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EXHIBIT 4.1
RECAPITALIZATION AGREEMENT
among
PROTOCOL HOLDINGS, INC.,
and
THE SEVERAL PARTICIPANTS NAMED
IN SCHEDULE I HERETO,
and
THE SEVERAL PARTIES SPECIFIED
AS "ORIGINAL STOCKHOLDERS"
ON THE SIGNATURE PAGES HEREOF
AND EACH ADDENDUM HERETO
Dated as of September 29, 1999
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TABLE OF CONTENTS
Page
ARTICLE I THE SECURITIES, CLOSING.................................................... 2
SECTION 1.01. Issuance and Sale to New Investors on the Initial Closing Date............. 2
SECTION 1.02. Redemption and Purchase by the Company..................................... 3
SECTION 1.03. Initial Closing Date....................................................... 4
SECTION 1.04. The Company's Right to Request Purchases of Additional Preferred Shares.... 4
SECTION 1.05. Provision of Financing on Subsequent Closing Dates......................... 6
SECTION 1.06. Subsequent Closing Dates................................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES............................................. 7
SECTION 2.01. Representations and Warranties of the Original Stockholders................ 7
SECTION 2.02. Representations and Warranties of the Tendering Stockholders as to the
Company.................................................................... 8
SECTION 2.03. Representations and Warranties of the New Investors........................ 24
ARTICLE III COVENANTS.................................................................. 26
SECTION 3.01. Certain Covenants.......................................................... 26
SECTION 3.02. Rights of Inspection....................................................... 26
SECTION 3.03. Notice of Certain Events................................................... 26
SECTION 3.04. Use of Proceeds............................................................ 27
SECTION 3.05. Consents and Approvals..................................................... 27
SECTION 3.06. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act...................................................... 27
SECTION 3.07. Amended and Restated Certificate of Incorporation.......................... 27
SECTION 3.08. Tax Sharing Agreements..................................................... 28
SECTION 3.09. Option Plan................................................................ 28
SECTION 3.10. Restrictions............................................................... 28
SECTION 3.11. Debt Financing............................................................. 28
SECTION 3.12. Equity Financing........................................................... 28
ARTICLE IV CONDITIONS PRECEDENT....................................................... 28
SECTION 4.01. Conditions Precedent to the Obligations of the New Investors with
Respect to the Initial Closing Date........................................ 29
SECTION 4.02. Conditions Precedent to the Obligations of the Original Stockholders
and the Company with Respect to the Initial Closing Date................... 31
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SECTION 4.03. Conditions Precedent to the Obligations of the New Investors with
Respect to Each Subsequent Closing......................................... 32
SECTION 4.04. Conditions Precedent to the Obligations of the Company with Respect to
Each Subsequent Closing.................................................... 33
ARTICLE V SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION............................... 34
SECTION 5.01. Survival of Representations................................................ 34
SECTION 5.02. Tax Indemnity.............................................................. 34
SECTION 5.03. General Indemnity.......................................................... 37
ARTICLE VI TERMINATION AND ABANDONMENT................................................ 42
SECTION 6.01. Termination and Abandonment................................................ 42
SECTION 6.02. Effect of Termination...................................................... 43
ARTICLE VII MISCELLANEOUS.............................................................. 43
SECTION 7.01. Consent to Common Stock Redemption......................................... 43
SECTION 7.02. Expenses, Etc.............................................................. 43
SECTION 7.03. Publicity and Confidentiality.............................................. 44
SECTION 7.04. Appointment, Duties and Indemnification of Representative.................. 44
SECTION 7.05. Execution in Counterparts.................................................. 46
SECTION 7.06. Notices.................................................................... 46
SECTION 7.07. Amendments, Supplements, Etc............................................... 47
SECTION 7.08. Entire Agreement........................................................... 47
SECTION 7.09. Applicable Law............................................................. 47
SECTION 7.10. Consent to Service of Process.............................................. 48
SECTION 7.11. Binding Effect, Benefits................................................... 48
SECTION 7.12. Assignability.............................................................. 48
SECTION 7.13. Stockholders Agreements.................................................... 48
SECTION 7.14. Waiver of Dividend......................................................... 48
SECTION 7.15. Stockholder Approval....................................................... 49
SECTION 7.16. Supplement................................................................. 49
SECTION 7.17. Waiver..................................................................... 49
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INDEX TO SCHEDULES
Schedule Description
I New Investors
IIA Original Stockholders (Pre-Closing)
IIB Original Stockholders (Post-Closing)
III Stockholders After the Closing
IV Subsequent Financings
2.02(a) Organization
2.02(b) Subsidiaries
2.02(e) Capitalization
2.02(f) Financial Statements
2.02(g) Certain Changes
2.02(h) Actions Pending
2.02(i) Liens and Encumbrances
2.02(j) Properties, Contracts, etc.
2.02(k) Real Property
2.02(n) Intellectual Property; Software
2.02(p) Taxes
2.02(q) Governmental Approvals
2.02(r) Noncompliance
2.02(s) Labor Controversies
2.02(t) Employee Benefit Plans
2.02(u) Insurance
2.02(v) Customers
2.02(w) Accounts Receivable
2.02(y) Related Party Transactions
2.02(z) Broker's or Finder's Fees
3.01 Exceptions to Certain Covenants
7.02 Fees and Expenses
7.13 Stockholders Agreements
7.16 Additional Original Stockholders
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INDEX TO EXHIBITS AND ANNEXES
Exhibit Description
Exhibit A Form of Amended and Restated Certificate of
Incorporation
Exhibit B Form of Escrow Agreement
Exhibit C Form of Stockholders Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Assumption Agreement
Exhibit F Form of Stock Option Plan
Exhibit G Form of Addendum
Annex
Annex I Form of Amended Schedule II - Part B
Annex II Form of Opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
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RECAPITALIZATION AGREEMENT dated as of September 29, 1999
among PROTOCOL HOLDINGS, INC., a Delaware corporation (the "Company"), the
several participants named in Schedule I hereto (being hereinafter called
individually a "New Investor" and collectively the "New Investors") and the
several persons specified as "Original Stockholders" on the signature page
hereof or any addendum hereto pursuant to Section 7.16 (such individuals being
collectively referred to as the "Original Stockholders").
WHEREAS, as of the date hereof, there are issued and
outstanding 3,804,750 shares of common stock, $.001 par value (the "Common
Stock"), of the Company, 90,500 shares of Class B Common Stock, $.001 par value
(the "Class B Common Stock"), and 6,462,606 shares of Series A Preferred Stock,
$.001 par value ("Series A Preferred Stock"), of the Company, which shares are
held by the Original Stockholders in the amounts set forth opposite the name of
each Original Stockholder on Part A of Schedule II hereto;
WHEREAS, prior to the Initial Closing Date (as hereinafter
defined), the Company desires to amend and restate its Certificate of
Incorporation (the "Amended and Restated Certificate of Incorporation"), to
authorize the Series B Preferred Stock (as defined below) substantially in the
form of Exhibit A hereto and to provide that the Company's authorized capital
stock shall be changed from:
(x) 7,000,000 shares of Preferred Stock, $.001 par value, all
of which have been designated as Series A Preferred Stock and (y)
15,000,000 shares of common stock, of which 14,900,000 shares have been
designated as Common Stock and 100,000 shares have been designated as
Class B Common Stock,
to the following:
(a) 22,000,000 shares of Preferred Stock, $.001 par value, of
which 7,000,000 shares shall be designated as Series A Preferred Stock
and 15,000,000 shares shall be designated as Series B Convertible
Preferred Stock, $.001 par value (the "Convertible Preferred Stock"),
and (b) 40,000,000 shares of Common Stock, of which 39,900,000 shares
shall be designated Common Stock and 100,000 shares shall be designated
as Class B Common Stock, in each case with the rights and designations
specified therein;
WHEREAS, on the Initial Closing Date, the Company wishes to
issue and sell for cash to the New Investors listed on Schedule I up to an
aggregate 10,247,848 shares of Convertible Preferred Stock at an aggregate
purchase price of $80,957,999.20 (said shares of Convertible Preferred Stock
being hereinafter collectively referred to as
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the "Recapitalization Securities"), and the New Investors, severally and not
jointly, wish to purchase the Recapitalization Securities on the terms and
subject to the conditions hereinafter set forth;
WHEREAS, immediately after the issuance and sale of the
Securities to the New Investors, certain of the Original Stockholders desire to
tender to the Company for redemption and purchase, and the Company desires to
redeem and purchase, up to an aggregate 7,716,202 shares of capital stock of the
Company held by such Original Stockholders for an aggregate redemption price up
to $60,957,995.80, all on the terms and subject to the conditions set forth
herein;
WHEREAS, from time to time during the three-year period after
the Initial Closing Date, subject to the terms and conditions hereinafter set
forth, the Company may wish to issue, sell and deliver to the New Investors up
to an additional 3,797,468 shares (the "Additional Preferred Shares") of
Convertible Preferred Stock, to finance the expansion of the business of the
Company;
WHEREAS, it is the intention of the parties that the
transactions contemplated hereby be accounted for as a recapitalization
transaction and, in accordance with such, it is the intention of the New
Investors, the Original Stockholders and the Company that, immediately after the
consummation of the transactions contemplated by this Agreement, assuming the
redemption of all shares of capital stock available for redemption and the
issuance of all the Additional Preferred Shares up to 83.9% of the outstanding
shares of capital stock of the Company shall be owned by the New Investors and
as few as 16.1% of the outstanding shares of capital stock of the Company shall
be owned by the Original Stockholders all in accordance with Schedule III
hereto;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
THE SECURITIES, CLOSING
SECTION 1.01. Issuance and Sale to New Investors on the
Initial Closing Date. (a) Subject to the terms and conditions set forth herein,
on the Initial Closing Date, the Company shall issue and sell to each New
Investor, and each New Investor shall purchase from the Company, the number of
Recapitalization Securities set forth opposite the name of such New Investor on
Schedule I hereto under the heading "Number of Shares of Series B Preferred
Stock Purchased".
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(b) As payment in full for the Recapitalization Securities so
to be purchased by each New Investor, and against delivery thereof as aforesaid,
on the Initial Closing Date, each New Investor shall pay to the Company by wire
transfer in immediately available funds the amount set forth opposite the name
of such New Investor on Schedule I hereto under the heading "Aggregate Purchase
Price."
SECTION 1.02. Redemption and Purchase by the Company. (a)
Subject to the terms and conditions set forth herein, on the Initial Closing
Date simultaneously with the issuance and sale of the Recapitalization
Securities to the New Investors pursuant to Section 1.01, each Original
Stockholder set forth on Part B of Schedule II hereto (the "Tendering
Stockholders") shall tender to the Company for redemption and purchase, and the
Company shall redeem and purchase, up to the maximum number of shares of capital
stock of the Company set forth opposite the name of such Original Stockholder in
such Part B of Schedule II under the heading "Maximum Number of Shares
Redeemed," up to an aggregate 7,716,202 shares. Such tender shall be effected by
delivery of the certificates evidencing the shares so tendered, duly endorsed
and blank or accompanied by stock powers duly endorsed and blank with all
signatures guaranteed and all requisite stock transfer taxes paid and stamps
affixed.
(b) The definitive number of shares of capital stock to be
tendered for redemption by each Tendering Stockholder shall be determined no
later than the fifth business day prior to the Initial Closing Date by delivery
to the Company by each Tendering Stockholder of a notice in writing specifying
the actual number of shares of Common Stock, Class B Common Stock or Series A
Preferred Stock that each Tendering Stockholder has elected to redeem. Upon such
election, Part B of Schedule II hereto shall be amended (in the form of Annex I
hereto) to reflect the actual number of shares to be tendered for redemption on
the Initial Closing Date. It is understood that the Tendering Stockholders set
forth on Part B of Schedule II marked as "Exiting Stockholders" shall tender for
redemption 100% of the shares of capital stock of the Company owned by such
stockholders on the Initial Closing Date.
(c) As payment in full of the price for the redemption and
purchase of such Common Stock, Class B Common Stock or Series A Preferred Stock
so tendered for redemption and purchase, and against delivery thereof as
aforesaid, on the Initial Closing Date, the Company shall pay an amount in cash
equal to the number of shares of Common Stock, Class B Common Stock or Series A
Preferred Stock, as the case may be, tendered for redemption and purchase
multiplied by $7.90, up to a maximum of $60,957,995.80 (the "Redemption Price"),
payable as follows:
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(i) the Company shall deposit $2,268,143 in cash (the "Escrow
Amount") in an escrow account pursuant to the Escrow Agreement (the
"Escrow Agreement") substantially in the form of Exhibit B hereto among
the Tendering Stockholders, the New Investors, the Company and the
escrow agent named therein (the "Escrow Agent"), to be held and
distributed by such Escrow Agent in accordance with the terms thereof.
(ii) the Company shall pay $1,500,000 to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Company ("BGC") to satisfy in part the fees and expenses set forth on
Schedule 2.02(z) and 7.02 hereto); and
(iii) the Company shall pay the fees and expenses payable by it
pursuant to the terms of any contract or commitment obtained by it and
permitted pursuant to Section 3.01 hereto; and
(iv) the Company shall pay to the Tendering Stockholders on a
pro rata basis by wire transfer in immediately available funds to the
account specified in writing by the Tendering Stockholders no later
than three business days prior to the Initial Closing Date, an amount
equal to the difference between (x) the Redemption Price, as finally
determined based on the actual number of shares tendered for redemption
in accordance with Section 1.02(b) and (y) the sum of the payments made
pursuant to subparagraphs (i) and (ii) above.
(d) All rights of the Tendering Stockholders with respect to
such shares of Common Stock, Class B Common Stock and Series A Preferred Stock
so redeemed and purchased shall forthwith cease upon such payment.
SECTION 1.03. Initial Closing Date. The closing of the sale
and purchase of the Recapitalization Securities and the redemption contemplated
by Section 1.02 above shall take place at the offices of Reboul, MacMurray,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on
the business day following the satisfaction or waiver of each of the conditions
precedent to such closing set forth in Sections 4.01 and 4.02 hereof or at such
other date and time or at such other place as may be mutually agreed upon among
the New Investors, the Original Stockholders and the Company but in no event
later than October 20, 1999 (such closing being herein called the "Initial
Closing" and such date and time being herein called the "Initial Closing Date").
SECTION 1.04. The Company's Right to Request Purchases of
Additional Preferred Shares. (a) In addition to the Recapitalization Securities
to be issued and sold to the New Investors on the Initial Closing Date, the
Company may request that the
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New Investors acquire the Additional Preferred Shares (said Additional Preferred
Shares, together with the Recapitalization Securities, being hereinafter
collectively called, the "Securities"), all pursuant to this Section 1.04.
(b) The maximum number of Additional Preferred Shares that may
be purchased by each New Investor and the aggregate purchase price for such
Additional Preferred Shares pursuant to this Section 1.04 is set forth opposite
the name of such New Investor on Schedule IV hereto under the headings "Maximum
Number of Shares of Series B Preferred Stock" and "Maximum Additional Preferred
Purchase Price", respectively. Any purchase of Additional Preferred Shares by
the New Investors on any Subsequent Closing Date (as hereinafter defined) shall
be pro rata among the New Investors in proportion to the maximum amount listed
on Schedule IV hereto. The aggregate number of Additional Preferred Shares for a
Subsequent Closing Date shall be reduced by the aggregate number of Additional
Preferred Shares purchased on previous Subsequent Closing Dates. On the date
(the "Termination Date") that is the earlier to occur of (i) the third
anniversary of the Initial Closing Date, (ii) such time as the Company shall
have consummated an initial public offering of its Common Stock registered under
the Securities Act of 1933, as amended (the "Securities Act") (an "IPO") and
(iii) a Change of Control, the number, if any, of Additional Preferred Shares
available for purchase hereunder, after taking into account all reductions
thereof, shall no longer be subject to any of the provisions of this Section
1.04.
As used in this Section 1.04, the term "Change of Control"
shall mean (i) a consolidation or merger of the Company with or into any other
unrelated corporation (other than a merger in which the Company is the surviving
corporation and which will not result in more than 50% of the capital stock of
the Company outstanding being owned of record or beneficially by persons other
than the holders of such capital stock immediately prior to such merger), (ii) a
sale of all or substantially all of the properties and assets of the Company as
an entirety to any other unrelated person, or (iii) the acquisition of
"beneficial ownership" by any "person" or "group" (other than the New Investors
and their respective affiliates) of voting stock of the Company representing
more than 50% of the voting power of all outstanding shares of such voting
stock, whether by way of merger or consolidation or otherwise. The terms
"person" and "group" shall have the meanings set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or
not applicable, (ii) the term "beneficial owner" shall have the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time, and (iii) any
"person" or "group" will be deemed to beneficially own any voting stock of the
Company
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so long as such person or group beneficially owns, directly or indirectly, in
the aggregate a majority of the voting stock of a registered holder of the
voting stock of the Company.
(c) At any time prior to the Termination Date, in the event
that the Company desires to finance (x) capital expenditures approved by the
Board of Directors for the business of the Company, including without limitation
additional acquisitions, (y) operating expenses approved by the Board of
Directors of the Company or (z) for general corporate purposes, the Board of
Directors may, on one or more occasions, notify the New Investors that it wishes
financing. Such notice (a "Put Notice") shall be in writing and shall specify
(i) the applicable purpose (including a brief description thereof), (ii) that
the Put Notice has been authorized by the Board of Directors of the Company,
(iii) the amount of Additional Preferred Shares to be purchased, (iv) that the
anticipated net proceeds from such financing will not be greater than is
reasonably necessary for the applicable purpose and costs incurred in connection
therewith and (v) the Subsequent Closing Date for such financing, provided,
however, that no Subsequent Closing Date shall be scheduled to occur less than
10 or more than 30 days after the date of the Put Notice to which it relates.
(d) Within 10 days after receipt of a Put Notice pursuant to
paragraph (c) above, the New Investors, subject to the other conditions set
forth in this Agreement, shall be required to purchase the Additional Preferred
Shares in accordance with Section 1.05 below.
SECTION 1.05. Provision of Financing on Subsequent Closing
Dates. In the event that the Company shall have delivered a Put Notice, then,
subject to the other terms and conditions of this Agreement, on the Subsequent
Closing Date specified in such Put Notice, the Company shall issue, sell and
deliver to each New Investor, and each New Investor shall purchase from the
Company the number of Additional Preferred Shares specified in the Put Notice at
a purchase price equal to $7.90 for each Additional Preferred Share. On each
Subsequent Closing Date, the Company shall issue stock certificates in
definitive form, registered in the name of each New Investor, evidencing the
Additional Preferred Shares being purchased by such New Investor in the amount
specified in the Put Notice.
SECTION 1.06. Subsequent Closing Dates. Each closing of a sale
and purchase of Additional Preferred Shares shall take place at the offices of
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10 a.m., New York time, on such dates, (which shall not be a
day on which banking institutions in the State of New York are required or
authorized to close) as shall be specified in any Put Notice (each such closing
being herein called a "Subsequent Closing" and each such date and time being
herein called a "Subsequent Closing Date").
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties of the Original
Stockholders. Each of the Original Stockholders, severally and not jointly,
represents and warrants to the New Investors as to itself as follows:
(a) Authorization of Agreement, Etc. Such Original Stockholder
has full legal capacity and unrestricted power to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by such Original Stockholder of this Agreement, and the execution and delivery
by such Original Stockholder of the Escrow Agreement, the Stockholders Agreement
substantially in the form of Exhibit C hereto (the "Stockholders Agreement"),
the Registration Rights Agreement substantially in the form of Exhibit D (the
"Registration Rights Agreement"), and the Assumption Agreement substantially in
the form of Exhibit E (the "Assumption Agreement", and together with the Escrow
Agreement, the Stockholders Agreement and the Registration Rights Agreement, the
"Ancillary Agreements"), to the extent it is a party thereto, will not violate
any provision of law, any order of any court or other agency of government, or
any provision of any indenture, agreement or other instrument to which such
Original Stockholder is a party or by which such Original Stockholder or any of
its respective properties or assets is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the shares of capital stock of the Company owned by such
Original Stockholder.
(b) Validity. This Agreement has been duly executed and
delivered by such Original Stockholder and constitutes the legal, valid and
binding obligation of such Original Stockholder, enforceable in accordance with
its terms. Each of the Ancillary Agreements when executed and delivered by such
Original Stockholder will constitute the legal, valid and binding obligation of
such Original Stockholder, enforceable in accordance with its terms.
(c) Title to Shares. Such Original Stockholder owns, of record
and beneficially, the number of shares of Common Stock, Class B Common Stock and
Series A Preferred Stock set forth opposite its name on Part A of Schedule II
hereto, free and clear of any pledges, security interests, liens, charges or
other encumbrances. Upon the filing by the Company of the Amended and Restated
Certificate of Incorporation, but immediately prior to the tender of Common
Stock, the Class B Common Stock or
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Series A Preferred Stock by the Tendering Stockholders pursuant to Section 1.02
hereof, such Original Stockholder will own, of record and beneficially, the
number of shares of Common Stock, Class B Common Stock or Series A Preferred
Stock set forth opposite its name on Part B of Schedule II hereto, free and
clear of any pledges, security interests, liens, charges or other encumbrances.
SECTION 2.02. Representations and Warranties of the Tendering
Stockholders as to the Company. Each of the Tendering Stockholders, severally
and not jointly, represents and warrants to the New Investors as to the Company
as follows:
(a) Organization, Power, Etc. of the Company. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and is qualified or licensed to do business in
each of the jurisdictions set forth on Schedule 2.02(a). Except as set forth on
Schedule 2.02(a), neither the nature of the business transacted by the Company
nor the character of the properties owned or held by it makes licensing or
qualification as a foreign corporation in any other jurisdiction necessary
except where the failure to so qualify would not have a material adverse effect
on the financial condition, operations or business of the Company and its
Subsidiaries taken as a whole ("Material Adverse Effect"). The Company has the
corporate power and authority to (i) own and hold its properties and to carry on
its business as currently conducted, (ii) execute, deliver and perform this
Agreement and the Ancillary Agreements, (iii) issue, sell and deliver the
Securities and (iv) redeem and purchase the shares of Common Stock, Class B
Common Stock or Series A Preferred Stock to be tendered for redemption pursuant
to Section 1.02 hereof.
(b) Subsidiaries. (i) Schedule 2.02(b) includes a complete and
accurate list of each Subsidiary of the Company, indicating the jurisdiction of
incorporation, each jurisdiction in which such Subsidiary is qualified as a
foreign corporation, its capital structure (including all authorized and
outstanding shares), and the nature and level of ownership in such Subsidiary by
the Company, any subsidiary of the Company and any other person (for purposes of
this Agreement, "person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, or an unincorporated organization). Each
Subsidiary of the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, is
duly qualified as a foreign corporation to do business, and is in good standing
in each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary except where the
failure to so qualify would not have a Material Adverse Effect. Except as set
forth on Schedule 2.02(b), all the outstanding shares of capital stock of the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and are owned by the Company or by a wholly-owned subsidiary of
the Company, free and clear
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of any liens, claims, charges, restrictions, rights of others, security
interests, prior assignments or other encumbrances of any nature whatsoever
(collectively, "Claims").
(ii) Except as set forth on Schedule 2.02(b) hereto, neither
the Company nor any of its Subsidiaries (as hereinafter defined) owns of record
or beneficially, directly or indirectly, (x) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation or
(y) any participating interest in any partnership, joint venture or other
non-corporate business enterprise.
(iii) For purposes of this Agreement, the term "Subsidiary",
when used with respect to the Company, shall mean any corporation or other
business entity, a majority of whose outstanding equity securities is at the
time owned, directly or indirectly, by the Company and/or one or more other
subsidiaries of the Company.
(c) Authorization of Agreements, Etc. (i) Each of (A) the
execution and delivery by the Company of this Agreement and the Ancillary
Agreements and the performance by the Company of its obligations hereunder and
thereunder, (B) the issuance and sale of the Securities, and (C) the redemption
and purchase by the Company of the shares of Common Stock, Class B Common Stock
and Series A Preferred Stock to be tendered for redemption pursuant to Section
1.02 hereof have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company or any of
its Subsidiaries, or any judgment, award or decree or any provision of any
indenture, agreement or other instrument to which it or any of its Subsidiaries
or any of their respective properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company or any of its
Subsidiaries other than violations, conflicts, breaches or defaults (exclusive
of violations of the Certificate of Incorporation or By-laws of the Company or
any of its Subsidiaries) which would not have a Material Adverse Effect.
(ii) Upon acceptance of the filing of the Amended and Restated
Certificate of Incorporation, the Securities will have been duly authorized by
the Company and, when issued, sold and paid for in accordance with this
Agreement, will be validly issued, fully paid and nonassessable shares of
Convertible Preferred Stock, and will be owned by each of the New Investors in
the amounts set forth opposite the name of such New Investor on Schedule I
hereto free and clear of any claims, liens or encumbrances by the Company. The
issuance, sale and delivery of the Securities are not subject to any preemptive
rights of stockholders of the Company or to any right of first
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refusal or other similar right in favor of any person, except as set forth in
Schedule 7.13 hereto.
(iii) The Common Stock, Class B Common Stock and Series A
Preferred Stock to be tendered for redemption and purchase pursuant to Section
1.02 hereof, when so tendered and upon payment of the redemption and purchase
price therefor pursuant to said Section 1.02, will be validly redeemed and
purchased and fully paid for and all rights of the Tendering Stockholders with
respect to such shares of Common Stock, Class B Common Stock and Series A
Preferred Stock so redeemed and purchased shall forthwith cease.
(d) Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
The Ancillary Agreements, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms.
(e) Capitalization. (i) Prior to the filing by the Company of
the Amended and Restated Certificate of Incorporation, the authorized capital
structure of the Company consisted of (x) 7,000,000 shares of Preferred Stock,
all of which shares have been classified as Series A Preferred Stock and (y)
15,000,000 shares of common stock, of which 14,900,000 shares have been
classified as Common Stock and 100,000 shares have been classified as Class B
Common Stock. Upon the filing by the Company of the Amended and Restated
Certificate of Incorporation, but immediately prior to the consummation of the
transactions contemplated hereby, the authorized capital stock of the Company
will consist of (x) 22,000,000 shares of Preferred Stock, of which 7,000,000
shares shall be designated as Series A Preferred Stock, 6,462,606 of which
shares will be issued and outstanding and 15,000,000 shares shall be designated
as Series B Convertible Preferred Stock, none of which will be issued and
outstanding, and (y) 40,000,000 shares of common stock, of which 39,900,000
shares shall be designated Common Stock, 3,804,750 of which shares will be
issued and outstanding and 100,000 shares shall be designated as Class B Common
Stock, 90,500 of which shares will be issued and outstanding. Except as
contemplated by this Agreement or set forth in Schedule 2.02(e) hereto, (x) no
subscription, warrant, option, convertible security or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock of the
Company or any of its Subsidiaries is authorized or outstanding, (y) there is
not any commitment of the Company or any of its Subsidiaries (whether oral or
written, fixed or contingent or otherwise) to issue any shares, warrants,
options or other such rights or to distribute to holders of any class of its
capital stock, any evidences of indebtedness or assets and (z) the Company and
its Subsidiaries have no obligation (contingent or other) to purchase,
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redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof. Part A of Schedule II hereto contains a true and complete list of all
the holders of shares of capital stock of the Company and their respective share
holdings as of the date hereof. Part B of Schedule II hereto contains a true and
complete list of all the holders of shares of capital stock of the Company and
their respective share holdings after giving effect to the filing by the Company
of the Amended and Restated Certificate of Incorporation, but immediately prior
to the Initial Closing. Schedule III hereto contains a true and complete list of
all the holders of shares of capital stock of the Company and their respective
share holdings immediately after giving effect to the transactions contemplated
hereby assuming the redemption of all shares of capital stock available for
redemption.
(f) Financial Statements. Attached as Schedule 2.02(f) hereto
are (i) the consolidated balance sheets of the Company and its Subsidiaries as
of December 31, 1998 and their related consolidated statements of income,
stockholders' equity and cash flows for the year then ended, certified by KPMG
Peat Marwick, the independent certified public accountants retained by the
Company, and (ii) the unaudited consolidated balance sheets of the Company and
its Subsidiaries as of July 31, 1999, and the related statements of income,
stockholders' equity, and cash flows for the seven months then ended, certified
by the principal financial officer of the Company. Except as set forth in
Schedule 2.02(f), all such financial statements (including any related schedules
and/or notes, if any) have been prepared in accordance with generally accepted
accounting principles consistently applied and consistent with prior periods
("GAAP"), except that such interim statements are subject to year end
adjustments (consisting only of normal recurring accruals, which in the
aggregate, would not be Material) and do not have all footnotes required under
generally accepted accounting principles. Except as set forth in Schedule
2.02(f) hereto, such balance sheets fairly present the consolidated financial
position of the Company and its Subsidiaries as of their respective dates, and
such statements of operations, changes in stockholders' equity and cash flows
fairly present the consolidated results of operations of the Company and its
Subsidiaries for the respective periods then ended, subject, in the case of
unaudited financial statements, to normal year-end adjustments (which
adjustments, in the aggregate, would not be material). Except (i) as set forth
in the consolidated financial statements of the Company and its Subsidiaries as
of December 31, 1998, or (ii) as incurred in the ordinary course of business and
consistent with past practice since December 31, 1998, or (iii) as set forth on
Schedule 2.02(f) hereto, neither the Company nor any of its Subsidiaries has any
material liabilities or obligations of any kind or nature, whether known or
unknown (whether absolute, secured, contingent or otherwise) and whether due or
to become due that would have a Material Adverse Effect.
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(g) Absence of Certain Changes or Events. Since December 31,
1998, except as otherwise set forth in Schedule 2.02(g) hereto, neither the
Company nor any of its Subsidiaries has:
(i) incurred any obligation or liability (fixed or contingent)
material to the Company and its Subsidiaries taken as a whole
("Material"), except normal trade or business obligations incurred in
the ordinary course of business and consistent with past practice, and
except in connection with this Agreement and the transactions
contemplated hereby;
(ii) discharged or satisfied any lien, security interest,
charge or other encumbrance or paid any Material obligation or
liability (fixed or contingent), other than in the ordinary course of
business and consistent with past practice;
(iii) mortgaged, pledged or subjected to any lien, security
interest, charge or other encumbrance any of its Material assets or
properties (other than as set forth on Schedule 2.02(g)(iii) hereto
("Permitted Liens"));
(iv) transferred, leased or otherwise disposed of any of its
Material assets or properties except for a fair consideration in the
ordinary course of business and consistent with past practice or,
except in the ordinary course of business and consistent with past
practice, acquired any Material assets or properties;
(v) declared, set aside or paid any distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeemed or otherwise acquired any of its capital
stock or split, combined or otherwise similarly changed its capital
stock or authorized the creation or issuance of or issued or sold any
capital stock or any securities or obligations convertible into or
exchangeable therefor, or given any person any right to acquire any
capital stock from the Company or any of its Subsidiaries, or agreed to
take any such action;
(vi) canceled or compromised any debt or claim in excess of
$25,000 other than in the ordinary course of business consistent with
past practice;
(vii) waived or released any rights of Material value except as
contemplated hereby;
(viii) transferred or granted any Material rights under any
concessions, leases, licenses, agreements, patents, inventions,
trademarks, trade names, servicemarks or copyrights or with respect to
any know-how;
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(ix) made or granted any material wage or salary increase
applicable to any group or classification of employees generally,
entered into any employment contract involving payments of more than
$50,000 per annum with, or made any loan in excess of $10,000 to, or
entered into any material transaction of any other nature with, any
officer or employee of the Company or affiliates;
(x) suffered any casualty loss or damage (whether or not such
loss or damage shall have been covered by insurance) which affects in
any material respect the ability of the Company and its Subsidiaries
taken as a whole to conduct the business conducted by such entities; or
(xi) suffered any Material Adverse Effect.
(h) Actions Pending, Etc. Schedule 2.02(h) hereto sets forth a
complete list and an accurate description of all actions, suits or proceedings
involving claims relating to the business of the Company or any of its
Subsidiaries by or against the Company or any of its Subsidiaries pending or
threatened against the Company or any of its Subsidiaries in writing by counsel
for the plaintiff or claimant at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality which is reasonably likely to have a Material Adverse
Effect. Schedule 2.02(h) sets forth a complete list and an accurate description
of all orders, judgments or decrees of any court or governmental agency
currently in effect with respect to which the Company or any of its Subsidiaries
has been named or is a party which apply, in whole or in part, to any of the
assets of the Company or any of its Subsidiaries which is reasonably likely to
have a Material Adverse Effect.
(i) Title to Properties, Absence of Liens and Encumbrances.
Except as set forth in Schedule 2.02(i) hereto, the Company and each of its
Subsidiaries, as the case may be, (x) has good and marketable title to all its
real property and (y) has good and valid title to all its other Material assets
and properties, in each case free and clear of all Claims of any nature
whatsoever, other than Permitted Liens.
(j) List of Properties, Contracts and Other Data. Annexed
hereto as Schedule 2.02(j) is a list setting forth with respect to the Company
and each of its Subsidiaries the following:
(i) all real property owned by the Company or any of its
Subsidiaries, all leases of real property leased by and/or used in the
business of the Company and its Subsidiaries and all leases or group of
related leases of personal property to which the Company or any of its
Subsidiaries is a party either as lessee (in which case such Schedule
2.02(j) shall include only leases which involve monthly
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payments of $10,000 or more) or lessor, in each case with a brief
description of the property to which each such lease relates;
(ii) (A) all Material patents, trademarks and trade names,
trademark and trade name registrations, servicemark registrations,
copyrights and copyright registrations, unexpired as of the date
hereof, all applications pending on said date for any such patent,
trademark, trade name, servicemark or copyright registrations, owned or
held by the Company or any of its Subsidiaries and (B) all licenses
granted by or to the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries is a party which relate, in whole or
in part, to any items of the categories mentioned in (A) above or to
other proprietary rights reasonably necessary to, or used by the
Company or by any of its Subsidiaries (such items listed in (A) and (B)
above and such other proprietary rights being collectively referred to
herein as the "Intellectual Property Rights"), whether owned by it or
otherwise;
(iii) all collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock
option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of the
Company or any of its Subsidiaries;
(iv) all contracts, understandings and commitments relating to
(i) contracts, understandings and commitments with governmental
entities, (ii) financing arrangements, including, without limitation,
mortgages, indentures and loan agreements which exceed $25,000, (iii)
the ten largest customers of the Company and its Subsidiaries, ranked
by annual revenue, (iv) any contract or group of related contracts,
understandings and commitments (other than customer contracts), which
exceed $100,000 in amount and (v) any other Material contracts,
understandings and commitments; and
(v) the names of all employees of the Company or any of its
Subsidiaries making more than $90,000 per year.
True and complete copies of all documents and reasonably
complete descriptions of all oral understandings (if any) referred to in
Schedule 2.02(j) have been provided to the New Investors and their counsel. In
addition, a true and complete schedule of the current annual compensation rates
for the employees listed pursuant to clause (v) above has been provided to the
New Investors and their counsel. Except as disclosed in such Schedule, neither
the Company nor any of its Subsidiaries has been
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notified of any claim that any contract referred to in such Schedule is not
valid and enforceable in accordance with its terms for the periods stated
therein, or that there is under any such contract any existing default or event
of default or event which with notice or lapse of time or both would constitute
such a default.
(k) Use of Real Property. Except as set forth in Schedule
2.02(k) hereto, the leased real properties listed in Schedule 2.02(j) hereto are
used and operated in compliance and conformity in all material respects with all
applicable leases, contracts, commitments, licenses and permits. Neither the
Company nor any of its Subsidiaries has received written notice of any Material
violation of any applicable law, order, regulation or requirement relating to
its operations or to the assets of the Company or any of its Subsidiaries and,
to the knowledge of the Company, there is no such violation which would have a
Material Adverse Effect.
(l) Leasehold Interests. Each lease or agreement to which the
Company or any of its Subsidiaries is a party and under which it is a lessee of
any real property, or any Material item of personal property, owned by any third
party is a valid and subsisting agreement, without any Material default of the
Company or any of its Subsidiaries thereunder and, to the best knowledge of the
Company, without any default thereunder of any other party thereto. No claim
been asserted in writing against the Company or any of its Subsidiaries adverse
to its rights in such leasehold interests which would have a Material Adverse
Effect.
(m) [intentionally omitted]
(n) Intellectual Property Rights; Software. (i) Except as set
forth in Schedule 2.02(n), (x) the Company and each of its Subsidiaries hold
free from contractual restrictions which would have a Material Adverse Effect,
all Intellectual Property Rights set forth in Schedule 2.02(j), (y) all
Intellectual Property Rights are valid and enforceable and (z) neither the
Company nor any of its Subsidiaries has received written notice that the Company
or any of its Subsidiaries is infringing upon any material Intellectual Property
Rights of any other person.
(ii) Schedule 2.02(n) lists all Material operating, management,
developmental and applications computer programs, software, databases and
related documentation owned, held or licensed by the Company or any of its
Subsidiaries (collectively, the "Software"), except for "off-the-shelf" programs
generally available to the public. The Software includes all Material software,
applications, databases and related documentation used in the conduct of the
business of the Company. Except as set forth on Schedule 2.02(n), (x) the
Company and each of its Subsidiaries own or have valid rights to use the
Software and have received no written notice of infringement of the
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rights of others and (y) the Company and each of its Subsidiaries have taken and
are taking reasonable precautions consistent with industry practices for such
information to protect any material trade secrets and other confidential
information included in the Software.
To the knowledge of the Company, all computer software,
hardware, data bases and systems used by the Company and/or its Subsidiaries are
free from any problems associated with changes in the calendar date from
December 31, 1999 to January 1, 2000 (collectively, the "Y2K Problem"), other
than any such problems the existence of which would not result in a Material
Adverse Effect. The Company and its Subsidiaries have made all upgrades
reasonably necessary to respond to the Y2K Problem. The Company and its
Subsidiaries have conducted reasonable system tests with respect to the Y2K
Problem and are satisfied with the results of such tests.
(o) Trade Secrets. No third party has notified the Company or
any of its Subsidiaries in writing that any person employed or otherwise
affiliated with the Company or any of its Subsidiaries has, in respect of his or
her activities to date, violated any of the terms or conditions of his or her
employment contract with any third party, or disclosed or utilized any trade
secrets or proprietary information or documentation of any third party, or
interfered in the employment relationship between any third party and any of its
employees.
(p) Taxes. (i) Except as set forth on Schedule 2.02(p), (i)
each of the Company and each of its Subsidiaries has duly and timely filed or
caused to be filed all federal and all other material Tax returns, reports,
estimates and information and other statements or returns (collectively, "Tax
Returns") required to be filed by or on behalf of the Company or such
Subsidiary, as the case may be, and any affiliated, consolidated, combined or
unitary group of which the Company or any of its Subsidiaries is or has been a
member (a "Tax Group") has duly and timely filed or caused to be filed all
federal and all other material Tax Returns required to be filed by or on behalf
of the Company, or such Subsidiary, as the case may be, pursuant to any
applicable federal, state, local or foreign tax laws for all years and periods
for which such Tax Returns have become due, and (ii) all such Tax Returns
(including all informational Tax Returns) were correct in all material respects
as filed and correctly reflect in all material respects any Tax or Taxes
required to be paid or collected by the Company, any of its Subsidiaries or any
Tax Group.
(ii) For purposes of this Agreement, "Tax" and "Taxes" shall
mean (A) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, gains, franchise,
profits, license, withholding on amounts paid or received, payroll, employment,
excise, severance, stamp,
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occupation, premium, property, environmental or windfall profit taxes, custom
duties or other taxes, governmental fees or other like assessments or charges of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any governmental authority responsible for the
imposition of any such taxes (domestic or foreign) and (B) any liability of the
Company or any of its Subsidiaries for the payment of any amounts of the type
described in (A) as a result of being a member of an affiliated, consolidated,
combined or unitary group for federal, state, local or foreign Tax purposes, and
(C) any liability of the Company or any of its Subsidiaries as a result of being
a party to any tax sharing or allocation agreement.
(iii) Except as set forth on Schedule 2.02(p), the Company, each
of its Subsidiaries and any Tax Group have paid all Taxes shown on the Tax
Returns and all other material Taxes, or where payment is not yet due, have
established, consistent with past practice, an adequate reserve on their
respective books and records for the payment of all such Taxes with respect to
any taxable period (or portion thereof) ending on or prior to the Initial
Closing Date (or otherwise relating or attributable to periods up to and
including the Initial Closing Date).
(iv) Except as set forth on Schedule 2.02(p), the Company has
not waived or extended the period of assessment under applicable law with
respect to any Tax Return of the Company, any of its Subsidiaries or any Tax
Group. Schedule 2.02(p) indicates those Tax Returns of the Company, any of its
Subsidiaries or any Tax Group that either have been audited or are currently the
subject of an audit or a pending or threatened audit. Except as set forth on
Schedule 2.02(p), there is no dispute or claim (including any anticipated claim)
concerning any Taxes of the Company, any of its Subsidiaries or any Tax Group
either (A) claimed or raised by any authority in writing or (B) as to which the
Original Stockholders have actual knowledge.
(v) Except as set forth on Schedule 2.02(p), for periods up to
and including the Initial Closing Date, the Company and each of its Subsidiaries
have been includable members of the "affiliated group" (within the meaning of
Section 1504 of the Code) of which the Company is currently the parent; for such
periods each of the Company and each of its Subsidiaries was entitled to report
its income on consolidated federal income tax returns filed on behalf of such
affiliated group and, for such periods, all federal income tax returns required
to be filed by the Company or any such Subsidiary have been (or will be) duly
and timely filed by the Company on a consolidated basis. Except as set forth on
Schedule 2.02(p) hereto, for all periods all other Tax Returns of each of the
Company and each of its Subsidiaries have been filed on a separate company,
non-combined, non-consolidated and non-unitary basis.
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(vi) Except as set forth in Schedule 2.02(p), neither the
Company nor any of its Subsidiaries has (A) received or is the subject of an
application for a tax ruling or entered into a legally binding agreement (such
as a closing agreement) with a taxing authority, which ruling or agreement could
affect the Taxes of the Company after the Initial Closing Date, or (B) filed any
election or caused any deemed election under Section 338 of the Code for which
the applicable Tax liability has not been paid.
(vii) Except as set forth in Schedule 2.02(p), (A) no extensions
of time have been granted to the Company, any of its Subsidiaries or any Tax
Group to file any Tax Return required by applicable law to be filed by it prior
to or on the Initial Closing Date, which have expired, or will expire, on or
before the Initial Closing Date without such Tax Return having been filed; (B)
no deficiency or adjustment for any Taxes of the Company, any of its
Subsidiaries or any Tax Group has been proposed, asserted or assessed in
writing, and no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are pending with regard to any such Taxes of
the Company, any of its Subsidiaries or any Tax Group; (C) no waiver or consent
extending any statute of limitations for the assessment or collection of any
Taxes has been executed by the Company, any of its Subsidiaries or any Tax Group
or on behalf of the Company or such Tax Group, nor have any requests for such
waivers or consents been proposed in writing; (D) neither the Company nor any of
its Subsidiaries owns or leases any interest in real property in the State of
New York; and (E) neither the Company nor any of its Subsidiaries owns or leases
any interest in real property in any other jurisdiction in which a Tax will be
payable with respect to such interest in real property as a result of the
transactions contemplated hereby.
(viii) Except as set forth in Schedule 2.02(p), neither the
Company nor any of its Subsidiaries has ever been a party to any tax-sharing or
allocation agreements.
(ix) Neither the Company nor any of its Subsidiaries is a party
to any agreement, contract or arrangement that would result, by reason of the
consummation of any of the transactions contemplated herein, separately or in
the aggregate, in the payment of any "excess parachute payments" by the Company
or any of its Subsidiaries within the meaning of Section 280G of the Code.
(x) Except as set forth in Schedule 2.02(p), neither the
Company nor any of its Subsidiaries is currently or will be required to include
any adjustment in taxable income for any Post-Closing Tax Period under Section
481 of the Code (or any similar provision of the Tax laws of any jurisdiction)
as a result of a change in method of accounting for any taxable period (or
portion thereof) ending on or before the Initial Closing Date (a "Pre-Closing
Tax Period") or pursuant to the provisions of any agreement
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entered into with any taxing authority with regard to the Tax liability of the
Company for any Pre-Closing Tax Period.
(xi) No agreement or consent pursuant to Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), has ever been made which
is currently in effect with respect to the Company or any of its Subsidiaries or
any assets or properties of the Company or any of its Subsidiaries. Further,
neither the Company nor any of its subsidiaries shall make any agreement or
consent pursuant to said Section 341(f) in respect of the transactions
contemplated by this Agreement.
(xii) The Company and each of its Subsidiaries have complied
with all applicable laws relating to the withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code) and have,
within the time and within the manner prescribed by law, withheld and paid over
to the proper taxing authorities all amounts required to be withheld and paid
over under all applicable laws in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(xiii) No power of attorney has been granted which is currently
in effect by or with respect to the Company or any of its Subsidiaries with
respect to any matter relating to Taxes.
(xiv) No claim has ever been made by any governmental authority
in a jurisdiction where the Company does not file Tax Returns that the Company
or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction.
(xv) The Company has previously delivered or made available to
the New Investors complete and accurate copies of each of: (i) all audit
reports, letter rulings and technical advice memoranda relating to federal,
state and local Taxes due from or with respect to the Company or any of its
Subsidiaries, (ii) the federal, state and local Tax Returns filed by the Company
or any of its Subsidiaries and (iii) any closing agreements entered into by the
Company or any of its Subsidiaries.
(q) Governmental Approvals. Except (i) as set forth in
Schedule 2.02(q) hereto and (ii) any filings required pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), no
approval, authorization, consent or order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution, delivery and performance by the Company of this Agreement or any of
the Ancillary Agreements, or in connection with the issuance, sale and delivery
of the Securities.
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(r) Compliance With Law; Environmental Matters. (i) Except as
set forth in Schedule 2.02(r) hereto, the Company and each of its Subsidiaries
has all governmental licenses, franchises and permits required under applicable
law for the business to be conducted in all Material respects (collectively,
"Governmental Permits") other than Governmental Permits that can be readily
obtained without resulting in a Material Adverse Effect.
(ii) The business of the Company and each of its Subsidiaries
is being conducted in compliance in all Material respects with all applicable
laws, ordinances, rules and regulations of all governmental authorities relating
to their respective properties or applicable to their respective businesses,
including without limitation the terms of all Governmental Permits and federal
securities laws, other than non-compliance that can be cured without resulting
in a Material Adverse Effect. Except as set forth in Schedule 2.02(r) hereto,
neither the Company nor any of its Subsidiaries has received any written notice
of any alleged Material violation of any of the foregoing, nor are any of the
Original Stockholders aware of any basis for any such allegation.
(iii) The Company and each of its Subsidiaries conducts its
businesses and operations in compliance in all Material respects with all
applicable environmental laws, ordinances and regulations, and neither the
Company nor any of its Subsidiaries has received written notice of any claim,
action, suit, proceeding, hearing or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste (collectively, an "Environmental Event") by the Company
or any of its Subsidiaries or with respect to any premises owned or occupied by
them which would have a Material Adverse Effect. Without limiting the generality
of the foregoing, to the knowledge of the Company, neither the Company, any of
its Subsidiaries nor any predecessor corporation has disposed of or placed on or
in any property or facility used in its business any waste materials, hazardous
materials or hazardous substances in violation of law.
(s) Labor Controversies. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement, and no such
agreement is applicable to any employees of the Company or any of its
Subsidiaries. There are not any controversies between the Company or any of its
Subsidiaries and any of such employees which might reasonably be expected to
have a Material Adverse Effect or any unresolved labor union grievances or
unfair labor practice or labor arbitration proceedings pending, nor has the
Company received written notice of any which are threatened, relating to the
business of the Company or any of its Subsidiaries. To the knowledge of the
Company, there are not any organizational efforts presently being made or
threatened involving any of such employees. Except as set forth in Schedule
2.02(s) hereto, neither the Company
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nor any of its Subsidiaries has received written notice of any claim that the
Company or any of its Subsidiaries has not complied in all Material respects
with any laws relating to the employment of labor, including any provisions
thereof relating to wages, hours, collective bargaining, the payment of social
security and similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that the Company or any of its
Subsidiaries is liable for any Material arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing.
(t) Employee Benefit Plans. (i) The Company, its Subsidiaries
and each other entity, that together with the Company, would be treated as a
single employer under Sections 414(b), (c) or (o) of the Code (an "ERISA
Affiliate") have complied and currently are in compliance in all material
respects, both as to form and operation, with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Code, with respect to each "employee benefit plan" as defined under Section 3(3)
of ERISA which the Company or any ERISA Affiliate (A) has ever adopted,
maintained, established, contributed to, been required during the six-year
period ending on the Initial Closing Date to contribute to or could have any
liability with respect to, (B) currently maintains or to which the Company or
any of its Subsidiaries currently contributes or is required to contribute or
(C) currently participates in or is required to participate in (a "Plan").
Schedule 2.02(t) hereto lists each Plan.
(ii) Neither the Company nor any ERISA Affiliate has during the
six-year period ending on the Initial Closing Date maintained, adopted or
established, contributed or been required to contribute to, or otherwise
participated in or been required to participate in, a "multiemployer plan" (as
defined in Section 3(37) of ERISA). No amount is due or owing from the Company
or any ERISA Affiliate on account of a "multiemployer plan" (as defined in
Section 3(37) of ERISA) or on account of any withdrawal therefrom.
(iii) Neither the Company nor any ERISA Affiliate has
maintained, contributed to or been required to contribute to, nor do any of its
employees participate in, any defined benefit plan as defined in Section 3(35)
of ERISA.
(iv) Notwithstanding anything else set forth herein, other than
routine claims for benefits and liability for premiums due to the Pension
Benefit Guaranty Corporation, neither the Company nor any ERISA Affiliate has
incurred any liability with respect to a Plan that is currently due and owing
and has not yet been satisfied, including without limitation under ERISA
(including without limitation Title I or Title IV thereof), the Code or other
applicable law, and no event has occurred, and, to the knowledge of the Company,
there exists no condition or set of circumstances (other than the accrual of
benefits under the normal terms of the Plans), which could result in the
imposition of any
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liability of the Company with respect to a Plan, including without limitation
under ERISA (including without limitation Title I or Title IV thereof), the Code
or other applicable law with respect to a Plan.
(v) Except (i) as required by applicable law or (ii) as set
forth in Schedule 2.02(t) hereto or provided in any insurance policy listed in
Schedule 2.02(u) hereto, neither the Company nor any ERISA Affiliate has
committed itself, orally or in writing, (x) to provide or cause to be provided
to any person any payments or provision of any "welfare" or "pension" benefits
(as defined in Sections 3(1) and 3(2) of ERISA) in addition to, or in lieu of,
those payments or benefits set forth under any Plan, (y) to continue the payment
of, or accelerate the payment of, benefits under any Plan, except as expressly
set forth thereunder or (z) to provide or cause to be provided any severance or
other post-employment benefit, salary continuation, termination, disability,
death, retirement, health or medical benefit to any person (including without
limitation any former or current employee) except as set forth under any Plan.
(vi) Notwithstanding any other provisions to the contrary set
forth herein, the New Investors shall not assume any liability which the Company
or any of its Subsidiaries may have incurred or may incur which arises out of,
is a result of, or is in any way related to, any Plan.
(u) Insurance. All policies of fire, liability, workers'
compensation, and other forms of insurance providing insurance coverage to or
for the Company or any of its Subsidiaries for events or occurrences arising or
taking place in the case of occurrence type insurance, and for claims made
and/or suits commenced in the case of claims-made type insurance, prior to the
Initial Closing Date, are listed in Schedule 2.02(u) hereto and, except as set
forth in said Schedule 2.02(u), all premiums with respect thereto covering all
periods up to and including the date as of which this representation is being
made have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. All such policies are in full force
and effect. All such policies will remain in full force and effect and will not
in any way be affected by, or terminate or lapse by reason of, any of the
transactions contemplated hereby.
(v) Customers. Schedule 2.02(v) hereto contains an accurate
and complete list of the companies which the Company expects to be its top
twenty customers in terms of revenue for calendar year 1999. Except as set forth
in said Schedule, since July 31, 1999 neither the Company nor any of its
Subsidiaries has lost or been notified in writing that it will lose any customer
on Schedule 2.02(v), and no customer on said Schedule has notified the Company
or any of its Subsidiaries in writing that it would in
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the event of a change of control of the Company cease to be a customer of the
Company or its Subsidiaries.
(w) Accounts Receivable. The accounts receivable reflected on
the balance sheet of the Company as of December 31, 1998 referred to in Section
2.02(f) above, and all accounts receivable arising between December 31, 1998 and
the date hereof, arose from bona fide transactions in the ordinary course of
business. Except as set forth in Schedule 2.02(w), no such account has been
assigned or pledged to any other person, firm or corporation and no defense or
set off to any such account to the Company's knowledge exists or has been
asserted in writing by the account obligor in excess of reserves provided
therefor.
(x) Offering of Securities. Neither the Company nor any person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Convertible Preferred Stock, Common
Stock or any similar securities of the Company has offered any such securities
for sale to, or solicited any offers to buy any such securities from, or
otherwise approached or negotiated with respect thereto with any person or
persons under circumstances that involved the use of any form of general
advertising or solicitation as such terms are defined in Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"); and, assuming the
accuracy of the representations and warranties of the New Investors set forth in
Section 2.03 hereof, neither the Company nor any person acting on the Company's
behalf has taken or will take any action (including, without limitation, any
offer, issuance, sale of any securities of the Company under circumstances which
might require the integration of such transactions with the placement of the
Convertible Preferred Stock and Common Stock under the Securities Act or the
rules and regulations of the Securities and Exchange Commission thereunder)
which would require that the offering, issuance, sale of the Convertible
Preferred Stock and Common Stock to the New Investors be registered under the
Securities Act.
(y) Related Party Transactions. Except as set forth in
Schedule 2.02(y) hereto and except for this Agreement and the transactions
contemplated hereby, there are no existing arrangements or proposed transactions
between the Company or any of its Subsidiaries and (i) any officer or director
of the Company or any of its Subsidiaries or any of the Original Stockholders or
any member of the immediate family of any of the foregoing persons (such
officers, directors, governing board members, stockholders and family members
being hereinafter individually referred to as a "Related Party") or (ii) any
business (corporate or otherwise) which a Related Party owns, directly or
indirectly, or in which a Related Party has an ownership interest.
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(z) Broker's or Finders' Fees. Except as set forth in Schedule
2.02(z) hereto, all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Original Stockholders directly
with the Company and the New Investors, without the intervention of any person
on behalf of the Original Stockholders and/or the Company in such manner as to
give rise to any claim by any person against the Company or any of the New
Investors for a finder's fee, brokerage commission or similar payment.
(aa) Knowledge. For purposes of this Agreement, "to the
knowledge of the Company," "known to the Company," and words of similar import
shall mean the actual knowledge of the Company's Chief Executive Officer and
Chief Financial Officer after having made such inquiries of the executive
officers of each of its Subsidiaries as shall be reasonably necessary to
determine the accuracy of the relevant representation and warranty.
SECTION 2.03. Representations and Warranties of the New
Investors. Each New Investor, severally and not jointly, represents and warrants
to the Company and the Original Stockholders as follows:
(a) Authorization; Organization. The execution, delivery and
performance by such New Investor of this Agreement and the Ancillary Agreements
to which it is a party and the purchase and receipt by such New Investor of the
Securities, have been duly authorized by all requisite action on the part of
such New Investor, and will not violate any provision of law, any order of any
court or other agency of government, the governing instrument of such New
Investor, or any provision of any indenture, agreement or other instrument by
which such New Investor or any of such New Investor's properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
such New Investor. Each New Investor that is a partnership or limited liability
company represents that it has been duly organized and is validly existing under
the laws of its jurisdiction of organization.
(b) Validity. This Agreement has been duly executed and
delivered by such New Investor and constitutes the legal, valid and binding
obligation of such New Investor, enforceable in accordance with its terms. Each
Ancillary Agreement to which such New Investor is a party, when executed and
delivered in accordance with this Agreement, will constitute the legal, valid
and binding obligation of such New Investor, enforceable in accordance with its
terms.
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(c) Investment Representations. (i) Such New Investor is
acquiring the Securities being purchased by it hereunder, for its own account,
for investment, and not with a view toward the resale or distribution thereof.
(ii) Such New Investor understands that it must bear the
economic risk of its investment for an indefinite period of time because the
Securities are not registered under the Securities Act or any applicable state
securities laws, and may not be resold unless subsequently registered under the
Securities Act and such other laws or unless an exemption from such registration
is available. Such New Investor also understands that, except as provided in the
Registration Rights Agreement, it is not contemplated that any registration will
be made under the Securities Act or that the Company will take steps which will
make the provision of Rule 144 under the Securities Act available to permit
resale of the Securities. Such New Investor agrees that it will not pledge,
transfer, convey or otherwise dispose of the Securities except in a transaction
that is the subject of either (i) an effective registration statement under the
Securities Act and any applicable state securities laws, or (ii) an opinion of
counsel to the effect that such registration is not required (which opinion and
counsel shall be reasonably satisfactory to the Company, it being agreed that
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol shall be satisfactory counsel, and
may be relied on by the Company in making such determination), it being intended
that the agreements contained in this sentence shall be construed consistently
with the provisions relating to the same subject matter contained in the
Registration Rights Agreement.
(iii) Such New Investor represents that it is able to fend for
itself in the transactions contemplated by this Agreement, and that it has the
ability to bear the economic risks of its investment in the Securities for an
indefinite period of time.
(iv) Such New Investor represents that it has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in the Securities. Each New
Investor further represents that it is an "accredited investor" as such term is
defined in Rule 501 of Regulation D of the Securities and Exchange Commission
under the Securities Act with respect to its purchase of the Securities and that
each New Investor that is a partnership or limited liability company has not
been formed solely for the purpose of acquiring the Securities it is receiving
hereunder.
(d) No Knowledge of Misrepresentations or Omissions. None of
the New Investors has any knowledge that the representations and warranties of
the Original Stockholders made in this Agreement qualified as to Material
Adverse Effect or Materiality are not true and correct, or that those not so
qualified are not true and correct
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in all material respects, and none of the New Investors has any knowledge of any
material errors in, or material omissions from the Schedules to this Agreement.
ARTICLE III
COVENANTS
SECTION 3.01. Certain Covenants. During the period from the
date of this Agreement to the Initial Closing Date, the Original Stockholders
will cause the Company to, and the Company will, conduct its business and
operations in the ordinary course consistent with past practice and use its
reasonable efforts to preserve its relationships with business partners,
suppliers, employees and customers. Without limiting the generality of the
foregoing, except as otherwise contemplated by this Agreement or as set forth in
Schedule 3.01 hereto, prior to the Initial Closing or the termination of this
Agreement, without the prior written consent of the New Investors, the Original
Stockholders will not permit the Company to, and the Company will not do any of
the things specified in Section 2.02(g) above, except as set forth in Schedule
3.01 hereof.
SECTION 3.02. Rights of Inspection. During the period from the
date of this Agreement to the Initial Closing Date, the Company shall, and shall
cause its officers, directors, employees, representatives, advisors and agents
to, afford, from the date hereof, the representatives, advisors and agents of
the New Investors complete access at all reasonable times during normal business
hours to its officers, employees, agents, properties, books, records and
workpapers, and shall furnish the New Investors all financial, operating and
other information and data that the New Investors may reasonably request through
such representatives, advisors or agents. The Company shall promptly furnish to
the New Investors a copy of all Material written correspondence, filings,
communications (or memoranda setting forth the substance thereof) between the
Company or any of its officers, employees, representatives, advisors or agents
and any governmental entity with respect to the obtaining of any waivers,
consent or approvals and the making of any registrations or filings that are
necessary for the consummation of the transactions contemplated by this
Agreement.
SECTION 3.03. Notice of Certain Events. During the period from
the date of the Agreement to the Initial Closing Date, the Company shall give
the New Investors prompt notice of (i) the occurrence, or failure to occur, of
any event that it believes would be likely to cause (x) any of the
representations or warranties of the Original Stockholders contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof or (y) any covenant, condition or
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agreement contained in this Agreement not to be complied with or satisfied in
any material respect, (ii) any failure of the Company or the Original
Stockholders to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder, (iii) any event of default under any agreement of the Company with
respect to indebtedness of the Company or any Subsidiary for borrowed money or a
purchase money obligation in excess of $25,000, and any event which, upon notice
or lapse of time or both, would constitute such an event of default, that would
permit the holder of such indebtedness or obligation to accelerate the maturity
thereof, and (iv) any communications between the Company or any of its
Subsidiaries and any governmental authority with respect to Material matters.
SECTION 3.04. Use of Proceeds. The Company shall apply (i) up
to $60,957,995.80 of the proceeds from the sale of the Recapitalization
Securities for the purchase of the Common Stock, Class B Common Stock and Series
A Preferred Stock to be tendered by the Original Stockholders for redemption
pursuant to Section 1.02, (ii) $20,000,000 to finance (w) capital expenditures
approved by the Board of Directors for the expansion of the Company's business
through additional acquisitions, (x) operating expenses approved by the Board of
Directors of the Company or (y) general corporate purposes approved by the Board
of Directors of the Company and (z) to pay all fees and expenses incurred by the
Company in connection with the transactions contemplated hereby.
SECTION 3.05. Consents and Approvals. Prior to the Initial
Closing Date, the Company and the New Investors shall promptly apply for or
otherwise seek and use their respective best efforts to obtain all
authorizations, consents, waivers and approvals (whether by or from any person,
entity, court or governmental agency or authority) as may be required in
connection with the consummation of this Agreement and the Ancillary Agreements
and the transactions contemplated hereby and thereby.
SECTION 3.06. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Without limiting Section
3.05 or any of the foregoing, each of the parties shall file any Notification
and Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act ("HSR Act"), shall use its
reasonable best efforts to obtain an early termination of the applicable waiting
period, and shall make any further filings pursuant thereto that may be
necessary, proper or advisable.
SECTION 3.07. Amended and Restated Certificate of
Incorporation. Between the date hereof and the Initial Closing Date, the Company
shall use its best efforts to cause the Amended and Restated Certificate of
Incorporation to be filed with the Secretary of State of Delaware and to be
effective. The Amended and Restated
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Certificate of Incorporation shall authorize the Convertible Preferred Stock
with the terms set forth in Exhibit A.
SECTION 3.08. Tax Sharing Agreements. Any existing Tax sharing
agreements, arrangements or understanding (whether written or oral) relating to
the Company or any of its Subsidiaries shall be terminated as of the Initial
Closing Date, and no amount shall be owed under any such agreement, arrangement
or understanding after the Initial Closing Date.
SECTION 3.09. Option Plan. (a) The Company will adopt a Stock
Option Plan substantially in the form annexed hereto as Exhibit F (the "Option
Plan").
(b) In the event that the Company becomes eligible to file a
registration statement on Form S-8 of the Securities Act then, as soon as
practicable thereafter, the Company shall file a registration statement on such
Form with respect to the shares of Common Stock issued, or issuable, upon
exercise of options issued under the Option Plan, and the Company's 1998 Stock
Option Plan and 1999 Stock Option Plan.
SECTION 3.10. Restrictions. Without the consent of a majority
in interest of the Original Stockholders, the Company will not amend, alter or
repeal the terms of the Convertible Preferred Stock in a manner adverse to the
Original Stockholders.
SECTION 3.11. Debt Financing. The New Investors shall
negotiate in good faith with First Dominion Capital LLC the definitive terms of
the senior debt financing on terms substantially as set forth in the Commitment
Letter dated August 6, 1999 from First Dominion Capital LLC (the "First Dominion
Commitment Letter").
SECTION 3.12. Equity Financing. Each New Investor shall, by
making any necessary capital calls or other financing arrangements, have the
cash necessary to purchase the shares of Convertible Preferred Stock to be
purchased by such New Investor on the Initial Closing Date pursuant to Section
1.01.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Obligations of the
New Investors with Respect to the Initial Closing Date. The obligations of each
New Investor hereunder is, at its option, subject to the satisfaction, on or
before the Initial Closing Date, of each of the following conditions:
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(a) Accuracy of Representations and Warranties. The
representations and warranties of the Original Stockholders and the Tendering
Stockholders contained in this Agreement or in any certificate delivered to the
New Investors pursuant hereto that are qualified with respect to Material
Adverse Effect or Materiality shall be true and correct in all respects and all
representations and warranties of the Original Stockholders and the Tendering
Stockholders that are not so qualified shall be true and correct in all Material
respects, in each case on and as of the Initial Closing Date as though made at
and as of that date, and the Representative (as hereinafter defined) on behalf
of each of the Original Stockholders and the Tendering Stockholders, severally
and not jointly, shall have delivered to the New Investors a certificate to that
effect.
(b) Compliance with Covenants. The Original Stockholders and
the Tendering Stockholders and the Company shall have performed and complied in
all material respects with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by them at or prior to the
Initial Closing Date, and the Representative on behalf of each of the Original
Stockholders and the Tendering Stockholders, severally and not jointly, shall
have delivered to the New Investors a certificate to that effect.
(c) Proceedings To Be Satisfactory. All proceedings to be
taken by the Original Stockholders, the Tendering Stockholders or the Company in
connection with the transactions contemplated hereby and the Ancillary
Agreements and all documents incident thereto shall be reasonably satisfactory
in form and substance to the New Investors and their counsel, and the New
Investors and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as it or they may reasonably
request.
(d) Opinion of Counsel. The New Investors shall have received
the opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company, dated the
Initial Closing Date, satisfactory in form and substance to the New Investors
and their counsel, to the effect set forth in Annex II hereto.
(e) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise impair the consummation of the transactions
contemplated hereby.
(f) Amended and Restated Certificate of Incorporation. The
Amended and Restated Certificate of Incorporation shall have been duly adopted,
and shall have been duly filed with the Secretary of State of the State of
Delaware and become legally effective. The Amended and Restated Certificate of
Incorporation shall authorize the Convertible Preferred Stock with the terms set
forth in Exhibit A.
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(g) Ancillary Agreements. On or prior to the Initial Closing
Date, each of the Ancillary Agreements shall have been executed and delivered by
the Company and, in the case of (i) the Escrow Agreement and the Assumption
Agreement, by the Tendering Stockholders and (ii) the Stockholders Agreement and
the Registration Rights Agreement, by Original Stockholders that do not tender
all of their capital stock in the Company hereunder.
(h) Stockholders Agreements. Each of the shareholder
agreements listed on Schedule 7.13 hereto with respect to which Original
Stockholders are signatory (other than those described in Item 12) shall have
been terminated by the parties thereto and shall no longer be in effect.
(i) Debt Financing. The Company shall have received not less
than $71,000,000 in proceeds of senior debt financing (the "Senior Debt
Financing") from First Dominion Capital LLC pursuant to documentation reasonably
acceptable to the New Investors, unless the failure to obtain such proceeds
results from the failure of the New Investors to accept the terms of such
financing as set forth in the First Dominion Commitment Letter or the failure of
the New Investors to negotiate the terms thereof in good faith.
(j) Consents and Assignments; HSR Act. The Company shall have
obtained all consents required to be obtained by it pursuant to Section 2.02(q)
hereof in form reasonably satisfactory to the New Investors. Without limiting
the generality of the foregoing, all applicable waiting periods under the HSR
Act with respect to the transactions contemplated hereby shall have expired or
been terminated.
(k) Supporting Documents. On or prior to the Initial Closing
Date, the New Investors and their counsel shall have received copies of the
following supporting documents:
(i) (1) copies of the Certificate of Incorporation of the
Company and each of its Subsidiaries and all amendments thereto,
certified as of a recent date by the Secretary of State of the State of
Delaware, or such other state in which it is incorporated, (2) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and good standing of the Company and each of its
Subsidiaries and listing all documents of the Company and each of its
Subsidiaries on file with said Secretary and (3) telephone confirmation
from said Secretary as of the close of business on the next business
day preceding the Initial Closing Date as to the continued good
standing of the Company and each of its Subsidiaries; and
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(ii) a certificate of the Secretary or an Assistant Secretary
of the Company dated the Initial Closing Date and certifying: (1) that
attached thereto is a true and complete copy of the By-laws of the
Company and each of its Subsidiaries as in effect on the date of such
certification; (2) that attached thereto is a true and complete copy of
the resolutions adopted by the Board of Directors and the stockholders
of the Company authorizing the execution, delivery and performance of
this Agreement and the Ancillary Agreement and that all such votes are
still in full force and effect and are all the votes adopted in
connection with the transactions contemplated by this Agreement; (3)
that the Certificate of Incorporation of the Company and each of its
Subsidiaries have not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i)(2)
above; and (4) as to the incumbency and specimen signature of each
officer of the Company executing this Agreement and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the
officer signing the certificate referred to in this paragraph (ii).
All such documents shall be satisfactory in form and substance
to the New Investors and their counsel.
SECTION 4.02. Conditions Precedent to the Obligations of the
Original Stockholders and the Company with Respect to the Initial Closing Date.
The obligations of the Original Stockholders and the Company hereunder are, at
their option, subject to the satisfaction, on or before the Initial Closing
Date, of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the New Investors contained in this Agreement
or in any certificate or document delivered to the Original Stockholders and the
Company pursuant hereto shall be true and correct on and as of the Initial
Closing Date as though made at and as of that date, and the New Investors shall
have delivered to the Original Stockholders and the Company a certificate to
such effect.
(b) Compliance with Covenants. The New Investors shall have
performed and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at or prior to the Initial
Closing Date, and the New Investors, severally and not jointly, shall have
delivered to the Original Stockholders and the Company a certificate to that
effect.
(c) All Proceedings To Be Satisfactory. All corporate and
other proceedings to be taken by the New Investors in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory
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in form and substance to the Original Stockholders, the Company and their
counsel, and the Original Stockholders, the Company and said counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(d) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.
(e) Ancillary Agreements. On or prior to the Initial Closing,
the Ancillary Agreements shall have been executed and delivered by each party
thereto other than the Original Stockholders.
(f) Debt Financing. The Company shall have entered into
definitive agreements in respect of the Senior Debt Financing on terms
substantially as set forth in the Commitment Letter and shall have received not
less than $71,000,000 in proceeds from the Senior Debt Financing.
(g) HSR Act. All applicable waiting periods under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
SECTION 4.03. Conditions Precedent to the Obligations of the
New Investors with Respect to Each Subsequent Closing. The obligations of each
of the New Investors to purchase and pay for the Additional Preferred Shares
being purchased by such New Investor on each Subsequent Closing Date are, at
such New Investor's option, subject to the satisfaction, on or before such date,
of the following conditions:
(a) Consummation of Initial Closing and Each Prior Subsequent
Closing. On the Initial Closing Date the Company shall have issued and sold the
Recapitalization Securities, and on each prior Subsequent Closing Date, the
Company shall have issued and sold the Additional Preferred Shares being issued
and sold on such Subsequent Closing Date.
(b) Preliminary Documentation. A Put Notice shall have been
given and shall have been delivered to the New Investors pursuant to Section
1.04(c) hereof.
(c) Opinion of Counsel. The New Investors shall have received
from ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP (or such other counsel satisfactory to the New
Investors) an opinion dated such Subsequent Closing Date confirming the opinion
delivered by such counsel in accordance with Section 4.01(d) hereof, with such
other changes as may be required as a result of the transactions contemplated by
this Agreement.
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(d) All Proceedings to Be Satisfactory. All corporate and
other proceedings to be taken by the Company and all waivers and consents to be
obtained by the Company in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the New Investors and their counsel, and the New Investors and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
(e) Supporting Documents. On or prior to such Subsequent
Closing Date, the New Investors and their counsel shall have received copies of
the supporting documents referred to in Section 4.01(k) above as if such
Subsequent Closing Date were the Initial Closing Date.
All such documents shall be reasonably satisfactory in form
and substance to the New Investors and their counsel.
In the event that the Certificate of Incorporation and/or
By-laws of the Company shall not have been amended since the Initial Closing
Date, the Company may, in lieu of furnishing such documents, cause the
certificate with respect thereto contemplated by paragraphs 4.01(k)(i) and
4.01(k)(ii) above to be replaced by a certificate as to the fact that such
documents were previously furnished and as to the absence of any amendments
thereto.
(f) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise impair the consummation of the transactions
contemplated hereby.
(g) Consents; HSR Act Waiting Period. The Company shall have
obtained all consents required to be obtained pursuant to Section 3.05 hereof.
Without limiting the generality of the foregoing, all applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby shall
have expired or been terminated.
SECTION 4.04. Conditions Precedent to the Obligations of the
Company with Respect to Each Subsequent Closing. The obligations of the Company
to issue and sell the Additional Preferred Shares on each Subsequent Closing
Date are, at its option, subject to the satisfaction, on or before such date, of
the following conditions:
(a) Consummation of Initial Closing and Each Prior Subsequent
Closing. On the Initial Closing Date the New Investors shall have purchased and
paid for the Recapitalization Securities, and on each prior Subsequent Closing
Date, the
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New Investors shall have purchased and paid for the Additional Preferred Shares
being issued and sold on such Subsequent Closing Date.
(b) Representations and Warranties to Be True and Correct. The
representations and warranties contained in Section 2.03 hereof as made by the
New Investors shall be true and correct in all material respects on such
Subsequent Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
(c) Performance. Each New Investor shall have performed and
complied in all material respects with all agreements and conditions contained
herein required to be performed or complied with by it prior to or at such
Subsequent Closing Date.
(d) All Proceedings to Be Satisfactory. All corporate, limited
liability company or partnership and other proceedings to be taken by each New
Investor and all waivers and consents to be obtained by any New Investor in
connection with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Company
and its counsel.
ARTICLE V
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 5.01. Survival of Representations. Subject as set
forth below, all representations and warranties made by any party hereto in this
Agreement or pursuant hereto shall survive for a period of one year, except that
(i) the representations and warranties contained in Sections 2.02(p), 2.02(r)
and 2.02(t) shall survive for the applicable statute of limitations period,
including any extensions thereof obtained or consented to by the party against
whom indemnification is sought, and (ii) representations and warranties
contained in Sections 2.01(c) and 2.02(e) shall survive without limitation.
SECTION 5.02. Tax Indemnity. (a) Regardless of any disclosure
made to the New Investors or the Company, the Tendering Stockholders, severally
and not jointly, agree to, and shall, indemnify, defend and hold the New
Investors, the Company and their respective affiliates harmless from and
against:
(i) a breach of any representations or warranties relating to
Taxes set forth in subsections (viii), (ix), (x), (xi) and (xiii) of
Section 2.02(p);
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(ii) without duplication of amounts payable under Section
5.02(a)(i), any and all Taxes incurred by, imposed upon or attributable
to the Company, any of its Subsidiaries or any Tax Group for any
taxable period (or portion thereof) ending on or before the Initial
Closing Date, except to the extent that such Taxes were (w) paid on or
prior to the last date covered by the most recent financial statements
attached hereto as Schedule 2.02(f), (x) specifically reserved for on
the most recent financial statements attached as Schedule 2.02(f)
hereto, (y) incurred by the Company and its Subsidiaries in the
ordinary course of their business between the date specified in clause
(w) of this Section 5.02(a)(ii) and the Initial Closing Date, or (z)
incurred in connection with transactions explicitly contemplated by
this Agreement or in connection with transactions for which the New
Investors' prior written consent has been obtained pursuant to Section
3.01;
(iii) in connection with Taxes described in Section 5.02(a)(i)
and (ii) and with any efforts to mitigate such Taxes pursuant to
Section 5.03(g), all reasonable fees and expenses (including all
reasonable legal, accounting and other professional fees and expenses)
incurred by the Company or any of its Subsidiaries or any other party
hereto.
It is understood and agreed that the Tendering Stockholders
shall not have any liability under this Section 5.02 unless the aggregate amount
of all Taxes for which the Tendering Stockholders would be liable exceeds
$100,000; provided, however, that the total liability of the Tendering
Stockholders under this Section 5.02 shall not exceed $9,000,000 or, with
respect to any particular Tendering Stockholder, the amount of cash actually
received by such Tendering Stockholder pursuant to this Agreement. The parties
agree that the tax payable associated with the disclosure made in Schedule
2.02(p)(1) with respect to the taxable year ended December 31, 1998 and the
portion of the 1999 taxable year up to the Initial Closing Date shall be an
obligation of the Original Stockholders pursuant to Section 5.02(a)(ii) and that
the aggregate amount of such liability shall be counted for purposes of
calculating the $100,000 threshold amount set forth in the immediately preceding
sentence. The obligation of the Tendering Stockholders to make indemnification
payments to the Company pursuant to this Section 5.02 shall be satisfied by the
payment in cash solely to and for the benefit of the New Investors of the
aggregate amount of all Taxes for which the Tendering Stockholders would be
liable hereunder. It is understood that any such payment to the New Investors
shall be treated for tax and financial reporting purposes as an adjustment of
the purchase price paid by the New Investors pursuant to Section 1.01(b).
(b) The Company agrees to, and shall, indemnify, defend and
hold the Original Stockholders harmless from and against (i) any and all Taxes
incurred by, imposed upon or attributable to the Company or any of its
Subsidiaries for any taxable
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period (or portion thereof) beginning after the Initial Closing Date or (ii)
Taxes for any period beginning before the Initial Closing Date that are
described by subclauses (x), (y) or (z) of Section 5.02(a)(ii).
(c) For purposes of paragraphs (a) and (b) above, (i) any
interest, penalty or additional charge included in Taxes shall be deemed to be a
Tax for the period in which the item on which the interest, penalty or
additional charge is based, and not a Tax for the periods during which the item
accrues and (ii) with respect to any taxable year that does not end on the
Initial Closing Date, the amount of any Taxes attributable to the portion of
such year that ends on the Initial Closing Date shall be determined in the case
of Taxes determined on a periodic basis, such as real estate Taxes, pro rata
based on the number of days in the portion of such taxable year ending on the
Initial Closing Date relative to the number of days in the portion of such
taxable year beginning after the Initial Closing Date, and, in the case of all
other Taxes on a closing of the books method.
(d) The indemnities provided for in this Section 5.02 shall be
the exclusive indemnities for Taxes under this Agreement and, anything in this
Agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation (including extensions thereof) for the
Taxes referred to herein and any Taxes subject to indemnification under this
Section 5.02 shall not be subject to the provisions of Section 5.03, with the
exception of: clause (i) of the second paragraph of Section 5.03(a), the third
paragraph of Section 5.03(a), 5.03(c) and 5.03(g).
(e) Timing Adjustments. In the event a final determination
(which shall include the execution of a Form 870-AD or successor form) results
in a timing difference (e.g. an acceleration of income or delay of deductions)
that actually increases the amount paid by the indemnifying party pursuant to
Section 5.02(a) or Section 5.02(b), the party that actually received such
enhanced indemnification payment (the "Indemnitee") shall promptly make a
payment to such indemnifying party as and when such Indemnitee actually realizes
any Tax benefit as a result of such timing difference in an amount equal to the
amount of such Tax benefit; it being understood that the amount of such payment
made by the Indemnitee shall in no event exceed the amount originally received
by the Indemnitee on account of such timing difference. Such Tax benefit for
federal, state and local income tax purposes, shall be computed for any year
using the Indemnitee's actual tax liability with and without giving effect to
such timing difference.
(f) Procedures Relating to Indemnification of Tax Claims. If a
claim shall be made by any taxing authority (including the commencement of an
audit or examination), which, if successful, might result in an indemnification
payment to any Indemnitee pursuant to Section 5.02(a) or Section 5.02(b), such
Indemnitee shall promptly notify the party or parties that would be responsible
for such indemnification
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payment (the "Indemnitor") in writing of such claim (a "Tax Claim") (it being
understood that if the Original Stockholders are the Indemnitor, such notice
shall be given to the Representative (as defined in Section 7.04) acting on
behalf of the Original Stockholders); provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnitors shall have been actually prejudiced as a result of
such failure (except that the Indemnitors shall not be liable for any expenses
incurred during the period in which the Indemnitee failed to give such notice).
With respect to any Tax Claim, the Indemnitee shall control
all proceedings taken in connection with such Tax Claim (including the selection
of counsel) and, without limiting the foregoing, may in its sole discretion
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto; provided, however,
that in no case shall any Indemnitee or any affiliate thereof settle or
compromise any Tax Claim or pay the Tax claimed and ▇▇▇ for a refund without the
prior written consent of the Indemnitor (it being understood that if the
Original Stockholders are the Indemnitor, such consent may be given by the
Representative acting on behalf of the Original Stockholders), which consent
shall not be unreasonably withheld or conditioned. The Indemnitor shall be
entitled to participate in the defense of any Tax Claim and employ counsel (not
reasonably objected to by the Indemnitee), at its own expense, separate from the
counsel employed by the Indemnitee; it being understood that the Indemnitee
shall control such defense.
The New Investors, the Company, the Original Stockholders and
each of their respective Affiliates shall cooperate with each other in
contesting any Tax Claim, which cooperation shall include, without limitation,
the retention and provision upon request of records and information which are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim. It is understood that the party requesting such cooperation shall pay
the out-of-pocket expenses incurred by the party from which cooperation is
requested.
SECTION 5.03. General Indemnity.
(a) Indemnification by the Tendering Stockholders. Each
Tendering Stockholder, severally and not jointly, shall indemnify the New
Investors and the Company, their respective affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered or
incurred by any such indemnified party (other than any relating to
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Taxes, for which indemnification provisions are set forth in Section 5.02) to
the extent arising (i) from any breach of any representation or warranty of the
Original Stockholders or the Tendering Stockholders contained in this Agreement
or in any certificate delivered by the Original Stockholders or the Tendering
Stockholders pursuant hereto and (ii) from any breach of any covenant of the
Original Stockholders or the Tendering Stockholders contained in this Agreement
attributable to periods prior to the Closing; provided, however, that the
Tendering Stockholders shall not have any liability under clause (i) above
unless the aggregate of all losses, liabilities, costs and expenses relating
thereto for which the Tendering Stockholders would, but for this proviso, be
liable exceeds on a cumulative basis an amount equal to $1,000,000 and then only
to the extent of any excess over $250,000; provided, further, however, that no
Tendering Stockholder's liability under clauses (i) and/or (ii) above shall
exceed in any event 20% of the cash proceeds actually received by such Tendering
Stockholder pursuant to the redemptions and purchases described in Section
1.02(b) herein. It is understood and agreed, however that (i) the limitations on
the liability of each Tendering Stockholder set forth in this Section 5.03(a)
shall not apply to a breach of the representations and warranties of such
Tendering Stockholder contained in Section 2.01(c) and (ii) the obligation of
the Tendering Stockholders to make indemnification payments to the Company
pursuant to this Section 5.03 shall be satisfied by the payment in cash solely
to and for the benefit of the New Investors of the aggregate amount of losses,
liabilities, costs and expenses for which the Tendering Stockholders are liable
hereunder. It is understood that any such payment to the New Investors shall be
treated for tax and financial reporting purposes as an adjustment of the
purchase price paid by the New Investors pursuant to Section 1.01(b).
Each of the New Investors acknowledges and agrees that, (i)
other than the representations and warranties of the Original Stockholders and
the Tendering Stockholders specifically contained in this Agreement, there are
no representations or warranties of the Original Stockholders and the Tendering
Stockholders either expressly or implied with respect to the transactions
contemplated hereby, the Company, its Subsidiaries or their respective assets,
liabilities and business and (ii) neither the New Investors nor any other person
shall have any claim or right to indemnification pursuant to this Article V with
respect to any information, documents or materials furnished prior to the
Closing by the Original Stockholders, the Company or its Subsidiaries or any of
their officers, directors, employees, agents or advisors.
Each of the New Investors and the Company further acknowledges
and agrees that, should the Closing occur, the sole and exclusive remedy with
respect to any and all claims relating to this Agreement, the transactions
contemplated hereby, the Company and its Subsidiaries and their respective
assets, liabilities and business (other
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than claims of, or causes of action arising from, fraud) shall be pursuant to
the indemnification provisions set forth in this Article 5.
(b) Indemnification by the New Investors. Each of the New
Investors shall, and shall cause the Company and the Subsidiaries to, indemnify
each of the Original Stockholders, their affiliates and each of their respective
officers, directors, employees, stockholders, agents and representatives against
and hold them harmless from any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses) suffered or incurred by any such
indemnified party (other than any relating to Taxes, for which indemnification
provisions are set forth in Section 5.02) to the extent arising from (i) any
breach of any representation or warranty of the New Investors contained in this
Agreement or in any certificate delivered by the New Investors pursuant hereto,
and (ii) any breach of any covenant of the New Investors contained in this
Agreement; provided, however, that the New Investors shall not have any
liability under clauses (i) or (ii) above for any breach if the Original
Stockholders had knowledge of such breach at the time of the Closing.
(c) Losses Net of Insurance, Tax Benefit etc. The amount of
any loss, liability, claim, damage, expense or Tax for which indemnification is
provided under this Article 5 shall be net of any amounts recovered or
recoverable by the indemnified party (which, in the case of the New Investors,
shall include the Company and its Subsidiaries) under insurance policies with
respect to such loss, liability, claim, damage, expense or Tax (collectively, a
"Loss") and shall be (i) increased to take account of any net Tax cost incurred
by the indemnified party arising from the receipt of indemnity payments
hereunder (grossed up for such increase) and (ii) reduced to take account of any
net Tax benefit realized by the indemnified party arising from the incurrence or
payment of any such Loss. In computing the amount of any such Tax cost or Tax
benefit, the indemnified party shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt of any indemnity payment hereunder or the incurrence or payment of
any indemnified Loss. Any indemnification payment hereunder shall initially be
made without regard to this paragraph and shall be increased or reduced to
reflect any such net Tax cost (including gross-up) or net Tax benefit only after
the indemnified party has actually realized such cost or benefit. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax cost or a net Tax benefit to the extent that, and at such
time as, the amount of Taxes payable by such indemnified party is increased
above or reduced below, as the case may be, the amount of Taxes that such
indemnified party would be required to pay but for the receipt of the indemnity
payment or the incurrence or payment of such Loss, as the case may be. The
amount of any increase or reduction hereunder shall be adjusted to reflect a
final determination (which shall include the execution of
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Form 870-AD or successor form) with respect to the indemnified party's liability
for Taxes and payments to reflect such adjustment shall be made if necessary.
Any indemnity payment under this Agreement shall be treated as an adjustment to
the purchase price for Tax purposes, unless a final determination (which shall
include the execution of a Form 870-AD or successor form) with respect to the
indemnified party or any of its Affiliates causes any such payment not to be
treated as an adjustment to the purchase price for United States Federal Income
Tax purposes.
(d) Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto (i) pursuant to Sections 5.03(a)(i)
and 5.03(b)(i) hereof, shall terminate when the applicable representation or
warranty terminates pursuant to Section 5.01 hereof, and (ii) pursuant to
Sections 5.03(a)(ii) and 5.03(b)(ii) hereof, shall not terminate; provided,
however, that such obligations to indemnify and hold harmless shall not in any
event terminate with respect to any item as to which the person to be
indemnified or the related party thereto shall have, before the expiration of
the applicable period, previously made a claim by delivering a notice of such
claim (stating in reasonable detail the basis of such claim) to the indemnifying
party.
(e) Procedures Relating to Indemnification (Other than under
Section 5.02). In order for a party (the "indemnified party") to be entitled to
any indemnification provided for under this Agreement (other than under Section
5.02) in respect of, arising out of or involving a claim or demand made by any
person against the indemnified party (a "Third Party Claim"), such indemnified
party must notify the indemnifying party in writing, and in reasonable detail,
of the Third Party Claim within five business days after receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure (except that the indemnifying
party shall not be liable for any expenses incurred during the period in which
the indemnified party failed to give such notice). Thereafter, the indemnified
party shall deliver to the indemnifying party, within five business days after
the indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim.
If a Third Party Claim is made against an indemnified party,
the indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to indemnify the
indemnified party thereof, to assume the defense thereof with counsel selected
by the indemnifying party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof.
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If the indemnifying party assumes such defense, the indemnified party shall have
the right to participate in the defense thereof and to employ counsel (not
reasonably objected to by the indemnifying party), at its own expense, separate
from the counsel employed by the indemnifying party, it being understood that
the indemnifying party shall control such defense. The indemnifying party shall
be liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has failed to assume the
defense thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of
any Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld). If the indemnifying party shall
have assumed the defense of a Third party Claim, the indemnified party shall
agree to any settlement, compromise or discharge of a Third Party Claim which
the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third party Claim, and which releases the indemnifying party completely in
connection with such Third Party Claim.
All claims under Sections 5.03(a) or 5.03(b) hereof other than
Third Party Claims shall be governed by Section 5.03(f) hereof.
(f) Other Claims. In the event any indemnified party should
have a claim against any indemnifying party under Section 5.03(a) or 5.03(b)
hereof that does not involve a Third Party Claim being asserted against or
sought to be collected from such indemnified party, the indemnified party shall
deliver notice of such claim with reasonable promptness to the indemnifying
party. The failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have to
such indemnified party under Sections 5.03(a) or 5.03(b) hereof, except to the
extent that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
indemnified party within 10 calendar days following its receipt of such notice
that the indemnifying party disputes its liability to the indemnified party
under Sections 5.03(a) or 5.03(b) hereof, such claim specified by the
indemnified party in such notice shall be
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conclusively deemed a liability of the indemnifying party under Section 5.03(a)
or 5.03(b) hereof and the indemnifying party shall pay the amount of such
liability to the indemnified party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its liability
with respect to such claim, as provided above, the indemnifying party and the
indemnified party shall proceed in good faith to negotiate a resolution of such
dispute.
(g) Mitigation. The Original Stockholders, the New Investors
and the Company and its Subsidiaries shall cooperate with each other with
respect to resolving any claim or liability with respect to which one party is
obligated to indemnify the other party hereunder, including by making
commercially reasonable efforts to mitigate or resolve any such claim or
liability, including pursuing remedies under the Company's acquisition
agreements. In the event that parties shall fail to make such commercially
reasonable efforts to mitigate or resolve any claim or liability, then
notwithstanding anything else to the contrary contained herein, the other party
shall not be required to indemnify any person for any loss, liability, claim,
damage or expense that could reasonably be expected to have been avoided if such
party had made such efforts.
In the event that the "indemnifying party" or the "indemnified
party" as described in this Section 5.03 is the Original Stockholders or the
Tendering Stockholders, then any notices required to be given to or by, and all
other actions or decisions required to be taken or made by, such "indemnifying
party" or "indemnified party" as provided in this Section 5.03, may be given to
or by, or may be taken or made by, the Representative.
ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.01. Termination and Abandonment. This Agreement may
be terminated at any time prior to the Closing:
(a) by mutual consent of the Original Stockholders and the New
Investors;
(b) by the New Investors, (i) if the conditions set forth in
Section 4.01 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by the Original
Stockholders on or before October 20,
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1999, (ii) if there has been a material breach of a representation or
warranty made by the Original Stockholders the effect of which is a
Material Adverse Effect, or (iii) if there has been a breach by the
Original Stockholders in any material respect of the covenants set forth
in this Agreement which by its nature cannot be cured or eliminated;
(c) by the Original Stockholders, if the conditions set forth in
Section 4.02 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by the New Investors on
or before October 20, 1999.
SECTION 6.02. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.01, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to any other party hereto or its shareholders or directors or officers
in respect thereof, except as follows: (i) the obligations imposed by Sections
7.02 and 7.03 hereof shall survive the termination and (ii) nothing herein shall
relieve any party from liability for any breach hereof.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Consent to Common Stock Redemption. Each of the
New Investors and the Original Stockholders that will be a holder of outstanding
shares of Common Stock or Convertible Preferred Stock, as the case may be,
immediately after giving effect to the transactions contemplated hereby,
consents to the redemption and purchase by the Company of all the issued and
outstanding shares of capital stock tendered by the Original Stockholders
pursuant to Section 1.02 hereof.
SECTION 7.02. Expenses, Etc. Each party hereto will pay its
own expenses in connection with the transactions contemplated hereby, provided,
however, that the Company agrees that it will pay the reasonable fees and
disbursements of the New Investors' legal and accounting advisors; provided,
further, however, that in the event the transactions contemplated hereby are not
consummated, the Company shall only be obligated to the New Investors pursuant
to this Section 7.02 if (i) within 9 months of the date hereof, the Company
agrees to a transaction or a series of transactions that are subsequently
consummated with a third party or parties concerning the sale of at least 80% of
the shares of capital stock of the Company at a price of at least $7.90 per
share or (ii) such failure to consummate the transactions contemplated hereby
results from the
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termination of the Agreement by the New Investors pursuant to Section
6.01(b)(ii) or (iii) hereof. In addition, at the Initial Closing, the Company
shall pay a financing fee of $567,150 to ▇▇▇▇▇▇ ▇▇▇▇▇ and $567,150 to BCI. The
Original Stockholders, on the one hand, and the New Investors, on the other
hand, will indemnify the other and hold it harmless from and against any claims
for finders' fees or brokerage commissions in relation to or in connection with
such transactions as a result of any agreement or understanding between such
indemnifying party and any third party. Notwithstanding the foregoing, it is
understood and agreed that all fees and expenses of BGC shall be paid in
accordance with Schedule 7.02. BGC hereby acknowledges that such payment shall
be in full satisfaction of any all fees, expenses or obligations of any kind
whatsoever (other than the indemnification obligations set forth therein which
shall survive in accordance with their terms) with respect to the Company and
the Original Stockholders that may be due to or payable to BGC, including
without limitation pursuant to the engagement letter between the Company and BGC
dated March 15, 1999.
SECTION 7.03. Publicity and Confidentiality. The parties
hereto agree to cooperate in issuing any press release or other public
announcement concerning this Agreement or the transactions contemplated hereby.
Each party shall furnish to the other drafts of all such press releases or
announcements prior to their release. Nothing contained herein shall prevent any
party from at any time furnishing any information required by any government
authority. The Company, the New Investors and the Original Stockholders will not
disclose or authorize the disclosure to third parties of any information
relating to the terms and provisions of this Agreement and the transactions
contemplated hereby without the consent of each other party (with the
Representative acting on behalf of the Original Stockholders) which will not be
unreasonably withheld; provided, however, such parties may disclose such
information on a confidential basis to stockholders, investors and prospective
investors, including affiliates. Nothing contained herein will prohibit either
of the Parties from disclosing information (i) which is or becomes part of the
public domain, (ii) was known to the one of the other parties prior to such
disclosure, (iii) is received by one of the other parties from a third party
under no obligation of secrecy to the one of the parties to this Agreement whose
information is disclosed or (vi) is required by law or to governments and
governmental agencies pursuant to subpoenas or other discovery and inquiry
procedures; provided, however, that the party making such disclosure will use
its reasonable efforts at the Company's expense to ensure that such governments
and governmental agencies treat such materials as confidential to the extent
permitted by law.
SECTION 7.04. Appointment, Duties and Indemnification of
Representative. (a) Each Original Stockholder hereby appoints Sienna Limited
Partnership II to act as "Representative" on its, his or her behalf hereunder
and under the
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Ancillary Agreements as set forth herein and therein. Each Original Stockholder
hereby irrevocably authorizes the Representative to take such actions on its,
his or her behalf and to exercise such powers as are specifically designated to
the Representative by the terms and provisions of Sections 4.01, 5.02 and 5.03
of this Agreement, together with such actions and powers as are reasonably
incidental thereto. Sienna Limited Partnership II hereby accepts such
appointment as Representative.
(b) The Company and the New Investors shall be entitled to
rely upon instructions from the Representative with respect to the giving of any
notices to any Original Stockholder as an "indemnified party" or an
"indemnifying party" hereunder or otherwise in connection with this Agreement.
None of the Company or the New Investors shall be liable for any acts or
omissions of the Representative in connection with the performance by the
Representative of its obligations hereunder. Each Original Stockholder hereby
appoints the Representative as its agent for purposes of the first sentence of
this paragraph.
(c) To the fullest extent permitted by law, each Original
Stockholder shall, on a pro rata basis, indemnify and hold harmless the
Representative and its agents and representatives from and against any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses to the extent relating to,
resulting from or arising out of any act or omission of the Representative
acting in such capacity under this Agreement or any instrument or other document
delivered pursuant to this Agreement, including the Ancillary Agreements, other
than for actions or omissions undertaken or performed in bad faith.
(d) By execution of this Agreement, each Original Stockholder
hereby appoints the Representative his, her or its attorney-in-fact to act on
such Original Stockholder's behalf and to take such actions and exercise such
discretion as is required of the Representative pursuant to Sections 4.01, 5.02
and 5.03 of this Agreement, including, without limitation, the following:
(i) to execute, acknowledge, deliver, record and file all
ancillary agreements, certificates and documents which the
Representative or the Original Stockholders deem necessary or
appropriate on behalf of the Original Stockholders in connection with
Sections 4.01, 5.02 and 5.03 of this Agreement;
(ii) to receive service of process on behalf of the Original
Stockholders in connection with any claims under Article V this
Agreement.
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SECTION 7.05. Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 7.06. Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be sufficient if contained in
a written instrument delivered in person or duly sent by national overnight
courier service or first class certified mail, postage prepaid, or by telecopy
addressed to such party at the address or telecopy number set forth below:
If to the Company, to it at:
Protocol Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
1251 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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If to any New Investor, to the address of such New Investor
appearing on Schedule I hereto with a copy to:
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to the Original Stockholders, to the address of such
Original Stockholder appearing on Schedule II hereto or such other address or
addresses as either party hereto shall have designated by notice in writing to
the other party hereto.
SECTION 7.07. Amendments, Supplements, Etc. At any time this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by the Company, the
New Investors and a majority in interest of the Original Stockholders.
SECTION 7.08. Entire Agreement. This Agreement, its Exhibits,
Schedules and Annexes, and the Ancillary Agreements and the documents executed
on the Initial Closing Date in connection herewith, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No representation,
warranty, promise, inducement or statement of intention or fact has been made by
either party which is not embodied in this Agreement or such other documents,
and neither party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement of intention or fact
not embodied herein or therein.
SECTION 7.09. Applicable Law. THIS AGREEMENT AND ALL MATTERS
RELATING TO THIS AGREEMENT, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO ITS CONFLICT OF LAW RULES.
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SECTION 7.10. Consent to Service of Process. Each of the
parties irrevocably consents to the jurisdiction of the courts of the State of
New York and located in the County of New York or any Federal court located in
such County in connection with any action, suit or other proceeding arising out
of or relating to this Agreement or any action taken or omitted hereunder, and
waives personal service of any summons, complaint or other process and agrees
that the service thereof may be made by certified or registered mail return
receipt requested directed to such person at such person's address for purposes
of notices hereunder. In connection with any such action or proceeding, each of
the parties hereby irrevocably (i) submits to the jurisdiction of such court,
(ii) waives any present or future objection to venue or jurisdiction in any such
court, and any present or future claim that any such court is an inconvenient or
otherwise inappropriate forum and (iii) agrees not to bring any action in
respect of any claim or potential claim of the parties hereunder, whether by way
of declaratory judgement or otherwise, in any other court.
SECTION 7.11. Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 7.12. Assignability. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by either party hereto without
the prior written consent of the other party hereto.
SECTION 7.13. Stockholders Agreements. Effective at the
Initial Closing, the shareholders agreements with respect to which Original
Stockholders are signatory set forth on Schedule 7.13 are terminated and no
party thereto shall have any further rights or obligations thereunder; provided,
however, the Investors Rights Agreement described in Item 12 of Schedule 7.13
shall not be terminated but shall effective at the Initial Closing, without
further action, be amended to omit therefrom the provisions of Section 1
thereof.
SECTION 7.14. Waiver of Dividend. Effective at the Initial
Closing, each Original Stockholder that is a holder of the Company's Series A
Preferred Stock waives any and all right to receive any and all dividends
declared or payable with respect to the Series A Preferred Stock including
without limitation the dividend declared by the Company's Board of Directors
described in Item (v)(A) of Schedule 2.02(g) hereto.
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SECTION 7.15. Stockholder Approval. The execution hereof by
each Original Stockholder shall constitute such Original Stockholder's consent
and approval, as a stockholder of the Company, to the consummation of each and
all the transactions consummated hereby, including without limitation the
Amendment and Restatement of the Company's Certificate of Incorporation set
forth on Exhibit A and the adoption of the Option Plan.
SECTION 7.16. Supplement. Stockholders of the Company set
forth on Schedule 7.16 who are not signatory hereto as of the date hereof may
become "Original Stockholders" hereof by execution and delivery on or before the
Initial Closing of an addendum in the form of Exhibit G hereto, agreeing to be
bound hereby as if they were original signatories hereof.
SECTION 7.17. Waiver. At any time prior to the Initial
Closing, the Original Stockholders, the Tendering Stockholders and the Company,
on the one hand, and the New Investors, on the other hand, may (i) extend the
time for the performance of any of the obligations or other acts of the other,
(ii) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PROTOCOL HOLDINGS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:President and Chief Executive Officer
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS II, L.P.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH, L.P.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Managing Director
BCI GROWTH IV, L.P.
By Glenpointe Associates, LLP,
General Partner
By Glenpointe Associates, LLC
General Partner
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Partner
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BCI GROWTH V, L.P.
By Glenpointe Associates V, LLC
General Partner
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Partner
BCI INVESTORS, L.L.C.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Partner
ORIGINAL STOCKHOLDERS: SIENNA LIMITED PARTNERSHIP II
By Sienna Associates
General Partner
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the General Partners
FIRST DOMINION CAPITAL
By /s/ ▇▇▇▇ ▇. Sabre
------------------------------
Name: ▇▇▇▇ ▇. Sabre
Title: Senior Managing Director
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REGENT CAPITAL PARTNERS L.P.
By Regent Capital Holdings II L.P.
General Partner
By Regent Capital Holdings Inc.
General Partner
By /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY, INC.
By /s/
------------------------------
Name:
Title:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ CANADA CORPORATION
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title:
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ FAMILY LIMITED PARTNERSHIP
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. Knee
------------------------------
▇▇▇▇▇▇ ▇. Knee
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
LA FIDUCIE FAMILLIALE ▇▇▇▇▇
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Trustee
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LA FIDUCIE FAMILLIALE ▇▇▇▇▇
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ FAMILY TRUST
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
54