof as allocated between them on an equitable
basis.
(iii) All notices to Members provided for hereunder shall be deemed
delivered to each Member upon receipt thereof either directly by the Member. The
Members shall proportionately pay all Tax Liabilities and costs and expenses for
which the Members are responsible hereunder; provided, however, the Members
shall be jointly and severally liable for all such Tax Liabilities, costs and
expenses.
(iv) The Member shall furnish to Buyer such information and documents as
may be reasonably requested by Buyer, and shall otherwise reasonably cooperate
with Buyer, in connection with Buyer's conduct of any Tax Proceedings described
herein.
(f) Books and Records. Prior to the Closing Date the Company shall
properly maintain its books and records necessary or appropriate to the filing
of the Tax Returns described in this Section 4.8, and on or before the Closing
the Members shall cause all such
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books and records and all other books and records related to the Company's Tax
Returns and Tax matters to be delivered to the Buyer. Buyer shall cause the
Company to retain all such books and records delivered to Buyer as provided
hereunder until the expiration of the statute of limitations (including any
waivers or extensions thereof) with respect to the taxable periods to which the
Tax Returns relate.
(g) Section 351. For all federal and state income tax purposes the
Members and Buyer shall (i) treat and report the transfer of the Seller
Interests in a manner consistent with its qualification as a transfer of
property to a controlled corporation pursuant to the provisions of Code Section
351 and comparable provisions of state income tax law, and (ii) file such Tax
Returns and Tax information reports related to the transfer as may be required
or otherwise appropriate under the Tax laws and regulations applicable to
transfers of property pursuant to Code Section 351.
(h) Survival. Notwithstanding any other provision of this Agreement, the
covenants set forth in this Section 4.8 shall survive until the expiration of
the respective statutes of limitations applicable to the periods to which the
Taxes referred to herein relate.
4.7 Consolidation Transactions.
Effective as of December 14, 1998, the Buyer acquired approximately 38
companies engaged in the business of cost reduction, cost recovery and profit
enhancement services by means of mergers into Buyer, or acquisitions by Buyer of
all or substantially all of the assets or stock or other equity interests of
such companies (collectively, the "INITIAL CONSOLIDATION TRANSACTIONS").
Contemporaneously with the transaction contemplated hereby, Buyer is attempting
to acquire various other companies (with the transaction contemplated hereby,
the "ADDITIONAL CONSOLIDATION TRANSACTIONS"), and following closing or
abandonment of the Additional Consolidation Transactions, Buyer intends to
pursue still more acquisitions (the "FURTHER CONSOLIDATION TRANSACTIONS"). The
Company and the Members acknowledge that as a result of the complexity of the
transactions contemplated hereby and the other Additional Consolidation
Transactions, and for valuation and other reasons, the Closing contemplated
hereby and the closing of the other Additional Consolidation Transactions may
need to be concurrent or sequenced as designated by Buyer. Accordingly, the
Company and the Members shall at any time upon or after execution of this
Agreement but prior to the Closing Date (i) provide any outstanding
documentation required to effect the Closing pursuant to this Agreement in
escrow pending release upon authorization of the Members at the Closing, (ii)
complete performance of their respective obligations hereunder and under the
other Transaction Documents to be performed by the Closing, and (iii) update the
schedules hereto and any other documentation or information provided to Buyer
during the course of this transaction such that all such disclosures shall be
accurate and current as of the Closing Date.
4.8 Supplemental Disclosure.
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At the Closing, the Company and the Members shall supplement or amend
each of the schedules hereto with respect to any matter hereafter arising which,
if existing or occurring at or prior to the date hereof, would have been
required to be set forth or listed in the schedules or which is necessary to
complete or correct any information in the schedules.
4.9 HSR.
Buyer and the Company shall cooperate in preparing and delivering to the
Department of Justice and the Federal Trade Commission notification of the
transactions contemplated hereby pursuant to, and shall use their commercially
reasonable best efforts to obtain early termination of the waiting period under,
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), if
applicable. Buyer and the Company shall each pay half of all filing fees payable
under the HSR Act in connection with the transactions contemplated hereby, and
each of Buyer and the Company shall pay its own costs incurred in preparation of
all reports and notifications required under the HSR Act.
4.10 Competing Proposals.
(a) Neither the Company nor any Member shall directly or indirectly,
initiate, solicit, encourage or participate in any discussions or negotiations
with, or provide any nonpublic information to, any person or entity concerning
any potential offer (other than as described herein) to acquire the Company, the
Business or any assets thereof or interests therein, or any other transaction or
arrangement that would interfere with the transactions contemplated hereby (a
"COMPETING PROPOSAL").
(b) The Company and the Members shall promptly communicate to Buyer the
existence or occurrence and terms of any Competing Proposal or contact related
thereto which the Members or the Company or any of its employees, directors, or
agents may receive in respect of any such proposed transaction and the identity
of the person, entity or group from whom such proposal or contact was received.
(c) The Company and the Members shall not transfer or hypothecate the
Business or any assets thereof or interests therein except to Buyer, or enter
into any agreement with any person other than Buyer in connection with any of
the foregoing.
4.11 Bonus Plan.
If Buyer does not close the IPO of its equity securities by June 30,
1999, Buyer will implement a cash bonus plan designed to reward employees on the
basis of the performance of the divisions or subsidiaries of Buyer in which they
work. Amounts payable under, and other terms of, any such plan will be subject
to restrictions imposed by Buyer's lenders, Buyer's capital investment
requirements, and preservation of adequate working capital.
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4.12 Best Efforts.
Upon the terms and subject to the conditions of this Agreement, each of
the parties hereto shall use its best efforts (other than the payment of money
unreimbursed by the other party) to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to cause the fulfillment of the conditions to Closing set
forth herein and to consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby.
4.13 Further Assurances.
Upon the reasonable request of a party or parties hereto at any time
after the Closing Date, the other party or parties shall forthwith execute and
deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as the requesting
party or parties or its or their counsel may reasonably request in order to
effectuate the purposes of this Agreement.
4.14 Notice of Breach.
At all times before the Closing, and thereafter until the second
anniversary of the Closing Date, each of the parties hereto shall promptly give
written notice with particularity of any breach or inaccuracy of any
representation, warranty, agreement or covenant of such party contained herein
or in any other Transaction Document to the parties to whom or which such
representation, warranty or covenant was made.
5. SURVIVAL; INDEMNIFICATION.
5.1 Survival.
The representations and warranties made in this Agreement or in any
exhibit, schedule, or any other Transaction Document or certificate shall
survive any investigation made by any party hereto and the Closing of the
transactions contemplated hereby until the second anniversary of the Closing
Date, except those representations and warranties contained in (i) Sections 2.21
(Taxes) and 2.28 (Brokers), which will survive until the expiration (including
extensions) of the applicable statute of limitations; and (ii) Sections 2.2
(Ownership of Seller Interests), 2.4 (Title to Assets) and 2.22 (Indebtedness)
which will survive indefinitely. As to any matter or claim which is based upon
fraud by the indemnifying party, the representations and warranties set forth in
this Agreement shall expire only upon expiration of the applicable statute of
limitations. No party will be liable to another under any warranty or
representation after the applicable expiration of such warranty or
representation; provided however, if a claim or notice is given under this
Article 5 with respect to any representation or warranty prior to the applicable
expiration date, such claim may be pursued to resolution notwithstanding
expiration of the representation or warranty under which the claim was brought.
Any investigations made by or on behalf of any of the parties prior to the date
hereof shall not affect any of the parties' obligations hereunder.
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Completion of the transactions contemplated hereby shall not be deemed or
construed to be a waiver of any right or remedy of any of the parties.
5.2 Indemnification by the Members.
Subject to the limits set forth in this Article 5, the Members and, if
the transactions contemplated hereby are not consummated, the Company, and their
successors and assigns shall jointly and severally indemnify, defend, reimburse
and hold harmless Buyer and its Affiliates and their successors and assigns, and
the officers, directors, employees and agents of any of them, from and against
any and all claims, losses, damages, liabilities, obligations, assessments,
penalties and interest, demands, actions and expenses, whether direct or
indirect, known or unknown, absolute or contingent (including, without
limitation, settlement costs and any legal, accounting and other expenses for
investigating or defending any actions or threatened actions) ("LOSSES")
reasonably incurred by any such indemnitee, arising out of or in connection with
any of the following:
(a) the ownership and operation of the Company before the
Closing, provided that such Loss is not an obligation for payment of money in an
amount reflected as a liability of the Company in the Financial Statements or a
trade payable incurred in the ordinary course of business since the date of the
Financial Statements;
(b) any untruth, inaccuracy or material omission of any
representation or warranty made by the Company or the Members in this Agreement
or any other Transaction Document; and
(c) the breach of any covenant, agreement or obligation of the
Company or the Members contained in this Agreement or any other Transaction
Document.
5.3 Indemnification by Buyer.
Subject to the limits set forth in this Article 5, Buyer and its
successors and assigns shall indemnify, defend, reimburse and hold harmless the
Members and their successors and assigns from and against any and all Losses
reasonably incurred by any such Members arising out of or in connection with any
of the following:
(a) the ownership and operation of the Company after the Closing
(except that, to the extent permitted by law, Buyer and its successors and
assigns will not be required to indemnify, defend, reimburse or hold harmless
any Stockholder in respect of any Losses arising as a result of acts or
omissions of that Stockholder, including without limitation in such
Stockholder's capacity as an employee of or consultant to Buyer or its
Affiliates after the Closing);
(b) any untruth, inaccuracy or material omission of any
representation or warranty made by Buyer in this Agreement or any other
Transaction Document; and
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(c) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any other Transaction Document.
5.4 Indemnification Procedure.
(a) Whenever any claim shall arise for indemnification hereunder (a
"CLAIM"), the party entitled to indemnification (the "INDEMNITEE") shall
promptly give written notice to the party obligated to provide indemnity (the
"INDEMNITOR") with respect to the Claim after the receipt by the Indemnitee of
reliable information of the facts constituting the basis for the Claim; but the
failure to timely give such notice shall not relieve the Indemnitor from any
obligation under this Agreement, except to the extent, if any, that the
Indemnitor is materially prejudiced thereby.
(b) Upon receipt of written notice from the Indemnitee of a Claim, the
Indemnitor shall provide counsel (such counsel subject to the reasonable
approval of the Indemnitee) to defend the Indemnitee against the matter from
which the Claim arose, at the Indemnitor's sole cost, risk and expense. The
Indemnitee shall cooperate in all reasonable respects, at the Indemnitor's sole
cost, risk and expense, with the Indemnitor in the investigation, trial, defense
and any appeal arising from the matter from which the Claim arose; provided,
however, that the Indemnitee may (but shall not be obligated to) participate in
any such investigation, trial, defense and any appeal arising in connection with
the Claim. If the Indemnitee's participation in any such investigation, trial,
defense and any appeal arising from such Claim relates to a legal position or
defense that varies materially from the legal positions or defenses pursued by
the Indemnitor, and if the Indemnitee reasonably believes that the Indemnitee's
interests will be adversely and materially affected if such legal position or
defense is not pursued, the Indemnitor shall bear the expense of the
Indemnitee's separate participation, including all fees, costs and expenses of
one separate counsel for the Indemnitee (or multiple Indemnitees). If the
Indemnitee elects to so participate, the Indemnitor shall cooperate with the
Indemnitee, and the Indemnitor shall deliver to the Indemnitee or its counsel
copies of all pleadings and other information within the Indemnitor's knowledge
or possession reasonably requested by the Indemnitee or its counsel that is
relevant to the defense of such Claim and that will not prejudice the
Indemnitor's position, claims or defenses. The Indemnitee and its counsel shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder. The Indemnitor shall have the right to elect
to settle any claim for monetary damages only without the Indemnitee's consent,
if the settlement includes a complete release of the Indemnitee. If the
settlement does not include such a release, it will be subject to the consent of
the Indemnitee, which will not be unreasonably withheld. The Indemnitor may not
admit any liability of the Indemnitee or waive any of the Indemnitee's rights
without the Indemnitee's prior written consent, which will not be unreasonably
withheld. If the subject of any Claim results in a judgment or settlement, the
Indemnitor shall promptly pay such judgment or settlement.
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(c) If the Indemnitor fails to assume the defense of the subject of any
Claim in accordance with the terms of Section 5.4(b), or if the Indemnitor fails
diligently to prosecute such defense, or if the Indemnitor has, in the
Indemnitee's good faith judgment, a conflict of interest, the Indemnitee may
defend against the subject of the Claim, at the Indemnitor's sole cost, risk and
expense, in such manner and on such terms as the Indemnitee deems appropriate,
including, without limitation, settling the subject of the Claim after giving
reasonable notice to the Indemnitor. If the Indemnitee defends the subject of a
Claim in accordance with this Section, the Indemnitor shall cooperate with the
Indemnitee and its counsel, at the Indemnitor's sole cost, risk and expense, in
all reasonable respects, and shall deliver to the Indemnitee or its counsel
copies of all pleadings and other information within the Indemnitor's knowledge
or possession reasonably requested by the Indemnitee or its counsel that are
relevant to the defense of the subject of any such Claim and that will not
prejudice the Indemnitor's position, claims or defenses. The Indemnitee shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee against
Losses arising under this Agreement shall be in addition to any other
obligations the Indemnitor might otherwise have and any other rights the
Indemnitee might otherwise have.
5.5 Payment.
All payments owing under this Article 5 will be made promptly as
indemnifiable Losses are incurred. If the Indemnitee defends the subject matter
of any Claim in accordance with Section 5.4(c) or proceeds with separate counsel
in accordance with Section 5.4(b), the expenses (including attorneys' fees)
incurred by the Indemnitee shall be paid by the Indemnitor in advance of the
final disposition of such matter as incurred by the Indemnitee, if the
Indemnitee undertakes in writing to repay any such advances in the event that it
is ultimately determined that the Indemnitee is not entitled to indemnification
under the terms of this Agreement or applicable law.
5.6 Limitations.
(a) Notwithstanding any provision of this Agreement to the contrary, no
party shall have any obligation to indemnify any person entitled to indemnity
under this Article 5 or to pay damages in respect of contract claims arising
under this Agreement or any other Transaction Document unless the persons so
entitled to indemnity or recovery thereunder have suffered Losses in an
aggregate amount attributable to all Claims and obligors in excess of Fifty
Thousand Dollars ($50,000) (the "THRESHOLD"), except claims arising from any
breach of the representations and warranties contained in Section 2.21 (Taxes)
shall not be subject to the Threshold. Once the aggregate amount of Losses
exceeds the Threshold, persons entitled to recovery shall be entitled to recover
the full amount of all Losses in excess of the Threshold. No person shall be
entitled to indemnification under this Article 5
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for Losses directly or indirectly caused by a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement or any duty to the potential Indemnitor.
(b) The maximum aggregate liability of the Members to Buyer on the one
hand, and Buyer, on the other hand to the Members, for all claims arising under
this Agreement and the other Transaction Documents shall equal the aggregate
Purchase Price. For purposes of this Section 5.6(b), the value of Shares
received shall be (i) prior to the IPO, the per share Agreed Price (as defined
in the Stockholder Agreement) then prevailing; and (ii) after the IPO, the per
share closing price on the primary exchange or market on which the Common Stock
is traded on the date such indemnifiable Losses become payable, except that the
value of any Shares sold in bona fide third party transactions will be the gross
proceeds to the Members of such sale.
6. CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of Each Party.
The obligations of the Members, on the one hand, and Buyer, on the other
hand, to consummate the transactions contemplated hereby are subject to the
fulfillment, at or before the Closing Date, of the conditions set forth in this
Section 6.1, any one or more of which may be waived in writing by the party
entitled to the benefit of such condition; provided, however, that such waiver
will not diminish such party's right to indemnification pursuant to Article 5,
unless so stated, and provided further that the Members will be required to
perform their obligations hereunder, notwithstanding lack of fulfillment of the
conditions set forth in this Section 6.1, if Buyer agrees in writing to be
liable for, and to indemnify the Members from and against, any obligations that
the Members would incur as a result of consummating the transactions
contemplated hereby notwithstanding the fact that the conditions in this Section
6.1 have not been fulfilled.
(a) No Action or Proceeding. No preliminary or permanent injunction or
other order issued by any Governmental Entity that declares this Agreement
invalid in any material respect or prevents or would be violated by the
consummation of the transactions contemplated hereby, or which materially
adversely affects the assets, properties, operations, prospects, net income or
financial condition of the Company, is in effect; and no action or proceeding
has been instituted or threatened by any Governmental Entity, other person, or
entity which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement, the result of which could constitute a
Material Adverse Change.
(b) Compliance with Law. There shall have been obtained all permits,
approvals, and consents of all Governmental Entities that counsel for Buyer or
for the Company may reasonably deem necessary or appropriate so that
consummation of the
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transactions contemplated by this Agreement will be in compliance with
applicable laws, including, without limitation, expiration or termination of the
waiting period prescribed by the HSR Act.
6.2 Conditions to Obligations of Buyer.
The obligations of Buyer to consummate the transactions contemplated
hereby are subject to the fulfillment, at or before the Closing Date, of the
conditions set forth in this Section 6.2, any one or more of which may be waived
by Buyer in writing in its discretion; provided however, such waiver will not
waive or diminish Buyer's right to indemnification pursuant to Article 5, unless
so stated:
(a) Representations and Warranties True. The representations and
warranties of the Company and the Members contained in this Agreement or in any
other Transaction Document shall be true and correct in all material respects as
of the date hereof and on the Closing Date, and at the Closing the Company and
the Members' Representative shall each have delivered to Buyer a certificate
dated the Closing Date to such effect signed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Company and by the
Members.
(b) Performance of the Company and the Members. The Company and the
Members shall have performed in all material respects all obligations required
to be performed by each of them under this Agreement on or before the Closing
Date, and at the Closing the Company and the Members, as the case may be, shall
each have delivered to Buyer a certificate to such effect dated the Closing Date
and signed by the President or any Vice President and the Secretary or any
Assistant Secretary of the Company or the Members, as applicable.
(c) Additional Closing Documents of the Company. Buyer has received, or
is receiving at the Closing, all of the following, each duly executed by the
parties thereto (other than Buyer) and dated the Closing Date (or an earlier
date satisfactory to Buyer), in form and substance satisfactory to Buyer:
(i) Copies, certified by the Secretary or an Assistant Secretary
of the Company of resolutions of the Members authorizing the execution, delivery
and performance of this Agreement and the other Transaction Documents to be
delivered by the Company and the Members and the consummation of the
transactions contemplated hereby and thereby;
(ii) Such other documents as Buyer may reasonably request.
(d) Additional Closing Documents of Each Member. Buyer has received, or
is receiving at the Closing, all of the following, each duly executed by each
Member and dated the Closing Date:
(i) The Accredited Investor Questionnaire described in Section
2.24;
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(ii) A Subordination Agreement substantially in the form of
Exhibit D, executed and delivered by each recipient of the Notes (as defined in
Schedule 1.3); and
(iii) Such other duly executed certificates, instruments and
documents in furtherance of the transactions contemplated by this Agreement and
the other Transaction Documents as Buyer may reasonably request.
(e) Consents and Approvals. All consents, waivers, authorizations and
approvals of any Governmental Entity, and of any other person or entity,
required under the Contracts, Licenses, or otherwise in connection with the
execution, delivery and performance of this Agreement, absence of which could
result in material liability to Buyer or a Material Adverse Change, or the
cancellation or adverse change in terms of, or payments under, any Contract,
shall have been duly obtained in form reasonably satisfactory to Buyer, shall be
in full force and effect on the Closing Date and the original executed copies
shall have been delivered to Buyer on or before the Closing Date.
(f) No Adverse Changes. Between the date of this Agreement and the
Closing Date there shall not have occurred any Material Adverse Change or any
event or circumstance that would reasonably be expected to result in a Material
Adverse Change.
(g) Due Diligence. Buyer is satisfied with the results of its due
diligence review of the business, operations, properties, assets, financial
condition and prospects of the Company.
(h) Closing Date Net Worth. At the Closing the Company will (i) have a
net worth calculated according to GAAP of at least _____________________ Dollars
($_______), and (ii) sufficient working capital to operate the Company; and at
the Closing the Company shall have delivered to Buyer a certificate dated the
Closing Date to such effect with supporting financial information, signed by the
President or any Vice President and the Secretary or any Assistant Secretary of
the Company.
(i) Financing. Buyer shall have available, on commercially reasonable
terms reasonably satisfactory to the senior lenders of Buyer, debt financing
sufficient to finance the cash portion of the Purchase Price and the cash
portion of the purchase price being paid by Buyer pursuant to each of the
Consolidation Transactions, and to provide Buyer with adequate working capital
following the transactions contemplated hereby and the Consolidation
Transactions.
(j) No Default. The Company shall not be in default of any material
obligation.
(k) Certificates. The Members shall have delivered to Buyer the
certificates representing the Seller Interests and the stock certificates or
stock powers as described in Section 1.2.
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(l) Books. The Company shall have delivered to Buyer the record books,
ledgers, minute books, corporate seals of the Company and documents relating to
the transfer of ownership interests in the Company.
(m) Employee Matters. Buyer shall be reasonably assured that employees
of the Company of a quantity and having the skills sufficient for the operation
of the Business are continuing their employment or affiliation with Buyer or
Buyer's Affiliates after the Closing. Buyer shall have received Employment
Agreements substantially in the form attached hereto as Exhibit E (with
conforming changes as appropriate for each employee), duly executed and
delivered by the persons named on Schedule 6.2.
(n) Other Closing Documents. Buyer shall have received such other duly
executed certificates, instruments and documents in confirmation of the
representations and warranties of the Company or the Members or in furtherance
of the transactions contemplated by this Agreement as Buyer or its counsel may
reasonably request.
6.3 Conditions to Obligations of the Members.
The obligations of the Members to consummate the transactions
contemplated hereby are subject to the fulfillment, at or before the Closing
Date, of the conditions set forth in this Section 6.3, any one or more of which
may be waived by the Members in writing in their discretion; provided however,
such waiver will not waive or diminish the right of the Members to
indemnification pursuant to Article 5, unless so stated:
(a) Representations and Warranties True. The representations and
warranties of Buyer contained in this Agreement or in any other Transaction
Document shall be true and correct in all material respects on the date hereof
and on the Closing Date, and at the Closing Buyer shall have delivered to the
Company a certificate to such effect dated the Closing Date, signed by the
President or any Vice President and the Secretary or any Assistant Secretary of
Buyer.
(b) Performance of Covenants. Buyer shall have performed in all material
respects all obligations required to be performed by Buyer under this Agreement
on or before the Closing Date, and at the Closing Buyer shall have delivered to
the Company a certificate to such effect dated the Closing Date signed by the
President or any Vice President and the Secretary or any Assistant Secretary of
Buyer.
(c) Additional Closing Documents of Buyer. Buyer has executed and
delivered, or is executing and delivering at the Closing the following
documents, each dated the Closing Date:
(i) Copies, certified by the Secretary or an Assistant Secretary
of Buyer, of resolutions of its Members authorizing the execution and delivery
of this Agreement and the other Transaction Documents to be delivered by Buyer
and the consummation of the transactions contemplated hereby;
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(ii) The Notes;
(iii) Employment Agreements substantially in the form of Exhibit
E (with conforming changes as appropriate for each employee), with each of the
persons named on Schedule 6.2.
(d) The Cash Payment. The Members shall have received the Cash Payment
(as described in Schedule 1.3).
(e) Tax Treatment. Buyer shall have received from Ernst & Young LLP a
tax opinion to the effect that the purchase and sale of the Seller Shares
contemplated hereby should qualify for treatment under Section 351 of the Code,
which opinion will permit reliance thereon by the Member.
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7. MISCELLANEOUS.
7.1 Termination.
This Agreement and the transactions contemplated hereby may be
terminated (a) by Buyer, if (i) the Company or the Members fail to comply in any
material respect with any of its or their covenants or agreements contained
herein, or (ii) any of the representations and warranties of the Company or the
Members is breached or is inaccurate in any material way; (b) by the Company or
the Members if (i) Buyer fails to comply in any material respect with any of its
covenants or agreements contained herein, or (ii) any of the representations and
warranties of Buyer is breached or is inaccurate in any material way; or (c) by
the Company or Buyer if (i) a Governmental Entity has issued a non-appealable
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto have used their best efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the transactions contemplated by this
Agreement; or (ii) a condition to its performance hereunder has not been
satisfied or waived prior to March 31, 1999; provided however, that if the board
of directors of Buyer should, in good faith, determine that it is necessary to
extend the Closing for the purpose of facilitating the financing of the
Additional Consolidation Transactions, it may extend such date by thirty-two
(32) days. Notwithstanding the foregoing, a party may not terminate this
Agreement if the event giving rise to the termination right results from the
willful failure of such party to perform or observe any of the covenants or
agreements set forth herein to be performed or observed by such party or if such
party is, at such time, in material breach of this Agreement.
In the event of termination of this Agreement pursuant to this Section
7.1, written notice shall be given forthwith by the terminating party to the
other parties and this Agreement will terminate and the transactions
contemplated hereby will be abandoned, without further action by any party. If
this Agreement is terminated as provided herein, no party to this Agreement will
have any liability or further obligation to any other party to this Agreement
except as provided in Sections 2.29 (Brokers), 4.2 (Confidentiality), 5
(Survival; Indemnification), 7.12 (Expenses), 7.13 (Arbitration), 7.14
(Submission to Jurisdiction), and 7.15 (Attorneys' Fees), and except that
termination of this Agreement will not affect any liability of any party for any
breach of this Agreement prior to termination, or any breach at any time of the
provisions hereof surviving termination.
7.2 Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed given upon personal delivery or three (3) days
after being mailed by certified or registered mail, postage prepaid, return
receipt requested, or one (1) business day after being sent via a nationally
recognized overnight courier service if overnight courier service is requested
from such service or upon receipt of electronic or other confirmation of
transmission if sent via facsimile, to the parties, their successors in interest
or their assignees at the following addresses and telephone numbers, or at such
other addresses
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or telephone numbers as the parties may designate by written notice in
accordance with this Section 7.2:
If to Buyer: Chief Executive Officer
EPS Solutions Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company
or any Member:▇▇▇▇▇▇ ▇▇▇▇▇▇▇
c/o EPS Solutions Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.3 Assignability and Parties in Interest.
This Agreement and the rights, interests or obligations hereunder may
not be assigned by any of the parties hereto, except that Buyer may assign its
rights and obligations under this Agreement in whole or in part to any Affiliate
or Affiliates of Buyer or any successor to all or substantially all of the
business or assets of Buyer. This Agreement shall inure to the benefit of and be
binding upon Buyer and the Company and their respective permitted successors and
assigns and upon each Member and his or her executors, administrators, heirs,
legal representatives and permitted successors and assigns. Nothing in this
Agreement will confer upon any person or entity not a party to this Agreement,
or the legal representatives of such person or entity, any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement.
7.4 Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of California, without regard to its
conflicts-of-law principles.
7.5 Counterparts.
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Facsimile transmission of any signed original document and/or
retransmission of any signed facsimile transmission will be deemed the same as
delivery of an original. At the request of any party, the parties will confirm
facsimile transmission by signing a duplicate original document. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute but one and the same instrument.
7.6 Publicity.
Prior to the Closing Date, no party may, or may it permit its Affiliates
to, issue or cause the publication of any press release or other public
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of Buyer and the Company, except that
Buyer may disclose details of this Agreement to other participants in, or as
necessary to effect, the Consolidation Transactions. Notwithstanding the
foregoing, in the event any such press release or announcement is required by
law to be made by the party proposing to issue the same, such party shall
consult in good faith with the other party as far in advance as practicable to
the issuance of any such press release or announcement.
7.7 Complete Agreement.
This Agreement, the exhibits and schedules hereto, and the other
Transaction Documents contain or will contain the entire agreement between the
parties hereto with respect to the transactions contemplated herein and therein
and shall supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, and understandings.
7.8 Modifications, Amendments and Waivers.
At any time prior to the Closing Date or termination of this Agreement,
any party may, (a) waive any inaccuracies in the representations and warranties
of any other party contained in this Agreement or in any other Transaction
Document; and (b) waive compliance by any other party with any of the covenants
or agreements contained in this Agreement. No waiver of any of the provisions of
this Agreement will be considered, or will constitute, a waiver of any of the
rights of remedies, at law or equity, of the party entitled to the benefit of
such provisions unless made in writing and executed by the party entitled to the
benefit of such provision.
7.9 Headings; References.
The headings contained in this Agreement and the other Transaction
Documents are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. References herein to Articles,
Sections, Schedules and Exhibits refer to the referenced Articles, Sections,
Schedules or Exhibits hereof unless otherwise specified.
7.10 Severability.
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Any provision of this Agreement which is invalid, illegal, or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality, or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal, or
unenforceable in any other jurisdiction.
7.11 Investigation.
All representations and warranties contained herein which are made to
the knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof. Representations and warranties made to the knowledge of the
Company shall be deemed made to the knowledge of the Members only and no other
person.
7.12 Expenses of Transactions.
All fees, costs and expenses incurred by Buyer, in connection with the
transactions contemplated by this Agreement shall be borne Buyer, and all fees,
costs and expenses incurred by the Company or the Members in connection with the
transactions contemplated by this Agreement shall be borne by the Members
jointly and severally.
7.13 Arbitration.
(a) (i) Any controversy or claim arising out of or relating to this
Agreement shall be solely and finally settled by arbitration administered by the
American Arbitration Association (the "AAA") in accordance with its Commercial
Arbitration Rules as then in effect (the "RULES"), except to the extent such
Rules vary from the following provisions. Notwithstanding the previous sentence,
the parties hereto may seek provisional remedies in courts of appropriate
jurisdiction, and such request shall not be deemed a waiver of the right to
compel arbitration of a dispute hereunder.
(ii) If any controversy or claim arising out of or relating to this
Agreement or any other Transaction Document also arises out of or relates to the
employment of any Stockholder by Buyer or any affiliate of Buyer, the provisions
of this Agreement governing dispute resolution shall govern resolution of such
controversy or claim. The provisions of this Agreement governing dispute
resolution supersede any provisions relating to such matters in any employment
agreement between any Stockholder and Buyer or any affiliate of Buyer.
(iii) The arbitration shall be conducted by one independent and impartial
arbitrator, appointed by the AAA; provided however, if the claim and any
counterclaim, in the aggregate, together with other arbitrations that are
consolidated pursuant to Section 7.13(f), exceed Five Hundred Thousand Dollars
($500,000) (the "ARBITRATION THRESHOLD"),
48
55
exclusive of interest and attorney's fees, the dispute shall be heard and
determined by three (3) arbitrators as provided herein (such arbitrator or
arbitrators are hereinafter referred to as the "ARBITRATOR"). The judgment of
the award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof. The arbitration proceedings shall be held in Orange
County, California unless the parties to the arbitration agree to another
location.
(b) If a party hereto determines to submit a dispute for arbitration
pursuant to this Section 7.13, such party shall furnish the other party with
whom it has the dispute with a notice of arbitration as provided in the Rules
(an "ARBITRATION NOTICE") which, in addition to the items required by the Rules,
shall include a statement of the nature, with reasonable detail, of the dispute.
A copy of the Arbitration Notice shall be concurrently provided to the AAA,
along with a copy of this Agreement, and if pursuant to Section 7.13(a) one (1)
Arbitrator is to be appointed, a request to appoint the Arbitrator. If a party
has a counterclaim against the other party, such party shall furnish the party
with whom it has the dispute a notice of such claim as provided in the Rules (a
"NOTICE OF COUNTERCLAIM") within ten (10) days of receipt of the Arbitration
Notice, which, in addition to the items required by the Rules, shall include a
statement of the nature, with reasonable detail, of the dispute. A copy of the
Notice of Counterclaim shall be concurrently provided to the AAA. If the claim
set forth in the Notice of Counterclaim causes the aggregate amount in dispute
to exceed the Arbitration Threshold, the Notice of Counterclaim shall so state.
If pursuant to Section 7.13(a) three (3) Arbitrators are to be appointed, within
fifteen (15) days after receipt of the Arbitration Notice or the Notice of
Counterclaim as applicable, each party shall select one person to act as
Arbitrator and the two (2) selected shall select a third arbitrator within ten
(10) days of their appointment. If the Arbitrators selected by the parties are
unable or fail to agree upon the third arbitrator within such time, the third
arbitrator shall be selected by the AAA. Each arbitrator shall be a practicing
attorney or a retired or former judge with at least twenty (20) years experience
with and knowledge of securities laws, complex business transactions, and
mergers and acquisitions.
(c) Once an Arbitrator is assigned to hear the matter, the Arbitrator
shall schedule a pre-hearing conference to reach agreement on procedural and
scheduling matters, arrange for the exchange of information, obtain stipulations
and attempt to narrow the issues.
(d) At the pre-hearing conference, the Arbitrator shall have the
discretion to order, to the extent the Arbitrator deems relevant and
appropriate, that each party may (i) serve a maximum of one set of no more than
twenty (20) requests for production of documents and one set of ten (10)
interrogatories (without subparts) upon the other parties; and (ii) depose a
maximum of five (5) witnesses. All objections to discovery are reserved for the
arbitration hearing except for objections based on privilege and proprietary or
confidential information. The responses to the document demand, the documents to
be produced thereunder, and the responses to the interrogatories shall be
delivered to the propounding party thirty (30) days after receipt by the
responding party of such document demand or interrogatory. Each deposition shall
be taken on reasonable notice to the deponent, and must be concluded within
eight (8) hours and all depositions must be taken within forty-five (45) days
following the pre-hearing conference. Any party deposing an
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opponent's expert must pay the expert's fee for attending the deposition. All
discovery disputes shall be decided by the Arbitrator.
(e) The parties must file briefs with the Arbitrator at least three (3)
days before the arbitration hearing, specifying the facts each intends to prove
and analyzing the applicable law. The parties have the right to representation
by legal counsel throughout the arbitration proceedings. The presentation of
evidence at the arbitration hearing shall be governed by the Federal Rules of
Evidence. Oral evidence given at the arbitration hearing shall be given under
oath. Any party desiring a stenographic record may secure a court reporter to
attend the arbitration proceedings. The party requesting the court reporter must
notify the other parties and the Arbitrator of the arrangement in advance of the
hearing, and must pay for the cost incurred.
(f) Any arbitration can be consolidated with one or more arbitrations
involving other parties, which arise under agreement(s) between the Buyer and
such other parties, if more than one such arbitration is commenced and any party
thereto contends that two or more arbitrations are substantially related and
that the issues should be heard in one proceeding, the Arbitrator selected in
the first-filed of such proceedings shall determine whether, in the interests of
justice and efficiency, the proceedings should be consolidated before that
Arbitrator.
(g) The Arbitrator's award shall be in writing, signed by the Arbitrator
and shall contain a concise statement regarding the reasons for the disposition
of any claim.
(h) To the extent permissible under applicable law, the award of the
Arbitrator shall be final. It is the intent of the parties that the arbitration
provisions hereof be enforced to the fullest extent permitted by applicable law.
7.14 Submission to Jurisdiction.
All actions or proceedings arising in connection with this Agreement for
preliminary or injunctive relief or matters not subject to arbitration, if any,
shall be tried and litigated exclusively in the state or federal courts located
in the County of Orange, State of California. The aforementioned choice of venue
is intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement in any jurisdiction other than that specified in
this paragraph. Each party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts located in the County of Orange,
State of California shall have in personam jurisdiction over each of them for
the purpose of litigating any such dispute, controversy, or proceeding. Each
party hereby authorizes and accepts service of process sufficient for personal
jurisdiction in any action against it as contemplated by this Section by
registered or certified mail, return receipt requested, postage prepaid, to its
address for the giving of notices as set forth in
57
Section 7.2. Nothing herein shall affect the right of any party to serve process
in any other manner permitted by law.
7.15 Attorneys' Fees.
If Buyer or any of its Affiliates, successors or assigns brings any
action, suit, counterclaim, cross-claim, appeal, arbitration, or mediation for
any relief against the Company or any of its Affiliates, successors or assigns
or any Member, or if the Company or any of its Affiliates, successors or assigns
or any Member brings any action, suit, counterclaim, cross-claim, appeal,
arbitration, or mediation for any relief against Buyer or any of its Affiliates,
successors or assigns, declaratory or otherwise, to enforce the terms hereof or
to declare rights hereunder (collectively, an "ACTION"), in addition to any
damages and costs which the prevailing party otherwise would be entitled, the
non-prevailing party shall pay to the prevailing party a reasonable sum for
attorneys' fees and costs (at the prevailing party's attorneys' then-prevailing
rates) incurred in bringing and prosecuting such Action and/or enforcing any
judgment, order, ruling, or award (collectively, a "DECISION") granted therein,
all of which shall be deemed to have accrued on the commencement of such Action
and shall be paid whether or not such action is prosecuted to a Decision. Any
Decision entered in such Action shall contain a specific provision providing for
the recovery of attorneys' fees and costs incurred in enforcing such Decision.
For the purposes of this Section, attorneys' fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
For purposes of this paragraph, "PREVAILING PARTY" includes, without
limitation, a party who agrees to dismiss an action on the other party's payment
of the sum allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it. If there are multiple claims,
the prevailing party shall be determined with respect to each claim separately.
The prevailing party shall be the party who has obtained the greater relief in
connection with any particular claim, although, with respect to any claim, it
may be determined that there is no PREVAILING PARTY.
7.16 Enforcement of the Agreement.
The Company, the Members and Buyer acknowledge that irreparable damage
would occur if any of the obligations of the Company and the Members under this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Buyer will be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the Company or the Members and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which Buyer is entitled at law or in equity.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
EPS SOLUTIONS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Title: SVP
-----------------------------------
NATIONAL HEALTH CARE RECOVERY SERVICES, L.L.C.
By: IM COMET LLC
Its: Manager
By: COMET CAPITAL CORP. NV
Its: Manager
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
--------------------
MEMBER(S):
IM COMET LLC
By: COMET CAPITAL CORP. NV
Its: Manager
By: ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
--------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ LAW
--------------------------------------------
▇▇▇▇▇ LAW
59
SCHEDULE 1.3
PURCHASE PRICE
(a) Aggregate Purchase Price.
(i) An aggregate of One Million Sixty Seven Thousand Four Hundred
Twenty Seven Dollars and Twenty-Six Cents ($1,067,427.26) (the "CASH
PAYMENT").
(ii) Cancellation of that certain Promissory Note and Pledge
Agreement made by ▇▇▇▇▇ ▇. Law in favor of Buyer in the principal amount
of Five Hundred Thirty-Two Thousand Five Hundred Seventy Two Dollars and
Seventy-Four Cents ($532,572.74).
(iii) Promissory notes of Buyer, dated as of the Closing Date
substantially in the form of Exhibit F for an aggregate principal amount
of Six Million Four Hundred Thousand Dollars ($6,400,000) (the "NOTE").
(iv) Repayment of Sellers Indebtedness as described on Schedule
2.22 in the aggregate amount of $1,350,000 via cash payments at closing
in the principal amount of $675,000 to each of Comet Capital Corporation
NV and IM Investments, Inc.
(b) Consideration per Member.
-----------------------------------------------------------------------------------------------------------
Seller Interests
Name of Owned and to Cash Note Debt
Member be sold to Buyer Consideration Consideration Forgiveness
-----------------------------------------------------------------------------------------------------------
IM COMET LLC 80% 0 $6,400,000
-----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 12 1/2% $1,000,000
-----------------------------------------------------------------------------------------------------------
▇▇▇▇▇ LAW 7 1/2% $67,427.26 $532,572.74
-----------------------------------------------------------------------------------------------------------
COMET CAPITAL CORPORATION 0 $675,000
NV (DEBT REPAYMENT)
-----------------------------------------------------------------------------------------------------------
IM INVESTMENTS, INC. 0 $675,000
(DEBT REPAYMENT)
-----------------------------------------------------------------------------------------------------------