Exhibit 2
PURCHASE AGREEMENT
by and among
XXXXX INC.,
and
The Members
of
ZOLFO XXXXXX, LLC
and
The Shareholders
of
ZOLFO XXXXXX HOLDINGS, INC.
Dated September 5, 2002
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), dated this 5th day of
September, 2002, is by and among (i) XXXXX INC., a Delaware corporation
("Buyer"), on the one hand, and (ii) Xxxxxxx X. Xxxxxx, Xxxxxxx X. France,
Xxxxxxx XxXxxxxx (individually a "Designated Principal" and collectively the
"Designated Principals") and Zolfo Xxxxxx Acquisition, LLC (the "Other Seller,"
and together with the Designated Principals, individually a "Seller" and
collectively the "Sellers"), on the other hand.
RECITALS
A. WHEREAS, Sellers collectively own all of the issued and outstanding
Interests of Zolfo Xxxxxx, LLC, a New Jersey limited liability company (the
"Company");
B. WHEREAS, the Designated Principals collectively own all of the issued and
outstanding shares of capital stock of Zolfo Xxxxxx Holdings, Inc. (the "Sub S
Holding Corporation");
C. WHEREAS, prior to the Closing hereunder, and as a condition precedent to
the execution of this Agreement and the consummation of the transactions
contemplated hereby, (1) each of the companies listed on Schedule A-1 was
contributed or otherwise transferred to the Company, and (2) each of the
corporations listed on Schedule A-2 was contributed or otherwise transferred to
the Sub S Holding Corporation;
D. WHEREAS, the ZC Companies were engaged in the business of providing
operational turnaround, corporate advisory, troubled company, financial crisis
management, interim management and recovery and restructuring services (the
"Business") and the Company, the Sub S Holding Corporation and the Subsidiaries
have, in all respects, succeeded to all of the properties, assets, rights,
privileges and obligations of the ZC Companies and are engaged in the Business;
E. WHEREAS, the professional services and continued employment of the
Designated Principals and each of the other principals and senior personnel of
the Company that enter into an employment agreement in the form attached hereto
as Exhibit D (individually, an "Other Principal" and collectively, the "Other
Principals") and certain other senior officers and employees of the Company are
necessary to the ongoing operation and success of the Business;
F. WHEREAS, Buyer desires to own the Business and acquire all of the
outstanding Interests of the Company and all of the outstanding shares of
capital stock of the Sub S Holding Corporation, and Sellers desire to sell the
same, on the terms and conditions hereinafter contained;
G. WHEREAS, immediately upon consummation of Buyer's acquisition of all of
the outstanding Interests of the Company and all of the outstanding shares of
capital stock of the Sub S Holding Corporation pursuant to this Agreement and
the transactions contemplated hereby, the Company shall be branded and operated
as "Xxxxx Zolfo Xxxxxx;" and
H. WHEREAS, Sellers and Buyer desire to make certain representations,
warranties and agreements in connection with the transactions contemplated
hereby;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, do hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Accredited Investor" has the meaning set forth in Section 4.6(a).
"Acquired Stock" means the Deferred Closing Stock and the
Installment Stock, collectively.
"Additional Cash Amount Due Sellers" has the meaning set forth in
Section 2.2(a).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliated Person" has the meaning set forth in Section 5.22.
"Agreement" has the meaning set forth in the preamble.
"Annual Period" has the meaning set forth in Section 2.1(b)(i).
"Auditor Opinion Consent" has the meaning set forth in Section 7.9.
"Bankruptcy Court Approval" has the meaning set forth in Section
5.12(b).
"Business" has the meaning set forth in the recitals.
"Business Day" means any day that is not a Saturday or Sunday or a
legal holiday on which banks are authorized or required by law to be closed in
New York, New York.
"Buyer" has the meaning set forth in the preamble.
"Buyer Common Stock" means the common stock, par value $.10 per
share, of Buyer.
"Buyer SEC Filing" has the meaning set forth in Section 7.9.
"Cash Consideration" has the meaning set forth in Section 2.1(a)(i).
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"Catalyst" has the meaning set forth in Section 5.24.
"Catalyst I" has the meaning set forth in Section 5.24.
"Change of Control" means the occurrence of any one or more of the
following: (i) a merger or consolidation involving Buyer in which Buyer's
stockholders immediately prior to such merger or consolidation do not in the
aggregate own directly or indirectly at least a majority equity interest and a
majority of the voting capital stock in the surviving entity (if Buyer is a
constituent corporation in such merger or consolidation) or in Buyer (if Buyer
is not a constituent corporation in such merger or consolidation), as the case
may be, immediately following the consummation of such merger or consolidation;
(ii) the sale, lease, exchange or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of Buyer;
(iii) the approval by Buyer's stockholders of any plan or proposal for the
liquidation, winding-up or dissolution of Buyer; or (iv) any transaction,
circumstance or event that would result in any "person" or "group" (as such
terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable), together with all affiliates and associates (as each
such term is defined in Rule 12b-2 under the Exchange Act) thereof, acquiring
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the equity interests or more than 50% of the
voting capital stock of Buyer.
"Client Contracts" has the meaning set forth in Section 5.12(b).
"Clients" has the meaning set forth in Section 5.12(a).
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the recitals.
"Company Auditor" means Deloitte & Touche LLP.
"Company Information" has the meaning set forth in Section 7.9.
"Company Interests" has the meaning set forth in Section 5.3(a).
"Constituent Documents" means, in the case of a limited liability
company, the certificate of formation, limited liability company operating
agreement and other constituent agreements and, in the case of a corporation,
the certificate of incorporation and by-laws.
"Contract" means any contract, agreement, arrangement, commitment,
instrument or understanding, whether written or oral.
"Deferred Closing Stock" has the meaning set forth in Section
2.1(a)(ii).
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"Designated Principals" has the meaning set forth in the preamble.
"Disclosure Schedule" means the disclosure schedules of Sellers and
Buyer accompanying this Agreement.
"Effective Date" means August 31, 2002.
"Effective Date Balance Sheet" has the meaning set forth in Section
2.2(a).
"Elections" has the meaning set forth in Section 9.3(a)(i)
"Employee Arbitration and Litigation" means (i) Xxxx Xxxxx, Xxxxxx
X. Xxxx and Xxxxxxx Xxxxxxx x. Xxxxx Xxxxxx, LLC, American Arbitration
Association case no. 18 Y 180 14330 1, and (ii) Zolfo Xxxxxx, LLC v. Xxxxxx X.
Xxxx and Parotta, Gund & Dzera Management, LLC dated July 9, 2002, filed with
the Superior Court of New Jersey Law Division Essex County Docket No. 6540-02.
"Employment Agreements" means the employment agreements between the
Company and each of the Designated Principals and Other Principals, dated the
Closing Date and otherwise substantially in the form of the forms of employment
agreements attached hereto as Exhibits A, B and C with respect to Xxxxxxx X.
Xxxxxx, Xxxxxxx X. France and Xxxxxxx XxXxxxxx, respectively, and Exhibit D
with respect to the Other Principals.
"Encumbrance" means any lien, pledge, mortgage, security interest,
charge, restriction, adverse claim or other encumbrance of any kind or nature
whatsoever.
"Environmental Law" means any and all Laws and other requirements
relating to the environment, or activities that might threaten or result in
damage to the environment or human health, or any Law that is concerned in whole
or in part with the environment and with protecting or improving the quality of
the environment and human and employee health and safety.
"ERISA" has the meaning set forth in Section 5.18(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exercise Price" has the meaning set forth in Section 2.1(c).
"Financial Statements" means the consolidated financial statements
of the ZC Companies as of December 31, 2000 and 2001 and for the three years
ended on December 31, 2001 audited by Deloitte & Touche LLP.
"Form 10-K" has the meaning set forth in Section 4.7.
"Forms 10-Q" has the meaning set forth in Section 4.7.
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"GAAP" means U.S. generally accepted accounting principles, as in
effect on the date of this Agreement, consistently applied.
"Governmental Body" means any governmental or regulatory body,
agency, authority, commission, department, bureau, court, tribunal, arbitrator
or arbitral body (public or private), or political subdivision, whether federal,
state, local or foreign.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Identified Prospects" has the meaning set forth in Section 5.12(a).
"Indemnification Obligations" means the respective indemnification
obligations of the Designated Principals and Buyer under Article X.
"Indemnified Parties" has the meaning set forth in Section 10.2(a).
"Independent Accounting Firm" has the meaning set forth in Section
2.2(b).
"Installment Payment" has the meaning set forth in Section
2.1(b)(i).
"Installment Stock" has the meaning set forth in Section 2.1(b).
"Interests" means the membership or other ownership or equity
interests in a limited liability company.
"Interim Financial Statements" means the consolidated unaudited
financial statements of the ZC Companies as of June 30, 2001 and 2002 and for
the six-month periods then ended.
"IRS" means the U.S. Internal Revenue Service.
"knowledge" means the knowledge, after reasonable inquiry, at any
time, of: in the case of an individual (including a Seller), such individual; in
the case of a corporation or other entity (including Buyer, the Company, the Sub
S Holding Corporation, each Subsidiary, each ZC Company and the Other Seller),
the directors, executive officers, members and managers of such corporation or
entity; provided, however, that reasonable inquiry of any director, executive
officer, member or manager of the Company shall include reasonable inquiry of
each of the Other Principals.
"Xxxxxxx Entities" means The Xxxxxxx Xxxxxx Corporation, The Xxxx
Xxxxxxxx Corporation and The Xxxxxx X. Xxxxxxxx Corporation.
"Xxxxxxx Services Agreements" means the services agreements between
each of the Xxxxxxx Entities and ZC Services, Inc., each dated June 27, 2001.
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
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"Licenses" has the meaning set forth in Section 5.16.
"LLC Subsidiaries" has the meaning set forth in Section 5.1(b).
"Loss(es)", in respect of any matter, means any loss, diminution in
value, liability, cost, expense, judgment, settlement or damage arising,
directly or indirectly, as a result of or in connection with such matter,
including reasonable attorneys', consultants' and other advisors' fees and
expenses, reasonable costs of investigating or defending any claim, action, suit
or proceeding or of avoiding the same or the imposition of any judgment or
settlement and reasonable costs of enforcing any Indemnification Obligations.
"Material Adverse Effect" means any material adverse effect on the
business, operations, assets, condition (financial or otherwise), liabilities,
results of operations or prospects of the Company, the Sub S Holding Corporation
and the Subsidiaries, taken as a whole, or Buyer and its subsidiaries, taken as
a whole, as the case may be.
"MLBFS" has the meaning set forth in Section 7.7.
"Nasdaq" has the meaning set forth in Section 6.6.
"Net Working Capital" means the excess of the total amount of
current assets over the total amount of current liabilities (not including any
Additional Cash Amount Due Sellers) of the Company computed in accordance with
GAAP on a basis consistent with the Financial Statements.
"Offering" has the meaning set forth in Section 9.6.
"Operating Profit" means the amount of consolidated operating profit
of the Company, the Sub S Holding Corporation and the Subsidiaries as shown on
the financial statements of the Company for any Annual Period, which financial
statements shall be prepared on an accrual basis in accordance with GAAP on a
basis consistent with the Financial Statements, except that in addition to the
deduction of all base compensation and benefits of the Designated Principals,
the Other Principals and the other professional and administrative staff of the
Company, the Sub S Holding Corporation and the Subsidiaries, all incentive
compensation received by the Other Principals and the professional and other
administrative staff of the Company, the Sub S Holding Corporation and the
Subsidiaries will also be deducted in calculating Operating Profit. There will
be no allocation or deduction for (i) any stock options granted by Buyer, or
(ii) Buyer corporate overhead unless Buyer and the Designated Principals agree
in good faith there is a direct benefit to the Company, such as for accounting,
information technology, interest, training, professional liability insurance,
etc. or the parties otherwise agree.
"Other Contracts" has the meaning set forth in Section 5.13(a).
"Other Principals" has the meaning set forth in the recitals.
"Other Seller" has the meaning set forth in the preamble.
"Permitted Encumbrances" has the meaning set forth in Section
5.10(c).
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"Person" means an individual, partnership, venture, unincorporated
association, organization, syndicate, corporation, limited liability company or
other entity, trust and trustee, executor, administrator or other legal or
personal representative or any government or any agency or political subdivision
thereof.
"Plans" has the meaning set forth in Section 5.18(a).
"Purchase Price" has the meaning set forth in Section 2.1(a)(ii).
"Registration Rights Agreement" means the registration rights
agreement between the Buyer and the Sellers dated the Closing Date and otherwise
substantially in the form of the form of registration rights agreement attached
hereto as Exhibit E.
"Representatives" has the meaning set forth in Section 10.2(a).
"Returns" means any return, report, document, statement or form
required to be filed with respect to any Taxes (including any schedules required
to be attached thereto), including, without limitation, information returns,
claims for refund, amended returns and declarations of estimated Tax.
"Services Agreements" means the services agreement, dated as of
January 29, 2002, between the Company and SFC LLC and the Xxxxxxx Services
Agreements.
"Shares" has the meaning set forth in Section 5.3(a)(ii).
"Sub S Holding Corporation" has the meaning set forth in the
preamble.
"Sub S Subsidiary" has the meaning set forth in Section 5.1(b).
"S-4 Prospectus" has the meaning set forth in Section 4.7.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"SFC LLC" has the meaning set forth in Section 5.28.
"Sellers" has the meaning set forth in the preamble.
"Shortfall Period" has the meaning set forth in Section 2.1(b)(ii).
"Stock Options" has the meaning set forth in Section 2.1(c).
"Subsidiary" means an LLC Subsidiary or a Sub S Subsidiary and
"Subsidiaries" means the LLC Subsidiaries and the Sub S Subsidiaries together.
"Target Operating Profit" has the meaning set forth in Section
2.1(b).
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"Tax" or "Taxes" shall mean all taxes, charges, fees, levies,
penalties or other assessments imposed by any U.S. federal, state, local or
foreign taxing authority, including, but not limited to, income, gross receipts,
excise, property, ad valorem, sales use (or similar taxes), transfer, franchise,
payroll, withholding, social security, business license fees or other taxes,
including any interest, penalties, or additions thereto.
"Transaction Documents" means this Agreement, the Employment
Agreements, the Registration Rights Agreement and the Services Agreements.
"U.S." means the United States of America.
"ZC Companies" has the meaning set forth in Section 5.2.
"ZC Consolidation" has the meaning set forth in Section 5.2.
"ZC Consolidation Date" means the date on which the ZC Consolidation
is effected.
"ZC Intellectual Property" means (i) the trademarks and domain names
listed or referenced in Section 5.11 to Sellers' Disclosure Schedule and all
other fictional business names, trading names, registered and unregistered
trademarks, service marks and applications therefor; (ii) all patents, patent
applications and inventions and discoveries that may be patentable; (iii) all
copyrights in both published works and unpublished works, including training
manuals and videos; and (iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, plans,
drawings and blue prints, owned, used or licensed by the Company, the Sub S
Holding Corporation or for any Subsidiary as licensee or licensor.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Company Interests and the Shares. Subject
to and upon the terms and conditions hereinafter set forth, at the Closing, and
in reliance upon the representations and warranties contained in this Agreement
or made pursuant hereto, Sellers hereby agree to sell, assign, transfer and
deliver to Buyer, and Buyer hereby agrees to purchase from Sellers, all of
Sellers' rights, title and interest in and to the Company Interests and the
Shares, free and clear of any and all Encumbrances.
(a) Fixed Consideration. In consideration of the aforesaid sale,
assignment, transfer and delivery of all of the Company Interests and all of the
Shares by Sellers to Buyer on the Closing Date, Buyer shall:
(i) at the Closing, pay or cause to be paid to Sellers an
aggregate amount, in cash, equal to one hundred million dollars
($100,000,000) (the "Cash Consideration") to be paid to the Sellers in
the amounts set forth on Schedule B; and
(ii) on January 15, 2003, issue and deliver to Sellers two
million nine hundred thousand (2,900,000) (subject to appropriate
adjustment for any stock split,
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dividend or combination of or in Buyer Common Stock after the Closing
Date) shares of Buyer Common Stock (the "Deferred Closing Stock" and
together with the Cash Consideration, the "Purchase Price") to be
delivered to the Sellers in the amounts set forth on Schedule B.
All payments of cash pursuant to Section 2.1(a)(i) shall be made in immediately
available funds by certified or official bank check or checks or by wire
transfer to an account or accounts specified by Sellers at least two (2)
Business Days prior to the date such payments are to be made.
(b) Contingent Consideration: Provided that the Company achieves the
Operating Profit specified below in this Section 2.1(b)(i) as a target (the
"Target Operating Profit"), Buyer shall issue and deliver to Sellers up to two
million five hundred thousand (2,500,000) (subject to appropriate adjustment for
any stock split, dividend or combination of or on Buyer Common Stock after the
Closing Date) additional shares of Buyer Common Stock (the "Installment Stock")
at the times and in the manner set forth below:
(i) If the Company's actual Operating Profit in a given
"Annual Period" (as set forth below) meets or exceeds the Target
Operating Profit for such Annual Period (as set forth below), Buyer
shall issue and deliver six hundred and twenty five thousand (625,000)
(subject to appropriate adjustment for any stock split, dividend or
combination of or on Buyer Common Stock after the Closing Date) shares
of Installment Stock to Sellers in the percentages set forth on
Schedule B (each, an "Installment Payment"):
ANNUAL PERIOD TARGET OPERATING PROFIT
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January 1, 2003 to December 31, 2003 $30 million
January 1, 2004 to December 31, 2004 $31 million
January 1, 2005 to December 31, 2005 $32 million
January 1, 2006 to December 31, 2006 $33 million
(ii) If the Target Operating Profit specified above for a
given Annual Period is not achieved (a "Shortfall Period"), the Sellers
shall not be entitled to receive an Installment Payment for such
Shortfall Period; provided, however, the Sellers shall be entitled to
receive the Installment Payment for that Shortfall Period if either:
(A) X + Y (greater than or equal to) Z, where
X = the actual Operating Profit achieved in the Shortfall Period;
Y = the lesser of (x) fifty percent (50%) of the excess, if any, of (1)
the actual Operating Profit achieved in the Annual Period next prior to
the Shortfall Period, over (2) the Target Operating Profit for such
next prior Annual Period, and (y) five million dollars ($5,000,000);
and
Z = the Target Operating Profit for the Shortfall Period; or
(B) X (greater than or equal to) Y + Z, where:
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X = the actual Operating Profit achieved in the Annual Period next
subsequent to the Shortfall Period;
Y = the Target Operating Profit for such next subsequent Annual Period;
and
Z = the excess of (x) the Target Operating Profit for the Shortfall
Period, over (y) the actual Operating Profit achieved in the Shortfall
Period.
In the event that the Target Operating Profit for the fourth Annual
Period is not achieved, the Sellers shall be entitled to receive the
Installment Payment under this Section 2.1(b)(ii)(B) for the fourth
Annual Period if the actual Operating Profit achieved in the fifth year
equals or exceeds the sum of $34 million and the excess of $33 million
over the actual Operating Profit achieved in the fourth Annual Period.
(iii) Buyer shall make any Installment Payment that is due to
Sellers under this Section 2.1(b) within ten (10) days after the date
the financial statements of the Buyer for that Annual Period are filed
with the SEC.
(iv) Immediately upon the occurrence of a Change in Control,
all of the remaining Installment Payments shall be delivered to the
Sellers such that all of the remaining Installment Stock shall be
issued and delivered to Sellers as soon as reasonably practicable after
such Change in Control; provided, however, that in the event such
Change in Control results in a conversion or reclassification of Buyer
Common Stock into another security or property, including cash, Buyer
shall make adequate provision in the documents governing such Change in
Control such that after such Change in Control the Sellers shall
receive the securities or other property, including cash, to which the
holder of a number of shares of Buyer Common Stock equal to the
remaining Installment Payments immediately prior to such Change in
Control is entitled as a result of such Change in Control.
(v) In the event that any of the Designated Principals is
terminated without "Cause" pursuant to Section 5(d) of such Designated
Principal's Employment Agreement, or any of the Designated Principals
terminates his Employment Agreement for "Good Reason" pursuant to
Section 5(e) thereof, all of the remaining Installment Payments shall
be delivered to the Sellers such that all of the remaining Installment
Stock shall be issued and delivered to Sellers as soon as reasonably
practicable after such termination.
(vi) During the period commencing on the date hereof and
ending on December 31, 2006, the location and salary (including bonus)
of the professional staff of the Business shall be determined jointly
by the Designated Principals, the Chief Executive Officer of the Buyer
and the Chief Operating Officer of the worldwide Xxxxx Xxxxx Xxxxxx
group, who shall use their reasonable commercial judgment and
reasonable best efforts to arrive at a consensus with respect to such
matters.
(c) Stock Options. At the Closing, Buyer will grant under its
existing option plans options to purchase Buyer Common Stock (the "Stock
Options") to Other Principals and professional staff of the Company as
summarized on Schedule C. Each Stock Option shall, upon
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vesting, entitle the holder to purchase one (1) share of Buyer Common Stock at
the "Exercise Price". The Exercise Price shall be the closing price of Buyer
Common Stock on Nasdaq on the date of grant of the Stock Option. The Stock
Options will vest and become exercisable over a four (4) year period as follows:
- First anniversary of Closing Date: 10%
- Second anniversary of Closing Date: 20%
- Third anniversary of Closing Date: 30%
- Fourth anniversary of Closing Date: 40%
In the event of a Change in Control, all unvested Stock
Options will vest immediately, in accordance with the provisions of Buyer's
option plans. If any individual to whom Stock Options are granted ceases to be
an employee of Buyer or any of its subsidiaries for any reason, that person may
exercise Stock Options that had vested as at the date of cessation of such
employment for ninety (90) days after such cessation. All Stock Options unvested
at such time will immediately terminate. Such terminated Stock Options will be
available for reissuance, for the balance of their remaining life, to other
professional staff of the Company at the discretion of A and the Chief Executive
Officer of Buyer, subject to approval of the Board of Directors (or the
compensation committee thereof) of Buyer. The exercise price of any such
reissued Stock Options shall be the closing price of Buyer Common Stock on
Nasdaq on the day of such reissuance.
2.2 Post-Closing Cash Payments. In addition to the Cash
Consideration, Buyer shall cause the Company to pay to the Designated Principals
additional cash in accordance with the provisions of this Section 2.2:
(a) Effective Date Balance Sheet. Within thirty (30) days
after the Closing Date, the Company shall prepare and deliver to Buyer and the
Designated Principals a consolidated balance sheet of the Company, the Sub S
Holding Corporation and the Subsidiaries as of the close of business on the day
immediately prior to the Effective Date prepared in accordance with GAAP on a
basis that is consistent with the Financial Statements (the "Effective Date
Balance Sheet"), except that the Effective Date Balance Sheet shall include
accruals for (i) accrued vacation pay of four hundred thousand dollars
($400,000), (ii) stay/termination bonus obligations of the Company of three
hundred fifty-thousand dollars ($350,000), and (iii) an amount due to the
Designated Principals equal to] the excess of the sum of the cash and accounts
receivable reflected on the Effective Date Balance Sheet over the sum of the
accounts payable reflected on the Effective Date Balance Sheet and the accruals
specified in clauses (i) and (ii) of this Section 2.2(a) (the "Additional Cash
Amount Due Sellers").
(b) Cash Payments. The Designated Sellers, jointly and
severally, represent, warrant, covenant and agree that the Net Working Capital
will equal or exceed five million dollars ($5,000,000), of which at least two
million dollars ($2,000,000) will consist of cash. If the Net Working Capital is
less than five million dollars ($5,000,000) or less than two million dollars
($2,000,000) of cash is reflected on the Effective Date Balance Sheet, the
Designated
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Principals shall promptly pay to the Company any such shortfall in cash.
Thereafter, after the Company has collected, in cash, accounts receivable
reflected on the Effective Date Balance Sheet in an amount equal to the excess
of (i) the sum of the accounts payable and the accruals specified in clauses (i)
and (ii) of Section 2.2 (a) over (ii) the amount of cash reflected in the
Effective Date Balance Sheet, within five (5) Business Days after the end of
each calendar month, Buyer shall cause the Company to pay to the Designated
Principals in cash (in the same proportion as the Cash Consideration was paid to
them) from the collection in such calendar month, of the accounts receivable
reflected on the Effective Date Balance Sheet, cash in an amount up to, but not
in excess of, the amount of the Additional Cash Amount Due Sellers.
ARTICLE III
CLOSING
3.1 Closing Date. The closing of the transactions contemplated
hereby (the "Closing") shall be held on the date hereof (the "Closing Date") at
9:00 a.m., prevailing local time, at the offices of Xxxxxx Xxxxx Xxxxxxxx &
Xxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
3.2 Certain Actions at Closing.
At the Closing:
(a) Each Seller shall:
(i) deliver to Buyer (x) evidence, reasonably satisfactory
to Buyer, that all of the Company Interests have been duly and
effectively assigned, transferred and delivered to Buyer and that Buyer
is the sole member of, and the owner of all of the Interests in, the
Company, and (y) certificates representing the Shares owned by such
Seller, duly endorsed in blank or accompanied by duly executed
instruments of transfer which are necessary to vest all of such
Seller's rights, title and interest in and to the Shares in Buyer and
Buyer and with any necessary transfer stamps attached;
(ii) execute and deliver to Buyer the Registration Rights
Agreement;
(iii) execute and deliver to the Company the Employment
Agreement to which such Seller is a party;
(iv) deliver, or cause to be delivered, to Buyer all
consents required by any material Client Contract or material Other
Contract; and
(v) deliver to Buyer the favorable opinion of Xxxxxxxx
Xxxxx & Deutsch LLP, counsel to Sellers and the Company, dated the
Closing Date, substantially in the form attached hereto as Exhibit F.
(b) Buyer shall:
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(i) pay the Cash Consideration to the Sellers pursuant to
Section 2.1(a)(i);
(ii) execute and deliver to each Seller the Registration
Rights Agreement;
(iii) cause the Company to execute and deliver the Employment
Agreements;
(iv) deliver to Sellers the favorable opinion of Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP, counsel to Buyer, dated the Closing Date,
substantially in the form attached hereto as Exhibit G.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS CONCERNING THE SELLERS
Each Seller, severally, hereby represents and warrants to
Buyer as to himself, herself or itself as follows:
4.1 Ownership of Company Interests. Such Seller owns,
beneficially and of record, and has good and marketable title to, the number of
Company Interests and the number of Shares set forth opposite his or her name in
Section 5.3(a) of the Sellers' Disclosure Schedule, free and clear of any and
all Encumbrances. At the Closing, such Seller shall transfer to, and Buyer will
own, such Company Interests and such number of Shares free and clear of any and
all Encumbrances, except for Encumbrances placed thereon by Buyer or Persons
claiming by, through or under Buyer.
4.2 Authorization. Such Seller has the full legal capacity,
power and authority to enter into and carry out such Seller's obligations under
this Agreement and the other Transaction Documents to which he or she is a party
and is not under any prohibition or restriction, contractual, statutory or
otherwise, against doing so. This Agreement and the other Transaction Documents
to which such Seller is a party have been duly authorized, executed and
delivered by such Seller and each constitutes a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity.
4.3 No Conflicts; Consents. Except as set forth in Section 4.3
of the Sellers' Disclosure Schedule, neither the execution and delivery by such
Seller of this Agreement or any of the Transaction Documents to which such
Seller is a party, nor the consummation by such Seller of the transactions
contemplated hereby or thereby, including the ZC Consolidation, does or will
conflict with, violate, result in the breach of any term of, result in the
acceleration of performance of any obligation under, constitute a default under,
require (other than required filings under the HSR Act) the consent or approval
of or any notice to or filing with any third party or Governmental Body, or
create an Encumbrance on any of the Company Interests or Shares owned by such
Seller under, (a) any note, mortgage, deed of trust, trust agreement, lease or
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other material Contract to which such Seller is a party or by which such Seller
or any of his or her respective properties or assets is bound, or (b) any Law,
judgment, order, decree, writ or injunction of any Governmental Body having
jurisdiction over such Seller or his or her properties or assets.
4.4 Litigation. Except as set forth in Section 4.4 of the
Sellers' Disclosure Schedule, there is no lawsuit, governmental investigation or
legal, administrative or arbitration action or proceeding pending or, to the
knowledge of such Seller, threatened against such Seller or any of his or her
properties or assets that seeks to prohibit, enjoin or otherwise challenge the
consummation of the transactions contemplated hereby.
4.5 Brokers and Finders. Such Seller has not engaged on behalf
of any ZC Company or the Company, the Sub S Holding Corporation or any
Subsidiary any broker, finder or investment advisor in connection with the
transactions contemplated hereby.
4.6 Investment Representations.
(a) Such Seller is an "accredited investor" as such term is
defined in Rule 501(a) promulgated under the Securities Act (an "Accredited
Investor");
(b) Such Seller has such knowledge, skill and experience in
financial, investment and business matters to be capable of evaluating the
merits and risks of an investment in the Acquired Stock, to make an informed
decision relating thereto and to protect his or her own interests in connection
with the transactions contemplated hereby;
(c) Such Seller will acquire the Deferred Closing Stock and
any Installment Stock in New York or New Jersey, for his or her own account, for
investment purposes only and not with an intent or view towards the further sale
or distribution thereof within the meaning of the Securities Act in any
transaction that would violate the registration requirements of the securities
laws of the U.S. or of any state;
(d) Such Seller is aware that the Acquired Stock has not been
registered under the Securities Act, and that the Acquired Stock is deemed to be
"restricted securities" as defined in Rule 144(a)(3) promulgated under the
Securities Act and may not be transferred, sold, assigned, hypothecated or
otherwise disposed of unless such transaction is the subject of a registration
statement filed with and declared effective by the SEC or unless an exemption
from the registration requirements under the Securities Act is available. Such
Seller hereby represents and warrants and hereby agrees that all offers and
sales of the Acquired Stock or any portion thereof or interest thereon shall be
made only pursuant to such registration or to an exemption from registration;
(e) Such Seller acknowledges that the purchase of the Acquired
Stock involves a high degree of risk;
(f) Such Seller each understands that the Acquired Stock is
being offered and sold pursuant to this Agreement in reliance on exemptions from
the registration requirements of the Securities Act and state securities laws,
and that Buyer is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such
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Seller set forth herein in order to determine the applicability of such
exemptions and the suitability of such Seller to acquire the Acquired
Stock;
(g) In evaluating its investment, such Seller has consulted
his or her own investment and/or legal and/or tax advisors; and
(h) The certificate(s) representing the Acquired Stock shall
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED OR
OFFERED FOR SALE, TRANSFER OR HYPOTHECATION UNLESS A REGISTRATION
STATEMENT UNDER THAT ACT AND OTHER APPLICABLE SECURITIES LAWS WITH
RESPECT TO SUCH SECURITIES IS THEN IN EFFECT OR SUCH REGISTRATION IS
NOT REQUIRED."
4.7 Current Public Information. Such Seller has been furnished
with a copy of Buyer's Annual Report on Form 10-K for the year ended December
31, 2001, as filed with the SEC (the "Form 10-K"), Buyer's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002 (the "Forms
10-Q") and Buyer's prospectus forming a part of its registration statement on
Form S-4 dated May 10, 2002 (Registration No. 333-87074) (the "S-4 Prospectus").
4.8 Independent Investigation; Access. Such Seller
acknowledges that, in making the decision to acquire the Acquired Stock, he or
she has relied upon independent investigations made by him or her and has been
given access and the opportunity to examine contracts and documents relating to
Buyer and such securities and an opportunity to ask questions of, and to receive
answers from, Buyer concerning Buyer and the terms and conditions of such
securities. Such Seller and his or her advisors, if any, have been furnished
with access to all publicly available materials relating to the business,
finances and operation of Buyer which have been requested. Such Seller and his
or her advisors, if any, have received answers to all such inquiries. Except as
set forth in this Agreement and the other Transaction Documents, Buyer has made
no representation or warranty to such Seller on which such Seller has relied to
enter into this Agreement and to consummate the transaction contemplated hereby.
4.9 No Government Recommendation or Approval. Such Seller
understands that no federal or state agency has passed on or made or will pass
on or make any recommendation or endorsement of the Acquired Stock or any
finding or determination concerning the fairness or advisability of an
investment in such securities.
4.10 Disclosure. No representation or warranty by such Seller
in this Article IV nor in any certificate delivered or to be delivered by such
Seller pursuant to this Agreement: contains or will contain any untrue statement
of material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE DESIGNATED PRINCIPALS
CONCERNING THE COMPANY AND SUB S HOLDING CORPORATION
Each Designated Principal, jointly and severally, hereby
represents and warrants to Buyer as follows:
5.1 Organization and Good Standing. (a) The Company is a
limited liability company, and the Sub S Holding Corporation is a corporation,
duly organized, validly existing and in good standing under the laws of New
Jersey. The Company has full limited liability company power and authority, and
the Sub S Holding Corporation has full corporate power and authority, to own its
properties and to carry on its business as it is now being conducted. Each of
the Company and the Sub S Holding Corporation is duly qualified to transact
business and is in good standing in each jurisdiction wherein the nature of the
business done or the property owned, leased or operated by it requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. True, correct and complete copies of the Constituent
Documents of the Company and the Sub S Holding Corporation and all amendments
thereto have been delivered to Buyer. The minutes, records, Interests register,
stock books and transfer records, as applicable, of the Company and the Sub S
Holding Corporation that have been made available to Buyer are true, correct and
complete in all material respects. Except for the Subsidiaries, neither the
Company nor the Sub S Holding Corporation owns any ownership or other equity
interest in any Person whatsoever.
(b) Schedule A-1 sets forth a true, correct and complete list
of each subsidiary of the Company (the "LLC Subsidiaries"). Schedule A-2 sets
forth a true, correct and complete list of each subsidiary of the Sub S Holding
Corporation (the "Sub S Subsidiaries"). Each LLC Subsidiary is a limited
liability company duly organized, validly existing and in good standing under
the laws of New Jersey and has full limited liability company power and
authority to own its properties and to carry on its business as it is now being
conducted. Each Sub S Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of New Jersey and has full
corporate power and authority to own its properties and to carry on its business
as it is now being conducted. Each Subsidiary is duly qualified to transact
business and is in good standing in each jurisdiction wherein the nature of the
business done or the property owned, leased or operated by it requires such
qualification, except where the failure to be so qualified could not have a
Material Adverse Effect. True, correct and complete copies of the Constituent
Documents of each Subsidiary and all amendments thereto have been delivered to
Buyer. The minutes, records, Interests register, stock books and transfer
records, as applicable, of each Subsidiary that have been made available to
Buyer are true, complete and correct in all material respects.
5.2 Consolidation of the ZC Companies. On the ZC Consolidation
Date, the Sellers caused one hundred percent (100%) of the equity interests of
the Sub S Subsidiaries to be contributed to the Sub S Holding Corporation. Each
of the Sub S Subsidiaries constitutes a "qualified subchapter S subsidiary"
within the meaning of Section 1361(b)(3) of the Code and the Treasury
Regulations promulgated thereunder for which a valid QSub elections has been
made under Treasury Regulation Section 1.1361-3 by the Company on the ZC
Consolidation Date. True,
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correct and complete copies of such QSub elections have been delivered to Buyer.
Also on the ZC Consolidation Date, the Sellers caused one hundred percent (100%)
of the Interests of the LLC Subsidiaries to be contributed to the capital of the
Company. The contributions of the equity interests in the Sub S Subsidiaries to
the Sub S Holding Corporation and the contributions of the Interests in the LLC
Subsidiaries to the Company by the Sellers are referred to herein as the "ZC
Consolidation." The Sub S Subsidiaries, the LLC Subsidiaries, the Sub S Holding
Corporation and the Company are collectively referred to herein as the "ZC
Companies" when referring to periods prior to the ZC Consolidation Date.
5.3 Capitalization.
(a) (i) Section 5.3(a)(i) of the Sellers' Disclosure Schedule
sets forth a true, correct and complete list of all of the members and
other owners of Interests in the Company and the number of Company
Interests each such member or owner owns. The Company Interests have
been duly authorized and are validly issued and outstanding, fully paid
and non-assessable. Sellers collectively own, beneficially and of
record, and have good, valid and marketable title to, and the right to
transfer to Buyer, all of the Company Interests, free and clear of any
and all Encumbrances. At the Closing, Sellers shall transfer to, and
Buyer will own, and have good, valid and marketable title to, all of
the issued and outstanding Interests of the Company, free and clear of
any and all Encumbrances, except for Encumbrances placed thereon by
Buyer, or Persons claiming by, through or under Buyer.
(ii) The Sub S Holding Corporation is authorized to issue
2,000 shares of common stock, no par value per share, of which 1000
shares (the "Shares") are issued and outstanding, and no other class or
series of stock or other ownership or equity interests. Section
5.3(a)(ii) of the Sellers' Disclosure Schedule sets forth a true,
correct and complete list of all of the stockholders of the Sub S
Holding Corporation and the number of Shares each stockholder owns. The
Shares have been duly authorized and are validly issued and
outstanding, fully paid and non-assessable. Sellers collectively own,
beneficially and of record, and have good, valid and marketable title
to, and the right to transfer to Buyer, all of the Shares, free and
clear of any and all Encumbrances. At the Closing, Sellers shall
transfer to, and Buyer will own, and have good, valid and marketable
title to, all of the issued and outstanding shares of capital stock of
the Company, free and clear of any and all Encumbrances, except for
Encumbrances placed thereon by Buyer or Persons claiming by, through or
under Buyer.
(iii) Schedule A-1 sets forth the authorized, issued and
outstanding Interests of each LLC Subsidiary. All issued and
outstanding Interests of each LLC Subsidiary have been duly authorized
and are validly issued and outstanding, fully paid and non-assessable,
and are owned beneficially and of record by the Company, free and clear
of any and all Encumbrances.
(iv) Schedule A-2 sets forth the authorized, issued and
outstanding shares of each class of capital stock or other ownership or
equity interests of each Sub S Subsidiary. All issued and outstanding
shares of capital stock or other ownership or equity interests of each
Sub S Subsidiary have been duly authorized and are validly
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issued and outstanding, fully paid and non-assessable, and owned
beneficially and of record by the Sub S Holding Corporation, free and
clear of any and all Encumbrances.
(b) There are no outstanding or authorized options, warrants,
purchase agreements, participation agreements, subscription rights, conversion
rights, exchange rights or other securities, contracts, arrangements,
understanding or commitments that could require the Company, the Sub S Holding
Corporation or any Subsidiary to issue, sell or otherwise cause to become
outstanding any of its Interests or capital stock or other ownership or equity
interests, or any securities convertible into, exercisable or exchangeable for
or carrying a right or option to purchase Interests or capital stock or other
ownership or equity interests or to create, authorize, issue, sell or otherwise
cause to become outstanding any new class of Interest or capital stock. None of
the issued and outstanding Interests or capital stock of the Company, the Sub S
Holding Corporation or any Subsidiary has been issued in violation of any rights
of any Person or in violation of the registration requirements of the Securities
Act or any state securities law.
5.4 No Conflicts; Consents. Except as set forth in Section 5.4
of the Sellers' Disclosure Schedule, neither the execution and delivery by any
Seller or the Company of this Agreement or any of the Transaction Documents to
which any Seller or the Company is a party, nor the consummation by the Sellers
of the transactions contemplated hereby or thereby, including the ZC
Consolidation, does or will (a) conflict with or violate the Constituent
Documents or resolutions of the managers, members, stockholders or board of
directors (or any committee thereof) of the Company, the Sub S Holding
Corporation or any Subsidiary or (b) conflict with, violate, result in the
breach of any term of, result in the acceleration of performance of any
obligation under, constitute a default under, require (other than required
filings under the HSR Act) the consent or approval of or any notice to or filing
with any third party or Governmental Body, or create an Encumbrance on any of
the Interests or Shares or properties or assets of the Company, the Sub S
Holding Corporation or any Subsidiary under, (i) any note, mortgage, deed of
trust, lease or other material Contract to which the Company, the Sub S Holding
Corporation or any Subsidiary is a party or by which the Company, the Sub S
Holding Corporation or any Subsidiary or any of their respective properties or
assets is bound, or (ii) any Law, judgment, order, decree, writ, injunction or
License of any Governmental Body having jurisdiction over the Company, the Sub S
Holding Corporation or any Subsidiary or their respective properties or assets.
5.5 Financial Statements; Undisclosed Liabilities.
(a) The Financial Statements and the Interim Financial
Statements (true, correct and complete copies of each of which have been
previously delivered to Buyer) have been prepared from the books and records of
the ZC Companies, in accordance with GAAP applied on a consistent basis
throughout the respective periods covered thereby, and fairly present in all
material respects the financial condition of the ZC Companies, as at their
respective dates, and the results of operations and cash flows of the ZC
Companies for the respective periods covered thereby, except that the Interim
Financial Statements do not include all of the information and footnotes
required by GAAP for complete financial statements and are subject to normal
year-end adjustments. The Interim Financial Statements include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation. The statements of operations included in the Financial Statements
and the Interim Financial
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Statements do not include any item of special or non-recurring income, except as
specifically identified therein.
(b) As of December 31, 2001 none of the ZC Companies had any
liabilities, debts or obligations (whether absolute, accrued, contingent or
otherwise) that were required in accordance with GAAP to be set forth on a
balance sheet, except for liabilities, debts and obligations that were set forth
on the balance sheet as of December 31, 2001 included in the Financial
Statements. As of June 30, 2002 none of the ZC Companies had any liabilities,
debts or obligations (whether absolute, accrued, contingent or otherwise) that
were required in accordance with GAAP to be set forth on a balance sheet, except
for liabilities, debts and obligations that were set forth on the balance sheet
included in the Interim Financial Statements.
(c) From June 30, 2002 until the ZC Consolidation Date, none
of the ZC Companies incurred, and from and after the ZC Consolidation Date
neither the Company, the Sub S Holding Corporation nor any Subsidiary has
incurred, any liability, debt or obligation (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business, consistent
with past practice, none of which liabilities, debts or obligations would have a
Material Adverse Effect.
(d) As of the Closing Date, the Company, the Sub S Holding
Corporation and the Subsidiaries will have no material liabilities of any kind,
whether absolute, accrued, contingent or otherwise, other than accounts payable,
accruals incurred in the ordinary course of business, and liabilities pursuant
to Section 2.2.
(e) From December 31, 2001 until the ZC Consolidation Date,
there was no material adverse change in the business, operations, assets,
condition (financial or otherwise), liabilities, results of operations or
prospects of the ZC Companies (taken as a whole) and from and after the ZC
Consolidation Date there has been no material adverse change in the business,
operations, assets, condition (financial or otherwise), liabilities, results of
operations or prospects of the Company, the Sub S Holding Corporation and the
Subsidiaries taken as a whole.
5.6 Taxes.
(a) Each of the Sub S Holding Corporation and the Sub S
Subsidiaries was a "small business corporation" and maintained a valid election
to be an "S" corporation under Subchapter S of the Code, and the equivalent
provisions of all applicable state income tax statutes, from its incorporation
until the ZC Consolidation Date, in the case of the Sub S Subsidiaries, and
until the Closing Date in the case of the Sub S Holding Corporation. None of the
Sub S Holding Corporation or any Sub S Subsidiary has been subject to Tax or
filed a Return in the City of New York.
(b) Except as set forth in Section 5.6 of the Sellers'
Disclosure Schedule, all Returns that are due by any of the ZC Companies or the
Company, the Sub S Holding Corporation or any Subsidiary for periods ending on
or prior to the Closing Date have been filed, or a valid request for extension
has been filed with respect thereto, on a timely basis (including any
extensions) with the appropriate governmental agencies in all jurisdictions in
which such Returns are required to be filed. Except as set forth in Section 5.6
of the Sellers' Disclosure
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Schedule, all Taxes due and payable by any of the ZC Companies or the Company,
the Sub S Holding Corporation or any Subsidiary on or prior to the Closing Date
have been or will be paid on a timely basis. Except as set forth on Schedule 5.6
of the Sellers' Disclosure Schedule, neither the Company, the Sub S Holding
Corporation nor any Subsidiary is currently the beneficiary of any extension of
time within which to file any Return.
(c) No written claim has ever been made by an authority in a
jurisdiction where the ZC Companies did not, or the Company, the Sub S Holding
Corporation or any Subsidiary does not, file Returns that it is or may be
subject to taxation by that jurisdiction, and neither the Company, the Sub S
Holding Corporation nor any of the ZC Companies nor any Subsidiary has received
any notice, or request for information, from any such authority.
(d) None of the ZC Companies or the Company, the Sub S Holding
Corporation or any Subsidiary is or has been a U.S. real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(ii) of the Code.
(e) The ZC Companies did comply and the Company, the Sub S
Holding Corporation and the Subsidiaries have complied (and until the Closing
will comply) with all applicable laws relating to the payment and withholding of
Taxes (including withholding and reporting requirements under Sections 1441
through 1464, 3401 through 3406, 6041 and 6049 of the Code and similar
provisions under any other laws) and, within the time and in the manner
prescribed by law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required.
(f) No waivers of statutes of limitations have been given or
requested in writing with respect to the Company, the Sub S Holding Corporation
or any Subsidiary.
5.7 Payables. All accounts payable of the Company, the Sub S
Holding Corporation and the Subsidiaries arose in the ordinary course of
business. All material items which are required by GAAP to be reflected as
payables on the Financial Statements and the Interim Financial Statements and in
the books and records of the Company, the Sub S Holding Corporation and the
Subsidiaries are so reflected and have been recorded in accordance with GAAP in
a manner consistent with past practice. From December 31, 2001 until the ZC
Consolidation Date, there was no material adverse change in the amount or
delinquency of accounts payable of the ZC Companies (taken as a whole) and from
and after the ZC Consolidation Date there has been no material adverse change in
the amount or delinquency of accounts payable of the Company, the Sub S Holding
Corporation and the Subsidiaries taken as a whole.
5.8 Receivables. All accounts receivable of the Company, the
Sub S Holding Corporation and the Subsidiaries have arisen in the ordinary
course of business and represent valid obligations to the Company, the Sub S
Holding Corporation and the Subsidiaries arising from bona-fide transactions in
the ordinary course of business.
5.9 Absence of Certain Changes. From January 1, 2002 until the
ZC Consolidation Date, the ZC Companies did operate, and from and after the ZC
Consolidation
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Date the Company, the Sub S Holding Corporation and the Subsidiaries have
operated, the Business in the ordinary course consistent with past practice.
Without limiting the generality of the immediately preceding sentence, since
December 31, 2001, except as provided in Section 5.9 of the Sellers' Disclosure
Schedule, none of the ZC Companies nor the Company, the Sub S Holding
Corporation or any Subsidiary has:
(i) amended or otherwise modified its Constituent Documents
(except for the documents executed to effect the transactions described
in Section 5.2, true, correct and complete copies of which have been
delivered to Buyer);
(ii) issued or sold, or authorized for issuance or sale, or
granted any options or made other agreements, arrangements or
understandings of the type referred to in Section 5.3(c) with respect
to, any shares of its capital stock or any other of its securities or
Interests, or altered any term of any of its outstanding securities or
Interests or made any change in its outstanding shares of capital stock
or Interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise, except
in connection with the ZC Consolidation as described in Section 5.2;
(iii) mortgaged, pledged or granted any security interest in
any of its assets;
(iv) increased the compensation or benefits of any of its
employees, or independent contractors, except in the ordinary course of
business consistent with past practice;
(v) adopted or amended any Plan;
(vi) terminated or modified any Client Contract or Other
Contract, or received any written notice of termination of any Client
Contract or Other Contract, except for terminations of Client Contracts
or Other Contracts upon their expiration in accordance with their
terms, provided, however, that Buyer acknowledges that many of the
Company's Contracts are subject to modification in connection with
bankruptcy proceedings involving Company clients and that any such
modifications shall not be deemed to be Contract modifications for
purposes of this Agreement unless such modification is caused by the
wrongful action or inaction of any ZC Company, the Company, the Sub S
Holding Corporation or any Subsidiary;
(vii) incurred or assumed any indebtedness for borrowed money
or guaranteed any obligation or the net worth of any Person, except for
endorsements of negotiable instruments for collection in the ordinary
course of business;
(viii) created or suffered to exist any Encumbrance on any
material asset, other than Permitted Encumbrances;
(ix) sold, transferred, leased to others or otherwise disposed
of any assets having a fair market value in excess of $50,000;
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(x) cancelled, waived or compromised any material debt or
claim;
(xi) suffered any damage or destruction to or loss of any
material tangible properties or assets (whether or not covered by
insurance) or suffered any Material Adverse Effect, nor has any event
or circumstance occurred that would result in a Material Adverse
Effect;
(xii) lost the services of any key employee or consultant;
(xiii) made any loan or advance to any Person other than
travel and other similar routine advances to employees in the ordinary
course of business consistent with past practice;
(xiv) purchased or acquired any capital stock or other
securities of any other corporation or any ownership interest in any
other business enterprise, except in connection with the ZC
Consolidation;
(xv) made any capital expenditures or capital additions or
betterments;
(xvi) changed the method of accounting or the accounting
principles or practices, including any policies or practices with
respect to the establishment of reserves for work-in-process and
accounts receivable, utilized in the preparation of the Financial
Statements and the Interim Financial Statements, other than as required
by GAAP;
(xvii) instituted or settled any litigation or any legal,
administrative or arbitration action or proceeding before any court or
Governmental Body;
(xviii) made any new elections or changed any current
elections with respect to its Taxes; or
(xix) entered into any agreement or commitment to do any of
the foregoing.
5.10 Title to Properties; Absence of Encumbrances; Condition
(a) Section 5.10(a) of the Sellers' Disclosure Schedule
contains a complete list by address of all real property owned, leased, operated
or used by the Company, the Sub S Holding Corporation and the Subsidiaries,
indicating the nature of the Company's, the Sub S Holding Corporation's or such
Subsidiary's interest therein. No condemnation, expropriation, eminent domain or
similar proceeding affecting all or any material portion of any such real
property is pending or, to the knowledge of any Seller or the Company, the Sub S
Holding Corporation or any Subsidiary, threatened.
(b) Except as set forth in Section 5.10(b) of the Sellers'
Disclosure Schedule, each of the Company, the Sub S Holding Corporation and each
Subsidiary has good title to, or a valid leasehold or other interest in, all of
the material properties and assets, real and personal, tangible and intangible,
it owns, or purports to own, leases or uses in the Business, including those
reflected in its books and records, free and clear of any and all Encumbrances,
except for
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Permitted Encumbrances. Except as set forth in Section 5.10(b) of the
Disclosure Schedule, none of such properties or assets leased by the Company,
the Sub S Holding Corporation or any Subsidiary is subject to any sublease,
sublicense or other agreement granting to any other Person any right to the use,
occupancy or enjoyment of such property or any portion thereof.
(c) "Permitted Encumbrances" means (i) liens for Taxes not yet
due and payable or which are being diligently contested in good faith by
appropriate proceedings and as to which appropriate reserves (to the extent
required by GAAP) have been established in the books and records of the Company,
the Sub S Holding Corporation or the appropriate Subsidiary; (ii) mechanics',
materialmen's, carriers', warehousemen's, landlord's and similar liens securing
obligations not yet delinquent or which are being diligently contested in good
faith by appropriate proceedings and as to which appropriate reserves (to the
extent required by GAAP) have been established in the books and records of the
Company, the Sub S Holding Corporation or the appropriate Subsidiary; and (iii)
Encumbrances on personal property taken by or granted to a Person who, by making
advances or incurring an obligation, gives value to enable the Company, the Sub
S Holding Corporation or any Subsidiary to acquire rights in or the use of such
property, provided that the Encumbrance does not extend to or cover any other
property and the total cost to the Company, the Sub S Holding Corporation or any
Subsidiary that would be required to discharge such Encumbrance in full does not
exceed the value so given by such Person to the Company, the Sub S Holding
Corporation or any Subsidiary.
(d) The material properties and assets owned, leased or used
by the Company, the Sub S Holding Corporation and each Subsidiary in the conduct
or operation of its business are in good operating condition and repair, are
suitable for the purposes for which they are used and are all of the properties
and assets necessary for the conduct and operation of the business of the
Company, the Sub S Holding Corporation and the Subsidiaries as currently
conducted. The Company, the Sub S Holding Corporation and the Subsidiaries are
the sole owner of all properties and assets, including trademarks, utilized in
the conduct or operation of the Business, except for properties and assets
leased or licensed to the Company pursuant to Contracts listed in Section 5.13
of the Disclosure Schedule or pursuant to Contracts that are not required to be
listed in such Section of the Sellers' Disclosure Schedule in accordance with
Section 5.13. The Company, the Sub S Holding Corporation and the Subsidiaries,
collectively, own and have good title to all of the properties, assets (whether
real or personal, tangible, intangible or mixed), business and operations,
including the goodwill, of the ZC Companies.
5.11 Intellectual Property.
Except as described in Section 5.11 of the Sellers' Disclosure
Schedule, there is no ZC Intellectual Property that is material to the conduct
of the Business. None of the Sellers or the Company, the Sub S Holding
Corporation or any Subsidiary has received any notice of any judicial,
administrative or arbitration proceeding instituted against the Company, the Sub
S Holding Corporation or any Subsidiary, or of any claim or threatened claim by
any Person against the Company, the Sub S Holding Corporation or any Subsidiary,
alleging that the conduct of the Business infringes any patent, trademark, trade
name, service xxxx, copyright, trade secret or other proprietary right of any
other Person and, to the knowledge of any Seller or the Company, the Sub S
Holding Corporation or any Subsidiary, there is no basis for any such proceeding
or claim. To the knowledge of any Seller or the Company or any Subsidiary, there
is
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no unauthorized use, infringement or misappropriation of any of the ZC
Intellectual Property by any third party, including any current or former
employee, other personnel or independent contractor of the Company, the Sub S
Holding Corporation or any Subsidiary.
5.12 Clients; Identified Prospects; Client Relations.
(a) Section 5.12(a) of the Sellers' Disclosure Schedule sets
forth a true, correct and complete list of all material clients that any of the
ZC Companies, the Company, the Sub S Holding Corporation, any Subsidiary, SFC
LLC or any Xxxxxxx Entity has billed since January 1, 1999 (the "Clients"). All
proposals and bids which have been sent to any Persons (the "Identified
Prospects") by any ZC Company or the Company, the Sub S Holding Corporation or
any Subsidiary with respect to the Business which remain outstanding as of the
Closing Date are consistent with the past practice of the Business.
(b) Sellers have provided to Buyer a true, correct and
complete copy of all outstanding Contracts, including retainer agreements and
engagement letters, between the Company, the Sub S Holding Corporation, any
Subsidiary, SFC LLC, any Xxxxxxx Entity and Clients and Identified Prospects
(the "Client Contracts"), and all outstanding written proposals or bids by the
Company, the Sub S Holding Corporation or any Subsidiary to Clients and
Identified Prospects. All of the Client Contracts are in written form and there
are no oral Client Contracts. Each of the Client Contracts is listed in Section
5.12(b) of the Sellers' Disclosure Schedule. To the extent any Client Contract
requires or is subject to the approval or order of a bankruptcy court (a
"Bankruptcy Court Approval"), all such Bankruptcy Court Approvals have been
obtained or are pending and Sellers have provided true, complete and correct
copies thereof to Buyer, except as described in Section 5.12(b) of Sellers'
Disclosure Schedule. To the extent the Company, the Sub S Holding Corporation or
any Subsidiary is holding any money or funds as a retainer fee under any Client
Contract, if required by law, such retainer fee is held in a separate bank
account. The Company, the Sub S Holding Corporation and the Subsidiaries have
appropriately recorded a liability in their books and records with respect to
such retainer fee. The list of Client Contracts in Section 5.12(b) of the
Sellers' Disclosure Schedule indicates under which of the Client Contracts the
Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC or any Xxxxxxx
Entity is holding any money or funds as a retainer fee and the amount of such
retainer fee.
(c) No retainer agreement, engagement letter, proposal, bid or
other agreement or arrangement between the Company, the Sub S Holding
Corporation or any Subsidiary and any Client or Identified Prospect (i) contains
covenants which place restrictions on the Company, the Sub S Holding Corporation
or any Subsidiary, including any restriction to engage in any business in any
place or to solicit clients or solicit Persons for employment or as independent
contractors, except as described in Section 5.12(c) of the Sellers' Disclosure
Schedule, or (ii) contains a contingent fee or similar arrangement, except as
described in Section 5.12(c) of the Sellers' Disclosure Schedule. Neither the
Company, the Sub S Holding Corporation nor any Subsidiary has any arrangement
with any Client or Identified Prospect which obligates the Company, the Sub S
Holding Corporation or any Subsidiary to provide services for an indeterminate
or indefinite period of time or to provide services beyond the date which is one
year from the Closing Date and for which the services to be rendered have a
value in excess of $100,000, except as described in Section 5.12(c) of the
Sellers' Disclosure Schedule.
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Nothing has come to the attention of any of the Sellers that has caused such
Seller to believe that the relationship between the Company, the Sub S Holding
Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity and any Client is
unsatisfactory such that it would have a Material Adverse Effect. None of the
Sellers or the Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC
or any Xxxxxxx Entity has received any notice (formal or informal) from any
Client of an intention to substantially reduce or terminate its relationship
with the Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC or any
Xxxxxxx Entity, and neither the Company, the Sub S Holding Corporation, any
Subsidiary, SFC LLC nor any Xxxxxxx Entity has engaged in any material
renegotiation of the terms of any Contract with any Client. Except in the
ordinary course of business, no client investigation or examination of any
account receivable or performance of the Company, the Sub S Holding Corporation,
any Subsidiary, SFC LLC or any Xxxxxxx Entity is currently being conducted by
any Person that at any time has been a client of the Company, the Sub S Holding
Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity and no such
investigation or examination has been threatened to the knowledge of any Seller
or the Company, the Sub S Holding Corporation or any Subsidiary. Except as set
forth in the "retainer" provision of the Interim Financial Statements or as set
forth in Section 5.12(c) of the Sellers' Disclosure Schedule, neither the
Company, the Sub S Holding Corporation, any Subsidiary nor SFC LLC has any
pre-billed fees for which it has not yet performed the billed work. None of the
Sellers or the Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC
or any Xxxxxxx Entity has been advised by any of the ten (10) clients which have
produced the most revenue in the current fiscal year (a list of such clients is
set forth on Section 5.12(c) of the Sellers' Disclosure Schedule) that such
clients intend to terminate business relationships with the Company, the Sub S
Holding Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity as a result
of the transactions contemplated hereby or otherwise.
(d) Subject to any of the terms of any existing Bankruptcy
Court Approval, the Client Contracts are legal, valid, binding and in full force
and effect and are enforceable by the Company, the Sub S Holding Corporation or
a Subsidiary, SFC LLC or any Xxxxxxx Entity, as the case may be, in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium and other similar laws affecting the rights
of creditors generally and by general principles of equity. Except as set forth
in Section 5.12(d) of the Sellers' Disclosure Schedule, neither the Company, the
Sub S Holding Corporation, any Subsidiary, SFC LLC nor any Xxxxxxx Entity is
(with or without the lapse of time or the giving of notice, or both) in breach
of or in default under any material Client Contract, and, to the knowledge of
any Seller or the Company, the Sub S Holding Corporation or any Subsidiary, no
other party to any material Client Contract (with or without the lapse of time
or the giving of notice, or both) is in breach of or in default under any such
Client Contract.
(e) Except as set forth in Section 5.12(e) of the Sellers'
Disclosure Schedule, neither the Company, the Sub S Holding Corporation nor any
Subsidiary is a party to any contract with a Governmental Body in the U.S. under
which the Company, the Sub S Holding Corporation or any Subsidiary is now
providing or will provide services related to the Business to such Governmental
Body. None of the ZC Companies and neither the Company, the Sub S Holding
Corporation nor any Subsidiary has ever been suspended or debarred from bidding
on contracts or subcontracts to provide services related to the Business to any
Governmental Body in the U.S., nor to the knowledge of any Seller or the
Company, the Sub S Holding Corporation or any Subsidiary, has any suspension or
debarment action been contemplated, threatened or
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commenced, in each case relating to any ZC Company, the Company, the Sub S
Holding Corporation or any Subsidiary providing services related to the Business
to any Governmental Body in the U.S.
(f) Buyer understands that the terms of many of the Company's
Contracts are subject to the rulings of a bankruptcy court and may be modified,
amended or terminated by orders rendered by any such court. This circumstance
shall not be deemed to cause the Sellers to be in breach of any of the
provisions of this Section 5.12 or Section 5.13 with respect to such Contracts,
unless such modification, amendment or termination is caused by the wrongful
action or inaction of any ZC Company, the Company, the Sub S Holding Corporation
or any Subsidiary.
5.13 Contracts.
(a) Section 5.13(a) of the Sellers' Disclosure Schedule sets
forth a true, correct and complete list of each of the following Contracts to
which the Company, the Sub S Holding Corporation or any Subsidiary is a party or
by which the Company, the Sub S Holding Corporation or any Subsidiary or its
assets or properties are bound (collectively, the "Other Contracts"); provided
that Other Contracts shall not include (i) any Contract relating to the
provision of professional services by the Company, the Sub S Holding Corporation
or any Subsidiary covered in Section 5.12, or (ii) any Contract for goods and
services entered into in the ordinary course of business, consistent with past
practice, which is terminable on no more than thirty (30) days' notice and
involves payments of no more than $10,000 per month or $100,000 in the
aggregate:
(i) each employment or other similar Contract providing for
compensation, severance or a fixed term of employment in respect of
services performed by any employee of the Company, the Sub S Holding
Corporation or any Subsidiary;
(ii) (a) each management, consulting, retainer or other
similar type of Contract under which services are provided by any
Person to the Company, the Sub S Holding Corporation or any Subsidiary
in excess of $100,000 per annum and (b) each Contract for services and
supplies provided by any other Person to the Company, the Sub S Holding
Corporation or any Subsidiary;
(iii) each Contract that restricts in any manner the operation
of the Business as presently conducted, including each Contract that
restricts the ability of the Company, the Sub S Holding Corporation or
any Subsidiary to solicit clients, employees or other service
providers;
(iv) each Contract with any Seller or Affiliated Person
thereof;
(v) each lease (as lessor, lessee, sublessor or sublessee) of
any real property;
(vi) each lease (as lessor, lessee, sublessor or sublessee) of
any tangible personal property requiring aggregate payments during its
term or any extension or renewal thereof in excess of $100,000;
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(vii) each license (as licensor, licensee, sublicensor or
sublicensee) of any intellectual property rights (other than customary,
non-negotiated licenses of commercially available, "packaged, off the
shelf" computer software);
(viii) each Contract under which any money has been or may be
borrowed or loaned, and each note, bond, factoring agreement, indenture
or other evidence of indebtedness has been issued or assumed, and each
guaranty (including "take-or-pay" and "keepwell" arrangements) of any
evidence of indebtedness or other obligation, or of the net worth, of
any Person;
(ix) each mortgage, deed of trust, security agreement,
purchase money agreement, conditional sales contract or capital lease
or other Contract that creates an encumbrances on any material property
or asset;
(x) each partnership, joint venture or similar Contract;
(xi) each Contract containing restrictions with respect to the
payment of dividends or other distributions in respect of the
Company's, the Sub S Holding Corporation's or any Subsidiary's capital
stock or other ownership interests;
(xii) each Contract to make unpaid capital expenditures in
excess of $100,000;
(xiii) each Contract containing a change of control or
acceleration of performance provision;
(xiv) each Contract with respect to any ZC Intellectual
Property;
(xv) each broker's, finder's or other similar retainer
agreement or engagement letter; and
(xvi) each other Contract having an indefinite term or a fixed
term of more than one (1) year.
True, correct and complete copies of all written Other Contracts required to be
disclosed pursuant to this Section 5.13(a) have been previously delivered to
Buyer. All of the Other Contracts are in written form and there are no oral
Other Contracts.
(b) The Other Contracts are legal, valid, binding and in full
force and effect and are enforceable by the Company, the Sub S Holding
Corporation or a Subsidiary, as the case may be, in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting the rights of creditors
generally and by general principles of equity. Except as set forth in Section
5.13(b) of the Sellers' Disclosure Schedule, neither the Company, the Sub S
Holding Corporation nor any Subsidiary is (with or without the lapse of time or
the giving of notice, or both) in breach of or in default under any of the Other
Contracts, and, to the knowledge of any Seller, the Company, the Sub S Holding
Corporation or any Subsidiary, no other party to any of the Other Contracts is
-27-
(with or without the lapse of time or the giving of notice, or both) in breach
of or in default under any of the Other Contracts.
5.14 Insurance. All insurance policies currently maintained by
the Company, the Sub S Holding Corporation and the Subsidiaries are accurately
listed and summarized in Section 5.14 of the Sellers' Disclosure Schedule. Such
insurance policies are adequate to insure the Company, the Sub S Holding
Corporation and the Subsidiaries against such risks as are customarily insured
against by companies in the same or similar business with the same or similar
size and scope of operations. Such insurance policies comply in all respects
with the requirements of any leases to which the Company, the Sub S Holding
Corporation or any Subsidiary is a party, including, without limitation, real
property leases. Each such insurance policy is in full force and effect (free
from any presently exercisable right of termination on the part of the insurance
company issuing such policy prior to the expiration of the term of such policy)
and all premiums due and payable in respect thereof have been paid. There are no
pending claims with respect to the Company, the Sub S Holding Corporation or any
Subsidiary or their properties or assets under any such insurance policy.
Neither the Company, the Sub S Holding Corporation nor any Subsidiary has
received notice of cancellation or non-renewal of any such policy. Except as set
forth in Section 5.14 of Sellers' Disclosure Schedule, the consummation of the
transactions contemplated hereby will not give rise to a right of termination of
any such policy by the insurance company issuing the same prior to the
expiration of the term of such policy.
5.15 Litigation. Except as set forth in Section 5.15 of the
Sellers' Disclosure Schedule, there is no lawsuit, governmental investigation or
legal, administrative or arbitration action or proceeding pending or, to the
knowledge of any Seller or the Company, the Sub S Holding Corporation or any
Subsidiary, threatened against any ZC Company, the Company, the Sub S Holding
Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity or any of their
respective properties or assets, or any director, manager, officer or employee
of any ZC Company, the Company, the Sub S Holding Corporation, any Subsidiary,
SFC LLC or any Xxxxxxx Entity, in his or her capacity as such, nor, to the
knowledge of any Seller or the Company, the Sub S Holding Corporation or any
Subsidiary, is there any basis for any action for negligence against the
Company, the Sub S Holding Corporation or any Subsidiary that would have a
Material Adverse Effect. Neither any ZC Company nor the Company, the Sub S
Holding Corporation nor any Subsidiary is identified as a party subject to any
restrictions or limitations under any judgment, order, decree, writ, injunction
or License of any Governmental Body.
5.16 Licenses. Section 5.16 of the Sellers' Disclosure
Schedule sets forth a true, correct and complete list of all approvals, permits,
certificates, qualifications, authorizations, licenses, franchises, consents,
orders and registrations of all U.S. federal, state and local, and all foreign
national, state and local, governmental or regulatory agencies and authorities
and any other Governmental Bodies necessary for the conduct of the Business, the
absence of which would have a Material Adverse Effect (collectively the
"Licenses"). Except as set forth in Section 5.16 of the Sellers' Disclosure
Schedule, the Licenses are valid and in full force and effect. None of the
Licenses will be terminated or become terminable as a result of the consummation
of the transactions contemplated hereby.
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5.17 Members, Partners, Principals, Employees and Independent
Contractors. Section 5.17 of the Sellers' Disclosure Schedule sets forth a true,
correct and complete list of all stockholders, members, partners, principals,
directors, officers, managers, employees and independent contractors of (a) the
Company, the Sub S Holding Corporation and the Subsidiaries as of the date
hereof, and (b) with respect to each such stockholders, member, partner,
principal, director, officer, manager, employee and independent contractor, (i)
the total compensation (including salary, bonus and other incentive
compensation) received by such stockholders, member, partner, principal,
director, officer, manager, employee and independent contractor in the year
ended December 31, 2001, such principal's, director's, officer's, employee's,
manager's and independent contractor's current compensation, (ii) the total
number of hours billed and billing rates of such stockholders, member, partner,
principal, director, officer, manager, employee and independent contractor in
the year ended December 31, 2001 and in the six (6) months ended June 30, 2002,
(iii) the number of years of continuous service of such principal, director,
officer, manager and employee, and (iv) the period of service of such
independent contractor. As of the Closing Date, no principal, officer or manager
of the Company, the Sub S Holding Corporation or any Subsidiary is on a leave of
absence.
5.18 Employee Benefit Plans; ERISA.
(a) Section 5.18 of the Sellers' Disclosure Schedule sets
forth a true, correct and complete list of all employee benefit plans, programs,
policies and arrangements, whether written or unwritten and whether or not
governed by the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (the "Plans"), that any of the ZC Companies, the Company, the Sub S
Holding Corporation, any Subsidiary or any other corporation or business which
is now or at the relevant time was a member of a controlled group of companies
or trades or businesses including the Company, the Sub S Holding Corporation any
Subsidiary or any of the ZC Companies, within the meaning of section 414 of the
Code, maintain or have maintained on behalf of current or former members,
partners, principals, directors, officers, managers, employees, consultants or
other personnel.
(b) There has been no prohibited transaction within the
meaning of Section 406 of ERISA, or Section 4975 of the Code, with respect to
any of the Plans; (ii) none of the Plans is or was subject to Section 412 of the
Code or Section 302 or Title IV of ERISA; and (iv) each of the Plans has been
operated and administered in all material respects in accordance with both its
terms (including the provisions of any related insurance policy) and all
applicable Laws, including ERISA. There are no actions, suits or claims pending
or threatened (other than routine claims for benefits), whether by participants,
the IRS, the Department of Labor or otherwise, with respect to any Plan and no
facts exist under which any such actions, suits or claims are likely to be
brought or under which the Company, the Sub S Holding Corporation, any
Subsidiary or any of the ZC Companies could incur any liability with respect to
a Plan other than in the ordinary course. None of the Plans is or was a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(c) None of the Company, the Sub S Holding Corporation, any
Subsidiary or any of the ZC Companies has announced, proposed or agreed to any
change in benefits under any Plan or the establishment of any new Plan. There
have been no changes in the operation or
-29-
interpretation of any Plan since the most recent annual report, which would have
any material effect on the cost of operating, maintaining or providing benefits
under such Plan.
(d) None of the Company, the Sub S Holding Corporation, any
Subsidiary or any of the ZC Companies has incurred any liability for the
misclassification of employees as leased employees or independent contractors.
(e) Except as provided for in this Agreement and in the other
Transaction Documents, the consummation of the transactions contemplated by this
Agreement, either alone or in combination with another event, will not (i)
result in any individual becoming entitled to any increase in the amount of
compensation or benefits or any additional payment from the Company, the Sub S
Holding Corporation, any Subsidiary or the ZC Companies (including, without
limitation, severance, golden parachute or bonus payments or otherwise), or (ii)
accelerate the vesting or timing of payment of any benefits or compensation
payable in respect of any individual.
(f) No Plan provides benefits to any non-U.S. employees.
5.19 Compliance with Laws. The ZC Companies did operate, and
the Company, the Sub S Holding Corporation and the Subsidiaries have operated,
the Business in compliance in all material respects with all applicable Laws,
including Environmental Laws. Neither any of the ZC Companies nor the Company,
the Sub S Holding Corporation nor any Subsidiary is a party to any pending
judicial or administrative proceeding and no such proceeding is, to the
knowledge of any Seller or the Company, the Sub S Holding Corporation or any
Subsidiary, threatened against the Company, the Sub S Holding Corporation, any
Subsidiary or any of their respective predecessors alleging the violation of any
Law, including any Environmental Law, and no notice from any Governmental Body
or other Person has been provided to any of the ZC Companies or the Company, the
Sub S Holding Corporation or any Subsidiary claiming any violation of Law,
including any Environmental Law, or calling attention to the need for any
investigation or remedial action in connection with any real property owned,
leased, operated or used by the Company, the Sub S Holding Corporation or any
Subsidiary.
5.20 Bank Accounts and Powers of Attorney. Section 5.20 of the
Sellers' Disclosure Schedule sets forth the name of each bank in which the
Company, the Sub S Holding Corporation or any Subsidiary has an account, lock
box or safe deposit box, the number of each such account, lock box and safe
deposit box and the names of all Persons authorized to draw thereon or have
access thereto. Except as set forth in Section 5.20 of the Disclosure Schedule,
no Person holds any power of attorney from the Company, the Sub S Holding
Corporation or any Subsidiary.
5.21 Books and Records. The books of account, stock books and
other records of the ZC Companies and the Company, the Sub S Holding Corporation
and the Subsidiaries that have been made available to Buyer are true, correct
and complete in all material respects. Except as disclosed in Section 5.21 of
the Sellers' Disclosure Schedule, the minute books of the ZC Companies and the
Company, the Sub S Holding Corporation and the Subsidiaries contain true,
correct and complete records in all material respects, as applicable, of all
meetings held of, and corporate action taken by, the shareholders, members, the
boards of directors or managers and
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committees of the boards of directors or managers of the ZC Companies and the
Company, the Sub S Holding Corporation and the Subsidiaries. At the Closing, all
of those books and records will be in the possession of Buyer.
5.22 Transactions with Related Parties. Except for (i)
employment relationships between the ZC Companies or the Company and employees
of the ZC Companies or the Company, (ii) remuneration by the ZC Companies or the
Company for services rendered as a director, officer, employee or manager, (iii)
the Services Agreements, and (iv) as set forth in Section 5.22 of the Sellers'
Disclosure Schedule, (a) since January 1, 2000 none of the ZC Companies or the
Company, the Sub S Holding Corporation or any Subsidiary has, in the ordinary
course of business or otherwise, directly or indirectly, purchased, leased or
otherwise acquired any property or obtained any services from, or sold, leased
or otherwise disposed of any property or furnished any services to, any Seller,
any trustee or beneficiary of any Seller, any spouse of any Seller or any
immediate family member of any Seller or the spouse of such family member, or
any other Person (other than any of the ZC Companies or the Company) that,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with the Company or any Seller, any trustee or
beneficiary of any Seller any spouse of any Seller or any immediate family
member of any Seller or the spouse of such family member (each of the Persons
described in this clause (a) being referred to herein as an "Affiliated
Person"); (b) the Company does not owe any amount to any Affiliated Person and
neither does any Subsidiary; and (c) no Affiliated Person owes any amount to the
Company or any Subsidiary; and (d) no part of the property or assets of any
Affiliated Person is used by the Company or any Subsidiary in the conduct or
operation of the Business.
5.23 Absence of Certain Business Practices. None of the
Sellers nor any of the ZC Companies or the Company, the Sub S Holding
Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity or any of the
directors, officers or managers of any of the ZC Companies or the Company, the
Sub S Holding Corporation, any Subsidiary, SFC LLC or any Xxxxxxx Entity nor, to
the knowledge of any Seller or the Company, the Sub S Holding Corporation or any
Subsidiary, any of the Company's employees or agents, or the employees or agents
or any other Person associated with or acting for or on behalf of any of them,
has directly or indirectly (a) made any contribution or gift, which contribution
or gift is in violation of any applicable Law, (b) made any bribe, rebate,
payoff, influence payment, kickback or other payment to any Person, private or
public, regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained for or in respect of any of the ZC Companies or the
Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC or any Xxxxxxx
Entity, or any Affiliate thereof, or (iv) in violation of any Law, or (c)
established or maintained any fund or asset that has not been properly recorded
in the books and records of the ZC Companies or the Company, the Sub S Holding
Corporation, the Subsidiaries, SFC LLC or any Xxxxxxx Entity.
5.24 Catalyst Equity Fund. True, correct and complete copies
of (a) the limited partnership agreement of Catalyst Equity Fund, L.P.
("Catalyst I") and all material amendments thereto, (b) any current management
agreement to which Catalyst I is a party, and (c) current any investment
guidelines or policies of Catalyst I have been delivered to Buyer. Catalyst I
and any successor funds sponsored by the Designated Principals are referred to
herein as "Catalyst."
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Catalyst I does not have any investments in any Person that is a client of
Buyer, the Company, the Sub S Holding Corporation or any of the Subsidiaries.
5.25 Brokers and Finders. No broker, finder or investment
advisor has been engaged by any Seller or any ZC Company or the Company, the Sub
S Holding Corporation or any Subsidiary in connection with the transactions
contemplated hereby.
5.26 Restrictions on Business Activities. There is no
judgment, order, decree, writ or injunction binding upon any Seller or the
Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC or any Xxxxxxx
Entity or, to the knowledge of any Seller or the Company, the Sub S Holding
Corporation or any Subsidiary, threatened that has or could prohibit or impair
the conduct of the Business by the Company, the Sub S Holding Corporation, any
Subsidiary, SFC LLC or any Xxxxxxx Entity as currently conducted or any business
practice of the Company, the Sub S Holding Corporation, any Subsidiary, SFC LLC
or any Xxxxxxx Entity, including the acquisition of property, the provision of
services, the hiring of employees or the solicitation of clients, in each case
either individually or in the aggregate.
5.27 Disclosure.
(a) No representation or warranty by Sellers in this
Agreement, nor in any certificate, Schedule or Exhibit delivered or to be
delivered pursuant to this Agreement contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading. To
the knowledge of any Seller or the Company, the Sub S Holding Corporation or any
Subsidiary, there is no information concerning the ZC Companies, the Company,
the Sub S Holding Corporation, the Subsidiaries, SFC LLC, the Xxxxxxx Entities
or the Business which has not heretofore been disclosed to Buyer which is
reasonably expected to have a Material Adverse Effect.
(b) The Company Information to be furnished to Buyer pursuant
to Section 7.9 is true, complete and correct and will not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained therein not misleading.
5.28 SFC LLC and the Xxxxxxx Entities.
(a) Xxxxxxx Xxxxxx Xxxxxx LLC, a limited liability company
organized under the laws of New Jersey ("SFC LLC"), is duly organized, validly
existing and in good standing under the laws of New Jersey and has full company
power and authority to own its properties and to carry on its business as it is
organized validly existing and in good standing under the laws of New Jersey and
has full corporate power and authority to own its properties and to carry on its
business as it is now being conducted. True, correct and complete copies of (i)
the Constituent Documents of SFC LLC and each Xxxxxxx Entity and all amendments
thereto and (ii) the Services Agreements have been delivered to Buyer.
(b) Neither the execution and delivery by the Sellers of this
Agreement and the other Transaction Documents to which they are a party or by
SFC LLC or any Xxxxxxx Entity of its respective Services Agreement or the
amended or restated operating agreement of SFC LLC dated as of September 4,
2002, or the amended and restated Constituent Documents of such
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Xxxxxxx Entity (dated as of September 4, 2002, with respect to each Xxxxxxx
Entity) nor the consummation by Sellers, SFC LLC or any Xxxxxxx Entity of the
transactions contemplated hereby and thereby, does or will (a) conflict with or
violate the Constituent Documents or resolutions of the directors or members of
SFC LLC or the stockholders or directors of the Xxxxxxx Entities or (b) conflict
with, violate, result in the breach of any term of, result in the acceleration
of performance of any obligation under, constitute a default under, require the
consent or approval of or any notice to or filing with any third party or
Governmental Body, or create an Encumbrance on any of the ownership interests or
properties or assets of SFC LLC or any Xxxxxxx Entity under, (i) any note,
mortgage, deed of trust, lease or other material Contract to which SFC LLC or
any Xxxxxxx Entity is a party or by which SFC LLC or any Xxxxxxx Entity or any
of their respective properties or assets is bound, or (ii) any Law, judgment,
order, decree, writ, injunction or License of any Governmental Body having
jurisdiction over SFC LLC or any Xxxxxxx Entity or their respective properties
or assets.
(c) Each Services Agreement is in full force and effect and
there is no notice that SFC LLC or any Xxxxxxx Entity does not intend to honor
its obligations under its respective Services Agreement. Each Services Agreement
is a valid and binding agreement of SFC LLC and the Xxxxxxx Entity, that is a
party thereto, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity.
(d) Neither SFC LLC nor any Xxxxxxx Entity has any material
liabilities of any kind, whether absolute, accrued, contingent or otherwise,
other than liabilities arising under the Services Agreement to which it is a
party. SFC LLC and each Xxxxxxx Entity has operated its business and conducted
its operations in compliance in all material respects with all applicable Laws
and none of them is a party to any pending judicial or administrative proceeding
and no such proceeding is, to the knowledge of any Seller or the Company, the
Sub S Holding Corporation or any Subsidiary, threatened alleging the violation
of any Law.
5.29 Members/Owners of ZC Acquisition, LLC. Each member of the
Other Seller or owner of Interests in the Other Seller is an Accredited Investor
and has such knowledge, skill and experience in financial, investment and
business matters to be capable of evaluating the merits and risks of an
investment in the Acquired Stock, to make an informed decision relating thereto
and to protect his or her own interests in connection with the transactions
contemplated hereby. Each member of the Other Seller or owner of Interests in
the Other Seller has been furnished with a copy of the Form 10-K, the Forms 10-Q
and the S-4 Prospectus.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to each of the Sellers as
follows:
6.1 Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Buyer has full corporate power and authority to own its properties and
to carry on its business as it is now being conducted.
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Buyer is duly qualified to transact business and is in good standing in each
jurisdiction wherein the nature of the business done or the property owned,
leased or operated by it requires such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect. True, correct and
complete copies of the Constituent Documents of Buyer and all amendments thereto
have been delivered to the Designated Principals.
6.2 Capitalization. Buyer is authorized to issue 100,000,000
shares of Buyer Common Stock, of which 30,614,402 shares were issued and
outstanding as of August 31, 2002, and 5,000,000 shares of preferred stock,
issuable in series, of which no shares are issued or outstanding. All of the
issued and outstanding shares of Buyer Common Stock have been duly authorized
and are validly issued and outstanding, fully paid and non-assessable. On
January 15, 2003, Buyer shall transfer to, and Sellers will own, and have good
and valid title to, all of the Defined Closing Stock, free and clear of any and
all Encumbrances, except for Encumbrances placed thereon by Sellers or Persons
claiming by, through or under Sellers.
6.3 Authorization. The execution and delivery by Buyer of this
Agreement and the other Transaction Documents to which Buyer is a party have
been duly authorized by all necessary corporate action required on the part of
Buyer. This Agreement and the other Transaction Documents to which Buyer is a
party have been duly executed and delivered by Buyer and each constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity.
6.4 No Conflicts; Consents. Neither the execution and delivery
by Buyer of this Agreement or any of the Transaction Documents to which Buyer is
a party nor the consummation by Buyer of the transactions contemplated hereby or
thereby does (a) conflict with or violate the Constituent Documents of Buyer, or
(b) conflict with, violate, result in the breach of any term of, constitute a
default under or require (other than a filing under the HSR Act) the consent or
approval of or any notice to or filing with any Person under, any note,
mortgage, deed of trust or other Contract to which Buyer is a party or by which
Buyer is bound, or any Law, order, decree, writ or injunction of any
Governmental Body having jurisdiction over Buyer, except with respect to clause
(b) where such conflict, violation, breach or default, or the failure to obtain
such consent or approval, give such notice or make such filing, would not
materially adversely impair the ability of Buyer to consummate the transactions
contemplated hereby or thereby.
6.5 Litigation. No lawsuit, governmental investigation or
legal, administrative or arbitration action or proceeding is pending or, to the
knowledge of Buyer, threatened against Buyer, or any director, officer or
employee of Buyer in his or her capacity as such, which questions the validity
of this Agreement or any other Transaction Document to which Buyer is a party or
seeks to prohibit, enjoin or otherwise challenge the consummation of the
transactions contemplated hereby or thereby.
6.6 Reporting Company Status. The Buyer Common Stock is
registered as a class under Section 12(g) of the Exchange Act and is currently
admitted for quotation on the Nasdaq National Market of the Nasdaq Stock Market,
Inc. ("Nasdaq"). Since June 30, 2001,
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Buyer has timely filed all reports required to be filed pursuant to Section
13(a) of the Exchange Act and is eligible to file a Registration Statement under
the Securities Act on Form S-3. Buyer has furnished each Seller with a true,
correct and complete copy (without exhibits) of the Form 10-K, the Forms 10-Q
and the S-4 Prospectus. The Form 10-K, the Forms 10-Q and the S-4 Prospectus, as
of their respective filing dates, complied as to form in all material respects
with the Exchange Act and the Securities Act, as applicable, and did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.7 Financial Statements. The financial statements of Buyer
included in the Form 10-K and the Forms 10-Q have been prepared from the books
and records of Buyer, in accordance with GAAP, and fairly present in all
material respects the financial condition of Buyer, as at their respective
dates, and the results of its operations and cash flows for the periods covered
thereby. Since December 31, 2001, there has been no material adverse change in
the business, operations, assets, financial condition, liabilities or results of
operations of Buyer, except that Buyer has borrowed an amount equal to the Cash
Consideration.
6.8 Brokers and Finders. Except as set forth in Section 6.8 of
the Buyer Disclosure Schedule, no broker, finder or financial advisor has been
engaged by Buyer or any of its subsidiaries in connection with the transactions
contemplated by this Agreement.
6.9 Investment Intent. Buyer is an Accredited Investor and is
acquiring the Company Interests for its own account and for investment purposes
and not with a view to the sale or other distribution of any of the Company
Interests in a transaction that would violate the registration requirements of
the Securities Act.
6.10 Absence of Certain Changes. Except as disclosed in
periodic reports filed by Buyer with the SEC under the Exchange Act, since
December 31, 2001, Buyer and its subsidiaries, taken as a whole, have operated
their businesses in the ordinary course consistent with past practice.
6.11 Intellectual Property. Except as described in Section
6.11 of the Buyer's Disclosure Schedule, there is no Buyer intellectual property
that is material to the conduct of its business. Neither Buyer nor its
subsidiaries has received any notice of any judicial, administrative or
arbitration proceeding instituted against Buyer or any subsidiary, or of any
claim or threatened claim by any Person against Buyer or any subsidiary,
alleging that the conduct of its business infringes any patent, trademark, trade
name, service xxxx, copyright, trade secret or other proprietary right of any
other Person. To the knowledge of Buyer or any of its subsidiaries, there is no
unauthorized use, infringement or misappropriation of any of Buyer's material
intellectual property by any third party, including any current or former
employee, other personnel or independent contractor of Buyer or any of its
subsidiaries.
6.12 Compliance with Laws. Buyer and its subsidiaries have
operated their businesses in compliance with all applicable Laws, including
Environmental Laws and ERISA, except where the failure to be in such compliance
would not have a Material Adverse Effect. Except as would not have a Material
Adverse Effect, neither Buyer nor any of its subsidiaries is a party to any
pending judicial or administrative proceeding and no such proceeding is, to the
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knowledge of Buyer, threatened against the Buyer or any of its predecessors or
any of its subsidiaries or any of its predecessors alleging the violation of any
Law, including any Environmental Law or ERISA, and no notice from any
Governmental Body or other Person has been provided to Buyer claiming any
violation of Law, including any Environmental Law or ERISA, or calling attention
to the need for any investigation or remedial action in connection with any real
property owned, leased, operated or used by the Buyer or any of its
subsidiaries.
6.13 Taxes.
(a) Except as set forth in Section 6.13 of the Buyer's
Disclosure Schedule, all Returns that are due by any of Buyer or any of its
material subsidiaries for periods ending on or prior to the Closing Date have
been filed, or a valid request for extension has been filed with respect
thereto, on a timely basis (including any extensions) with the appropriate
governmental agencies in all jurisdictions in which such Returns are required to
be filed, except where the failure to file such Returns would not have a
Material Adverse Effect. Except as set forth in Section 6.13 of Buyer's
Disclosure Schedule, all Taxes due and payable by any of Buyer or any of its
subsidiaries on or prior to the Closing Date have been or will be paid on a
timely basis, except when the failure to make such payment would not have a
Material Adverse Effect. Except as set forth on Schedule 6.13 of the Buyer's
Disclosure Schedule, neither the Buyer nor any of its material subsidiaries is
currently the beneficiary of any extension of time within which to file any
Return.
(b) No written claim has ever been made by an authority in a
jurisdiction where the Buyer or any of its material subsidiaries does not file
Returns that it is or may be subject to taxation by that jurisdiction, and
neither the Buyer nor any of its material subsidiaries has received any notice,
or request for information, from any such authority.
(c) Buyer and its material subsidiaries have complied (and
until the Closing will comply) with all applicable laws relating to the payment
and withholding of Taxes (including withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, 6041 and 6049 of the Code and
similar provisions under any other laws) and, within the time and in the manner
prescribed by law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required.
(d) No waivers of statutes of limitations have been given or
requested in writing with respect to Buyer or any of its material subsidiaries.
6.14 Absence of Certain Business Practices. Except as would
not have a Material Adverse Effect, neither Buyer nor any of its subsidiaries or
any of the directors, officers or managers of any of Buyer or any of its
subsidiaries nor, to the knowledge of Buyer, any of Buyer's employees or agents,
or the employees or agents or any other Person associated with or acting for or
on behalf of any of them, has directly or indirectly (a) made any contribution
or gift, which contribution or gift is in violation of any applicable Law, (b)
made any bribe, rebate, payoff, influence payment, kickback or other payment to
any Person, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special
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concessions or for special concessions already obtained for or in respect of any
of Buyer or any of its subsidiaries, or any Affiliate thereof, or (iv) in
violation of any Law, or (c) established or maintained any fund or asset that
has not been properly recorded in the books and records of the Buyer or its
subsidiaries.
6.15 Restrictions on Business Activities. There is no
judgment, order, decree, writ or injunction binding upon Buyer or any of its
subsidiaries or, to the knowledge of Buyer, threatened that has or could
prohibit or impair the conduct of their respective businesses as currently
conducted or any business practice of Buyer or any of its subsidiaries,
including the acquisition of property, the provision of services, the hiring of
employees or the solicitation of clients, in each case either individually or in
the aggregate.
6.16 Disclosure. No representation or warranty by Buyer in
this Agreement, nor in any certificate, Schedule or Exhibit delivered or to be
delivered pursuant to this Agreement contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading. To
the knowledge of Buyer, there is no information concerning Buyer and its
subsidiaries or their respective businesses which has not heretofore been
disclosed to the Designated Principals which is reasonably expected to have a
Material Adverse Effect.
ARTICLE VII
COVENANTS OF SELLERS
Sellers hereby covenant and agree as follows:
7.1 Certain Filings. Sellers shall make or cause the Company
to make all filings with Governmental Bodies that are required to be made by
Sellers or by the Company or Sub S Holding Corporation to carry out the
transactions contemplated by this Agreement, including as required under the HSR
Act. Sellers agree to assist, and to cause the Company to assist, Buyer in
making all such filings, applications and notices as may be necessary or
desirable in order to obtain the authorization, approval or consent of any
Governmental Body which reasonably may be required or which Buyer reasonably may
request in connection with the consummation of the transactions contemplated
hereby, including as required under the HSR Act. After the ZC Consolidation,
Sellers shall make a valid election under Section 754 of the Code with respect
to the LLC Subsidiaries in the manner prescribed under Treasury Regulation
Section 1.754-1.
7.2 Consents and Approvals. Sellers agree to use their
commercially reasonable efforts to obtain, and to cause the Company and the Sub
S Holding Corporation to obtain, prior to the Closing, all consents,
authorizations, approvals and waivers required in connection with the
consummation of the transactions contemplated hereby.
7.3 Resignation of Directors. At the Closing, Sellers shall
cause each of the managers, directors and officers of the Company, the Sub S
Holding Corporation and the Subsidiaries to deliver written resignations, and
Buyer shall be entitled to elect the managers and directors of the Company, the
Sub S Holding Corporation and the Subsidiaries.
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7.4 Affiliate Loans. At or prior to the Closing, Sellers
shall repay, and shall cause any and all Affiliated Persons (other than the
Company, the Sub S Holding Corporation and the Subsidiaries) to repay, any loans
owing to the Company, the Sub S Holding Corporation and the Subsidiaries.
7.5 Further Assurances. Sellers shall execute and deliver,
and to cause the Company, the Sub S Holding Corporation and the Subsidiaries to
execute and deliver, such additional documents and instruments, and to perform
such additional acts, as Buyer reasonably may request to effectuate or carry out
and perform all the terms, provisions and conditions of this Agreement and the
transactions contemplated hereby and to effectuate the intent and purposes
hereof.
7.6 Key-Man Insurance. The Designated Principals shall use
their best efforts to assist Buyer or the Company to obtain Key-man insurance on
the lives of the Designated Principals in the amounts set forth in Schedule D
and otherwise on commercially reasonable terms in Buyer's sole discretion.
7.7 Termination of Lines of Credit. At or prior to the
Closing, Sellers shall cause (i) the WMCA Loan and Security Agreement No.
721-07J70 between ZC LLC and Xxxxxxx Xxxxx Business Financial Services Inc.
("MLBFS") dated December 4, 2001, (ii) the guaranty by the Company and any
Subsidiary of the obligations of C. Flair LLC (f.k.a. ZC Transportation LLC
under the WMCA Reducing Revolver Loan Agreement No. 721-07J53 between C. Flair
LLC, ZC LLC and MLFBS dated June 6, 2001, and (iii) any other lines of credit,
indebtedness for borrowed money or guarantees thereof of the Company, the Sub S
Holding Corporation and the Subsidiaries to be terminated and be of no force and
effect and there shall be no obligation or liability of the ZC Companies, or the
Company, the Sub S Holding Corporation or any of the Subsidiaries in relation to
the foregoing.
7.8 Notification of Certain Matters. Promptly after obtaining
knowledge thereof, Sellers shall notify Buyer in writing of (a) the occurrence
or non-occurrence of any fact or event which causes or could cause (i) any
representation or warranty of Sellers contained in this Agreement to be untrue,
incorrect or incomplete in any material respect at any time or (ii) any
covenant, condition or agreement of Sellers in this Agreement not to be
performed, complied with or satisfied in any material respect, and (b) any
failure of Sellers to perform, comply with or satisfy any covenant, condition or
agreement to be performed, complied with or satisfied by Sellers hereunder in
any material respect; provided, however, that no such notification shall affect
the representations or warranties of Sellers, or the right of Buyer to rely
thereon. Sellers shall give prompt notice in writing to Buyer of any notice or
other communication from any third party alleging that the consent of such third
party is or may be required to be obtained by Sellers or the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement.
7.9 Company Information. At or prior to the Closing, and
thereafter upon Buyer's request, Sellers will furnish any and all information
about the Company, the Sub S Holding Corporation, the Subsidiaries, SFC LLC, the
Xxxxxxx Entities and the ZC Companies relating to periods ending on or prior to
the Closing Date (collectively, "Company Information"), including, but not
limited to, company descriptions and financial information, that Buyer may
reasonably request in connection with any report or registration statement that
Buyer is required
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to file with the SEC under the Exchange Act or the Securities Act (each, a
"Buyer SEC Filing") in connection with or as a result of the consummation of the
transactions contemplated hereby, and shall cause the Company Auditor to provide
Buyer with a consent of the Company Auditor to the inclusion of the Financial
Statements and its audit opinion with respect thereto in any Buyer SEC Filing
(the "Auditor Opinion Consent").
7.10 SFC LLC and the Xxxxxxx Entities. Sellers will cause SFC
LLC and each Xxxxxxx Entity to fulfill its obligations under its respective
Services Agreement for the term thereof and to comply with the terms of its
Constituent Documents. The Sellers will not amend or otherwise modify any of the
Constituent Documents of SFC LLC or any Xxxxxxx Entity without the express prior
written consent of Buyer.
7.11 Employee Arbitration and Litigation. The Designated
Principals shall pay any and all costs and expenses, including fees and
disbursements of counsel, in connection with the prosecution and defense of the
Employee Arbitration and Litigation and shall be responsible for and pay any
judgment against the Company, or settlement, arising out of the Employee
Arbitration and Litigation.
ARTICLE VIII
COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
8.1 Certain Filings. Buyer agrees to make or cause to be made
all filings with Governmental Bodies that are required to be made by Buyer to
carry out the transactions contemplated by this Agreement, including as required
under the HSR Act. Buyer agrees to assist Sellers in making all such filings,
applications and notices as may be necessary or desirable in order to obtain the
authorization, approval or consent of any Governmental Body which reasonably may
be required or which Sellers reasonably may request in connection with the
consummation of the transactions contemplated hereby, including as required
under the HSR Act.
8.2 Lease Deposits. Within ten (10) Business Days after
Closing, Buyer agrees to replace all letters of credit posted by the Company or
the Sellers as lease deposits on real estate and personal property leased in
connection with the Business, which letters of credit and lease deposit are
described in all material respects in Section 8.2 of the Sellers' Disclosure
Schedule.
8.3 Further Assurances. Buyer agrees to execute and deliver
such additional documents and instruments, and to perform such additional acts,
as Sellers reasonably may request to effectuate or carry out and perform all the
terms, provisions and conditions of this Agreement and the transactions
contemplated hereby and to effectuate the intent and purposes hereof.
8.4 Employee Benefits.
(a) Commencing on the Closing Date and through December 31,
2006, Buyer shall provide or shall cause the Company, the Sub S Holding
Corporation or any applicable
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Subsidiary to provide those persons, other than Designated Principals and Other
Principals, who, immediately prior to the Closing Date, were employees of the
Company, the Sub S Holding Corporation or any Subsidiary ("Retained Employees")
with:
(i) base salaries at the levels in effect for such
Retained Employees as at July 1, 2002, subject to any increases for
contractual or annual reviews to which they were entitled on that date,
such increases to be agreed to by Buyer prior to their implementation;
(ii) incentive compensation on the same basis as it
was paid by the ZC Companies for the year ended December 31, 2001. For
calendar years commencing on January 1, 2007, the Retained Employees
who remain employees of the Company will participate in a bonus plan
that will be specifically developed by Buyer in its reasonable
discretion that takes into account the operating characteristics of the
Business; and
(iii) employee welfare and retirement plans and
programs that provide benefits that are, in the aggregate, comparable
to either (x) those provided to such Retained Employees immediately
prior to the Closing Date or (y) those offered to similarly situated
employees of Buyer.
(b) In addition to the foregoing, Buyer shall recognize the
service of the Retained Employees with the Company, the Sub S Holding
Corporation and the Subsidiaries and their respective predecessors prior to the
Closing Date for purposes of eligibility and vesting under such employee welfare
and retirement plans and programs. It is expressly agreed that the provisions of
this Section 8.4 are not intended to be for the benefit of or otherwise be
enforceable by any third party, including, without limitation, any Retained
Employee or employee organization. Nothing herein shall prevent Buyer or the
Company, the Sub S Holding Corporation or any Subsidiary from amending or
modifying any employee benefit plan, program or arrangement in any respect (in
accordance with its terms and applicable Law) or terminating or modifying the
terms and conditions of employment of any particular Retained Employee or any
other person.
8.5 Notification of Certain Matters. Promptly after obtaining
knowledge thereof, Buyer shall notify the Designated Principals of (a) the
occurrence or non-occurrence of any fact or event which causes or would be
reasonably likely to cause (i) any representation or warranty of Buyer contained
in this Agreement to be untrue, incorrect or incomplete in any material respect
or (ii) to cause any covenant, condition or agreement of Buyer in this Agreement
not to be performed, complied with or satisfied in any material respect and (b)
any failure of Buyer to perform, comply with or satisfy any covenant, condition
or agreement to be performed, complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall affect the
representations or warranties of Buyer or Sellers' right to rely thereon.
8.6 Accrual Reserves. Within thirty (30) days after the first
anniversary of the Closing Date, Buyer, shall cause the Company to determine the
amount of the reserves on the Effective Date Balance Sheet for vacation pay and
stay/termination bonus obligations that remain unpaid and shall cause to the
Company to pay such amount to the Designated Principals.
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8.7 Payment of Awards in Employee Arbitration and Litigation.
Buyer shall cause the Company promptly to pay to the Designated Principals any
amounts awarded to and received by the Company as a judgment or in settlement of
the Employee Arbitration and Litigation.
ARTICLE IX
CERTAIN OTHER AGREEMENTS
The parties hereby further covenant and agree as follows:
9.1 Non-Competition and Non-Solicitation.
(a) General. The Designated Principals acknowledge that Buyer
would not consummate the transactions contemplated by this Agreement without the
assurance that the Designated Principals will not engage in any of, the
activities prohibited by this Section 9.1 for the periods set forth below. The
Designated Principals agree to restrict their actions as provided for in this
Section 9.1. The Designated Principals further acknowledge that the scope and
duration of the restrictions set forth in this Section 9.1 are reasonable in
light of the specific nature and duration of the transactions contemplated by
this Agreement and the payments the Designated Principals are receiving pursuant
to the terms of this Agreement, which payments benefit the Designated Principals
directly.
(b) Follow-On Acquisitions. Buyer agrees that, after the
Closing Date, all activities of Buyer and its Affiliates in the distressed
workout/bankruptcy area (including any acquisitions of unrelated entities
engaged in the Business or a closely related field) ("Related Business") will be
conducted through the Company or the division of Buyer operating the Company
Business. In addition, Buyer agrees that the operating profit of any Related
Business acquired after the Closing Date shall be included in the Operating
Profit of the Company for purposes of determining (i) the amount of any
incentive compensation earned by the Sellers, and (ii) whether the Company has
achieved sufficient Target Operating Profit to earn the Installment Payments;
provided, however, that the Target Operating Profit shall be increased by an
amount equal to the operating profit of any Related Business acquired after the
Closing Date for last twelve (12) months prior to such acquisition, unless the
Designated Sellers and Buyers shall otherwise agree or unless the Designated
Principals object to such increase, in which event the Target Operating Profit
shall not be so increased and the earnings of such Related Business shall
not be included in the Operating Profit of the Company for any purpose described
in clause (i) or (ii) of this Section 9.1(b).
(c) Noncompetition. The Designated Principals acknowledge and
recognize the highly competitive nature of the Business and that the Designated
Principals' positions with the ZC Companies, the Company and the Subsidiaries
and access to the ZC Companies', the Company's, the Sub S Holding Corporation's
and the Subsidiaries' confidential records and proprietary information render
the Designated Principals special and unique. In consideration of the payment to
the Designated Principals of amounts in connection with the sale of the Company
Interests owned by the Designated Principals pursuant to this Agreement, each of
the Designated Principals agrees that for a period of five (5) years after the
Closing Date, such Designated
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Principal will not, directly or indirectly (as defined below), compete with any
business the Company, the Sub S Holding Corporation or any Subsidiary is
conducting on the Closing Date or which is then covered in a written proposal or
business plan in any place where the Company, the Sub S Holding Corporation or
any Subsidiary does business at the time such Designated Principal seeks to
engage in such business. The covenants contained in this Section 9.1(c) and in
Sections 9.1(d) and (e) are independent of any similar covenant contained in any
Employment Agreement and shall survive and remain in full force and effect in
accordance with their terms notwithstanding a termination of such Employment
Agreement for any reason whatsoever; provided, however, that in the event that a
Designated Principal's Employment Agreement is terminated by the Company without
"Cause" (as such term is defined in Section 5(c) of the Employment Agreement)
pursuant to Section 5(d) of the Employment Agreement or by a Designated
Principal for "Good Reason" pursuant to Section 5(e) thereof, the provisions of
this Section 9.1(c) with respect to such Designated Principal shall terminate on
the date that is two (2) years from the date of termination of such Designated
Principal's Employment Agreement, but in no event later than the last day of the
"Covered Time" under such Employment Agreement (as such term is defined in
Section 7(a)(vii) thereof).
(d) Nonsolicitation. In further consideration of the payments
made in connection with the sale of the Company Interests owned by the
Designated Principals pursuant to this Agreement, each of the Designated
Principals agrees that for a period of five (5) years after the Closing Date,
except in connection with the conduct of the Business by the Company, the Sub S
Holding Corporation or any Subsidiary, he shall not, (a) directly or indirectly
solicit or attempt to solicit or participate in the solicitation of or otherwise
advise or encourage any director, officer, manager, employee, independent
contractor, agent, consultant or representative or client of, or vendor or
supplier to, the Company, the Sub S Holding Corporation or any Subsidiary to
terminate his, her or its relationship with the Company, the Sub S Holding
Corporation or any Subsidiary or to reduce the amount of business it does with
the Company, the Sub S Holding Corporation or any Subsidiary; or (b) directly or
indirectly solicit or attempt to solicit or participate in the solicitation of
or otherwise advise or encourage any director, officer, manager, employee,
independent contractor, agent, consultant or representative of the Company, the
Sub S Holding Corporation or any Subsidiary to become an employee, independent
contractor, agent, representative or consultant of or to any other Person.
(e) Use of Name. For a period of twenty-five (25) years after
the Closing Date, no Designated Principal shall use the names "ZC" together or
"Xxxxxx" separately or in connection with a business that is, in whole or in
material part, the same as or similar to, or in competition with, the Business,
as it is conducted by the Company the Sub S Holding Corporation and the
Subsidiaries on the Closing Date, other than with the express prior written
consent of, the Sub S Holding Corporation Buyer.
(f) Construction. For purposes of any provision of this
Section 9.1, "directly or indirectly" means in a Designated Principal's
individual capacity for his own benefit or for the benefit of any other Person,
or as a shareholder, partner, member or other principal, officer, director,
trustee, manager, employee, agent or consultant of or to any Person whatsoever;
provided, however, that this Section 9.1 shall not prohibit a Designated
Principal from being a passive investor in (i.e. having no participation or
involvement in management) no more than (two percent) 2% of the outstanding
equity securities of any actively traded public Person.
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(g) Enforcement. The Designated Principals acknowledge and
agree that, by virtue of their positions, services and access to and use of
confidential records and proprietary information, any violation by them of any
of the undertakings contained in this Section 9.1 would cause Buyer, the Company
and the Sub S Holding Corporation immediate, substantial and irreparable injury
for which they have no adequate remedy at Law. Accordingly, each of the
Designated Principals agrees that in the event of his breach or threatened
breach of any said undertakings, Buyer, the Company and the Sub S Holding
Corporation will be entitled to temporary and permanent injunctive relief in any
court of competent jurisdiction (without the need to post bond and without
proving that damages would be inadequate). The rights and remedies provided for
in this Section 9.1 are cumulative and shall be in addition to rights and
remedies otherwise available to the parties hereunder or under any other
agreement or applicable Law. If the final judgment of a court of competent
jurisdiction declares that any provision of this Section 9.1, is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power, and is hereby directed,
to reduce the scope, duration or area of the provision, to delete specific words
or phrases and to replace any invalid or unenforceable provision with a
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable provision, and provisions of this
Section 9.1 shall be enforceable as so modified.
9.2 Cessation of Employment. The Designated Principals
acknowledge that the professional services and the continued employment of the
Designated Principals are special and unique and critical to the ongoing
operation and success of the Business and that Buyer would not consummate the
transactions contemplated by this Agreement without the commitment of the
Designated Principals to enter into and perform their obligations under their
respective Employment Agreements for the entire term thereof. Therefore, each of
the Designated Principals covenants and agrees that he will in good faith
diligently perform all of his obligations under his Employment Agreement in
accordance with the terms thereof for the entire term thereof to the best of his
ability and in a manner consistent with the expertise, initiative, dedication,
and loyalty with which he performed services for the ZC Companies prior to the
ZC Consolidation Date.
9.3 Certain Tax Matters.
(a) (i) Buyer and each Seller shall join in making timely and
irrevocable elections under Section 338(h)(10) of the Code and, if permissible,
similar elections under any applicable state income tax laws with respect to the
Sub S Holding Corporation. In such event, Buyer and each Seller shall report the
transaction consistent with such elections under Section 338(h)(10) of the Code
and any applicable state tax provisions (the "Elections") and shall take no
position contrary thereto unless and to the extent required to do so pursuant to
a determination (as defined in Section 1313(a) of the Code or any similar state
or local tax provision).
(ii) Buyer shall prepare, and Buyer and each Seller
shall execute at the Closing any and all forms necessary to effectuate
the Elections (including IRS Form 8023-A and any similar forms under
applicable state income tax laws (the "Section 338 Forms")). Buyer and
each Seller shall cause the Section 338 Forms to be duly executed by an
authorized person, and Buyer shall duly and timely file the Section 338
Forms in accordance with applicable Tax laws and the terms of this
Agreement.
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(iii) Buyer and each Seller agree to allocate the
Aggregate Deemed Sale Price (as defined under applicable Treasury
Regulations) of the assets of the Sub S Holding Corporation as set
forth in a schedule that will be generated with the assistance of
Deloitte & Touche LLP within sixty (60) days following the Closing
Date, in accordance with the guidelines of the IRS, which shall reflect
an allocation agreed to by the parties. Buyer and each Seller will
reflect such allocation in all applicable tax returns filed by any of
them, including but not limited to the Section 338 Forms. Buyer and
each Seller will not take a position before any taxing authority or
otherwise (including in any tax return) inconsistent with such
allocation unless and to the extent required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
state or local law).
(b) Sellers, on the one hand, and Buyer, on the other hand,
shall each be responsible for 50% of all transfer, excise, stamp, sales, use,
recording or similar taxes or fees arising out of the sale, transfer, conveyance
or assignment of the Company Interests and the Shares by Sellers. Sellers shall
make any required filing under applicable law.
(c) (i) Other than as set forth in Section 9.3(b), and
Section 9(c)(iv), Sellers shall be liable for and shall indemnify Buyer, the
Company and the Sub S Holding Corporation for Taxes of the Company and the Sub S
Holding Corporation (and any predecessor to the Company and the Sub S Holding
Corporation) for any taxable years or periods that end on or before the Closing
Date and, with respect to any taxable years or periods beginning before and
ending after the Closing Date, the portion of such taxable years or periods
ending on and including the Closing Date.
(ii) Following the Closing Date, Buyer, the Company
and the Sub S Holding Corporation shall be liable for and shall
indemnify Sellers for Taxes of the Company and the Sub S Holding
Corporation for any taxable years or periods that begin after the
Closing Date and, with respect to any taxable years or periods
beginning before and ending after the Closing Date, the portion of the
taxable years beginning on the day after the Closing Date.
(iii) For purposes of Sections 9.3(c)(i) and (c)(ii),
whenever it is necessary to determine the liability for Taxes of the
Company and the Sub S Holding Corporation for a portion of a taxable
year or period that begins before and ends after the Closing Date, the
determination of such Taxes for the portion of year or period ending
on, and the portion of the year or period beginning after, the Closing
Date, shall be determined using the closing of books method described
in Section 1362(e)(3) of the Code.
(iv) Notwithstanding the provisions of Sections
9.3(c)(i) and (ii), Buyer shall reimburse Sellers for Taxes based on
the taxable income from operations of the Company and the Sub S
Holding Corporation, (and any predecessors to the Company and the Sub
S Holding Corporation) for the period beginning after the Effective
Date and ending on the Closing Date.
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(d) Any payment by Buyer or any Seller under this Section 9.3
will be treated for Tax purposes as an adjustment to the Purchase Price.
(e) Sellers shall cause the Company and the Sub S Holding
Corporation to file when due all Returns that are required to be filed by the
Company and the Sub S Holding Corporation for taxable years or periods ending on
or before the Closing Date, and Buyer shall file or cause to be filed when due
all other Returns that are required to be filed by or with respect to the
Company and the Sub S Holding Corporation.
(f) After the Closing Date, Buyer and each Seller shall:
(i) assist in all reasonable respects (and cause
their respective Affiliates to assist) the other party in preparing any
Returns which such party is responsible for preparing and filing in
accordance with this Section 9.3;
(ii) cooperate in all reasonable respects in
preparing for any audits of, or disputes with taxing authorities
regarding, and Returns of, the Company and the Sub S Holding
Corporation;
(iii) make available to the other any to any taxing
authority as reasonably requested all information, records and
documents relating to Taxes of the Company and the Sub S Holding
Corporation, except to the extent determined by counsel for the party
involved to be privileged or work product;
(iv) provide timely notice to the other in writing of
any pending or threatened Tax audit or assessments of the Company or
the Sub S Holding Corporation for taxable periods for which the other
may have a liability under this Section 9.3; and
(v) furnish the other with copies of all
correspondence received from any taxing authority in connection with
any Tax audit or information request with respect to any such taxable
period.
(g) (i) Buyer shall notify the Sellers in writing upon receipt
by Buyer or the Company or the Sub S Holding Corporation of notice of
any pending or threatened Tax audits or assessments which may
materially affect the Tax liabilities of the Company or the Sub S
Holding Corporation for which the Sellers would be required to
indemnify Buyer and the Company and the Sub S Holding Corporation.
Sellers shall have the right to participate in the resolution of any
such Tax audit or assessment.
(ii) Sellers shall notify Buyer in writing upon
receipt by any Seller of notice of any pending or threatened Tax audits
or assessments which may materially affect the Tax liabilities of the
Company or the Sub S Holding Corporation for which Buyer, the Company
or the Sub S Holding Corporation would be required to indemnify
Sellers. Buyer shall have the right to participate in the resolution of
any such Tax audit or assessment.
9.4 Private Plane. Until December 31, 2006, Buyer shall cause
the Company to pay to an entity identified by the Designated Principals two
million dollars ($2,000,000) per
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year in the aggregate, in monthly installments in arrears against the
presentation to Buyer of monthly invoices, to defray the costs of operating an
airplane to be used in the Business, as determined by the Designated Principals.
The Designated Principals, where appropriate and approved by a client of Buyer
or the Company, will seek client reimbursement for such charges.
9.5 Catalyst. Without the consent of Buyer, Catalyst shall
not invest in any Person that is a client of Buyer, any subsidiary of Buyer, the
Company or the Subsidiaries, unless Catalyst made its initial investment in such
Person prior to the Closing Date. The Designated Principals shall not establish
an investment fund similar to Catalyst without prior consultation with Buyer and
in any event any such fund shall be subject to the investment restrictions
described in the foregoing sentence for so long as any Designated Principal
maintains an equity interest in such fund. On or prior to the Closing Date, the
Designated Principals shall take such action as is required to terminate all
benefits payable under the Company's benefit plans to employees of Catalyst
without any cost, expense, liability or obligation to the Company.
9.6 Lock-up Agreement. Each Seller hereby agrees that in the
event Buyer proposes an underwritten public offering (the "Offering") of its
Common Stock after the Closing Date, it shall, upon the request of the managing
underwriter for the Offering, enter into a "lock-up" agreement for the period
commencing on the execution of such "lock-up" and expiring on the earlier of (a)
one hundred and twenty (120) days following the pricing of the Offering, and (b)
May 31, 2003 on such terms as may be reasonably requested by the managing
underwriter for the Offering.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations, Warranties and Covenants.
The representations and warranties of the parties contained in this Agreement,
or in any Schedule or certificate delivered pursuant hereto, shall survive the
Closing and shall continue in full force and effect (a) in the case of the
representations and warranties of Sellers contained in Sections 5.6, 5.18 and
5.19 until thirty (30) days following the expiration of the applicable statute
of limitations with respect to the matter to which the claim relates, as such
limitation period may be extended from time to time, (b) in the case of the
representations and warranties of Sellers contained in Sections 4.1, 4.2, 4.5,
4.6, 5.2, 5.25 and 5.29 and of Buyer contained in Sections 6.3 and 6.8,
indefinitely, and (c) in the case of all other representations and warranties of
the parties contained in this Agreement, or in any Schedule or certificate
delivered pursuant hereto, until two (2) years after the Closing Date. Each
party hereto shall be entitled to rely on any such representation or warranty
regardless of any inquiry or investigation made by on behalf of such party.
Notwithstanding the foregoing, any representation or warranty in respect of
which indemnity may be sought hereunder shall survive the time at which it would
otherwise terminate pursuant to this Section 10.1 if notice of the breach
thereof shall have been given to the party against whom such indemnity may be
sought prior to the expiration of the applicable survival period. The parties'
covenants and agreements under this Agreement shall survive the Closing
indefinitely unless a shorter period of performance is specified with respect to
such covenant or agreement.
10.2 Indemnification by Sellers.
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(a) Subject to Sections 10.2(b) and 10.8, the Designated
Principals, jointly and severally, shall indemnify and hold harmless Buyer, the
Company, the Sub S Holding Corporation, each Subsidiary and each of their
respective stockholders, directors, officers, members, managers, employees,
agents and representatives (collectively, "Representatives"), and their
respective heirs, personal representatives, legatees, successors and assigns
(all of the foregoing, the "Indemnified Parties"), from and against any Loss
incurred or suffered by such Person as a result of, arising or resulting from or
in connection with:
(i) any representation or warranty made by any Seller
in this Agreement or in any other Transaction Document or in any
Schedule or certificate delivered pursuant hereto or thereto being
untrue, incorrect or incomplete;
(ii) a failure by any Seller to perform, comply with
or satisfy any covenant or agreement on the part of such Seller
contained herein or in any other Transaction Document;
(iii) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person
with any Seller, any of the ZC Companies or the Company, the Sub S
Holding Corporation or any Subsidiary in connection with the
transactions contemplated hereby;
(iv) the insufficiency of any reserves for
liabilities reflected on the Effective Date Balance Sheet relating to
vacation pay and stay/termination bonuses; and
(v) any claim arising out of the improper operation
and administration, prior to the Closing, of any Plan under both its
terms (including the provisions of any related insurance policy) and
all applicable Laws, including ERISA.
Any amount paid pursuant to this Section 10.2(a) or Section 9.3 shall be paid to
Buyer or, at Buyer's election, to the Company, the Sub S Holding Corporation or
a Subsidiary shall be the amount required to put Buyer or the Company, the Sub S
Holding Corporation or such Subsidiary, as the case may be, substantially in the
position it or they would have been in had (A) such representation or warranty
been true, correct and complete or such covenant or agreement been performed,
complied or satisfied with, or (B) any such Losses or Taxes not been incurred.
(b) Notwithstanding Section 10.2(a):
(i) The Designated Principals shall not have any
obligation to indemnify the Indemnified Parties from and against any
Loss under clause (i) of Section 10.2(a) or clause (ii) of Section
10.2(a) with respect to the covenants contained in Sections 7.2 and 7.8
until the Indemnified Parties have suffered aggregate Losses, by reason
of all such breaches, in excess of one million dollars ($1,000,000);
provided that such threshold shall not apply to any Loss under clause
(i) of Section 10.2(a) that is also a Loss under Section 2.2(b),
Section 9.3, or Sections 10.2(a)(iii), (iv) or (v); and
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(ii) The Designated Principals shall not have any
obligation to indemnify the Indemnified Parties from and against any
Loss under clause (i) of Section 10.2(a) or clause (ii) of Section
10.2(a) with respect to the covenants contained in Sections 7.2 and 7.8
to the extent the aggregate Losses the Indemnified Parties have
suffered by reason of all such breaches exceed twenty-five million
dollars ($25,000,000) (as reduced pursuant to the proviso to this
sentence, the "Ceiling Amount"); provided, however, that the Ceiling
Amount shall be reduced to twenty million dollars ($20,000,000) on the
first anniversary of the Closing Date with respect to claims for
indemnification made thereafter; provided, however, that the Ceiling
Amount shall not apply to (x) any Loss incurred or suffered by any
Indemnified Party as a result of, arising or resulting from or in
connection with a representation or warranty in Section 4.1, 4.5, 4.6,
5.2, 5.3, 5.6, 5.22, 5.25, 5.28(c) or 5.29 being untrue, incorrect or
incomplete or (y) any Loss under clause (i) of Section 10.2(a) that is
also a Loss under Section 9.3.
(c) Notwithstanding anything to the contrary contained in
Section 10.2(b) or 10.8 or anywhere else in this Agreement, Sellers shall
indemnify and hold harmless the Indemnified Parties from and against any and all
Losses incurred or suffered by such Person after the Closing Date as a result
of, arising or resulting from or in connection with any fraudulent act or
intentional misconduct by Sellers, the Company, the Sub S Holding Corporation,
any Subsidiary or any of the ZC Companies prior to the Closing Date.
10.3 Indemnification by Buyer. Buyer shall indemnify and hold
harmless Sellers from and against any Loss incurred or suffered by Sellers and
their respective heirs, personal representatives, legatees, successors and
permitted assigns as a result of, arising or resulting from or in connection
with:
(i) any representation or warranty made by Buyer in
this Agreement or in any other Transaction Document or in any Schedule
or certificate delivered pursuant hereto or thereto being untrue,
incorrect or incomplete;
(ii) a failure by Buyer to perform, comply with or
satisfy any covenant or agreement on the part of Buyer contained herein
or in any other Transaction Document; and
(iii) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person
with Buyer or any of its subsidiaries in connection with the
transactions contemplated hereby.
Any amount paid pursuant to this Section 10.3 or Section 9.3 shall be paid to
Sellers and shall be the amount required to put Sellers substantially in the
position they would have been in had (A) such representation or warranty been
true, correct and complete or such covenant or agreement been performed,
complied or satisfied with, or (B) any such Losses or Taxes not been incurred.
10.4 Assumption of Defense. An indemnified party shall
promptly give notice to each indemnifying party after obtaining knowledge of any
matter as to which recovery may be sought against such indemnifying party
because of the indemnity set forth above, and, if such
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indemnity shall arise from the claim of a third party, shall permit such
indemnifying party to assume the defense of any such claim or any proceeding
resulting from such claim; provided, however, that failure promptly to give any
such notice shall not affect the indemnification provided under this Article X,
except to the extent such indemnifying party shall have been actually and
materially prejudiced as a result of such failure. Notwithstanding the
foregoing, an indemnifying party may not assume the defense of any such
third-party claim if the claim (a) is reasonably likely to result in
imprisonment or another criminal penalty of the indemnified party, (b) is
reasonably likely to result in an equitable remedy which would materially impair
the indemnified party's ability to exercise its rights under this Agreement, or
materially impair Buyer's right or ability to operate the Company or the Sub S
Holding Corporation or the Company's, the Sub S Holding Corporation's or any
Subsidiary's right to operate any material part of the Business, or (c) names
both the indemnifying party and the indemnified party (including impleaded
parties) and representation of both parties by the same counsel would create a
conflict. If an indemnifying party assumes the defense of such third-party
claim, such indemnifying party shall agree prior thereto, in writing, that it is
liable under this Article X to indemnify the indemnified party in accordance
with the terms contained herein in respect of such third-party claim, shall
conduct such defense diligently, shall have full and complete control over the
conduct of such proceeding on behalf of the indemnified party and shall, subject
to the provisions of this Section 10.4, have the right to decide all matters of
procedure, strategy, substance and settlement relating to such proceeding;
provided, however, that any counsel chosen by such indemnifying party to conduct
such defense shall be reasonably satisfactory to the indemnified party. The
indemnified party may participate in such proceeding and retain separate
co-counsel at its sole cost and expense, and the indemnifying party will not
without the written consent of the indemnified party consent to the entry of any
judgment or enter into any settlement with respect to the matter which does not
include a provision whereby the plaintiff or the claimant in the matter releases
the indemnified party from all liability with respect thereto. Failure by an
indemnifying party to notify the indemnified party of its election to defend any
such claim or proceeding by a third party within thirty (30) days after notice
thereof shall have been given to such indemnifying party by the indemnified
party shall be deemed a waiver by such indemnifying party of its right to defend
such claim or action.
10.5 Non-Assumption of Defense. If no indemnifying party is
permitted or elects to assume the defense of any such third-party claim or
proceeding resulting therefrom, the indemnified party shall diligently defend
against such claim or litigation in such manner as it may deem appropriate and,
in such event, the indemnifying party or parties shall promptly reimburse the
indemnified party for all reasonable out-of-pocket costs and expenses, legal or
otherwise, incurred by the indemnified party and its Affiliates in connection
with the defense against such claim or proceeding, as such costs and expenses
are incurred. Any counsel chosen by such indemnified party to conduct such
defense shall be reasonably satisfactory to the indemnifying party or parties,
and only one counsel shall be retained to represent all indemnified parties in
an action (except that if litigation is pending in more than one jurisdiction
with respect to an action, one such counsel may be retained in each jurisdiction
in which such litigation is pending and except if representation of all
indemnified parties by the same counsel would create a conflict). No indemnified
party shall settle or compromise any such claim without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld or
delayed.
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10.6 Indemnified Party's Cooperation as to Proceedings. The
indemnified party will cooperate in all reasonable respects with any
indemnifying party in the conduct of any proceeding as to which such
indemnifying party assumes the defense. For the cooperation of the indemnified
party pursuant to this Section 10.6, the indemnifying party or parties shall
promptly reimburse the indemnified party for all reasonable out-of-pocket costs
and expenses, legal or otherwise, incurred by the indemnified party or its
Affiliates in connection therewith, as such costs and expenses are incurred.
10.7 Payments Treated as Purchase Price Adjustment. Any
payment by Buyer or Sellers under this Article X will be treated for Tax
purposes as an adjustment to the Purchase Price for the Company Interests and
the Shares.
10.8 Sole Remedy. Except with respect to claims for equitable
relief, and except for fraud or willful misconduct, the indemnities provided for
in Section 9.3 and this Article X shall be the sole and exclusive remedies for
any claim of a party arising out of or relating to this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Each party shall pay its own expenses
incidental to negotiations, preparation of agreements and the Closing whether or
not the transactions contemplated hereby are finally consummated. All expenses
incurred solely for the benefit of the Designated Principals and the Other
Principals not accrued on the Effective Date Balance Sheet shall be paid by the
Designated Principals and the Other Principals and not by the ZC Companies or
the Company, the Sub S Holding Corporation or any Subsidiary.
11.2 Entirety of Agreement. This Agreement (including the
Disclosure Schedules and all other Schedules and Exhibits hereto), together with
the other Transaction Documents and certificates delivered hereunder and
thereunder, state the entire agreement of the parties, merge all prior
negotiations, agreements and understandings, if any, and state in full all
representations, warranties, covenants and agreements which have induced this
Agreement.
11.3 Notices. All notices and demands of any kind which any
party hereto may be required or desire to serve upon another party under the
terms of this Agreement shall be in writing and shall be given by personal
service upon such other party or mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested; sending a copy
thereof by Federal Express or equivalent courier service; or sending a copy
thereof by facsimile, to the parties at the respective addresses and facsimile
numbers set forth on the signature pages hereto.
In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon delivery or transmission, as applicable. In the case of service by
mail, such service shall be deemed complete on the fifth (5th) Business Day
after mailing. The addresses and facsimile numbers to which, and persons to
whose attention, notices and demands shall be delivered or sent may be changed
from time to time by notice served as hereinabove provided by any party upon any
other party.
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11.4 Amendment. This Agreement may be modified or amended
only by an instrument in writing, duly executed by Buyer and the Designated
Principals, and when so modified or amended shall be binding upon all of the
Sellers as so modified or amended.
11.5 Waiver. No waiver by any party of any term, provision,
condition, covenant, agreement, representation or warranty contained in this
Agreement (or any breach thereof) shall be effective unless it is in writing
executed by the party against which such waiver is to be enforced. No waiver
shall be deemed or construed as a further or continuing waiver of any such term,
provision, condition, covenant, agreement, representation or warranty (or
breach) on any other occasion or as a waiver of any other term, provision,
condition, covenant, agreement, representation or warranty (or of the breach of
any other term, provision, condition, covenant, agreement, representation or
warranty) contained in this Agreement on the same or any other occasion.
11.6 Counterparts; Facsimile. For the convenience of the
parties, any number of counterparts hereof may be executed, each such executed
counterpart shall be deemed an original and all such counterparts together shall
constitute one and the same instrument. Facsimile transmission of any signed
original counterpart and/or retransmission of any signed facsimile transmission
shall be deemed the same as the delivery of an original.
11.7 Assignment; Binding Nature; No Beneficiaries. This
Agreement may not be assigned by any party hereto without the written consent of
Buyer and the Designated Principals; provided, however, that Buyer may assign
its rights hereunder to any Affiliate of Buyer that assumes the obligations of
Buyer hereunder, but no such assignment shall relieve Buyer of any such
obligations. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, personal representatives, legatees, successors and permitted
assigns. Except as otherwise expressly provided in Article X, this Agreement
shall not confer any rights or remedies upon any Person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors and permitted assigns.
11.8 Headings. The headings in this Agreement are inserted
for convenience only and shall not constitute a part hereof or alter the meaning
of any provision hereof.
11.9 Governing Law; Jurisdiction; Venue. This Agreement shall
be governed by, and construed and enforced in accordance with, the internal laws
of the State of New York applicable to contracts made and to be entirely
performed therein, without regard to the principles of conflict of laws. In the
event of any controversy or claim arising out of or relating to this Agreement
or the breach or alleged breach hereof, each of the parties hereto irrevocably
(a) submits to the exclusive jurisdiction of the U.S. District Court for the
Southern District of New York or, if such court does not have jurisdiction, the
New York State Supreme Court sitting in the County of New York, (b) waives any
objection which it may have at any time to the laying of venue of any action or
proceeding brought in any such court, (c) waives any claim that such action or
proceeding has been brought in an inconvenient forum or that there is a more
convenient forum for such action or proceeding, and (d) agrees that service of
process or of any other papers upon such party by registered mail at the address
to which notices are required to be sent to such party under Section 11.3 shall
be deemed good, proper and effective service upon such party.
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11.10 Construction. In this Agreement (a) words denoting the
singular include the plural and vice versa, (b) "it" or "its" or words denoting
any gender include all genders, (c) the word "including" shall mean "including
without limitation," whether or not expressed, (d) any reference to a statute
shall mean the statute and any regulations thereunder in force as of the date of
this Agreement or the Closing Date, as applicable, unless otherwise expressly
provided, (e) any reference herein to a Section, Article, Schedule or Exhibit
refers to a Section or Article of or a Schedule or Exhibit to this Agreement,
unless otherwise stated, (f) all references to "$" or "dollars" mean U.S.
dollars, and (g) when calculating the period of time within or following which
any act is to be done or steps taken, the date which is the reference day in
calculating such period shall be excluded and if the last day of such period is
not a Business Day, then the period shall end on the next day which is a
Business Day. Any reference in this Agreement to "herein," "hereof," "hereby,"
"hereunder" or words of similar import shall mean and refer to this Agreement as
a whole and not to any particular part hereof.
11.11 Negotiated Agreement. Buyer and Sellers acknowledge
that they have been advised and represented by counsel in the negotiation,
execution and delivery of this Agreement and the other Transaction Documents and
accordingly agree that if an ambiguity exists with respect to any provision of
this Agreement or any other Transaction Document, such provision shall not be
construed against any party because such party or its representatives drafted
such provision.
11.12 Public Announcements. Each of the parties agrees that
neither Buyer nor any Seller shall issue any press release or make any other
public announcement concerning this Agreement or the transactions contemplated
hereby without the prior written approval of Buyer, in the case of an
announcement by a Seller, and the Designated Principals, in the case of an
announcement by Buyer; provided, however, that Buyer may, upon written notice to
the Designated Principals, describe this Agreement and the transactions
contemplated hereby in any press release or filing with the SEC it is required
to make under applicable Law, which shall, in any event, be subject to review by
Sellers prior to its release.
11.13 Remedies Cumulative. The remedies provided for or
permitted by this Agreement shall be cumulative and the exercise by any party of
any remedy provided for herein shall not preclude the assertion or exercise by
such party of any other right or remedy provided for herein.
11.14 Specific Enforcement. Each party expressly agrees that
one or more of the other parties will be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of the Agreement, the non-breaching party or parties
shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without any showing of actual damage, or a decree of
specific performance, in accordance with the provisions hereof.
[SIGNATURE PAGES FOLLOW]
-52-
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first set forth above.
KROLL INC.
Address:
Xxxxx Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
By_________________________
Attention: Xxxxxxx Xxxxx, Esq. Name: Xxxxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000 Title: President and CEO
with copies to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
-53-
SELLERS
notices to: ___________________________
Xxxxxxx X. Xxxxxx
c/o Xxxxxxx XxXxxxxx
Xxxxx Xxxxxx, LLC
000 Xxxxxxxxxx Xxxxxxx ___________________________
Xxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx X. France
facsimile: (000)000-0000
___________________________
Xxxxxxx XxXxxxxx
with copies to:
Xxxxxxxx Xxxxx & Deutsch LLP ZOLFO XXXXXX ACQUISITION, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 By:___________________________
Attention: Xxxxx Xxxxxxxx, Esq. Name: Xxxxxxx XxXxxxxx
Facsimile No.: (000) 000-0000 Title: Manager
54
Table of Contents
Page
ARTICLE I CERTAIN DEFINITIONS........................................................................ 2
ARTICLE II PURCHASE AND SALE.......................................................................... 8
2.1 Purchase and Sale of Company Interests and the Shares...................................... 8
ARTICLE III CLOSING.................................................................................... 12
3.1 Closing Date............................................................................... 12
3.2 Certain Actions at Closing................................................................. 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS CONCERNING THE SELLERS........................... 13
4.1 Ownership of Company Interests............................................................. 13
4.2 Authorization.............................................................................. 13
4.3 No Conflicts; Consents..................................................................... 13
4.4 Litigation................................................................................. 14
4.5 Brokers and Finders........................................................................ 14
4.6 Investment Representations................................................................. 14
4.7 Current Public Information................................................................. 15
4.8 Independent Investigation; Access.......................................................... 15
4.9 No Government Recommendation or Approval................................................... 15
4.10 Disclosure................................................................................. 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE DESIGNATED PRINCIPALS CONCERNING THE COMPANY
AND SUB S HOLDING CORPORATION.............................................................. 16
5.1 Organization and Good Standing............................................................. 16
5.2 Consolidation of the ZC Companies.......................................................... 16
5.3 Capitalization............................................................................. 17
5.4 No Conflicts; Consents..................................................................... 18
5.5 Financial Statements; Undisclosed Liabilities.............................................. 18
5.6 Taxes...................................................................................... 19
5.7 Payables................................................................................... 20
5.8 Receivables................................................................................ 20
5.9 Absence of Certain Changes................................................................. 20
5.10 Title to Properties; Absence of Encumbrances; Condition.................................... 22
5.11 Intellectual Property...................................................................... 23
5.12 Clients; Identified Prospects; Client Relations............................................ 24
5.13 Contracts.................................................................................. 26
5.14 Insurance.................................................................................. 28
5.15 Litigation................................................................................. 28
5.16 Licenses................................................................................... 28
5.17 Members, Partners, Principals, Employees and Independent Contractors....................... 29
5.18 Employee Benefit Plans; ERISA.............................................................. 29
5.19 Compliance with Laws....................................................................... 30
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Table of Contents
(continued)
Page
5.20 Bank Accounts and Powers of Attorney....................................................... 30
5.21 Books and Records.......................................................................... 30
5.22 Transactions with Related Parties.......................................................... 31
5.23 Absence of Certain Business Practices...................................................... 31
5.24 Catalyst Equity Fund....................................................................... 31
5.25 Brokers and Finders........................................................................ 32
5.26 Restrictions on Business Activities........................................................ 32
5.27 Disclosure................................................................................. 32
5.28 SFC LLC and the Xxxxxxx Entities........................................................... 32
5.29 Members/Owners of ZC Acquisition, LLC...................................................... 33
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.................................................... 33
6.1 Organization and Good Standing............................................................. 33
6.2 Capitalization............................................................................. 34
6.3 Authorization.............................................................................. 34
6.4 No Conflicts; Consents..................................................................... 34
6.5 Litigation................................................................................. 34
6.6 Reporting Company Status................................................................... 34
6.7 Financial Statements....................................................................... 35
6.8 Brokers and Finders........................................................................ 35
6.9 Investment Intent.......................................................................... 35
6.10 Absence of Certain Changes................................................................. 35
6.11 Intellectual Property...................................................................... 35
6.12 Compliance with Laws....................................................................... 35
6.13 Taxes...................................................................................... 36
6.14 Absence of Certain Business Practices...................................................... 36
6.15 Restrictions on Business Activities........................................................ 37
6.16 Disclosure................................................................................. 37
ARTICLE VII COVENANTS OF SELLERS....................................................................... 37
7.1 Certain Filings............................................................................ 37
7.2 Consents and Approvals..................................................................... 37
7.3 Resignation of Directors................................................................... 37
7.4 Affiliate Loans............................................................................ 38
7.5 Further Assurances......................................................................... 38
7.6 Key-Man Insurance.......................................................................... 38
7.7 Termination of Lines of Credit............................................................. 38
7.8 Notification of Certain Matters............................................................ 38
7.9 Company Information........................................................................ 38
7.10 SFC LLC and the Xxxxxxx Entities........................................................... 39
7.11 Employee Arbitration and Litigation........................................................ 39
ARTICLE VIII COVENANTS OF BUYER......................................................................... 39
8.1 Certain Filings............................................................................ 39
8.2 Lease Deposits............................................................................. 39
ii
Table of Contents
(continued)
Page
8.3 Further Assurances......................................................................... 39
8.4 Employee Benefits.......................................................................... 39
8.5 Notification of Certain Matters............................................................ 40
8.6 Accrual Reserves........................................................................... 40
8.7 Payment of Awards in Employee Arbitration and Litigation................................... 41
ARTICLE IX CERTAIN OTHER AGREEMENTS................................................................... 41
9.1 Non-Competition and Non-Solicitation....................................................... 41
9.2 Cessation of Employment.................................................................... 43
9.3 Certain Tax Matters........................................................................ 43
9.4 Private Plane.............................................................................. 45
9.5 Catalyst................................................................................... 46
9.6 Lock-up Agreement.......................................................................... 46
ARTICLE X INDEMNIFICATION............................................................................ 46
10.1 Survival of Representations, Warranties and Covenants...................................... 46
10.2 Indemnification by Sellers................................................................. 46
10.3 Indemnification by Buyer................................................................... 48
10.4 Assumption of Defense...................................................................... 48
10.5 Non-Assumption of Defense.................................................................. 49
10.6 Indemnified Party's Cooperation as to Proceedings.......................................... 50
10.7 Payments Treated as Purchase Price Adjustment.............................................. 50
10.8 Sole Remedy................................................................................ 50
ARTICLE XI MISCELLANEOUS.............................................................................. 50
11.1 Expenses................................................................................... 50
11.2 Entirety of Agreement...................................................................... 50
11.3 Notices.................................................................................... 50
11.4 Amendment.................................................................................. 51
11.5 Waiver..................................................................................... 51
11.6 Counterparts; Facsimile.................................................................... 51
11.7 Assignment; Binding Nature; No Beneficiaries............................................... 51
11.8 Headings................................................................................... 51
11.9 Governing Law; Jurisdiction; Venue......................................................... 51
11.10 Construction............................................................................... 52
11.11 Negotiated Agreement....................................................................... 52
11.12 Public Announcements....................................................................... 52
11.13 Remedies Cumulative........................................................................ 52
11.14 Specific Enforcement....................................................................... 52
iii
Schedules
Schedule A-1 List of LLC Subsidiaries
Schedule A-2 List of Sub S Subsidiaries
Schedule B Allocation of Purchase Price among Sellers
Schedule C Stock Options Grants
Schedule D Key Man Insurance
Exhibits
Exhibit A Employment Agreement with Xxxxxxx X. Xxxxxx
Exhibit B Employment Agreement with Xxxxxxx X. France
Exhibit C Employment Agreement with Xxxxxxx XxXxxxxx
Exhibit D Employment Agreement with Other Principals
Exhibit E Registration Rights Agreement
Exhibit F Opinion of Xxxxxxxx Xxxxx & Deutsch LLP
Exhibit G Opinion of Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
i
