EXHIBIT 10.15
AGREEMENT OF PURCHASE AND SALE OF ASSETS
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This Agreement of Purchase and Sale of Assets (this "Agreement") is entered
into and effective as of September 4, 1997 by and among LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC., a New York corporation (the "Buyer"), LITIGATION
RESOURCES OF AMERICA, INC., a Texas corporation which is the owner of all of the
authorized and issued capital stock of the Buyer (the "Parent"), and AMICUS ONE
LEGAL SUPPORT SERVICES, INC., a New York corporation (the "Seller") and Xxxxxxx
X. Xxxxxx, a resident of New Jersey, individually ("Portas"), Xxxxxx X.
Xxxxxxxx, a resident of New York, individually ("Xxxxxxxx"), Xxxx Xxxxxxxx, a
resident of New York, individually ("Xxxxxxxx") and Xxxxxx Xxxxxxx, a resident
of New York, individually ("Breshin") (Portas, Spinozzi, Xxxxxxxx and Breshin
being collectively referred to sometimes as the "Seller's Stockholders").
Buyer, Parent, Seller and the Seller's Stockholders are hereinafter sometimes
referred to collectively as the "Parties" or singularly as a "Party."
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller is the owner of various assets associated with the
Business (as hereinafter defined);
WHEREAS, the Buyer and the Parent desire for the Buyer to purchase all of
the Assets (as hereinafter defined) owned by the Seller and used in the
Business, and the Seller desires to sell such Assets to the Buyer;
WHEREAS, in connection with the purchase and sale of the Assets, the Parties
desire to set forth in this Agreement the terms and conditions with respect to
the transfer of such Assets;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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As used herein, the following terms shall have the following meanings:
ACCOUNTS PAYABLE. The term "Accounts Payable" shall mean all of the
accounts payable of the Business.
ACCOUNTS PAYABLE REPORT. The term "Accounts Payable Report" shall mean a
report prepared as of the time specified which shows the accounts payable of the
Business by service provider and the age of each Account Payable.
ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall mean all of the
accounts receivable of the Business.
ACCOUNTS RECEIVABLE REPORT. The term "Accounts Receivable Report" shall
mean a report prepared as of the time specified which shows the Accounts
Receivable of the Business listed separately by customer and with the age of
each Account Receivable.
AFFILIATE. The term "Affiliate" of a person shall mean, with respect to
that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of management and policies of a person whether
through the ownership of voting securities, by contract, through the holding of
a position as a director or officer of such person, or otherwise. As used in
this definition, the term "person" means an individual, a corporation, a
partnership, an association, a joint stock company, a trust, an incorporated
organization, or a government or political subdivision thereof.
ANCILLARY AGREEMENTS. The term "Ancillary Agreements" shall have the
meaning set forth in Section 3.2.
ASSETS. The term "Assets" shall have the meaning set forth in Section 2.1.
ASSUMED LIABILITIES. The term "Assumed Liabilities" shall have the meaning
set forth in Section 2.6.
BALANCE SHEET REPORT. The term "Balance Sheet Report" means the unaudited
cash basis balance sheet of the Seller as of a given date showing the assets,
liabilities and equity of the Seller adjusted to include the Accounts
Receivable, Accounts Payable, Trade Payables, Notes Payable and accrued
liabilities and further adjusted to exclude Excluded Assets and liabilities not
assumed by the Buyer prepared by the Seller on a basis consistent with prior
time periods, except for giving effect to the pro forma adjustments reflected in
the Financial Statements.
XXXX OF SALE. The term "Xxxx of Sale" shall have the meaning set forth in
Section 6.2(g).
BOOKS AND RECORDS. The term "Books and Records" shall have the meaning set
forth in Section 2.1(c).
BUSINESS. The term "Business" shall mean the court reporting and litigation
support business of the Seller as presently conducted.
BUYER INDEMNIFIED PARTIES. The term "Buyer Indemnified Parties" shall have
the meaning set forth in Section 7.1A.
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CASH PURCHASE PRICE. The term "Cash Purchase Price" shall have the meaning
set forth in Section 2.3(i).
CLOSING. The term "Closing" shall mean the consummation of the events and
transactions to take place on the Closing Date.
CLOSING DATE. The term "Closing Date" shall mean September 5, 1997, or such
later date as shall be mutually agreed by and between the Buyer and Seller .
CLOSING DATE ACCOUNTS PAYABLE REPORT. The term "Closing Date Accounts
Payable Report" shall mean an Accounts Payable Report prepared as of the
Closing Date.
CLOSING DATE ACCOUNTS RECEIVABLE REPORT. The term "Closing Date Accounts
Receivable Report" shall mean an Accounts Receivable Report prepared as of the
Closing Date.
CLOSING DATE BALANCE SHEET REPORT. The term "Closing Date Balance Sheet
Report" shall mean a Balance Sheet Report prepared as of the Closing Date.
CLOSING DATE INCOME STATEMENT. The term "Closing Date Income Statement"
shall mean an income statement of the Seller, prepared for the period commencing
January 1, 1997 and ending at the Closing Date, after giving effect to the same
pro forma adjustments, if any, set forth in the Financial Statements.
CLOSING DATE REPORTS. The term "Closing Date Reports" shall have the
meaning set forth in Section 2.4.
COMMON STOCK. The term "Common Stock" shall mean the $.01 par value common
stock of the Parent.
CONTRACTS. The term "Contract" shall have the meaning as contained in
Section 2.1(b).
CUSTOMERS. The term "Customers" shall have the meaning as contained in
Section 3.28.
DAMAGES. The term "Damages" shall have the meaning set forth in Section
7.1A.
EFFECTIVE DATE. The term "Effective Date" shall mean the "Closing Date."
EMPLOYEE. The term "Employee" shall mean any employee of the Seller who, as
of the Effective Date, is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Seller's applicable policies, are eligible to return to active status,
but shall not include any independent contractor providing court reporting or
litigation support services to Seller from time to time.
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ENVIRONMENTAL, HEALTH & SAFETY LAWS. The term "Environmental, Health &
Safety Laws" shall mean all laws (including rules and regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments and all agencies thereof
concerning pollution or protection of the environment, public health and safety,
or employee health and safety.
ERISA. The term "ERISA" shall have the meaning as contained in Section
3.20.
EQUIPMENT. The term "Equipment" shall have the meaning as contained in
Section 2.1(a).
EXCLUDED ASSETS. The term "Excluded Assets" shall have the meaning as
contained in Section 2.2.
FINAL NET WORTH. The term "Final Net Worth" means total assets minus total
liabilities, as reflected on the Closing Date Balance Sheet Report.
FINANCIAL STATEMENTS. The term "Financial Statements" shall mean the
Seller's balance sheet income statement and statement of cash flows of the
Seller at and for the period ended June 30, 1997.
GAAP. The term "GAAP" shall mean generally accepted accounting principles
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
GUARANTEED NET WORTH. The term "Guaranteed Net Worth" shall mean the amount
of $254,901, as such amount may be increased under Section 2.6 upon payment of
the Notes Payable by the Buyer.
INTELLECTUAL PROPERTY. The term "Intellectual Property" shall have the
meaning as contained in Section 2.1(e).
LEASED ASSETS. The term "Leased Assets" shall have the meaning ascribed
thereto in Section 3.6.
NET WORTH. The term "Net Worth" means the dollar amount of total assets
minus the total liabilities of the Seller as of a given time period as
determined by the Balance Sheet Report as of such time period.
NOTE. The term "Note" shall have the meaning set forth in Section 2.3(iii).
NOTES PAYABLE. The term "Notes Payable" shall mean any and all indebtedness
of Seller (i) pursuant to a credit facility dated March 13, 1997 ("WCMA Note,
Loan and Security Agreement") between Seller and Xxxxxxx Xxxxx Financial
Business Services, Inc. in the aggregate original principal amount of $300,000
due March 1998, or (ii) to Citibank.
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NOTICE OF ACTION. The term "Notice of Action" shall have the meaning set
forth in Section 7.1C.
NOTICE OF ELECTION. The term "Notice of Election" shall have the meaning
set forth in Section 7.1C.
ORDINARY COURSE OF BUSINESS. The term "Ordinary Course of Business" shall
mean the ordinary course of Seller's business substantially consistent with
Seller's past custom and practice.
OWNER. The term "Owner" shall mean Amicus One Legal Support Services, Inc.,
the owner of the Business.
PARENT SHARES. The term "Parent Shares" shall mean any of the shares of
common stock of the Parent whether issued at the Closing or issued or issuable
upon conversion of the Note, as contemplated by this Agreement and any of the
Ancillary Agreements, as the context requires.
PUBLIC OFFERING. The term "Public Offering" means the sale by the Parent of
any of its Common Stock for cash in an underwritten public offering registered
on the appropriate form with the Securities and Exchange Commission.
PUBLIC OFFERING PRICE. The term "Public Offering Price" shall refer to the
initial share price of the Common Stock at the time and on the date of the
initial Public Offering of Common Stock by Parent.
PURCHASE PRICE. The term "Purchase Price" shall mean the consideration
payable to the Seller for the Assets as set forth or contemplated in Section
2.3.
REGISTRATION RIGHTS AGREEMENT. The term "Registration Rights Agreement"
shall have the meaning as contained in Section 6.2(j).
SCHEDULE OF ACCRUED LIABILITIES. The term "Schedule of Accrued Liabilities"
shall mean a schedule of accrued liabilities prepared for the period and as of
the date specified, with such pro forma adjustments, if any, as may be
contemplated by this Agreement.
SELLER INDEMNIFIED PARTIES. The term "Seller Indemnified Parties" shall
have the meaning set forth in Section 7.1B.
SHAREHOLDERS' AGREEMENT. The term "Shareholders' Agreement" shall have the
meaning set forth in Section 6.2(j).
SUBORDINATION AGREEMENTS. The term "Subordination Agreements" shall mean
the Subordination Agreements of even date herewith entered into among Seller and
any of the Buyer, the Parent, Affiliates, and holders of Senior Indebtedness (as
such item is defined in Note).
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TRADE PAYABLES. The term "Trade Payables" shall mean all of the Accounts
Payable of the Business incurred in the ordinary course of business.
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
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2.1 SALE OF ASSETS. Subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer agrees to purchase and receive from the Seller on the
Effective Date, all assets owned by Seller and used in or derived from the
Business (other than those specifically excluded under Section 2.2 below)
including the following (such assets to be referred to herein as the "Assets"):
(a) All office equipment, supplies, computer hardware, computer software,
data processing equipment, and other equipment (the "Equipment"), including the
Equipment described on Schedule 2.1(a);
(b) All contracts, leases, documents, franchises, licenses, instruments,
agreements and other written or oral agreements relating to the Business of
Seller to which Seller is a party or by which Seller or any of the Assets may be
bound as well as all rights, privileges, claims and options relating to the
foregoing (the "Contracts"), including the material Contracts of the Seller
described on Schedule 2.1(b);
(c) All customer and supplier files and databases, customer and supplier
lists, and copies of accounting and financial records, invoices, and other books
and records relating principally to the Business (the "Books and Records"),
including the Books and Records described on Schedule 2.1(c);
(d) Employee files for those employees actually hired by Buyer;
(e) All right, title and interest of Seller, in, to and under all service
marks, trademarks, trade and assumed names, principally related to the Business
together with the right to recover for infringement thereon, if any (the
"Intellectual Property"), and other marks and/or names described on Schedule
2.1(e) or as described in Section 2.1(j);
(f) All advertising materials and all other printed or written materials
related to the conduct of the Business;
(g) All of the Seller's general intangibles, claims, rights of set off,
rights of recoupment, goodwill, trade secrets and royalty rights and other
proprietary intangibles, licenses and sublicenses granted and obtained with
respect thereto, and rights thereunder, which are used in the Business, and
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions (the "General Intangibles"),
including the General Intangibles described on Schedule 2.1(g);
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(h) All goodwill and going concern value and all other intangible properties
related to the Business;
(i) All of Seller's receivables, including Accounts Receivable, notes
receivable and trade receivables, and intercompany receivables relating to the
Business; and
(j) The exclusive right to use the names "Amicus One Legal Support
Services, Co.," "Cardinal Reporting Co." and "AM Court Reporting, Co.", any
similar name or derivative thereof, and any past or present assumed names or
trade names in connection with Seller's use of the Assets (the "Seller's Names")
in all areas in which the Business is conducted and all other rights with
respect to the Seller's Names in which the Seller has an interest outside such
area, if any, except that Seller may use the aforementioned names in connection
with the winding up of its affairs and liquidation.
2.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not purchasing
any of the following excluded assets related to the Business ("Excluded
Assets"): (i) cash, and (ii) cash investments in securities, cash deposits
(including security deposits for utilities and other security deposits), right
to receive cash refunds, and other cash equivalents, all as more specifically
described on Schedule 2.2.
2.3 PURCHASE PRICE. Upon the terms and subject to the conditions
contained herein and as consideration for the sale of the Assets and the
performance by the Seller of various other matters as provided herein, the Buyer
or the Parent shall pay the Seller, at the Closing, the aggregate amount of the
following (the "Purchase Price"):
(i) Cash in the amount of One Million Six Hundred Thousand Dollars
($1,600,000) (the "Cash Purchase Price"), paid by the wire transfer of
immediately available funds to the account or accounts specified by the Seller;
(ii) 116,471 shares of Common Stock at a deemed issuance price of Eight and
50/100 Dollars ($8.50); and
(iii) Subject to the provisions of Section 2.4, a convertible subordinated
promissory note of the Buyer dated as of the Closing Date in substantially the
form of EXHIBIT A in the amount of Five Hundred and Sixty Thousand Dollars
($560,000) which shall be subordinated to other indebtedness of the Parent and
the Buyer as specified therein, and convertible into Common Stock, as provided
therein ( the "Note"); The Note shall, subject to certain cash flow requirements
and certain limitations imposed by the Subordination Agreements, bear interest
at an annual rate of Six Percent (6%), and provide for equal quarterly payments
of accrued interest for the first year and equal quarterly payments of principal
and accrued interest over a four (4) year period commencing with the fifth
quarterly payment date.
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2.4 DETERMINATION OF FINAL NET WORTH. Each of the Closing Date Balance
Sheet Report, the Closing Date Accounts Receivable Report, the Closing Date
Accounts Payable Report, the Closing Date Schedule of Accrued Liabilities and
the Closing Date Income Statement (collectively, the "Closing Date Reports") of
the Seller shall be compiled by the Seller's accountants, as promptly as
possible after the Closing, and delivered, along with a letter as to the scope
of such compilation, to Buyer and Buyer's accountants within 30 days after the
Closing Date. The Buyer's accountants shall review the Closing Date Reports
(including any corresponding work papers of Seller's accountants) and report to
the Seller's accountants in writing within 30 days of receipt thereof of any
discrepancy as a result of their compilation thereof. If Seller's accountants
and Buyer's accountants cannot resolve such discrepancy within 30 days after
Seller's accountants receipt of such reported discrepancy, then they shall so
notify the Seller and the Buyer. The Seller and the Buyer shall attempt to
resolve the discrepancy within 15 days of such notice. If the Seller and the
Buyer cannot resolve the discrepancy to their mutual satisfaction, another
independent public accounting firm acceptable to the Seller and the Buyer shall
be retained to review the Closing Date Reports. Such firm's conclusions as to
any such discrepancy in the Closing Date Reports for purposes of determining the
Final Net Worth of the Seller shall be conclusive. The Seller and the Buyer
shall share equally in the expenses of retaining such accounting firm. The
Buyer shall pay the expenses of the Buyer's accountants for their review of the
Closing Date Reports, and the Seller shall pay the expenses of Seller's
accountants for their review of the Closing Date Reports.
2.5 ADJUSTMENT OF PURCHASE PRICE. After the Closing Date, the Purchase
Price set forth in Section 2.3 shall be adjusted as follows: (i) if the Final
Net Worth of the Company as finally determined pursuant to Section 2.4 shall be
more than the Guaranteed Net Worth, then the cash portion of the Purchase Price
shall be increased by an amount equal to the amount of such excess, and paid to
Seller by wire transfer promptly upon determination of final net worth and (ii)
if the Final Net Worth of the Company as finally determined pursuant to Section
2.4 shall be less than the Guaranteed Net Worth, then the Note portion of the
Purchase Price and thereafter, if necessary, the Common Stock delivered under
Section 2.3(ii) shall be reduced by an amount equal to the amount of such
shortfall (such Common Stock to be valued at $8.50 per share for purposes of
this Section 2.5 only).
2.6 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions contained herein, the Buyer agrees that on the Closing Date, it will
not assume any liabilities of Seller except for those liabilities listed as
current liabilities on Seller's Balance Sheet dated June 30, 1997 (including the
notes thereto), subject, however, to adjustments for changes in liabilities
occurring in the ordinary course of Seller's business following June 30, 1997
through the Closing Date, as determined under Section 2.4 and set forth on the
Closing Date Reports ("Assumed Liabilities"). Buyer specifically excludes and
does not assume any liabilities relating to or arising out of any of Seller's
tax obligations, tax claims, tax charges, tax fines or any related tax
liabilities, regardless of the source, cause or origin of such tax liabilities.
At or prior to the Closing, Buyer shall pay by wire transfer of immediately
available funds the full amount due on the note payable to Xxxxxxx Xxxxx
Business Financial Services, Inc. and as soon as practicable thereafter provide
the Seller with evidence of release of all liens with respect thereto. Upon
payment of such Notes Payable, the amount of the Guaranteed Net Worth shall be
increased by all amounts paid with respect thereto.
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2.7 ALLOCATION OF PURCHASE PRICE. For all federal, state and local tax
purposes, the Purchase Price shall be allocated among the various Assets in the
manner indicated in SCHEDULE 2.7 hereto subject to adjustment pursuant to the
Closing Date Reports. None of the Parties shall file any tax return or report
or take any position with any taxing agency or authority which is inconsistent
with the foregoing allocation, except to the extent mandated by a court of law
or the appropriate taxing agency or authority in a determination binding upon
one Party provided that such Party has given written notice and reasonable
opportunity to the other Party, at its expense, to contest and appeal such
determination on behalf of both Parties and such determination has nevertheless
become final. Within ninety (90) days after the Closing Date, the Parties shall
prepare for filing with the Internal Revenue Service a Form 8594 in accordance
with the foregoing allocation.
2.8 TAXES. Seller shall be liable for the payment of all sales and use
taxes arising out of the sale and transfer or removal of the Assets, if any, and
the assumption of the Assumed Liabilities. On or before the Effective Date, the
Seller agrees to furnish to the Buyer certificates from the state taxing
authorities, and any related certificates, that the Buyer may reasonably request
and are reasonably available from the relevant taxing authorities, as evidence
that all sales and use tax liabilities of the Seller accruing before the
Effective Date have been fully provided for or satisfied. The Buyer shall not
be responsible for any business, occupation, withholding or similar tax, or any
taxes of any kind of the Seller, related to any period before the Effective
Date.
2.9 TITLE TO ASSETS AND RISK OF LOSS. Title to the Assets and risk of
loss or damage to the Assets by casualty (whether or not covered by insurance)
will pass to the Buyer immediately upon completion of the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
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The Seller hereby represents and warrants, except as otherwise set forth on
the Schedules attached hereto, that:
3.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, has all
necessary corporate powers to own its properties and to operate the Business as
now owned and operated by it, and is not qualified, nor required to be
qualified, to do business in any other state.
3.2 AUTHORITY. Seller has the full right, power, legal capacity and
authority to execute, deliver and perform Seller's obligations under this
Agreement and all agreements ancillary to this Agreement which are part of the
underlying transaction made the basis of this Agreement and executed in
connection herewith, including but not limited to the Exhibits hereto
("Ancillary Agreements"). The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Seller has been duly authorized by the
Board of Directors and all of the stockholders of the Seller.
3.3 CONSENTS AND APPROVALS; NO BREACH OR DEFAULT. Except as set forth on
SCHEDULE 3.3(A), no consent, approval or authorization of, or filing or
registration with, any governmental
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or regulatory authority, or any other person or entity, is required to be made
or obtained by Seller in connection with the execution, delivery or performance
of this Agreement, or the consummation by Seller of the transactions
contemplated hereby. Except as set forth on SCHEDULE 3.3(B), neither the
execution and delivery of this Agreement or the Ancillary Agreements by Seller,
nor the consummation of the transactions contemplated herein by Seller, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency or court to which Seller is, or the Assets are, subject, or
(B) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under, any material agreement, contract,
lease, license, instrument, promissory note, conditional sales contract,
partnership agreement or other arrangement to which Seller or any of Seller's
Affiliates is a party, or by which Seller is bound, or to which the Assets are
subject, or (C) conflict with or violate the articles of incorporation or by-
laws or other charter document of Seller.
3.4 VALID AND BINDING OBLIGATION. This Agreement, and upon execution by
the proper persons, each of the Ancillary Agreements to be executed by Seller or
any of Seller's Stockholders in connection herewith, will constitute the legal,
valid, and binding obligation of Seller and each of Seller's Stockholders who is
a party thereto, enforceable against Seller or each of such Seller's
Stockholders in accordance with its terms, except as same may be limited by
applicable bankruptcy laws, insolvency laws, or other similar laws affecting the
rights of creditors generally and further subject to the action of a court with
respect to equitable remedies.
3.5 TITLE TO ASSETS. Except as set forth on SCHEDULE 3.5 and the
Financial Statements, Seller has good and marketable title to the Assets, free
and clear of restrictions or conditions to transfer or assignment, or mortgages,
liens, pledges, charges, encumbrances, equities, claims, covenants, except to
the extent of executory obligations expressly set forth in any agreement or
contract with respect to the Leased Assets and Purchased Assets subject to
Seller financing agreements as set forth in the Schedules hereto. Seller shall
deliver to Buyer at Closing good and marketable title to the Assets, free and
clear of restrictions or conditions to transfer or assignment, or mortgages,
liens, pledges, charges, encumbrances, equities, claims, or covenants, except to
the extent of executory obligations expressly set forth in any agreement or
contract with respect to the Leased Assets and Purchased Assets subject to
Seller financing agreements as set forth in the Schedules hereto.
3.6 POSSESSION OF ASSETS; LEASED ASSETS. Seller is in possession of all
of the Assets, and all of the assets leased to Seller from others. All assets
leased to Seller from others, whether real, personal or mixed, are described on
SCHEDULE 3.6 and SCHEDULE 3.14(B) attached hereto (the "Leased Assets"). The
Assets and the Leased Assets constitute all of the material property, whether
real, personal, mixed, tangible, or intangible, that is owned or used in the
Business by Seller, other than the Excluded Assets. Seller does not own legal
or equitable title to any assets or interests in assets except the Assets, the
Leased Assets and the Excluded Assets. Seller shall deliver to Buyer on the
Closing Date, possession of and/or control or dominion over all of the Assets
and the Leased Assets, including without limitation all of Seller's Accounts
Receivable,
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property and equipment, other personal property, contract rights and general
intangibles, client and supplier lists, and assumed and trade names.
3.7 CONDITION. All of the Assets and the Leased Assets are in good
operating condition and repair for their intended use, except for ordinary wear
and tear.
3.8 CONTRACTS AND LEASES. The Contracts include all of the contracts,
leases, documents, instruments, agreements, and other written or oral
arrangements to which Seller is a party or by which Seller or the Assets may be
bound. Except as set forth on SCHEDULE 2.1(B), all of the Contracts are valid
and in full force and effect, and there has not been any default by Seller or,
to the best of Seller's knowledge, any third party to any of said Contracts, or
any event, fact or circumstance which with notice or lapse of time or both,
would constitute a default by Seller or any other party to any of the Contracts.
Seller has not received notice that any party to any of the Contracts intends to
cancel or terminate any of the Contracts or exercise or not exercise any options
that such party might have under any of the Contracts.
3.9 EQUIPMENT. All of the equipment owned by Seller is set forth on
SCHEDULE 3.9.
3.10 ACCOUNTS RECEIVABLE. All of the Accounts Receivable of Seller as set
forth in the books and records of Seller, and all papers and documents relating
thereto, are genuine and in all respects what they purport to be, and each such
Account Receivable is valid and subsisting and is owed by the account debtor
named in such Account Receivable. The amount of each Account Receivable
represented as owing as of the date indicated (i) is the correct amount actually
and unconditionally owing as of the date indicated, (ii) to the best of Seller's
knowledge, is not subject to any set-offs, credits, disputes, defenses,
deductions or countercharges, and (iii) to the best knowledge of Seller, will be
paid in the Ordinary Course of Business, net of allowances as set forth in the
Seller's financial statements. None of the Accounts Receivable has been paid
outside of the Ordinary Course of Business, and neither Seller nor any of its
Affiliates has made any efforts to collect any of the Accounts Receivable
outside of the Ordinary Course of Business.
3.11 INVENTORIES. Seller does not have any raw materials, work in process,
finished goods or other inventory.
3.12 LICENSES. All licenses owned by Seller or in which Seller has any
rights, licenses or sublicenses (collectively, the "Licenses"), together with a
brief description of each, are set forth on SCHEDULE 3.12. To the best of
Seller's knowledge, Seller has not infringed, and is not now infringing, on any
license belonging to any other person or other entity. Seller owns and holds
adequate licenses necessary for the Business as now conducted by it, and that
use does not, and will not, conflict with, infringe on or otherwise violate any
rights of others. Buyer is hereby acquiring, and will continue to enjoy the use
and benefit of, the Licenses.
3.13 INTELLECTUAL PROPERTY. All of the intellectual property (the
"Intellectual Property") of Seller is set forth on SCHEDULE 3.13. The
Intellectual Property constitutes all of the intellectual property necessary to
the lawful conduct of the Business without any infringement or conflict with
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the rights of others, and no adverse claims have been asserted against the
Intellectual Property, Seller or the Business with respect thereto.
3.14 REAL PROPERTY; LEASED REAL PROPERTY. Except as set forth in SCHEDULE
3.14(A) with respect to real property owned by Seller, and SCHEDULE 3.14(B)
with respect to real property leased by Seller (such real property being
hereinafter referred to collectively as the "Real Property"), Seller neither
owns nor leases any real property or improvements or interests therein. Except
for Seller, there are no parties in possession of any portion of the Real
Property as lessees, tenants at will or at sufferance, trespassers or otherwise.
3.15 SUBSIDIARIES. Seller does not own, and has never previously owned,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, business, trust, or other entity.
3.16 INSURANCE. Attached hereto as SCHEDULE 3.16 is a true, complete and
accurate list of all insurance policies maintained by Seller.
3.17 BANKING. The names and addresses of all banks or other financial
institutions in which Seller has an account, deposit or safe deposit box, with
the names of all persons authorized to draw on these accounts or deposits or
having access to these boxes, are set forth on SCHEDULE 3.17 attached hereto.
3.18 POWERS OF ATTORNEY. No person or other entity holds a general or
special power of attorney from Seller.
3.19 PERSONNEL. Attached hereto as SCHEDULE 3.19 (A) is a list of the
names, addresses, hire dates, dates of birth and job descriptions of all
Employees of Seller, stating their rates of compensation including, if
determined, bonuses payable to each. Attached hereto as SCHEDULE 3.19 (B) is a
list of the names, addresses, dates of birth and services provided by all
independent court reporters used by Seller during the preceding one (1) year,
stating their rates and methods of compensation.
3.20 EMPLOYEE BENEFITS. SCHEDULE 3.20 is a true, correct and complete
list of each "employee benefit plan," within the meaning of Section 3(3) of
Employee Retirement Income Security Act of 1974, as amended ("ERISA") has ever
been maintained or sponsored by Seller or any of its Affiliates. Each such
employee benefit plan (and each related trust, insurance contract, or fund) is
in full force and effect, and complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other applicable laws.
Neither Seller nor any other party is in default under any of the plans, there
have been no claims of default, and there are no facts, conditions or
circumstances which if continued, or on notice, will result in a default, under
any plan. None of the plans will, by its terms or under applicable law, become
binding upon or become an obligation of the Buyer. No assets of any plan are
being transferred to Buyer or to any plan of Buyer. Seller does not contribute
to, and has never contributed to, and has never
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been required to contribute to, any multiemployer plan, and Seller does not
have, and has never had, any liability (including withdrawal liability) under
any multiemployer plan.
3.21 EMPLOYMENT AGREEMENTS. SCHEDULE 3.21 is a list of all employment
agreements, consulting agreements, collective bargaining agreements, and
agreements providing for director and officer indemnification or other
agreements or arrangements providing for employee or other remuneration,
severance payments or benefits to which Seller is a party or by which Seller is
bound (collectively, the "Seller Employment Agreements"). Buyer will not have
any duty, liability or obligation with respect to any of the Seller Employment
Agreements. Except as set forth on SCHEDULE 3.21, no Employees are represented
by any labor organization.
3.22 LIABILITIES. Seller does not have any liabilities, obligations or
commitments of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, except (i) liabilities which are adequately
disclosed or accrued against in the Balance Sheet Reports, and (ii) liabilities
which have been incurred in the Ordinary Course of the Business since June 30,
1997 and in accordance with standard, customary and historical practices and
experiences of Seller, except for giving effect to the pro forma adjustments
reflected in the Seller's Financial Statements. In no event shall the Buyer be
liable for (or have paid any) legal, accounting or other costs or expenses
incurred by Seller in connection with any of the transactions contemplated in
this Agreement. Seller will pay on or before the Closing Date all of such
expenses incurred in connection with the execution and delivery of this
Agreement and the Ancillary Agreements and the performance of the transactions
specified or contemplated therein.
3.23 LITIGATION. Except as set forth on SCHEDULE 3.23, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Seller, its Affiliates,
the Assets, the Leased Assets or the Business.
3.24 TAX MATTERS. Seller has filed all tax or information returns that
Seller was required to file, and all such tax returns or reports were correct
and complete in all material respects. All taxes owed by Seller (whether or not
shown on any tax return) which are due and owing have been paid, except for any
such taxes being contested in good faith and for which adequate reserves have
been established. Seller is not the beneficiary of any extension of time within
which to file any tax return, and Seller has not waived any statute of
limitations in respect of taxes or agreed to any extension of time with respect
to a tax assessment or deficiency. Seller has withheld and paid all taxes
required to have been withheld or paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, partner, or other third
party. Neither Seller nor any director or officer (or employee responsible for
tax matters) of Seller has reason to believe that any authority might assess any
additional taxes for any period for which tax returns or reports have been
filed. Except as set forth on SCHEDULE 3.24, there is no dispute or claim
concerning any tax liability of Seller.
3.25 COMPLIANCE WITH LAWS. Seller has complied in all material respects
with, and is not in violation of, applicable material federal, state or local
ordinances, statutes, laws, rules, restrictions and regulations (including,
without limitation, any applicable Environmental, Health
Page 13 of 36
& Safety Laws) that affects, or is likely to affect, directly or indirectly, the
Business, the Assets, the Leased Assets, the Real Property or the clients,
suppliers or financial prospects of Seller. There are not any uncured material
violations of federal, state or local laws, ordinances, statutes, orders, rules,
restrictions, regulations or requirements affecting any portion of the Business,
the Real Property, the Assets or the Leased Assets, and neither any of the
Assets, the Leased Assets or the Real Property, nor the operation thereof nor
the conduct of the Business, violates in any material respect any applicable
federal, state or municipal laws, ordinances, orders, regulations or
requirements. Seller has not received notice of any past, present or future
event, condition, circumstance, activity, practice, incident, action or plan
which may interfere with or prevent compliance or continued compliance with the
Environmental, Health & Safety Laws or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, demand,
lawsuit, proceeding, hearing, study or investigation, based on, related to, or
alleging any violation of the Environmental Health & Safety Laws.
3.26 FINANCIAL STATEMENTS. The Financial Statements (i) are true,
complete, and correct in all material respects, (ii) fairly and accurately
present the financial position of Seller as of the periods described therein,
and the results of the operations of Seller for the periods indicated, and (iii)
have been prepared consistently and in accordance with the Seller's historical
customs and practices, except for the pro forma adjustments thereto described
therein or otherwise contemplated in this Agreement.
3.27 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
SCHEDULE 3.27 or otherwise set forth in this Agreement, since June 30, 1997.
(A) there has been no: (i) material adverse change in the financial
condition, assets, liabilities, business or prospects of Seller; (ii) material
loss, destruction or damage to any property of Seller, whether or not insured;
(iii) labor trouble, pending or threatened, involving Seller, or change in the
personnel of Seller or the terms or conditions of their employment or other
engagement; nor (iv) other event or condition of any character (excluding
general economic condition affecting the Business) that has or could have a
material adverse effect on the financial condition, business, liabilities,
goodwill or prospects of the Business;
(B) Seller and its Affiliates have used their reasonable best efforts to
preserve the business organization of Seller intact, to maintain the goodwill of
the Business, to keep available to the Business the Employees and the
Independent Contractors, and to preserve the present relationships of Seller
with its suppliers, clients, regulatory authorities and others having business
relationships with it;
(C) Seller has maintained and operated the Business in the Ordinary Course
of Business and in accordance with industry practices and Seller's historical
policies;
Page 14 of 36
(D) Seller has not issued or sold, nor directly or indirectly redeemed or
acquired, any of its securities;
(E) Seller has not declared, set aside nor paid a dividend or other
distribution, nor made any payment of any type to the holders of any equity
interest in Seller, other than ordinary salary, compensation or expenses which
have been paid in the Ordinary Course of Business and fully disclosed to Buyer;
(F) Seller has neither waived nor released any material right of or
material claim held by it, nor discounted any of its receivables, nor revalued
any of its assets or liabilities;
(G) Seller has not acquired nor disposed of any assets having a value of
$5,000 individually or $15,000 in the aggregate, and has not entered into any
contract, commitment or arrangement therefor, and has not entered into any other
transaction, other than for value in the Ordinary Course of Business and in
accordance with industry practices;
(H) Seller has not changed the salary or other compensation payable or to
become payable by Seller to any of its officers, directors, employees,
independent contractors, agents or other personnel, and has not declared, made
or committed to any kind of payment of a bonus or other additional salary or
compensation to any such person;
(I) Seller has not made a loan to any person or entity, and has not
guarantied any loan, in an amount in excess of $5,000 individually or $15,000 in
the aggregate;
(J) Seller has not amended nor terminated any material contract, agreement,
permit or license to which Seller is a party, or by which Seller or any of the
Assets or Leased Assets are bound;
(K) Seller has maintained all debt and lease instruments, and has not
entered into any new or amended debt or lease instruments;
(L) Seller has not entered into any agreement or instrument which would
constitute an encumbrance, mortgage or pledge of the Assets, or which would bind
Buyer or the Assets after Closing, in an amount in excess of $5,000 individually
or $15,000 in the aggregate;
(M) Seller has provided to Buyer any and all books, records, contracts,
and other documents or data pertaining to the ownership, use, insurance,
operation, renovation and maintenance of the Assets, the Leased Assets and the
Business;
Page 15 of 36
(N) To the best of Seller's knowledge and belief, Seller has performed
all of Seller's obligations under all contracts and commitments applicable to
Seller, the Assets and the Leased Assets, and has maintained Seller's books of
account and records in the usual, regular and customary manner, except for the
pro forma adjustments contemplated by this Agreement;
(O) Seller has complied with all material statutes, laws, ordinances and
regulations applicable to Seller, the Assets, the Leased Assets and the conduct
of the Business;
(P) Seller has paid all bills and other payments due with respect to the
ownership, use, insurance, operation and maintenance of the Business, the Assets
and the Leased Assets, as and when such bills or other payments were due, and
has taken all action necessary or prudent to prevent liens or other claims for
the same from being filed or asserted against any part of the Assets or the
Leased Assets; provided however, Seller has not made any expenditures outside
the Ordinary Course of Business, nor any capital expenditures, in excess of
$5,000 individually or $15,000 in the aggregate;
(Q) Seller has not made any material changes in its management,
operations, accounting or business practices or methods (including without
limitation, any change in depreciation or amortization policies or rates),
except for the pro forma adjustments contemplated set forth in the Seller's
Financial Statements or otherwise expressly set forth herein, except as set
forth in this Agreement, the Ancillary Agreements or any schedules thereto and
(R) all revenues or cash or other receipts from all sources received by
Seller have been deposited in Seller's account.
3.28 CLIENTS. SCHEDULE 3.28 to this Agreement is a true, complete and
correct list of all clients and customers of Seller ("Customers"), together
with summaries of the sales or services provided to each client during the six
month period ended June 30, 1997. Except as indicated in SCHEDULE 3.28, Seller
does not have any information, nor is it aware of any facts or circumstances,
indicating that any of these clients intend not to do business with Buyer to the
same volume and extent, and on the same terms, as they have historically done
business with Seller.
3.29 INTERESTS IN CLIENTS, SUPPLIERS AND COMPETITORS. No officer,
director or shareholder of Seller (nor any former officer, director or
shareholder), or member of their immediate families, has any direct or indirect
interest in any competitor, supplier or client of Seller, nor any person or
other entity who has done business with Seller in the one year period preceding
the date of this Agreement.
Page 16 of 36
3.30 CORPORATE DOCUMENTS. Seller has furnished to Buyer for its
examination (i) a true, complete and correct copy of Seller's Articles of
Incorporation and By-laws and all other written agreements between the Seller
and its officers or directors of Seller, all as amended to date; (ii) true,
complete and correct copies of the contents of the minute books of Seller
(including proceedings of audit and other committees), each of which contains
all records for all proceedings, consents, actions and meetings of the
stockholders or directors of Seller since its date of formation.
3.31 BULK SALE WARRANTY FOR SALES TAX PURPOSES. Prior to Closing, Seller
has never sold a substantial or significant part of its assets in any single
transaction or series of transactions. The transaction contemplated herein is
the sale of the entire operating assets of a business, and a sale outside the
ordinary course of Seller's business, and except for sales or use tax that may
arise from the sale of Seller's equipment, no sales tax is due upon or by
reason of the Closing.
3.32 DISCLOSURE. Seller has provided to Buyer actual copies of all
material Contracts, documents concerning all litigation and administrative
proceedings, employee benefit plans, Licenses, insurance policies, lists of
suppliers, clients, employees and independent contractors, and corporate records
relating to Seller or its assets and liabilities, the Business and the Real
Property, and such information covers all material commitments and liabilities
of Seller. In addition, (i) Buyer has been kept fully informed with respect to
all material developments in the business of Seller since the June 30, 1997,
(ii) management of Seller has not made any material business decisions, nor
taken any material actions, since the June 30, 1997 of which Buyer has not been
advised, and (iii) Buyer and its agents have been granted unlimited access to
the books and records of Seller (whether retained electronically, on disc or on
paper).
3.33 FULL DISCLOSURE. This Agreement, the schedules and exhibits hereto,
and all other documents and written information furnished by Seller or its
Affiliates to Buyer or its representatives pursuant hereto or in connection
herewith, are, to the knowledge of Seller, true, complete and correct, and do
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made herein and therein not
misleading. There are, to the knowledge of Seller, no facts or circumstances
relating to the Business or Seller's liabilities, prospects, operations or
financial condition, or the Assets, which materially and adversely affect or, so
far as the Seller can now reasonably foresee, will materially and adversely
affect, the Business, Seller or the assets, liabilities, prospects, operations
or financial condition thereof, or the ability of the Seller to perform this
Agreement or the obligations of Seller hereunder. For purposes of the
representations and warranties of the Seller in this Agreement, any disclosure
by Seller in response to any item or schedule provided shall be deemed to be
responsive to the specific disclosure called for by any schedule delivered
pursuant to this Agreement, provided that the facts disclosed in such schedule
would reasonably apprise the Buyer or Parent of the potential applicability of
such facts to another disclosure schedule.
Page 17 of 36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer and Parent jointly and severally represent and warrant, except as
otherwise set forth on the Schedules attached hereto, that:
4.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all the necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it and is not qualified, nor
required to be qualified, to do business in any other state.
4.2 AUTHORITY. Each of Buyer and Parent, as applicable, has the full
right, power, legal capacity, and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements and to deliver and perform Buyer's and
Seller's respective obligations under this Agreement and all agreements
ancillary to this Agreement which are part of the underlying transactions made
the basis of this Agreement executed in connection herewith. The execution,
delivery and performance of this Agreement, the Ancillary Agreements, and each
document or instrument or agreement to be executed by Buyer and Parent in
connection herewith have been duly authorized by the Board of Directors of the
Buyer and Parent, no shareholder approval of either is required. The execution,
delivery and performance of this Agreement and any Ancillary Agreements by Buyer
and Parent, as applicable, have been duly authorized by all necessary corporate
action.
4.3 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, each of
this Agreement and the Ancillary Agreements will constitute the legal, valid,
and binding obligation of Buyer or Parent, as applicable, enforceable in
accordance with its terms, except as limited by bankruptcy laws, insolvency
laws, and other similar laws affecting the rights of creditors generally.
4.4 BROKERS. Except for The GulfStar Group, Inc. neither Buyer, nor
Parent, nor any of their respective Affiliates, officers, directors, or
employees, has employed any broker, agent, or finder, or incurred any liability
for any brokerage fees, agent's fees, commissions or finder's fees in connection
with the transactions contemplated herein. Buyer and Parent agree to pay any
and all of such fees of the GulfStar Group, Inc. or any other broker, agent or
finder.
4.5 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
filing or registration with, any governmental or regulatory authority, or any
other person or entity, is required to be made or obtained by Buyer or Parent in
connection with the execution, delivery and performance of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby.
Page 18 of 36
4.6 LITIGATION. There is no suit, action, arbitration or legal,
administrative or other proceeding or governmental investigation pending or
threatened against or affecting, Parent or Buyer which could have an effect on
the consummation or performance of the transactions and action contemplated by
this agreement and the Ancillary Agreements.
4.7 FINANCIAL STATEMENTS. The financial statements of Parent delivered
to Seller (i) are true, complete and correct in all material respects, (ii)
fairly and accurately present the financial position of Parent as of the periods
described therein, and the results of the operations of Parent for the periods
indicated, and (iv) have been prepared in accordance with generally accepted
accounting principles and in accordance with Parent's historical custom and
practice.
4.8 PUBLIC OFFERING. Parent has provided to Seller true and accurate
information as to the status of the proposed Public Offering by Parent.
4.9 COMMON STOCK. The Parent Shares to be issued to Buyer pursuant to
Section 2.3 hereof have been duly authorized by proper corporate action and when
issued will be duly and validly issued, fully paid and non-assessable shares of
Common Stock of Parent. Parent has duly reserved for issuance the share of
Common Stock which are issuable upon conversion of the Notes. The shares of
Common Stock issuable upon conversion of the Note will upon conversion of the
Note be duly and validly authorized and issued, fully paid and non-assessable
4.10 FUNDING. Parent has the financing resources to provide for
funding of the operations of the Business after the Effective Date, consistent
with the present and reasonably anticipated future needs of such Business.
4.11 FULL DISCLOSURE. This Agreement, the schedules and exhibits
hereto, and all other documents and written information furnished by Buyer and
Parent or their respective Affiliates to Seller or its representatives pursuant
hereto or in connection herewith, are to the knowledge of the Buyer and Parent
true, complete and correct, and do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading. There are, to the knowledge
of the Buyer and Parent, no facts or circumstances relating to the business of
the Buyer or Parent or their respective liabilities, prospects, operations,
financial condition or assets, which materially and adversely affect or, so far
as the Buyer or Parent can now reasonably foresee, will materially and
adversely affect, the business of the Buyer or Parent or their respective
assets, liabilities, prospects, operations or financial condition thereof, or
the ability of the Seller to perform this Agreement or the obligations of Seller
hereunder. For purposes of the representations and warranties of the Buyer or
Parent in this Agreement, any disclosure by Buyer or Parent in response to any
item or schedule provided shall be deemed to be responsive to the specific
disclosure called for by any schedule delivered pursuant to this Agreement,
provided that the facts disclosed in such schedule would reasonably apprise the
Seller of the potential applicability of such facts to another disclosure
schedule.
Page 19 of 36
ARTICLE V
COVENANTS OF THE PARTIES
------------------------
Buyer, Parent and Seller covenant and agree as follows:
5.1 CONDUCT OF THE BUSINESS. Except as otherwise permitted by this
Agreement or consented to by Buyer or Parent in writing, Seller shall conduct
the Business in the ordinary course in substantially the same manner as
heretofore, using its best efforts to preserve intact its present business
organization, to keep available the services of its Employees, and to preserve
its relationships with customers, suppliers and others having business dealings
with it.
5.2 CERTAIN CHANGES. Except as otherwise permitted by this Agreement or
consented to by Buyer or Parent in writing, Seller shall not: (a) subject any
of the Assets to any lien or encumbrance; (b) dispose of any of the Assets
except in the ordinary course of business; or (c) grant any increase in
compensation or benefits to any Employee; (d) materially modify any of the
Liabilities, or (e) with respect to the Business, perform any act outside the
ordinary course of the Business except as otherwise contemplated by this
Agreement.
5.3 NOTICE. Seller will notify Buyer as soon as possible in writing if
(i) any of Seller's representations or warranties set forth in this Agreement
are or become untrue in any material respect prior to the Closing Date, (ii)
Seller fails to fully perform all of the covenants of Seller set forth in this
Agreement in any material respect, or (iii) there occurs any material adverse
development in the Business or Seller's market position, sales, profit trends,
labor regulations, litigation or insurance claims or otherwise. Buyer or Parent
will notify Seller as soon as possible in writing if (i) any of Buyer's or
Parent's representations or warranties set forth in this Agreement are or
become untrue in any material respect prior to the Closing Date, (ii) Buyer or
Parent fails to fully perform all of the covenants of Buyer or Parent set forth
in this Agreement in any material respect, or (iii) there occurs any material
adverse development in the business of Parent or Parent's market position,
sales, profit trends, labor regulations, litigation or insurance claims,
financial resources, proposed public offering, or otherwise.
5.4 RECORD RETENTION. From and after the Closing, Seller shall permit
Buyer the right, during normal business hours, to inspect any documents, books,
records or other information pertaining to the Assets.
5.5 BULK SALES. It may not be practicable to comply or attempt to comply
with the procedures of the "Bulk Sales Act" or similar law in any or all of the
states in which the Assets are situated or of any other state which may be
asserted to be applicable to the transactions contemplated hereby. Accordingly,
to induce Buyer to waive any requirements for compliance with any or all of such
laws, Seller hereby agrees that except for the Assumed Liabilities, the
indemnity provisions of Article VII hereof shall apply to any damages of Buyer
arising out of or resulting from the failure of Buyer or Seller to comply with
any such laws or any similar law which may be asserted to be applicable.
Page 20 of 36
5.6 TERMINATION OF EMPLOYMENT OF SELLER'S EMPLOYEES. Buyer anticipates
extending an offer of employment to substantially all of the employees of the
Seller on substantially the same terms and conditions as the Employees currently
are employed by Seller. Notwithstanding the foregoing, nothing herein shall
imply or guarantee employment of any Employee of Seller by Buyer. If Seller's
Employees desire employment with Buyer, they will be interviewed in conjunction
with the applicants from other sources and given strong consideration for
available positions with Buyer, at the wages, hours, and conditions of
employment established by Buyer prior to hiring any employees. Seller agrees to
use its best efforts to make available the Employees to the Buyer that Buyer
desire to hire for the purpose of operating the Business. Notwithstanding
anything to the contrary contained herein, Buyer agrees that it will offer to
employ substantially all of Seller's employees. Nothing shall prohibit Buyer
from terminating any of Seller's Employees subsequent to their employment by
Buyer.
5.7 INSURANCE. Seller shall assist Buyer in transferring to Buyer any
insurance applicable to the Assets or the Leased Assets which Buyer elects to
maintain in effect.
5.8 CONFIDENTIALITY. Seller will not, and will not permit any of its
Affiliates to, disclose any information of a confidential or proprietary nature
concerning the Assets or the Business to any third parties without Buyer's or
Parent's consent (except to professionals employed or retained by Seller in
connection with the Agreement and the transactions contemplated hereby), and in
no event shall Seller use, or allow any of its Affiliates to use, such
confidential or proprietary information for its or his own benefit or to the
detriment of Buyer or the Business. No public or private announcement shall be
made of the transactions contemplated herein, nor the terms hereof, by Seller or
any of its affiliates, without the prior written approval of Buyer as to
timing, form and content.
5.9 NON-COMPETITION AGREEMENT. The Seller agrees that, for the period
beginning on the Closing Date and continuing for three (3) years following the
Closing Date, neither the Seller or any of its Affiliates, shall, either
directly or indirectly, individually or separately, for themselves or as a
shareholder, owner, partner, joint venturer, promoter, consultant, manager,
independent contractor, agent, or in some similar capacity for any reason
whatsoever:
A. Enter into, engage in, or be connected with any court reporting
business or business operation or activity within Westchester, New York, Kings,
Queens, Bronx, Richmond, Rockland and Nassau Counties in New York and Bergen,
Essex, Union, Middlesex, Morris, Warren, Somerset, Sussex and Passaic Counties
in New Jersey;
B. Call upon any customer whose account is or was serviced in whole or in
part by the Seller in relation to the Business or the Buyer with the intent of
selling or attempting to sell to any such customer any services similar to the
services provided by the Buyer; and
Page 21 of 36
C. Intentionally divert, solicit or take away any customer, supplier or
employee of the Buyer, or the patronage of any customer or supplier of the
Buyer, or otherwise interfere with or disturb the relationship existing between
the Buyer and any of its customers, suppliers, or employees, directly or
indirectly.
In the event the Buyer ceases operation of the Business other than in a
merger, consolidation, or similar transaction, or upon the filing of a
bankruptcy or receivership proceeding against the Buyer, or upon the appointment
of a liquidator for the Buyer, the provisions of this Section 5.9 will not be
applicable to the conduct of Seller or its affiliates subsequent thereto.
Notwithstanding anything to the contrary contained herein, it is understood
and agreed that the foregoing provisions contained in this Section 5.9 shall not
apply to an individual named in Section 5.9 if that particular individual
executes an Employment Agreement or Consulting Agreement as of the Closing Date
with the Buyer containing noncompete provisions. It is mutually understood and
agreed that if any of the provisions relating to the scope, time or territory in
this Section 5.9 are more extensive than is enforceable under applicable law or
are broader than necessary to protect the goodwill and legitimate business
interests of the Buyer, then the Parties agree that they will reduce the degree
and extent of such provisions by whatever minimal amount is necessary to bring
such provisions within the ambit of enforceability under applicable law. Nothing
contained herein shall prohibit any person from working as a court reporter for
any court or governmental agency.
The Parties acknowledge that the remedies at law for breach of Seller's
covenants contained in this Section 5.9 are inadequate, and they agree that the
Buyer shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of said covenants in addition to any other remedies at law
or equity that may be available to the Buyer.
ARTICLE VI
THE CLOSING
-----------
6.1 CLOSING. Payment of the Purchase Price required to be made by the
Buyer and Parent to the Seller and the transfer of the Assets by the Seller and
the other transactions contemplated hereby shall take place on the Closing Date
at 10:00 a.m. CST, at the offices of Xxxxx, Xxxxx & Xxxxxx Incorporated, 0
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 or by fax unless the time or
location is changed by mutual agreement of the Parties. At the Closing, (a) the
Seller will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 6.2 below, (b) the Buyer and Parent will
deliver to the Seller the various certificates, instruments, and documents
referred to in Section 6.3 below, and (c) the Buyer will deliver to the Seller
the Purchase Price specified in Section 2.3 above. Post closing adjustments will
be made in accordance with Section 2.5 hereof.
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6.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND PARENT. The obligation of
the Buyer and Parent to proceed with the Closing and consummate the transactions
to be performed by it in connection with the Closing is subject to satisfaction
of the following conditions:
(a) the representations and warranties of Seller hereunder shall be true
and correct in all material respects at and as of the Closing Date;
(b) the Seller shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (iii) affect adversely in any material respect the rights in
and to the Assets (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(d) the Seller shall have delivered to the Buyer a certificate to the
effect that each of the conditions specified above in Section 6.2(a) -(c) is
satisfied in all respects;
(e) the Buyer shall have received from counsel to the Seller an opinion in
form and substance acceptable to Buyer, addressed to the Buyer, and dated as of
the Closing Date containing such assumptions and qualifications as may be
reasonably acceptable to Buyer's legal counsel;
(f) Xxxxxxx X. Xxxxxx shall have individually entered into the separate
consulting agreement set forth as EXHIBITS B ( the "Consulting Agreement"), and
Xxxxxx X. Xxxxxxxx, Xxxx Xxxxxxxx and Xxxxxx Xxxxxxx, shall have each
individually entered into the separate Employment Agreements with Buyer in the
forms attached hereto as EXHIBITS C-1, C-2 AND C-3, respectively (the
"Employment Agreements");
(g) The Seller shall have delivered to Buyer instruments of assignment and
transfer or bills of sale signed by Seller as the Buyer shall reasonably
request, including the Xxxx of Sale and Assumption Agreement in substantially
the form attached hereto as EXHIBIT D (the "Xxxx of Sale");
(h) The Seller shall have delivered to the Buyer an Investor
Representation Letter in substantially the form attached hereto as EXHIBIT E
executed
Page 23 of 36
by the Seller with respect to the acquisition of the Common Stock, the Note and
the Common Stock into which the Note is convertible;
(i) Seller shall have entered into the Subordination Agreements in the form
of EXHIBITS F-1 and F-2.
(j) Seller shall have entered into with Parent an Addendum to
Shareholders' Agreement in the form attached hereto as EXHIBIT G (the
"Shareholder's Agreement") and a Registration Rights Agreement in the form of
EXHIBIT H (the "Registration Rights Agreement");
(k) Seller shall have delivered to Buyer a Stock Pledge Agreement in
substantially the form of EXHIBIT I-1 attached hereto (the "Stock Pledge
Agreement") and an Escrow Agreement in the form of Exhibit I-2 by and between
the Seller, Buyer, Parent and Xxxxxx X. Xxxxxxxx, Esq.;
(l) Buyer shall have completed its due diligence review of Seller and the
Business and been satisfied with the results;
(m) The Board of Directors and shareholders of Seller shall have approved
the terms of this transaction and Seller shall have delivered a certificate
therefore to Buyer;
(n) Seller shall have delivered to Buyer all other items required to
be delivered hereunder or as may be reasonably requested which are reasonably
necessary or would reasonably facilitate consummation of the transactions
contemplated hereby; and
(o) All actions to be taken by the Seller in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in Section 6.2 if it executes a
writing so stating at or prior to the Closing Date.
6.3 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the Seller
to proceed with Closing and consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions and compliance with Section 6.6:
Page 24 of 36
(a) the representations and warranties of Buyer and Parent hereunder shall
be true and correct in all material respects at and as of the Closing Date;
(b) the Buyer and Parent shall have performed and complied with all of
their respective covenants hereunder in all material respects through the
Closing;
(c) no action, suit, or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(d) each of Buyer and Parent shall have delivered to the Seller a
certificate to the effect that each of the conditions applicable to it which are
specified above in Section 6.3(a)-(c) is satisfied in all respects;
(e) the Seller shall have received from counsel to the Buyer and Parent an
opinion in form and substance acceptable to Seller, addressed to the Seller, and
dated as of the Closing Date containing such assumptions and qualifications as
may be reasonably acceptable to Seller's legal counsel;
(f) the Buyer shall have paid the Purchase Price required by Section 2.3;
(g) the Buyer shall have entered into the Consulting Agreement and the
Employment Agreements;
(h) the Buyer shall have caused Parent to enter into the Shareholders'
Agreement and the Registration Rights Agreement with Seller;
(i) The Buyer and Parent shall have executed and delivered to Seller the
Xxxx of Sale;
(j) Seller shall have completed its due diligence review of Buyer and
Parent and been satisfied with the results;
(k) the Board of Directors and shareholders of Seller shall have approved
the terms of this transaction;
Page 25 of 36
(l) all actions to be taken by the Buyer in connection with consummation of
the transactions contemplated hereby, and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 6.3 if Seller
executes a writing so stating at or prior to the Closing.
6.4 FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. The Seller, at any time at or after the Closing, will
execute, acknowledge and deliver any further bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by the Buyer, for the purpose of
assigning and confirming to the Buyer, all of the Assets. The Buyer shall notify
the Seller promptly, and in no event more than ten (10) business days after the
Buyer's receipt, of any tax inquiries or notifications thereof which relate to
any period prior to the Effective Date, and the Seller shall prepare and deliver
responses to such inquiries as the Seller deems necessary or appropriate. In
addition, the Seller shall make available the books and records of the Business
during reasonable business hours and take such other actions as are reasonably
requested by the Buyer to assist the Buyer in the operation of the Business.
6.5 CONFIDENTIAL INFORMATION. After the Closing and except as otherwise
specifically permitted in this Agreement or reasonably required by the Parent to
conduct its business and pursue the Public Offering, each Party to this
Agreement agrees, on behalf of itself and its Affiliates, to use reasonable
efforts not to divulge, communicate, use to the detriment of any other Party to
this Agreement or its Affiliates or for the benefit of any other person or
persons, any confidential information or trade secrets of such other Party with
respect to the Assets or the Business, including personnel information, secret
processes, know-how, customer lists, formulae, or other technical data;
provided, if any Party to this Agreement or any of its Affiliates is compelled
to disclose such information to any tribunal, regulatory or governmental
authority or agency or else stand liable for contempt or suffer other censure
and penalty, such Party may so disclose such information without any liability
hereunder.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION.
A. BY THE SELLER AND SELLER'S SHAREHOLDERS. Subject to Section
7.1(E) hereof, the Seller and each of the Seller's Stockholders, individually,
jointly and severally, (collectively
Page 26 of 36
herein "Seller Indemnitors") shall indemnify, save, defend and hold harmless the
Buyer, Parent and Buyer's and Parent's shareholders and the directors, officers
and financial advisors, investment bankers, attorneys and accountants of each,
together with their respective successors in interest or heirs (collectively,
the "Buyer Indemnified Parties") from and against any and all costs, lawsuits,
losses, liabilities, deficiencies, claims and expenses, including interest,
penalties, attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively referred to herein as
"Damages"), (i) incurred in connection with or arising out of or resulting from
or incident to any breach of any covenant, breach of warranty as of the
Effective Date, or the inaccuracy of any representation as of the Effective
Date, made by the Seller in or pursuant to this Agreement or the Ancillary
Agreements, including any schedule, certificate, exhibit, or other instrument
furnished or to be furnished by the Seller or its Affiliates under this
Agreement, or (ii) based upon, arising out of, or otherwise in respect of any
liability or obligation of the Business or relating to the Assets (a) relating
to any period prior to the Effective Date, other than those Damages based upon
or arising out of the Assumed Liabilities, or (b) arising out of facts or
circumstances existing prior to the Effective Date, other than those Damages
based upon or arising out of the Assumed Liabilities; provided, however, that
the Seller and its stockholders shall not be liable for any such Damages to the
extent, if any, such Damages result from or arise out of a breach or violation
of this Agreement by any Buyer Indemnified Parties.
B. BY THE BUYER. Subject to Section 7.1(E) hereof, the Buyer and
Parent, jointly and severally, shall indemnify, save, defend and hold harmless
the Seller, Seller's Stockholders, and financial advisors, investment bankers,
attorneys and accountants of each, together with their respective successors in
interest or heirs (collectively, the "Seller Indemnified Parties") from and
against any and all Damages (i) incurred in connection with or arising out of or
resulting from or incident to any breach of any covenant , breach of warranty as
of the Effective Date, or the inaccuracy of any representation as of the
Effective Date, made by the Buyer or Parent in or pursuant to this Agreement or
the Ancillary Agreements, including any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by the Buyer or Parent under this
Agreement, or (ii) based upon, arising out of or otherwise in respect of any
liability or obligation of the Business or relating to the Assets (a) relating
to any period on and after the Effective Date, other than those Damages based
upon or arising out of the Retained Liabilities, or (b) arising out of facts or
circumstances existing on and after the Effective Date, other than those Damages
based upon or arising out of the Retained Liabilities; provided, however, that
the Buyer and Parent shall not be liable for any such Damages if such Damages
result from or arise out of a breach or violation of this Agreement by any
Seller Indemnified Parties.
C. DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("Notice of Action"); provided that
Page 27 of 36
the failure of any indemnified Party to give timely notice shall not affect its
rights to indemnification hereunder to the extent that the indemnified Party
demonstrates that the amount the indemnified Party is entitled to recover
exceeds the actual damages to the indemnifying Party caused by such failure to
so notify within ten (10) days and so long as the indemnifying Party is not
materially prejudiced by the failure to receive such notice. The indemnifying
Party may elect to compromise or defend any such asserted liability and to
assume all obligations contained in this Section 7.1 to indemnify the
indemnified Party by a delivery of notice of such election ("Notice of
Election") within ten (10) days after delivery of the Notice of Action. Upon
delivery of the Notice of Election, the indemnifying Party shall be entitled to
take control of the defense and investigation of such lawsuit or action and to
employ and engage attorneys of its own choice to handle and defend the same, at
the indemnifying Party's sole cost, risk and expense, and such indemnified Party
shall cooperate in all reasonable respects, at the indemnifying Party's sole
cost, risk and expense, except with respect to the fees and expenses of the
indemnified Party's attorney, which shall be borne by the indemnified Party,
with the indemnifying Party and such attorneys in the investigation, trial, and
defense of such lawsuit or action and any appeal arising therefrom; provided,
however, that the indemnified Party may, at its own cost, risk and expense,
participate in such investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. If the Notice of Election is delivered to the
indemnified Party, the indemnified Party shall not pay, settle or compromise
such claim without the indemnifying Party's consent, which consent shall not be
unreasonably withheld. If the indemnifying Party elects not to defend the claim
of the indemnified Party or does not deliver to the indemnified Party a Notice
of Election within ten (10) days after delivery of the Notice of Action, the
indemnified Party may, but shall not be obligated to defend, or the indemnified
Party may compromise or settle (exercising reasonable business judgment) the
claim or other matter on behalf, for the account, and at the risk, of the
indemnifying Party.
D. THIRD PARTY CLAIMS. The provisions of this Section 7.1 are not
limited to matters asserted by the Parties, but cover Damages incurred in
connection with third party claims. The indemnity hereunder is in addition to
any and all rights and remedies of the Parties in connection herewith.
E. LIMITATION ON INDEMNIFICATION. Notwithstanding the other
provisions of this Section 7.1, Seller Indemnitors shall not be liable to Buyer
Indemnified Parties, and Buyer shall not be liable to Seller Indemnified
Parties, for the first $40,000 in aggregate Damages suffered by such indemnified
Parties; provided, however, that once any such indemnified Parties have suffered
Damages aggregating in excess of $40,000, the indemnifying Party shall
reimburse the indemnified Parties for the full amount of such Damages, including
the $40,000 in Damages initially excluded. In no event shall the aggregate
Damages payable by an indemnifying Party to indemnified Parties exceed one half
of the Purchase Price, and further provided that any damages payable to Buyer or
Parent shall be made first by reducing the principal amount of the Note and
thereafter reducing the amount of Common Stock set forth in Section 2.3 hereof.
Damages shall be computed net of any insurance recovery.
Page 28 of 36
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for two (2) years thereafter, except that the representations and
warranties contained in Sections 3.5 and 3.24 shall survive for the applicable
statute of limitations.
ARTICLE VIII
TERMINATION AND REMEDIES
------------------------
8.1 SPECIFIC PERFORMANCE; REMEDIES. Each of the Parties hereby agrees
that the transactions contemplated by this Agreement are unique, and that each
Party shall have, in addition to any other legal or equitable remedy available
to it, the right to enforce this Agreement by decree of specific performance.
If any legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it, he or they may be entitled at law
or equity. The rights and remedies granted herein are cumulative and not
exclusive of any other right or remedy granted herein or provided by law.
8.2 OFFSET; REMEDIES. Subject to the provisions of Section 7.1(E) hereof,
to the extent not otherwise prohibited by applicable law, all amounts due and
owing by the Buyer or Parent to the Seller under this Agreement, the Note, or
any other document, instrument, or agreement executed or issued in connection
herewith shall be subject to offset by the Buyer or Parent to the extent of any
Damages actually incurred by any breach by the Seller, under this Agreement by
any Party other than the Buyer or the Parent under the Consulting Agreement or
the Employment Agreements, or any document, instrument, or agreement executed in
connection herewith. In the event Buyer elects to offset any Damages incurred
as a result of any such breach, Buyer or Parent shall furnish Seller notice
containing detailed information about the breach, the magnitude of the damages
that Buyer or Parent has or reasonably expects to incur, and whether the offset
is against the Note, the Parent Shares pledged under the Stock Pledge Agreement
or otherwise (the act of offsetting by Buyer shall be referred to as an
"Offset"). The Seller acknowledges and agrees that but for the right of Offset
contained in this Agreement, the Buyer would not have entered into this
Agreement or any of the transactions contemplated herein. If any legal action
or other proceeding is brought for the enforcement of this Agreement, the
Consulting Agreement, the Employment Agreements, or any document, instrument, or
agreement executed in connection herewith, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the Consulting Agreement, the Employment Agreements, or any
document, instrument, or agreement executed in connection herewith, the
successful or prevailing Party or Parties shall be entitled to recover other
remedies to which it or they may be entitled at law or equity. The rights and
remedies granted herein are cumulative and not exclusive of any other right or
remedy granted herein or provided by law. Buyer or Parent shall not effect an
Offset hereunder without giving Seller at least 10 days advance written notice
of its intent to do so. Seller or its stockholders may contest any
Page 29 of 36
offset under the arbitration provisions set forth in Section 9.14 herein.
Notwithstanding any other provisions of this Section 8.2, all rights of offset
with respect to amounts due or owing under the Employment Agreements and the
Consulting Agreement shall expire to the extent not exercised on or prior to the
second anniversary of the Closing.
8.3 TERMINATION. (a) This Agreement may be terminated at any time prior
to the Closing: (i) by the mutual consent of Seller, Parent and Buyer; or (ii)
by Seller, Parent or Buyer, three months after the date hereof, if any of the
conditions precedent to its obligations hereunder have not been fulfilled, other
than as a result of such terminating Party's breach or negligence; or (iii) if
any bona fide action or proceeding shall be pending against either Party on or
before the Closing that could result in an unfavorable judgment, decree or order
that would prevent or make unlawful the carrying out of this Agreement or if any
agency of the federal or of any state government shall have objected at or
before the Closing to this acquisition or to any other action required by or in
connection with this Agreement (which objection could potentially prevent the
consummation of the transactions contemplated by this Agreement).
(b) This Agreement may be terminated by Buyer or Parent at any time
prior to the Closing if Seller shall have failed to comply in any material
respect with its agreements herein and such failure shall be continuing or if
the representations or warranties of Seller herein shall prove to have been
inaccurate in any material respect when made, provided that, Buyer or Parent
shall give Seller a reasonable period of time, but in any event not less than
thirty (30) days to cure any default hereunder, by the payment of compensation
(if the matter is reasonably capable of rectification by that means) or by the
rectification of the matter before the Closing.
(c) This Agreement may be terminated by Seller at any time prior to
the Closing if Buyer or Parent shall have failed to comply in any material
respect with their respective agreements herein and such failure shall be
continuing or if the representations or warranties of Buyer or Seller herein
shall prove to have been inaccurate in any material respect when made, provided
that, Seller shall give Buyer or Parent, as the case may be, a reasonable period
of time, but in any event not less than thirty (30) days, to cure any default
hereunder, by the payment of compensation (if the matter is reasonably capable
of rectification by that means) or by the rectification of the matter before the
Closing.
(d) Nothing in this Section 8.3 shall be deemed to release either
Party from any liability for any breach by such Party of the terms and
provisions of this Agreement; provided, however that such Party shall not be
liable in the event the Agreement is terminated pursuant to Section 8.3(a), or
pursuant to Section 8.3(b) and Section 8.3(c) if the breach is not intentional
and reasonable good faith efforts are made to rectify the breach but it is not
resolved.
(e) For purposes only of determining whether termination of this
Agreement is permissible pursuant to this Section 8.3, neither Seller nor Buyer
or Parent will be deemed to have failed to comply in any material respect with
its agreements herein, nor will any representation or warranty herein be deemed
to be inaccurate in any material respect, unless such failure to comply
Page 30 of 36
or inaccuracy could reasonably be expected to result in Damages to the other
Party of in excess of $40,000.
ARTICLE XI
MISCELLANEOUS
-------------
9.1 FEES. Except as expressly set forth herein to the contrary, each
Party shall be responsible for all costs, fees and expenses (including attorney
and accountant fees and expenses) paid or incurred by such Party in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transaction contemplated hereby.
9.2 MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only in writing signed by all of the Parties.
9.3 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed with receipt of
transmission confirmed during regular business hours during a business day to
the appropriate location described below, or three (3) business days after
posting thereof by United States first-class, registered or certified mail,
return receipt requested, with postage and fees prepaid and addressed as
follows:
IF TO SELLER: Xxxxxxx X. Xxxxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Xxxxxx X. Xxxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxx xx the Xxxxxx, Xxx Xxxx 00000
Xxxx Xxxxxxxx
00 Xxxxxxx Xxxxx Xxxx
Xx. Xxxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxx
0 Xxxxx Xxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
With a copy to: Xxxxxx X. Xxxxxxxx, Esq.
000 Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Page 31 of 36
IF TO BUYER: Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Phone: 713/000-0000
Fax: 713/000-0000
With a copy to: Xxxx X. Xxxxx, Xx.
Xxxxx, Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Any addressee at any time by furnishing notice to the other addressees in the
manner described above may designate additional or different addresses for
subsequent notices or communications.
9.4 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or affect the enforceability of any other
provision of this Agreement.
9.5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and any Ancillary
Agreements set forth the entire agreement among the Parties with respect to the
subject matter hereof. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.
9.6 WAIVER. No delay in the exercise of any right under this Agreement
shall waive such rights. Any waiver, to be enforceable, must be in writing.
9.7 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
9.8 ASSIGNMENT. The Seller shall not assign this Agreement or any
interest herein .
9.9 HEADINGS. Headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.
9.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this
Agreement or to be delivered by the Seller, upon review and approval by the
Buyer, are and shall be hereby incorporated in and made a part of this
Agreement. All Schedules to this Agreement must be delivered no later than four
(4) days prior to Closing, in order to provide the Buyer ample time to review
and evaluate the items described therein and disclosed thereby. Although the
Schedules remain subject to the review and approval of the Buyer, no such review
or approval shall constitute a waiver by the Buyer of any breach or default
caused by the inaccuracy or incompleteness of any Schedule, the accuracy and
completeness of the Schedules being the sole responsibility of the Seller.
Page 32 of 36
9.11 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parties and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
Party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over against any Party to this Agreement.
9.12 SURVIVAL. Subject to Section 7.2, this Agreement, including but not
limited to all covenants, warranties, representations and indemnities contained
herein, shall survive the Closing, and the Xxxx of Sale and all other documents,
instruments or agreements relating to the Assets and the transactions
contemplated herein shall not be deemed merged therein.
9.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
9.14 ARBITRATION. If a dispute arises out of or relates to this
Agreement, or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 9.14. Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this Section 9.14, the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages. Any arbitration
hereunder commenced prior to full payment of the Note or conversion of the Note
into Parent Shares (such event being referred to as the "Note Payment Date"),
shall be held in New York, New York. Any arbitration commenced on or after the
Note Payment Date shall be held in Houston, Texas. Expenses related to the
arbitration, including counsel fees, shall be borne by the Party incurring such
expenses except to the extent otherwise provided in Section 9.15 herein. The
fees of the arbitrator and of the American Arbitration Association, if any,
shall be divided equally among the Parties involved in the controversy.
Judgment upon the award rendered by the arbitrator (which may, if deemed
appropriate by the arbitrator, include equitable or mandatory relief with
respect to performance of obligations hereunder) may be entered in any court of
competent jurisdiction. Nothing in this Section shall restrict any Parties'
ability to seek injunctive or other equitable relief in any court of competent
jurisdiction prior to initiating mediation or arbitration. In the event that
such injunctive or equitable relief is sought by any Party, such Party is
specifically entitled to enforce the appropriate provisions
Page 33 of 36
of the Agreement in obtaining such relief in any court of competent jurisdiction
and, thereafter, submit the remaining controversy, dispute or claim to
arbitration in accordance with this Section. Any such proceeding for injunctive
or equitable relief hereunder commenced prior to the Note Payment Date, shall be
held in New York, New York, and any such proceeding commenced on or after the
Note Payment Date shall be held in Houston, Texas.
9.15 ATTORNEYS' FEES. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees from the other Party hereto.
9.16 DRAFTING. Both Parties hereto acknowledge that each Party was
actively involved in the negotiation and drafting of this Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Agreement shall be construed in favor or against either Party hereto
because one is deemed to be the author thereof.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement in multiple counterparts effective as of the date first written above.
BUYER:
LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC.,
a New York corporation
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx, Chairman and Chief Executive
Officer
PARENT:
LITIGATION RESOURCES OF AMERICA, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx, Chairman and Chief Executive
Officer
SELLER:
AMICUS ONE LEGAL SUPPORT SERVICES, INC.,
a New York Corporation
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------------
Xxxxxxx Xxxxxx, President
Page 34 of 36
SELLER'S STOCKHOLDERS
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
XXXXXXX X. XXXXXX, Individually
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------------------
XXXXXX X. XXXXXXXX, Individually
/s/ Xxxx Xxxxxxxx
---------------------------------------------
XXXX XXXXXXXX, Individually
/s/ Xxxxxx Xxxxxxx
---------------------------------------------
XXXXXX XXXXXXX, Individually
Page 35 of 36
Schedules
-----------
2.1(a) - Equipment
2.1(b) - Contracts
2.1(c) - Books and Records
2.1(e) - Intellectual Property
2.1(g) - General Intangibles
2.2 - Excluded Assets
2.7 - Allocation of Purchase Price
3.3(A) - Consents and Approvals
3.3(B) - Breaches or Defaults
3.5 - Exceptions to Title
3.6 - Leased Personal Property
3.9 - Equipment
3.12 - Licenses
3.13 - Intellectual Property
3.14(A) - Owned Real Property
3.14(B) - Leased Real Property
3.16 - Insurance Policies
3.17 - Banking
3.19(A) - Employees
3.19(B) - Independent Contractors
3.20 - Employee Benefit Plans
3.21 - Employment Agreements
3.22 - Liabilities
3.23 - Litigation
3.24 - Tax Matters
3.27 - Certain Changes or Events
3.28 Clients
Exhibits
--------
A Note
B Portas Consulting Agreement
C-1 Xxxxxxxx Employment Agreement
C-2 Xxxxxxxx Employment Agreement
C-3 Breshin Employment Agreement
D Xxxx of Sale and Assumption Agreement
E Investor Representation Letter
F-1 Xxxx'x Subordination Agreement
F-2 Texas Commerce Bank Subordination Agreement
G Shareholder's Agreement
H Registration Rights Agreement
I-1 Stock Pledge Agreement
I-2 Escrow Agreement
Page 36 of 36
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), NOR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR
SUCH SHARES MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY
TIME, EXCEPT UPON (1) SUCH REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF THIS
NOTE OR SUCH SHARES OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER, THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (3) THE
SUBMISSION TO THE ISSUER OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER,
TO THE EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE
IN VIOLATION OF THE SECURITIES ACT, OR OTHER APPLICABLE SECURITIES LAWS OF ANY
STATE, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO (1) THE SENIOR
DEBT, AS DEFINED IN, PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE
SUBORDINATION AGREEMENT EFFECTIVE AS OF THE DATE HEREOF BY THE MAKER HEREOF AND
PAYEE NAMED HEREIN IN FAVOR OF TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AND (2)
THE SENIOR SUBORDINATED DEBT, AS DEFINED IN, PURSUANT TO, AND TO THE EXTENT
PROVIDED IN, THE SUBORDINATION AGREEMENT EFFECTIVE AS OF THE DATE HEREOF BY THE
MAKER HEREOF AND PAYEE NAMED HEREIN IN FAVOR OF THE DELAWARE STATE EMPLOYEES'
RETIREMENT FUND, DECLARATION OF TRUST FOR DEFINED BENEFIT PLAN OF ICI AMERICAN
HOLDINGS, INC., AND DECLARATION OF TRUST FOR DEFINED BENEFIT PLAN OF ZENECA
HOLDINGS, INC.
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC.
Convertible Subordinated Promissory Note
$560,000 Houston, Texas September __, 1997
Litigation Resources of America-Northeast, Inc., a New York corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), for value received,
hereby promises to pay to Amicus Legal Support Services, Inc., a New York
corporation (the "Holder"), or permitted assigns, the principal sum of FIVE
HUNDRED AND SIXTY THOUSAND AND NO/100 DOLLARS ($560,000) together with accrued
interest on the amount of such principal sum, payable in accordance with the
terms set forth below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBORDINATED TO
ALL SENIOR INDEBTEDNESS, AS HEREINAFTER DEFINED, NOW OWING OR HEREAFTER EXISTING
OR ARISING, AND SHALL BE ON AN EQUIVALENT BASIS WITH OTHER SUBORDINATED
INDEBTEDNESS, AS HEREINAFTER DEFINED.
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular, (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the Financial Accounting Standards
Board that are applicable from time to time, and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision hereof.
1.1 "Amicus Cash Flow" means $437,000.
1.2 "Amicus Division" means the separate operating division of the Company
which hereafter operates the business conducted using the assets purchased on
the original issue date of this Note under the Purchase Agreement.
1.3 "Annual Cash Flow" means the Company's net income from operations of
the Amicus Division before interest, taxes, debt service, depreciation and
amortization ("Net Income"), calculated quarterly on a trailing twelve-month
basis. For the first three quarterly computations during the term of this Note,
Annual Cash Flow shall be computed as follows: (a) For the first quarterly
computation following the date of this Note, Net Income for the first calendar
quarter following the date of this Note (the "First Calendar Quarter") shall be
multiplied by four (4); (b) for the second quarterly computation following the
date of this Note, Net Income for the second calendar quarter following the date
of this Note shall be added to Net Income for the First Calendar Quarter and
the sum (the "Second Quarter Sum") shall be multiplied by two (2); (c) for the
third quarterly computation following the date of this Note, Net Income for the
third calendar quarter following the date of this Note shall be added to the
Second Quarter Sum (set forth in subdivision "b" hereof), and the total shall be
divided by .75. If Net Income for a full calendar quarter is not available for
purposes of this calculation, Net Income for the partial quarter shall be
divided by the number of days in the partial quarter and the result shall be
multiplied by 90 to create a full calendar quarter.
1.4 "Board of Directors" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
PAGE 2 OF 11
1.5 "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
1.6 "Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
1.7 "Event of Default" has the meaning specified in Section 3.1.
1.8 "GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
1.9 "Indebtedness" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable, (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds, (iii) for
all trade debt of the Person, and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
1.10 "Lien" means any mortgage, deed of trust, lien, security interest,
pledge, claim, charge, liability, obligation or other encumbrance.
1.11 "Maturity Date", when used with respect to this Note means September
5, 2002 (or such other date upon which this Note becomes due and payable).
1.12 "Maximum Nonusurious Rate" means the indicated rate ceiling from time
to time in effect as defined by Article 5069-1.04, Vernon's Annotated Civil
Statutes, as amended.
1.13 "Note" means this Convertible Subordinated Promissory Note.
1.14 "Other Subordinated Indebtedness" means any other Indebtedness now or
hereinafter due and owing by the Company or to any person who is the seller of a
court reporting, litigation service, document reproduction and/or attorney job
placement on a permanent or temporary basis business and who finances all or
part of the purchase price thereof.
PAGE 3 OF 11
1.15 "Parent" means Litigation Resources of America, Inc., a Texas
corporation.
1.16 "Parent Stock" means shares of common stock, $.01 par value, of
Parent and any securities for which such stock may be exchanged or into which it
may be converted.
1.17 "Pecks Group of Investors" means those persons defined as "Investors"
who are parties to the Securities Purchase Agreement dated effective January
17, 1997 among the Investors, the Parent and certain subsidiaries of the Parent,
and the permitted assigns of the Investors.
1.18 "Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
1.19 "Public Offering" means the closing of the sale by the Parent of
securities for cash in an underwritten public offering registered on the
appropriate form with the SEC.
1.20 "Purchase Agreement" means that certain Agreement of Purchase and
Sale of Assets dated as of September__, 1997 executed by and among the Company,
the Parent, the Holder and all of the stockholders of the Holder.
1.21 "SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of 1933 or
any successor act thereto.
1.22 Senior Indebtedness" means any and all indebtedness, liabilities and
obligations of the Company to any Person including Other Subordinated
Indebtedness that is incurred by the Company or its affiliates in financing the
purchase by it or its affiliates of a court reporting, litigation support
service, document reproduction and/or attorney job placement on a permanent or
temporary basis business, whether direct or indirect, absolute or contingent,
now owing or hereafter existing or arising, or due or to become due, including
without limitation, future indebtedness (principal, interest, fees and expenses,
collection costs or otherwise) and future advances of funds, and all
modifications, renewals, extensions or rearrangements of any of the foregoing.
1.23 "Subordination Agreements" means those certain Subordination
Agreements executed as of even date herewith by and among the Company, Parent,
the Holder, the holders of the Senior Indebtedness, and the holders of the Other
Subordinated Indebtedness.
1.24 "Subsidiary" means a corporation or other entity in which more than
50% of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.
PAGE 4 OF 11
ARTICLE II
Payments
2.1 Interest. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate of six percent (6.0%) per annum, calculated on the basis of a
365-day year or 366-day year as the case may be. All past due payments of
principal, and if permitted by applicable law, of interest, shall bear interest
from day to day at a rate of fourteen percent (14%) per annum, all to be
computed from maturity (whether stated or by acceleration) until paid.
2.2 Payment of Principal and Interest. Beginning October 1, 1997, the
Company shall make quarterly payments of interest and, in addition, beginning
October, 1998, the Company shall make fifteen (15) quarterly payments of
principal, each in the amount of $41,333.33, on or before the first day of each
January, April, July and October (and if the first day is not a Business Day,
the first Business Day thereafter) of each quarter thereafter, with the
sixteenth (16/th/) and final payment of principal and accrued interest being due
and payable on July 1, 2002, subject to the provisions of Section 2.3 below.
Prepayments will be credited first to the accrued but unpaid interest, and then
to installments of unpaid principal in the order of maturity. In addition,
this Note and all accrued interest shall at the option of the Holder either
become immediately due and payable or immediately convertible into shares of
Parent Stock as hereinafter provided concurrently with the consummation of a
Public Offering, as further set forth in Article V hereof.
2.3 Cash Flow Requirements. Notwithstanding Section 2.2 above, the
Company shall not be required to make a payment of principal due under this Note
if the Amicus Division of the Company has not generated Annual Cash Flow at
least equal to the Amicus Cash Flow for the period ended on the last day of the
month preceding the month in which the payment is due. In each such case, the
Maturity Date shall be extended for an additional three-month period until the
Note has been paid in full.
ARTICLE III
Remedies
3.1 Events of Default. An "Event of Default" occurs if:
3.1 the Company defaults in the performance of any covenant made by
the Company in this Note, and such default remains uncured for a period of
thirty (30) days after notice from Holder; or
3.1.2. the Company defaults on payments required by this Note or
breaches any of the terms, covenants, or conditions contained in any of the
documents evidencing, securing or guaranteeing any Senior Indebtedness,
including, but not limited to, any loan agreements, promissory notes or security
agreements, and the applicable grace periods expire, unless such default is
waived
PAGE 5 OF 11
or the holders of the Senior Indebtedness elect not to declare a default
thereunder or the Company is permitted to make payments under this Note; or
3.1.3 (i) a receiver, liquidator, custodian, or trustee of the
Company, or of any material property thereof is appointed by court order of a
court of competent jurisdiction and such order remains in effect on the 90th day
after its entry, or (ii) a petition is filed, a case is commenced, or relief is
ordered against the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed with 90
days of such filing, commencement, or order; or
3.1.4. the Company (i) commences a voluntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization or other
similar law or any other case or proceeding and is adjudicated a bankrupt or
insolvent, (ii) files a petition, answer or consent seeking reorganization or
similar relief under any applicable federal or state law, (iii) makes an
assignment for the benefit of creditors, or (iv) admits in writing its inability
to pay its debts generally as they become due.
3.2 Acceleration of Maturity. This Note and all accrued interest shall
become immediately due and payable at the option of the Holder at any time after
notice by Holder to the Company of the occurrence of an Event of Default which
is not cured within fifteen (15) days thereafter. The provisions of this Section
3.2 shall govern notwithstanding any other agreement or document of the Company
or the Parent (with the exception of the Subordination Agreements).
3.3 Sale of Company. If all or substantially all of the stock or assets
of the Company is sold, the Parent shall have the option to either (i) pay this
Note in full or cause this Note to be paid in full or (ii) assume the
obligations of the Company under this Note.
ARTICLE IV
Covenants
The Company covenants and agrees that, so long as this Note is outstanding:
4.1 Payment of Principal and Accrued Interest. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof, except to the extent of any limitations
contained in the Purchase Agreement (including any rights of offset) or the
Subordination Agreements.
4.2 Limitation on Liens. The Company will not create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except for:
PAGE 6 OF 11
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Company in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business in respect of
obligations which are not overdue for a period of more than 90 days beyond the
Company's customary payment terms or which are being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits by the Parent to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business not to exceed $1,000,000 in the
aggregate at any given time;
(e) encumbrances and restrictions on the use of real property which do
not materially impair the use thereof;
(f) any interest or title of (i) a lessor in assets being leased to
the Company or (ii) a seller in assets being purchased by the Company; and
(g) Liens granted in connection with the Senior Indebtedness.
4.3 No Further Indebtedness. The Amicus Division of the Company shall not
incur any additional Indebtedness, except with respect to accounts payable
arising in the ordinary course of business.
ARTICLE V
Conversion
5.1 At the Option of Holder. On the date of and simultaneously with the
closing of the Public Offering, the Holder shall have the one-time right to
convert all, or any portion, of the outstanding principal balance of this Note
and any accrued interest due thereon into shares of Parent Stock at a price
equal to the Transaction Price, as hereinafter defined, and otherwise on and
subject to the terms and conditions set forth in this Article V. As used
herein, the term "Transaction Price" shall mean the initial issuance price per
share of the Parent Stock issued in the Public Offering, without giving effect
to any underwriting discounts or commissions. The Holder exercise such Holder's
right to convert all, or any portion, of the outstanding principal amount of
this Note into shares of Parent Stock by (i) giving written notice on or prior
to September 9, 1997 (the "Election
PAGE 7 OF 11
Deadline") to the Company that the Holder elects to convert all or a portion of
the outstanding principal amount of this Note and any accrued interest due
thereon into Parent Stock, (ii) stating in such written notice the denominations
in which the Holder wishes the certificate or certificates for Parent Stock to
be issued, and (iii) surrendering this Note to the Company for notation or
cancellation, as appropriate. If not exercised when it first becomes available,
or if exercised only in part, the right to convert all or the portion of this
Note for which this option has not been exercised as described herein shall not
continue and shall expire at midnight, Houston, Texas time, on the date of the
Election Deadline.
5.2 Accrued Interest; Fractional Shares; Conversion Date. In the event of
any conversion, the Company will, as soon as practicable after surrender of this
Note and compliance by the Holder with the other conditions herein contained and
consummation of the Public Offering, cause to be issued and delivered to the
surrendering Holder certificates for the number of full shares of Parent Stock
to which the Holder shall be entitled as aforesaid, together with any unpaid
interest on the principal amount, if not converted, accrued through the date of
closing of the Public Offering. The Holder shall not be entitled to receive
fractional shares of Parent Stock upon conversion or script in lieu thereof, but
the number of shares of Parent Stock to be received by the Holder upon
conversion shall be rounded down to the next whole number and the Holder shall
be entitled to payment for the fractional share in cash at the then applicable
Transaction Price. Such conversion shall be deemed to have been made as of the
date of closing of the Public Offering, so that the persons entitled to receive
the shares of Parent Stock upon conversion of the principal amount hereof shall
be treated for all purposes as having been the record holder or holders of such
shares of Parent Stock at such time.
5.3 No Shareholder Rights; Representations and Agreements Upon Issuance.
This Note shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Parent, or to any other rights whatsoever except the rights
herein expressed and such as are set forth, and no dividends shall be payable or
accrue in respect of this Note or the interest represented hereby or the Parent
Stock purchasable hereunder until or unless, and except to the extent that, the
outstanding principal amount hereof and any accrued interest due thereon shall
be converted. No shares of Parent Stock can or will be issued upon conversion
until the Holder becomes a party to a Shareholders' Agreement in the form
required by the Parent and gives appropriate investment representations
concerning knowledge about the investment and acknowledgments of any applicable
restrictions on transferability.
ARTICLE VI
Miscellaneous
6.1 Collection Fees. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
PAGE 8 OF 11
6.2 Consent to Amendments. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the prior written
consent to such amendment, action or omission to act from the Holder.
6.3 Benefits of Note. Except as set forth in Section 3.3, nothing in this
Note, express or implied, shall give to any Person, other than the Company,
Holder, and their successors any benefit or any legal or equitable right, remedy
or claim under or in respect of this Note.
6.4 Successors and Assigns. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
6.5 Restrictions on Transfer. This Note shall not be transferable or
assignable in any manner whatsoever, except to the Holder's Stockholders
individually or to any entity designated by them as successor(s) in interest of
Amicus One Legal Support Services, Inc. provided such transfer is permissible
under applicable securities laws.
6.6 Waiver; Remedies Cumulative. No failure to exercise and no delay on
the part of Holder in exercising any power or right in connection herewith shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No course of dealing between the Company
and Holder shall operate as a waiver of any right of Holder under this Note. No
modification or waiver of any provision of this Note or any other instrument
evidencing, securing, or guaranteeing this Note nor any consent to any departure
therefrom shall in any event be effective unless the same shall be in writing
and signed by the person against whom enforcement thereof is to be sought, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. All rights and remedies of Holder existing
hereunder are cumulative to and not exclusive of any rights or remedies
otherwise available thereto.
6.7 Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, or by telefax with confirmed receipt, to the
following addresses: if to the Company, 650 First City Tower, 0000 Xxxxxx,
Xxxxxxx, Xxxxx 00000, Fax 713/000-0000 or at any other address designated by the
Company in writing to Holder; if to Holder, c/o Xxxxxx X. Xxxxxxxx, Esq., 000
Xxxx Xxxxxx, 00/xx/ Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Fax 212/000-0000 or at any
other address designated by Holder to the Company in writing.
6.8 Separability Clause. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions
PAGE 9 OF 11
in such jurisdiction shall not in any way be affected or impaired thereby;
provided, however, such construction does not destroy the essence of the bargain
provided for hereunder.
6.9 Governing Law. This Note shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
6.10 Usury. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of New York and the United States of
America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (referred to as "Applicable Law").
The Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
6.11 Arbitration. The arbitration provisions contained in Section 9.14 of
the Purchase Agreement shall govern this Note.
6.12 No Protest. The Company hereby waives presentment, protest and demand
and notice of protest, demand, dishonor and nonpayment of this Note.
THIS NOTE, ANY AND ALL ADDITIONAL PROMISSORY NOTES, IF ANY, ISSUED BY THE
COMPANY TO HOLDER AND ALL DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION
HEREWITH OR THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANY AND
HOLDER WITH RESPECT TO THE OBLIGATIONS OWED THEREBY TO HOLDER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE COMPANY AND HOLDER. PAYMENT OF THIS NOTE IS SUBJECT TO
THE PURCHASE AGREEMENT AND THE SUBORDINATION AGREEMENTS.
PAGE 10 OF 11
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC.,
A NEW YORK CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
PAGE 11 OF 11
EXHIBIT B
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), dated effective the 5/th/ day
of September, 1997 (the "Effective Date"), is entered into by and between
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), and XXXXXXX X.
XXXXXX, an individual residing in the State of New York (the "Consultant"). The
Company and Consultant may sometimes hereinafter be referred to singularly as a
"Party" or collectively as the "Parties." All capitalized terms not otherwise
defined herein shall have the same meaning as contained in that certain
Agreement of Purchase and Sale of Assets executed as of September 5, 1997 (the
"Purchase Agreement"), by and among the Company, Amicus One Legal Support
Services, Inc., a New York corporation ("Seller"), the Consultant and other
stockholders of the Seller, individually, and Litigation Resources of America,
Inc., a Texas corporation (the "Parent").
W I T N E S S E T H:
WHEREAS, Consultant has been an employee, officer and director of the
Seller, which operates a business known as, or conducted under the names,
"Amicus One Legal Support Services Inc.," "Cardinal Reporting Co." and "AM
Court Reporting, Co." (collectively the "Business"), and his knowledge of the
affairs of the Business, particularly its court reporting business in New York,
New York and New Jersey (the "Business Area"), are of great value to the
Company; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Company has
purchased from the Seller, and the Seller has sold to the Company, all or
substantially all of the assets of the Seller; and
WHEREAS, pursuant to the Purchase Agreement the Company and the Consultant
have agreed to enter into this Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants, promises
and undertakings herein contained and other consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the Parties hereby
undertake and agree as follows:
1. Statement of Services. The Company hereby engages Consultant to
perform certain services and to provide certain expertise related to the
Business. The services to be performed by Consultant under this Agreement shall
include, but not be limited to (a) providing management advice to the Company's
General Manager and CEO Xxxxxxx Xxxxxx, (b) working to maintain existing Company
client relationships in the Business Area, (c) working to develop new client
relationships for the Company and its Affiliates, and (d) working to locate new
acquisition opportunities ("Acquisition Candidates") and providing the Company
or Affiliates introductions to principals of such Acquisition Candidates
(collectively, the "Services").
The Services shall be performed by Consultant only at the express request
of the designated representatives of the Company or Parent. Consultant is
authorized to perform the Services at the instruction of, and will report to Xx.
Xxxxxxx X. Xxxxxx, Chief Executive Officer of Parent, or otherwise specified
from time to time by the Board of Directors of the Company.
2. Payment. For the services to be rendered by the Consultant hereunder
during the initial term, the Company shall pay Consultant:
(a) a monthly consulting fee in the amount of $4,200 (the "Base
Compensation"), which shall be paid in a monthly lump sum on the 15th day of
such each month (and, if necessary, prorated for partial months);
(b) a monthly car allowance of $600.00, paid in a monthly lump sum on the
15th day of each month.
(c) in the event that Consultant identifies a business as an Acquisition
Candidate for the Company or any Affiliate, evidenced by the Consultant's
introduction of key principals of such Acquisition Candidate to the Company or
an Affiliate, and such Acquisition Candidate has not been previously brought to
the attention of the Company or any Affiliate, or assists in procuring a
previously identified Acquisition Candidate, which has not signed a letter of
intent with the Company or Parent, to sign such a letter, and the Company or an
Affiliate ultimately acquires such business, the Consultant shall be entitled to
receive, at the closing of such acquisition, a cash payment equal to one quarter
of one percent (.25%) of the aggregate purchase price paid in connection with
such acquisition. For purposes of this Paragraph, the "purchase price" for an
acquisition shall be the aggregate of the amount of all cash, principal amount
of promissory notes and value of stock (as stated in the relevant acquisition
documents) delivered at the closing of such acquisition. In no event shall
Company or any Affiliate be obligated to close any acquisition with regard to
any business identified by the Consultant as an Acquisition Candidate, and no
fee shall be payable hereunder unless and until such acquisition closes.
(d) a cash commission based upon the sales revenues generated from a
National Account (as defined below) identified by the Consultant and originated
by the Company. The
2
amount of the commission payment will be based upon a formula ("Formula") to be
established by the Parent's Board of Directors. The Formula may be amended from
time to time by the Parent's Board of Directors and the Consultant shall be
eligible to receive a cash commission payment hereunder based upon the Formula
as it exists on the date of the origination of the National Account. A "National
Account" is any account established with an insurance or "Fortune 500" company
pursuant to which two or more of the offices of Parent or any Affiliate, in
different geographic regions, renders services. Until notice of a change in the
Formula applicable to the Consultant is given to the Consultant by the Company,
the Formula applicable to the Consultant shall be as set forth on Schedule A.
In certain circumstances, more than one individual may be entitled to
receive a commission based upon sales from a single National Account. In such
circumstances, the commission described above would be shared by the Consultant
and the other individuals on such a basis as is determined to be fair by the
Parent's Board of Directors. All commissions payable hereunder will be paid in
cash within forty-five (45) days of the end of the fiscal year in which they are
earned.
3. Term of Agreement. The term of this Agreement shall commence on the
Effective Date and, unless earlier terminated as provided below, expire one (1)
year thereafter (such initial term being referred to as the "Original Term").
This Agreement shall be automatically renewed for successive additional terms of
one (1) year unless notice of termination is given in writing by either Party to
the other Party at least sixty days prior to the expiration of the initial term
or any such renewal term (such additional term or terms being referred to as a
renewal term of terms).
4. Reports. Consultant shall furnish written quarterly reports to Xx.
Xxxxxx on or before the fifteenth (15/th/) day of the month following the end of
the quarter concerning the status of the Services and the results of the
activities of Consultant under the Agreement. Said Report shall be in such form
as agreed upon by the Parties hereto.
5. Expenses. During the term of this Agreement, the Company shall
reimburse the Consultant for all reasonable out-of-pocket expenses for travel
(including parking fees and toll fees), meals, hotel accommodations and similar
items incurred by him in connection with the Business of the Company and
approved by the Company, or incurred in accordance with the travel and
reimbursement policies of the Company, as the same shall be in effect from time
to time.
6. Services.
(a) The Services shall be performed solely by Consultant and Consultant
shall not engage or allow any other entity or person to perform the Services
without the knowledge and express written consent of Xx. Xxxxxx. This Agreement
is made with the express understanding that Consultant is an independent
contractor. Nothing contained herein shall be construed or applied to
3
create the relationship of employer and employee or principal and agent between
the Company or any Affiliate and Consultant. Consultant shall have no power or
authority to enter into any contracts or otherwise bind or incur liability on
behalf of the Company.
(b) Consultant will establish a client maintenance and development budget
with the Company's General Manager.
(c) Consultant shall be fully responsible for all state and federal income
taxes, pension benefits, social security taxes, employment, disability, and
other customary insurance and for any other taxes or payments which may be due
and owing by Consultant or which are the result of fees or amounts paid by the
Company under this Agreement, and Consultant shall timely pay, indemnify and
hold harmless the Company from any payment which may be due and owing by
Consultant.
7. Ownership of the Services. The results of all Services performed by
Consultant for the Company, and all information derived from the performance of
such Services, shall be the sole and exclusive property of the Company, and
Consultant shall not disclose such results and information to any third party
without the Company's prior written consent.
8. Business Opportunities. Subject to Section 2 herein, during the term of
this Agreement, the Consultant agrees that with respect to any court reporting
business opportunity in New York or New Jersey which is offered to, or comes to
the attention of, the Consultant, the Company shall have the right to take
advantage of such business opportunity or other business proposal for its own
benefit. The Consultant agrees to promptly deliver notice to the Board or the
Chief Executive Officer in writing of the existence of such opportunity or
proposal and the Consultant may take advantage of such opportunity only if the
Company does not elect to exercise its right to take advantage of such
opportunity.
9. Covenant Not to Compete. The Consultant recognizes that the Company
has business goodwill and other legitimate business interests which must be
protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to retain the Consultant on the terms and conditions set
forth herein, the Company's agreement to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Consultant's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 8, the Consultant agrees that upon the
expiration of the term of this Agreement, then for a period of the latest date
of (i) five (5) years after the date of this Agreement, or (ii) three (3) years
after the date his service as a consultant is so terminated.
4
(a) Consultant will not enter into, engage in, or be connected with any
court reporting business or business operation or activity within Westchester,
New York, Kings, Queens, Bronx, Richmond, Rockland and Nassau Counties in New
York and Bergen, Essex, Union Middlesex, Morris, Warren, Somerset, Sussex and
Passaic Counties in New Jersey; and
(b) Consultant will not call upon any customer whose account is serviced in
whole or in part by the Company or its Affiliates at the time of the termination
of Consultant as a consultant hereunder, with the purpose of selling or
attempting to sell to any such customer any services included within that
offered by the Company or its Affiliates; and
(c) Consultant will not intentionally divert, solicit or take away any
customer, supplier or employee of the Company or its Affiliates, or the
patronage of any customer or supplier of the Company or its Affiliates, or
otherwise interfere with or disturb the relationship existing between the
Company or its Affiliates and any of their respective customers, suppliers or
employees, directly or indirectly.
In the event the Company ceases operation of the Business of the Company
other than in a merger, consolidation, or similar transaction, or upon the
filing of a bankruptcy or receivership proceeding against the Company, or upon
the appointment of a liquidator for the Company, the provisions of this Section
8 shall not be applicable to the conduct of Consultant subsequent thereto.
It is mutually understood and agreed that if any of the provisions relating
to the scope, time or territory in this Section 8 are more extensive than is
enforceable under applicable laws or are broader than necessary to protect the
good will and legitimate business interests of the Company, then the Parties
agree that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Consultant's
covenants contained in this Section 8 are inadequate, and they agree that the
Company shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Company.
10. Confidentiality The information and knowledge divulged to Consultant
by the Company or which Consultant acquires as a result of the performance of
the Services hereunder shall be regarded by Consultant as confidential (the
"Confidential Information"). Consultant agrees that for a period of three (3)
years after the expiration or termination of this Agreement, Consultant will
keep confidential all Confidential Information and will refrain from using,
publishing or revealing
5
such Confidential Information, excepting only information that (a) was known to
Consultant prior to its disclosure by the Company, (b) becomes part of the
public domain without the fault, in whole or in part, of Consultant, (c) is
disclosed to Consultant by a third party in good faith and is not subject to an
obligation of confidentiality, or (d) is specifically released in writing from
confidential status by the Company.
11. Liability.
Consultant shall indemnify and hold harmless the Company, and all
Affiliates and their agents, employees and representatives from all suits,
actions or claims of any character, including, but not limited to, suits,
actions or claims for occupational injury(ies), arising from the performance of
the Services under this Agreement except for the negligent acts of the Company
or any Affiliate. While on the property of the Company, or any Affiliates,
Consultant agrees to comply with all applicable safety requirements.
12. Facilities. Consultant shall be provided reasonable access to
Company facilities and equipment necessary or useful to Consultant in the
fulfillment of his obligations under this Agreement, and for winding up the
affairs of Cardinal Reporting Co., Inc.
13. Termination.
(a) This Agreement shall be in full force and effect for the Term hereof,
provided that the Company reserves the right to terminate this letter agreement
in the event of any breach in any material respects of any terms or conditions
of this Agreement upon at least ten (10) days prior written notice to
Consultant. Upon such termination or expiration, Consultant shall render a
final invoice to the Company reflecting all outstanding fees and any outstanding
reimbursable expenses incurred prior to termination or expiration.
(b) Either party may terminate this Agreement for any reason upon sixty
(60) days written notice.
(c) Upon such termination or expiration of this Agreement, neither Party
shall have any further rights or obligations hereunder, provided that the
obligations of Consultant set forth in paragraphs 6, 7, 8, 9 and 10 hereof shall
expressly survive the termination or expiration of this Agreement, and
Consultant shall also continue to be obligated hereunder for any obligations,
events, actions or inactions that occurred or accrued prior to the termination
or expiration of this Agreement.
14. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when (a) delivered personally with a written receipt
acknowledging delivery, (b) telefaxed with receipt
6
confirmed, or (c) three (3) business days after the posting thereof by United
States first class, registered or certified mail, return receipt requested, with
postage fee prepaid and addressed as follows:
If to the Company:
Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telefax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Consultant:
Xxxxxxx X. Xxxxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
15. Specific Performance. The Consultant acknowledges that a remedy at
law for any breach or attempted breach of Sections 7, 8, 9 and 10 of this
Agreement will be inadequate, the Consultant agrees that the Company shall be
entitled to specific performance and injunctive and other equitable relief in
case of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief.
16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. Assignment. Neither this Agreement, nor any interest herein, may not
be assigned by the Consultant to any party without the written authorization of
the Company.
18. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto, the Consultant's heirs and personal
representatives, and the successors and assigns of the Company.
19. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
7
20. Prior Agreements. Consultant represents and warrants to the Company
that he has fulfilled all of the terms and conditions of all prior consulting or
employment agreements to which he may be or have been a party, and at the time
of execution of this Agreement is not a party to any other consulting,
employment or other agreement which would in any respect prevent him from
fulfilling his obligations hereunder or conflict herewith.
21. Parole Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided however, the amount of compensation to be paid Consultant for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Consultant of any of the
duties to the Company.
22. Waiver. Any waiver to be enforceable must be in writing and executed
by the Party against whom the waiver is sought to be enforced.
23. Arbitration and Limitation on Claims. Any controversy, dispute or
claim arising out of, in connection with, or in relation to, the interpretation,
performance or breach of this Agreement, including, without limitation, the
validity, scope and enforceability of this Section which cannot first be settled
through ordinary negotiation between the Parties shall be submitted in good
faith to mediation by and in accordance with the Commercial Mediation Rules of
the American Arbitration Association or any successor organization. In the
event that mediation of such controversy, dispute or claim cannot be settled
through the mediation proceeding, the Parties agree that the controversy,
dispute or claim shall be submitted to binding and final arbitration in
accordance with the then existing Rules for Commercial Arbitration of the
American Arbitration Association or any successor organization. Any arbitration
hereunder commenced prior to full payment of the Note or conversion of the Note
into Parent Shares (such event being referred to as the "Note Payment Date"),
shall be held in New York, New York. Any arbitration commenced on or after the
Note Payment Date shall be held in Houston, Texas. Any such arbitration shall
be to a three member panel selected through the rules governing selection and
appointment of such panels of the American Arbitration Association or any
successor organization. The award rendered by the arbitrators may be confirmed,
entered and enforced as a judgment in any court of competent jurisdiction;
however, the Parties otherwise waive any rights to appeal the award except with
regard to fraud by the panel. Any such action must be brought within two years
of the date the cause of action accrues. The arbitrators shall award the Party
which substantially prevails in any arbitration proceeding recovery of that
Party's attorneys' fees, the arbitrators' fees and all costs in connection with
the arbitration from the Party who does not substantially prevail. The Parties'
remedies are limited solely to the specific remedies provided in this Agreement.
The Parties waive any entitlement to punitive damages, consequential damages and
lost profits and will limit any damage claim to actual economic damages
incurred.
8
Nothing in this Section shall restrict any Parties' ability to seek
injunctive or other equitable relief in any court of competent jurisdiction
prior to initiating mediation or arbitration. In the event that such injunctive
or equitable relief is sought by any Party, such Party is specifically entitled
to enforce the appropriate provisions of the Agreement in obtaining such relief
in any court of competent jurisdiction and, thereafter, submit the remaining
controversy, dispute or claim to arbitration in accordance with this Section.
Any such proceeding for injunctive or equitable relief hereunder commenced prior
to the Note Payment Date, shall be held in New York, New York, and any such
proceeding commenced on or after the Note Payment Date shall be held in Houston,
Texas.
24. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
25. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation
By: _________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
THE CONSULTANT:
______________________________________
Xxxxxxx X. Xxxxxx
9
SCHEDULE A
Commission Price Structure of
Percentage of Gross Sales National Account
3.00% Market price
2.50% Discount of 5% to less than 10% from
market price rate
2.00% Discount of 10% to less than 15% from
market price rate
1.50% Discount of 15% to less than 20% from
market price rate
1.00% Discount of 20% to less than 25% from
market price rate
0.50% Discount of 25% or more from market price
rate
10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated effective the ____ day of
September___, 1997 (the "Effective Date"), is entered into by and between
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), and XXXXXX X.
XXXXXXXX, an individual residing in the State of New York (the "Employee"). The
Company may sometimes hereinafter be referred to as "Employer." The Employer
and Employee may sometimes hereinafter be referred to singularly as a "Party" or
collectively as the "Parties." All capitalized terms not otherwise defined
herein shall have the same meaning as contained in that certain Agreement of
Purchase and Sale of Assets executed as of September__, 1997 (the "Purchase
Agreement"), by and among the Company, Amicus One Legal Support Services, Inc.,
a New York corporation ("Seller"), the Employee and other stockholders of the
Seller, individually, and Litigation Resources of America, Inc., a Texas
corporation (the "Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has been an employee, officer and director of the Seller and
its business known as or conducting business under "Amicus One Legal Support
Services Inc.", "Cardinal Reporting Co." and "AM Court Reporting, Inc." (the
"Amicus Business"), and his knowledge of the affairs of the Cardinal Business,
particularly its court reporting business in the New York City Metropolitan
area, are of great value to the Company; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Company has
purchased from the Seller, and the Seller has sold to the Company, all or
substantially all of the Assets of the Seller, which required the approval the
shareholders of the Seller; and
WHEREAS, part of the consideration given to the Seller and the Employee under
the Purchase Agreement included an agreement by the Company to enter into this
Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants, promises and
undertakings herein contained and other consideration, the receipt , adequacy
and sufficiency of which are hereby acknowledged, the Parties hereby undertake
and agree as follows:
-1-
1. Employment Term. The Employer hereby employs the Employee commencing on
the Effective Date for a term of three (3) years (the "Employment Term"), unless
sooner terminated as hereinafter provided. The term of this Agreement may be
renewed or extended for one or more successive additional one (1) year terms
unless either party gives at least 90 days prior to the expiration of the
initial term or any such renewal term notice that such party desires to
terminate or renegotiate the terms of any such extension of this Agreement. In
the event that at the expiration of the initial Employment Term, either party
desires to so renegotiate an extension of this Agreement, both parties shall use
their best reasonable efforts to so renegotiate the Agreement, but neither party
shall have any liability if the parties are unable to reach agreement as to such
extension of this Agreement. Unless otherwise provided herein, Sections 12 - 26
of this Agreement shall survive the expiration or termination of this Agreement,
for any reason whatsoever. The Employee accepts such employment and agrees to
perform the services specified herein, all upon the terms and conditions
hereinafter stated.
2. Duties. The Employee shall serve as the manager of the Company's
operations in New York, New York with the title of General Manager-New York and
shall report to, and be subject to the general direction and control of the
Chief Executive Officer and the Board of Directors of the Company (the "Board").
The Employee shall perform such management and administrative duties, consistent
with the Employee's position, as are from time to time assigned to the Employee
by the Chief Executive Officer and the Board including developing local,
regional, and national customers for the Company and its Affiliates (defined
below). The Employee also agrees to perform, without additional compensation,
such other services for the Company, and for any parent, subsidiary or affiliate
corporations of the Company and any partnerships in which the Company may from
time to time have an interest (herein collectively called "Affiliates"), as the
Chief Executive Officer or Board shall from time to time specify, if such
services are of the nature commonly associated with the position set forth above
of a company engaged in activities similar to the activities engaged in by the
Company and to perform such other activities as are consistent with the
Employee's past responsibilities as an employee of the Seller and the Amicus
Business; provided, that Employee shall not be required to engage in any
business that is not reasonably related to the Business of the Company, as
hereinafter defined. For purposes of this Agreement, the "Business of the
Company" or, alternatively, "Business" shall be defined as the current business
of the Company, including, but not limited to, the marketing and providing of
court reporting and litigation support services in the New York City
Metropolitan area. The term "Company" as used in this Agreement shall be deemed
to include and refer to all such Affiliates.
3. Extent of Service. The Employee shall devote his full business time,
attention and energy to the business of the Employer, and shall not be engaged
in any other business activity during the term of this Agreement. The foregoing
shall not be construed as preventing the Employee from making passive
investments in other businesses or enterprises, if (i) such investments will not
require services on the part of the Employee which would in any material way
impair the performance of his duties under this Agreement, (ii) such other
businesses or enterprises are not
-2-
engaged in any business competitive with the business of the Company, and (iii)
the Employee has complied with Sections 12 and 13 of this Agreement with respect
to each such passive investment. As soon a practicable after the expiration of
the first six months following the date of this Agreement and at least annually
thereafter, the Chief Executive Officer of the Company shall provide the
Employee with a written or oral performance review. The parties mutually agree
that is not anticipated that such review will result in any adjustment of
compensation based upon such review.
4. Compensation. As payment for the services to be rendered by the Employee
hereunder during each year of the initial term, the Employee shall be entitled
to receive:
(a) a salary in the amount of Seventy Five Thousand and No/100
Dollars ($75,000) per year effective as of the date hereof, which
shall be payable in at least monthly installments, or in accordance
with the payroll policies of the Company in effect from time to time
if such policies provide for payment of salary more frequently than
monthly, until termination of this Agreement; and
(b) a bonus to be calculated in accordance with Schedule A
attached hereto, payable within ninety (90) days after the end of each
fiscal year of the Company (the "Annual Bonus") including, without
limitation, the first fiscal year of the Company; provided, however,
that any Annual Bonus calculated with respect to a fiscal year during
which the Employee was employed for only a part of such year shall be
prorated to account for the number of days during such year in which
Employee was employed by the Company.
5. Expenses. During the term of this Agreement, the Employer shall promptly
pay or reimburse the Employee for all reasonable out-of-pocket expenses for
travel, meals, hotel accommodations and similar items incurred by him in
connection with the Business of the Company and approved by the Chief Executive
Officer of the Company or incurred in accordance with the travel and
reimbursement policies of the Company as the same shall be in effect from time
to time, upon submission by him of an appropriate statement documenting such
expenses. The Company shall also pay the Employee an automobile allowance in the
amount of $250.00 per month.
6. Employee Benefits. During the term of this Agreement, the Employee shall
be entitled to participate in all employee benefit plans from time to time made
generally available to the executive employees of the Company, including any
stock option plan, retirement plan, profit-sharing plan, group life plan, health
or accident insurance or other employee benefit plans as the same shall be
maintained in effect, as determined by the Board, which, at or prior to the
Closing, will include, at least, health insurance. Employer will use
commercially reasonably efforts to assist Employee in procuring health insurance
coverage for any preexisting conditions.
-3-
7. Vacation. During the term of this Agreement, the Employee shall be
entitled to annual vacation time determined in accordance with the vacation
policies of the Company in effect from time to time but not less than four (4)
weeks per year, during which time his compensation shall be paid in full.
Unused vacation time shall not accrue from year to year, unless otherwise
required by law.
8. Covenants of Employee. For and in consideration of the employment herein
contemplated and the consideration paid or promised to be paid by the Company,
the Employee does hereby covenant, agree and promise that during the term hereof
and thereafter to the extent specifically provided in this Agreement:
(a) Except as otherwise specifically permitted by this Agreement,
during the term of this Agreement, Employee will not actively engage,
directly or indirectly, in any other business other than that of
Company, except at the direction or approval of the Chief Executive
Officer of the Company.
(b) The Employee will use his best reasonable efforts to
accurately make, maintain and preserve all records and reports that
the Chief Executive Officer of the Company may from time to time
request or require.
(c) The Employee will fully account for all money, records,
goods, wares and merchandise or other property belonging to the
Company of which the Employee has custody, and will pay over and
deliver same promptly whenever and however he may be reasonably
directed to do so by the Chief Executive Officer of the Company.
(d) The Employee will comply in all material respects with all
rules, regulations and special instructions of the Company applicable
to him, and will be loyal and faithful to the Company at all times.
(e) The Employee will make available to the Company any and all
of the information of which he has knowledge relating to the Business
of the Company, and will make all suggestions and recommendations
which he reasonably believes will be of mutual benefit to the Parties.
(f) The Employee agrees that upon termination of his employment
hereunder he will immediately surrender and turn over to the Company
all books, records, forms, specifications, formulae, data, processes,
papers and writings related to the Business of the Company and all
other property belonging to the Company, together with all copies of
the foregoing, it being understood and agreed that the same are the
sole property of the Company.
-4-
(g) The Employee agrees that all ideas, concepts, processes,
discoveries, devices, machines, tools, materials, designs,
improvements, inventions and other things of value relating to the
Business of the Company (hereinafter collectively referred to as
"intangible rights"), whether patentable or not, which are conceived,
made, invented or suggested by him alone or in collaboration with
others during the term of his employment, and whether or not during
regular working hours, shall be promptly disclosed in writing to the
Chief Executive Officer or Board of Directors of the Company and shall
be the sole and exclusive property of the Company. The Employee
hereby assigns all of his right, title and interest in and to all such
intangible rights to the Company, and its successors or assigns. In
the event that any of such intangible rights shall be deemed by the
Company to be patentable or otherwise registerable under any federal,
state or foreign law, the Employee further agrees that, at the expense
of the Company, he will execute all documents and do all things
reasonably necessary, advisable or proper to obtain patents therefor
or registration thereof, and to vest in the Company full title
thereto.
9. Mutual Covenants of the Company and the Employee. For and in
consideration of the employment herein contemplated and the compensation,
covenants, conditions and promises herein recited, the Company and the Employee
do hereby mutually agree that during the term hereof:
(a) The Employee shall not, by reason of this Agreement, have any
vested interest in, or right, title or claim to, any land, buildings,
equipment, machinery, processes, systems, products, contracts, goods,
wares, merchandise, business assets or other things of value belonging
to or which may hereafter be acquired or owned by the Company.
(b) In carrying out his duties as specified above, the Employee
shall primarily be responsible for making day-to-day decisions in the
ordinary course of business of the Company, subject to possible
review by the Chief Executive Officer and/or the Board. The
responsibility for the Company's plans, properties, contracts,
methods, and policies shall be vested in the Board and the Company
may, in its sole and absolute discretion, give, sell, assign, transfer
or otherwise dispose of any or all of its assets or businesses in
whole or in part, to any person, firm or corporation, whether or not
such person, firm or corporation is in any manner owned by or
associated with or affiliated with the Company.
(c) The Employee acknowledges that because of the nature of the
position for which he has been employed, the Employee may be called
upon to perform such duties and render such services as are required
of him hereunder irregularly, and agrees to perform to the best of his
abilities such duties as the business may reasonably demand, and
acknowledges that the number of hours per day or per week
-5-
may vary. Notwithstanding the foregoing, the Employee shall work in a
manner that is consistent with his prior customary practice on behalf
of the Seller and the Amicus Business.
(d) The Company agrees that it will not terminate any employee of
the Company without giving prior notification of such termination to
the Employee.
10. Termination of Employment for Cause. The Employer may terminate the
employment of the Employee if the Employer suffers or may reasonably be expected
to suffer any material adverse effect on the Company's Business as a result of
the Employee (any such termination being a termination for "Cause"):
(a) Breaching any provision of this Agreement and failing to
cure such breach within thirty (30) days after receipt of written
notice thereof;
(b) Misappropriating funds or property of the Company;
(c) Securing any personal profit not thoroughly disclosed to
and approved by the Company in connection with any transaction entered
into on behalf of the Company;
(d) Engaging in conduct, even if not in connection with the
performance of his duties hereunder, which would reasonably be
expected to result in a material adverse effect to the interest of the
Company if he was retained as an employee, such as his commission of a
felony or a crime of moral turpitude;
(e) Becoming and remaining "Disabled," as hereinafter defined
(either physically, mentally or otherwise) for a consecutive period of
one hundred thirty-five (135) days during any consecutive twelve-
month time period;
(f) Failing to carry out and perform the material duties
assigned to the Employee in accordance with the terms hereof and
failing to cure such breach within ten (10) days after written notice
thereof;
(g) Failing to comply with corporate policies of the Company
that are promulgated from time to time and made known to Employee and
failing to cure such breach within ten (10) days after written notice
thereof; or
(h) The Business failing to achieve quarterly Net Profit, as
defined on Schedule A to this Agreement of $109,125 for each of two
(2) consecutive fiscal quarters.
-6-
In the event of the death of the Employee, such occurrence shall immediately
constitute a termination for Cause. Except as provided in item (e) above, no
termination for Cause shall be effective if the Employee is Disabled.
In the event the Employee is terminated for Cause because he is Disabled, the
Employee may be permitted to participate in any disability insurance policy the
Company then has in effect.
In the event of termination of his employment for Cause, the Employee shall be
entitled to receive his compensation, as determined in Section 4 of this
Agreement, due or accrued on a pro rata basis to the date of termination. Any
salary or remuneration owed as of the date of termination shall be paid less the
amount of damages, if any, caused to the Company by such breach, but no such
damages offset shall extend beyond any compensation due and owing under this
Agreement or the Purchase Agreement.
Notwithstanding the cure provisions provided in Sections 10(a), 10 (f) and
10(g), the Employee shall not have the opportunity to cure any violation of
these subsections if such violation cannot reasonably be expected to be cured.
In such event, the Company shall be required to furnish the Employee notice of
the violation, but the Employee shall not be furnished an opportunity to cure.
"Disabled" shall mean the continuous inability, whether mental or physical, of
Employee to perform his normal job functions as determined by at least two of
three medical physicians selected as follows: the Employee or his legal
designee shall be entitled to appoint one physician, the Company shall be
entitled to appoint one physician, and such two appointed physicians shall
mutually appoint a third physician. Notwithstanding the foregoing, the
Employee, or his designee, and the Company may mutually agree that he is
"Disabled" within the meaning of this Agreement.
11. Termination By Employee With Good Reason. The Employee shall have the
right to terminate this Agreement for any material breach of this Agreement by
the Company, which shall include but not be limited to materially changing the
duties assigned to Employee beyond those contemplated in Section 2 of this
Agreement or causing Employee to relocate his primary residence in violation of
Section 2 of this Agreement; provided that the Company shall be furnished ten
(10) days notice of such breach and an opportunity to cure (any such termination
constituting a "Termination By Employee With Good Reason"). Notwithstanding the
cure provisions provided in the preceding sentence, the Employer shall not have
the opportunity to cure any violation of this Agreement if such violation cannot
reasonably be expected to be cured but the Employee shall still furnish notice
to the Company. In the event of a Termination with Good Reason by the Employee
the Company shall continue making payments to Employee in an amount equal to the
compensation of the Employee, as determined in Section 4 of this Agreement, as
if he was still employed for a period equal to the lesser of (i) one (1) year,
or (ii) the remaining term of this Agreement, which amount, in the event of a
Termination Without Cause or a Termination By Employee With Good Reason, shall
constitute the full and total amount of liquidated damages that the Employee
shall be
-7-
entitled to receive from the Company and its Affiliates for any contractual or
tort claims arising out of his employment relationship with the Company.
12. Covenant Not to Compete. The Employee recognizes that the Company has
business goodwill and other legitimate business interests which must be
protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to employ the Employee on the terms and conditions set forth
herein, the Company's agreement to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Employee's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 12, the Employee agrees that in the
event (i) Employee is terminated for Cause, or (ii) Employee leaves the employ
of the Company other than a Termination By Employee With Good Reason prior to
expiration of the term of the Agreement, or (iii) upon the expiration of the
term of this Agreement, then for a period of the latest date of (i) five (5)
years after the date of this Agreement, or (ii) three (3) years after the date
employment is so terminated:
(a) Enter into, engage in, or be connected with any court
reporting business or business operation or activity within
Westchester, New York, Kings, Queens, Bronx, Richmond, Rockland and
Nassau Counties in New York and Bergen, Essex, Union, Middlesex,
Morris, Warren, Somerset, Sussex and Passaic Counties in New Jersey;
and
(b) Employee will not call upon any customer whose account is
serviced in whole or in part by the Employer or its Affiliates at the
time of the termination of Employee's employment, with the purpose of
selling or attempting to sell to any such customer any services
included within that offered by the Employer or its Affiliates; and
(c) Employee will not intentionally divert, solicit or take
away any customer, supplier or employee of the Employer or its
Affiliates, or the patronage of any customer or supplier of the
Employer or its Affiliates, or otherwise interfere with or disturb the
relationship existing between the Employer or its Affiliates and any
of their respective customers, suppliers or employees, directly or
indirectly.
In addition, the foregoing restrictive covenants shall also apply to the
Employee in the event of Termination By Employee With Good Reason by the
Employee, but only for a period of one (1) year.
In the event the Company ceases operation of the Business of the Company other
than in a merger, consolidation, or similar transaction, or upon the filing of a
bankruptcy or receivership
-8-
proceeding against the Employer, or upon the appointment of a liquidator for the
Company, the provisions of this Section 12 shall not be applicable to the
conduct of Employee subsequent thereto. In addition, in the event that at the
expiration of this Agreement at the end of its schedule term the Company is
unwilling to extend the Agreement, the Employee shall be immediately entitled to
work as a court reporter in the Territory set forth in Section 12 (a) provided
that he continues to comply with Sections 12(b) and 12(c) while he works as a
court reporter and for any court or governmental agency.
It is mutually understood and agreed that if any of the provisions relating to
the scope, time or territory in this Section 12 are more extensive than is
enforceable under applicable laws or are broader than necessary to protect the
good will and legitimate business interests of the Company, then the Parties
agree that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Employee's
covenants contained in this Section 12 are inadequate, and they agree that the
Company shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Company.
13. Business Opportunities. Except for passive investments by the
Employee in publicly traded entities, or investments in private ventures which
do not compete with, or are not in the same business as, the Company and which
come to the attention of the Employee outside of the scope of his employment,
for as long as the Employee shall be employed by the Company and thereafter with
respect to any business opportunities learned about during the time of
Employee's employment by the Company, the Employee agrees that with respect to
any future business opportunity or other new and future business proposal which
is offered to, or comes to the attention of, the Employee and which is related
to, or connected with, the Business of the Company, the Company shall have the
right to take advantage of such business opportunity or other business proposal
for its own benefit. The Employee agrees to promptly deliver notice to the Board
in writing of the existence of such opportunity or proposal and the Employee may
take advantage of such opportunity only if the Employer does not elect to
exercise its right to take advantage of such opportunity.
14. Confidential Information. The Employee acknowledges that in the
course of his employment with the Company, he will receive certain trade
secrets, know-how, lists of customers, employee records and other confidential
information and knowledge concerning the Business of the Company (hereinafter
collectively referred to as "Information") which the Company desires to protect.
The Employee understands that such Information is confidential and he agrees
that he will not reveal such Information to anyone outside the Company except
(i) for information already known to the public, now or in the future, or (ii)
in connection with any legal proceeding regarding this
-9-
Agreement, the Purchase Agreement or the transactions contemplated thereby or as
otherwise required by law or judicial order. The Employee further agrees that
during the term of this Agreement and thereafter he will not use such
Information in competing with the Company. Upon termination of his employment
hereunder, the Employee shall surrender to the Company all papers, documents,
writings and other property produced by him or coming into his possession by or
through his employment hereunder and relating to the information referred to in
this Section 14, which are not general knowledge in the industry, and the
Employee agrees that all such materials will at all times remain the property of
the Company.
15. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally with a written receipt
acknowledging delivery or telefaxed with receipt confirmed, or three (3)
business days after the posting thereof by United States first class, registered
or certified mail, return receipt requested, with postage fee prepaid and
addressed as follows:
If to the Company: Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telefax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Employee: Xxxxxx X. Xxxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxx xx the Xxxxxx, Xxx Xxxx 00000
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
16. Specific Performance. The Employee acknowledges that a remedy at law
for any breach or attempted breach of Sections 12, 13 or 14 of this Agreement
will be inadequate, the Employee agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
17. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
-10-
18. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
encumber or dispose of any right to receive payments hereunder, it being
understood that such payments and the right thereto are nonassignable and
nontransferable.
19. Binding Effect. Subject to the provisions of Section 18 of this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the Employee's heirs and personal representatives, and the
successors and assigns of the Company.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
21. Prior Employment Agreements. Employee represents and warrants to the
Company that he has fulfilled all of the terms and conditions of all prior
employment agreements to which he may be or have been a party, and at the time
of execution of this Agreement is not a party to any other employment agreement.
22. Parole Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided, however, the amount of compensation to be paid Employee for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Employee of any of the
duties of his employment with the Company. Written notification of any
modification of compensation paid or payable to the Employee for his services
shall be conclusively deemed to be a ratification and confirmation of this
Agreement amended by such change in compensation unless the Employee shall
object in writing with ten (10) days after such written notification from the
Company.
23. Waiver. Any waiver to be enforceable must be in writing and executed
by the Party against whom the waiver is sought to be enforced.
24. Arbitration. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 24. Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be
-11-
mutually agreed upon by the Parties involved in the controversy and to be
selected from the National Panel of Commercial Arbitrators (or successor panel,
if any). If within 45 days after service of the demand for arbitration the
Parties are unable to agree upon such an arbitrator who is willing to serve,
then an arbitrator shall be appointed by the American Arbitration Association in
accordance with its rules. Except as specifically provided in this Section 24,
the arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The arbitrator shall not render
an award of punitive damages. Any arbitration hereunder commenced prior to full
payment of the Note or conversion of the Note into Parent Shares (such event
being referred to as the "Note Payment Date"), shall be held in New York, New
York. Any arbitration commenced on or after the Note Payment Date shall be held
in Houston, Texas. Expenses related to the arbitration, including counsel fees,
shall be borne by the Party incurring such expenses except to the extent
otherwise provided in Section 25 herein. The fees of the arbitrator and of the
American Arbitration Association, if any, shall be divided equally among the
Parties involved in the controversy. Judgment upon the award rendered by the
arbitrator (which may, if deemed appropriate by the arbitrator, include
equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The arbitrator
shall award the prevailing Party in any arbitration proceeding recovery of its
attorneys' fees, the arbitrators' fees and other costs in connection with the
arbitration from the non-prevailing Party. Nothing in this Section shall
restrict any Parties' ability to seek injunctive or other equitable relief in
any court of competent jurisdiction prior to initiating mediation or
arbitration. In the event that such injunctive or equitable relief is sought by
any Party, such Party is specifically entitled to enforce the appropriate
provisions of the Agreement in obtaining such relief in any court of competent
jurisdiction and, thereafter, submit the remaining controversy, dispute or claim
to arbitration in accordance with this Section. Any such proceeding for
injunctive or equitable relief hereunder commenced prior to the Note Payment
Date, shall be held in New York, New York, and any such proceeding commenced on
or after the Note Payment Date shall be held in Houston, Texas.
25. Attorney's Fees. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees and other costs from the other Party hereto.
26. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
27. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
-12-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation
By: _________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
THE EMPLOYEE:
_______________________________________
Xxxxxx X. Xxxxxxxx
-13-
SCHEDULE A
CALCULATION OF ANNUAL BONUS
Each year the accountants regularly employed by the Company shall
determine the amount of Net Profit, if any, of the Amicus Division of the
Company during each consecutive twelve (12) month time period ending on the last
day of the fiscal year of the Company ("Annual Profits"), commencing with the
first fiscal year of the Company and continuing each year during the term of
this Agreement. Beginning with the first fiscal year of the Company, to the
extent that the Annual Profits of the current year exceed the Annual Profits of
the prior year, the Employee shall be paid an annual bonus equal to ten percent
(10%) of the amount of such excess, if any; provided that for the first fiscal
year of the Company (A)(i) the Annual Profits shall be calculated for each full
month of operations and added together, (ii) the Annual Profits for any partial
month of operations shall be divided by the number of actual days in such month
and multiplied by 30 to create a full month and (iii) the sum of (A)(i) and
(A)(ii) shall be added together, that result divided by the number of full and
partial months of operations and the quotient multiplied by 12 to create the
number representing Annual Profits for the first fiscal year and (B) the Annual
Profits of the prior year shall be deemed to be $485,000. For purposes of this
calculation, "Net Profit" shall mean earnings before income taxes, interest,
depreciation and amortization.
EXHIBIT C-2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), effective the ____ day of
September__, 1997 (the "Effective Date"), is entered into by and between
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), and XXXX XXXXXXXX, an
individual residing in the State of New York (the "Employee"). The Company may
sometimes hereinafter be referred to as "Employer." The Employer and Employee
may sometimes hereinafter be referred to singularly as a "Party" or collectively
as the "Parties." All capitalized terms not otherwise defined herein shall have
the same meaning as contained in that certain Agreement of Purchase and Sale of
Assets executed as of September___, 1997 (the "Purchase Agreement"), by and
among the Company, Amicus One Legal Support Services, Inc., a New York
corporation ("Seller"), the Employee and other stockholders of the Seller,
individually, and Litigation Resources of America, Inc., a Texas corporation
(the "Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has been an employee, officer and director of the Seller and
its business known as or conducting business under "Amicus One Legal Support
Services Inc.", "Cardinal Reporting Co." and "AM Court Reporting, Co." (the
"Amicus Business"), and his knowledge of the affairs of the Amicus Business,
particularly its court reporting business in White Plains, New York and
surrounding areas, are of great value to the Company; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Company has
purchased from the Seller, and the Seller has sold to the Company, all or
substantially all of the Assets of the Seller, which required the approval the
shareholders of the Seller; and
WHEREAS, part of the consideration given to the Seller and the Employee under
the Purchase Agreement included an agreement by the Company to enter into this
Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants, promises and
undertakings herein contained and other consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Parties hereby undertake and
agree as follows:
-1-
1. Employment Term. The Employer hereby employs the Employee commencing on
the Effective Date for a term of one year (the "Employment Term"), unless sooner
terminated as hereinafter provided. Unless otherwise provided herein, Sections
12 - 26 of this Agreement shall survive the expiration or termination of this
Agreement, for any reason whatsoever. The Employee accepts such employment and
agrees to perform the services specified herein, all upon the terms and
conditions hereinafter stated.
2. Duties. The Employee shall (i) provide the Company assistance in training
new personnel (whether at the Westchester Office or otherwise) and (ii) assist
in managing the assignment of court reporting jobs by the Westchester office.
The Employee shall report to, and be subject to the general direction and
control of Xxxxxx Xxxxxxxx the General Manager-New York of the Company. The
Employee shall not be required to engage in any business that is not reasonably
related to the Business of the Company, as hereinafter defined. For purposes of
this Agreement, the "Business of the Company" or, alternatively, "Business"
shall be defined as the current business of the Company, including, but not
limited to, the marketing and providing of court reporting and litigation
support services in the New York Metropolitan area.
3. Extent of Service. The Employee shall be employed on a part-time basis and
shall devote such time, attention and energy to the business of the Employer as
shall be reasonably required to perform his duties under Section 2. Subject to
Sections 12-14, the Employee may engage in any other business activity during
the term of this Agreement, so long as such business activity does not unduly
interfere with the performance of his duties under Section 2.
4. Compensation. As payment for the services to be rendered by the Employee
hereunder during the initial term, the Employee shall be entitled to receive a
salary in the amount of Five Thousand and No/100 Dollars ($5,000) per year
effective as of the date hereof, which salary shall be payable monthly or in
accordance with the payroll policies of the Company in effect from time to time
if such policies provide for payment of salary more frequently than monthly,
until termination of this Agreement.
5. Expenses. During the term of this Agreement, the Employer shall promptly
pay or reimburse the Employee for all reasonable out-of-pocket expenses for
travel, meals, hotel accommodations and similar items incurred by him in
connection with the Business of the Company and approved by the Board or
incurred in accordance with the travel and reimbursement policies of the Company
as the same shall be in effect from time to time, upon submission by him of an
appropriate statement documenting such expenses.
6. Employee Benefits. During the term of this Agreement, the Employee shall
be entitled to participate in all employee benefit plans from time to time made
generally available to the executive employees of the Company, including any
stock option plan, retirement plan, profit-sharing plan, group life plan, health
or accident insurance or other employee benefit plans as the
-2-
same shall be maintained in effect, as determined by the Board, and subject to
any limitations set forth therein with respect to part-time employees, if any.
7. Vacation. During the term of this Agreement, the Employee shall not be
entitled to any paid vacation time, unless otherwise required by law.
8. Covenants of Employee. For and in consideration of the employment herein
contemplated and the consideration paid or promised to be paid by the Company,
the Employee does hereby covenant, agree and promise that during the term hereof
and thereafter to the extent specifically provided in this Agreement:
(a) The Employee will use his best reasonable efforts to
truthfully and accurately make, maintain and preserve all records and
reports that the Company may from time to time request or require.
(b) The Employee will fully account for all money, records,
goods, wares and merchandise or other property belonging to the
Company of which the Employee has custody, and will pay over and
deliver same promptly whenever and however he may be reasonably
directed to do so by the Company.
(c) The Employee will obey all rules, regulations and special
instructions of the Company applicable to him, and will be loyal and
faithful to the Company at all times.
(d) The Employee will make available to the Company any and all
of the information of which he has knowledge relating to the business
of the Company, and will make all suggestions and recommendations
which he feels will be of mutual benefit to the Parties.
(e) The Employee agrees that upon termination of his employment
hereunder he will immediately surrender and turn over to the Company
all books, records, forms, specifications, formulae, data, processes,
papers and writings related to the Business of the Company and all
other property belonging to the Company, together with all copies of
the foregoing, it being understood and agreed that the same are the
sole property of the Company.
9. Mutual Covenants of the Company and the Employee. For and in consideration
of the employment herein contemplated and the compensation, covenants,
conditions and promises herein recited, the Company and the Employee do hereby
mutually agree that during the term hereof:
(a) The Employee shall not, by reason of this Agreement, have any
vested interest in, or right, title or claim to, any equipment,
machinery, processes, systems,
-3-
products, contracts, business assets or other things of value
belonging to or which may hereafter be acquired or owned by the
Company.
(b) The Employee agrees to perform to the best of his abilities
such duties as the business may reasonably demand, and acknowledges
that the number of hours per day or per week may vary.
Notwithstanding the foregoing, the Employee shall work in a manner
that is consistent with his prior customary practice on behalf of the
Seller and the Cardinal Business.
(c) The Company agrees that it will not terminate any employee of
the Company without giving prior notification of such termination to
the Employee.
10. Termination of Employment for Cause. The Employer may terminate the
employment of the Employee if the Employer suffers or may reasonably be expected
to suffer any material adverse effect as a result of the Employee (any such
termination being a termination for "Cause"):
(a) Breaching any material provision of this Agreement and
failing to cure such breach within ten (10) days after receipt of
written notice thereof;
(b) Misappropriating funds or property of the Company;
(c) Securing any personal profit not thoroughly disclosed to
and approved by the Company in connection with any transaction entered
into on behalf of the Company;
(d) Engaging in conduct, even if not in connection with the
performance of his duties hereunder, which would reasonably be
expected to result in a material adverse effect to the interest of the
Company if he was retained as an employee, such as his commission of a
felony or a crime of moral turpitude;
(e) Becoming and remaining "Disabled," as hereinafter defined
(either physically, mentally or otherwise) for a period of one hundred
thirty-five (135) days during any consecutive twelve-month time
period;
(f) Failing to carry out and perform the duties assigned to the
Employee in accordance with the terms hereof and failing to cure such
breach within ten (10) days after written notice thereof; or
(g) Failing to comply with corporate policies of the Company
that are promulgated from time to time and made known to Employee and
failing to cure such breach within ten (10) days after written notice
thereof.
-4-
In the event of the death of the Employee, such occurrence shall immediately
constitute a termination for Cause. Except as provided in item (e) above, no
termination for Cause shall be effective if the Employee is Disabled.
In the event the Employee is terminated for Cause because he is Disabled, the
Employee may be permitted to participate in any disability insurance policy the
Company then has in effect.
In the event of termination of his employment for Cause, the Employee shall be
entitled to receive his compensation, as determined in Section 4 of this
Agreement, due or accrued on a pro rata basis to the date of termination. Any
salary or remuneration owed as of the date of termination shall be paid less the
amount of damages, if any, caused to the Company by such breach, but no such
damages offset shall extend beyond any compensation due and owing under this
Agreement.
Notwithstanding the cure provisions provided in Sections 10(a), 10 (f) and
10(g), the Employee shall not have the opportunity to cure any violation of
these subsections if such violation cannot reasonably be expected to be cured.
In such event, the Company shall be required to furnish the Employee notice of
the violation, but the Employee shall not be furnished an opportunity to cure.
"Disabled" shall mean the continuous inability, whether mental or physical, of
Employee to perform his normal job functions as determined by at least two of
three medical physicians selected as follows: the Employee or his legal
designee shall be entitled to appoint one physician, the Company shall be
entitled to appoint one physician, and such two appointed physicians shall
mutually appoint a third physician. Notwithstanding the foregoing, the
Employee, or his designee, and the Company may mutually agree that he is
"Disabled" within the meaning of this Agreement.
11. Termination By the Company Without Cause or By the Employee With Good
Reason. The Company may terminate the employment of Employee for any reason
other than those for Cause, in which event such termination shall be deemed a
"Termination Without Cause". In addition, the Employee shall have the right to
terminate this Agreement for any material breach of this Agreement by the
Company, which shall include but not be limited to materially changing the
duties assigned to Employee beyond those contemplated in Section 2 of this
Agreement; provided that the Company shall be furnished ten (10) days notice of
such breach and an opportunity to cure (any such termination constituting a
"Termination By Employee With Good Reason"). Notwithstanding the cure provisions
provided in the preceding sentence, the Employer shall not have the opportunity
to cure any violation of this Agreement if such violation cannot reasonably be
expected to be cured but the Employee shall still furnish notice to the Company.
In the event of a Termination Without Cause or a Termination with Good Reason by
the Employee the Company shall continue making payments to Employee in an amount
equal to the compensation of the Employee, as determined in Section 4 of this
Agreement, as if he was still employed for a period equal to the lesser of (i)
one (1) year, or (ii) the remaining term of this Agreement, which amount, in the
event of a Termination Without Cause or a Termination By Employee With Good
Reason, shall constitute the full and total amount of liquidated damages that
the Employee shall be entitled to receive from the Company and
-5-
its Affiliates for any contractual or tort claims arising out of his employment
relationship with the Company.
12. Covenant Not to Compete. The Employee recognizes that the Company has
business goodwill and other legitimate business interests which must be
protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to employ the Employee on the terms and conditions set forth
herein, the Company's agreement to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Employee's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 12, the Employee agrees that in the
event (i) Employee is terminated for Cause, or (ii) Employee leaves the employ
of the Company other than a Termination By Employee With Good Reason prior to
expiration of the term of the Agreement, or (iii) upon the expiration of the
term of this Agreement, then for a period three (3) years after the date
employment is so terminated:
(a) Enter into, engage in, or be connected with any court
reporting business or business operation or activity within
Westchester, New York, Kings, Queens, Bronx, Richmond, Rockland and
Nassau Counties in New York and Bergen, Essex, Union, Middlesex,
Morris, Warren, Somerset, Sussex and Passaic Counties in New Jersey,
except that Employee may work as a court reporter for a court or
governmental agency or perform work as a court reporter for the
Company within those counties; and
(b) Employee will not call upon any customer whose account is
serviced in whole or in part by the Employer or its Affiliates at the
time of the termination of Employee's employment, with the purpose of
selling or attempting to sell to any such customer any services
included within that offered by the Employer or its Affiliates; and
(c) Employee will not intentionally divert, solicit or take
away any customer, supplier or employee of the Employer or its
Affiliates, or the patronage of any customer or supplier of the
Employer or its Affiliates, or otherwise interfere with or disturb the
relationship existing between the Employer or its Affiliates and any
of their respective customers, suppliers or employees, directly or
indirectly.
In addition, the foregoing restrictive covenants shall also apply to the
Employee in the event of his Termination Without Cause or in the event of
Termination By Employee With Good Reason by the Employee, but only for a period
of one (1) year.
In the event the Company ceases operation of the Business of the Company other
than in a merger, consolidation, or similar transaction, or upon the filing of a
bankruptcy or receivership
-6-
proceeding against the Employer, or upon the appointment of a liquidator for the
Company, the provisions of this Section 12 shall not be applicable to the
conduct of Employee subsequent thereto.
It is mutually understood and agreed that if any of the provisions relating to
the scope, time or territory in this Section 12 are more extensive than is
enforceable under applicable laws or are broader than necessary to protect the
good will and legitimate business interests of the Company, then the Parties
agree that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Employee's
covenants contained in this Section 12 are inadequate, and they agree that the
Company shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Company.
13. Business Opportunities. Except for passive investments by the
Employee in publicly traded entities, or investments in private ventures which
do not compete with, or are not in the same business as, the Company and which
come to the attention of the Employee outside of the scope of his employment,
for as long as the Employee shall be employed by the Company and thereafter with
respect to any business opportunities learned about during the time of
Employee's employment by the Company, the Employee agrees that with respect to
any future business opportunity or other new and future business proposal which
is offered to, or comes to the attention of, the Employee and which is related
to, or connected with, the Business of the Company, the Company shall have the
right to take advantage of such business opportunity or other business proposal
for its own benefit. The Employee agrees to promptly deliver notice to the Board
in writing of the existence of such opportunity or proposal and the Employee may
take advantage of such opportunity only if the Employer does not elect to
exercise its right to take advantage of such opportunity.
14. Confidential Information. The Employee acknowledges that in the
course of his employment with the Company, he will receive certain trade
secrets, know-how, lists of customers, employee records and other confidential
information and knowledge concerning the Business of the Company (hereinafter
collectively referred to as "Information") which the Company desires to protect.
The Employee understands that such Information is confidential and he agrees
that he will not reveal such Information to anyone outside the Company except
(i) for information already known to the public, now or in the future, or (ii)
in connection with any legal proceeding regarding this Agreement, the Purchase
Agreement or the transactions contemplated thereby or as otherwise required by
law or judicial order. The Employee further agrees that during the term of this
Agreement and thereafter he will not use such Information in competing with the
Company. Upon termination of his employment hereunder, the Employee shall
surrender to the Company all papers, documents, writings and other property
produced by him or coming into his possession by or through his employment
hereunder and relating to the information referred to in this Section 14, which
are
-7-
not general knowledge in the industry, and the Employee agrees that all such
materials will at all times remain the property of the Company.
15. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally with a written receipt
acknowledging delivery or three (3) business days after the posting thereof by
United States first class, registered or certified mail, return receipt
requested, with postage fee prepaid and addressed as follows:
If to the Company: Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telefax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Employee: Xxxx Xxxxxxxx
00 Xxxxxxx Xxxxx Xxxx
Xx. Xxxxx, Xxx Xxxx 00000
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
16. Specific Performance. The Employee acknowledges that a remedy at law
for any breach or attempted breach of Sections 12, 13 or 14 of this Agreement
will be inadequate, the Employee agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
17. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
18. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
encumber or dispose of any right to receive payments hereunder, it being
understood that such payments and the right thereto are nonassignable and
nontransferable.
-8-
19. Binding Effect. Subject to the provisions of Section 18 of this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the Employee's heirs and personal representatives, and the
successors and assigns of the Company.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
21. Prior Employment Agreements. Employee represents and warrants to the
Company that he has fulfilled all of the terms and conditions of all prior
employment agreements to which he may be or have been a party.
22. Parole Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided, however, the amount of compensation to be paid Employee for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Employee of any of the
duties of his employment with the Company. Written notification of any
modification of compensation paid or payable to the Employee for his services
shall be conclusively deemed to be a ratification and confirmation of this
Agreement amended by such change in compensation unless the Employee shall
object in writing with ten (10) days after such written notification from the
Company.
23. Waiver. Any waiver to be enforceable must be in writing and executed
by the Party against whom the waiver is sought to be enforced.
24. Arbitration. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 24. Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this Section 24, the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages. Any arbitration
hereunder commenced
-9-
prior to full payment of the Note or conversion of the Note into Parent Shares
(such event being referred to as the "Note Payment Date"), shall be held in New
York, New York. Any arbitration commenced on or after the Note Payment Date
shall be held in Houston, Texas. Expenses related to the arbitration, including
counsel fees, shall be borne by the Party incurring such expenses except to the
extent otherwise provided in Section 25 herein. The fees of the arbitrator and
of the American Arbitration Association, if any, shall be divided equally among
the Parties involved in the controversy. Judgment upon the award rendered by the
arbitrator (which may, if deemed appropriate by the arbitrator, include
equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The arbitrator
shall award the prevailing Party in any arbitration proceeding recovery of its
attorneys' fees, the arbitrators' fees and other costs in connection with the
arbitration from the non-prevailing Party. Nothing in this Section shall
restrict any Parties' ability to seek injunctive or other equitable relief in
any court of competent jurisdiction prior to initiating mediation or
arbitration. In the event that such injunctive or equitable relief is sought by
any Party, such Party is specifically entitled to enforce the appropriate
provisions of the Agreement in obtaining such relief in any court of competent
jurisdiction and, thereafter, submit the remaining controversy, dispute or claim
to arbitration in accordance with this Section. Any such proceeding for
injunctive or equitable relief hereunder commenced prior to the Note Payment
Date, shall be held in New York, New York, and any such proceeding commenced on
or after the Note Payment Date shall be held in Houston, Texas.
25. Attorney's Fees. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees and other costs from the other Party hereto.
26. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
27. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
-10-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation
By: _________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
THE EMPLOYEE:
_______________________________________
Xxxx Xxxxxxxx
EXHIBIT C-3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated effective the ____ day of
September, 1997 (the "Effective Date"), is entered into by and between
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation
(hereinafter called the "Company," which term includes any directly or
indirectly controlled subsidiaries or successor entities), and XXXXXX XXXXXXX,
an individual residing in the State of New York (the "Employee"). The Company
may sometimes hereinafter be referred to as "Employer." The Employer and
Employee may sometimes hereinafter be referred to singularly as a "Party" or
collectively as the "Parties." All capitalized terms not otherwise defined
herein shall have the same meaning as contained in that certain Agreement of
Purchase and Sale of Assets executed as of September___, 1997 (the "Purchase
Agreement"), by and among the Company, Amicus One Legal Support Services, Inc.,
a New York corporation ("Seller"), the Employee and other stockholders of the
Seller, individually, and Litigation Resources of America, Inc., a Texas
corporation (the "Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has been an employee, officer and director of the Seller and
its business known as or conducting business under "Amicus One Legal Support
Services Inc.", "Cardinal Reporting Co." and "AM Court Reporting, Co." (the
"Amicus Business"), and his knowledge of the affairs of the Amicus Business,
particularly its court reporting business in White Plains, New York and
surrounding areas, are of great value to the Company; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Company has
purchased from the Seller, and the Seller has sold to the Company, all or
substantially all of the Assets of the Seller, which required the approval the
shareholders of the Seller; and
WHEREAS, part of the consideration given to the Seller and the Employee under
the Purchase Agreement included an agreement by the Company to enter into this
Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants, promises and
undertakings herein contained and other consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Parties hereby undertake and
agree as follows:
-1-
1. Employment Term. The Employer hereby employs the Employee commencing on
the Effective Date for a term of three years (the "Employment Term"), unless
sooner terminated as hereinafter provided. Unless otherwise provided herein,
Sections 12 - 26 of this Agreement shall survive the expiration or termination
of this Agreement, for any reason whatsoever. The Employee accepts such
employment and agrees to perform the services specified herein, all upon the
terms and conditions hereinafter stated.
2. Duties. The Employee shall (i) assist in managing the assignment of court
reporting jobs in the Westchester office and (ii) provide the Company assistance
in training new personnel (whether at the Westchester Office or otherwise). The
Employee shall report to, and be subject to the general direction and control of
Xxxxxx Xxxxxxxx the General Manager-New York of the Company. The Employee shall
not be required to engage in any business that is not reasonably related to the
Business of the Company, as hereinafter defined. For purposes of this
Agreement, the "Business of the Company" or, alternatively, "Business" shall be
defined as the current business of the Company, including, but not limited to,
the marketing and providing of court reporting and litigation support services
in the White Plains, New York Metropolitan area.
3. Extent of Service. The Employee shall be employed on a part-time basis and
shall devote such time, attention and energy to the business of the Employer as
shall be reasonably required to perform his duties under Section 2. Subject to
Sections 12-14, the Employee may engage in any other business activity during
the term of this Agreement, so long as such business activity does not unduly
interfere with the performance of his duties under Section 2.
4. Compensation. As payment for the services to be rendered by the Employee
hereunder during the initial term, the Employee shall be entitled to receive a
salary in the amount of Seventy Five Hundred and No/100 Dollars ($7,500) per
year effective as of the date hereof, which salary shall be payable monthly or
in accordance with the payroll policies of the Company in effect from time to
time if such policies provide for payment of salary more frequently than
monthly, until termination of this Agreement.
5. Expenses. During the term of this Agreement, the Employer shall promptly
pay or reimburse the Employee for all reasonable out-of-pocket expenses for
travel, meals, hotel accommodations and similar items incurred by him in
connection with the Business of the Company and approved by the Board or
incurred in accordance with the travel and reimbursement policies of the Company
as the same shall be in effect from time to time, upon submission by him of an
appropriate statement documenting such expenses.
6. Employee Benefits. During the term of this Agreement, the Employee shall
be entitled to participate in all employee benefit plans from time to time made
generally available to the executive employees of the Company, including any
stock option plan, retirement plan, profit-sharing plan, group life plan, health
or accident insurance or other employee benefit plans as the
-2-
same shall be maintained in effect, as determined by the Board, and subject to
any limitations set forth therein with respect to part-time employees, if any.
7. Vacation. During the term of this Agreement, the Employee shall not be
entitled to any paid vacation time, unless otherwise required by law.
8. Covenants of Employee. For and in consideration of the employment herein
contemplated and the consideration paid or promised to be paid by the Company,
the Employee does hereby covenant, agree and promise that during the term hereof
and thereafter to the extent specifically provided in this Agreement:
(a) The Employee will use his best reasonable efforts to
truthfully and accurately make, maintain and preserve all records and
reports that the Company may from time to time request or require.
(b) The Employee will fully account for all money, records,
goods, wares and merchandise or other property belonging to the
Company of which the Employee has custody, and will pay over and
deliver same promptly whenever and however he may be reasonably
directed to do so by the Company.
(c) The Employee will obey all rules, regulations and special
instructions of the Company applicable to him, and will be loyal and
faithful to the Company at all times.
(d) The Employee will make available to the Company any and all
of the information of which he has knowledge relating to the business
of the Company, and will make all suggestions and recommendations
which he feels will be of mutual benefit to the Parties.
(e) The Employee agrees that upon termination of his employment
hereunder he will immediately surrender and turn over to the Company
all books, records, forms, specifications, formulae, data, processes,
papers and writings related to the Business of the Company and all
other property belonging to the Company, together with all copies of
the foregoing, it being understood and agreed that the same are the
sole property of the Company.
9. Mutual Covenants of the Company and the Employee. For and in consideration
of the employment herein contemplated and the compensation, covenants,
conditions and promises herein recited, the Company and the Employee do hereby
mutually agree that during the term hereof:
(a) The Employee shall not, by reason of this Agreement, have any
vested interest in, or right, title or claim to, any equipment,
machinery, processes, systems,
-3-
products, contracts, business assets or other things of value
belonging to or which may hereafter be acquired or owned by the
Company.
(b) The Employee agrees to perform to the best of his abilities
such duties as the business may reasonably demand, and acknowledges
that the number of hours per day or per week may vary.
Notwithstanding the foregoing, the Employee shall work in a manner
that is consistent with his prior customary practice on behalf of the
Seller and the Cardinal Business.
(c) The Company agrees that it will not terminate any employee of
the Company without giving prior notification of such termination to
the Employee.
10. Termination of Employment for Cause. The Employer may terminate the
employment of the Employee if the Employer suffers or may reasonably be expected
to suffer any material adverse effect as a result of the Employee (any such
termination being a termination for "Cause"):
(a) Breaching any material provision of this Agreement and
failing to cure such breach within ten (10) days after receipt of
written notice thereof;
(b) Misappropriating funds or property of the Company;
(c) Securing any personal profit not thoroughly disclosed to
and approved by the Company in connection with any transaction entered
into on behalf of the Company;
(d) Engaging in conduct, even if not in connection with the
performance of his duties hereunder, which would reasonably be
expected to result in a material adverse effect to the interest of the
Company if he was retained as an employee, such as his commission of a
felony or a crime of moral turpitude;
(e) Becoming and remaining "Disabled," as hereinafter defined
(either physically, mentally or otherwise) for a period of one hundred
thirty-five (135) days during any consecutive twelve-month time
period;
(f) Failing to carry out and perform the duties assigned to the
Employee in accordance with the terms hereof and failing to cure such
breach within ten (10) days after written notice thereof; or
(g) Failing to comply with corporate policies of the Company
that are promulgated from time to time and made known to Employee and
failing to cure such breach within ten (10) days after written notice
thereof.
-4-
In the event of the death of the Employee, such occurrence shall immediately
constitute a termination for Cause. Except as provided in item (e) above, no
termination for Cause shall be effective if the Employee is Disabled.
In the event the Employee is terminated for Cause because he is Disabled, the
Employee may be permitted to participate in any disability insurance policy the
Company then has in effect.
In the event of termination of his employment for Cause, the Employee shall be
entitled to receive his compensation, as determined in Section 4 of this
Agreement, due or accrued on a pro rata basis to the date of termination. Any
salary or remuneration owed as of the date of termination shall be paid less the
amount of damages, if any, caused to the Company by such breach, but no such
damages offset shall extend beyond any compensation due and owing under this
Agreement.
Notwithstanding the cure provisions provided in Sections 10(a), 10 (f) and
10(g), the Employee shall not have the opportunity to cure any violation of
these subsections if such violation cannot reasonably be expected to be cured.
In such event, the Company shall be required to furnish the Employee notice of
the violation, but the Employee shall not be furnished an opportunity to cure.
"Disabled" shall mean the continuous inability, whether mental or physical, of
Employee to perform his normal job functions as determined by at least two of
three medical physicians selected as follows: the Employee or his legal
designee shall be entitled to appoint one physician, the Company shall be
entitled to appoint one physician, and such two appointed physicians shall
mutually appoint a third physician. Notwithstanding the foregoing, the
Employee, or his designee, and the Company may mutually agree that he is
"Disabled" within the meaning of this Agreement.
11. Termination By the Company Without Cause or By the Employee With Good
Reason. The Company may terminate the employment of Employee for any reason
other than those for Cause, in which event such termination shall be deemed a
"Termination Without Cause". In addition, the Employee shall have the right to
terminate this Agreement for any material breach of this Agreement by the
Company, which shall include but not be limited to materially changing the
duties assigned to Employee beyond those contemplated in Section 2 of this
Agreement; provided that the Company shall be furnished ten (10) days notice of
such breach and an opportunity to cure (any such termination constituting a
"Termination By Employee With Good Reason"). Notwithstanding the cure provisions
provided in the preceding sentence, the Employer shall not have the opportunity
to cure any violation of this Agreement if such violation cannot reasonably be
expected to be cured but the Employee shall still furnish notice to the Company.
In the event of a Termination Without Cause or a Termination with Good Reason by
the Employee the Company shall continue making payments to Employee in an amount
equal to the compensation of the Employee, as determined in Section 4 of this
Agreement, as if he was still employed for a period equal to the lesser of (i)
one (1) year, or (ii) the remaining term of this Agreement, which amount, in the
event of a Termination Without Cause or a Termination By Employee With Good
Reason, shall constitute the full and total amount of liquidated damages that
the Employee shall be entitled to receive from the Company and
-5-
its Affiliates for any contractual or tort claims arising out of his employment
relationship with the Company.
12. Covenant Not to Compete. The Employee recognizes that the Company has
business goodwill and other legitimate business interests which must be
protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to employ the Employee on the terms and conditions set forth
herein, the Company's agreement to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Employee's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 12, the Employee agrees that in the
event (i) Employee is terminated for Cause, or (ii) Employee leaves the employ
of the Company other than a Termination By Employee With Good Reason prior to
expiration of the term of the Agreement, or (iii) upon the expiration of the
term of this Agreement, then for a period three (3) years after the date
employment is so terminated:
(a) Enter into, engage in, or be connected with any court
reporting business or business operation or activity within
Westchester, New York, Kings, Queens, Bronx, Richmond, Rockland and
Nassau Counties in New York and Bergen, Essex, Union, Middlesex,
Morris, Warren, Somerset, Sussex and Passaic Counties in New Jersey,
except that Employee may work as a court reporter for a court or
governmental agency or perform work as a court reporter for the
Company within those counties; and
(b) Employee will not call upon any customer whose account is
serviced in whole or in part by the Employer or its Affiliates at the
time of the termination of Employee's employment, with the purpose of
selling or attempting to sell to any such customer any services
included within that offered by the Employer or its Affiliates; and
(c) Employee will not intentionally divert, solicit or take
away any customer, supplier or employee of the Employer or its
Affiliates, or the patronage of any customer or supplier of the
Employer or its Affiliates, or otherwise interfere with or disturb the
relationship existing between the Employer or its Affiliates and any
of their respective customers, suppliers or employees, directly or
indirectly.
In addition, the foregoing restrictive covenants shall also apply to the
Employee in the event of his Termination Without Cause or in the event of
Termination By Employee With Good Reason by the Employee, but only for a period
of one (1) year.
In the event the Company ceases operation of the Business of the Company other
than in a merger, consolidation, or similar transaction, or upon the filing of a
bankruptcy or receivership
-6-
proceeding against the Employer, or upon the appointment of a liquidator for the
Company, the provisions of this Section 12 shall not be applicable to the
conduct of Employee subsequent thereto.
It is mutually understood and agreed that if any of the provisions relating to
the scope, time or territory in this Section 12 are more extensive than is
enforceable under applicable laws or are broader than necessary to protect the
good will and legitimate business interests of the Company, then the Parties
agree that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Employee's
covenants contained in this Section 12 are inadequate, and they agree that the
Company shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Company.
13. Business Opportunities. Except for passive investments by the
Employee in publicly traded entities, or investments in private ventures which
do not compete with, or are not in the same business as, the Company and which
come to the attention of the Employee outside of the scope of his employment,
for as long as the Employee shall be employed by the Company and thereafter with
respect to any business opportunities learned about during the time of
Employee's employment by the Company, the Employee agrees that with respect to
any future business opportunity or other new and future business proposal which
is offered to, or comes to the attention of, the Employee and which is related
to, or connected with, the Business of the Company, the Company shall have the
right to take advantage of such business opportunity or other business proposal
for its own benefit. The Employee agrees to promptly deliver notice to the Board
in writing of the existence of such opportunity or proposal and the Employee may
take advantage of such opportunity only if the Employer does not elect to
exercise its right to take advantage of such opportunity.
14. Confidential Information. The Employee acknowledges that in the
course of his employment with the Company, he will receive certain trade
secrets, know-how, lists of customers, employee records and other confidential
information and knowledge concerning the Business of the Company (hereinafter
collectively referred to as "Information") which the Company desires to protect.
The Employee understands that such Information is confidential and he agrees
that he will not reveal such Information to anyone outside the Company except
(i) for information already known to the public, now or in the future, or (ii)
in connection with any legal proceeding regarding this Agreement, the Purchase
Agreement or the transactions contemplated thereby or as otherwise required by
law or judicial order. The Employee further agrees that during the term of this
Agreement and thereafter he will not use such Information in competing with the
Company. Upon termination of his employment hereunder, the Employee shall
surrender to the Company all papers, documents, writings and other property
produced by him or coming into his possession by or through his employment
hereunder and relating to the information referred to in this Section 14, which
are
-7-
not general knowledge in the industry, and the Employee agrees that all such
materials will at all times remain the property of the Company.
15. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally with a written receipt
acknowledging delivery or three (3) business days after the posting thereof by
United States first class, registered or certified mail, return receipt
requested, with postage fee prepaid and addressed as follows:
If to the Company: Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telefax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Employee: Xxxxxx Xxxxxxx
0 Xxxxx Xxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
16. Specific Performance. The Employee acknowledges that a remedy at law
for any breach or attempted breach of Sections 12, 13 or 14 of this Agreement
will be inadequate, the Employee agrees that the Company shall be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
17. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
18. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
encumber or dispose of any right to receive payments hereunder, it being
understood that such payments and the right thereto are nonassignable and
nontransferable.
-8-
19. Binding Effect. Subject to the provisions of Section 18 of this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the Employee's heirs and personal representatives, and the
successors and assigns of the Company.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
21. Prior Employment Agreements. Employee represents and warrants to the
Company that he has fulfilled all of the terms and conditions of all prior
employment agreements to which he may be or have been a party.
22. Parole Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided, however, the amount of compensation to be paid Employee for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Employee of any of the
duties of his employment with the Company. Written notification of any
modification of compensation paid or payable to the Employee for his services
shall be conclusively deemed to be a ratification and confirmation of this
Agreement amended by such change in compensation unless the Employee shall
object in writing with ten (10) days after such written notification from the
Company.
23. Waiver. Any waiver to be enforceable must be in writing and executed
by the Party against whom the waiver is sought to be enforced.
24. Arbitration. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 24. Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this Section 24, the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages. Any arbitration
hereunder commenced prior
-9-
to full payment of the Note or conversion of the Note into Parent Shares (such
event being referred to as the "Note Payment Date"), shall be held in New York,
New York. Any arbitration commenced on or after the Note Payment Date shall be
held in Houston, Texas. Expenses related to the arbitration, including counsel
fees, shall be borne by the Party incurring such expenses except to the extent
otherwise provided in Section 25 herein. The fees of the arbitrator and of the
American Arbitration Association, if any, shall be divided equally among the
Parties involved in the controversy. Judgment upon the award rendered by the
arbitrator (which may, if deemed appropriate by the arbitrator, include
equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The arbitrator
shall award the prevailing Party in any arbitration proceeding recovery of its
attorneys' fees, the arbitrators' fees and other costs in connection with the
arbitration from the non-prevailing Party. Nothing in this Section shall
restrict any Parties' ability to seek injunctive or other equitable relief in
any court of competent jurisdiction prior to initiating mediation or
arbitration. In the event that such injunctive or equitable relief is sought by
any Party, such Party is specifically entitled to enforce the appropriate
provisions of the Agreement in obtaining such relief in any court of competent
jurisdiction and, thereafter, submit the remaining controversy, dispute or claim
to arbitration in accordance with this Section. Any such proceeding for
injunctive or equitable relief hereunder commenced prior to the Note Payment
Date, shall be held in New York, New York, and any such proceeding commenced on
or after the Note Payment Date shall be held in Houston, Texas.
25. Attorney's Fees. If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees and other costs from the other Party hereto.
26. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
-10-
27. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation
By: _________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
THE EMPLOYEE:
_______________________________________
Xxxxxx Xxxxxxx
September 2, 1997
EXHIBIT D
---------
XXXX OF SALE,
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into
effective as of September__, 1997, between AMICUS ONE LEGAL SUPPORT SERVICES,
INC., a New York corporation, and LITIGATION RESOURCES OF AMERICA-NORTHEAST,
INC., a New York corporation ("Purchaser"). Purchaser and Seller may be
hereinafter sometimes referred to collectively as the "Parties" or individually
as a "Party." All defined terms not otherwise defined herein shall have the
meanings ascribed to them in that certain Agreement of Purchase and Sale of
Assets effective of even date with the effective date hereof, executed by and
between Seller, the stockholders of the Seller, the Purchaser and Litigation
Resources of America, Inc., a Texas corporation (the "Parent") and the parent of
the Buyer (the "Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser and Parent have agreed to purchase from Seller, and
Seller has agreed to grant, bargain, sell, convey, transfer, assign and deliver
to Purchaser, the Assets; and
WHEREAS, as partial consideration for the sale and assignment of the
Assets, Purchaser has agreed to assume the Assumed Liabilities, on and subject
to the terms and conditions set forth in the Agreement;
NOW, THEREFORE, in consideration of the payment of Ten Dollars ($10.00) and
other good and valuable consideration, including the delivery to Seller of the
Purchase Price, the receipt and sufficiency of which are hereby acknowledged,
Purchaser and Seller hereby agree as follows:
1. SALE AND ASSIGNMENT. Seller has granted, bargained, sold, conveyed,
transferred, assigned and delivered, and by these presents does grant, bargain,
sell, convey, transfer, assign and deliver unto Purchaser, its successors and
assigns, the Assets.
2. BULK SALES. Purchaser and Seller hereby waive compliance by Seller
with the bulk sales laws of the State of New York. This waiver shall in no
event stop or prevent (i) Purchaser or Seller from asserting as a bar or defense
to any action or proceeding brought under any such law that it is not applicable
to the sale and assignment contemplated hereby, nor (ii) Purchaser from
asserting against Seller any claim for breach or default by Seller or Seller
from asserting against Purchase or Parent any claim for breach or default under
the Agreement, nor (iii) any Purchaser Indemnified Party or Seller Indemnified
Party from asserting any claim for indemnification under the Agreement.
September 2, 1997
3. ASSUMPTION. Subject to the exceptions and exclusions of Section 2.6 of
the Agreement, and otherwise on and subject to the terms and conditions of the
Agreement, Purchaser hereby assumes and agrees to pay and perform the Assumed
Liabilities.
4. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller has good and
marketable title to the Assets, free and clear of all mortgages, liens, security
interests, pledges, charges, options, claims, restrictions, or encumbrances of
any nature whatsoever, except as set forth in the Agreement, the Ancillary
Agreements or any of the Schedules thereto. Seller further represents and
warrants that (i) Seller has obtained all consents or approvals necessary to
prevent the execution, delivery or performance of the Agreement or this Xxxx of
Sale, Assignment and Assumption Agreement from being or becoming, with notice or
lapse of time or both, a default under any contract, lease or other agreement
assigned hereby, (ii) there has been no default, and there exists no fact or
circumstance which with notice or lapse of time or both would become a default,
under any such contract, lease or agreement, and (iii) no material contract,
lease or other agreement assigned hereby has been terminated, modified, renewed
or extended, except as previously disclosed in writing to Purchaser. In
addition subject to the limitations set forth in the agreements, all of Seller's
representations and warranties set forth in the Agreement with respect to the
Assets and Assumed Liabilities are incorporated herein by reference, subject to
the limitations set forth in the Agreements.
5. INDEMNIFICATION. Each Party shall indemnify, save, defend, and hold
harmless the other Party and the other Party's directors and officers from and
against any and all Damages incurred in connection with or arising out of or
resulting from or incident to any breach of any covenant or warranty, or the
inaccuracy of any representation, made in or pursuant to this Xxxx of Sale,
Assignment and Assumption Agreement, to the extent to which such indemnified
party would be entitled to indemnification under, and on and subject to the
terms and conditions set forth in, the Agreement.
6. ATTORNEYS' FEES. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it may be entitled at law or equity.
7. GOVERNING LAW; ARBITRATION. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of New York,
without regard to conflicts of law principles, and the laws of the United States
applicable in New York. Any controversy, dispute or claim arising out of, in
connection with, or in relation to, the interpretation, performance or breach of
this Agreement, including, without limitation, the validity, scope and
enforceability of this Section which cannot first be settled through ordinary
negotiation between the Parties shall be submitted in good faith to mediation by
and in accordance with the Commercial Mediation Rules of the American
Arbitration Association or any successor organization. In the event that
mediation of such controversy, dispute or claim cannot be settled through the
mediation proceeding, the Parties
2
September 2, 1997
agree that the controversy, dispute or claim shall be submitted to binding and
final arbitration by and in accordance with the then existing Rules for
Commercial Arbitration of the American Arbitration Association or any successor
organization. Any such arbitration shall be to a three member panel selected
through the rules governing selection and appointment of such panels of the
American Arbitration Association or any successor organization. The award
rendered by the arbitrators may be confirmed, entered and enforced as a judgment
in any court of competent jurisdiction; however, the Parties otherwise waive any
rights to appeal the award except with regard to fraud by the panel. Any such
action must be brought within two years of the date the cause of action accrues.
The arbitrators shall award the Party which substantially prevails in any
arbitration proceeding recovery of that Party's reasonable attorneys' fees, the
arbitrators' fees and all costs in connection with the arbitration from the
Party who does not substantially prevail. Any arbitration hereunder commenced
prior to full payment of the Note or conversion of the Note into Parent Shares
(such event being referred to as the "Note Payment Date"), shall be held in New
York, New York. Any arbitration commenced on or after the Note Payment Date
shall be held in Houston, Texas. Nothing in this Section shall restrict any
Parties' ability to seek injunctive or other equitable relief in any court of
competent jurisdiction prior to initiating mediation or arbitration. In the
event that such injunctive or equitable relief is sought by any Party, such
Party is specifically entitled to enforce the appropriate provisions of the
Agreement in obtaining such relief in any court of competent jurisdiction and,
thereafter, submit the remaining controversy, dispute or claim to arbitration in
accordance with this Section. Any such proceeding for injunctive or equitable
relief hereunder commenced prior to the Note Payment Date, shall be held in New
York, New York, and any such proceeding commenced on or after the Note Payment
Date shall be held in Houston, Texas.
8. FURTHER ASSURANCES. Each of the Parties shall perform such actions
and deliver or cause to be delivered any and all such documents, instruments and
agreements as the other Party may reasonably request for the purpose of fully
and effectively carrying out this Agreement and the transactions contemplated
hereby.
9. MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only by written instrument signed by both of the Parties.
10. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, and the documents,
instruments and agreements executed in connection herewith, set forth the entire
agreement and understanding between the Parties with respect to the subject
matter hereof and thereof. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns.
3
September 2, 1997
11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which together shall constitute one and the same agreement.
EXECUTED AND DELIVERED EFFECTIVE as of the date first set forth above.
PURCHASER:
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC.,
a New York corporation
By:____________________________________________
Xxxxxxx X. Xxxxxx,
President & Chief Executive Officer
SELLER:
AMICUS ONE LEGAL SUPPORT SERVICES, INC.
a New York corporation
By:____________________________________
________, _____President
4
EXHIBIT E
[FORM OF SELLER'S INVESTOR REPRESENTATION LETTER]
September__, 1997
Litigation Resources of America, Inc.
Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx, President
Re: Investor Representations
Gentlemen:
The purpose of this letter is to evidence certain representations and
warranties to be made with respect to certain matters relating to the
acquisition by Amicus One Legal Support Services, Inc. (the "Seller") of (i)
shares of common Stock issued by Litigation Resources of America, Inc., a Texas
corporation (the "Company"), having a par value of one-cent ($0.01) per share
(the "Common Stock"); (ii) a Convertible Subordinated Promissory Note in the
aggregate principal amount of $560,000 (the "Convertible Note") issued by the
Company and by Litigation Resources of America-Northeast, Inc. (the
"Purchaser"), for and in partial consideration of the sale of certain of the
assets of the Seller, upon the terms and conditions set forth herein and in that
certain Agreement of Purchase and Sale of Assets (the "Purchase Agreement"),
dated ______, 1997 entered into by and among the Seller, the Company and the
Purchaser and (iii) any shares of Common Stock issued upon conversion of the
Convertible Note ("Conversion Shares").
The Investor hereby represents and warrants to the Company, the
Purchaser , and each of the Company's and the Purchaser's officers, directors,
shareholders, agents, attorneys, employees and representatives as follows:
1. Investment Intent. (i) The Common Stock and the Convertible Note
and any Conversion Shares acquired (collectively the "Securities") are being (or
in the case of Conversion Shares, will be) acquired solely for the account of
the Seller, for investment and not with a view to or for the resale,
distribution, subdivision or fractionalization thereof, (ii) the Seller has no
contract, understanding, undertaking, agreement or arrangement with any person
to sell, transfer or pledge to any person the Securities or any portion thereof
(other than as set forth in the Purchase Agreement or in the Ancillary
Agreements, as defined in the Purchase Agreement, (iii) the Seller has no
present plans to enter into any such contract, undertaking, agreement or
arrangement, (iv) the Seller understands the legal consequences of the foregoing
representations and warranties to mean that the
Litigation Resources of America, Inc.
September __, 1997
Page 2
Seller must bear the economic risk of the investment in the Securities for an
indefinite period of time, (v) the Investor has such knowledge and experience in
financial and business matters that the Investor is capable of evaluating the
merits and risks of acquiring the Securities, and (vi) the Investor acknowledges
that the acquisition of the Securities by the Seller involves a high degree of
risk which may result in the loss of the total amount of this investment.
2. No General Solicitation. The Securities have been offered to the
Seller without any form of general solicitation or advertising of any type by or
on behalf of the Company or any of its officers, directors, shareholders,
employees, agents, attorneys or representatives.
3. Access to Information. The Seller and its officers and directors
have (i) for a reasonable amount of time had an opportunity to ask questions and
receive answers concerning the terms and conditions of the issuance of the
Securities and the proposed business and affairs of the Company, and is
satisfied with the results thereof, (ii) been given access, if requested, to all
other documents with respect to the Company or this transaction, as well as to
such other information as the Seller or such other persons has requested, and
(iii) relied solely on investigations conducted by the Investor in making the
decision to acquire the Securities or approve the transactions set forth in the
Purchase Agreement.
4. Exemption Status. The Investor understands that the Securities
to be sold hereunder are being issued in reliance upon the exemptions from
registration under the Securities Act of 1933, as amended. The Investor
understands that the undersigned, the Company, the Company's officers,
directors, shareholders, employees, agents, attorneys and representatives are
relying on, among other things, the representations and warranties of the
Investor set forth herein in issuing the Securities to the Seller.
5. Securities Compliance. The Investor understands and agrees that
(i) no sale, distribution, transfer or other disposition of the Securities, or
any portion thereof, can be made by the Seller unless the Securities have been
registered under the Securities Act of 1933, as amended, and applicable
securities laws of any other relevant jurisdiction, or exemptions from such
registration are available, as evidenced by an opinion of counsel, satisfactory
to the Company, with respect to the proposed sale, distribution, transfer or
other disposition, and (ii) an appropriate legend will be endorsed on the
certificates representing the Securities evidencing such restrictions.
6. Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
Litigation Resources of America, Inc.
September __, 1997
Page 3
7. Representations of Entities. If Investor is a corporation,
partnership, trust or other entity, (i) it is authorized and qualified to
purchase and hold the Securities, (ii) it has not been formed for the purpose of
acquiring the Securities, (iii) the person executing this Agreement for and on
behalf of such entity has been duly authorized by such entity to do so, (iv) it
is willing and able to bear the substantial economic risk of an investment in
the Securities and has no need for liquidity with respect thereto, and (v) it is
able to withstand a complete loss of its investment.
8. No Governmental Review. The Investor acknowledges and understands
that no federal or state agency has passed on the fairness of the investment in
the Securities, nor made any recommendation or endorsement of the Securities,
and that there is a significant risk of loss of all or a portion of the Seller's
investment in the Securities.
9. State of Residence and Domicile. The Investor is a corporation
organized and whose principal place of business is in the State of New York.
The Investor acknowledges that the Company and the Company's officers,
directors, stockholders, agents, attorneys and other representatives are relying
on the representations and warranties set forth herein, and would not deliver
the Securities to the Seller but for the execution and delivery of this letter
by the Investor.
Very truly yours,
AMICUS ONE LEGAL SUPPORT SERVICES, INC., a New
York corporation
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT F-1
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") dated as of September__,
1997 made by Litigation Resources of America, Inc., a Texas corporation (THE
"COMPANY"), Litigation Resources of America-Northeast, Inc., a New York
corporation ("NORTHEAST"), and Amicus One Legal Support Services, Inc., a New
York corporation (the "SELLER SUBORDINATED CREDITOR") and the Senior
Subordinated Creditors listed on the signature pages hereto (the "SENIOR
SUBORDINATED CREDITORS").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of
January 17, 1997 (as amended, supplemented or otherwise modified from time to
time pursuant to the terms thereof, the "SECURITIES PURCHASE AGREEMENT"), by and
among the Company, certain other parties and the Senior Subordinated Seller
Subordinated Creditor, the Senior Subordinated Creditors were issued the
Company's 12% Senior Subordinated Notes due January 17, 2004 in the aggregate
principal amount of $9,000,000 (as amended, supplemented or otherwise modified
from time to time pursuant to the terms thereof, the "SENIOR SUBORDINATED
NOTES"); and
WHEREAS, pursuant to that Agreement of Purchase and Sale of Assets dated as
of September__, 1997 (as amended, supplemented or otherwise modified from time
to time pursuant to the terms thereof, the "ASSET PURCHASE AGREEMENT"), by and
among the Company, Northeast and the Seller Subordinated Creditor and the
stockholders of the Seller Subordinated Creditor, the Seller Subordinated
Creditor will be issued a Convertible Subordinated Promissory Note of Northeast
due September__, 2002 in the original principal amount of $560,000 (as amended,
supplemented or otherwise modified from time to time pursuant to the terms
thereof, the "SELLER SUBORDINATED NOTE"); and
WHEREAS, it is a condition under the Securities Purchase Agreement that the
Company, the Payor and the Seller Subordinated Creditor shall execute and
deliver this Subordination Agreement to the Senior Subordinated Creditors prior
to entering into the transactions contemplated by the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the benefits accruing to the parties
hereto, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby make the following representations and warranties and hereby
covenant and agree as follows:
-1-
ARTICLE I
SUBORDINATION
SECTION 1.1. Defined Terms. For purposes of this Subordination
Agreement, the following terms shall have the following meanings:
"COMPANY" shall have the meaning set forth in the preamble.
"DEFAULT NOTICE" shall have the meaning set forth in Section
1.2.B.1(1)(b).
"GUARANTORS" shall mean Northeast and each such other subsidiary of
the Company at any time which shall become a party to the Subsidiary Guarantee
Agreement dated effective January 17, 1997 by and among the Company and the
Guarantors or the Subsidiary Guarantee Agreement dated the date hereof by and
among the Company and one or more Guarantors.
"INTEREST NOTES" shall mean interest notes issued by the Company, in
the sole discretion of the holders of the Senior Subordinated Notes, in lieu of
a cash payment of any or all interest due on the Senior Subordinated Notes for a
specific period of time.
"OBLIGATIONS" shall mean all obligations and liabilities (direct or
indirect, absolute or contingent, due or to become due or now existing or
hereafter incurred), whether for principal, interest, premium, fees, costs, or
expenses or otherwise of the Company and any of the Guarantors under the Senior
Subordinated Notes, including but not limited to those obligations with respect
to the Senior Subordinated Notes arising under the Subsidiary Guarantee
Agreement.
"OTHER SUBORDINATED INDEBTEDNESS" means any indebtedness now or
hereinafter due and owing by the Company or any of the Guarantors to any person
who is the seller of a court reporting and/or litigation service business and
who finances all or part of the purchase price thereof.
"PAYOR" shall have the meaning set forth in the preamble.
"SELLER SUBORDINATED CREDITOR" shall have the meaning set forth in the
preamble.
"SELLER SUBORDINATED DEBT" shall have the meaning set forth in Section
1.2.A
"SELLER SUBORDINATED" shall have the meaning set forth in second
whereas clause.
-2-
"SENIOR SUBORDINATED CREDITOR" shall mean, collectively, the holder or
holders of the Senior Subordinated Notes, and their respective successors and
assigns, in each case as a holder of Obligations, and Senior Subordinated
Creditor means any one of them.
"SENIOR SUBORDINATED DEBT" shall have the meaning set forth in Section
1.2.A.
"SENIOR SUBORDINATED DEBT LIENS" shall have the meaning set forth in
Section 1.2.G.
"SENIOR SUBORDINATED NOTE" shall have the meaning set forth in the
first whereas clause.
"SUBORDINATION AGREEMENT" shall mean this Subordination Agreement, as
amended, supplemented or otherwise modified from time to time pursuant to the
terms hereof.
"SUBSIDIARY GUARANTEE AGREEMENT" shall mean that certain Subsidiary
Guarantee Agreement dated the date hereof by and among the Company and one or
more Guarantors.
SECTION 1.2. Subordination.
A. Seller Subordinated Debt Subordinate to Senior Subordinated Debt.
All obligations and indebtedness of the Company to the Seller Subordinated
Creditor in respect of the Seller Subordinated Note shall be junior and
subordinate to prior payment in full of the Obligations to the extent and in the
manner provided in this Section 1.2 and the Seller Subordinated Creditor by
acceptance of this Subordination Agreement agrees to be bound by the provisions
of this Section 1.2. The Senior Subordinated Debt shall continue to be senior
and entitled to the benefits of these subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Subordinated
Debt or extension or renewal of the Senior Subordinated Debt. For purposes
hereof, indebtedness evidenced by the Senior Subordinated Note, the Interest
Notes and the Subsidiary Guarantee Agreement, including any refinancing,
extension or modification thereof, and any additional indebtedness senior to
Other Subordinated Indebtedness which is created or incurred after the date
hereof shall constitute "SENIOR SUBORDINATED DEBT," and any and all
indebtedness, including the payment of the principal of, and interest on, and
all other amounts owing in respect of the Seller Subordinated Note, including
any refinancing, extension or modification thereof, shall constitute "SELLER
SUBORDINATED DEBT."
B. Suspension of Right to Receive Payments in Respect of the Seller
Subordinated Note.
-3-
B(1). Failure to pay Principal of or Interest on Senior Subordinated
Debt. (a) Upon (i) the maturity of Senior Subordinated Debt by lapse of time,
acceleration or otherwise, (ii) any failure by the Company or a Guarantor to
make any payment of principal or interest when due with respect to Senior
Subordinated Debt following expiration of any applicable grace period, (iii) any
default in the payment by the Company or a Guarantor of any interest or other
amounts due with respect to Senior Subordinated Debt, or (iv) the issuance by
the Company of any Interest Notes (solely to the extent that the Senior
Subordinated Creditor has opted for such issuance because otherwise the Company
would default under the Senior Subordinated Debt) then, unless either (x) with
respect to (i), (ii) or (iii) of paragraph B(l)(a) above, such failure or
default is remedied in a manner reasonably satisfactory to the holders of the
Senior Subordinated Debt or waived in writing by the holders of such Senior
Subordinated Debt, or (y) with respect to (iv) of paragraph B(l)(a) above, all
such Interest Notes are paid off in full, all principal on the Senior
Subordinated Debt and all interest thereon and other amounts due in connection
therewith, shall be paid to the holders of the Senior Subordinated Debt in full,
or such payment duly provided for in cash or in a manner reasonably satisfactory
to the holders of such Senior Subordinated Debt, before any direct or indirect
payment or distribution of any kind or character, whether in cash, property or
securities, shall be paid or delivered with respect to the Seller Subordinated
Debt, and any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or delivered with respect to the
Seller Subordinated Debt, shall be paid or delivered directly to the holders of
the Senior Subordinated Debt, ratably, for application in payment thereof,
unless and until all Senior Subordinated Debt shall have been paid in full.
(b) Upon the occurrence of (i) any default or event with respect to
the Senior Subordinated Debt of the types described in clause (i), (ii), (iii)
or (iv) of paragraph B(1)(a) above, or (ii) any other default with respect to
any Senior Subordinated Debt as defined therein or in the instrument under which
it is outstanding which would, with the giving of notice or the passage of time,
or both, automatically accelerate or permit the holders of such Senior
Subordinated Debt to accelerate the maturity thereof upon written notice thereof
given to the Company or any Guarantor by the holders of such Senior Subordinated
Debt or their representatives (a "DEFAULT NOTICE"), then, unless and until
either (x) with respect to (i), (ii) or (iii) of paragraph B(1)(a) above, such
default with respect to Senior Subordinated Debt shall have been remedied in a
manner reasonably satisfactory to the holders of the Senior Subordinated Debt or
waived in writing by the holders of such Senior Subordinated Debt, or (y) with
respect to (iv) of paragraph B(l)(a) above, all such Interest Notes are paid in
full, no direct or indirect payment (in cash, property or securities or by
setoff or otherwise) shall be made by the Company or any of the Guarantors with
respect to the Seller Subordinated Debt.
(c) Upon the occurrence of (i) any default or event with respect to
Senior Subordinated Debt of the types described in clause (i), (ii), (iii) or
(iv) of paragraph B(l)(a) above, or (ii) the giving of any Default Notice,
neither the Company nor any of the Guarantors shall make any direct or indirect
payments, and the Seller Subordinated Creditor shall not receive, ask, demand,
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xxx for any payment or otherwise exercise their remedies against the Company or
any of the Guarantors with respect to the Seller Subordinated Debt, unless and
until such default with respect to Senior Subordinated Debt has been remedied in
a manner reasonably satisfactory to the holders of the Senior Subordinated Debt
or waived in writing.
B(2). Acceleration of Payment of Senior Subordinated Debt. If at the
time (i) the Senior Subordinated Debt shall have been declared by the holders
thereof due and payable before its expressed maturity and (ii) such acceleration
shall not have been expressly rescinded in writing by the holders of Senior
Subordinated Debt pursuant to the Securities Purchase Agreement, then any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable with respect to the Seller
Subordinated Debt shall be paid or delivered directly to the holders of Senior
Subordinated Debt, ratably, for application in payment thereof, unless and until
all Senior Subordinated Debt shall have been paid in full or such acceleration
shall have been rescinded.
B(3). Bankruptcy or Insolvency. In the event of (a) any insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition or other
similar proceedings, or any receivership proceedings in connection therewith,
relative to the Company or any Guarantor, their creditors as such or their
property; (b) any proceedings for liquidation, dissolution or other winding-up
of the Company or Northeast, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings; (c) any assignment of the Company or any
Guarantor for the benefit of creditors; (d) any other marshaling of the assets
of the Company or any Guarantor; or (e) any acceleration of any Senior
Subordinated Debt, then all Senior Subordinated Debt (including any interest
thereon occurring at the legal rate after the commencement of such proceedings),
shall be paid in full before any further payment or distribution, whether in
cash, securities or other property, is made with respect to the Seller
Subordinated Debt. In any of such proceedings, any payment or distribution of
any kind or character, whether in cash, property or securities, which may be
payable or deliverable with respect to the Seller Subordinated Debt shall be
paid or delivered directly to the holders of the Senior Subordinated Debt
(including any interest thereon occurring at the legal rate after the
commencement of any such proceeding in addition to interest that would have
accrued thereon but for the commencement of such proceedings), ratably, for
application in payment thereof, unless and until all Senior Subordinated Debt
shall have been paid in full.
C. Rights of Holders of Senior Subordinated Debt Not to Be Impaired.
No right of any present or future holder of any Senior Subordinated Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act by any such holder, or by
any noncompliance by the Company, any Guarantor or the Senior Subordinated
Creditor with the terms and provisions and covenants herein contained,
regardless of any knowledge thereof any such holder of the Senior Subordinated
Debt may have or otherwise be charged with. The provisions of this Section 1.2
are intended to be for the benefit of, and shall be enforceable directly by, any
one or more of the holders from time to time of the Senior Subordinated Debt.
The Senior
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Subordinated Creditor waives notice of or proof of reliance on the Subordination
Agreement and protest, demand for payment and notice of default by the holders
of Senior Subordinated Debt.
D. Company's Obligation Unconditional. The provisions of this Section
1.2 are solely for the purpose of defining the relative rights of the holders of
Senior Subordinated Debt, on the one hand, and the holders of the Seller
Subordinated Debt, on the other hand, against the Company and Northeast and
their properties. Nothing herein shall impair, as between the Company and
Northeast, on the one hand, and the Senior Subordinated Creditors, on the other
hand, the obligation of the Company and Northeast which is unconditional and
absolute, to pay all amounts due with respect to the Seller Subordinated Debt in
accordance with the terms thereof and the provisions hereof and, except as
expressly provided in this Section 1.2, nothing herein shall prevent the Seller
Subordinated Creditor from exercising all remedies otherwise permitted by
applicable law, hereunder or under the Seller Subordinated Note, subject to the
rights under this Section 1.2 of holders of Senior Subordinated Debt to receive
cash, property or securities otherwise payable or deliverable to the Senior
Subordinated Creditors. The failure to make any payment with respect to the
Subordination Agreement by reason of any provision of this Section 1.2 shall not
be construed as preventing the occurrence of a default hereunder.
E. Payments Held in Trust. If the Seller Subordinated Creditor shall
receive any payment or delivery of cash, property or securities in respect of
the Seller Subordinated Note in contravention of any of the provisions of this
Section 1.2 and before all the Senior Subordinated Debt shall have been paid in
full, the Seller Subordinated Creditor will hold any amount so received in trust
for benefit of the holders of Senior Subordinated Debt and will forthwith
deliver and transfer to the holders of Senior Subordinated Debt such payment or
delivery in the form received to be applied in payment or prepayment of Senior
Subordinated Debt; provided, however, that the Seller Subordinated Creditor
shall not be obligated to make an independent determination as to whether a
payment received by it was appropriately made by the Payor.
F. Subrogation. (a) Upon the payment in full of all Senior
Subordinated Debt, the Seller Subordinated Creditor shall be subrogated to the
rights of the holders of Senior Subordinated Debt to receive payments or
distributions of assets of the Payor applicable to Senior Subordinated Debt
until the Seller Subordinated Debt shall have been paid in full. For the purpose
of subrogation, no payments to the holders of Senior Subordinated Debt of any
cash, property or securities that the Seller Subordinated Creditor would be
entitled to receive and retain but for the provisions of this Section 1.2, and
no payment over pursuant to the provisions of this Section 1.2 to holders of
Senior Subordinated Debt by the Seller Subordinated Creditor, shall, as between
the Payor and its creditors (other than the holders of Senior Subordinated
Debt), on the one hand, and the Seller Subordinated Creditor, on the other hand,
be deemed to be a payment by the Payor with respect to the Senior Subordinated
Debt.
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(b) The Seller Subordinated Creditor agrees that if it becomes
subrogated to the rights of the holders of the Senior Subordinated Debt as a
result of a payment or distribution to the holders of the Senior Subordinated
Debt pursuant to these subordination provisions and they obtain payment in cash
or property from the Payor and apply such payment to the Seller Subordinated
Debt, and if any payment by the Payor to holders of the Senior Subordinated Debt
must be disgorged by the holders of the Senior Subordinated Debt as a result of
any action under the United States Bankruptcy Code or other debtor relief law,
the Seller Subordinated Creditor shall disgorge and pay to the holders of the
Senior Subordinated Debt any amount collected by the Seller Subordinated
Creditor in exercising their rights of subrogation that was applied to payment
of the Seller Subordinated Debt.
G. Subordinated Debt Liens. (a) Notwithstanding any defect,
deficiency, error or omission contained in any security instruments hereafter
creating any lien or security interest securing payment of all or any portion of
the Senior Subordinated Debt ("SENIOR SUBORDINATED DEBT LIENS") and
notwithstanding any defect, deficiency, error or omission in the execution,
acknowledgment or filing or recording of same, the Seller Subordinated Creditor
waive and relinquish all rights to contest, question or raise any such defect,
deficiency, error or omission, and further acknowledges, ratifies and confirms
that, as between the Seller Subordinated Creditor and the holders of the Senior
Subordinated Debt, the Senior Subordinated Debt Liens on the property covered
thereby are, or when the security interests creating the Senior Subordinated
Debt Liens are executed will be, valid and perfected security interests and
liens, senior in priority to any and all liens in favor of the Seller
Subordinated Creditor.
(b) The Seller Subordinated Creditor agrees that, notwithstanding any
agreement in any document now or hereafter existing relating to or securing
payment of the Seller Subordinated Debt, so long as any portion of Senior
Subordinated Debt remains unpaid, and upon notice to the Seller Subordinated
Creditor, the holders of Senior Subordinated Debt upon foreclosure of the Senior
Subordinated Debt Liens, may sell any property covered by any of the Senior
Subordinated Debt Liens without the approval of or consent from the Seller
Subordinated Creditor, and any provision in any such document which requires the
consent or approval of the Seller Subordinated Creditor prior to any such sale
is hereby waived and relinquished so long as any part of the Senior Subordinated
Debt remains unpaid, and the interest, if any, of the Seller Subordinated
Creditor in such property so sold shall be deemed to be released without the
necessity of any executed release, termination or other act.
(c) Any holder of Senior Debt may extend, renew, modify or amend the
terms of any security therefor and release, sell or exchange such security and
otherwise deal freely with the Company, any Guarantor or any affiliate to the
same extent as could any person, all without notice to or consent of the Seller
Subordinated Creditor and without affecting the liabilities and obligations of
the Seller Subordinated Creditor pursuant to the provisions hereof.
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(d) The Seller Subordinated Creditor agrees that, notwithstanding any
agreement in any document now or hereafter existing relating to or securing
payment of the Seller Subordinated Debt, so long as any portion of Senior
Subordinated Debt remains unpaid, unless prior approval of or consent is
obtained from the Senior Subordinated Creditors, the Seller Subordinated Debt
will be and remain unsecured.
H. Waiver. The Seller Subordinated Creditor agree that,
notwithstanding any agreement to the contrary, so long as any portion of Senior
Subordinated Debt remains unpaid, any provision in any document now or hereafter
existing which requires the consent or approval of the Seller Subordinated
Creditor prior to the taking of any action by the Senior Subordinated Creditors
is hereby waived and relinquished.
I. Amendment. The provisions in Sections A through I shall not be
amended or modified and no term or provision hereof shall be waived without the
express prior written consent of the holders of Senior Subordinated Debt.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Seller Subordinated Creditor hereby represent and warrant to the
holders of the Senior Subordinated Debt that:
SECTION 2.1 Capacity. The Seller Subordinated Creditor is a
corporation duly formed as such under the laws of the State of New York which
has full authority to enter into this Subordination Agreement.
SECTION 2.2. Authorization, Absence of Conflicts. The execution,
delivery and performance by them of this Subordination Agreement (a) will not
(i) violate any law or regulations applicable to the Seller Subordinated
Creditor, (ii) violate or constitute (with due notice or lapse of time or both)
a default under any indenture, agreement, license or other instrument to which
the Seller Subordinated Creditor is a party or by which it or any of its
properties may be bound or affected, (iii) violate any order of any court,
tribunal or governmental agency binding upon them or their properties or (iv)
result in the creation or imposition of any Lien of any nature whatsoever upon
any of its properties or assets and (b) does not require any license, consent or
approval of any governmental agency or regulatory authority.
SECTION 2.3. Binding Obligations. This Subordination Agreement
constitutes a legal, valid and binding obligation of the Seller Subordinated
Creditor, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium or similar laws affecting enforceability of
creditors' rights generally or equitable principles at the time in effect.
ARTICLE III
DEFAULT AND REMEDIES
SECTION 3.1. Exercise of Rights. If an Event of Default shall occur
and be continuing, a majority (by principal amount of the Senior Subordinated
Notes then outstanding) of the Senior Subordinated Creditors shall have the
right, power and authority to do all things they deem necessary or advisable to
enforce the provisions of this Subordination Agreement. A majority (by principal
amount of the Senior Subordinated Notes then outstanding) of the Senior
Subordinated Creditors shall have the right in their sole discretion to
determine which rights, guarantees, liens, security interests or remedies they
shall retain, pursue, release, subordinate, modify or take any other action with
respect thereto, without in any way modifying or affecting any other of them or
any of their rights hereunder.
SECTION 3.2. Expenses. The Company agrees to pay on demand all
reasonable costs and expenses of the Senior Subordinated Creditors (including
without limitation all reasonable fees and disbursements of any counsel to the
Senior Subordinated Creditors), incurred by the Senior Subordinated Creditors in
connection with the enforcement of the Senior Subordinated Creditors' rights
hereunder and the collection of amounts payable hereunder. This agreement to pay
costs is cumulative of, and shall not limit, the Senior Subordinated Creditors
rights to indemnification against all liability, loss or damages pursuant to
paragraph 12B of the Securities Purchase Agreement.
SECTION 3.3. Cumulative Remedies. This Subordination Agreement and the
obligations of the Seller Subordinated Creditor hereunder are in addition to and
not in substitution for any other obligations or security interests now or
hereafter held by the Senior Subordinated Creditors. The remedies herein
provided are cumulative and are not exclusive of any remedy provided by law.
SECTION 3.4. Waivers and Amendments. No failure on the part of the
Senior Subordinated Creditors to exercise, and no delay in exercising, and no
course of dealing with respect to, any right, power or remedy hereunder shall
operate as a waiver thereof or of any default, nor shall any single or partial
exercise by the Senior Subordinated Creditors of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy of the Senior Subordinated Creditors. No
modification or waiver of any provision of this Subordination Agreement nor
consent to any departure herefrom shall in any event be effective unless the
same shall be in writing and signed by the Senior Subordinated Creditors and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Notices. All notices, requests, demands or other
communications related to this Subordination Agreement to or on the Seller
Subordinated Creditor or any Senior Subordinated Creditors shall be in writing
and shall be sent by first class mail, overnight courier or by fax with hard
copy by first class mail or overnight courier, if to the Seller Subordinated
Creditor, to their address set forth on the signature pages hereto and, if to
any Senior Subordinated Creditors, to the respective addresses set forth on
Schedule I, or at such other address or facsimile numbers as any such party may
hereafter specify to the others in writing, and (unless otherwise specified
herein) shall be deemed received 24 hours after it is sent if sent via facsimile
(with receipt confirmed) or overnight courier.
SECTION 4.2. Successors and Assigns; Survival. (a) This Subordination
Agreement shall inure to the benefit of and shall be binding upon the respective
successors and assigns of the parties hereto; provided, however, that any such
successor or assignee shall agree to be bound by this Agreement. All covenants,
agreements, representations and warranties made herein by the Seller
Subordinated Creditor shall survive the execution and delivery of this
Subordination Agreement and shall continue in full force and effect until all
Obligations have been paid in full.
(b) Any Senior Subordinated Creditor may assign its rights and powers
under this Subordination Agreement, and, in the event of such assignment, the
assignee of such rights and powers, to the extent of such assignment, shall have
the same rights and remedies as if originally named herein in the place of such
Senior Subordinated Creditor.
SECTION 4.3. Section Headings. Article and Section headings contained
in this Subordination Agreement are for convenience only and shall not affect
the construction of this Subordination Agreement.
SECTION 4.4. Governing Law. This Subordination Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to the conflicts or choice of law principles thereof.
SECTION 4.5. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SUBORDINATION AGREEMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
SUBORDINATION AGREEMENT, THE SELLER SUBORDINATED CREDITOR HEREBY ACCEPTS FOR
ITSELF AND IN
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RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE SELLER SUBORDINATED CREDITOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE SELLER SUBORDINATED CREDITOR AT THEIR ADDRESS SET FORTH
IN SECTION 4.1, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE SENIOR SUBORDINATED CREDITOR TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE SELLER SUBORDINATED CREDITOR IN ANY
OTHER JURISDICTION.
SECTION 4.6 Severability. If any part of this Subordination Agreement
is contrary to, prohibited by or deemed invalid under any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, without
invalidating the remainder hereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
SECTION 4.7. WAIVER OF TRIAL BY JURY. THE SELLER SUBORDINATED CREDITOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED
BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS SUBORDINATION AGREEMENT OR ANY OTHER AGREEMENT
OR DOCUMENT REFERRED TO HEREIN AND THE SELLER SUBORDINATED CREDITOR AGREE THAT
ANY SUCH DISPUTE SHALL, AT THE OPTION OF ANY SENIOR SUBORDINATED CREDITOR AS THE
CASE MAY BE, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
SECTION 4.8. Counterparts. This Subordination Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
ARTICLE V
TERMINATION
This Agreement shall terminate upon the payment in full of all
Obligations.
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IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be duly executed by their duly authorized officers as of the day
and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA,
INC., a Texas corporation
By:___________________________
Name:_________________________
Title:________________________
ADDRESS:
Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
NORTHEAST
LITIGATION RESOURCES OF AMERICA-NORTHEAST,
INC., a New York corporation
By:____________________________
Name:__________________________
Title:_________________________
ADDRESS:
Litigation Resources of America-Northeast, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
THE SELLER SUBORDINATED CREDITOR:
AMICUS ONE LEGAL SUPPORT SERVICES, INC.,
a New York corporation
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By:____________________________
Name:__________________________
Title:_________________________
ADDRESS:
______________________________
______________________________
New York, New York 100__
SENIOR SUBORDINATED CREDITORS:
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By:__________________________________
Name:________________________________
Title:_________________________________
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLAN OF ICI AMERICAN HOLDINGS
INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By:__________________________________
Name:________________________________
Title:_________________________________
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLAN OF ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
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By:_________________________________
Name:_______________________________
Title:______________________________
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Senior Subordinated Creditors:
SCHEDULE I
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-332-1334
Attn: Xxxxxx X. Xxxxxx
DECLARATION OF TRUST
FOR DEFINED BENEFIT
PLAN OF ZENECA HOLDINGS INC.
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-332-1334
Attn: Xxxxxx X. Xxxxxx
DECLARATION OF TRUST
FOR DEFINED BENEFIT
PLAN OF ICI AMERICAN HOLDINGS INC.
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-332-1334
Attn: Xxxxxx X. Xxxxxx
with a copy to, in each case,
XXXXXXX XXXX & XXXXXXXXX
One Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: 000-000-0000
Attn: Xxxxxxx X. Xxxxx, Xx.
EXHIBIT F-2
SELLER DEBT SUBORDINATION AGREEMENT
This Seller Debt Subordination Agreement (the "Agreement") is made and
entered into effective September 4, 1997, by and among LITIGATION RESOURCES OF
AMERICA, INC., LOONEY & COMPANY, XXXXX, BURY & ASSOCIATES, INC., LITIGATION
RESOURCES OF AMERICA-CALIFORNIA, INC., LITIGATION RESOURCES OF AMERICA-MIDWEST,
INC., LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC. ("LRA-NE"), BLOCK COURT
REPORTING, INC. and BLOCK TAPE TRANSCRIPTION SERVICES, INC. (sometimes herein
collectively called the "Borrowers," and singly called a "Borrower"), and AMICUS
ONE LEGAL SUPPORT SERVICES, INC. (the "Subordinate Creditor"), and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION (the "Senior Creditor").
RECITALS
The Borrowers are indebted to the Senior Creditor pursuant to the terms
of a Third Amended and Restated Credit Agreement (the "Credit Agreement") dated
September 4, 1997, among the Borrowers and the Senior Creditor, and may become
further indebted to the Senior Creditor. All Indebtedness, liabilities and
obligations of any of the Borrowers under the Credit Agreement or any other
document or instrument evidencing, securing, guaranteeing or in any manner
pertaining to the Loans (collectively, the "Loan Documents"), and all other
Indebtedness owing by any of the Borrowers to the Senior Creditor howsoever
evidenced (such documents evidencing, securing, guaranteeing, or pertaining to
such other Indebtedness are also included within the definition of the "Loan
Documents"), whether now or hereafter existing for principal or interest
(including without limitation interest accruing after the commencement of any
proceeding referred to in Section 3), or for fees, expenses or otherwise, are
herein called the "Senior Debt." All terms used in this Agreement shall, unless
otherwise herein specifically given another meaning, have the meanings ascribed
to them in the Credit Agreement.
LRA, LRA-NE, the Subordinated Creditor, Xxxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxxx, Xxxx Xxxxxxxx and Xxxxxx Xxxxxxx have entered into an Agreement of
Purchase and Sale of Assets (the "Amicus Agreement") dated as of September 4,
1997, for the sale by the Subordinated Creditor and the purchase by LRA-NE of
substantially all of the assets (the "Assets") which are owned by the
Subordinated Creditor. Pursuant to the terms of the Amicus Agreement, LRA-NE
will become indebted to the Subordinated Creditor as evidenced by a 6%
convertible subordinated promissory note (the "Note") in the original principal
sum of $560,000.00, to be executed by LRA-NE payable to the order of the
Subordinated Creditor. One or more of the Borrowers may, from time to time,
become further indebted to the Subordinated Creditor for other or further
Indebtedness, liabilities or obligations. All such Indebtedness now owing, and
all other Indebtedness, liabilities or obligations any of the Borrowers to the
Subordinated Creditor hereafter existing, are herein called the "Subordinated
Debt." The foregoing term includes, but is not limited to, all obligations of
any of the Borrowers owing to the Subordinated Creditor whether, (i) created
directly or acquired by assignment or otherwise, (ii) evidenced by a note, open
account, application for letter of credit, or otherwise, (iii) absolute or
contingent, (iv) joint, several or independent, (v) arising by operation of law,
or (vi) otherwise.
LRA-NE has requested that the Senior Creditor consent to the sale and
purchase transaction with the Subordinated Creditor to be evidenced by the
Amicus Agreement. Conditioned on the Subordinated Creditor and the Borrowers
executing and delivering this Agreement to the Senior Creditor and the
acquisition of all of the Assets, the Senior Creditor is willing to consent to
the
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Amicus Agreement, the sale and purchase transaction to occur pursuant thereto
and to the continuation of the Loans to the Borrowers pursuant to the Credit
Agreement. It is expressly understood and agreed by the parties that this
Agreement relates to and includes all Indebtedness of any of the Borrowers to
the Subordinated Creditor, whether presently existing or to exist in the future.
AGREEMENT
In consideration of the premises, for other good, fair and valuable
considerations, the receipt, adequacy and reasonable equivalency of which are
acknowledged, and as an inducement to the Senior Creditor to consent to the
Amicus Agreement and the sale and purchase transaction to occur pursuant
thereto, and to continue financial accommodations to the Borrowers, it is agreed
among the parties as follows:
1. Subordination. The Borrowers and the Subordinate Creditor agree that
the payment of or in respect of the Subordinated Debt owing or to become owing
in the future is and shall be expressly subordinated to the prior payment in
full of all Senior Debt to the extent and in the manner hereinafter set forth.
2. Payments on the Subordinated Debt. Except as herein provided, no
payments shall be made on the Subordinated Debt.
A. (1) Expect as permitted in Section 2.B, Section 2.C or Section
3.A(5), or unless and until all Senior Debt has been paid in full and
no commitment is in existence to advance or create the Senior Debt,
no payment shall be made by any of the Borrowers, directly or
indirectly, in respect of or on the Subordinated Debt, and (2) the
Subordinate Creditor shall not ask, demand, xxx for, take any action
to enforce, take or receive, directly or indirectly, in cash or other
property, by sale, setoff or in any other manner whatsoever, any
amounts owing in respect of the Subordinated Debt. In the event that
notwithstanding the provisions of the preceding sentence of this
Section, any of the Borrowers shall make any payment on account of or
in respect of the Subordinated Debt in violation of this Agreement,
such payment shall be segregated from other funds and property of the
Subordinate Creditor and held by the Subordinate Creditor in trust
for the benefit of, and shall be promptly paid over and delivered to
the Senior Creditor, with any necessary endorsement, for the payment
of all Senior Debt remaining unpaid to the extent necessary to pay
all Senior Debt or held as collateral in the case of non-cash
property for the payment of the Senior Debt.
B. Notwithstanding anything to the contrary contained in Section 2.A, so
long as there shall exist no Event of Default of which the
Subordinate Creditor shall have been given notice (or if notice of an
Event of Default shall have been given to the Subordinate Creditor
and the Borrowers shall have cured the Event of Default without the
Senior Creditor accelerating the Senior Debt), LRA-NE may make, and
the Subordinate Creditor may receive and retain for the Subordinate
Creditor's account, scheduled accrued interest payments, as and when
such interest payments accrue on the Note.
C. Notwithstanding anything to the contrary contained in Section 2.A, so
long as, (a) there shall exist no Event of Default of which the
Subordinate Creditor shall have been given notice (or if notice of an
Event of Default shall have been given to the Subordinate Creditor
and the Borrowers shall have cured the Event of Default without the
Senior Creditor accelerating the
-2-
Senior Debt), (b) there shall not have occurred any default under the
terms hereof, (c) the Borrowers are in compliance with the Borrowers'
covenants set out in the Credit Agreement, and (d) any such payment
shall not cause a Default, LRA-NE may make, and the Subordinate
Creditor may receive and retain for the Subordinate Creditor's
account, scheduled principal installment payments, as and when such
principal payments are due on the Note and pay the entire balance of
the Subordinated Debt from the proceeds from one or more equity
offerings, or offerings of Subordinated Debt.
D. The quarterly installments to be paid on the Note shall not exceed
$41,333.33 of principal, together with accrued interest thereon,
without the Senior Creditor's prior written consent.
E. LRA-NE and the Subordinate Creditor shall maintain records with
respect to such payments and upon the occurrence of a Default or of
an Event of Default of which the Subordinate Creditor shall have been
given notice and, during the continuance of any uncured Event of
Default, no Borrower or any guarantor of the Senior Debt shall have
the right to make, and the Subordinate Creditor shall cease to have
the right to receive and retain, any payments on the Subordinated
Debt and all such payments received by the Subordinate Creditor
thereafter shall be held in trust for the benefit of the Senior
Creditor pursuant to this Agreement.
3. Furtherance of Subordination.
A. Upon any distribution of all or any of the assets of any of the
Borrowers, (whether in (i) connection with the dissolution, winding
up, liquidation, arrangement, reorganization, adjustment, protection,
relief or composition of any of the Borrowers or the Indebtedness of
any of the Borrowers, (ii) any bankruptcy, insolvency, arrangement,
reorganization, receivership, relief or similar proceedings of any of
the Borrowers, or (iii) upon an assignment for the benefit of
creditors or otherwise of any of the Borrowers (collectively, the
foregoing being "Proceedings," or individually, a "Proceeding")) the
following provisions shall apply:
(1) The Senior Creditor shall first be entitled to receive payment in
full of the principal thereof, premium, if any, and interest,
including post-petition interest due on the Senior Debt, before the
Subordinate Creditor is entitled to receive any payment on account of
or in respect of the Subordinated Debt.
(2) Any payment, Dividend or distribution of assets of any of the
Borrowers of any kind or character, whether in cash, property or
securities to which the Subordinate Creditor would be entitled except
for the provisions of this Agreement, shall be paid by the Person
making such payment or distribution, whether a trustee in bankruptcy,
a receiver or liquidating trustee or other trustee or agent, directly
to the Senior Creditor to the extent necessary to make payment in full
of all Senior Debt remaining unpaid.
(3) In any Proceeding, the Senior Creditor is irrevocably authorized
and empowered (in the name of the Subordinate Creditor or otherwise),
but shall not have the obligation, to demand, xxx for, collect and
receive every payment or distribution referred to in Section 3.A.(1)
and Section 3.A.(2) and give acquittance therefor and to file claims
and proofs of claim and take such other action (including, without
limitation, voting the Subordinated Debt or enforcing any security
interest or other Lien securing payment of the Subordinated Debt)
-3-
as the Senior Creditor may deem necessary or advisable for the
exercise or enforcement of any of the rights or interests of the
Senior Creditor hereunder.
(4) In any Proceeding, the Subordinate Creditor shall duly and
promptly take such action to the extent, and only to the extent, as
the Senior Creditor may expressly request, (a) to collect the
Subordinated Debt for the account of the Senior Creditor and to file
appropriate claims or proofs of claim in respect of the Subordinated
Debt, (b) to execute and deliver to the Senior Creditor such powers
of attorney, assignments, or other instruments as the Senior Creditor
may request in order to enable the Senior Creditor to enforce any and
all claims with respect to, and any security interest and Liens
securing payment of, the Subordinated Debt, and (c) to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to the Subordinated Debt.
(5) If, and to the extent, the Senior Creditor shall not elect or
shall fail to take the actions authorized in Section 3.A.(3), the
Subordinate Creditor may demand, xxx for, collect and, after the
Senior Debt is paid in full, including, if necessary, the payment
over by the Subordinate Creditor to the Senior Creditor of amounts
due on the Senior Debt, receive every payment or distribution
referred to in Section 3.A.(1) and Section 3.A.(2) and give
acquittance therefor and to file claims and proofs of claim and take
such other action (including, without limitation, voting the
Subordinated Debt or enforcing any security interest or other Lien
securing payment of the Subordinated Debt) as the Subordinate
Creditor may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the Subordinate
Creditor.
B. To the fullest extent permitted by law, the Subordinate Creditor
irrevocably agrees that the Subordinate Creditor will not exercise
and the Subordinate Creditor waives, any right of setoff, including,
without limitation, any right of setoff under (S)553 of the
Bankruptcy Code. If the foregoing waiver is adjudicated unenforceable
by a court, then the Subordinated Creditor agrees that, in the event
that the Subordinated Creditor exercises any right of setoff in any
Proceeding, the Subordinate Creditor will pay directly to the Senior
Creditor an amount equal to the amount of the Subordinated Debt which
was so setoff for application to the Senior Debt until all Senior
Debt shall have been paid in full.
C. In the event that, notwithstanding the foregoing provisions of this
Section 3, any payment or distribution of assets of any of the
Borrowers of any kind or character, whether in cash, property or
securities, shall be received by the Subordinate Creditor in
violation of this Agreement on account of the Subordinated Debt
before all Senior Debt is paid in full, or effective provision shall
have been made for its payment, such payment or distribution shall be
received and held in trust for and shall be paid over to the Senior
Creditor for application to the payment of the Senior Debt until all
Senior Debt shall have been paid in full.
D. The Senior Creditor is authorized to demand specific performance of
this Agreement, whether or not the Borrowers shall have complied with
any of the provisions hereof applicable to any of the Borrowers at
any time when the Subordinate Creditor shall have failed to comply
with any of the provisions of this Agreement applicable to the
Subordinate Creditor. The Subordinate Creditor irrevocably waives
any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such relief of specific performance.
-4-
4. Subordination of Liens. The Subordinate Creditor agrees that the
Subordinate Creditor will not hold any Lien or security interest in any real or
personal property as security for any of the Subordinated Debt unless the Senior
Creditor has given the Senior Creditor's prior written consent to the creation
thereof. All such Liens and security interest (including if the Subordinate
Creditor shall acquire any Lien or security interest in the future as security
for the Subordinated Debt regardless of whether such Lien or security interest
is permitted or prohibited by this Agreement or the Loan Documents) will be held
by the Subordinate Creditor in accordance with the terms of this Agreement for
the benefit of the Senior Creditor and shall enforce such Lien or security
interest in accordance with the written instructions of the Senior Creditor. Any
cash or other property received in violation of this Agreement on account of any
Lien or security interest securing the Subordinated Debt shall be delivered to
the Senior Creditor and, in the case of cash, applied to, or, in the case of
other property, held as collateral for, the Senior Debt. To the extent that any
Subordinated Debt is now or hereafter secured by a Lien or security interest (a
"Subordinate Lien") against any real or personal property that is also subject
to a Lien or security interest securing the Senior Debt (a "Senior Debt"), the
Subordinate Creditor agrees that such Subordinate Lien shall be second, junior
and subordinate to such Senior Lien and such Senior Lien shall be first and
prior to such Subordinate Lien. It is agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens and security interests, or the time or order
of filing of Liens and security interest, or the time or order of filing of
financing statements, or the giving or failure to give notice of the acquisition
or expected acquisition of purchase money or other security interests.
5. Commencement of Proceedings. The Subordinate Creditor agrees that, so
long as any of the Senior Debt shall remain unpaid, the Subordinate Creditor
will not commence, or join with any creditor other than the Senior Creditor in
commencing any Proceeding referred to in Section 3.A.
6. Subrogation. The Subordinate Creditor agrees that until indefeasible
payment in full of the Senior Debt shall have occurred without the right of any
Person to set aside or contest the payment thereof and no commitment is in
existence to advance or create Senior Debt, no payment or distribution to the
Senior Creditor pursuant to the provisions of this Agreement shall entitle the
Subordinate Creditor to exercise any right of subrogation in respect thereof and
the Subordinate Creditor shall not be subrogated to the rights of the Senior
Creditor to receive payments or distributions of assets of the any of the
Borrowers made on the Senior Debt. As among the Borrowers and all other
creditors (other than the Senior Creditor and the Subordinate Creditor), all
payments or distributions made to the Senior Creditor to which the Subordinate
Creditor would otherwise be entitled except for the terms of this Agreement
shall be deemed to be a payment by the Borrowers to or on account of
Subordinated Debt and not payment with respect to the Senior Debt. It is
expressly understood that this Agreement is intended solely to be for the
purposes of defining the rights among the Senior Creditor and the Subordinate
Creditor and shall not affect the rights of the Subordinate Creditor against any
other Person.
7. Subordination Legend: Further Assurances.
A. LRA-NE and the Subordinate Creditor will cause each instrument
evidencing Subordinated Debt to be endorsed with the following legend:
"The indebtedness evidenced by this instrument is subordinated to the
Senior Debt (as defined in the Subordination Agreement below referred
to) pursuant to, and to the extent provided in, the Subordination
Agreement dated effective as of September 4, 1997, by
-5-
the maker hereof and payee named herein in favor of Texas
Commerce Bank National Association referred to in such
Subordination Agreement."
B. The Borrowers and the Subordinate Creditor each will further xxxx
their respective books of account in such a manner as shall be
effective to give proper notice of the effect of this Agreement and
will, in the case of any Subordinated Debt which is not evidenced by
any instrument, upon the Senior Creditor's reasonable request, cause
such Subordinated Debt to be evidenced by an appropriate instrument
or instruments endorsed with the above legend. The Borrowers and the
Subordinate Creditor each will, at their respective expense and at
any time and, from time to time, promptly execute and deliver all
further instruments and documents, and take all further actions that
may be necessary or desirable, or that the Senior Creditor may
reasonably request, in order to protect any right or interest
granted or purported to be granted hereby or to enable the Senior
Creditor to exercise and enforce the Senior Creditor's rights and
remedies hereunder.
8. Changes or Dispositions of Subordinated Debt. The Subordinate
Creditor shall not, (a) cancel or otherwise discharge any of the Subordinated
Debt or subordinate any of the Subordinated Debt to any Indebtedness of any of
the Borrowers other than the Senior Debt, (b) sell, assign, pledge, encumber or
otherwise dispose of any of the Subordinated Debt (and any attempted action
in violation of this Section shall be void), or (c) permit the terms of any of
the Subordinated Debt to be changed in such a manner as to have an adverse
effect upon the rights or interests of the Senior Creditor.
9. Agreement by the Borrowers. The Borrowers agree that none of the
Borrowers will make any payment of any of the Subordinated Debt, or take any
other action in contravention of the provisions of this Agreement.
10. Senior Debt Not Affected. All rights and interests of the Senior
Creditor hereunder, and all agreements and obligations of the Borrowers and the
Subordinate Creditor under this Agreement, shall remain in full force and
effect irrespective of, (a) any lack of validity or enforceability of all or any
portion of this Agreement, (b) any change in the amount of interest rate
accruing on, time, manner or place of payment of, or in any other term of, all
or any of the Senior Debt, or any amendment or waiver of any consent to
departure from any of the Loan Documents, including, without limitation, changes
in the terms of disbursement of the Loan proceeds or repayment thereof,
modifications, extensions or renewals of payment dates, changes in interest rate
or the advancement of additional funds by the Senior Creditor in the Senior
Creditor's discretion, (c) any exchange, release or non-perfection of any
collateral or any release or amendment or waiver of or consent to departure from
any guaranty for all or any of the Senior Debt, (d) lack of the reservation of
any rights against the Subordinate Creditor or any other Person (all of which
are waived by the Subordinate Creditor), or (e) any other circumstance in
respect of this Agreement which might otherwise constitute a defense available
to, or a discharge of, any of the Borrowers of or in respect of the Senior Debt
or the Subordinate Creditor.
11. Reinstatement. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by the Senior Creditor upon the
insolvency, the bankruptcy or reorganization of any of the Borrowers or
otherwise, all as though such payment had not been made.
6
12. Waivers. Except as specifically set out herein, the Subordinate
Creditor waives promptness, diligence, notice of acceptance, notice of intention
to accelerate, notice of acceleration and any other notice with respect to any
of the Senior Debt and this Agreement and any requirement that the Senior
Creditor protect, secure, perfect or insure any security interest or Lien or any
property subject thereto or exhaust any right or take any action against any of
the Borrowers or any other Person or any Collateral. Except as specifically set
out herein, the Subordinate Creditor waives any right or benefit of any notice
of any action, event or circumstance relating to the Senior Debt, including but
not limited to the incurring, modification, default, exercise of remedies,
compromise or release of or with respect to the Senior Debt.
13. Representations and Warranties.
A. LRA-NE and the Subordinate Creditor represent and warrant that the
Subordinated Debt represented by the Note, (1) bears interest, and at
all times prior to the payment in full of the Senior Debt, will bear
interest at six (6) per cent per annum, (2) the principal of the Note
is due and payable in sixteen (16) quarterly installments commencing
on October 1, 1998, and continuing on each January 1, April 1, July 1
and October 1 thereafter, and (3) the interest on the Note is due and
payable as it accrues in quarterly installments commencing on October
1, 1997, and continuing on each January 1, April 1, July 1 and
October 1 thereafter.
B. Each of the Borrower respectively represents and warrants that, (1)
the Subordinated Debt now outstanding, true and complete copies of
any instruments evidencing which having been furnished to the Senior
Creditor, has not been amended or otherwise modified and constitutes
the legal, valid and binding obligation of the Borrowers enforceable
against the Borrowers in accordance with its terms, and (2) there
exists no default in respect of any such Subordinated Debt.
C. The Subordinate Creditor represents and warrants that, (1) the
Subordinate Creditor owns the Subordinated Debt now outstanding free
and clear of any Lien, security interest, charge or encumbrance or
any rights of others, (2) the execution, delivery and performance by
the Subordinate Creditor of this Agreement do not and will not
contravene any law or governmental regulation or any contractual
restriction binding on or affecting the Subordinate Creditor or any
of the Subordinate Creditor's properties, and do not and will not
result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of the
Subordinate Creditor's properties, (3) this Agreement is a legal,
valid and binding obligation of the Subordinate Creditor, enforceable
against the Subordinate Creditor in accordance with its terms, and
(4) to the knowledge of the Subordinate Creditor, there exists no
default in respect of any Subordinated Debt.
14. Amendments. No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Subordinate Creditor or any of the
Borrowers therefrom shall in any event be effective unless the same shall be in
writing and signed by the Senior Creditor, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
15. Expenses. The Borrowers and the Subordinate Creditor jointly and
severally agree to pay, upon demand, to the Senior Creditor the amount of any
and all reasonable expenses, including the reasonable fees and expenses of the
Senior Creditor's counsel, which the Senior Creditor may incur in
7
connection with the exercise or enforcement of any of the rights or interests
of the holders of the Senior Debt hereunder.
16. Notices. Any notice required or permitted to be given hereunder
shall be in writing, shall be addressed to the parties hereto at the respective
addresses set out below, which may be changed by the giving of written notice to
that effect pursuant hereto, and shall be deemed effectively given if (i)
delivered personally, or (ii) upon being deposited with the U.S. Postal Service,
postage prepaid, certified mail, return receipt requested:
If to any of the Borrowers: LITIGATION RESOURCES OF AMERICA, INC.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to the Subordinated Creditor: AMICUS ONE LEGAL SUPPORT SERVICES, INC.
c/o Xxxxxx X. Xxxxxxxx, Esquire
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Senior Creditor: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
17. No Waiver, Remedies. No failure on the part of the Senior Creditor
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, or shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
18. Continuing Agreement: Transfer of Note. All representations,
warranties and covenants made by the Subordinate Creditor or any of the
Borrowers or on behalf of any of the Borrowers shall be considered to have been
relied upon by the Senior Creditor and shall survive execution and delivery
of the Loan Documents regardless of any investigation by or on behalf of the
Senior Creditor or any discovery of any thereof. This Agreement is a continuing
agreement and shall, (a) remain in full force and effect until the Senior Debt
shall have been paid in full, (b) be binding upon the Subordinate Creditor, the
Borrowers and their respective successors and assigns and any subsequent holder
of Subordinated Debt, and (c) inure to the benefit of and be enforceable by the
Senior Creditor and the Senior Creditor's successors, transferees and assigns of
the Senior Debt. Without limiting the generality of the foregoing, the Senior
Creditor may assign or otherwise transfer the evidence of any Senior Debt held
by the Senior Creditor to any other Person, and such other Person shall
thereupon become vested with all the rights in respect thereof granted to the
Senior Creditor herein or otherwise.
19. Governing Law. THIS AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED
AND DELIVERED, AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE
CONFLICTS-OF-LAW RULES AND PRINCIPLES OF THE STATE OF TEXAS, AND THE APPLICABLE
LAWS OF THE U.S. SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT.
8
20. Venue. Any suit, action or proceeding with respect to the
interpretation or enforcement of this Agreement, or the enforcement of any
judgment entered by any court in respect thereof, shall be brought in the courts
of the State of Texas, Xxxxxx County, Texas, or in the U.S. courts located in
Southern District of Texas as the Senior Creditor, in the Senior Creditor's sole
discretion, may elect. The parties submit to the non-exclusive jurisdiction of
such courts for the purpose of any such suit, action or proceeding.
A. Each of the parties waives, in connection with any such suit, action or
proceeding, any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any such action
or proceeding in such respective jurisdictions.
B. Each of the parties consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to
each such Person, as the case may be, at its address set forth in
Section 16.
C. Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law.
21. Jury Trial. Each party waives any right it may have to a trial by jury
in respect of any legal proceeding directly or indirectly arising out of, under
or in connection with or relating to this Agreement. Except as prohibited by
law, each party hereto waives any right it may have to claim or recover in any
litigation referred to in this Section any special, indirect, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages, whether such claim is based on contract, tort, duty imposed or
implied by law or otherwise. Each party hereto, (a) certifies that no
representative, agent or attorney of the Senior Creditor has represented,
expressly or otherwise, that the Senior Creditor would not, in the event of
litigation, seek to enforce the foregoing waivers, and (b) acknowledges and
agrees that it has been induced to enter into this Agreement and the other Loan
Documents, as applicable, by, among other things, the mutual waivers and
certifications herein.
22. Separate Agreements. The parties acknowledge and agree that this
Agreement is independent and distinct from the Loan Documents, including the
Credit Agreement. The Subordinate Creditor acknowledges that the Subordinate
Creditor is not a party to and does not and shall not have any rights or
benefits thereunder. The Subordinate Creditor acknowledges that the Subordinate
Creditor has been provided copies of the Loan Documents, that the Subordinate
Creditor has had the opportunity to review the Loan Documents with legal counsel
and that this Agreement to be construed and interpreted as if jointly prepared
by the parties.
23. Counterparts. This Agreement may be separately executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Agreement.
24. Section Headings. Headings are for convenience only and shall be given
no substantive meaning or significance in construing this Agreement.
-9-
25. Entire Agreement. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND
UNDERSTANDING BY AND AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDES ALL PRIOR AGREEMENTS, CONSENTS AND UNDERSTANDINGS RELATING TO
SUCH SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
Executed September __, 1997, to be effective as of the date first above
written.
LITIGATION RESOURCES OF LOONEY & COMPANY
AMERICA, INC.
BY: BY:
------------------------------- ---------------------------------
XXXX XXXXXXXX XXXX XXXXXXXX
CHIEF FINANCIAL OFFICER CHIEF FINANCIAL OFFICER
XXXXX, BURY & ASSOCIATES, INC. LITIGATION RESOURCES OF
AMERICA-CALIFORNIA, INC.
BY: BY:
------------------------------- ---------------------------------
XXXX XXXXXXXX XXXX XXXXXXXX
CHIEF FINANCIAL OFFICER CHIEF FINANCIAL OFFICER
LITIGATION RESOURCES OF LITIGATION RESOURCES OF
AMERICA-MIDWEST, INC. AMERICA-NORTHEAST, INC.
BY: BY:
------------------------------- ---------------------------------
XXXX XXXXXXXX XXXX XXXXXXXX
CHIEF FINANCIAL OFFICER CHIEF FINANCIAL OFFICER
BLOCK COURT REPORTING, INC. BLOCK TAPE TRANSCRIPTION
SERVICES, INC.
BY: BY:
------------------------------- ---------------------------------
XXXX XXXXXXXX XXXX XXXXXXXX
CHIEF FINANCIAL OFFICER CHIEF FINANCIAL OFFICER
AMICUS ONE LEGAL SUPPORT TEXAS COMMERCE BANK
SERVICES, INC. NATIONAL ASSOCIATION
BY:
---------------------------------- ---------------------------------
NAME: XXXXXX XXXXXX
TITLE: VICE PRESIDENT
-10-
EXHIBIT G
EXHIBIT A
ADDENDUM AGREEMENT
TO
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT made this ____ day of September__, 1997, among AMICUS
ONE LEGAL SUPPORT SERVICES, INC., a New York corporation (the "Proposed
Shareholder"), and each of the parties listed on the signature pages hereof (the
"Shareholders");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, LITIGATION RESOURCES OF AMERICA, INC. (the "Corporation"),
and the Shareholders, who are the holders of all of the issued and outstanding
shares of common stock, $0.01 par value ("Common Stock"), of the Corporation,
are parties to a First Amended and Restated Shareholders' Agreement dated as of
May 14, 1997 (the "Agreement"), pertaining to the ownership and transferability
of shares of Common Stock of the Corporation by the Shareholders and other
matters; and
WHEREAS, the Corporation proposes to issue an aggregate of 116,471
shares of Common Stock of the Corporation to the Proposed Shareholder; and
WHEREAS, the Corporation proposes to also issue a Convertible
Subordinated Promissory Note in the aggregate principal amount of $560,000 (the
"Convertible Note"), convertible under the terms and conditions set forth
therein into shares of Common Stock (the "Conversion Shares");
WHEREAS, Section 13(j) of the Agreement requires the Proposed
Shareholder to execute an Addendum Agreement in substantially the form of this
instrument;
NOW, THEREFORE, in consideration of the premises, the Proposed
Shareholder hereby agrees as follows:
1. The Proposed Shareholder agrees that upon the transfer or issuance
to him of 116,471 shares of Common Stock of the Corporation as contemplated
herein, he will become a Shareholder and will become bound by and will observe
and perform, and such shares, along with all shares hereafter acquired
(including, but not limited to any "Conversion Shares"), will continue to be
subject to, all of the terms and conditions of the Agreement. The Corporation
and the Shareholder agree and understand that it is anticipated that such shares
will eventually be distributed to the shareholders of the Shareholder and that
provided that such shareholders execute an
Addendum Agreement in substantially the form of this Agreement and such
distribution is permissible under applicable securities laws, such distribution
shall be permitted by the Corporation.
2. The address to which all notices, requests, consents and other
communications under the Agreement shall be sent to the Proposed Shareholder as
provided in Section 11 of the Agreement, is as set forth below.
3. This Addendum Agreement shall be attached to and become part of
the Agreement.
THE CORPORATION:
LITIGATION RESOURCES OF AMERICA, INC.
a Texas corporation
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
THE PROPOSED SHAREHOLDER:
No. of
Shares of
Common
Address Stock Owned Name
------- ----------- ----
c/o Xxxxxx X. Xxxxxxxx, Esq. 116,471 AMICUS ONE LEGAL SUPPORT SERVICES,
INC., a New York corporation
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXHIBIT I-1
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made
effective as of the __th day of September, 1997, by AMICUS ONE LEGAL SUPPORT
SERVICES, INC., a New York corporation (the "Pledgor"), LITIGATION RESOURCES OF
AMERICA, INC., a Texas corporation ("Parent") and LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC., a New York corporation ("Northeast"). Parent and
Northeast are sometimes referred to herein as "Secured Parties").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Pledgor, the Stockholders of the Pledgor (the "Stockholders"),
Parent and Northeast Party have entered into an Agreement of Purchase and Sale
of Assets dated September __, 1997 (the "Purchase Agreement"), pursuant to which
Pledgor has sold to Secured Parties substantially all of the assets involved in
the business of Pledgor; and
WHEREAS, Pledgor and the Stockholders have certain obligations under the
Purchase Agreement, including, but not limited to, the obligation of Pledgor and
the Stockholders to indemnify Secured Parties for any breaches of
representations and warranties of Pledgor or the Stockholders contained in the
Purchase Agreement; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Secured
Parties are obligated to issue at the Closing (as defined in the Purchase
Agreement) certain shares of common stock, $.01 par value (the "Parent Stock")
and the Note (as defined in the Purchase Agreement), and the Pledgor has the
right to convert at certain times sums due under the Note into additional shares
of Parent Stock, on the terms and conditions contained in the Note; and
WHEREAS, the terms of the Purchase Agreement provide for the Pledgor to
pledge the Parent Stock issued at the Closing and issued upon conversion of the
Note to the Secured Parties to secure certain of the obligations of Pledgor
and the Stockholders under the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows (all capitalized terms used herein
and not otherwise defined shall have the meanings set forth in the Purchase
Agreement):
1. Pledge of Parent Stock. Pledgor hereby pledges and grants to Secured
Parties a security interest in the Parent Stock, which shall attach immediately
upon each issuance of Parent
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Stock whether issued at the Closing or upon conversion of the Note. Pledgor will
deliver to Secured Parties the certificate or certificates representing the
Parent Shares immediately upon the earlier of (i) payment of the Note in full or
conversion of the Note into Parent, or (ii) immediately following the delivery
of notice to the Pledgor/Seller of an Offset Claim which exceeds the unpaid
principal amount of the Note, in order that Secured Parties might perfect their
security interest therein. The Pledgor and the Secured Parties hereby
acknowledge and agree that the value of the Parent Stock shall be deemed to be
$8.50 per share of Parent Stock; provided, however, that if the Parent has
successfully consummated a public offering of its shares of Parent Stock, then
it shall mean the average public trading price of each share of Parent Stock
over the five (5) most recent business days falling prior to the date of
delivery by the Secured Parties/Buyer to the Pledgor/Seller of the notice of
Offset Claim, as such term is defined in the Purchase Agreement (the "Agreed
Value"). Pledgor shall possess all voting rights pertaining to the Parent Stock,
so long as an Event of Offset, as hereinafter defined in this Pledge Agreement,
has not occurred, or if an Event of Offset has allegedly occurred but is being
disputed by the parties hereto prior to submission to arbitration in accordance
with Section 9.14 of the Purchase Agreement, and Secured Parties shall have no
voting rights that may be presently or hereafter attributable to the Parent
Stock. In addition, so long as an Event of Offset has not occurred, or if an
Event of Offset has allegedly occurred but is being disputed by the parties
hereto prior to submission to arbitration in accordance with Section 9.14 of the
Purchase Agreement, then Pledgor shall have the right to receive all dividends,
if any, on the Parent Stock, and Pledgor shall be entitled to receive all
proceeds upon liquidation of the Parent Stock, if any, as well as all other
rights with respect to the Parent Stock except for the right to transfer title
thereto. Notwithstanding the foregoing, if an Event of Offset has occurred and
(i) has been resolved, either by failure to timely dispute it as required by
Section 9.14 of the Purchase Agreement, by agreement or by arbitration decided
in favor of Secured Parties (a "Resolved Event of Offset") or (ii) has been
submitted to arbitration in accordance with Section 9.14 of the Purchase
Agreement which arbitration is still pending or in process (a "Continuing Event
of Offset"), then Secured Parties shall have the right to designate a
representative or trustee to vote those shares of Parent Stock covered by or
subject to the Resolved Event of Offset or Continuing Event of Offset (the
"Offset Shares"), to receive all dividends and liquidation proceeds with respect
to the Offset Shares, and to receive all other rights with respect to the Offset
Shares, to the extent permissible under applicable law.
2. Representations and Warranties. Pledgor hereby represents, warrants
and covenants to and with Secured Parties that:
(a) Pledgor will not, without the written consent of Secured Parties,
sell, contract to sell, encumber, or dispose of the Parent Stock or any
interest therein until this Pledge Agreement and all obligations under the
Purchase Agreement have been fully satisfied.
(b) No consent of any party is necessary for Pledgor to perform its
obligations hereunder, or if any such consent is required, such consent has
been received prior to the execution of this Pledge Agreement.
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3. Event of Offset. Each delivery by Secured Parties/Buyer to the
Pledgor/Seller of a notice of Offset Claim shall constitute an Event of Offset
("Event of Offset") under this Pledge Agreement.
4. Remedies.
(a) Upon the occurrence of a Resolved Event of Offset, Secured Parties
may, at their option, exercise with reference to the Parent Stock any and
all of the rights and remedies of a Secured Parties under the Uniform
Commercial Code as adopted in the State of New York and as otherwise
granted therein or under any other applicable law or under any other
agreement executed by Pledgor, including, without limitation, the right and
power to sell, at public or private sale(s), or otherwise dispose of or
keep the Parent Stock and any part or parts thereof, or interest or
interests therein owned by Pledgor, in any manner authorized or permitted
under this Pledge Agreement or under the Uniform Commercial Code, and to
apply the proceeds thereof toward payment of any costs and expenses and
attorneys' fees and legal expenses thereby incurred by Secured Parties, and
toward payment of the obligations under the Purchase Agreement in such
order or manner as Secured Parties may elect. Notwithstanding anything to
the contrary contained herein, the Secured Parties shall only foreclose on
that portion of the Parent Stock that is reasonably necessary in the
reasonable good faith judgment of the Secured Parties in order to satisfy
the amount of the claim constituting the Resolved Event of Offset. For
purposes hereof, the Agreed Value of the Parent Stock shall be deemed to be
the value that the Secured Parties is receiving on the foreclosure of the
Parent Stock and Secured Parties shall not be entitled to foreclose on more
Parent Stock than is necessary to recover all of its damages resulting from
the Resolved Event of Offset.
(b) Secured Parties are hereby granted the right, at its option, after
a Continuing Event of Offset, to transfer at any time to itself or its
nominee the securities or other property hereby pledged, or any part
thereof, and to thereafter exercise all voting rights with respect to such
Parent Stock so transferred and to receive the proceeds, payments, monies,
income or benefits attributable or accruing thereto and to hold the same as
security for the obligations hereby secured, or at Secured Parties's
election, to apply such amounts to the obligations, only if due, and in
such order as Secured Parties may elect or Secured Parties may, at their
option, without transferring such securities or property to its nominee,
exercise all voting rights with respect to the securities pledged hereunder
and vote all or any part of such securities at any regular or special
meeting of shareholders.
(c) Pledgor hereby agrees to cooperate fully with Secured Parties in
order to permit Secured Parties to sell, at foreclosure or other private
sale, Pledgor's interest in the Parent Stock pledged hereunder as provided
in this Pledge Agreement. Specifically, Pledgor agrees to deliver to
Secured Parties the certificate or certificates representing the Parent
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Stock if Pledgor has possession at that time, to fully comply with the
securities laws of the United States and of the State of Texas or New York,
as applicable, and to take such other action as may be necessary to permit
Secured Parties to sell or otherwise transfer the securities pledged
hereunder in compliance with such laws.
5. Termination. This Pledge Agreement shall continue as security for the
payment or satisfaction of the obligations under the Purchase Agreement until
the earliest to occur of (i) termination of the Purchase Agreement, (ii)
termination of this Pledge Agreement by written notice of the Secured Parties to
the Pledgor, or (iii) three (3) years after the date of this Pledge Agreement,
provided that no Continuing Event of Offset exists which has not been satisfied
by Pledgor, or if there is an Continuing Event of Offset, the pledge shall
continue only to the extent of the amount of Stock based on the Stock Agreed
Value equal to the amount of damages reasonably expected to be caused by the
Continuing Event of Offset; provided however, upon the expiration of six months,
two years and three years after the date of this Pledge Agreement (each a
"Release Date"), the following provisions shall apply: (a) if no Offset Claim or
Continuing Event of Offset exists on such Release Date, the Secured party shall
release one-third (1/3) of the number of shares Stock originally pledged under
this Pledge Agreement from the pledge established hereby, and the remaining
shares of Stock shall remain pledged under the terms and conditions of this
Pledge Agreement; or (b) if an Offset Claim or Continuing Event of Offset
exists, the amount of Damages resulting from such Offset Claim or Continuing
Event of Offset shall be determined, and on the first Release Date, the second
Release Date and the third Release Date, one third (1/3), one half (1/2) and all
of the remaining Stock, respectively, that have not been Offset against shall be
released from the pledge established hereby and delivered to the Pledgor and the
remaining shares of Stock shall remained pledged under the terms and conditions
of this Pledge Agreement.
6. Release from Pledge. Upon the termination of this Pledge Agreement,
Secured Parties shall immediately release their security interest in the Parent
Stock. In addition, Secured Parties shall deliver the certificate or
certificates representing the Parent Stock to Pledgor if Secured Parties has
possession of such certificates at that time. Upon such occurrence, the
security interest of Secured Parties shall automatically terminate and Secured
Parties shall thereafter have no interest whatsoever in the Parent Stock.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
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If to Pledgor: c/o Xxxxxx X. Xxxxxxxx, Esq.
000 Xxxx Xxxxxx
00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the
Secured Parties: Litigation Resources of America-Northeast, Inc.
Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: President
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxx, Xx.
8. Successors. This Pledge Agreement shall be binding upon, and inure to
the benefit of the parties hereto and their successors and assigns. Any
assignee whatsoever will be bound by the obligations of the assigning party
under this Pledge Agreement, and any assignment shall not diminish the liability
or obligation of the assignor under the terms of this Pledge Agreement unless
otherwise agreed.
9. Severability. In the event that any one or more of the provisions
contained in this Pledge Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Pledge Agreement or any such other
instrument.
10. Paragraph Headings. The paragraph headings used herein are
descriptive only and shall have no legal force or effect whatsoever.
11. Gender. Whenever the context so requires, the masculine shall include
the feminine and neuter, and the singular shall include the plural and
conversely.
12. Survival of Warranties. All representations, warranties, and
agreements made by the parties in this Pledge Agreement or in any certificates
delivered pursuant hereto will survive the execution date hereof.
13. Applicable Law. This Pledge Agreement shall be construed and
interpreted in accordance with the laws of the United States of America and the
New York, and is intended to be performed in accordance with and as permitted by
such laws.
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14. Definitions. All terms and definitions used herein shall have the
same meaning as in the Purchase Agreement unless otherwise indicated.
15. Drafting. The parties hereto acknowledge that each party was actively
involved in the negotiation and drafting of this Pledge Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Pledge Agreement shall be construed in favor or against either party hereto
because one is deemed to be the author thereof.
16. Attorneys' Fees. If any litigation is instituted to enforce or
interpret the provisions of this Pledge Agreement or the transactions described
herein, the prevailing party in such action shall be entitled to recover its
reasonable attorneys' fees from the other party hereto.
17. Arbitration. The arbitration provisions contained in Section 9.14 of
the Purchase Agreement shall govern this Pledge Agreement.
18. Multiple Counterparts. This Pledge Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of which
shall constitute one instrument.
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IN WITNESS WHEREOF, this Pledge Agreement has been executed effective as of
the date first above written.
PLEDGOR:
AMICUS ONE LEGAL SUPPORT SERVICES, INC.,
a New York corporation
By:________________________________
Name:___________________________
Title:__________________________
SECURED PARTIES:
LITIGATION RESOURCES OF AMERICA, INC., a Texas
corporation
By:_______________________________________________
Name:_______________________________________
Title:______________________________________
LITIGATION RESOURCES OF AMERICA-NORTHEAST,
INC., a New York corporation
By:_______________________________________________
Name:_______________________________________
Title:______________________________________
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EXHIBIT I-2
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is dated effective as of the
__th day of September __, 1997, by and between LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation (the "Buyer"), LITIGATION RESOURCES OF
AMERICA, INC., a Texas corporation which is the owner of all of the authorized
and issued capital stock of the Buyer (the "Parent"), and AMICUS ONE LEGAL
SUPPORT SERVICES, INC., a New York corporation (the "Seller") and Xxxxxxx X.
Xxxxxx, a resident of New Jersey, individually ("Portas"), Xxxxxx X. Xxxxxxxx, a
resident of New York, individually ("Xxxxxxxx"), Xxxx Xxxxxxxx, a resident of
New York, individually ("Xxxxxxxx") and Xxxxxx Xxxxxxx, a resident of New York,
individually ("Breshin") (Portas, Spinozzi, Xxxxxxxx and Breshin being
collectively referred to sometimes as the "Seller's Stockholders"), and Xxxxxx
X. Xxxxxxxx, Esq., as escrow Agent (the "Escrow Agent"). All defined terms
contained in this Agreement shall have the meanings ascribed to them in the
Agreement of Purchase and Sale of Assets Purchase Agreement, dated September __,
1997 by and between the Buyer, Parent, Seller and Seller's Stockholders (the
"Purchase Agreement"), or the Pledge Agreement (as such term is defined in the
Purchase Agreement), unless otherwise specifically indicated. Parent, Buyer,
Seller, Seller's Stockholders and Escrow Agent are sometimes hereinafter
referred to collectively as the "Parties" and individually as a "Party".
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Purchase Agreement Buyer has
purchased from Seller, and Seller has sold to Buyer, the Assets;
WHEREAS, the Pledge Agreement requires that Seller deliver to Secured
Parties the certificate or certificates representing the Parent Shares
(collectively, the "Escrowed Shares") immediately upon the earlier of (i)
payment of the Note in full or conversion of the Note into Parent, or (ii)
immediately following the delivery of notice to the Pledgor/Seller of an Offset
Claim which exceeds the unpaid principal amount of the Note, in order that
Secured Parties might perfect their security interest therein, to secure certain
potential obligations of the Seller to the Secured Parties; and
WHEREAS, the Escrowed Shares would be delivered to the Secured Parties
under the Pledge Agreement, but for their being held in escrow pursuant to this
Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
1. Delivery of Escrow Shares. The Escrowed Shares have been delivered to
Escrow Agent, and Escrow Agent acknowledges receipt thereof. The Parties agree
that the Escrow Agent shall hold the Escrow Shares in escrow until delivered to
the Secured Parties or returned to the Seller in accordance with the terms of
this Agreement.
2. Delivery of Escrowed Shares to Secured Parties. Immediately upon the
earlier of (i) payment of the Note in full or conversion of the Note into
Parent, or (ii) delivery of notice to the Pledgor/Seller and to the Escrow Agent
of an Offset Claim which exceeds the unpaid principal amount of the Note, the
Escrow Agent shall deliver the Escrowed Shares to the Secured Parties in order
that Secured Parties might perfect their security interest therein.
3. Termination and Distribution. This Escrow Agreement shall terminate
upon delivery of the Escrowed Shares to the Secured Party or termination of the
Pledge Agreement, whichever shall first occur. In the event that the Pledge
Agreement terminates prior to the delivery of the Escrowed Shares under Section
2, the Escrowed Shares shall be returned to the Seller.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the Parties to be effective as of the date first set forth above.
BUYER:
LITIGATION RESOURCES OF
AMERICA-NORTHEAST , INC.,
a New York corporation
By:
___________________________________________
Xxxxxxx X. Xxxxxx, Chairman and
Chief Executive Officer
PARENT:
LITIGATION RESOURCES OF AMERICA, INC.,
a Texas corporation
By:
___________________________________________
Xxxxxxx X. Xxxxxx, Chairman and
Chief Executive Officer
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SELLER:
AMICUS ONE LEGAL SUPPORT SERVICES, INC.,
a New York Corporation
By:
__________________, __________
SELLER'S STOCKHOLDERS
_____________________________________________
XXXXXXX X. XXXXXX, Individually
_____________________________________________
XXXXXX X. XXXXXXXX, Individually
_____________________________________________
XXXX XXXXXXXX, Individually
_____________________________________________
XXXXXX XXXXXXX, Individually
ESCROW AGENT:
_____________________________________________
XXXXXX X. XXXXXXXX, ESQ., Individually
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