EXHIBIT 10.18
AGREEMENT OF PURCHASE AND SALE OF ASSETS
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This Agreement of Purchase and Sale of Assets (this "Agreement") is entered
into and effective as of September 15, 1997 by and among LITIGATION RESOURCES OF
AMERICA-CALIFORNIA, INC., a California corporation (the "Buyer"), LITIGATION
RESOURCES OF AMERICA, INC., a Texas corporation and the parent of Buyer (the
"Parent"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇, a resident of California d.b.a. JILIO & ASSOCIATES
(the "Seller"). Buyer, Parent and Seller are hereinafter sometimes referred to
collectively as the "Parties" or singularly as a "Party."
W I T N E S S E T H :
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WHEREAS, the Seller is the owner of various assets associated with the
Business (as hereinafter defined);
WHEREAS, the Buyer desires to purchase all of the Assets (as hereinafter
defined) owned by the Seller and used in the Business (such purchase of the
Assets being sometimes herein referred to as the "Acquisition"), and the Seller
desires to sell such Assets to the Buyer;
WHEREAS, in connection with the purchase and sale of the Assets, the Parties
desire to set forth in this Agreement the terms and conditions with respect to
the transfer of such Assets; and
WHEREAS, the parties understand that the Parent or its Affiliates may enter
into other agreements similar or dissimilar to this Agreement (the "Other
Agreements") for the acquisition by the Parent or such Affiliates of the assets
or stock of other entities (collectively, the "Other Acquired Businesses," and
each of those entities, individually, an "Other Acquired Business"), which Other
Agreements will be among those entities and their equity owners, the Parent and
Affiliates of the Parent;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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As used herein, the following terms shall have the following meanings:
ACCOUNTS PAYABLE. The term "Accounts Payable" shall mean all of the
accounts payable of the Business existing as of the Effective Date.
ACCOUNTS PAYABLE REPORT. The term "Accounts Payable Report" shall mean a
report prepared as of the time specified which shows accounts payable of the
Business by service provider and age of each Account Payable.
ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall mean all of the
accounts receivable, notes receivable, trade receivables and intercompany
receivables relating to the Business and existing as of the Effective Date.
ACCOUNTS RECEIVABLE REPORT. The term "Accounts Receivable Report" shall
mean a report prepared as of the time specified which shows Accounts Receivable
of the Business by customer and age of each Account Receivable.
ACQUISITION. The term "Acquisition" shall have the meaning set forth in the
preamble hereto.
AFFILIATE. The term "Affiliate" of a person shall mean, with respect to
that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of the ability to affect the management and
policies of a person whether through the ownership of voting securities, by
contract, through the holding of a position as a director or officer of such
person, or otherwise. As used in this definition, the term "person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a joint stock company, a trust, an incorporated organization, or a
Governmental Authority.
AGREEMENT. The term "Agreement" shall have the meaning set forth in the
preamble hereto.
ANCILLARY AGREEMENTS. The term "Ancillary Agreements" shall have the
meaning set forth in Section 3.2.
ASSETS. The term "Assets" shall have the meaning set forth in Section 2.1.
ASSUMED LIABILITIES. The term "Assumed Liabilities" shall have the meaning
set forth in Section 2.6.
BALANCE SHEET REPORT. The term "Balance Sheet Report" means the accrual
basis balance sheet of the Business as of a given date showing the assets,
liabilities and equity of the Business adjusted to include Accounts Receivable,
Accounts Payable and accrued liabilities and further adjusted to exclude
Excluded Assets and Retained Liabilities, prepared by the Seller on a basis
consistent with prior time periods.
▇▇▇▇ OF SALE. The term "▇▇▇▇ of Sale" shall have the meaning set forth in
Section 6.3(xi).
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BOOKS AND RECORDS. The term "Books and Records" shall have the meaning set
forth in Section 2.1(c).
BUSINESS. The term "Business" shall mean the court reporting and litigation
support business of the Seller as presently conducted.
BUYER. The term "Buyer" shall have the meaning set forth in the preamble
hereto.
BUYER INDEMNIFIED PARTIES. The term "Buyer Indemnified Parties" shall have
the meaning set forth in Section 7.1A.
CAPITAL STOCK. The term "Capital Stock" shall mean, with respect to: (a)
any corporation, any share, or any depositary receipt or other certificate
representing any share, of an equity ownership interest in that corporation; and
(b) any other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity interest
in that Entity.
CASH PURCHASE PRICE. The term "Cash Purchase Price" shall have the meaning
set forth in Section 2.3(a).
CLOSING. The term "Closing"shall have the meaning set forth in Section 6.1.
CLOSING DATE. The term "Closing Date" shall have the meaning set forth in
Section 6.1.
CLOSING DATE ACCOUNTS PAYABLE REPORT. The term "Closing Date Accounts
Payable Report" shall mean an Accounts Payable Report prepared as of the
Closing Date.
CLOSING DATE ACCOUNTS RECEIVABLE REPORT. The term "Closing Date Accounts
Receivable Report" shall mean an Accounts Receivable Report prepared as of the
Closing Date.
CLOSING DATE BALANCE SHEET REPORT. The term "Closing Date Balance Sheet
Report" shall mean a Balance Sheet Report prepared as of the Closing Date.
CLOSING DATE INCOME STATEMENT. The term "Closing Date Income Statement"
shall mean an income statement of the Business, prepared as of the Closing Date,
covering the period from the end of the Seller's last fiscal year to the Closing
Date.
CLOSING DATE REPORTS. The term "Closing Date Reports" shall have the
meaning set forth in Section 2.4.
CLOSING MEMORANDUM. The term "Closing Memorandum" shall mean the form of
closing memorandum to be prepared by the Buyer and the Parent and approved by
the Seller (which approval will not be unreasonably withheld) for the Closing
under this Agreement in which are included the forms of officers certificates,
certificates of the Seller, opinions of counsel and certain other documents to
be delivered at the Closing as provided herein.
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CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
CONTRACTS. The term "Contracts" shall have the meaning as contained in
Section 2.1(b).
CUSTOMERS. The term "Customers" shall have the meaning as contained in
Section 3.27.
DAMAGES. The term "Damages" shall have the meaning set forth in Section
7.1A.
EFFECTIVE DATE. The term "Effective Date" shall mean 12:01 a.m. on the
"Closing Date."
EMPLOYEE. The term "Employee" shall mean any employee of the Business who,
as of the Effective Date, is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Seller's applicable policies, are eligible to return to active status,
but shall not include any independent contractor providing court reporting
services to Seller from time to time.
EMPLOYMENT AGREEMENTS. The term "Employment Agreements" shall have the
meaning ascribed to it in Section 3.20.
ENTITY. The term "Entity" shall mean any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
ENVIRONMENTAL, HEALTH & SAFETY LAWS The term "Environmental, Health &
Safety Laws" shall mean all laws (including rules and regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign Governmental Authorities concerning pollution
or protection of the environment, public health and safety, or employee health
and safety.
EQUIPMENT. The term "Equipment" shall have the meaning as contained in
Section 2.1(a).
ERISA. The term "ERISA" shall have the meaning as contained in Section
3.20.
EXCHANGE ACT. The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
EXCLUDED ASSETS. The term "Excluded Assets" shall have the meaning as
contained in Section 2.2.
EXPIRATION DATE. The term "Expiration Date" shall have the meaning set forth
in the introductory paragraph to Article III.
FINAL NET WORTH. The term "Final Net Worth" means total assets minus total
liabilities, as reflected on the Closing Date Balance Sheet Report.
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FINAL PROSPECTUS. The term "Final Prospectus shall mean the prospectus
included in the Registration Statement at the time it becomes effective, except
that if the prospectus first furnished to the Underwriter after the Registration
Statement becomes effective for use in connection with the IPO differs from the
prospectus included in the Registration Statement at the time it becomes
effective (whether or not that prospectus so furnished is required to be filed
with the SEC pursuant to Securities Act Rule 424(b)), the prospectus so first
furnished is the "Final Prospectus."
FINANCIAL STATEMENTS. The term "Financial Statements" shall mean the
balance sheet, income statement and statement of changes of financial position
of the Business.
FUNDED DEBT. The term "Funded Debt" shall mean any obligation for money
borrowed from financial institutions.
GAAP. The term "GAAP" shall mean generally accepted accounting principles
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
GENERAL INTANGIBLES. The term "General Intangibles" shall have the meaning
set forth in Section 2.1(g).
GOVERNMENTAL APPROVAL. The term "Governmental Approval" shall mean at any
time any authorization, consent, approval, permit, franchise, certificate,
license, implementing order or exemption of, or registration or filing with, any
Governmental Authority, including any certification or licensing of a natural
person to engage in a profession or trade or a specific regulated activity, at
that time.
GOVERNMENTAL AUTHORITY. The term "Governmental Authority" shall mean (a)
any national, state, county, municipal or other government, domestic or foreign,
or any agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the authority
under any applicable Governmental Requirement to assess and collect Taxes for
its own account.
GOVERNMENTAL REQUIREMENT. The term "Governmental Requirement" shall mean at
any time (a) any law, statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, writ, edict, award, authorization or other
requirement of any Governmental Authority in effect at that time or (b) any
obligation included in any certificate, certification, franchise, permit or
license issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
GUARANTEED NET WORTH. The term "Guaranteed Net Worth" shall mean the amount
of $955,822.
INTELLECTUAL PROPERTY. The term "Intellectual Property" shall have the
meaning as contained in Section 2.1(e).
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INVENTORY. The term "Inventory" shall have the meaning as contained in
Section 2.1(j).
IPO. The term "IPO" shall mean the first time a registration statement filed
under the Securities Act with respect to a primary offering by the Parent to the
public of Parent Shares is declared effective under the Securities Act and the
shares registered by that registration statement are issued and sold by the
Parent (otherwise than pursuant to the exercise by the Underwriter of any over-
allotment option).
IPO CLOSING. The term "IPO Closing" shall mean the delivery to the
Underwriters of Parent Shares against the receipt of payment therefor pursuant
to the IPO.
IPO CLOSING DATE. The term "IPO Closing Date" shall mean the date on which
the Parent first receives payment for the Parent Shares it sells to the
Underwriter in the IPO.
IPO PRICE. The term "IPO Price" shall mean the price per share of Parent
Shares which is set forth as the "price to public" on the cover page of the
Final Prospectus.
LEASED ASSETS. The term "Leased Assets" shall have the meaning ascribed
thereto in Section 3.6.
LICENSES. The term "Licenses" shall have the meaning ascribed thereto in
Section 3.12.
LITIGATION. The term "Litigation" shall mean any action, case, proceeding,
claim, grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
MATERIAL. The term "Material" shall mean, as applied to any Entity or the
Business, material to the business, operations, property or assets, liabilities,
financial condition or results of operations of the Business or that Entity and
its Subsidiaries considered as a whole, as the case may be.
MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" shall mean, with
respect to the consequences of any fact or circumstance (including the
occurrence or non-occurrence of any event) to the Business, that such fact or
circumstance has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and circumstances,
any Material Damages.
MINIMUM CASH AMOUNT. The term "Minimum Cash Amount" shall have the meaning
set forth in Section 6.2(iv).
NET WORTH. The term "Net Worth" means the dollar amount of total assets
minus the total liabilities of the Business as of a given time period as
determined by the Balance Sheet Report as of such time period.
NOTES. The term "Notes" shall have the meaning set forth in Section 8.5.
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NOTE ONE. The term "Note One" shall have the meaning set forth in Section
8.5.
NOTE TWO. The term "Note Two" shall have the meaning set forth in Section
8.5.
NOTICE OF ACTION. The term "Notice of Action" shall have the meaning set
forth in Section 7.1C.
NOTICE OF ELECTION. The term "Notice of Election" shall have the meaning
set forth in Section 7.1C.
OFFSET. The term "Offset" shall have the meaning set forth in Section 8.2.
OPTION PRICE. The term "Option Price" shall have the meaning set forth in
Section 8.5.
ORDINARY COURSE OF BUSINESS. The term "Ordinary Course of Business" shall
mean the ordinary course of Seller's Business consistent with past custom and
practice (including with respect to quantity and frequency).
OTHER ACQUIRED BUSINESSES. The term "Other Acquired Businesses" shall have
the meaning set forth in the preamble hereto.
OTHER AGREEMENTS. The term "Other Agreements" shall have the meaning set
forth in the preamble hereto.
OTHER FINANCING SOURCES. The term "Other Financing Sources" shall have the
meaning set forth in Section 6.2(iv).
PARENT. The term "Parent" shall have the meaning set forth in the preamble
hereto.
PARENT SHARES. The term "Parent Shares" shall mean any of the shares of
common stock of the Parent.
PARTY. The terms "Party" and "Parties" shall have the meanings set forth in
the preamble hereto.
PBGC. The term "PBGC" shall mean the Pension Benefits Guaranty Corporation.
PERSON. The term "Person" shall mean any natural person, Entity, estate,
trust, union or employee organization or Governmental Authority.
PRICING. The term "Pricing" shall have the meaning set forth in Section 6.1.
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PUBLIC OFFERING. The term "Public Offering" means the sale by the Parent of
any of its securities for cash in an underwritten public offering registered on
the appropriate form with the Securities and Exchange Commission.
PUBLIC OFFERING PRICE. The term "Public Offering Price" shall refer to the
price to the public of the Parent Shares pursuant to the initial Public Offering
of the Parent Shares by Parent.
PURCHASE PRICE. The term "Purchase Price" shall mean the consideration
payable to the Seller for the Assets as set forth or contemplated in Section
2.3.
REAL PROPERTY. The term "Real Property" shall have the meaning as contained
in Section 3.14.
REGISTRATION RIGHTS AGREEMENT. The term "Registration Rights Agreement"
shall have the meaning set forth in Section 6.2(xi).
REGISTRATION STATEMENT. The term "Registration Statement" shall mean the
registration statement, including (a) each preliminary prospectus included
therein prior to the date on which that registration statement is declared
effective under the Securities Act (including any prospectus filed with the SEC
pursuant to Securities Act Rule 424(b)), (b) the Final Prospectus and (c) any
amendments and all supplements and exhibits thereto, filed by the Parent with
the SEC to register the Parent Shares under the Securities Act for public
offering and sale in the IPO.
RETAINED LIABILITIES. The term "Retained Liabilities" shall mean all
liabilities of the Business other than the Assumed Liabilities.
SCHEDULE OF ACCRUED LIABILITIES. The term "Schedule of Accrued Liabilities"
shall mean a schedule of all accrued liabilities of the Business prepared for
the period and as of the date specified.
SEC. The term "SEC" means the Securities and Exchange Commission or any
successor Governmental Authority.
SECURITIES ACT. The term "Securities Act" shall mean the Securities Act of
1933, as amended.
SELLER. The term "Seller" shall have the meaning set forth in the preamble
hereto.
SELLER EMPLOYMENT AGREEMENT. The term "Seller Employment Agreement" shall
have the meaning ascribed to it in Section 6.2(x).
SELLER'S NAMES. The term "Seller's Names" shall have the meaning set forth
in Section 2.1(k).
STOCK PLEDGE AGREEMENT. The term "Stock Pledge Agreement" shall have the
meaning set forth in Section 6.3(xiii).
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SUBSIDIARY. The term "Subsidiary," of any specified Person at any time,
shall mean any Entity a majority of the Capital Stock of which is at that time
owned or controlled, directly or indirectly, by the specified Person.
SUPPLEMENTAL INFORMATION. The term "Supplemental Information" shall have
the meaning set forth in Section 5.10.
TAXES. The term "Taxes" shall mean any and all local, state or federal
taxes imposed upon the Business or the Seller, including, without limitation,
tax obligations, tax claims, tax charges, tax fines or any related tax
liabilities, regardless of the source, cause or origin of such tax liabilities,
including taxes imposed as a result of the consummation of the Acquisition.
UNDERWRITER. The term "Underwriter" shall mean collectively (a) the
investment banking firms that prospectively may enter into the Underwriting
Agreement and (b) from and after the IPO Pricing Date, the investment banking
firms party to the Underwriting Agreement.
UNDERWRITING AGREEMENT. The term "Underwriting Agreement" shall mean the
underwriting agreement to be entered into between the Parent and the Underwriter
with respect to the IPO.
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
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2.1 SALE OF ASSETS. Subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer agrees to purchase from the Seller on the Closing Date,
all assets owned by Seller and used in or derived from the Business (other than
those specifically excluded under Section 2.2 below) including the following
(such assets to be referred to herein as the "Assets"):
(a) All office equipment, furniture, artwork, service equipment, supplies,
computer hardware, computer software, data processing equipment, and tools (the
"Equipment"), including the Equipment described on SCHEDULE 2.1(A);
(b) All contracts, leases, documents, franchises, instruments, Licenses,
agreements and other written or oral agreements relating to the Business of
Seller to which Seller is a party or by which Seller or any of the Assets may be
bound as well as all rights, privileges, claims and options relating to the
foregoing (the "Contracts"), including the Contracts described on SCHEDULE
2.1(B);
(c) All customer and supplier files and databases, customer and supplier
lists, accounting and financial records, invoices, and other books and records
relating principally to the Business (the "Books and Records"), including the
Books and Records described on SCHEDULE 2.1(C);
(d) Employee files for those Employees actually hired by
Buyer;
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(e) All right, title and interest of Seller, in, to and under all service
marks, trademarks, patents, inventions, copyrights, trademarks, trade secrets
and trade and assumed names, principally related to the Business together with
the right to receive royalties with respect thereto or recover for infringement
thereon, if any (the "Intellectual Property"), and other marks and/or names
described on SCHEDULE 2.1(E);
(f) All advertising materials and all other printed or written materials
related to the conduct of the Business;
(g) All of the Seller's general intangibles, claims, rights of set off,
rights of recoupment and other proprietary intangibles, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, which are used
in the Business, and remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions (the
"General Intangibles"), including the General Intangibles described on SCHEDULE
2.1(G);
(h) All goodwill, going concern value and other intangible properties
related to the Business;
(i) All of Seller's Accounts Receivable, except such portion of Seller's
Accounts Receivable constituting Excluded Assets.
(j) All raw materials, work in process, finished goods, consigned goods,
and other inventories relating to the Business, as more fully described on
SCHEDULE 2.1(J) (the "Inventory");
(k) The exclusive right to use the name "Jilio & Associates", any similar
name or derivative thereof, and any past or present assumed names in connection
with the Business or Seller's use of the Assets (the "Seller's Names"); and
(l) The Real Property described on SCHEDULE 3.14(A), if any.
2.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not purchasing
any of the following excluded assets related to the Business ("Excluded
Assets"): (i) cash, (ii) cash investments, cash deposits, right to receive cash
refunds, and other cash equivalents, (iii) 50% of Seller's Accounts Receivable,
(iv) assets of any employee benefit plan described on SCHEDULE 3.19, or (v)
motor vehicles, all as more specifically described on SCHEDULE 2.2. The Parties
agree that as the Accounts Receivable are collected following the Effective
Date, $.50 of each dollar collected shall be retained by the Buyer and the
remaining $.50 of each dollar collected shall be paid to the Seller.
2.3 PURCHASE PRICE. Upon the terms and subject to the conditions
contained herein and as consideration for the sale of the Assets and the
performance by the Seller of various other matters as provided herein, the Buyer
shall pay or deliver to the Seller, on the IPO Closing Date and as soon as
practicable after the IPO Closing, the aggregate amount $8,000,000, payable by
delivery of the following consideration (collectively the "Purchase Price"):
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(a) Subject to the provisions of Section 2.5, a Cash Sum in the
amount of Dollars ($5,600,000) (the "Cash Purchase Price"), paid by the wire
transfer of immediately available funds; and
(b) Such number of whole Parent Shares on the IPO Closing Date as,
when multiplied by 90% of the IPO Price, will most nearly approximate, but not
exceed, $2,400,000 and cash in the amount equal to the excess of $2,400,000 over
the product of that number of Parent Shares multiplied by 90% of the IPO Price.
2.4 DETERMINATION OF FINAL NET WORTH. Each of the Closing Date Balance
Sheet Report, the Closing Date Accounts Receivable Report, the Closing Date
Accounts Payable Report, the Closing Date Schedule of Accrued Liabilities and
the Closing Date Income Statement (collectively, the "Closing Date Reports") of
the Business shall be prepared by the Seller, as promptly as possible after the
Closing. Seller's accountants shall then review and certify the Closing Date
Reports, and deliver them to Buyer and Buyer's accountants within 30 days after
the IPO Closing Date. The Buyer's accountants shall review the Closing Date
Reports (including any corresponding work papers of Seller's accountants) and
report to the Seller's accountants in writing within 30 days of receipt thereof
of any discrepancy between the Seller's accountants certification and the
Buyer's accountants results of review. If Seller's accountants and Buyer's
accountants cannot resolve such discrepancy within 30 days after Seller's
accountants receipt of such reported discrepancy, then they shall so notify the
Seller and the Buyer, and the Seller and the Buyer shall attempt to resolve the
discrepancy within 15 days of such notice. If the Seller and the Buyer cannot
resolve the discrepancy to their mutual satisfaction, another independent public
accounting firm acceptable to the Seller and the Buyer shall be retained to
review the Closing Date Reports. Such firm's conclusions as to the carrying
values to appear on the Closing Date Reports for purposes of determining the
Final Net Worth of the Business shall be conclusive. The Seller and the Buyer
shall share equally in the expenses of retaining such independent accounting
firm. The Buyer shall pay the expenses of the Buyer's accountants for their
review of the Closing Date Reports, and the Seller shall pay the expenses of
Seller's accountants for their review of the Closing Date Reports.
2.5 ADJUSTMENT OF PURCHASE PRICE. After the IPO Closing Date, the
Purchase Price set forth in Section 2.3, shall be adjusted as follows: (i) if
the Final Net Worth of the Business as finally determined pursuant to Section
2.4 shall be more than the Guaranteed Net Worth, then the cash portion of the
Purchase Price shall be increased by the amount of such excess and (ii) if the
Final Net Worth of the Business as finally determined pursuant to Section 2.4
shall be less than the Guaranteed Net Worth, then the cash portion of the
Purchase Price shall be decreased by the amount of such deficiency. In the event
that the Final Net Worth is more than the Guaranteed Net Worth, the Buyer shall
within 15 days pay the amount of such excess in cash to the Seller. In the
event that the Final Net Worth is less than the Guaranteed Net Worth, the Seller
shall within 15 days refund the amount of such deficiency in cash to Buyer.
2.6 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions contained herein, the Buyer agrees that on the Closing Date, it will
not assume (i) any liabilities of the Business (except for those liabilities
listed as current liabilities on Seller's Balance Sheet dated July 31, 1997
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(including the Real Property leases listed on SCHEDULE 3.14B) subject, however,
to adjustments for changes in liabilities occurring in the ordinary course of
Seller's business following July 31, 1997 through the Closing Date, as
determined under Section 2.4 and set forth on the Closing Date Reports ("Assumed
Liabilities")), (ii) any liabilities for Taxes or Funded Debt, or (iii) any
liabilities described on SCHEDULE 3.21.
2.7 ALLOCATION OF PURCHASE PRICE. For all federal, state and local tax
purposes, the Purchase Price shall be allocated among the various Assets in the
manner indicated in SCHEDULE 2.7 hereto subject to adjustment pursuant to the
Closing Date Reports. None of the Parties shall file any tax return or report
or take any position with any Governmental Authority which is inconsistent with
the foregoing allocation, except to the extent mandated by a Governmental
Authority in a determination binding upon one Party provided that such Party has
given written notice and reasonable opportunity to the other Party, at its
expense, to contest and appeal such determination on behalf of both Parties and
such determination has nevertheless become final. Within ninety (90) days after
the Closing Date, the Parties shall prepare for filing with the Internal Revenue
Service a Form 8594 in accordance with the foregoing allocation.
2.8 TAXES. Seller shall be liable for the payment of all sales and use
taxes arising out of the sale and transfer or removal of the Assets, if any, and
the assumption of the Assumed Liabilities. On or before the Closing Date, the
Seller agrees to use her best efforts to furnish to the Buyer certificates from
the state taxing authorities, and any related certificates that the Buyer may
reasonably request, as evidence that all sales and use tax liabilities of the
Business accruing before the Effective Date have been fully provided for or
satisfied. The Buyer shall not be responsible for any business, occupation,
withholding or similar tax, or any taxes of any kind of the Business, related to
any period before the Effective Date.
2.9 TITLE TO ASSETS AND RISK OF LOSS. Title to the Assets and risk of
loss or damage to the Assets by casualty (whether or not covered by insurance)
will pass to the Buyer immediately upon completion of the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
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Seller represents and warrants that all of the following representations and
warranties in this Article III are true at the date of this Agreement and shall
be true at the time of Closing and the IPO Closing Date, and that such
representations and warranties shall survive the IPO Closing Date for a period
of two years (the last day of such period being the "Expiration Date"), except
that (i) the warranties and representations set forth in Sections 3.5 and 3.24
hereof shall survive the IPO Closing Date for a period of three years, which
shall be deemed to be the Expiration Date for Sections 3.5 and 3.24, and (ii)
solely for purposes of determining whether a claim for indemnification under
Section 7.1 hereof has been made on a timely basis, and solely to the extent
that in connection with the IPO, the Seller actually incurs liability under the
Securities Act, the Exchange Act, or any other federal or state securities laws,
the representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
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3.1 SEPARATE PROPERTY. The Business constitutes the separate property
of the Seller and her spouse has no community property interest in any of the
Assets.
3.2 AUTHORITY. Seller has the full right, power, legal capacity and
authority to execute, deliver and perform Seller's obligations under this
Agreement and all agreements ancillary to this Agreement which are part of the
underlying transaction made the basis of this Agreement and executed in
connection herewith, including but not limited to the Exhibits hereto
("Ancillary Agreements").
3.3 CONSENTS AND APPROVALS; NO BREACH OR DEFAULT. Except as set forth on
SCHEDULE 3.3(A), no consent, approval or authorization of, or filing or
registration with, any Person or Entity, is required to be made or obtained by
Seller in connection with the execution, delivery or performance of this
Agreement, or the consummation by Seller of the transactions contemplated
hereby. Except as set forth on SCHEDULE 3.3(B), neither the execution and
delivery of this Agreement or the Ancillary Agreements by Seller, nor the
consummation of the transactions contemplated herein by Seller, will (a) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Authority to
which Seller is, or the Assets are, subject, or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, promissory
note, conditional sales contract, partnership agreement or other arrangement to
which Seller or any of Seller's Affiliates is a party, or by which Seller is
bound, or to which the Assets are subject.
3.4 VALID AND BINDING OBLIGATION. Upon execution and delivery, this
Agreement and each document, instrument or agreement to be executed by Seller in
connection herewith, will constitute the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as same
may be limited by applicable bankruptcy laws, insolvency laws, or other similar
laws affecting the rights of creditors generally.
3.5 TITLE TO ASSETS. Except as set forth on SCHEDULE 3.5, Seller has
good, indefeasible and marketable title to the Assets, free and clear of
restrictions or conditions to transfer or assignment, or mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights-of-way,
covenants, conditions or restrictions. Seller shall, subject to the exceptions
set forth on SCHEDULE 3.5 deliver to Buyer at Closing good, indefeasible and
marketable title to the Assets, free and clear of restrictions or conditions to
transfer or assignment, or mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights-of-way, covenants, conditions or
restrictions.
3.6 POSSESSION OF ASSETS; LEASED ASSETS. Seller is in possession of all
of the Assets, and all assets leased to the Business from others. All assets
leased to Seller from others and used in the Business, whether real, personal or
mixed, are described on SCHEDULE 3.6 and SCHEDULE 3.14(B) attached hereto (the
"Leased Assets"). The Assets and the Leased Assets constitute all of the
property, whether real, personal, mixed, tangible, or intangible, that is owned
or used in the
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Business by Seller. Seller does not own legal or equitable title to any assets
or interests in assets except the Assets and the Leased Assets. Seller shall
deliver to Buyer on the Closing Date, possession of and/or control or dominion
over all of the Assets and the Leased Assets, including without limitation all
of Seller's accounts receivable, property, plant and equipment, other personal
property, contract rights and general intangibles, customer and supplier lists,
and assumed and trade names.
3.7 CONDITION. To the Knowledge of the Seller, all of the Assets and the
Leased Assets are in good operating condition and repair for their intended use,
ordinary wear and tear excepted.
3.8 CONTRACTS AND LEASES. All of the contracts, leases, documents,
instruments, agreements, and other written or oral arrangements to which Seller
is a party or by which Seller or the Assets may be bound are set forth on
SCHEDULE 2.1(B). Except as set forth on SCHEDULE 2.1(B), to the Knowledge of
the Seller, all of the Contracts are valid and in full force and effect, and
there has not been any default by Seller or any third party to any of said
Contracts, or any event, fact or circumstance which with notice or lapse of time
or both, would constitute a default by Seller or any other party to any of the
Contracts. Seller has not received notice that any party to any of the Contracts
intends to cancel or terminate any of the Contracts or exercise or not exercise
any options that such party might have under any of the Contracts.
3.9 EQUIPMENT. All of the equipment owned by the Business is set forth on
SCHEDULE 2.1(A).
3.10 ACCOUNTS RECEIVABLE. All of the Accounts Receivable of the Business
as set forth in the Books and Records of the Business and all papers and
documents relating thereto, are genuine and in all respects what they purport to
be, and each such Account Receivable is valid and subsisting and is owed by the
account debtor named in such Account Receivable. The amount of each Account
Receivable represented as owing as of the date indicated (a) is the correct
amount actually and unconditionally owing as of the date indicated, (b) is not
subject to any set-offs, credits, disputes, defenses, deductions or
countercharges, and (c) to the best knowledge of Seller, will be paid in the
Ordinary Course of Business. None of the Accounts Receivable has been paid
outside of the Ordinary Course of Business, and neither Seller nor any of her
Affiliates has made any efforts to collect any of the Accounts Receivable
outside of the Ordinary Course of Business.
3.11 INVENTORIES. Except as set forth on SCHEDULE 2.1(J), the Business
does not have any raw materials, work in process, finished goods or other
inventory.
3.12 LICENSES. All licenses and sublicenses owned by Seller or in which
Seller has any rights (collectively, the "Licenses"), together with a brief
description of each, are set forth on SCHEDULE 2.1(B). Seller has not
infringed, and is not now infringing, on any license belonging to any other
Person or Entity. Seller owns and holds adequate licenses necessary for the
Business as now conducted by her, and that use does not, and will not, conflict
with, infringe on or otherwise violate any rights of others. Buyer is hereby
acquiring, and will continue to enjoy the use and benefit of, the Licenses.
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3.13 INTELLECTUAL PROPERTY. All of the Intellectual Property of the
Business is set forth on SCHEDULE 2(E). The Intellectual Property constitutes
all of the intellectual property necessary to the lawful conduct of the Business
without any infringement or conflict with the rights of others, and no adverse
claims have been asserted against the Intellectual Property, Seller or the
Business with respect thereto.
3.14 REAL PROPERTY; LEASED REAL PROPERTY. Except as set forth in SCHEDULE
3.14(A) with respect to real property owned by the Business, and SCHEDULE
3.14(B) with respect to real property leased by the Business (such real property
being hereinafter referred to collectively as the "Real Property"), Seller
neither owns nor leases any real property or improvements or interests therein.
Except for Seller, there are no parties in possession of any portion of the Real
Property as lessees, tenants at will or at sufferance, trespassers or otherwise.
The heating, electrical, plumbing and other building equipment, as of the
Closing, will be adequate in quantity and quality for normal operations of the
Business, as presently conducted.
3.15 INSURANCE. Attached hereto as SCHEDULE 3.15 is a true, complete and
accurate list of all insurance policies maintained by the Business. The Seller
has maintained and now maintains insurance protection against all liabilities,
claims and risks against which, with respect to the Business and the Assets, it
is customary to insure in the Ordinary Course of Business.
3.16 BANKING. The names and addresses of all banks or other financial
institutions in which the Business has an account, deposit or safe deposit box,
with the names of all persons authorized to draw on these accounts or deposits
or having access to these boxes, are set forth on SCHEDULE 3.16 attached hereto.
3.17 POWERS OF ATTORNEY. No Person or Entity holds a general or special
power of attorney from Seller.
3.18 PERSONNEL. Attached hereto as SCHEDULE 3.18 (A) is a list of the
names, addresses, hire dates, dates of birth and job descriptions of all
Employees of Seller, stating their rates of compensation including, if
determined, bonuses payable to each. Attached hereto as SCHEDULE 3.18 (B) is a
list of the names, addresses, dates of birth and services provided by all
independent contractors used by Seller during the preceding one (1) year,
stating their rates and methods of compensation.
3.19 EMPLOYEE BENEFITS. SCHEDULE 3.19 is a true, correct and complete list
of each "employee benefit plan," within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which has ever been
maintained or sponsored by Seller or any of her Affiliates. Each such employee
benefit plan (and each related trust, insurance contract, or fund) is in full
force and effect, and complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws. Neither
Seller nor any other party is in default under any of the plans, there have been
no claims of default, and there are no facts, conditions or circumstances which
if continued, or on notice, will result in a default, under any plan. None of
the plans will, by its terms or under applicable law, become
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binding upon or become an obligation of the Buyer. No assets of any plan are
being transferred to Buyer or to any plan of Buyer. Seller does not contribute
to, and has never contributed to, and has never been required to contribute to,
any multiemployer plan, and Seller does not have, and has never had, any
liability (including withdrawal liability) under any multiemployer plan.
3.20 EMPLOYMENT AGREEMENTS. SCHEDULE 3.20 is a list of all employment
agreements, consulting agreements, collective bargaining agreements, and other
agreements or arrangements providing for employee or other remuneration,
severance payments or benefits to which Seller or any of her Affiliates is a
party or by which Seller or any of her Affiliates is bound (collectively, the
"Employment Agreements"). Buyer will not have any duty, liability or obligation
with respect to any of the Employment Agreements. Except as set forth on
SCHEDULE 3.20, no Employees are represented by any labor organization.
3.21 LIABILITIES. Seller does not have any liabilities, obligations or
commitments of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, except (a) liabilities which are adequately
disclosed or accrued against in the Balance Sheet Reports, (b) liabilities which
have been incurred in the Ordinary Course of the Business since July 31, 1997,
and in accordance with standard, customary and historical practices and
experiences of Seller, and (c) liabilities expressly set forth, as to the nature
and amount thereof, on SCHEDULE 3.21. Buyer shall not incur any duty, liability
or obligation with respect to any liabilities set forth on SCHEDULE 3.21. In no
event shall the Buyer be liable for (or have paid any) legal, accounting or
other costs or expenses incurred by Seller in connection with any of the
transactions contemplated in this Agreement.
3.22 LITIGATION. Except as set forth on SCHEDULE 3.22, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, to the Seller's Knowledge, threatened against or
affecting Seller, her Affiliates, the Assets, the Leased Assets or the Business.
3.23 TAX MATTERS. Seller has filed all tax returns that Seller was
required to file, and all such tax returns were correct and complete in all
respects. All Taxes owed by Seller (whether or not shown on any tax return)
have been paid. Seller is not the beneficiary of any extension of time within
which to file any tax return, and Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency. Seller has withheld and paid all Taxes
required to have been withheld or paid in connection with amounts paid or owing
to any Employee, independent contractor, creditor, or other third party. Seller
has no reason to believe that any authority might assess any additional Taxes
for any period for which tax returns have been filed. There is no dispute or
claim concerning any Tax liability of Seller.
3.24 COMPLIANCE WITH LAWS. To the Seller's Knowledge, Seller has complied
with, and is not in violation of, applicable federal, state or local ordinances,
statutes, laws, rules, restrictions and regulations (including, without
limitation, any applicable Environmental, Health & Safety Laws) that affect, or
are likely to affect, directly or indirectly, the Business, the Assets,
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the Leased Assets, the Real Property or the Customers, suppliers or financial
prospects of Seller. There are not any uncured violations of federal, state or
local laws, ordinances, statutes, orders, rules, restrictions, regulations or
requirements affecting any portion of the Business, the Real Property, the
Assets or the Leased Assets, and neither any of the Assets, the Leased Assets or
the Real Property, nor the operation thereof nor the conduct of the Business,
violates any applicable federal, state or municipal laws, ordinances, orders,
regulations or requirements. Seller has not received notice of any past,
present or future event, condition, circumstance, activity, practice, incident,
action or plan which may interfere with or prevent compliance or continued
compliance with the Environmental, Health & Safety Laws or which may give rise
to any common law or legal liability, or otherwise form the basis of any claim,
action, demand, lawsuit, proceeding, hearing, study or investigation, based on,
related to, or alleging any violation of the Environmental Health & Safety Laws.
3.25 FINANCIAL STATEMENTS. The Financial Statements (a) are true,
complete, and correct in all material respects, (b) fairly and accurately
present the financial position of the Business as of the periods described
therein, and the results of the operations of the Business for the periods
indicated, and (c) have been prepared consistently and in accordance with the
Business's historical customs and practices.
3.26 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE
3.26, since July 31, 1997.
(A) there has been no: (i) material adverse change in the financial
condition, assets, liabilities, business or prospects of the Business; (ii)
loss, destruction or damage to any property of the Business, whether or not
insured; (iii) labor trouble, pending or threatened, involving the Business, or
change in the personnel of the Business or the terms or conditions of their
employment or other engagement; nor (iv) other event or condition of any
character that has or could have a Material Adverse Effect on the Business;
(B) Seller and her Affiliates have used their best efforts to
preserve the business organization of Seller intact, to maintain the goodwill of
the Business, to keep available to the Business the Employees and the
independent contractors, and to preserve the present relationships of Seller
with her suppliers, Customers, regulatory authorities and others having business
relationships with her;
(C) Seller has maintained and operated the Business in the Ordinary
Course of Business and in accordance with industry practices and Seller's
historical policies;
(D) Seller has not made any payment of any type to any Employee or
Affiliate other than ordinary salary or expenses which have been paid in the
Ordinary Course of Business and fully disclosed to Buyer;
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(E) Seller has neither waived nor released any Material right of or
Material claim held by her, nor discounted any of her Accounts Receivable, nor
revalued any of her Assets or liabilities;
(F) Seller has not acquired nor disposed of any assets having a value
of $5,000 individually or $15,000 in the aggregate, and has not entered into any
contract, commitment or arrangement therefor, and has not entered into any other
transaction, other than for value in the Ordinary Course of Business and in
accordance with industry practices;
(G) Seller has not changed the salary or other compensation payable or
to become payable by Seller to the Employees, independent contractors, agents or
other personnel, and has not declared, made or committed to any kind of payment
of a bonus or other additional salary or compensation to any such person;
(H) Seller has not made a loan to any Person or Entity, and has not
guarantied any loan, in an amount in excess of $5,000 individually or $15,000 in
the aggregate;
(I) Seller has not amended nor terminated any material contract,
agreement, permit or license to which Seller is a party, or by which Seller or
any of the Assets or Leased Assets are bound;
(J) Seller has maintained all debt and lease instruments, and has not
entered into any new or amended debt or lease instruments;
(K) Seller has not entered into any agreement or instrument which
would constitute an encumbrance, mortgage or pledge of the Assets, or which
would bind Buyer or the Assets after Closing, in an amount in excess of $5,000
individually or $15,000 in the aggregate;
(L) Seller has provided to Buyer any and all books, records,
contracts, and other documents or data pertaining to the ownership, use,
insurance, operation, renovation and maintenance of the Assets, the Leased
Assets and the Business;
(M) Seller has performed all of Seller's obligations under all
contracts and commitments applicable to the Business, the Assets and the Leased
Assets, and has maintained the Business's books of account and records in the
usual, regular and customary manner;
(N) Seller has complied with all statutes, laws, ordinances and
regulations applicable to the Business, the Assets, the Leased Assets and the
conduct of the Business;
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(O) Seller has paid all bills and other payments due with respect to
the ownership, use, insurance, operation and maintenance of the Business, the
Assets and the Leased Assets, as and when such bills or other payments were due,
and has taken all action necessary or prudent to prevent liens or other claims
for the same from being filed or asserted against any part of the Assets or the
Leased Assets; provided however, Seller has not made any expenditures outside
the Ordinary Course of Business, nor any capital expenditures, in excess of
$5,000 individually or $15,000 in the aggregate;
(P) Seller has not made any material changes in her management,
operations, accounting or business practices or methods (including without
limitation, any change in depreciation or amortization policies or rates); and
(Q) all revenues or cash or other receipts from all sources in all
media received by the Business have been deposited in the Business's account.
3.27 CUSTOMERS. SCHEDULE 3.27 to this Agreement is a true, complete and
correct list of all Customers of Seller, together with summaries of the services
provided to each Customer during the one (1) year preceding the Closing Date.
"Customer" means a customer or client of the Seller during the one year
preceding the Closing Date. Except as indicated in SCHEDULE 3.27, Seller does
not have any information, nor is she aware of any facts or circumstances,
indicating that any of these Customers intend not to do business with Buyer to
the same volume and extent, and on the same terms, as they have historically
done business with Seller.
3.28 INTERESTS IN CUSTOMERS, SUPPLIERS AND COMPETITORS. No Affiliate or
Employee (nor any former Affiliate or Employee) of Seller, nor any relative of
any of them, has any direct or indirect interest in any competitor, supplier or
customer of Seller, nor any Person or Entity who has done business with Seller
in the one (1) year preceding the Closing Date.
3.29 BULK SALE WARRANTY FOR SALES TAX PURPOSES. Prior to Closing, Seller
has never sold a substantial or significant part of her assets in any single
transaction or series of transactions. The transaction contemplated herein is
the sale of the entire operating assets of a business, and a sale outside the
ordinary course of Seller's business, and therefor no sales tax is due upon the
Closing of the Acquisition.
3.30 DISCLOSURE. Seller has provided to Buyer actual copies of all
Contracts, documents concerning all litigation and administrative proceedings,
employee benefit plans, Licenses, insurance policies, lists of suppliers,
Customers, Employees and independent contractors, and corporate records relating
to Seller or her assets and liabilities, the Business and the Real Property, and
such information covers all material commitments and liabilities of Seller. In
addition, (a) Buyer has been kept fully informed with respect to all material
developments in the business of Seller since the July 31, 1997, (b) management
of Seller has not made any material business decisions, nor taken any material
actions, since July 31, 1997 of which Buyer has not been
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advised, and (c) Buyer and its agents have been granted unlimited access to the
books and records of Seller (whether retained electronically, on disc or on
paper).
3.31 FULL DISCLOSURE. This Agreement, the schedules and exhibits hereto,
and all other documents and written information furnished by Seller to Buyer or
its representatives pursuant hereto or in connection herewith, are true,
complete and correct, and do not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements made
herein and therein not misleading. There are no facts or circumstances relating
to the Business or Seller's liabilities, prospects, operations or financial
condition, or the Assets, which materially and adversely affect or, so far as
the Seller can now reasonably foresee, will materially and adversely affect, the
Business, Seller or the assets, liabilities, prospects, operations or financial
condition thereof, or the ability of the Seller to perform this Agreement or the
obligations of Seller hereunder.
3.33 BROKERS. Except for The GulfStar Group, Inc., neither the Seller
nor her Affiliates, officers, directors, or employees, has employed any broker,
agent, or finder, or incurred any liability for any brokerage fees, agent's
fees, commissions or finder's fees in connection with the transactions
contemplated herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Parent and Buyer jointly and severally represent and warrant that all
of the following representations and warranties in this Article IV are true at
the date of this Agreement and shall be true at the time of Closing and the IPO
Closing Date, and that such representations and warranties shall survive the IPO
Closing Date until the Expiration Date, except that solely for purposes of
determining whether a claim for indemnification under Section 7.1 hereof has
been made on a timely basis, and solely to the extent that in connection with
the IPO, the Seller actually incurs liability under the Securities Act, the
Exchange Act, or any other federal or state securities laws, the representations
and warranties set forth herein shall survive until the expiration of any
applicable limitations period, which shall be deemed to be the Expiration Date
for such purposes.
4.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all the necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it.
4.2 AUTHORITY. Each of Buyer and Parent, as applicable, has the right,
power, legal capacity, and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution,
delivery and performance of this Agreement and any Ancillary
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Agreements by Buyer and Parent, as applicable, have been duly authorized by all
necessary corporate action.
4.3 CAPITAL STOCK OF PARENT AND BUYER. The respective designations and
numbers of outstanding shares and voting rights of each class of outstanding
capital stock of the Parent and the Buyer are as follows: (i) immediately prior
to the Closing Date and the IPO Date, the authorized capital stock of Parent
will consist of 100,000,000 shares of common stock, $.01 par value per share
("Parent Shares") of which the number of issued and outstanding shares will be
set forth in the Registration Statement, and 10,000,000 shares of preferred
stock, $1.00 par value, of which the number of issued and outstanding shares
will be set forth in the Registration Statement, all of which will be fully paid
and non-assessable except as otherwise set forth in the Registration Statement,
and (ii) as of the date of this Agreement, the authorized capital stock of Buyer
consists of 10,000 shares of common stock, no par value, all of which are issued
and outstanding.
4.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on in the Registration Statement,
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Parent or the Buyer to issue any of their respective
authorized but unissued capital stock, and (ii) neither the Parent nor the Buyer
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. SCHEDULE 4.4 includes
complete and accurate copies of all stock option or stock purchase plans,
including a list of all outstanding options, warrants or other rights (excluding
the Other Agreements) to acquire Parent Shares.
4.5 COMMON STOCK. At the time of issuance thereof and delivery to the
Seller, the Parent Shares to be delivered to the Seller pursuant to this
Agreement will constitute valid and legally issued Parent Shares, fully paid and
nonassessable, and with the exception of restrictions upon resale (a) set forth
in Section 9.3 hereof and (b) contained in the Stock Pledge Agreement, will be
identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the Parent Shares issued and outstanding as
of the date hereof by reason of the provisions of the Texas Business Corporation
Act. Except as provided in the previous sentence, the Parent Shares issued and
delivered to the Seller shall at the time of such issuance and delivery be free
and clear of any liens, claims or encumbrances of any kind or character. The
Parent Shares to be issued to the Seller pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Registration Rights
Agreement.
4.6 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, each of
this Agreement and the Ancillary Agreements will constitute the legal, valid,
and binding obligation of Buyer or Parent, as applicable, enforceable in
accordance with its terms, except as limited by bankruptcy laws, insolvency
laws, and other similar laws affecting the rights of creditors generally.
4.7 BROKERS. Except for The GulfStar Group, Inc. neither Buyer nor any of
its respective Affiliates, officers, directors, or employees, has employed any
broker, agent, or finder, or incurred
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any liability for any brokerage fees, agent's fees, commissions or finder's fees
in connection with the transactions contemplated herein. Seller shall not be
liable for the fee paid to The GulfStar Group, Inc.
4.8 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
filing or registration with, any Person or Entity, is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE PARTIES
------------------------
Buyer and Seller covenant and agree as follows:
5.1 CONDUCT OF THE BUSINESS. Except as otherwise permitted by this
Agreement or consented to by Buyer in writing, Seller shall through the IPO
Closing Date conduct the Business in the ordinary course in substantially the
same manner as heretofore, using her best efforts to preserve intact her present
business organization, to keep available the services of her Employees, and to
preserve her relationships with Customers, suppliers and others having business
dealings with her.
5.2 CERTAIN CHANGES. Except as otherwise permitted by this Agreement or
consented to by Buyer in writing, Seller shall not: (a) subject any of the
Assets to any lien or encumbrance; (b) dispose of any of the Assets; or (c)
grant any increase in compensation or benefits to any Employee; (d) materially
modify any of the liabilities, or (e) with respect to the Business, perform any
act outside the Ordinary Course of Business except as otherwise contemplated by
this Agreement.
5.3 NOTICE. Seller will notify Buyer immediately in writing if (i) any of
Seller's representations or warranties set forth in this Agreement are or become
untrue prior to the IPO Closing Date, (ii) Seller fails to fully perform all of
the covenants of Seller set forth in this Agreement, or (iii) there occurs any
Material adverse development in the Business or Seller's market position, sales,
profit trends, labor regulations, litigation or insurance claims or otherwise.
5.4 RECORDS. From the date of execution of this Agreement until the
Closing, Seller shall permit Buyer the right, during normal business hours, to
inspect any documents, Books and Records or other information pertaining to the
Assets.
5.5 U.C.C. SEARCHES. Within five (5) days from the date of execution
hereof, Buyer, at Buyer's sole cost and expense, shall deliver to Seller current
searches of all Uniform Commercial Code financing statements filed with the
Office of the Secretary of State of California and in any other state, or
county in which the Seller has an office, against Seller. Any and all liens,
pledges, mortgages, security interests and encumbrances affecting the Assets,
regardless of whether same are disclosed in such lien searches, shall be
released and discharged by Seller at or prior to Closing.
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5.6 BULK SALES. It may not be practicable to comply or attempt to comply
with the procedures of the "Bulk Sales Act" or similar law in any or all of the
states in which the Assets are situated or of any other state which may be
asserted to be applicable to the transactions contemplated hereby. Accordingly,
to induce Buyer to waive any requirements for compliance with any or all of such
laws, Seller hereby agrees that except for the Assumed Liabilities, the
indemnity provisions of Article VII hereof shall apply to any damages of Buyer
arising out of or resulting from the failure of Buyer or Seller to comply with
any such laws or any similar law which may be asserted to be applicable.
5.7 TERMINATION OF EMPLOYMENT OF SELLER'S EMPLOYEES. Buyer anticipates
extending an offer of employment to substantially all of the Employees of the
Seller on substantially the same terms and conditions as the Employees currently
are employed by Seller. Notwithstanding the foregoing, nothing herein shall
imply or guarantee employment of any Employee of Seller by Buyer. If Seller's
Employees desire employment with Buyer, they will be interviewed in conjunction
with the applicants from other sources and given strong consideration for
available positions with Buyer, at the wages, hours, and conditions of
employment established by Buyer prior to hiring any Employees. Seller agrees to
use her best efforts to make available the Employees to the Buyer that Buyer
desires to hire for the purpose of operating the Business. Notwithstanding
anything to the contrary contained herein, Buyer agrees that it will offer to
employ substantially all of Seller's Employees. Nothing shall prohibit Buyer
from terminating any of Seller's Employees subsequent to their employment by
Buyer.
5.8 COOPERATION IN CONNECTION WITH THE IPO. The Seller will (a) provide
the Parent and the Underwriter with all the Information concerning Seller which
is reasonably requested by the Parent and the Underwriter from time to time in
connection with effecting the IPO and (b) cooperate with the Parent and the
Underwriter and their respective representatives in the preparation and
amendment of the Registration Statement (including the Financial Statements) and
in responding to the comments of the SEC staff, if any, with respect thereto, to
the extent that any of the foregoing concern or reasonably relate to the Seller.
The Seller agrees promptly to (a) advise the Parent if, at any time during the
period in which a prospectus relating to the IPO is required to be delivered
under the Securities Act, any information contained in the then current
Registration Statement prospectus concerning the Seller becomes incorrect or
incomplete in any material respect and (b) provide the Parent with the
information needed to correct or complete that information.
5.9 ADDITIONAL FINANCIAL STATEMENTS. Seller shall promptly furnish to
Buyer a copy of all Financial Statements for each additional month-end period
beyond July 31, 1997 as soon as same is regularly prepared by Seller in the
Ordinary Course of Business. All such additional Financial Statements shall be
subject to the same representations and warranties as contained in Section 3.26
of this Agreement. The Parties acknowledge and agree that Buyer shall be
permitted to conduct at its sole cost and expense an audit of Seller for the
fiscal years ended 1994, 1995 and 1996 in connection with the IPO. Buyer shall
pay Seller's reasonable costs incurred in preparing such monthly financial
statements.
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5.10 SUPPLEMENTAL INFORMATION. The Seller agrees that, with respect to the
representations and warranties of that party contained in this Agreement, that
party will have the continuing obligation through the IPO Closing to provide the
Parent promptly with such additional supplemental Information (collectively, the
"Supplemental Information"), in the form of (a) amendments to then existing
Schedules or (b) additional Schedules, as would be necessary, in the light of
the circumstances, conditions, events and states of facts then known to the
Seller, to make each of those representations and warranties true and correct as
of the Closing and on the IPO Closing Date. For purposes only of determining
whether the conditions to the obligations of the Parent and Buyer which are
specified in Section 6.3 have been satisfied, the Schedules as of the Closing
and on the IPO Closing Date shall be deemed to be the Schedules and the Investor
Representation Letter as of the date hereof as amended or supplemented by the
Supplemental Information provided to the Parent prior to the Effective Date
pursuant to this Section 5.10; provided, however, that if the Supplemental
Information so provided discloses the existence of circumstances, conditions,
events or states of facts which, in any combination thereof, (a) have had a
Material Adverse Effect or (b), based upon the advice of the Underwriter, the
Parent has determined (which shall be conclusive for purposes of this Section
5.10 and 8.3(a)(iv), but not for any purpose of Article VII), (i) are having or
will have a Material Adverse Effect, (ii) will materially adversely affect the
Parent's ability to consummate the IPO or (iii) will adversely affect the
pricing of the Parent Shares in the IPO, the Parent will be entitled to
terminate this Agreement pursuant to Section 8.3(a)(iv); and provided, further,
that if the Parent is entitled to terminate this Agreement pursuant to Section
8.3(a)(iv), but elects not to do so, it will be entitled to treat as Buyer
Indemnified Losses (which treatment will not prejudice the right of the Seller
to contest Damage claims made by the Parent in respect of those Buyer
Indemnified Losses) all Damages to the Business which are attributable to the
circumstances, conditions, events and state of facts first disclosed herein
after the date hereof in the Supplemental Information. The Parent will provide
the Seller with copies of the Registration Statement, including all pre-
effective amendments thereto, promptly after the filing thereof with the SEC
under the Securities Act.
5.11 INSURANCE. Seller shall assist, and shall cause her Affiliates to
assist, Buyer in transferring to Buyer any insurance applicable to the Assets or
the Leased Assets which Buyer elects to maintain in effect.
5.12 CONFIDENTIALITY. Seller will not, and will not permit any of her
Affiliates to, disclose any information of a confidential or proprietary nature
concerning the Assets or the Business to any third parties, and in no event
shall Seller use, or allow any of her Affiliates to use, such confidential or
proprietary information for her or his own benefit or to the detriment of Buyer
or the Business. No public or private announcement shall be made of the
transactions contemplated herein, nor the terms hereof, by Seller or any of her
Affiliates, without the prior written approval of Buyer as to timing, form and
content. Except for disclosure required in the Registration Statement or a
public announcement made in connection therewith, no public announcement shall
be made of the transactions contemplated herein, nor the terms hereof, by Parent
or any of its Affiliates, without the prior written approval of Buyer as to form
and content
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ARTICLE VI
THE CLOSING
-----------
6.1 PRICING. At or prior to Pricing, the Parties shall take all actions
necessary to (a) complete the Acquisition (including the execution and delivery
of this Agreement and the Ancillary Agreements which shall be placed in escrow
under the control of the Parent for release to the Parties on the IPO Date), and
(b) effect the delivery of the Parent Shares referred to in Section 2.3 hereof,
provided however, that such actions shall not include the actual completion of
the Acquisition or the delivery of the Common Stock and funds referred to in
Section 2.3 hereof, each of which actions shall only be taken upon the IPO
Closing Date as herein provided. For purposes of this Article VI, the term
"Pricing" shall mean the date of determination by Parent and the Underwriter of
the public offering price of the Parent Shares in the IPO; the Parties
contemplate that the Pricing shall take place on the Closing Date. The escrow
agreement relating to this Agreement and the Ancillary Agreements shall provide
that in the event that there is no IPO Closing Date, and this Agreement
terminates as provided in Section 8.3(b)(ii), the Agreement and the Ancillary
Agreements shall not be delivered to the Parties. The taking of the actions
described in clauses (a) and (b) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
Incorporated, ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. On the IPO
Closing Date, all transactions contemplated by this Agreement, including the
delivery of the Parent Shares, the wire transfer of the cash portion of the
Purchase Price which Seller is entitled to receive pursuant to Section 2.3
hereof, and the closing of the IPO shall occur and be completed. Except as
otherwise provided in Section 8.3 hereof, during the period from the Closing
Date to the IPO Closing Date, this Agreement may only be terminated by the
Parties if the Underwriting Agreement is terminated pursuant to the terms
thereof.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of the
Seller with respect to actions to be taken on the Closing Date are subject to
the satisfaction or waiver on or prior to the Closing Date of all of the
following conditions other than the conditions set forth in this Section 6.2(i)
and (viii) that cannot be satisfied prior to the IPO Closing Date. The
obligations of the Seller with respect to actions to be taken on the IPO Closing
Date are subject to the satisfaction or waiver on or prior to the IPO Closing
Date of the conditions set forth in this Section 6.2(i) and (viii). As of (a)
the Closing Date if any such conditions have not been satisfied other than the
conditions set forth in this Section 6.2(i) and (viii) that cannot be satisfied
prior to the IPO Closing Date or (b) the IPO Closing Date, if any such
conditions have not been satisfied, the Seller shall have the right to terminate
this Agreement, or in the alternative, waive any condition not so satisfied.
Any act or action of the Seller in consummating the Closing on the Closing Date
to the extent set forth in the first sentence of Section 6.1 shall constitute a
waiver of any conditions not so satisfied other than the conditions set forth in
this Section 6.2(i) and (viii) that cannot be satisfied prior to the IPO Closing
Date. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of Parent and Buyer contained in Article IV
hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of the Parent and the Buyer contained in
Article IV shall be
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true and correct in all material respects as of the Closing Date and the
IPO Closing Date as though such representations and warranties had been
made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by the Parent and the Buyer on
or before the Closing Date and the IPO Closing Date shall have been duly
complied with and performed in all material respects; and certificates to
the foregoing effect dated the Closing Date and the IPO Closing Date,
respectively, and signed by each of the Parent and the Buyer shall have
been delivered to the Seller.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of the Parent or the Buyer as a result
of which the management of the Seller deems it inadvisable to proceed with
the transactions hereunder.
(iii) OPINION OF COUNSEL. The Seller shall have received an
opinion from counsel for the Parent dated the Closing Date, in the form
attached as Exhibit F-1 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as amended
to cover the offering, issuance and sale by Parent of such number of Parent
Shares at the IPO Price (which need not be set forth in the Registration
Statement when it becomes effective under the Securities Act) as shall
yield aggregate cash proceeds to the Parent from that sale (net of
Underwriter's discount or commissions) in at least the amount (the "Minimum
Cash Amount") that is sufficient, when added to the funds, if any,
available from other sources (if any, and as set forth in the Registration
Statement when it becomes effective under the Securities Act)(the "Other
Financing Sources") to enable the Parent to pay or otherwise deliver on the
IPO Closing Date (i) the total cash portion of the Purchase Price then to
be delivered pursuant to Article II; (ii) the total cash portion of the
acquisition consideration then to be delivered pursuant to the Other
Agreements as a result of the consummation of the acquisition transactions
contemplated thereby, and (iii) the total amount of indebtedness of the
Seller, each Other Acquired Business and the Parent which the Registration
Statement discloses at the time it becomes effective under the Securities
Act will be repaid with proceeds received by the Parent from the IPO and
Other Financing Sources.
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no
action or proceeding shall have been instituted or threatened to restrain
or prohibit the Acquisition.
(vi) GOOD STANDING CERTIFICATES. Parent and the Buyer each shall
have delivered to the Seller certificates, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the Texas and California
Secretaries of State, respectively, and in each state in which the Parent
and Buyer is authorized to do business, showing that each of the Parent and
the Buyer is in good standing and authorized to do business and that all
state franchise
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and/or income tax returns and taxes for the Parent and the Buyer,
respectively, for all periods prior to the Closing have been filed and
paid.
(vii) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred with respect to the Parent or the Buyer which would
constitute a Material Adverse Effect.
(viii) CLOSING OF IPO. The closing of the sale of the Parent
Shares to the Underwriters in the IPO shall have occurred simultaneously
with the IPO Closing Date hereunder.
(ix) SECRETARY'S CERTIFICATE. The Seller shall have received a
certificate or certificates, dated the Closing Date and signed by the
secretary of each of the Parent and the Buyer, certifying the truth and
correctness of attached copies of the Parent's and the Buyer's respective
resolutions of their boards of directors and, if required, the stockholders
of the Parent and the Buyer approving the Parent's and the Buyer's entering
into this Agreement and the consummation of the transactions contemplated
hereby.
(x) SELLER EMPLOYMENT AGREEMENT. The Buyer shall have entered into
an employment agreement with the Seller in the form attached as Exhibit A
("Seller Employment Agreement").
(xi) REGISTRATION RIGHTS AGREEMENT. Parent shall have entered into
the Registration Rights Agreement with the Seller in the form attached as
Exhibit B ("Registration Rights Agreement").
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARENT AND THE BUYER. The
obligations of the Parent and the Buyer with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions other than the conditions set
forth in this Section 6.3(i) and (vii) that cannot be satisfied prior to the IPO
Closing Date. The obligations of Parent and Buyer with respect to actions to be
taken on the IPO Closing Date are subject to the satisfaction or waiver on or
prior to the IPO Closing Date of all of the following conditions. As of (a) the
Closing Date if any such conditions other than the conditions set forth in this
Section 6.3(i) and (vii) that cannot be satisfied prior to the IPO Closing Date
have not been satisfied or (b) as of the IPO Closing Date, if any such
conditions have not been satisfied, Parent and Buyer shall have the right to
terminate this Agreement, or waive any such condition, but no such waiver shall
be deemed to affect the survival of the representations and warranties contained
in Article III hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATION. All
the representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects as of the
Closing Date and the IPO Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; all of
the terms, covenants and conditions of this Agreement to be complied with
or
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performed by the Seller on or before the Closing Date or the IPO Closing
Date, as the case may be, shall have been duly performed or complied with
in all Material respects; and the Seller shall have delivered to the Buyer
certificates dated the Closing Date and the IPO Closing Date, respectively,
and signed by them to such effect.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of Parent as a result of which the
management of Parent deems it inadvisable to proceed with the transactions
hereunder.
(iii) OPINION OF COUNSEL. Parent shall have received an opinion
from Counsel to the Seller, dated the Closing Date, substantially in the
form attached as Exhibit F-2 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as
amended to cover the offering, issuance and sale by Parent of such number
of Parent Shares at the IPO Price as shall yield aggregate cash proceeds to
the Parent from that sale (net of Underwriter's discount or commissions) in
at least the Minimum Cash Amount.
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties shall have been obtained; and no
action or proceeding shall have been instituted or threatened to restrain
or prohibit the Acquisition.
(vi) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred with respect to the Seller which would constitute a Material
Adverse Effect, and the Seller shall not have suffered any Material loss or
damages to any of her properties or assets, whether or not covered by
insurance, which change, loss or damage Materially affects or impairs the
ability of the Seller to conduct her business.
(vii) CLOSING OF IPO. The closing of the sale of the Parent Shares
to the Underwriters in the IPO shall have occurred simultaneously with the
IPO Closing Date hereunder.
(viii) SELLER EMPLOYMENT AGREEMENT. The Seller shall have entered
into the Seller Employment Agreement.
(ix) REGISTRATION RIGHTS AGREEMENT. Seller shall have entered into
the Registration Rights Agreement.
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(x) ▇▇▇▇ OF SALE. Seller shall have delivered to the Buyer
instruments of assignment and transfer or bills of sale signed by the
Seller as the Buyer reasonably requests, including the ▇▇▇▇ of Sale
attached as Exhibit C ("▇▇▇▇ of Sale").
(xi) INVESTOR REPRESENTATION LETTER. Seller shall have delivered
to the Parent at or prior to the signing of the Registration Statement an
Investor Representation Letter in the form attached as Exhibit D, with
respect to the acquisition of the Parent Shares to be issued to Seller.
(xiii) STOCK PLEDGE AGREEMENT. Seller shall have delivered to
Buyer a Stock Pledge Agreement in the form attached as Exhibit E ("Stock
Pledge") as well as the Parent Shares issuable to the Seller at the Closing
(complete with stock powers executed in blank).
(xiv) SATISFACTION. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this
Agreement or incidental hereto and all other related legal matters shall
have been approved by counsel to the Parent.
6.4 FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. The Seller, at any time at or after the Closing, will
execute, acknowledge and deliver any further bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by the Buyer, for the purpose of
assigning and confirming to the Buyer, all of the Assets. The Buyer shall
notify the Seller promptly, and in no event more than ten (10) business days
after the Buyer's receipt, of any tax inquiries or notifications thereof which
relate to any period prior to the Effective Date, and the Seller shall prepare
and deliver responses to such inquiries as the Seller deems necessary or
appropriate. In addition, the Seller shall make available the books and records
of the Business during reasonable business hours and take such other actions as
are reasonably requested by the Buyer to assist the Buyer in the operation of
the Business.
6.5 CONFIDENTIAL INFORMATION. After the Closing and except as otherwise
specifically permitted in this Agreement, each party to this Agreement agrees,
on behalf of itself and its Affiliates, to use reasonable efforts not to
divulge, communicate, use to the detriment of any other party to this Agreement
or its Affiliates or for the benefit of any other person or persons, any
confidential information or trade secrets of such other party with respect to
the Assets or the Business, including personnel information, secret processes,
know-how, customer lists, formulae, or other technical data; provided however,
if any party to this Agreement or any of its Affiliates is compelled to disclose
such information to any tribunal, regulatory or Governmental Authority or else
stand liable for contempt or suffer other censure and penalty, such party may so
disclose such information without any liability hereunder.
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6.6 ASSIGNMENT OF CONTRACTS. On or before the Effective Date, Seller
shall have delivered to Buyer all of the Contracts presently in force and shall
have effected a valid assignment of all of Seller's rights and obligations
thereunder.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION.
A. BY THE SELLER. Subject to Section 7.1(E) hereof, the Seller
shall indemnify, save, defend and hold harmless the Parent and Buyer and their
respective shareholders, directors, officers, partners, agents and employees
(collectively, the "Buyer Indemnified Parties") from and against any and all
costs, lawsuits, losses, liabilities, deficiencies, claims and expenses,
including interest, penalties, attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively
referred to herein as "Damages"), (i) incurred in connection with or arising out
of or resulting from or incident to any breach of any covenant, breach of
warranty as of the Effective Date, or the inaccuracy of any representation as of
the Effective Date, made by the Seller in or pursuant to this Agreement or the
Ancillary Agreements, or any other agreement contemplated hereby or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by the Seller under this Agreement, (ii) based upon, arising out of, or
otherwise in respect of any liability or obligation of the Business or relating
to the Assets (a) relating to any period prior to the Effective Date, other than
those Damages based upon or arising out of the Assumed Liabilities, or (b)
arising out of facts or circumstances existing prior to the Effective Date,
other than those Damages based upon or arising out of the Assumed Liabilities;
provided however, that the Seller shall not be liable for any such Damages to
the extent, if any, such Damages result from or arise out of a breach or
violation of this Agreement by any Buyer Indemnified Parties, and (iii) any
liability under the Securities Act, the Exchange Act or other federal or state
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a Material fact relating to the
Seller, and provided to Parent or its counsel by the Seller, contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a Material fact relating to the
Seller required to be stated therein or necessary to make the statements therein
not misleading, provided however, that such indemnity shall not inure to the
benefit of Parent and Buyer to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and Seller provided, in writing, corrected
information to Parent and Parent's counsel for inclusion in the Final
Prospectus, and such information was not included or properly delivered.
B. BY THE BUYER. Subject to Section 7.1(E) hereof, the Parent and
Buyer shall indemnify, save, defend and hold harmless the Seller from and
against any and all Damages (i) incurred in connection with or arising out of or
resulting from or incident to any breach of any covenant, breach of warranty as
of the Effective Date, or the inaccuracy of any representation as of the
Effective Date, made by the Buyer or Parent in or pursuant to this Agreement,
the Ancillary
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Agreements, or any other agreement contemplated hereby or in any schedule,
certificate, exhibit, or other instrument furnished or to be furnished by the
Buyer under this Agreement, (ii) based upon, arising out of or otherwise in
respect of any liability or obligation of the Business or relating to the Assets
(a) relating to any period on and after the Effective Date, other than those
Damages based upon or arising out of the Retained Liabilities, or (b) arising
out of facts or circumstances existing on and after the Effective Date, other
than those Damages based upon or arising out of the Retained Liabilities;
provided, however, that the Buyer shall not be liable for any such Damages to
the extent, if any, such Damages result from or arise out of a breach or
violation of this Agreement by the Seller , (iii) under the Securities Act, the
Exchange Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a Material fact relating to Parent, Buyer or any Other Acquired
Business contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission (or alleged omission) to
state therein a Material fact relating to Parent or Buyer or any of the Other
Acquired Businesses required to be stated therein or necessary to make the
statements therein not misleading.
C. DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("Notice of Action"); provided that the failure of any
indemnified Party to give timely notice shall not affect its rights to
indemnification hereunder to the extent that the indemnified Party demonstrates
that the amount the indemnified Party is entitled to recover exceeds the actual
damages to the indemnifying Party caused by such failure to so notify within ten
(10) days and so long as the indemnifying Party is not materially prejudiced by
the failure to receive such notice. The indemnifying Party may elect to
compromise or defend any such asserted liability and to assume all obligations
contained in this Section 7.1 to indemnify the indemnified Party by a delivery
of notice of such election ("Notice of Election") within ten (10) days after
delivery of the Notice of Action. Upon delivery of the Notice of Election, the
indemnifying Party shall be entitled to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying Party's sole
cost, risk and expense, and the indemnified Party shall cooperate in all
reasonable respects, at the indemnifying Party's sole cost, risk and expense
(except with respect to the fees and expenses of the indemnified Party's
attorney, which shall be borne by the indemnified Party) with the indemnifying
Party and such attorneys in the investigation, trial, and defense of such
lawsuit or action and any appeal arising therefrom; provided, however, that the
indemnified Party may, at its own cost, risk and expense, participate in such
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. If the Notice of Election is delivered to the indemnified
Party, the indemnified Party shall not pay, settle or compromise such claim
without the indemnifying Party's consent, which consent shall not be
unreasonably withheld. If the indemnifying Party elects not to defend the claim
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of the indemnified Party or does not deliver to the indemnified Party a Notice
of Election within ten (10) days after delivery of the Notice of Action, the
indemnified Party may, but shall not be obligated to, defend, compromise or
settle (exercising reasonable business judgment) the claim or other matter on
behalf, for the account, and at the risk, of the indemnifying Party.
D. THIRD PARTY CLAIMS. The provisions of this Section 7.1 are not
limited to matters asserted by the Parties, but cover Damages incurred in
connection with third party claims. The indemnity hereunder is in addition to
any and all rights and remedies of the Parties in connection herewith.
E. LIMITATION ON INDEMNIFICATION. Notwithstanding the other
provisions of this Section 7.1, Seller shall not be liable to Buyer Indemnified
Parties, and Parent and Buyer shall not be liable to Seller, for the first
$25,000 in aggregate Damages suffered by such indemnified Parties; provided,
however, that once any such indemnified Parties have suffered Damages
aggregating in excess of $25,000, the indemnifying Party shall reimburse the
indemnified Parties for the full amount of such Damages, including the $25,000
in Damages initially excluded. In no event shall the aggregate Damages payable
by an indemnifying Party to indemnified Parties exceed 50% of the Purchase
Price.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of the Parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the Parties until the
Expiration Date.
ARTICLE VIII
TERMINATION AND REMEDIES
------------------------
8.1 SPECIFIC PERFORMANCE; REMEDIES. Each of the Parties hereby agrees
that the transactions contemplated by this Agreement are unique, and that each
Party shall have, in addition to any other legal or equitable remedy available
to it, the right to enforce this Agreement by decree of specific performance.
If any legal action or other proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement, the successful or
prevailing Party or Parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding in addition to any
other remedies to which it, he or they may be entitled at law or equity. The
rights and remedies granted herein are cumulative and not exclusive of any other
right or remedy granted herein or provided by law.
8.2 OFFSET; REMEDIES. To the extent not otherwise prohibited by
applicable law, all amounts due and owing by the Buyer to the Seller under this
Agreement, the Ancillary Agreements, or any other document, instrument, or
agreement executed in connection herewith shall be subject to offset by the
Buyer to the extent of any Damages incurred by any breach by the Seller, under
this Agreement or any Ancillary Agreement, or any document, instrument, or
agreement executed in
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connection herewith. In the event Buyer elects to offset any Damages incurred as
a result of any such breach, Buyer shall furnish Seller notice containing
detailed information about the breach, the magnitude of the damages that Buyer
has or reasonably expects to incur, and whether the offset is against the Parent
Shares pledged under the Stock Pledge Agreement or otherwise (the act of
offsetting by Buyer shall be referred to as an "Offset"). The Seller
acknowledges and agrees that but for the right of Offset contained in this
Agreement, the Buyer would not have entered into this Agreement or any of the
transactions contemplated herein. If any legal action or other proceeding is
brought for the enforcement of this Agreement, any Ancillary Agreement, or any
document, instrument, or agreement executed in connection herewith, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, or any Ancillary Agreement, or any
document, instrument, or agreement executed in connection herewith, the
successful or prevailing Party or Parties shall be entitled to recover other
remedies to which it or they may be entitled at law or equity. The rights and
remedies granted herein are cumulative and not exclusive of any other right or
remedy granted herein or provided by law. Buyer shall not effect an Offset
hereunder without giving Seller at least 10 days advance written notice of its
intent to do so. During such 10-day period, Seller shall have the right to cure
any breach giving rise to the Damages which are the subject of the Offset,
provided the events giving rise to such Damages are curable.
8.3 TERMINATION. Termination of This Agreement. (a) This Agreement may be
terminated at any time prior to the Closing solely:
(i) by the mutual written consent of the Parent and the Seller;
(ii) subject to Section 8.5, by the Seller, on the one hand, or by
the Parent, on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
December 31, 1997, unless the failure of such transactions to be
consummated results from the willful failure of the Party seeking to
terminate this Agreement to perform or materially adhere to any agreement
required hereby to be performed or adhered to by it prior to or at the
Closing or thereafter on the IPO Closing Date;
(iii) by the Seller, on the one hand, or by the Parent, on the
other hand, if a Material breach or default shall be made by the other
Party in the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein; or
(iv) by the Parent if it is entitled to do so as provided in Section
5.10.
(b) Subject to Section 8.5, this Agreement may be terminated after
the Closing solely:
(i) by the Parent or the Seller if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
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(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within ten (10) New York City business
days after the date of the Closing.
8.4 LIABILITIES IN EVENT OF TERMINATION. If this Agreement is
terminated pursuant to Section 8.3, there shall be no liability or obligation on
the part of any Party hereto except to the extent that such liability is based
on the breach by that Party of any of its representations, warranties or
covenants set forth in this Agreement.
8.5 SELLER'S OPTION. If the IPO Closing Date has not occurred by
December 31, 1997, and Seller has not breached this Agreement, Seller shall have
the option to terminate this Agreement as set forth in Section 8.3 or require
Buyer or Parent to purchase the Assets for the same Purchase Price as is
provided in Section 2.3 hereof, subject to the adjustments provided in Sections
2.4 and 2.5 (the "Option Price"); provided that the form of payment of the
Option Price shall be as described below. The Option Price would be payable 50%
in cash and 50% in two convertible subordinated notes of Buyer ("Notes"). One
Note ("Note One") would be in an original principal amount equal to 20% of the
Option Price and would bear interest at 7% per annum payable quarterly. The
principal balance of Note One would be payable in 16 quarterly installments, the
first of which would be due on the end of the 15/th/ month following the date of
such Note. Payments of principal and interest on Note One would be subject to
(a) the continued generation by the division of the Buyer established to operate
the Business of EBIT (as defined below) of at least $1,006,200 and (b)
subordination provisions regarding such payments as are required by Parent's
senior lenders (such subordination provisions to be substantially the same as
those executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇). Note One would have default provisions
equivalent to those contained in other such notes issued the subsidiaries of the
Parent in previous transactions and, in the event of an IPO or upon the sale of
the Parent, would, at Seller's option, accelerate or convert into Parent Shares.
Any conversion of Note One would be at the sales price or 90% of the IPO price.
The second Note ("Note Two") would be in an original principal amount equal to
30% of the Option Price and would bear interest at 6% per annum payable
quarterly. The principal balance of Note Two would be payable in full at the
end of the eighth year. Note Two would have default provisions similar to those
contained in similar notes issued by subsidiaries of the Parent and would be
subordinated as required by Parent's senior lenders. Note Two would
automatically convert into Parent Shares upon the occurrence of certain
conditions. EBIT shall be equal to Seller's pre-tax income plus (i) net
interest expense, (ii) one-time expenses and (iii) depreciation and
amortization. In addition to the other conditions contained herein, the
Seller's option will be subject to the additional condition that the Buyer shall
have received notification from Texas Commerce Bank, N.A. that such it has
approved consummation of the transactions contemplated by this Section 8.5 under
the Parent's acquisition line of credit.
ARTICLE IX
COVENANTS OF BUYER AND SELLER AFTER CLOSING
9.1. FINAL NET WORTH ADJUSTMENT. Within 30 days after the IPO Closing
Date, the Buyer and Seller shall adjust the Purchase Price of the Assets as set
forth in Sections 2.4 and 2.5, and the
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Buyer shall deliver to Seller, or Seller shall deliver to Buyer, cash equal to
the differential between the Guaranteed Net Worth and the Final Net Worth, if
any.
9.2. PREPARATION AND FILING OF TAX RETURNS.
(i) The Seller shall file or cause to be filed all federal income
tax returns of the Seller for all taxable periods that end on or before the
IPO Closing Date, and shall permit the Parent to review all such tax
returns prior to such filings.
(ii) Parent shall file or cause to be filed all separate tax returns
of, or that include, any Other Acquired Business for all taxable periods
ending after the IPO Closing Date.
(iii) Each Party shall, and shall cause its Subsidiaries and
Affiliates to, provide to each of the other Parties hereto such cooperation
and information as any of them reasonably may request in filing any tax
return, amended tax return or claim for refund, determining a liability for
taxes or a right to refund of taxes or in conducting any audit or other
proceeding in respect of taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant tax returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and tax basis of
property, which such Party may possess. Each Party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each Party required to file tax returns pursuant to
this Agreement shall bear all costs of filing such tax returns.
9.3 RESTRICTIVE LEGEND. The Seller consents to the imprinting on all
certificates representing Parent Shares issued to her as part of the Purchase
Price of the following legend:
THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH
REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF SUCH SHARES OF AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF SUCH
SHARES OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE
EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN
VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS
PROMULGATED THEREUNDER.
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9.4 PLEDGE OF PARENT SHARES. Seller shall deliver all Parent Shares
acquired from the Buyer as part of the Purchase Price to Buyer to be held
pursuant to the terms of the Stock Pledge Agreement.
ARTICLE X
MISCELLANEOUS
-------------
10.1 FEES. Except as expressly set forth herein to the contrary, each
Party shall be responsible for all costs, fees and expenses (including attorney
and accountant fees and expenses) paid or incurred by such Party in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transaction contemplated hereby.
10.2 MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only in writing signed by all of the Parties.
10.3 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed with receipt of
transmission confirmed during regular business hours during a business day to
the appropriate location described below, or three (3) business days after
posting thereof by United States first-class, registered or certified mail,
return receipt requested, with postage and fees prepaid and addressed as
follows:
IF TO SELLER: Jilio & Associates
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
IF TO the Seller:
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail ▇▇▇▇▇@▇▇▇.▇▇▇
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IF TO BUYER OR PARENT: Litigation Resources of America-California, Inc.
Litigation Resources of America, Inc.
650 First City Tower, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: 713/▇▇▇-▇▇▇▇
Fax: 713/▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: 713/▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any addressee at any time by furnishing notice to the other addressees in the
manner described above may designate additional or different addresses for
subsequent notices or communications.
10.4 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or affect the enforceability of any other
provision of this Agreement.
10.5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the Ancillary
Agreements set forth the entire agreement among the Parties with respect to the
subject matter hereof. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.
10.6 WAIVER. No delay in the exercise of any right under this Agreement
shall waive such rights. Any waiver, to be enforceable, must be in writing.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
10.8 ASSIGNMENT. The Seller shall not assign this Agreement or any
interest herein.
10.9 HEADINGS. Headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.
10.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to
this Agreement or to be delivered by the Seller, upon review and approval by the
Buyer, are and shall be hereby incorporated in and made a part of this
Agreement. All Schedules to this Agreement must be delivered no later than four
(4) days prior to Closing, in order to provide the Buyer ample time to review
and evaluate the items described therein and disclosed thereby. Although the
Schedules remain subject to the review and approval of the Buyer, no such review
or approval shall constitute a waiver
-37-
by the Buyer of any breach or default caused by the inaccuracy or incompleteness
of any Schedule, the accuracy and completeness of the Schedules being the sole
responsibility of the Seller.
10.11 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the Parties, the Buyer
Indemnified Parties and their respective successors and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any Party to this Agreement, nor shall any provision
give any third person any right of subrogation or action over against any Party
to this Agreement.
10.12 SURVIVAL. Subject to Section 7.2, this Agreement, including but not
limited to all covenants, warranties, representations and indemnities contained
herein, shall survive the Closing, and the ▇▇▇▇ of Sale and all other documents,
instruments or agreements relating to the Assets and the transactions
contemplated herein shall not be deemed merged therein.
10.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
10.14 ATTORNEYS' FEES. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees from the other Party hereto.
10.15 DRAFTING. All Parties hereto acknowledge that each Party was
actively involved in the negotiation and drafting of this Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Agreement shall be construed in favor or against any Party hereto because
one is deemed to be the author thereof.
-38-
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement in multiple counterparts effective as of the date first written above.
BUYER:
------
LITIGATION RESOURCES OF
AMERICA-CALIFORNIA, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and Chief Executive
Officer
PARENT:
-------
LITIGATION RESOURCES OF AMERICA, INC.,
a Texas corporation
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and Chief Executive
Officer
SELLER:
-------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
-39-
Schedules
-----------
2.1(a) - Equipment
2.1(b) - Contracts
2.1(c) - Books and Records
2.1(e) - Intellectual Property
2.1(g) - General Intangibles
2.1(j) - Inventory
2.2 - Excluded Assets
2.7 - Allocation of Purchase Price
3.3(A) - Consents and Approvals
3.3(B) - Breaches or Defaults
3.5 - Exceptions to Title
3.6 - Leased Personal Property
3.14(A) - Owned Real Property
3.14(B) - Leased Real Property
3.15 - Insurance Policies
3.16 - Banking
3.18(A) - Employees
3.18(B) - Independent Contractors
3.19 - Employee Benefit Plans
3.20 - Employment Agreement
3.21 - Liabilities
3.22 - Litigation
3.26 - Certain Changes or Events
3.27 - Customers
4.4 - Parent Capitalization
Exhibits
-----------
A Seller Employment Agreement
B Registration Rights Agreement
C ▇▇▇▇ of Sale
D Investor Representation Letter
E Stock Pledge Agreement
F-1 Legal Opinion
F-2 Legal Opinion
-40-
EXHIBIT A
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated effective the ____ day
of _________, 1997 (the "Effective Date"), is entered into by and between
LITIGATION RESOURCES OF AMERICA -- CALIFORNIA, INC., a California corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), and ▇▇▇▇▇▇▇ ▇▇▇▇▇, an
individual residing in the State of California (the "Employee"). The Company
and Employee may sometimes hereinafter be referred to singularly as a "Party" or
collectively as the "Parties." All capitalized terms not otherwise defined
herein shall have the same meaning as contained in that certain Agreement of
Purchase and Sale of Assets executed as of September __, 1997 (the "Purchase
Agreement"), by and among Employee, the Company and LITIGATION RESOURCES OF
AMERICA , INC., a Texas corporation and the parent company of the Company
("Parent") and certain other parties.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has been the sole owner of her own business d.b.a Jilio &
Associates ("Business") and her knowledge of the affairs of the Business are of
great value to the Company, which acquired the Business pursuant to the Purchase
Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants, promises
and undertakings herein contained and other consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby undertake and
agree as follows:
1. Employment Term. The Company hereby employs the Employee commencing
on the Effective Date for a term of three (3) years (the "Employment Term"),
unless sooner terminated as hereinafter provided. The term of this Agreement
may be renewed or extended for one or more successive additional one (1) year
terms upon mutual agreement of the Parties at least 90 days prior to the
expiration of the initial term or any such renewal term. Unless otherwise
provided herein, Sections 12 - 26 of this Agreement shall survive the expiration
or termination of this Agreement, for any reason whatsoever. The Employee
accepts such employment and agrees to perform the services specified herein, all
upon the terms and conditions hereinafter stated.
2. Duties. The Employee shall serve as the President of the Division (as
defined on Exhibit A) of the Company and shall report to, and be subject to the
general direction and control of the Chief Executive Officer and the Board of
Directors of the Company (the "Board"). The Employee shall perform such
management and administrative duties, consistent with the Employee's position,
as are from time to time assigned to the Employee by the Chief Executive Officer
and the
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Board, including developing local, regional, and national customers for the
Company and its Affiliates (defined below). The Employee also agrees to perform,
without additional compensation, such other services for the Company, and for
any parent, subsidiary or affiliate corporations of the Company and any
partnerships in which the Company may from time to time have an interest (herein
collectively called "Affiliates"), as the Chief Executive Officer or Board shall
from time to time specify, if such services are of the nature commonly
associated with the position of president of a division of a company engaged in
activities similar to the activities engaged in by the Company and to perform
such other activities as are consistent with the Employee's past
responsibilities as an employee of the Company; provided, that Employee shall
not be required to engage in any business that is not reasonably related to the
Business of the Company, as hereinafter defined. For purposes of this Agreement,
the "Business of the Company" or, alternatively, "Business" shall be defined as
the current business of the Company, including, but not limited to, the court
reporting business in the Orange County, California area. The term "Company" as
used in this Agreement shall be deemed to include and refer to all such
Affiliates.
3. Extent of Service. The Employee shall devote her full business time,
attention and energy to the business of the Company, and shall not be engaged in
any other business activity during the term of this Agreement. The foregoing
shall not be construed as preventing the Employee from making passive
investments in other businesses or enterprises, if (i) such investments will not
require services on the part of the Employee which would in any material way
impair the performance of her duties under this Agreement, (ii) such other
businesses or enterprises are not engaged in any business competitive with the
business of the Company, and (iii) the Employee has complied with Sections 12
and 13 of this Agreement with respect to each such passive investment.
4. Compensation. As payment for the services to be rendered by the
Employee hereunder during the initial term, the Employee shall be entitled to
receive:
(a) a salary in the aggregate amount of One Hundred Thousand Dollars
($150,000.00) per year effective as of the date hereof, which shall be payable
monthly or in accordance with the payroll policies of the Company in effect
from time to time if such policies provide for payment of salary more
frequently than monthly, until the date of termination of Employee's
employment under this Agreement;
(b) a bonus to be calculated in accordance with Schedule A attached hereto,
payable within ninety (90) days after the end of each combined fiscal year of
the Company (the "Annual Bonus") including, without limitation, the first
fiscal year end after the Effective Date hereof; provided, however, that any
Annual Bonus calculated with respect to a fiscal year during which the
Employee was employed for only a part of such year shall be prorated to
account for the number of days during such year in which Employee was employed
by the Company;
(c) in the event that the Employee identifies a business as an acquisition
candidate for Parent or any of its subsidiaries, such acquisition candidate
has not been previously brought to the attention of Parent and Parent or any
of its subsidiaries ultimately
-2-
acquires such business, the Employee shall be entitled to receive, at the
closing of such acquisition, a cash payment equal to one percent (1%) of the
total consideration paid by the Parent or any subsidiary in connection with
such acquisition. In no event shall Parent or any subsidiary be obligated to
close any acquisition with regard to any business identified by the Employee
as an acquisition candidate, and no fee shall be payable hereunder unless and
until such acquisition closes; and
(d) commissions based upon the revenues generated from National Account
(as defined below) sales originated by her or employees of the Parent or its
subsidiaries who report to her. The amount of commissions payable will be
based upon a formula ("Formula") to be established by the Board of Directors
of the Parent. The Formula may be amended from time to time by the Parent's
Board of Directors and the Employee shall be entitled to receive compensation
hereunder based upon the Formula as it exists on the date of the origination
of the National Account. A "National Account" is any account established with
an insurance or "Fortune 500" company pursuant to which two or more of the
Parent's offices in different geographical areas render services. Until
notice of a change in the Formula applicable to the Employee is given to the
Employee by the Parent's Board of Directors, the Formula applicable to the
Employee shall be as follows:
Commission Price Structure of
Percentage of Gross Sales National Account
3.00% Market price
2.50% Discount of 5% to less than 10% from
market price rate
2.00% Discount of 10% to less than 15% from
market price rate
1.50% Discount of 15% to less than 20% from
market price rate
1.00% Discount of 20% to less than 25% from
market price rate
0.50% Discount of 25% or more from market price
rate
In certain circumstances, more than one individual may be entitled to
receive commissions based upon sales from a National Account. In such
circumstances, the commissions described above would be shares by the Employee
and the other individual(s) on such a basis as is determined to be
-3-
fair by the Parent's Board of Directors. All commissions payable hereunder will
be paid in cash within 45 days of the end of the calendar year in which they are
earned.
5. Expenses. During the term of this Agreement, the Company shall
promptly pay or reimburse the Employee for all reasonable out-of-pocket expenses
for travel, meals, hotel accommodations and similar items incurred by her in
connection with the Business of the Company and approved by the Board or
incurred in accordance with the travel and reimbursement policies of the Company
as the same shall be in effect from time to time, upon submission by her of an
appropriate statement documenting such expenses. The Company shall also pay
the Employee an automobile allowance in the amount of $750.00 per month.
6. Employee Benefits. During the term of this Agreement, the Employee
shall be entitled to participate in all employee benefit plans from time to time
made generally available to the executive employees of the Parent, including any
stock option plan, retirement plan, profit-sharing plan, group life plan, health
or accident insurance or other employee benefit plans as the same shall be
maintained in effect, as determined by the Board. In the event that the Parent
adopts a stock option plan, the Employee shall be eligible to participate as a
key employee under such plan. If the Parent grants stock options to any of its
officers under such a plan and the Employee is also granted stock options, the
stock options granted to the Employee shall be on the same terms as those
granted to the officers.
7. Vacation. During the term of this Agreement, the Employee shall be
entitled to annual vacation time determined in accordance with the vacation
policies of the Company in effect from time to time but not less than four (4)
weeks per year, during which time her compensation shall be paid in full.
Unused vacation time shall not accrue from year to year.
8. Covenants of Employee. For and in consideration of the employment
herein contemplated and the consideration paid or promised to be paid by the
Company, the Employee does hereby covenant, agree and promise that during the
term hereof and thereafter to the extent specifically provided in this
Agreement:
(a) Except as otherwise specifically permitted by this Agreement, during
the term of this Agreement, Employee will not actively engage, directly or
indirectly, in any other business other than that of Company, except at the
direction or approval of the Company.
(b) The Employee will use her best reasonable efforts to truthfully and
accurately make, maintain and preserve all records and reports that the
Company may from time to time request or require.
(c) The Employee will fully account for all money, records, goods, wares
and merchandise or other property belonging to the Company of which the
Employee has custody, and will pay over and deliver same promptly whenever and
however she may be reasonably directed to do so by the Company.
-4-
(d) The Employee will obey all rules, regulations and special instructions
of the Company applicable to her, and will be loyal and faithful to the
Company at all times.
(e) The Employee will make available to the Company any and all of the
information of which she has knowledge relating to the business of the
Company, and will make all suggestions and recommendations which she feels
will be of mutual benefit to the Parties.
(f) The Employee agrees that upon termination of her employment hereunder
she will immediately surrender and turn over to the Company all books,
records, forms, specifications, formulae, data, processes, papers and writings
related to the Business of the Company and all other property belonging to the
Company, together with all copies of the foregoing, it being understood and
agreed that the same are the sole property of the Company.
(g) The Employee agrees that all ideas, concepts, processes, discoveries,
devices, machines, tools, materials, designs, improvements, inventions and
other things of value relating to the Business of the Company (hereinafter
collectively referred to as "intangible rights"), whether patentable or not,
which are conceived, made, invented or suggested by her alone or in
collaboration with others during the term of her employment, and whether or
not during regular working hours, shall be promptly disclosed in writing to
the Company and shall be the sole and exclusive property of the Company. The
Employee hereby assigns all of her right, title and interest in and to all
such intangible rights to the Company, and its successors or assigns. In the
event that any of such intangible rights shall be deemed by the Company to be
patentable or otherwise registerable under any federal, state or foreign law,
the Employee further agrees that, at the expense of the Company, she will
execute all documents and do all things reasonably necessary, advisable or
proper to obtain patents therefor or registration thereof, and to vest in the
Company full title thereto.
9. Mutual Covenants of the Company and the Employee. For and in
consideration of the employment herein contemplated and the compensation,
covenants, conditions and promises herein recited, the Company and the Employee
do hereby mutually agree that during the term hereof:
(a) The Employee shall not, by reason of this Agreement, have any vested
interest in, or right, title or claim to, any land, buildings, equipment,
machinery, processes, systems, products, contracts, goods, wares, merchandise,
business assets or other things of value belonging to or which may hereafter
be acquired or owned by the Company.
(b) In carrying out her duties as President of the Division, the Employee
shall primarily be responsible for making day-to-day decisions in the ordinary
course of business of the Company, subject to possible review by the Chief
Executive Officer and/or the Board. The responsibility for the Company's
plans, properties, contracts, methods, and policies shall be vested in the
Board and the Company may, in its sole and absolute discretion, give, sell,
-5-
assign, transfer or otherwise dispose of any or all of its assets or
businesses in whole or in part, to any person, firm or corporation, whether or
not such person, firm or corporation is in any manner owned by or associated
with or affiliated with the Company.
(c) The Employee acknowledges that because of the nature of the position
for which she has been employed, the Employee may be called upon to perform
such duties and render such services as are required of her hereunder
irregularly, and agrees to perform to the best of her abilities such duties as
the business may reasonably demand, and acknowledges that the number of hours
per day or per week may vary. Notwithstanding the foregoing, the Employee
shall work in a manner that is consistent with her prior customary practice on
behalf of the Company.
(d) The Company agrees that it will not terminate any employee of the
Company without giving prior notification of such termination to the Employee.
10. Termination of Employment for Cause. The Company may terminate the
employment of the Employee if the Company suffers or may reasonably be expected
to suffer any material adverse effect as a result of the Employee (any such
termination being a termination for "Cause"):
(a) Breaching any material provision of this Agreement and failing to cure
such breach within thirty (30) days after receipt of written notice thereof;
(b) Misappropriating funds or property of the Company;
(c) Securing any personal profit not thoroughly disclosed to and approved
by the Company in connection with any transaction entered into on behalf of
the Company;
(d) Engaging in conduct, even if not in connection with the performance of
her duties hereunder, which would reasonably be expected to result in a
material adverse effect to the interest of the Company if she were retained as
an employee, such as her commission of a felony or a crime of moral turpitude;
(e) Becoming and remaining "Disabled," as hereinafter defined (either
physically, mentally or otherwise) for a period of one hundred thirty-five
(135) days during any consecutive twelve-month time period;
(f) Failing to carry out and perform the duties assigned to the Employee
in accordance with the terms hereof and failing to cure such breach within
thirty (30) days after written notice thereof; or
-6-
(g) Failing to comply with corporate policies of the Company that are
promulgated from time to time and made known to Employee and failing to cure
such breach within thirty (30) days after written notice thereof.
In the event of the death of the Employee, such occurrence shall
immediately constitute a termination for Cause. Except as provided in item (e)
above, no termination for Cause shall be effective if the Employee is Disabled.
In the event the Employee is terminated for Cause because she is Disabled,
the Employee may be permitted to participate in any disability insurance policy
the Company then has in effect.
In the event of termination of her employment for Cause, the Employee shall
be entitled to receive her compensation, as determined in Section 4 of this
Agreement, due or accrued on a pro rata basis to the date of termination. Any
salary or remuneration owed as of the date of termination shall be paid less the
amount of damages, if any, caused to the Company by such breach, but no such
damages offset shall extend beyond any compensation due and owing under this
Agreement.
Notwithstanding the cure provisions provided in Sections 10(a), 10 (f) and
10(g), the Employee shall not have the opportunity to cure any violation of
these subsections if such violation cannot reasonably be expected to be cured.
In such event, the Company shall be required to furnish the Employee notice of
the violation, but the Employee shall not be furnished an opportunity to cure.
"Disabled" shall mean the continuous inability, whether mental or physical,
of Employee to perform her normal job functions as determined by at least two of
three medical physicians selected as follows: the Employee or her legal
designee shall be entitled to appoint one physician, the Company shall be
entitled to appoint one physician, and such two appointed physicians shall
mutually appoint a third physician. Notwithstanding the foregoing, the
Employee, or her designee, and the Company may mutually agree that she is
"Disabled" within the meaning of this Agreement.
11. Termination By the Company Without Cause or By the Employee With Good
Reason. The Company may terminate the employment of Employee for any reason
other than those for Cause, in which event such termination shall be deemed a
"Termination Without Cause." In addition, the Employee shall have the right to
terminate this Agreement for any material breach of this Agreement by the
Company, which shall include but not be limited to materially changing the
duties assigned to Employee beyond those contemplated in Section 2 of this
Agreement or causing Employee to relocate her primary residence (or to spend an
inordinate number of days) outside of the area set forth in Section 2 of this
Agreement (it being understood that the Employee may be required to periodically
travel outside of such area to oversee businesses whose Net Profits are included
in her bonus calculation); provided that the Company shall be furnished thirty
(30) days notice of such breach and an opportunity to cure (any such termination
constituting a "Termination By Employee With Good Reason"). Notwithstanding the
cure provisions provided in the preceding sentence, the Company shall not have
the opportunity to cure any violation of this Agreement if such violation cannot
reasonably be expected to be cured but the Employee shall still furnish notice
to the
-7-
Company. In the event of a Termination Without Cause or a Termination with Good
Reason by the Employee the Company shall continue making payments to Employee in
an amount equal to the compensation of the Employee, as determined in Section 4
of this Agreement, as if she was still employed for a period equal to the lesser
of (i) one (1) year, or (ii) the remaining term of this Agreement, which amount,
in the event of a Termination Without Cause or a Termination By Employee With
Good Reason, shall constitute the full and total amount of liquidated damages
that the Employee shall be entitled to receive from the Company and its
Affiliates for any contractual or tort claims arising out of her employment
relationship with the Company.
12. Covenant Not to Compete. The Employee recognizes that the Company has
business goodwill and other legitimate business interests which must be
protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to employ the Employee on the terms and conditions set forth
herein, the agreement by the Company to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Employee's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 12, the Employee agrees that in the
event (i) Employee is terminated for Cause, or (ii) Employee leaves the employ
of the Company other than a Termination By Employee With Good Reason prior to
expiration of the term of the Agreement, or (iii) upon the expiration of the
term of this Agreement, then for a period of the latest date of (i) five (5)
years after the date of this Agreement, or (ii) three (3) years after the date
employment is so terminated:
(a) Employee will not in any capacity or relationship enter into, engage
in, or be connected with any business or business operation or activity within
a fifty (50) mile radius of any office location then operated by the Company
or any Affiliate, at the time of such termination, which consists in whole or
in part of the Business of the Company; and
(b) Employee will not call upon any customer whose account is serviced in
whole or in part by the Company or its Affiliates at the time of the
termination of Employee's employment, with the purpose of selling or
attempting to sell to any such customer any services included within that
offered by the Company or its Affiliates; and
(c) Employee will not intentionally divert, solicit or take away any
customer, supplier or employee of the Company or its Affiliates, or the
patronage of any customer or supplier of the Company or its Affiliates, or
otherwise interfere with or disturb the relationship existing between the
Company or its Affiliates and any of their respective customers, suppliers or
employees, directly or indirectly.
In addition, the foregoing restrictive covenants shall also apply to the
Employee in the event of her Termination Without Cause or in the event of
Termination By Employee With Good Reason by the Employee, but only for a period
of one (1) year from such date of termination.
-8-
In the event the Company ceases operation of the Business of the Company
(other than in a merger, consolidation, sale of assets or similar transaction,
or upon the filing of a bankruptcy or receivership proceeding against the
Company, or upon the appointment of a liquidator for the Company), the
provisions of this Section 12 shall not be applicable to the conduct of Employee
subsequent thereto.
It is mutually understood and agreed that if any of the provisions relating
to the scope, time or territory in this Section 12 are more extensive than is
enforceable under applicable laws or are broader than necessary to protect the
good will and legitimate business interests of the Company, then the Parties
agree that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Employee's
covenants contained in this Section 12 are inadequate, and they agree that the
Company shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Company.
13. Business Opportunities. Except for passive investments by the
Employee in publicly traded entities, or investments in private ventures which
do not compete with, or are not in the same business as, the Company and which
come to the attention of the Employee outside of the scope of her employment for
as long as the Employee shall be employed by the Company and thereafter with
respect to any business opportunities learned about during the time of
Employee's employment by the Company, the Employee agrees that with respect to
any future business opportunity or other new and future business proposal which
is offered to, or comes to the attention of, the Employee and which is in any
way related to, or connected with, the Business of the Company, the Company
shall have the right to take advantage of such business opportunity or other
business proposal for its own benefit. The Employee agrees to promptly deliver
notice to the Board in writing of the existence of such opportunity or proposal
and the Employee may take advantage of such opportunity only if the Company does
not elect to exercise its right to take advantage of such opportunity.
14. Confidential Information. The Employee acknowledges that in the
course of her employment with the Company, she will receive certain trade
secrets, know-how, lists of customers, employee records and other confidential
information and knowledge concerning the Business of the Company (hereinafter
collectively referred to as "Information") which the Company desires to protect.
The Employee understands that such Information is confidential and she agrees
that she will not reveal such Information to anyone outside the Company except
(i) for information already known to the public, now or in the future, or (ii)
in connection with any legal proceeding regarding this Agreement, the Purchase
Agreement or the transactions contemplated thereby or as otherwise required by
law or judicial order. The Employee further agrees that during the term of this
Agreement and thereafter she will not use such Information in competing with the
Company. Upon termination of her employment hereunder, the Employee shall
surrender to the Company all papers,
-9-
documents, writings and other property produced by her or coming into her
possession by or through her employment hereunder and relating to the
information referred to in this Section 14, which are not general knowledge in
the industry, and the Employee agrees that all such materials will at all times
remain the property of the Company.
15. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally with a written receipt
acknowledging delivery or telefaxed with receipt confirmed, or three (3)
business days after the posting thereof by United States first class, registered
or certified mail, return receipt requested, with postage fee prepaid and
addressed as follows:
If to the Company: Litigation Resources of America
-- California, Inc.
c/o Litigation Resources of America, Inc.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telefax:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Employee: ▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
16. Specific Performance. The Employee acknowledges that a remedy at law
for any breach or attempted breach of Sections 12, 13 or 14 of this Agreement
will be inadequate, the Employee agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
17. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
18. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee, her spouse nor their estates shall have any right to
encumber or dispose of any right to receive payments hereunder, it being
understood that such payments and the right thereto are nonassignable and
nontransferable.
-10-
19. Binding Effect. Subject to the provisions of Section 18 of this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the Employee's heirs and personal representatives, and the
successors and assigns of the Company.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California.
21. Prior Employment Agreements. Employee represents and warrants to the
Company that she has fulfilled all of the terms and conditions of all prior
employment agreements to which she may be or have been a party, and at the time
of execution of this Agreement is not a party to any other employment agreement.
22. Parole Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided, however, the amount of compensation to be paid Employee for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Employee of any of the
duties of her employment with the Company. Written notification of any
modification of compensation paid or payable to the Employee for her services
shall be conclusively deemed to be a ratification and confirmation of this
Agreement amended by such change in compensation unless the Employee shall
object in writing with thirty (30) days after such written notification from the
Company.
23. Waiver. Any waiver to be enforceable must be in writing and executed
by the Party against whom the waiver is sought to be enforced.
24. Attorney's Fees. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees and other costs from the other Party hereto.
25. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
27. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
-11-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC.
a California corporation
By: _________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
THE EMPLOYEE:
_______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
-12-
SCHEDULE A
----------
CALCULATION OF ANNUAL BONUS
The Business will be operated as a separate division (the "Division")
of the Company. Except as expressly provided below, the Division will not
include the Acquired Businesses.
(a) Each year the accountants regularly employed by the Company shall
determine the aggregate amount of Net Profit, if any, of the Division during
each consecutive twelve (12) month time period ending on the last day of the
fiscal year of the Company ("Annual Profits"), and continuing each year during
the term of this Agreement. Beginning with the first fiscal year end of the
Company subsequent to the Effective Date hereof, to the extent that the Annual
Profits of the Division for the current year exceed the Annual Profits of the
Division for the prior year, the Employee shall be paid an annual bonus equal to
ten percent (10%) of the amount of such excess, if any, provided, however, that
if the Annual Profits for the Division for the current year are less than the
Annual Profits for the prior year, then such amount shall offset any positive
increase in Annual Profits attributable to the Division for purposes of
determining the payment of a bonus to Employee hereunder in the following year;
and further provided that for the first fiscal year and last fiscal year of the
Employment Term of the Company (A)(i) the Annual Profits shall be calculated for
each full month of operations and added together, (ii) the Annual Profits for
any partial month of operations shall be divided by the number of actual days in
such month and multiplied by 30 to create a full month and (iii) the sum of
(A)(i) and (A)(ii) shall be added together, that result divided by the number of
full and partial months of operations and the quotient multiplied by 12 to
create the number representing Annual Profits for the first fiscal year and (B)
the Annual Profits of the prior year shall be deemed to be $1,118,000. For
purposes of this calculation, "Net Profit" shall mean the Division's pre-tax
income plus (i) net interest expense, (ii) one-time expenses and (iii)
depreciation and amortization. In addition, the Parent currently anticipates
acquiring or establishing additional court reporting businesses ("Acquired
Businesses") in (i) Orange County, (ii) California south of Orange County,
including San Diego or (iii) Las Vegas, Nevada (collectively, the "Territory").
In the event the Parent acquires or establishes an Acquired Business within the
Territory which Acquired Business has annual revenues of $2,500,000 or less in
the 12-month period immediately prior to its acquisition (a "Qualifying
Business"), the Employee shall be appointed to manage or oversee the operations
of such Qualifying Business. For purposes of calculating the bonus payable
hereunder, the Net Profit of the Division shall be increased by any increase in
the Net Profit of each Qualifying Business, accruing from the date an Acquired
Business becomes a Qualifying Business, less any bonuses paid to other employees
of or consultants to the Qualifying Business arising as a result of such
increase in Net Profit. In addition, the Company acknowledges that the Employee
is currently formulating a plan to establish court reporting businesses in other
areas, to be owned, directly or indirectly by the Parent. If such plans are
approved by the Parent and such offices are opened, for purposes of calculating
the bonus payable hereunder, the Net Profit of the Division shall be increased
by any Net Profit from such offices.
EXHIBIT C
---------
▇▇▇▇ OF SALE,
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ▇▇▇▇ OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into
effective as of _______, 1997, between ▇▇▇▇▇▇▇ ▇▇▇▇▇, an individual ("Seller"),
and LITIGATION RESOURCES OF AMERICA -- CALIFORNIA, INC., a California
corporation ("Buyer"). Buyer and Seller may be hereinafter sometimes referred
to collectively as the "Parties" or individually as a "Party." All defined
terms not otherwise defined herein shall have the meanings ascribed to them in
that certain Agreement of Purchase and Sale of Assets effective of September __,
1997, executed by and between Seller, the Buyer and Litigation Resources of
America, Inc., a Texas corporation and the parent of the Buyer (the
"Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Buyer has agreed to purchase from Seller, and Seller has agreed to
grant, bargain, sell, convey, transfer, assign and deliver to Buyer, the Assets;
and
WHEREAS, as partial consideration for the sale and assignment of the
Assets, Buyer has agreed to assume the Assumed Liabilities, on and subject to
the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the payment of Ten Dollars ($10.00) and
other good and valuable consideration, including the delivery to Seller of the
Purchase Price, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller hereby agree as follows:
1. SALE AND ASSIGNMENT. Seller has granted, bargained, sold, conveyed,
transferred, assigned and delivered, and by these presents does grant, bargain,
sell, convey, transfer, assign and deliver unto Buyer, its successors and
assigns, the Assets.
2. BULK SALES. Buyer and Seller hereby waive compliance by Seller with
the bulk sales laws of the State of California. This waiver shall in no event
stop or prevent (i) Buyer or Seller from asserting as a bar or defense to any
action or proceeding brought under any such law that it is not applicable to the
sale and assignment contemplated hereby, nor (ii) Buyer from asserting against
Seller any claim for breach or default by Seller under the Agreement, nor (iii)
any Buyer Indemnified Party from asserting any claim for indemnification under
the Agreement.
3. ASSUMPTION. Subject to the exceptions and exclusions of Section 2.6 of
the Agreement, and otherwise on and subject to the terms and conditions of the
Agreement, Buyer hereby assumes and agrees to pay and perform the Assumed
Liabilities.
4. SELLER'S REPRESENTATIONS AND WARRANTIES. Except as otherwise described
in the Agreement, Seller has good, marketable and indefeasible title to the
Assets, free and clear of all
mortgages, liens, security interests, pledges, charges, options, claims,
restrictions, or encumbrances of any nature whatsoever. Except as otherwise
described in the Agreement, Seller further represents and warrants that (i)
Seller has obtained all consents or approvals necessary to prevent the
execution, delivery or performance of the Agreement or this ▇▇▇▇ of Sale,
Assignment and Assumption Agreement from being or becoming, with notice or lapse
of time or both, a default under any contract, lease or other agreement assigned
hereby, (ii) there has been no default, and there exists no fact or circumstance
which with notice or lapse of time or both would become a default, under any
such contract, lease or agreement, and (iii) no contract, lease or other
agreement assigned hereby has been terminated, modified, renewed or extended,
except as previously disclosed in writing to Buyer. In addition, all of
Seller's representations and warranties set forth in the Agreement with respect
to the Assets and Liabilities are incorporated herein by reference.
5. INDEMNIFICATION. Each Party shall indemnify, save, defend, and hold
harmless the other Party and the other Party's directors, officers, agents, and
employees from and against any and all Damages incurred in connection with or
arising out of or resulting from or incident to any breach of any covenant or
warranty, or the inaccuracy of any representation, made in or pursuant to this
▇▇▇▇ of Sale, Assignment and Assumption Agreement, to the extent to which such
indemnified party would be entitled to indemnification under, and on and subject
to the terms and conditions set forth in, the Agreement.
6. ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it may be entitled at law or equity.
7. GOVERNING LAW; JURISDICTION; VENUE; SERVICE. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas, without regard to conflicts of law principles, and the laws of the
United States applicable in Texas. Venue for any litigation between the Parties
hereto with respect to the subject matter of this Agreement shall be in Houston,
Texas. Each Party hereby irrevocably submits to personal jurisdiction in Texas.
Each Party hereby waives all objections to personal jurisdiction in Texas and
venue in Houston, Texas for purposes of such litigation. Each Party waives
summons or citation and agrees that delivery of a duly filed complaint or
petition as provided in the notice section of this Agreement will suffice as
substitute service of summons or citation.
8. FURTHER ASSURANCES. Each of the Parties shall perform such actions
and deliver or cause to be delivered any and all such documents, instruments and
agreements as the other Party may reasonably request for the purpose of fully
and effectively carrying out this Agreement and the transactions contemplated
hereby.
9. MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only by written instrument signed by both of the Parties.
2
10. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, and the documents,
instruments and agreements executed in connection herewith, set forth the entire
agreement and understanding between the Parties with respect to the subject
matter hereof and thereof. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns.
11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which together shall constitute one and the same agreement.
EXECUTED AND DELIVERED EFFECTIVE the ____ day of ____, 1997.
BUYER:
------
LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC.
a California corporation
By:_____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President & Chief Executive Officer
SELLER:
-------
____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
3
EXHIBIT D
---------
SELLER'S INVESTOR REPRESENTATION LETTER
September 15, 1997
Litigation Resources of America, Inc.
Litigation Resources of America -- California, Inc.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Re: Investor Representations
Gentlemen:
The purpose of this letter is to evidence certain representations and
warranties to be made with respect to certain matters relating to the
acquisition by ▇▇▇▇▇▇▇ ▇▇▇▇▇, an individual (the "Investor"), of shares of
Common Stock issued by Litigation Resources of America, Inc., a Texas
corporation (the "Company"), having a par value of one-cent ($0.01) per share
(the "Common Stock"), for and in partial consideration of the sale of certain of
the assets of the Investor to Litigation Resources of America -- California,
Inc., a California corporation ("Buyer"), upon the terms and conditions set
forth herein and in that certain Agreement of Purchase and Sale of Assets (the
"Purchase Agreement"), entered into by and among the Investor, the Company, and
the Buyer.
The Investor hereby represents and warrants to the Company, the Buyer
, and each of the Company's and the Buyer's officers, directors, shareholders,
agents, attorneys, employees and representatives as follows:
1. Investment Intent. (i) The Common Stock is being acquired solely
for the account of the Investor, for investment and not with a view to or for
the resale, distribution, subdivision or fractionalization thereof, (ii) the
Investor has no contract, understanding, undertaking, agreement or arrangement
with any person to sell, transfer or pledge to any person the Common Stock or
any part thereof, (iii) the Investor has no present plans to enter into any such
contract, undertaking, agreement or arrangement, (iv) the Investor understands
the legal consequences of the foregoing representations and warranties to mean
that the Investor must bear the economic risk of the investment in the Common
Stock for an indefinite period of time, (v) the Investor has such knowledge and
experience in financial and business matters that the Investor is capable of
evaluating the merits and risks of acquiring the Common Stock, and (vi) the
Investor acknowledges that the acquisition of the Common Stock by the Investor
involves a high degree of risk which may result in the loss of the total amount
of this investment.
Litigations Resources of America, Inc.
Litigation Resources of America -- California, Inc.
September 15, 1997
Page 2
2. No General Solicitation. The Common Stock has been offered to
the Investor without any form of general solicitation or advertising of any type
by or on behalf of the Company or any of its officers, directors, shareholders,
employees, agents, attorneys or representatives.
3. Access to Information. The Investor has (i) for a reasonable
amount of time had an opportunity to ask questions and receive answers
concerning the terms and conditions of the issuance of the Common Stock and the
proposed business and affairs of the Company, and is satisfied with the results
thereof, (ii) has been given access, if requested, to all other documents with
respect to the Company or this transaction, as well as to such other information
as the Investor has requested, and (iii) has relied solely on investigations
conducted by the Investor in making the decision to acquire the Common Stock or
approve the transactions set forth in the Purchase Agreement.
4. Exemption Status. The Investor understands that the Common Stock
to be sold hereunder are being issued in reliance upon the exemptions from
registration under the Securities Act of 1933, as amended. The Investor
understands that the undersigned, the Company, the Company's officers,
directors, shareholders, employees, agents, attorneys and representatives are
relying on, among other things, the representations and warranties of the
Investor set forth herein in issuing the Common Stock to the Investor.
5. Securities Compliance. The Investor understands and agrees that
(i) no sale, distribution, transfer or other disposition of the Common Stock, or
any portion thereof, can be made by the Investor unless the Common Stock has
been registered under the Securities Act of 1933, as amended, and applicable
securities laws of any other relevant jurisdiction, or exemptions from such
registration are available, as evidenced by an opinion of counsel, satisfactory
to the Company, with respect to the proposed sale, distribution, transfer or
other disposition, and (ii) an appropriate legend will be endorsed on the Common
Stock evidencing such restrictions.
6. Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
7. Representations of Natural Persons. If the Investor is a natural
person, the Investor has reached the age of majority in the state in which the
Investor resides, has adequate means of providing for the Investor's current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Common Stock, has no need for liquidity in such
investment, and is able to withstand a complete loss of such investment.
Litigations Resources of America, Inc.
Litigation Resources of America -- California, Inc.
September 15, 1997
Page 3
8. Representations of Entities. If Investor is a corporation,
partnership, trust or other entity, (i) it is authorized and qualified to
purchase and hold the Common Stock, (ii) it has not been formed for the purpose
of acquiring the Common Stock, (iii) the person executing this Agreement for and
on behalf of such entity has been duly authorized by such entity to do so, (iv)
it is willing and able to bear the substantial economic risk of an investment in
the Common Stock and has no need for liquidity with respect thereto, and (v) it
is able to withstand a complete loss of its investment.
9. No Governmental Review. The Investor acknowledges and understands
that no federal or state agency has passed on the fairness of the investment in
the Common Stock, nor made any recommendation or endorsement of the Common
Stock, and that there is a significant risk of loss of all or a portion of the
Investor's investment in the Common Stock.
10. State of Residence and Domicile. The Investor is either (i) a
permanent resident of the State of California, or (ii) not a resident or citizen
of the United States.
The Investor acknowledges that the Company and the Company's officers,
directors, agents, attorneys and other representatives are relying on the
representations and warranties set forth herein, and would not deliver the
Common Stock to the Investor but for the execution and delivery of this letter
by the Investor.
Very truly yours,
▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT E
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made
effective as of the ___ day of _____________, 1997, by ▇▇▇▇▇▇▇ ▇▇▇▇▇, an
individual ("Pledgor"), and LITIGATION RESOURCES OF AMERICA -- CALIFORNIA, INC.,
a California corporation ("Secured Party"). All capitalized terms contained
herein without definition shall have the respective meanings given to them in
that certain Agreement of Purchase and Sale of Assets dated September __, 1997
(the "Purchase Agreement") by and among the Pledgor, Secured Party, and
Litigation Resources of America, Inc., a Texas corporation and the parent
company of the Secured Party (the "Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Pledgor has agreed to sell substantially all of its assets to
Secured Party upon the terms and conditions contained in the Purchase Agreement;
and
WHEREAS, Pledgor has certain obligations under the Purchase Agreement,
including, but not limited to, the obligation of Pledgor to indemnify Secured
Party for any breaches of representations and warranties of Pledgor contained in
the Purchase Agreement; and
WHEREAS, pursuant to the terms of the Purchase Agreement and as partial
consideration for the purchase of the common stock of the Company by the Secured
Party, the Pledgor has been issued shares of common stock, $.01 par value per
share (the "Common Stock"), of the Parent; and
WHEREAS, the terms of the Purchase Agreement provide for the Pledgor to
pledge a portion of the shares of Common Stock to the Secured Party in order to
secure the obligations of Pledgor under the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Pledge of Common Stock. Pledgor hereby pledges and grants to Secured
Party a security interest in the _______ shares (the "Shares") of the Common
Stock issued pursuant to the Purchase Agreement (which constitute 50% of the
shares of Common Stock issued to her pursuant to the Agreement), which shall
attach immediately upon the issuance of such Shares to Pledgor in accordance
with the terms of the Purchase Agreement. Immediately upon receipt of the
Shares, Pledgor shall be required to deliver to Secured Party the certificate or
certificates representing the Shares in order that Secured Party might perfect
its security interest therein. The Pledgor and the Secured Party hereby
acknowledge and agree that the value of the Common Stock ("Agreed Value") shall
be deemed to be (i) the IPO Price if shares are being surrendered hereunder in
order to effect an adjustment in the Purchase Price pursuant to Section 2.5 of
the Purchase Agreement and (ii) if shares are being surrendered hereunder for
any other reason, the average public trading price of each
-1-
share of Common Stock over the five (5) most recent business days falling prior
to the date of delivery by the Secured Party to the Pledgor of the notice of an
event requiring an Offset, as such term is defined in the Purchase Agreement.
Pledgor shall possess all voting rights pertaining to the Shares, so long as an
Event of Offset, as hereinafter defined, has not occurred, or if an Event of
Offset has allegedly occurred but is being disputed by the parties hereto, and
Secured Party shall have no voting rights that may be presently or hereafter
attributable to the Shares. In addition, so long as an Event of Offset has not
occurred, or if an Event of Offset has allegedly occurred but is being disputed
by the parties hereto, then Pledgor shall have the right to receive all
dividends, if any, on the Shares, and Pledgor shall be entitled to receive all
proceeds upon liquidation of the Shares, if any, as well as all other rights
with respect to the Shares except for the right to transfer title thereto.
Notwithstanding the foregoing, if an Event of Offset has occurred and (i) has
been resolved, by agreement or otherwise (a "Resolved Event of Offset") or (ii)
is the subject of litigation, which litigation is still pending or in process (a
"Continuing Event of Offset"), then Secured Party shall have the right to
designate a representative or trustee to vote those shares of Common Stock
covered by or subject to the Resolved Event of Offset or Continuing Event of
Offset (the "Offset Shares"), to receive all dividends and liquidation proceeds
with respect to the Offset Shares, and to receive all other rights with respect
to the Offset Shares.
2. Representations and Warranties. Pledgor hereby represents, warrants
and covenants to and with Secured Party that:
(a) Pledgor will not, without the written consent of Secured Party,
sell, contract to sell, encumber, or dispose of any Shares remaining
subject to the security interest created by this Pledge Agreement.
(b) No consent of any party is necessary for the Pledgor to perform
its obligations hereunder, or if any such consent is required, such consent
has been received prior to the execution of this Pledge Agreement.
3. Event of Offset. Each delivery by Secured Party to the Pledgor of a
notice of a claim of offset shall constitute an Event of Offset ("Event of
Offset") under this Pledge Agreement.
4. Remedies.
(a) Upon the occurrence of a Resolved Event of Offset, Secured Party
may, at its option, exercise with reference to the Shares any and all of
the rights and remedies of a secured party under the Uniform Commercial
Code as adopted in the State of Texas and as otherwise granted therein or
under any other applicable law or under any other agreement executed by
Pledgor, including, without limitation, the right and power to sell, at
public or private sale(s), or otherwise dispose of or keep the Shares and
any part or parts thereof, or interest or interests therein owned by
Pledgor, in any manner authorized or permitted under this Pledge Agreement
or under the Uniform Commercial Code, and to apply the proceeds thereof
toward payment of any costs and expenses and attorneys' fees and legal
expenses thereby incurred by Secured Party, and toward payment of the
obligations under the Purchase Agreement in such order or manner as Secured
Party may elect. Notwithstanding anything
-2-
to the contrary contained herein, the Secured Party shall only foreclose on
that portion of the Shares that is reasonably necessary in the reasonable
good faith judgment of the Secured Party in order to satisfy the amount of
the claim constituting the Resolved Event of Offset. For purposes hereof,
the Agreed Value of the Shares shall be deemed to be the value that the
Secured Party is receiving on the foreclosure of the Shares and Secured
Party shall not be entitled to foreclose on more Shares than is necessary
to recover all of its damages resulting from the Resolved Event of Offset.
(b) Secured Party is hereby granted the right, at its option, after a
Continuing Event of Offset, to transfer at any time to itself or its
nominee the securities or other property hereby pledged, or any part
thereof, and to thereafter exercise all voting rights with respect to such
Shares so transferred and to receive the proceeds, payments, monies, income
or benefits attributable or accruing thereto and to hold the same as
security for the obligations hereby secured, or at Secured Party's
election, to apply such amounts to the obligations, only if due, and in
such order as Secured Party may elect or Secured Party may, at its option,
without transferring such securities or property to its nominee, exercise
all voting rights with respect to the securities pledged hereunder and vote
all or any part of such securities at any regular or special meeting of
shareholders.
(c) Pledgor hereby agrees to cooperate fully with Secured Party in
order to permit Secured Party to sell, at foreclosure or other private
sale, Pledgor's interest in the Shares pledged hereunder as provided in
this Pledge Agreement. Specifically, Pledgor agrees to deliver to Secured
Party the certificate or certificates representing the Shares if Pledgor
has possession at that time, to fully comply with the securities laws of
the United States and of the State of Texas and to take such other action
as may be necessary to permit Secured Party to sell or otherwise transfer
the securities pledged hereunder in compliance with such laws.
5. Termination. This Pledge Agreement shall continue as security for the
payment or satisfaction of the obligations under the Purchase Agreement until
the earliest to occur of: (i) termination of this Pledge Agreement by written
notice of the Secured Party to the Pledgor, (ii) the date upon which none of the
representations and warranties of Pledgor contained in the Purchase Agreement
survive and all covenants and obligations of Pledgor under said Purchase
Agreement have been fully and properly performed or (ii) three (3) years after
the date hereof, provided that Secured Party has not given Pledgor notice of an
Event of Offset which has not been satisfied by Pledgor, or if there is an Event
of Offset, the pledge shall continue only to the extent of the number of Shares
based on the Agreed Value equal to the amount of damages reasonably expected to
be caused by the Event of Offset; provided however, upon the expiration of six
months, two years and three years after the date of this Pledge Agreement (each
a "Release Date"), the following provisions shall apply: (x) if no Event of
Offset exists on such Release Date, the Secured Party shall release one-third
(1/3) of the number of Shares initially pledged hereunder from the pledge
established hereby, and the remaining shares of Shares shall remain pledged
under the terms and conditions of this Pledge Agreement; or (y) if an Event of
Offset exists, the amount of Damages resulting from such Event of Offset shall
be determined, and on the first Release Date, the second Release Date and the
third Release Date, one third (1/3), one half (1/2) and all of the remaining
Shares, respectively, that have not been Offset against shall be released from
the pledge established hereby and delivered
-3-
to the Pledgor and the remaining Shares shall remain pledged under the terms and
conditions of this Pledge Agreement.
6. Release from Pledge. Upon the termination of this Pledge Agreement,
Secured Party shall immediately release its security interest in the Shares. In
addition, Secured Party shall deliver the certificate or certificates
representing the Shares to Pledgor if Secured Party has possession of such
certificates at that time. Upon such occurrence, the security interest of
Secured Party shall automatically terminate and Secured Party shall thereafter
have no interest whatsoever in the Shares.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Pledgor: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail ▇▇▇▇▇@▇▇▇.▇▇▇
If to the
Secured Party: Litigation Resources of America -- California, Inc.
c/o Litigation Resources of America, Inc.
650 First City Tower, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Copy to: ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
8. Successors. This Pledge Agreement shall be binding upon, and inure to
the benefit of the parties hereto and their successors and assigns. Any
assignee whatsoever will be bound by the obligations of the assigning party
under this Pledge Agreement, and any assignment shall not diminish the liability
or obligation of the assignor under the terms of this Pledge Agreement unless
otherwise agreed.
-4-
9. Severability. In the event that any one or more of the provisions
contained in this Pledge Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Pledge Agreement or any such other
instrument.
10. Paragraph Headings. The paragraph headings used herein are
descriptive only and shall have no legal force or effect whatsoever.
11. Gender. Whenever the context so requires, the masculine shall include
the feminine and neuter, and the singular shall include the plural and
conversely.
12. Survival of Warranties. All representations, warranties, and
agreements made by the parties in this Pledge Agreement or in any certificates
delivered pursuant hereto will survive the execution date hereof.
13. Applicable Law. This Pledge Agreement shall be construed and
interpreted in accordance with the laws of the United States of America and the
State of Texas, and is intended to be performed in accordance with and as
permitted by such laws.
14. Definitions. All terms and definitions used herein shall have the
same meaning as in the Purchase Agreement unless otherwise indicated.
15. Drafting. The parties hereto acknowledge that each party was actively
involved in the negotiation and drafting of this Pledge Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Pledge Agreement shall be construed in favor or against either party hereto
because one is deemed to be the author thereof.
16. Attorneys' Fees. If any litigation is instituted to enforce or
interpret the provisions of this Pledge Agreement or the transactions described
herein, the prevailing party in such action shall be entitled to recover its
reasonable attorneys' fees from the other party hereto.
17. Multiple Counterparts. This Pledge Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of which
shall constitute one instrument.
18. Substitution of Collateral. Upon the request of the Pledgor to
substitute collateral for the Shares pledged hereunder, the Secured Party will
negotiate in good faith to accept such substituted collateral pursuant to a
security agreement appropriate to adequately perfect a security interest therein
in favor of Secured Party, such substituted collateral to be in form, substance
and amount reasonably acceptable to the Secured Party.
-5-
IN WITNESS WHEREOF, this Pledge Agreement has been executed effective as of
the date first above written.
PLEDGOR:
________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
SECURED PARTY:
LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC.
By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
-6-
EXHIBIT F-1
FORM OF OPINION OF BUYER'S COUNSEL
Based upon our examination and consideration of the Agreement, the
Ancillary Agreements, and subject to the assumptions, exceptions, qualifications
and limitations set forth herein, we are of the opinion that:
1. Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California with the corporate
power and authority to own its assets and to transact its businesses
as now being conducted. Buyer is in good standing in all jurisdictions
in which the character of the properties and assets now owned or held
by it or the nature of the businesses now conducted by it requires it
to be so licensed or qualified and where the failure so to qualify
would affect materially and adversely the business, financial
condition or results of operations of Buyer.
2. The Parent is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Texas with the corporate
power and authority to own its assets and to transact its business as
now being conducted. The Parent is in good standing in all
jurisdictions in which the character of the properties and assets now
owned or held by it or the nature of the business now conducted by it
requires it to be so licensed or qualified and where the failure so to
qualify would affect materially and adversely the business, financial
condition or results of operations of the Parent.
3. The Agreement and Ancillary Agreements to which either Buyer or Parent
are a party have been duly and validly authorized, executed and
delivered and are valid and binding on either the Buyer or Parent, as
applicable, and enforceable in accordance with their terms, except as
limited by bankruptcy laws, insolvency laws, and other similar laws
affecting the rights of creditors generally.
4. Except for such as have been obtained and delivered to Seller at
closing and except where the failure to obtain such authorization,
approval or consent or to take such action or make such filing would
not have a material adverse effect on Buyer or Parent, as applicable,
to our knowledge no authorization, approval or consent of or
declaration or filing with any governmental authority or regulatory
body is necessary or required of the Buyer or the Parent in connection
with the execution and delivery of the Agreement and the Ancillary
Agreements by either and the performance by either Buyer or Parent of
its obligations thereunder.
5. The execution and delivery of the Agreement and the Ancillary
Agreements to which it is a party by each of the Buyer and the Parent
and the performance of its obligations thereunder do not to our
knowledge (i) violate any provision of any existing law or regulation
applicable to each or (ii) violate any order, judgment,
award or decree of any court, arbitrator or governmental authority
applicable to each or (iii) violate the charter or bylaws of, or any
securities issued by, each or (iv) violate any mortgage, indenture,
lease, contract or other agreement known to us to which either is a
party or by which either the Buyer or Parent or any of their assets is
bound.
6. To our knowledge, neither the Buyer nor the Parent is in default under
any material order, judgment, award or decree of any court, arbitrator
or governmental authority binding upon or affecting it or by which its
assets may be bound or affected, and to our knowledge, no such order,
judgment, award or decree materially adversely affects the ability of
the Buyer or the Parent to carry on its respective business as now
conducted or perform its respective obligations under the Agreement or
the Ancillary Agreements.
7. To our knowledge, except as disclosed in the Agreement and the
Ancillary Agreements and the schedules thereto, no litigation,
investigation or administrative proceeding of or before any court,
arbitrator or governmental authority is pending or threatened against
the Buyer or Parent or their assets (a) with respect to the Agreement,
the Ancillary Agreements or the transactions contemplated thereby, or
(b) that, if adversely determined, would have a material adverse
effect on the business or financial condition of Buyer or Parent or
their assets.
EXHIBIT F-2
FORM OF OPINION OF SELLER'S COUNSEL
Based upon our examination and consideration of the Agreement and the
Ancillary Agreements, and subject to the assumptions, exceptions, qualifications
and limitations set forth herein, we are of the opinion that:
1. The Seller has all material licenses, permits and authorizations
necessary to own and use the properties owned and used by her and to
operate the Business as now owned and operated by her.
2. To our knowledge and except as otherwise disclosed in the Agreement,
Seller has good and indefeasible title to the Assets, free and clear of
restrictions or conditions to transfer or assignment, or mortgages,
liens, pledges, charges or encumbrances of record, or arising under
applicable law. The Business constitutes the separate property of the
Seller and Seller's spouse has no community property interest in the
Business or any of the Assets. The Agreement and Ancillary Agreements
are in form and content sufficient to vest in the Buyer title to the
Assets and, upon execution and delivery to the Buyer, will cause all
right, title and interest in and to the Assets to vest in the Buyer.
3. Seller has the full right, power and legal capacity to execute, deliver
and perform Seller's obligations under the Agreement and the Ancillary
Agreements.
4. The Agreement and each Ancillary Agreement has been duly executed and
delivered by the Seller, is binding on Seller and enforceable against
Seller in accordance with its terms, except as limited by bankruptcy
laws, insolvency laws, and other similar laws affecting the rights of
creditors generally.
5. Except for such as have been obtained and provided to Buyer, Seller
need not give any notice to, make any filing with, or obtain any
authorization, consent or approval, or make any declaration or filing
with any government or governmental agency or regulatory body or other
third party in connection with the execution and delivery of the
Agreement and the Ancillary Agreements or the performance by the Seller
of Seller's obligations thereunder.
6. The execution and delivery of the Agreement and the Ancillary
Agreements by the Seller, and the performance of Seller's obligations
thereunder (a) do not violate any provision of (i) any existing law or
regulation applicable to the Seller, the Business or the Assets or (ii)
to our knowledge, any order, judgment, award or decree of any court,
arbitrator or governmental authority applicable to the Seller, or (iii)
to our knowledge, except as disclosed in the Agreement and the
schedules thereto, any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Seller is a party or by which the Seller, the
Business or the Assets are bound, and (b) will not result in, or
require, the creation or imposition of any lien on the Assets or any
portion of the Business.
7. To our knowledge, the Seller is not in default under any order,
judgment, award or decree of any court, arbitrator or governmental
authority binding upon or affecting her or by which the Business or any
of the Assets may be bound or affected, and no such order, judgment,
award or decree materially adversely affects the ability of the Seller
to carry on her business as now conducted or the ability of the Seller
to perform her obligations under the Agreement or the Ancillary
Agreements.
8. To our knowledge, except as disclosed in the Agreement and the
schedules thereto, no litigation, investigation or administrative
proceeding of or before any court, arbitrator or governmental authority
is pending or threatened against the Seller, the Business or the Assets
(a) with respect to the Agreement or the transactions contemplated
thereby, or (b) that, if adversely determined, would have a material
adverse effect on the business or financial condition of the Seller,
the Business or the Assets.