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EXHIBIT 10.32
AGREEMENT RE eFOX
BY AND AMONG
EPS SOLUTIONS CORPORATION
"BUYER"
ENTERPRISE PROFIT SOLUTIONS CORPORATION
"EPS"
eFOX CORPORATION
"COMPANY"
AND
THE MEMBERS NAMED HEREIN
"MEMBERS"
MARCH 19, 1999
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TABLE OF CONTENTS
1. Purchase of Membership Interests.............................................1
2. Option.......................................................................1
2.1. RIGHT TO PURCHASE..................................................1
2.2. EXERCISE PROCEDURE.................................................2
2.3. EXERCISE PRICE.....................................................2
2.4. MATERIAL INFORMATION...............................................2
2.5. NO INTERFERENCE WITH OPTION.........................................2
3. Representations and Warranties of the Company and the Members................2
3.1. ORGANIZATION AND GOOD STANDING.....................................3
3.2. OWNERSHIP OF MEMBERSHIP INTERESTS..................................3
3.3. AUTHORIZATION OF AGREEMENT.........................................4
3.4. TITLE TO ASSETS....................................................4
3.5. CERTAIN PROPERTY OF THE COMPANY....................................4
3.6. YEAR 2000 COMPLIANCE...............................................6
3.7. NO CONFLICT OR VIOLATION...........................................7
3.8. CONSENTS...........................................................7
3.9. LABOR AND EMPLOYMENT MATTERS.......................................7
3.10. EMPLOYEE PLANS....................................................8
3.11. LITIGATION........................................................8
3.12. CERTAIN AGREEMENTS................................................9
3.13. COMPLIANCE WITH APPLICABLE LAW....................................9
3.14. LICENSES.........................................................10
3.15. INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.......10
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3.16. LIABILITIES.......................................................11
3.17. TAXES.............................................................11
3.18. BROKERS...........................................................12
3.19. ACKNOWLEDGMENT RE DELOITTE & TOUCHE LLP...........................12
4. Representations and Warranties of Buyer.....................................12
4.1. ORGANIZATION AND CORPORATE AUTHORITY..............................12
4.2. NOTES.............................................................12
4.3. NO CONFLICT OR VIOLATION..........................................12
4.4. PURCHASE FOR INVESTMENT...........................................13
4.5. INVESTIGATION BY BUYER............................................13
5. Certain Understandings and Agreements of the Parties........................13
5.1. ACCESS............................................................13
5.2. CONFIDENTIALITY...................................................13
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5.3. CERTAIN CHANGES AND CONDUCT OF BUSINESS...........................14
5.4. RESTRICTIVE COVENANTS.............................................16
5.5. MEMBER RESTRICTIONS...............................................19
5.6. NOTICE OF BREACH..................................................19
5.7. FINANCIALS........................................................19
5.8. CONTINUANCE OF EXISTING INDEMNIFICATION RIGHTS....................19
5.9. TAX MATTERS.......................................................20
5.10. TAKE-ALONG AND TAG-ALONG RIGHTS...................................22
5.11. BUSINESS PLAN.....................................................23
5.12. FINANCING OF THE COMPANY..........................................23
5.13. EMPLOYEES.........................................................24
5.14. USE OF SERVICES...................................................25
6. Survival; Indemnification...................................................25
6.1. SURVIVAL..........................................................25
6.2. INDEMNIFICATION BY THE MEMBERS....................................26
6.3. INDEMNIFICATION BY BUYER..........................................26
6.4. INDEMNIFICATION PROCEDURE.........................................26
6.5. PAYMENT...........................................................28
6.6. LIMITATIONS.......................................................29
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7. Miscellaneous...............................................................29
7.1. NOTICES...........................................................29
7.2. ASSIGNABILITY AND PARTIES IN INTEREST.............................30
7.3. GOVERNING LAW.....................................................30
7.4. COUNTERPARTS......................................................30
7.5. COMPLETE AGREEMENT................................................30
7.6. MODIFICATIONS, AMENDMENTS AND WAIVERS.............................30
7.7. HEADINGS; REFERENCES..............................................31
7.8. SEVERABILITY......................................................31
7.9. INVESTIGATION.....................................................31
7.10. EXPENSES OF TRANSACTIONS.........................................31
7.11. ARBITRATION......................................................31
7.12. SUBMISSION TO JURISDICTION.......................................33
7.13. ATTORNEYS' FEES..................................................33
7.14. ENFORCEMENT OF THE AGREEMENT.....................................34
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EXHIBITS
A. Form of Promissory Note
B. Form of Subordination Agreement
C. Form of Assignment Agreement
D. Form of Employment Offer Letter
E. Form of Restricted Stock Purchase Agreement
SCHEDULES
3.5(a) Real Property
3.5(b) Personal Property
3.5(c) Proprietary Rights
3.8 Consents
3.9 Employees
3.12 Contracts
3.14 Licenses
3.16 Liabilities
3.17(b) Tax Returns
3.18 Brokers
5.13 eFox Employees
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AGREEMENT RE eFOX
THIS AGREEMENT RE eFOX (this "AGREEMENT") is made and entered into as of
March 19, 1999 by and among eFox, LLC, a Delaware limited liability Company,
(the "COMPANY"), the members of the Company listed on the signature page hereof
(each such individual a "MEMBER," and collectively, the "MEMBERS"), Xxxxx X.
Xxxxxx, acting for and on behalf of the Members as their representative pursuant
to Section 5.5 (the "MEMBER REPRESENTATIVE"), EPS Solutions Corporation, a
Delaware corporation ("BUYER"), and Enterprise Profit Solutions Corporation, a
Delaware corporation and the wholly owned subsidiary of Buyer ("EPS").
A. The Company is engaged in the business of developing and marketing
web-enabled sales effectiveness applications on the Internet and on a company's
intranet or extranet, including artificial intelligence-driven sales coaching
applications, Just In Time sales training modules and database-oriented sales
performance tools. (the "BUSINESS").
B. The Members each own fifty percent (50%) of the membership interests
of the Company, constituting all of the issued and outstanding membership
interests in the Company.
C. The Members desire to sell to Buyer certain membership interests in
the Company and to grant to Buyer an option to acquire all of the remaining
issued and outstanding membership interests in the Company on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. PURCHASE OF MEMBERSHIP INTERESTS. Concurrently with execution and
delivery by Buyer and the Members of this Agreement, (i) Buyer is purchasing
from each of the Members 19.9% of his or her membership interests in the Company
(the "INITIAL INTERESTS") in exchange for $200,000, paid in the form of a
promissory note of Buyer (the "INITIAL NOTE") in the form of Exhibit A, and (ii)
the Members are entering into a Subordination Agreement in the form of Exhibit B
(the "SUBORDINATION AGREEMENT") related to their rights to payment under the
Initial Note and any promissory note delivered by Buyer upon exercise of the
Option (as defined in Section 2.1) pursuant to Section 2.3(a). The Members
hereby acknowledge receipt from Buyer of the Initial Note and Buyer hereby
acknowledges receipt from the Members of the Subordination Agreement and an
Assignment Agreement, in the form attached hereto as Exhibit C, transferring the
Initial Interests to Buyer free of any liens or restrictions. In addition, Buyer
acknowledges receipt of an opinion of counsel to the Company, and the Company
acknowledges receipt of an opinion of counsel to Buyer, as to the enforceability
of this Agreement and the Subordination Agreement.
2. OPTION.
2.1. RIGHT TO PURCHASE The Members hereby grant to Buyer an exclusive,
irrevocable option (the "OPTION") to purchase all of the membership interests in
the Company that may be
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issued and outstanding on the date of exercise of the Option, together with any
options or other securities or rights to acquire membership interests in the
Company and any other equity or voting rights in the Company outstanding on such
date (collectively, the "OUTSTANDING SECURITIES"), for the Exercise Price
described in Section 2.3. The Option may be exercised at any time in Buyer's
discretion, in one single transaction for all the Outstanding Securities, at any
time from the date hereof until 5:00 p.m. on March 31, 2004 (the "OPTION
PERIOD"). Buyer may, in its discretion, by written notice to the Company,
terminate the Option Period and Buyer's right to exercise the Option before 5:00
p.m. on March 31, 2004.
2.2. EXERCISE PROCEDURE. Buyer shall exercise the Option, if at all, by
delivering a written notice of exercise to the Member Representative together
with the Exercise Price. Promptly (but no later than three days) after receipt
by the Member Representative of the exercise notice and the Exercise Price, the
Members shall deliver to Buyer certificates representing the Outstanding
Securities, if any, duly endorsed for transfer to Buyer or an assignment of
membership interests duly endorsed, and sufficient to transfer full right, title
and interest in the Outstanding Securities to Buyer, free of any liens or
encumbrances.
2.3. EXERCISE PRICE. The "EXERCISE PRICE" payable by Buyer upon exercise
of the Option shall be $800,000, payable (a) by bank check or by promissory note
in the form of Exhibit A, in Buyer's discretion, if, at the time of exercise,
the Initial Note has not become due and payable in full according to its terms,
or (b) by wire transfer of immediately available funds to an account specified
in writing by the Members if, at the time of exercise, the Initial Note has
become due and payable in full according to its terms.
2.4 MATERIAL INFORMATION. If in connection with or within thirty (30)
days after Exercise (as defined below) Buyer becomes aware of any material
information related to the Company not disclosed to Buyer in writing before
Buyer's delivery of the notice of exercise, Buyer will have ten days from
receipt of such information to rescind the exercise, and if Buyer rescinds the
exercise, the Option will be deemed not to have been exercised and will remain
exercisable for the duration of the Option Period. Buyer will be entitled in
connection with exercise of the Option to rely upon any information provided by
the Company or the Members. The date of exercise of the Option, if such exercise
is not rescinded by Buyer, is referred to herein as the "EXERCISE DATE") and the
exercise of the Option may be referred to herein as the "EXERCISE."
2.5 NO INTERFERENCE WITH OPTION. During the Option Period, no Member may
(a) transfer any membership interest or other securities of or equity interest
in the Company, or any interest therein, or agree to any such transfer, or (b)
engage in any of the activities described in Section 5.4(a), (b), (c). or (d).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS.
Each representation and warranty contained in this Article 3 is
qualified by the disclosures made in the disclosure schedule attached hereto.
This Article 3 and the disclosure schedule shall be read together as an
integrated provision. The Company and the Members, jointly and severally,
represent and warrant to Buyer that:
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3.1. ORGANIZATION AND GOOD STANDING. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware with full corporate power and authority to carry on the
Business as it is now being conducted, and to own, lease or operate its assets
and properties. The Company is duly qualified to do business and is in good
standing in every jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except where failure to be so qualified would not have
a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" shall mean a material
adverse effect on or change in the Business or the financial condition or
results of operation of the Company, other than any such change or effect
attributable to or resulting from (i) changes in conditions (economic or
otherwise) generally applicable to the industries in which the Company operates
the Business, or general economic conditions globally, in the United States or
in the regions thereof in which the Company operates the Business, or (ii) any
change in laws, rules or regulations of general applicability relating to or
affecting the industries in which the Company operates the Business or
interpretations of such laws, rules or regulations by any Governmental Entity.
Complete and accurate copies of the charter documents of the Company, with all
amendments thereto to the date hereof, and the bylaws as presently in effect,
have been furnished to Buyer or its representatives.
3.2. OWNERSHIP OF MEMBERSHIP INTERESTS.
(a) The Members each own fifty percent (50%) of the membership interests
of the Company, constituting all of the issued and outstanding membership
interests in the Company (the "CURRENT Interests").
(b) The Current Interests constitute all of the issued and outstanding
membership interests in the Company and are validly issued and outstanding,
fully paid and non-assessable. Neither the Members nor the Company has granted,
issued or agreed to grant or issue any other equity interests in the Company and
there are no outstanding options, warrants, subscription rights, securities that
are convertible into or exchangeable for, or any other commitments of any
character relating to, any equity interests of the Company.
(c) Immediately before the sale contemplated by Article 1, the Members
have good and valid title to, and sole record and beneficial ownership of, the
Current Interests, free and clear of any claims, liens, pledges, options,
security interests, trusts encumbrances or other rights or interests of any
person or entity.
(d) All dividends, distributions and redemptions made or to be made by
the Company with respect to its equity interests have complied or will comply
with applicable law.
(e) All offers and sales of membership interests in the Company prior to
the date hereof were exempt from the registration requirements of the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and were registered or qualified
under or exempt from all applicable state securities laws.
(f) The Company does not own, and did not own at any time, directly or
indirectly, either of record or beneficially, any equity interest in any entity,
and does not have the right to acquire any equity interest in any entity.
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3.3. AUTHORIZATION OF AGREEMENT. The Company and the Members have all
requisite power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
approved by the Members and no other proceedings on the part of the Company or
the Members are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and the Members and constitutes the legal, valid and
binding obligation of the Company and the Members, except as such enforceability
may be limited by general principles of equity and bankruptcy, insolvency,
reorganization and moratorium and other similar laws relating to creditors'
rights (the "ENFORCEABILITY EXCEPTIONS.")
3.4. TITLE TO ASSETS. The Company owns, or has valid leasehold interests
in, all material assets used in the Business, whether real, personal, mixed,
tangible or intangible, free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims of
any kind except any of the following: (i) purchase money security interests in
specific items of equipment each having a value not in excess of $5,000; (ii)
Personal Property leased pursuant to Personal Property Leases; (iii) liens for
taxes not yet payable; (iv) additional security interests and liens consented to
in writing by Buyer; (v) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vi) such imperfections of title
and encumbrances, if any, as would not have a Material Adverse Effect; (vii)
liens incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or (ii)
above, provided that any extension, renewal or replacement lien is limited to
the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase (all of the
foregoing, the "PERMITTED LIENS"). There are no outstanding agreements, options
or commitments of any nature obligating the Company or any Member to transfer
any of the assets of the Company or rights or interests therein to any party
other than sales of inventory in the ordinary course of business.
3.5. CERTAIN PROPERTY OF THE COMPANY.
(a) Real Property. The Company has never owned and does not currently
own any real property. Schedule 3.5(a) lists all real properties leased by the
Company, including a brief description of the operating facilities located
thereon, the annual rent payable thereon, the length of the term, any option to
renew with respect thereto and the notice and other provisions with respect to
termination of rights to the use thereof.
(i) The Company has a valid leasehold in the real properties
shown in Schedule 3.5(a) under written leases (each lease being referred to
herein as a "REAL PROPERTY LEASE," and collectively the "REAL PROPERTY LEASES")
and to the knowledge of the Company and each Member, each Real Property Lease is
a valid and binding obligation of each of the other parties thereto, except as
enforceability may be limited by the Enforceability Exceptions.
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(ii) The Company is not, and neither the Company nor any Member
has any knowledge that any other party to any Real Property Lease is, in default
with respect to any material term or condition thereof, and no event has
occurred which through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance upon
any asset of the Company.
(iii) To the knowledge of the Company and each Member all of the
buildings, fixtures and other improvements to which the Real Property Leases
relate are in good operating condition and repair, except for ordinary wear and
tear, and the operation thereof as presently conducted is not in violation of
any applicable building code, zoning ordinance or other law or regulation.
(b) Personal Property. Schedule 3.5(b) lists all vehicles, furniture,
fixtures, equipment and other items of tangible personal property owned or
leased by the Company (the "PERSONAL PROPERTY"). All items of Personal Property
that are material to the Business are in good operating condition and repair,
except for ordinary wear and tear, and are sufficient to enable the Company to
operate the Business as presently conducted. The Company holds valid leases in
all of the Personal Property leased by it, and none of such Personal Property is
subject to any sublease, license or other agreement granting to any person any
right to use such property (each such lease, sublease, license or other
agreement, a "PERSONAL PROPERTY LEASE," and collectively the "PERSONAL PROPERTY
LEASES"). Schedule 3.5(b) provides a description and the location of each item
of Personal Property, accurately identifies such Personal Property as owned or
leased, and lists each Personal Property Lease. The Company is not in material
breach of or default, and no event has occurred which, with due notice or lapse
of time or both, may constitute such a material breach or default, under any
Personal Property Lease.
(c) Proprietary Rights.
(i) Schedule 3.5(c) lists all material Proprietary Rights owned
by, registered in the name of, licensed to, or otherwise used by the Company
that are material to the Business. For purposes of this Agreement "PROPRIETARY
RIGHTS" means trademarks and service marks that are registered with the United
States Patent and Trademark Office, all applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated therewith;
patents, patent applications and disclosures for patent applications; computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and
data); copyrights that are registered with the United States Copyright Office;
licenses, including, without limitation, software licenses, immunities,
covenants not to xxx and the like relating to any of the foregoing; Internet Web
sites, domain names and registrations or applications for registration thereof;
books and records describing or used in connection with any of the foregoing;
and claims or causes of action arising out of or related to infringement or
misappropriation of any of the foregoing. All trademarks and service marks that
are material to the conduct of the Business as of the date hereof are registered
with the United States Patent and Trademark Office, and all copyrights that are
material to the conduct of the Business as of the date hereof are registered
with the United States Copyright Office.
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(ii) All of the Proprietary Rights that are material to the
Business are owned by the Company free and clear of any and all liens, security
interests, claims, charges and encumbrances or are used by the Company pursuant
to a valid and enforceable license granting rights sufficiently broad to permit
the uses of the Proprietary Rights in connection with the conduct of the
Business in the manner presently conducted and to convey such right and
authority to Buyer.
(iii) Schedule 3.5(c) lists any material licenses, sublicenses or
other agreements pursuant to which the Company grants a license to any person to
use the Proprietary Rights or is a licensee of any of the Proprietary Rights.
(iv) The grants, registrations and applications included in or
applicable to the Proprietary Rights listed on Schedule 3.5(c) have not lapsed,
expired or been abandoned and no application or registration thereof is the
subject of any proceeding before any court, arbitrator, federal, state, local or
foreign government agency, regulatory body, or other governmental authority
(each a "GOVERNMENTAL ENTITY," and collectively "GOVERNMENTAL ENTITIES") with
authority to bind the Company except as would not have a Material Adverse
Effect. There have not been any actions or other judicial or adversary
proceedings involving the Company concerning any of the Proprietary Rights, nor
to the knowledge of the Company or any Member, is any such action or proceeding
threatened.
(v) The conduct of the Business does not conflict with valid
patents, trademarks, trade secrets, trade names or other intellectual property
rights of others. To the knowledge of the Company or any Member, there are no
conflicts with or infringements of any of the Proprietary Rights by any third
party.
(vi) The Company is the sole owner of its trade secrets,
including, without limitation, customer lists, formulas, inventions, processes,
know-how, computer programs and routines associated, developed or used in
connection with the Business that are material to the operation of the Business
(the "TRADE SECRETS"), free and clear of any liens, encumbrances, restrictions,
or legal or equitable claims of others, and has taken all reasonable security
measures to protect the secrecy, confidentiality, and value of the Trade
Secrets. Any of the employees of the Company and any other persons who, either
alone or in concert with others, developed, invented, discovered, derived,
programmed or designed the Trade Secrets, or who have knowledge of or access to
information relating to them, have been put on notice and have entered into
agreements that the Trade Secrets are proprietary to the Company and not to be
divulged or misused.
3.6 YEAR 2000 COMPLIANCE. All date-related output, calculations or
results before, during or after the calendar year 2000 that are produced or used
by any hardware, software (other than software that is generally available upon
payment of a "shrink-wrap" type license and that has not been customized for use
in connection with the Business), firmware or facilities systems (the "COMPUTER
SYSTEMS") owned or used by the Company and material to the Business are Year
2000 Compliant except as the failure to be compliant would not have a Material
Adverse Effect. For purposes of this Section, "YEAR 2000 COMPLIANT" means:
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(a) all dates receivable by the Computer Systems, as well as
calculations, output and results will (i) include a consistent-length century
indicator of at least two base ten digits, and (ii) have date elements in
interfaces and data storage that will permit specifying the century to eliminate
date ambiguity;
(b) when any date data is represented without a century, either in an
interface or in data storage, the correct century will be unambiguous for all
manipulations involving that data;
(c) data calculations involving either a single century or multiple
centuries will neither (i) cause an abnormal ending or operation, nor (ii)
generate incorrect results or results inconsistent with output or results from
any other century;
(d) when sorting by date, all records will be sorted in accurate
chronological sequence; and when the date is used as a key, records will be read
and written in accurate chronological sequence; and
(e) leap years will be determined by the following standard: (i) if
dividing the year by 4 yields an integer, it is a leap year, except for years
ending in 00, but (ii) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
3.7. NO CONFLICT OR VIOLATION. The execution, delivery and performance
by the Company and the Members of this Agreement and the consummation of the
transactions contemplated hereby do not and will not: (i) violate or conflict
with any provision of the charter documents or bylaws of the Company; (ii)
violate any provision or requirement of any domestic or foreign, federal or
state, law, statute, judgment, order, writ, injunction, decree, award, rule, or
regulation of any Governmental Entity applicable to the Company or the Business;
(iii) violate, result in a breach of, constitute (with due notice or lapse of
time or both) a default or cause any obligation, penalty, premium or right of
termination to arise or accrue under any Contract (as hereinafter defined); (iv)
result in the creation or imposition of any lien, charge or encumbrance of any
kind whatsoever upon any of the properties or assets of the Company; or (v)
result in the cancellation, modification, revocation or suspension of any
license, permit, certificate, franchise, authorization or approval issued or
granted by any Governmental Entity (each a "LICENSE," and collectively, the
"LICENSES"), except where any occurrence or result referred to in (ii), (iii),
(iv) or (v) above would not result in a Material Adverse Effect.
3.8. CONSENTS. Schedule 3.8 lists all material consents and notices
required to be obtained or given by or on behalf of the Company or any Member
before consummation of the transactions contemplated by this Agreement in
compliance with all applicable laws, rules, regulations, or orders of any
Governmental Entity, or the provisions of any material Contract, and all such
consents have been duly obtained and are in full force and effect, except where
the failure to obtain such consent will not have a Material Adverse Effect.
3.9. LABOR AND EMPLOYMENT MATTERS. Schedule 3.9 lists all employees of
the Company, including date of retention, current title and compensation. There
is no employment agreement, collective bargaining agreement or other labor
agreement to which the Company is a party or by which it is bound. The Company
has complied with all applicable laws, rules and regulations relating to the
employment of labor, including those related to wages, hours,
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collective bargaining and the payment and withholding of taxes and other sums as
required by appropriate Governmental Entities, except where the failure to
comply would not result in a Material Adverse Effect, and has withheld and paid
to the appropriate Governmental Entities or is holding for payment not yet due
to such Governmental Entities, all amounts required to be withheld from
employees of the Company and is not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing. There
is no unfair labor practice complaint against the Company pending before the
National Labor Relations Board or any state or local agency; pending labor
strike or other material labor trouble affecting the Company; material labor
grievance pending against the Company; pending representation question
respecting the employees of the Company; pending arbitration proceedings arising
out of or under any collective bargaining agreement to which the Company is a
party. For purposes of this Agreement, "EMPLOYEES" includes employees,
independent contractors and other persons filling similar functions.
3.10. EMPLOYEE PLANS.
(a) All accrued obligations of the Company, whether arising by operation
of law, by contract or past custom, or otherwise, for payments by the Company to
trusts or other funds or to any Governmental Entity, with respect to
unemployment compensation benefits, social security benefits or any other
benefits or obligations, with respect to employment of employees through the
date hereof, and for salaries, vacation and holiday pay, sick pay, bonuses and
other forms of compensation payable to employees in respect of the services
rendered by any of them prior to the date hereof, have been paid.
(b) The Company does not have and has never had any bonus, pension,
stock option, stock purchase, benefit, welfare, profit-sharing, deferred
compensation, retainer, consulting, retirement, welfare, disability, vacation,
severance, hospitalization, insurance, incentive, deferred compensation and
other similar fringe or employee benefit plans, funds, programs or arrangements,
whether written or oral, in each of the foregoing cases which cover, are
maintained for the benefit of, or relate to any current or former employees,
members, officers or directors of the Company ("EMPLOYEE PLANS").
(c) There are no contracts, agreements, plans or arrangements covering
any of the Company's employees with "change of control" or similar provisions.
There is no contract, agreement, plan or arrangement covering the Company or any
employee, that individually or collectively could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code.
3.11. LITIGATION. There are no claims, actions, suits or proceedings of
any nature pending or, to the knowledge of the Company or any Member, threatened
by or against the Members, the Company, the officers, directors, employees,
agents of the Company, or any of their respective Affiliates involving,
affecting or relating to the Business or any assets, properties or operations of
the Company or the transactions contemplated by this Agreement, except for
claims, actions, suits or proceedings that would not result in a Material
Adverse Effect. Neither the Company nor any of the Company's assets is subject
to any material order, writ, judgment, award, injunction or decree of any
Governmental Entity. For purposes of this Agreement, "AFFILIATE" shall have the
meaning ascribed to such term in Rule 405 under the Securities Act.
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3.12. CERTAIN AGREEMENTS.
(a) Schedule 3.12 lists all material, written or oral contracts,
agreements, instruments, licenses, commitments and other arrangements to which
the Company is a party or otherwise relating to, or affecting in any material
respect, any of its assets, properties or operations (each a "CONTRACT," and
collectively, the "CONTRACTS").
(b) Each Contract is valid, binding and enforceable against the parties
thereto in accordance with its terms, except as such enforceability may be
limited by the Enforceability Exceptions, and is in full force and effect on the
date hereof other than those Contracts not requiring the payment of money to the
Company, the failure of which to be enforceable or in full force and effect
would not have a Material Adverse Effect. The Company has performed all material
obligations required to be performed by it under, and is not in material default
or breach of, any Contract, and no event has occurred which, with due notice or
lapse of time or both, would constitute such a material default or breach by the
Company.
(c) To the knowledge of the Company and each Member, no other party to
any Contract is in material default or breach in respect thereof, and no event
has occurred which, with due notice or lapse of time or both, would constitute
such a material default or breach.
(d) There are no material disputes with any party to any Contract, and
to the knowledge of the Company and each Member, no party to any Contract has
credibly threatened to cancel or terminate any such agreement, whether as a
result of the transactions contemplated by this Agreement or otherwise.
(e) The Company has delivered to Buyer or Buyer's representatives true
and complete originals or copies of all the Contracts and a copy of every
Material Notice received by the Company or any Member since formation of the
Company, with respect to any of the Contracts. For purposes hereof, "MATERIAL
NOTICE" means those notices alleging a material breach of a Contract or
intention to terminate or materially modify a Contract, but does not include
routine correspondence.
(f) To the knowledge of the Company and each Member, no party to any
Contract has assigned any of its rights or delegated any of its duties under
such Contract.
3.13 COMPLIANCE WITH APPLICABLE LAW. The operations of the Company are,
and have been, conducted in all material respects in accordance with all
applicable laws, regulations, orders and other requirements of all Governmental
Entities having jurisdiction over the Company or its assets, properties or
operations, including, without limitation, all such laws, regulations, orders
and requirements relating to the Business except in any case where the failure
to so conduct its operations would not have a Material Adverse Effect. The
Company has not received any notice of any material violation of any such law,
regulation, order or other legal requirement, and is not in material default
with respect to any order, writ, judgment, award, injunction or decree of any
Governmental Entity, applicable to the Company or any of its assets, properties
or operations.
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3.14. LICENSES.
(a) Schedule 3.14 lists all material Licenses issued or granted to the
Company, and all pending applications therefor. The Licenses constitute all
material Licenses required, and consents, approvals, authorizations and other
requirements prescribed, by any law, rule or regulation which must be obtained
or satisfied by the Company in connection with the Business or that are
necessary for the execution, delivery and performance by the Company and the
Members of this Agreement. The Licenses are sufficient and adequate in all
material respects to permit the continued lawful conduct of the Business in the
manner now conducted and the ownership, occupancy and operation of the Company's
properties for its present uses and the execution, delivery and performance of
this Agreement. No jurisdiction in which the Company is not qualified or
licensed as a foreign corporation has demanded or requested in writing that it
qualify or become licensed as a foreign corporation. The Company has delivered
to Buyer or its representatives true and complete copies of all the material
Licenses together with all amendments and modifications thereto.
(b) Each License has been issued to, and duly obtained and fully paid
for by the Company and is valid, in full force and effect, and not subject to
any pending or known threatened administrative or judicial proceeding to
suspend, revoke, cancel or declare such License invalid in any material respect.
The Company is not in violation in any material respect of any of the Licenses.
3.15. INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
(a) Except pursuant to this Agreement, there are no material
transactions, agreements or arrangements of any kind, direct or indirect,
between the Company and any director, officer, employee, member, relative or
Affiliate of the Company or any of the Members, including, without limitation,
loans, guarantees or pledges to, by or for the Company or from, to, by or for
any of such persons, that are either (i) currently in effect, or (ii) reflected
in the Company's financial results.
(b) Except pursuant to this Agreement, no officer, director or member of
the Company, or any Affiliate of any such person, now has, or since formation of
the Company had, either directly or indirectly:
(i) an equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity which
furnishes or sells, or during such period furnished or sold, services or
products to the Company, or purchased, or during such period purchased from the
Company, any goods or services, or otherwise does, or during such period did,
business with the Company;
(ii) a beneficial interest in any contract, commitment or
agreement to which the Company is or was a party or under which it was obligated
or bound or to which its properties may be or may have been subject, other than
stock options and other contracts, commitments or agreements between the Company
and such persons in their capacities as employees, officers or directors of the
Company; or
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(iii) any rights in or to any of the assets, properties or rights
used by the Company in the ordinary course of business.
3.16. LIABILITIES. Schedule 3.16 sets forth all material liabilities and
obligations of the Company, whether absolute, accrued, contingent or otherwise,
and whether due or to become due (including, without limitation, any liability
for taxes and interest, penalties and other charges payable with respect to any
such liability or obligation), and no facts or circumstances exist which, with
notice or the passage of time or both, could reasonably be expected to result in
any material claims against or obligations or liabilities of the Company, except
for such liabilities or obligations which will not result in a Material Adverse
Effect. The Company has no liabilities to any of its Members or any Affiliates
of its Members.
3.17. TAXES.
(a) For purposes of this Agreement, the following terms shall have the
meanings specified hereinbelow:
(i) "TAX" OR "TAXES" means all taxes, including, without
limitation, all net income, gross receipts, sales, use, withholding, payroll,
employment, social security, unemployment, excise and property taxes, plus
applicable penalties and interest thereon.
(ii) "TAX LIABILITIES" means all liabilities for Taxes.
(iii) "TAX PROCEEDING" means any audit or other examination, or
any judicial or administrative proceeding, relating to liability for or refunds
or adjustments with respect to Taxes.
(iv) "TAX RETURN" shall mean all reports and returns required to
be filed with respect to Taxes.
(b) Tax Returns, Tax Payments and Tax Audits. The Company has (i) timely
filed or caused to be timely filed all Federal and state partnership information
Tax Returns and other material Tax Returns of the Company required to be filed
as of the date hereof (after giving effect to any extension of time to file such
Tax Returns) and (ii) paid, when due, all Taxes due and payable by the Company
for the tax periods relating to such Tax Returns (whether or not shown on such
Tax Returns). All such previously-filed Tax Returns were complete and accurate
in all material respects when filed, and as of the date hereof no additional Tax
Liabilities for periods covered by such previously-filed Tax Returns have been
assessed on or proposed to the Company. No Tax Return is currently being audited
by a Tax authority, or is the subject of a written notice from a Tax authority
that such Tax authority intends to commence an audit or examination of such Tax
Return. The Company has not given its consent to waive or extend the applicable
statute of limitations for any Tax Return or the assessment of Taxes required to
be reported thereon. The Company has either delivered to Buyer or made available
for inspection by Buyer or its representatives or agents complete and correct
copies of all Tax audit reports and statements of Tax deficiencies with respect
to any delinquent Tax assessed against or agreed to by the Company for all
taxable periods commencing on or after January 1, 1999, for which audit reports
or statements of deficiencies have been received by the Company.
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(c) No Liens. None of the assets of the Company are subject to any liens
in respect of Taxes (other than for current Taxes not yet due and payable).
(d) No Closing Agreements. The Company has not executed or entered into
any closing agreement pursuant to Section 7121 of the Code, or any predecessor
provisions thereof, or any similar provision of state Tax law.
3.18. BROKERS. Except as provided on Schedule 3.18, no broker, finder,
investment banker, or other person is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement, based upon arrangements made by or on behalf of the Company or any of
the Members.
3.19 ACKNOWLEDGMENT RE DELOITTE & TOUCHE LLP. In December 1998, Buyer
purchased the Integrated Cost Reduction Strategies ("ICRS") business unit of
Deloitte & Touche LLP ("DELOITTE"). The Company and the Members acknowledge, for
the benefit of Deloitte and its Affiliates, that Deloitte is not related to
Buyer, that Buyer and the individuals related to Buyer with whom the Company and
the Members have dealt in connection with the transactions contemplated by the
various agreements of the Company and the Members with Buyer have acted and will
act on behalf of Buyer and not Deloitte or any of Deloitte's Affiliates (as
partners, principals, employees, agents, associates or otherwise). For these
purposes, "Affiliates" of Deloitte include persons controlling, controlled by,
or under common control with Deloitte, including without limitation partners of
Deloitte.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to the Members that:
4.1. ORGANIZATION AND CORPORATE AUTHORITY. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to carry on its business as it
is now conducted and to own, lease or operate its assets and properties and has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Buyer, has been effectively authorized by all
necessary action of Buyer, corporate or otherwise, and constitutes the legal,
valid and binding obligation of Buyer, except as such enforceability may be
limited by the Enforceability Exceptions.
4.2. NOTES. The Initial Note constitutes, and any note delivered by
Buyer in payment of the Exercise Price will constitute, a legal, valid and
binding obligation of Buyer, except as such enforceability may be limited by the
Enforceability Exceptions.
4.3. NO CONFLICT OR VIOLATION. The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby do not and will not: (i) violate or conflict with any provision of the
charter documents or bylaws of Buyer; (ii) violate any provision or requirement
of any domestic or foreign, federal or state, law, statute, judgment, order,
writ, injunction, decree, award, rule, or regulation of any Governmental Entity
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applicable to Buyer; (iii) violate, result in a breach of, constitute (with due
notice or lapse of time or both) a default or cause any obligation, penalty,
premium or right of termination to arise or accrue under any material contract,
agreement, instrument, license, commitment or other arrangement to which Buyer
is a party or otherwise relating to, or affecting in any material respect, any
of its assets, properties or operations; (iv) result in the creation or
imposition of any lien, charge or encumbrance of any kind whatsoever upon any of
the properties or assets of Buyer; or (v) result in the cancellation,
modification, revocation or suspension of any license, permit, certificate,
franchise, authorization or approval issued or granted by any Governmental
Entity, except where any occurrence or result referred to in (ii), (iii), (iv)
or (v) above would not result in a material adverse effect on or change in the
financial condition or results of operation of Buyer.
4.4. PURCHASE FOR INVESTMENT. Buyer acknowledges that neither the offer
nor the sale of the any membership interests in the Company has been registered
under the Securities Act. Buyer is acquiring membership interests in the Company
solely for its own account and not with a view to any distribution or other
disposition of such membership interests, and the membership interests in the
Company acquired by Buyer pursuant to this Agreement will not be transferred
except in a transaction registered or exempt from registration under the
Securities Act.
4.5. INVESTIGATION BY BUYER. In entering into this Agreement, Buyer
acknowledges that, except for the specific representations and warranties of the
Company and the Members contained in Article 3, none of the Company, the
Members, or any of their respective directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives, makes or shall be
deemed to have made any representation or warranty, either express or implied,
as to the accuracy or completeness of any of the information (including, without
limitation, any reserve estimates, projections, forecasts or other
forward-looking information) provided or otherwise made available to Buyer or
any of its directors, officers, employees, Affiliates, controlling persons,
agents, advisors or representatives.
5. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
5.1. ACCESS. The Company shall afford to Buyer full access during normal
business hours throughout the Option Period to its records (including, without
limitation, its accounting records and the workpapers of its independent
accountants), and to the properties, books, material contracts, agreements,
instruments, licenses, commitments and other arrangements to which it is a party
or that otherwise relate to, or affect, its assets, properties or operations
and, during such period, shall furnish promptly to Buyer all information
concerning it or its properties, liabilities and personnel as Buyer may request.
In addition, throughout the Option Period the Company and the Members shall
inform Buyer promptly of all material developments, events or circumstances
related to the business or condition of the Company.
5.2. CONFIDENTIALITY. During the Option Period, (a) the Company and the
Members will keep the matters contemplated herein and all information provided
by Buyer (or Deloitte & Touche LLP), confidential, and will not provide
information about such matters to any party or use such information except to
the extent necessary to effect the transactions contemplated hereby, and (b)
Buyer will keep the matters contemplated herein and all information provided by
the Company and the Members related to the Company and its business
confidential, and will not
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provide information about such matters to any party or use such information
except to the extent necessary to effect the transactions contemplated hereby.
Buyer and the Company shall each cause their respective Affiliates, officers,
directors, employees, agents, and advisors to keep confidential all information
received in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, however, this Section 5.2 will not prohibit Buyer
from making any disclosure that may be required under the Securities Exchange
Act of 1934, as amended. If the Option is not exercised by the end of the Option
Period or is terminated, the Company and the Members on the one hand, and Buyer
on the other hand, shall, and shall cause their Affiliates to, each maintain the
confidentiality of any information obtained from the other in connection with
the transactions contemplated hereby or during the Option Period (the
"INFORMATION"), other than Information that (i) was in the public domain before
the date of this Agreement or subsequently came into the public domain other
than as a result of disclosure by the party to whom the Information was
delivered; or (ii) was lawfully received by a party from a third party free of
any obligation of confidence of or to such third party; or (iii) was already in
the possession of the party prior to receipt thereof, directly or indirectly,
from the other party; or (iv) is required to be disclosed in a judicial or
administrative proceeding after giving the other party as much advance notice of
the possibility of such disclosure as practicable so that the other party may
attempt to stop such disclosure; or (v) is independently developed by the party
to whom the Information was delivered without reference to the Information. If
the Option is not exercised by the end of the Option Period, Buyer, on the one
hand, and the Members and the Company, on the other, shall return to the other
all material containing or reflecting the Information provided by the other,
shall not retain any copies, extracts, or other reproductions thereof or derived
therefrom, and Buyer shall ensure the return of all such material from all other
parties with whom it has been shared, and shall thereafter refrain from using
the Information and shall maintain its confidentiality pursuant to this
Agreement.
5.3. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) During the Option Period, the Company shall, and the Members shall
use all reasonable efforts to cause the Company to, conduct the Company's
business in the ordinary course consistent with the Business Plan (as defined in
Section 5.11). Without limiting the generality of the preceding sentence, except
as required or permitted pursuant to the terms hereof or as consented to in
writing by Buyer or contemplated by the Business Plan, during the Option Period
the Company shall not, and the Members shall cause the Company not to:
(i) enter into any new contract calling for payments by the
Company in excess of $50,000 over the life of the contract or series of related
contracts, unless such contract is, or series of related contracts are,
terminable upon 90 days' notice without further cost to the Company;
(ii) make any change in the charter documents or bylaws of the
Company, issue any additional membership interests or equity securities or grant
any option, warrant or right to acquire any membership interests or equity
securities or issue any security convertible into or exchangeable for the
membership interests in the Company, alter any term of any of the outstanding
securities of the Company, or make any change in the outstanding membership
interests or other ownership interests or in the capitalization, whether by
reason of a
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reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur or assume any indebtedness for borrowed money,
issue any notes, bonds, debentures or other corporate securities or grant any
option, warrant or right to purchase any of the foregoing, (B) issue any
securities convertible or exchangeable for debt securities of the Company, or
(C) issue any options or other rights to acquire directly or indirectly any debt
securities of the Company or any security convertible into or exchangeable for
such debt securities;
(iv) make any sale, assignment, transfer, lease, license,
abandonment or other conveyance of any of the assets of the Company or any part
thereof (including, without limitation, intellectual property), except
transactions in the ordinary course of business consistent with the Business
Plan;
(v) subject any of the assets of the Company, or any part
thereof, to any lien, security interest, charge, interest or other encumbrance,
or suffer such to be imposed other than Permitted Liens;
(vi) acquire any assets or properties or own any interest in any
entity;
(vii) hire any employees or consultants, other than pursuant to
at-will employment arrangements, or enter into any Employee Plan, program or
arrangement or any employment, severance or consulting agreement or arrangement,
except as contemplated by Section 5.13;
(viii) make or commit to make any capital expenditure in excess
of $100,000 or invest, advance, loan, pledge or donate any monies to any
customers or other persons or entities or to make any similar commitments with
respect to outstanding bids or proposals;
(ix) sell, transfer, or lease any assets to, or enter into any
agreement or arrangement with, any Member or any Affiliate of the Company or any
Member;
(x) guarantee any indebtedness for borrowed money or any other
obligation;
(xi) delay payment of payables or accelerate collection of
receivables relative to the Company's historical practices regarding the timing
of such payments and collections;
(xii) declare or make any dividends, distributions or other
payments to equity holders other than in amounts sufficient to enable all
members of the Company to pay their tax obligations resulting from income of the
Company;
(xiii) make any change in any revenue recognition or cost
allocation practices or method of accounting or accounting principle, method,
estimate or practice (except for any such change required by reason of a
concurrent change in GAAP), or write down the value of any assets or write-off
as uncollectible any Accounts Receivable except in the ordinary course of
business consistent with past practices;
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(xiv) settle, release or forgive any material claim or litigation
or waive any material right;
(xv) provide any confidential, trade secret, or nonpublic
information about the Company other than as necessary to conduct the business of
the Company consistent with the Business Plan;
(xvi) transfer to any third party any actual or potential
business opportunities of the Company other than to Affiliates of Buyer; or
(xvii) engage in negotiations regarding or commit itself to do
any of the foregoing.
(b) During the Option Period, the Company shall, and the Members shall
cause it to:
(i) use commercially reasonable efforts to maintain, in all
material respects, the assets and properties of the Company in accordance with
present practices and in a condition suitable for their intended use;
(ii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due all
taxes, assessments, fees and other charges lawfully levied or assessed against
it, unless the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted;
(iii) maintain and comply with all material Licenses;
(iv) comply with all material Environmental Laws, and upon
receipt of notice that there exists a violation of any Environmental Law,
immediately notify Buyer in writing; and
(v) conduct the business of the Company in a manner that is
complementary to (not in competition with) the business of Buyer and its
Affiliates.
5.4. RESTRICTIVE COVENANTS.
(a) Non-Competition. The Members recognize that the covenants of each
Member contained in this Section 5.4(a) (the "COVENANT NOT TO COMPETE") are an
essential part of this Agreement. After the Exercise Date, each Member shall not
individually, or in concert, directly or indirectly:
(i) either on its, his, her or their own account or for any other
person or entity, solicit, induce, attempt to induce, or endeavor to cause (in
each case in such a manner that could have a material adverse effect on the
financial condition or operation of the Business or the assets of the Company or
Buyer or any of its Affiliates) any customer, which has utilized the services of
the Company at any time during the Option Period or with whom the Company was
engaged in meaningful negotiations as of the Exercise Date (each, a "CUSTOMER"),
to modify, amend, terminate or otherwise alter the terms upon which it acquires
services from Buyer or Buyer's Affiliates, or to acquire from any party other
than Buyer or its Affiliates any services of the kind available from Buyer or
its Affiliates;
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(ii) engage or become interested in, as owner, employee, partner,
through equity ownership (not including up to a 5% passive equity interest in a
public company), investment of capital, lending of money or property, rendering
of services, or otherwise, either alone or in association with others, any
business competitive with the Business (including within the definition of the
Business, without limitation, any business of the type or types conducted by the
Company at any time during the Option Period or under development by the Company
on the Exercise Date), provided that the restrictions in this paragraph (ii)
will not prohibit Xxxxx Xxxxxx from any activities that are specifically
permitted under his Employment Agreement with Buyer or its Affiliates.
(iii) take any material action intended to advance an interest of
any competitor of the Business, or encourage any other person to take such
action; or
(iv) take any material action intended to cause any Customer or
prospective customer to use the services or purchase the products of any
competitor of the Business.
This Covenant Not to Compete shall be limited to any county or any other
political subdivision of any state of the United States of America, or of any
other country in the world, where the Company generated revenue or established
goodwill at any time during the Option Period. This Covenant Not to Compete
shall bind each Member until the third anniversary of the Exercise Date,
provided, however, that if the employment of Xxxxx Xxxxxx is terminated after
the Exercise Date by EPS without Cause or by Xxxxx Xxxxxx for Good Reason (each
as defined in Xxxxx Xxxxxx'x Employment Agreement with EPS), and if Buyer fails
to consummate a public offering that results in a public trading market of
equity securities of Buyer on a national securities exchange or the Nasdaq Stock
Market by the time that any restricted stock acquired by Xxxxx Xxxxxx pursuant
to the Restricted Stock Purchase Agreement referenced in Section 5.13(b) vests,
then after such termination of employment and such vesting, Xxxxx Xxxxxx will no
longer be subject to the covenants contained in Sections 5.4(a)(i) and (ii), and
the covenants in Section 5.4(a)(iv) will not be breached by any general
marketing efforts with which Xxxxx Xxxxxx may be involved that are not targeted
specifically at any Customer. The parties hereto agree that the duration and
area for which the Covenant Not to Compete set forth in this Section 5.4(a) is
to be effective are reasonable.
(b) Confidentiality. Notwithstanding the expiration of the Covenant Not
to Compete set forth in Section 5.4(a) each Member shall at all times keep
confidential and shall not disclose to others any Proprietary Rights and shall
not use or permit to be used any Proprietary Rights for any purpose other than
performance of obligations to Buyer.
(c) Non-Diversion. During the Option Period and if the Option Period
terminates without Exercise, (i) each of the Members shall not, and shall cause
their Affiliates not to, divert or attempt to divert or take advantage of or
attempt to take advantage of any actual or potential business or opportunities
of Buyer or its Affiliates of which any of the Members become aware as the
result of their relationship with Buyer or its Affiliates and which relate
specifically to the business of Buyer or its Affiliates but are not also
opportunities of the Company; and (ii) Buyer shall not, and shall cause its
Affiliates not to, divert or attempt to divert or take advantage of or attempt
to take advantage of any actual or potential business or opportunities of the
Company of which Buyer becomes aware as the result of its relationship with the
Company and which relate
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specifically to the business of the Company but are not also opportunities of
Buyer. For the period during which the Covenant Not to Compete applies pursuant
to Section 5.4(a), each of the Members shall not, and shall cause their
Affiliates not to, divert or attempt to divert or take advantage of or attempt
to take advantage of any actual or potential business or opportunities of Buyer
or its Affiliates of which any of the Members become aware as the result of
their affiliation with the Company or their relationship with Buyer or its
Affiliates and which relate specifically to the business of the Company or Buyer
or its Affiliates. This Section 5.4(c) is in addition to and not by way of
limitation of any other duties the Members may have to Buyer or its Affiliates,
and any duties Buyer may have to the Company.
(d) Non-Recruitment. During the Option Period and if the Option
terminates without Exercise, (i) the Company and each of the Members shall not,
and shall cause their Affiliates not to, hire away, or cause any other person to
hire away, any employee of or consultant to Buyer or its Affiliates or directly
or indirectly entice or solicit or seek to induce or influence any of such
employees or consultants to leave their employment or engagement with Buyer or
its Affiliates, provided however, that such restrictions shall not apply to
persons responding to a public advertisement by the Members directed to
potential employees generally; and (ii) Buyer shall not, and shall cause its
Affiliates not to, hire away, or cause any other person to hire away, any
employee of or consultant to the Company, or directly or indirectly entice or
solicit or seek to induce or influence any of such employees or consultants to
leave their employment or engagement with the Company, provided however, that
such restrictions shall not apply to persons responding to a public
advertisement by Buyer directed to potential employees generally. Part (i) of
this Section 5.4(d) will not prohibit the Company from hiring any of the Leased
Employees after termination of the Option Period if (a) this Agreement has not
been knowingly, willfully or recklessly breached in any material respect by the
Company or any of the Members (or any such breach has been cured and any
material adverse effects of such breach have been ameliorated in all material
respects within 15 days of notice of such breach), and (b) the Company has
achieved at least 80% of the pre-tax income targets set forth from time to time
in the Business Plan (as defined in Section 5.11). For the period during which
the Covenant Not to Compete applies pursuant to Section 5.4(a), each of the
Members shall not, and shall cause their Affiliates not to, hire away, or cause
any other person to hire away, any employee of or consultant to Buyer or its
Affiliates (including without limitation persons employed or engaged by the
Company before the Exercise Date) or directly or indirectly entice or solicit or
seek to induce or influence any of such employees or consultants to leave their
employment or engagement with the company or Buyer or its Affiliates, provided
however, that such restrictions shall not apply to persons responding to a
public advertisement by the Members directed to potential employees generally
(e) Remedies. The covenants contained in this Section 5.4 impose a
reasonable restraint on the Members in light of the activities and business of
the Company and future plans of Buyer. The Members acknowledge that if they
violate any of the covenants contained in this Section 5.4 (collectively, the
"RESTRICTIVE COVENANTS"), it will be difficult to determine the resulting
damages to Buyer and, in addition to any other remedies Buyer may have, Buyer
shall be entitled to temporary injunctive relief without being required to post
a bond and permanent injunctive relief without the necessity of proving actual
damages. Each Member shall be severally liable to pay all costs, including
reasonable attorneys' fees and expenses, that Buyer may incur in enforcing or
defending, to any extent, any of the Restrictive Covenants breached by such
Member, whether or not litigation
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is actually commenced and including litigation of any appeal defended by Buyer,
where such party succeeds in enforcing any of the Restrictive Covenants. Buyer
may elect to seek one or more remedies at its discretion on a case by case
basis. Failure to seek any or all remedies in one case shall not restrict Buyer
from seeking any remedies in another situation. Such action by Buyer shall not
constitute a waiver of any of its rights.
(f) Severability and Modification of any Unenforceable Covenant. Each of
the Restrictive Covenants will be read and interpreted with every reasonable
inference given to its enforceability. However, if any term, provision or
condition of the Restrictive Covenants is held by a court or arbitrator to be
invalid, void or unenforceable, the remainder of the provisions thereof shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. If a court or arbitrator should determine any of the Restrictive
Covenants are unenforceable because of over-breadth, then the court or
arbitrator shall modify such covenant so as to make it enforceable to the
fullest extent the court or arbitrator deems reasonable and enforceable under
the prevailing circumstances. The Covenant Not to Compete shall be deemed to be
a series of separate covenants, one for each and every county of each and every
state of the United States of America and each and every political subdivision
of each and every country outside the United States of America where the
Covenant Not to Compete is intended to be effective.
5.5. MEMBER REPRESENTATIVE. The Members shall at all times maintain a
representative (the "MEMBER REPRESENTATIVE") for purposes of taking certain
actions and giving certain consents on behalf of the Members as specified
herein. The Member Representative will be Xxxxx X. Xxxxxx unless and until the
Members mutually agree upon a replacement and notify Buyer thereof. Each Member
hereby grants to the Member Representative the right to vote such Member's
membership interests in the Company as the proxy of such Member consistent with
this Section 5.5, and actions taken, consents given and representations made by
the Member Representative on behalf of the Members pursuant hereto shall be
binding upon the Members. The proxy granted by each Member hereby is coupled
with an interest and is irrevocable. During the Option Period, the Member
Representative is authorized by the Members to take any action on behalf of the
Members to facilitate the transactions contemplated hereby which such Member
Representative is directed to take by the Company acting through a majority of
the members of the Board of Directors in office prior to the Exercise ,
including, without limitation, amending this Agreement, and executing documents
or instruments. After the Option Period for a period of 18 months, the Member
Representative is authorized by the Members to take any action on behalf of the
Members to facilitate or administer the transactions contemplated hereby as the
Member Representative deems appropriate.
5.6. NOTICE OF BREACH. During the Option Period, each of the parties
hereto shall promptly give the other parties hereto written notice with
particularity of any breach or inaccuracy of any representation, warranty,
agreement or covenant of such party contained herein.
5.7. FINANCIALS. Within 45 days after the end of each fiscal quarter and
within 90 days after the end of each fiscal year of the Company, the Company
shall deliver to Buyer its balance sheets as at the end of such period and the
related statements of income and cash flow for the quarter or year then ended
(collectively the "FINANCIAL STATEMENTS"), together with the written
representation of the Members that (i) such Financial Statements were prepared
in accordance
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with generally accepted accounting principles ("GAAP") consistently applied
except as disclosed in the footnotes thereto (except that the quarterly
financial statements may be subject to year-end adjustments, the net effect of
which will not represent a Material Adverse Change); (ii) the Financial
Statements fairly present, in all material respects, the financial condition and
the results of the operations of the Company as at the relevant dates thereof
and for the periods covered thereby; and (iii) there have been no material
changes or modifications of revenue recognition, cost allocation practices,
method of accounting, or other financial or operational practices or principles
except for any such change required by reason of a concurrent change in GAAP
during the periods covered by the Financial Statements.
5.8. CONTINUANCE OF EXISTING INDEMNIFICATION RIGHTS. From and after the
Exercise Date and for a period of six years thereafter and for so long as any
claims that have been asserted prior to the end of such six-year period remain
outstanding, Buyer shall cause the Company to continue, or if the Company is
merged into Buyer or any Affiliate of Buyer or liquidated, Buyer will provide
for, the performance of the Company's indemnification obligations to present and
former directors and officers of the Company provided for in the Certificate of
Incorporation and Bylaws of the Company as in effect on the date of this
Agreement, and with respect to indemnification for acts or omissions occurring
prior to the Exercise Date, provided however, that such obligations shall not
apply to any claim or cost (i) in respect of which such former director or
officer would not be entitled to indemnity under applicable law, or (ii) arising
in connection with facts or circumstances involving any inaccuracy of any
representation or breach of any covenant of the Company or Members in this
Agreement
5.9 TAX MATTERS.
(a) Certain Operating Conventions and Procedures. The taxable year of
the Company shall close on the date of this Agreement and all items of Company
income, gain, loss, deduction and expense for the Company's 1999 taxable year
shall be based on a closing of the Company's books and records. The taxable year
of the Company shall also close on the Exercise Date, and thus, all items of
Company income, gain, loss, deduction and expense for the taxable year in which
the Exercise occurs shall be based on a closing of the Company's books and
records.
(b) Tax Returns Required to Be Filed Prior to the Exercise Date. The
Members shall cause the Company to prepare and file all Federal and state
partnership information Tax Returns and other Tax Returns required to be filed
by the Company for any taxable year of the Company ending on or before the
Exercise Date. The Company shall be responsible for, and shall pay all
reasonable costs and expenses related to, the preparation and filing of such Tax
Returns.
(c) Cooperation. Buyer and the Members shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to Section 5.9(b). Such cooperation shall include
the retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to the filing of such Tax Returns.
(d) Exercise Date. Without limiting the generality of Section 5.9(a) or
(b), Buyer shall be liable for, and shall indemnify and hold the Members
harmless against, all Taxes of the
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Company attributable to operations, acts or omissions of Buyer with respect to
the Company on the Exercise Date that are not in the ordinary course of
business.
(e) Tax Proceedings.
(i) Buyer shall, upon receipt of notice thereof by Company,
notify Xxxxx X. Xxxxxx of any written communication from a Tax authority with
respect to any pending Tax Proceeding involving a taxable year ending on or
before the Exercise Date. Buyer shall include with such notification a copy of
the written communication so received by Company.
(ii) Xxxxx X. Xxxxxx shall have the right, but not the
obligation, to represent the interests of the Company in any Tax Proceeding
relating to taxable years ending on or before the Exercise Date and to employ
counsel of his choice in connection therewith; provided however, that, without
the prior written consent of Buyer, which shall not be unreasonably withheld,
Xxxxx X. Xxxxxx shall not agree to settle or compromise any Tax Proceeding
relating to taxable years ending on or before the Exercise Date and/or any Tax
Liability issue arising therein if such settlement or compromise can reasonably
be expected to materially adversely impact the Tax position of Buyer, its
Affiliates and the Company, taken as a whole, following the Exercise. Without
the prior written consent of Xxxxx X. Xxxxxx, which shall not be unreasonably
withheld, Buyer shall not agree to settle or compromise any such Tax Proceeding
relating to taxable years ending on or after the Exercise Date or Tax
Liabilities arising therein if such settlement or compromise can reasonably be
expected to materially adversely impact the Tax position of the Members with
respect to any taxable year ending on or before the Exercise Date. All costs and
expenses relating to any such Tax Proceedings shall be borne by the Company.
(iii) All notices provided for hereunder shall be deemed
delivered to the relevant party upon receipt thereof by the relevant party.
(iv) Each party shall furnish to the other relevant party or
parties such information and documents as may be reasonably requested by such
other party or parties, and shall otherwise reasonably cooperate with such other
party or parties, in connection with the preparation of any Tax Return and the
conduct of any Tax Proceedings.
(f) Amended Returns. The Company shall not amend, and Buyer shall not
permit the Company to amend, any Tax Return that may affect the Taxes for which
Members are or may be liable under this Agreement.
(g) Books and Records. Prior to the Exercise Date the Company shall
properly maintain its books and records necessary or appropriate to the filing
of the Tax Returns described in this Section 5.9, and at or before the Exercise
the Members shall cause all such books and records and all other books and
records related to the Company's Tax Returns and Tax matters to be delivered to
the Buyer. Buyer shall cause the Company to retain all such books and records
delivered to Buyer as provided hereunder until 90 days after the expiration of
the applicable statute of limitations (including any waivers or extensions
thereof) with respect to the taxable periods to which the Tax Returns relate.
Prior to disposing of any such books and records, Buyer
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or the Company, as the case may be, shall offer such books and records to the
Member Representative (at the sole expense of the Members).
5.10 TAKE-ALONG AND TAG-ALONG RIGHTS.
(a) Members' Take-Along Right.
(i) If at any time after the Option Period the Members shall
initiate to or receive from any person or entity not affiliated with any Member
or the Company (a "THIRD PARTY OFFEROR") a bona fide, arm's length proposal for
such Third Party Offeror to purchase all of the equity of the Company, or a
proposal to effect a business combination, by merger or otherwise, of the
Company with any entity following which the Company would be wholly owned by
such entity (either a "COMPANY SALE OFFER"), such Members shall deliver a notice
(the "TAKE-ALONG NOTICE") with respect to the Company Sale Offer to Buyer
summarizing pertinent information about the Company Sale Offer, including the
purchase price thereunder, together with a copy of any writings between the
Members and the Third Party Offeror necessary to establish the terms of such
Company Sale Offer.
(ii) Upon receipt of the Take-Along Notice, Buyer shall be
obligated in connection with the consummation of the Company Sale Event to sell
all membership interests in the Company and any securities convertible or
exchangeable into membership interests in the Company owned by Buyer to the
Third Party Offeror upon the terms and conditions of the Company Sale Offer.
Buyer will waive any appraisal or dissenters' rights in respect of such
transaction, and take all other actions reasonably necessary or desirable to
cause the consummation of the Company Sale Event on the terms proposed in the
Company Sale Offer, including, without limitation, the execution of any merger,
redemption, sale or other such agreement designed to facilitate such Company
Sale Event. Such a sale by Buyer will be at the same per security price and on
the same terms as the Members receive for their membership interests in such
transaction.
(iii) Buyer shall cause each person or entity to which Buyer
transfers membership interests in the Company or securities convertible or
exchangeable into membership interests in the Company to enter into an agreement
subjecting such person or entity to the obligations set forth in this Section
5.10(a).
(b) Buyer's Tag-Along Right.
(i) If at any time after the Option Period any Member proposes to
sell any of his or her membership interests in the Company or any securities
convertible or exchangeable into membership interests in the Company to any
person or entity (a "SALE TRANSACTION"), such Member shall deliver a notice (the
"TAG-ALONG NOTICE") to Buyer summarizing pertinent information about the
proposed sale, including the purchase price, together with a copy of any writing
between the Member and the third party necessary to establish the terms of such
sale.
(ii) Buyer shall have a period of ten (10) business days after
delivery of the Tag-Along Notice within which to deliver written notice (the
"ELECTION NOTICE") to the Member
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delivering the Tag-Along Notice of Buyer's desire to participate in the Member's
sale, in which event (A) Buyer will be entitled to sell to the third party (on
the same terms as the Member delivering the Tag-Along Notice) up to a number of
membership interests in the Company equal to the total number of membership
interests involved in the Sale Transaction multiplied by a fraction, the
numerator of which shall be the number of membership interests that Buyer owns
beneficially or is entitled to receive upon conversion or exercise of securities
issued by the Company, and the denominator of which shall be the aggregate
number of membership interests outstanding or issuable upon conversion or
exercise of securities issued by the Company, and (B) the membership interests
to be sold by the Member will reduced accordingly.
(iii) Notwithstanding anything herein to the contrary, Buyer may
not elect to have any membership interests included in such sale unless (A) such
membership interests shall when sold be free and clear of all liens, charges and
encumbrances of any kind other than restrictions arising under this Agreement,
and (B) Buyer takes all actions reasonably required to vest title to the
membership interests sold by Buyer in the purchaser thereof, free and clear of
all liens, charges and encumbrances.
(iv) The Members and the Company shall cause each person and
entity that becomes a member of the Company to enter into an agreement
subjecting such person or entity to the obligations set forth in this Section
5.10(b).
5.11 BUSINESS PLAN. Within 90 days of the date of this Agreement, the
Company will propose to Buyer a written business plan for the Company (the
"BUSINESS PLAN"), and from time to time during the Option Period the Company and
Buyer may propose modifications to the Business Plan. The Business Plan and all
changes thereto will be subject to written approval by the Buyer and the
Company, which will not be unreasonably withheld. In extenuating circumstances
or to take advantage of opportunities requiring immediate action, the Chief
Executive Officer of the Company may take action that could constitute a change
to the Business Plan with the prior verbal approval of Buyer if such action is
confirmed to Buyer in writing in reasonable detail within 15 days. Buyer
recognizes that, in light of its start-up nature, the Company may need to shift
its business focus to move with market opportunities or to advance itself toward
its goal of revenues and target profitability, and Buyer will, in general,
accommodate modifications to the Business Plan consistent with such shifts in
business focus and market opportunities, provided that it will be not be
unreasonable for Buyer or the Company to withhold its approval if the proposed
Business Plan or any proposed modification thereof (i) is inconsistent with the
initial Business Plan or the commitments of the Company and the Members set
forth in this Agreement, or (ii) deviates from a fundamental emphasis upon
enhancing member value by maximizing revenues and profitability of the Company.
During the Option Period, the Company will conduct its business in accordance
with the Business Plan.
5.12 FINANCING OF THE COMPANY. The Members shall provide, in the form of
contributions to the capital of the Company and not loans to the Company, all
cash needed by the Company at any time to finance its operations or to pursue
the Business Plan, except that the Members will not be required to provide
financing for business initiatives required by Buyer that are not provided for
in the Business Plan. Return by the Company to the Members of such capital
contributions will be subject to the restrictions set forth in Section 5.3(a).
If necessary in order to access sufficient cash to meet the Company's cash
needs, the Members will borrow
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money and secure such borrowings with personal guaranties and such collateral as
may be required by the lender, provided that the Members may not pledge any
membership interests in the Company or any stock of Buyer that is subject to
performance related restrictions. Buyer and its Affiliates shall have no
obligation to provide any financing to the Company and shall have no obligation
to the Members in respect of their contributions to the capital of the Company,
whether or not the Option is exercised. The Company shall incur no indebtedness
or other obligations to the Members in return for the Members' contributions to
the capital of the Company, other than the claims on the Company's equity
represented by the membership interests in the Company owned by the Members.
5.13 EMPLOYEES.
(a) Resignation From the Company. Schedule 5.13 lists each person
employed by the Company immediately before execution and delivery of this
Agreement (the "EFOX EMPLOYEES"). Concurrently with execution and delivery of
this Agreement and as a condition to its effectiveness, each eFox Employee is
resigning from the Company and becoming an employee of EPS, at the salary listed
on Schedule 5.13 corresponding to such person pursuant to an Employment Offer
Letter substantially in the form of Exhibit D.
(b) Restricted Stock. Concurrently with execution and delivery of this
Agreement and as a condition to its effectiveness, each person listed on
Schedule 5.13 is purchasing the number of shares of Series A Common Stock of
Buyer listed on Schedule 5.13 corresponding to such person, which shares are
subject to performance-based restrictions pursuant to a Restricted Stock
Purchase Agreement substantially in the form of Exhibit E.
(c) Assignment to the Company. During the Option Period and as long as
this Agreement has not been knowingly or willfully or recklessly breached in a
material respect by the Company or the Members (or any such breach has been
cured and any material adverse effects of such breach have been ameliorated in
all material respects within 15 days of notice of such breach), EPS will assign
the Leased Employees (as defined below) to work in the business of the Company
under the day-to-day supervision of Xxxxx X. Xxxxxx or his successor as the
Chief Executive Officer of the Company. For purposes hereof, "LEASED EMPLOYEES"
means the persons listed on Schedule 5.13 and such additional personnel as may
be hired by EPS and assigned to the Company at the request of Xxxxx Xxxxxx or
his successor. EPS will use reasonable efforts to hire additional Leased
Employees and assign them to the Company if and when requested by the Company,
consistent with the Business Plan. During the Option Period and as long as the
Company and the Members comply with this Agreement EPS will not transfer any
Leased Employee to any assignment other than work in the business of the
Company, unless the Company gives its written consent to such transfer.
(d) Compensation. As legal employer, EPS shall pay all salary and
benefits payable to the employees assigned to the Company, as well as all taxes
and other employee costs arising in connection with employment of such persons.
The Company shall pay to EPS, as compensation for provision of such employees to
the Company, all costs incurred by EPS to employ such employees, but not
including any allocation of general overhead of Buyer that is not increased in
connection with employing such employees. Such compensation will be paid by the
Company monthly against EPS's invoice and reasonable documentation of such
costs.
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(e) Training, Supplies. The Company shall be solely responsible for
providing, at its expense, all training, equipment and supplies required by
Leased Employees to perform their duties to the Company.
(f) Responsibility and Indemnity. The Company shall be responsible for,
and shall indemnify, defend, and hold harmless EPS and Buyer and their
successors and assigns and their directors, officers, employees and agents from
and against, any and all claims, costs, liabilities and damages arising as a
result of or in connection with (i) any acts or omissions of the Leased
Employees in performance of their duties to the Company, (ii) any acts or
omissions of the Company or termination of the employment of any Leased
Employees in connection with any reduction in force by the Company or any
decision by the Company not to continue to utilize any particular Leased
Employees.
(g) Intellectual Property. Inventions, works of authorship, or other
intellectual property ("Inventions") conceived, invented, written, or developed
by any Leased Employee in the course and scope of his or her employment with
Buyer and assignment to the Company will belong to the Company, provided that
the Company will obtain no rights to any Inventions of Leased Employees
conceived, invented, written or developed in the course and scope of their
employment with Buyer not in the course and scope of their assignment to the
Company.
5.14 USE OF SERVICES. During the Option Period, Buyer will use
reasonable efforts to facilitate the marketing of the services of eFox through
sales personnel associated with Buyer's Performance Learning Division to clients
with an identifiable need for such services.
6. SURVIVAL; INDEMNIFICATION.
6.1. SURVIVAL.
The representations and warranties made in this Agreement, which are
made only as of the date of this Agreement, shall survive any investigation made
by any party hereto until the date that is 90 days after the fiscal year in
which the Option is Exercised, except those representations and warranties
contained in (i) Sections 3.17 (Taxes) and 3.18 (Brokers), which will survive
until the expiration (including extensions) of the applicable statute of
limitations; and (ii) Sections 3.2 (Ownership of Membership Interests); 3.4
(Title to Assets) and 3.16 (Liabilities), which will survive indefinitely. As to
any matter or claim which is based upon fraud by the indemnifying party, the
representations and warranties set forth in this Agreement shall expire only
upon expiration of the applicable statute of limitations. No party will be
liable to another under any warranty or representation after the applicable
expiration of such warranty or representation; provided however, if a claim or
notice is given under this Article 6 with respect to any representation or
warranty prior to the applicable expiration date, such claim may be pursued to
resolution notwithstanding expiration of the representation or warranty under
which the claim was brought. Any investigations made by or on behalf of any of
the parties prior to the date hereof shall not affect any of the parties'
obligations hereunder. Completion of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy of any of the
parties.
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6.2. INDEMNIFICATION BY THE MEMBERS.
Subject to the limits set forth in this Article 6, the Members and, if
the Option has not been exercised, the Company, and their successors and assigns
shall jointly and severally indemnify, defend, reimburse and hold harmless Buyer
and its Affiliates and their successors and assigns, and the officers,
directors, employees and agents of any of them, from and against any and all
claims, losses, damages, liabilities, obligations, assessments, penalties and
interest, demands, actions and expenses, whether direct or indirect, known or
unknown, absolute or contingent (including, without limitation, settlement costs
and any legal, accounting and other expenses for investigating or defending any
actions or threatened actions) ("Losses") reasonably incurred by any such
indemnitee, arising out of or in connection with any of the following:
(a) the ownership and operation of the Company before the date of this
Agreement;
(b) any untruth or inaccuracy of any representation, warranty or
certification made by the Company or the Members in or pursuant to this
Agreement; and
(c) the breach of any covenant, agreement or obligation of the Company
or the Members contained in this Agreement.
6.3. INDEMNIFICATION BY BUYER.
Subject to the limits set forth in this Article 6, Buyer and its
successors and assigns shall indemnify, defend, reimburse and hold harmless the
Members and their successors and assigns from and against any and all Losses
reasonably incurred by any such Members arising out of or in connection with any
of the following:
(a) the ownership and operation of the Company after the exercise of the
Option (except that, to the extent permitted by law, Buyer and its successors
and assigns will not be required to indemnify, defend, reimburse or hold
harmless any Member in respect of any Losses arising as a result of acts or
omissions of that Member, including without limitation in such Member's capacity
as an employee of or consultant to Buyer or its Affiliates after the Exercise);
(b) any untruth or inaccuracy of any representation, warranty or
certification made by Buyer in this Agreement; and
(c) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement.
6.4. INDEMNIFICATION PROCEDURE.
(a) Whenever any claim shall arise for indemnification hereunder (a
"CLAIM"), the party entitled to indemnification (the "INDEMNITEE") shall
promptly give written notice to the party obligated to provide indemnity (the
"INDEMNITOR") with respect to the Claim after the receipt by the Indemnitee of
reliable information of the facts constituting the basis for the Claim; but the
failure to timely give such notice shall not relieve the Indemnitor from any
obligation under this Agreement, except to the extent, if any, that the
Indemnitor is materially prejudiced thereby.
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(b) Upon receipt of written notice from the Indemnitee of a Claim, the
Indemnitor shall provide counsel (such counsel subject to the reasonable
approval of the Indemnitee) to defend the Indemnitee against the matter from
which the Claim arose, at the Indemnitor's sole cost, risk and expense. The
Indemnitee shall cooperate in all reasonable respects, at the Indemnitor's sole
cost, risk and expense, with the Indemnitor in the investigation, trial, defense
and any appeal arising from the matter from which the Claim arose; provided
however, that the Indemnitee may (but shall not be obligated to) participate in
any such investigation, trial, defense and any appeal arising in connection with
the Claim. If the Indemnitee's participation in any such investigation, trial,
defense and any appeal arising from such Claim relates to a legal position or
defense that varies materially from the legal positions or defenses pursued by
the Indemnitor, and if the Indemnitee reasonably believes that the Indemnitee's
interests will be adversely and materially affected if such legal position or
defense is not pursued, the Indemnitor shall bear the expense of the
Indemnitee's separate participation, including all fees, costs and expenses of
one separate counsel for the Indemnitee (or multiple Indemnitees). If the
Indemnitee elects to so participate, the Indemnitor shall cooperate with the
Indemnitee, and the Indemnitor shall deliver to the Indemnitee or its counsel
copies of all pleadings and other information within the Indemnitor's knowledge
or possession reasonably requested by the Indemnitee or its counsel that is
relevant to the defense of such Claim and that will not prejudice the
Indemnitor's position, claims or defenses. The Indemnitee and its counsel shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder. The Indemnitor shall have the right to elect
to settle any claim for monetary damages only without the Indemnitee's consent,
if the settlement includes a complete release of the Indemnitee. If the
settlement does not include such a release, it will be subject to the consent of
the Indemnitee, which will not be unreasonably withheld. The Indemnitor may not
admit any liability of the Indemnitee or waive any of the Indemnitee's rights
without the Indemnitee's prior written consent, which will not be unreasonably
withheld. If the subject of any Claim results in a judgment or settlement, the
Indemnitor shall promptly pay such judgment or settlement.
(c) If the Indemnitor fails to assume the defense of the subject of any
Claim in accordance with the terms of Section 6.4(b), if the Indemnitor fails
diligently to prosecute such defense, or if the Indemnitor has, in the
Indemnitee's good faith judgment, a conflict of interest, the Indemnitee may
defend against the subject of the Claim, at the Indemnitor's sole cost, risk and
expense, in such manner and on such terms as the Indemnitee deems appropriate,
including, without limitation, settling the subject of the Claim with the
consent of the Indemnitor. If the Indemnitee defends the subject of a Claim in
accordance with this Section, the Indemnitor shall cooperate with the Indemnitee
and its counsel, at the Indemnitor's sole cost, risk and expense, in all
reasonable respects, and shall deliver to the Indemnitee or its counsel copies
of all pleadings and other information within the Indemnitor's knowledge or
possession reasonably requested by the Indemnitee or its counsel that are
relevant to the defense of the subject of any such Claim and that will not
prejudice the Indemnitor's position, claims or defenses. The Indemnitee shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee against
Losses arising under this Agreement shall be in addition to any other
obligations the Indemnitor might otherwise have and any other rights the
Indemnitee might otherwise have.
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(e) At the request of the Indemnitor, the Indemnitee shall seek recovery
from its insurance provider(s) with respect to any Loss for which the Indemnitor
is or may be required to make an indemnification payment pursuant to this
Section 6.4.
(f) The amount which the Indemnitor is required to pay to, for or on
behalf of the Indemnitee pursuant to this Section 6.4 shall be adjusted
(including, without limitation, retroactively) (i) by any insurance proceeds
actually recovered by or on behalf of such Indemnitee in reduction of the
related indemnifiable Loss and (ii) to take account of the cash value to Buyer
of any Tax benefit realized as a result of the indemnifiable Loss. If the
Indemnitee has received or has had paid on its behalf an indemnification payment
for an indemnifiable Loss and subsequently receives insurance proceeds for such
Loss, or realizes any cash value as a result of any Tax benefit as a result of
such Loss, then the Indemnitee shall (i) promptly notify the Indemnitor of the
amount and nature of such proceeds and benefits and (ii) pay to the Indemnitor
the amount of such insurance proceeds or cash Tax benefit or, if lesser, the
amount of the indemnification payment.
(g) The Indemnitee shall be obligated to use all reasonable efforts to
mitigate to the fullest extent practicable the amount of any Loss arising from
any claim by a third party for which it is entitled to seek indemnification
hereunder, and the Indemnitor shall not be required to make any payment to the
Indemnitee in respect of such Loss to the extent the Indemnitee fails to comply
with the foregoing obligations.
(h) The Indemnitor shall be subrogated to all rights of the Indemnitee
against any third party in respect of any matter giving rise to a claim for
indemnification hereunder.
(i) Notwithstanding any other provision of this Agreement, this Section
6.4 shall not apply to any claims under Section 5.9, which shall be governed
solely and exclusively by the provisions thereof.
(j) The indemnification provisions in this Article 6 encompass Claims
solely between the parties hereto, not involving any third party, as well as
Claims involving third parties.
(k) Following the Exercise, the indemnities provided for in this Article
6 shall be the sole and exclusive remedies of the parties and their successors
and assigns with respect to any disputes relating to this Agreement, the events
giving rise to this Agreement and the transactions provided for herein or
contemplated hereby, it being agreed and understood that the parties expressly
waive any and all other remedies, including any and all such remedies as may be
provided by statute, rule or regulation (other than intentional fraud).
6.5. PAYMENT. All payments owing under this Article 6 will be made
promptly as indemnifiable Losses are incurred. If the Indemnitee defends the
subject matter of any Claim in accordance with Section 6.4(c) or proceeds with
separate counsel in accordance with Section 6.4(b), the expenses (including
reasonable attorneys' fees) incurred by the Indemnitee shall be paid by the
Indemnitor in advance of the final disposition of such matter as incurred by the
Indemnitee, if the Indemnitee undertakes in writing to repay promptly any such
advances in the event that it is ultimately determined that the Indemnitee is
not entitled to indemnification under the terms of this Agreement or applicable
law.
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6.6. LIMITATIONS.
(a) Notwithstanding any provision of this Agreement to the contrary, no
party shall have any obligation to indemnify any person entitled to indemnity
under this Article 6 or to pay damages in respect of contract or other claims
arising under this Agreement or any other Transaction Document unless the
persons so entitled to indemnity or recovery thereunder have suffered Losses in
an aggregate amount attributable to all Claims and obligors in excess of Fifty
Thousand Dollars ($50,000) (the "THRESHOLD"), except claims arising from any
breach of the representations and warranties contained in Section 3.17 (Taxes)
or covenants in Section 5.9 (Tax Matters) shall not be subject to the Threshold.
Once the aggregate amount of Losses exceeds the Threshold, persons entitled to
recovery shall be entitled to recover the full amount of all Losses in excess of
the Threshold. No person shall be entitled to indemnification under this Article
6 for Losses directly or indirectly caused by a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement or any duty to the potential Indemnitor.
(b) (i) The maximum aggregate liability of the Members (and, if the
Option is not exercised, the Company) on the one hand, to Buyer, and Buyer, on
the other hand to the Members (and, if the Option is not exercised, the
Company), for all claims arising under or otherwise related to this Agreement
shall be $500,000.
7. MISCELLANEOUS.
7.1. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given upon personal delivery
or three (3) days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, or one (1) business day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested from such service or upon receipt of electronic or other
confirmation of transmission if sent via facsimile, to the parties, their
successors in interest or their assignees at the following addresses and
telephone numbers, or at such other addresses or telephone numbers as the
parties may designate by written notice in accordance with this Section 7.1:
If to Buyer: EPS Solutions Corporation
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: General Counsel
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
0 Xxxx Xxxxx, Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Xxxxxx X. Xxxxxx, Esq.
If to the Company
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or any Member: Xxxxx X. Xxxxxx
000 Xxxx Xxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx
(Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn.: Xxxxx X. Xxxxx, Esq.
7.2. ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement and the
rights, interests or obligations hereunder may not be assigned by any of the
parties hereto without the prior written consent of the other parties hereto,
except that Buyer may assign its rights hereunder to (a) any successor to all or
substantially all of the business or assets of Buyer, but only if the transferee
assumes Buyer's liabilities hereunder, or (b) to any Affiliate of Buyer. This
Agreement shall inure to the benefit of and be binding upon Buyer and the
Company and their respective permitted successors and assigns and upon each
Member and his or her executors, administrators, heirs, legal representatives
and permitted successors and assigns. Nothing in this Agreement will confer upon
any person or entity not a party to this Agreement, or the legal representatives
of such person or entity, any rights or remedies of any nature or kind
whatsoever under or by reason of this Agreement.
7.3. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its conflicts-of-law principles.
7.4. COUNTERPARTS. Facsimile transmission of any signed original
document and/or retransmission of any signed facsimile transmission will be
deemed the same as delivery of an original. At the request of any party, the
parties will confirm facsimile transmission by signing a duplicate original
document. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the same
instrument.
7.5. COMPLETE AGREEMENT. This Agreement and the exhibits and schedules
hereto, contain the entire agreement between the parties hereto with respect to
the transactions contemplated herein and shall supersede all previous oral and
written and all contemporaneous oral negotiations, commitments, and
understandings.
7.6. MODIFICATIONS, AMENDMENTS AND WAIVERS. Any party may, (a) waive any
inaccuracies in the representations and warranties of any other party contained
in this Agreement; and (b) waive compliance by any other party with any of the
covenants or agreements contained in this Agreement. No waiver of any of the
provisions of this Agreement will be considered, or will constitute, a waiver of
any of the rights or remedies, at law or equity, of the party entitled to the
benefit of such provisions unless made in writing and executed by the
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party entitled to the benefit of such provision. This Agreement may be amended,
supplemented or modified only by a written instrument duly executed by each
party hereto.
7.7. HEADINGS; REFERENCES. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References herein to Articles, Sections,
Schedules and Exhibits refer to the referenced Articles, Sections, Schedules or
Exhibits hereof unless otherwise specified.
7.8. SEVERABILITY. Any provision of this Agreement which is invalid,
illegal, or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality, or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal, or unenforceable in any other jurisdiction.
7.9. INVESTIGATION. All representations and warranties contained herein
which are made to the knowledge of a party shall require that such party make
reasonable investigation and inquiry with respect thereto to ascertain the
correctness and validity thereof. Representations and warranties made to the
knowledge of the Company shall be deemed made to the knowledge of the Members
only and no other person.
7.10. EXPENSES OF TRANSACTIONS. All fees costs and expenses incurred by
Buyer in connection with the transactions contemplated by this Agreement shall
be borne by Buyer, and all fees, costs and expenses incurred by the Company or
the Members in connection with the transactions contemplated by this Agreement
shall be borne by the Members jointly and severally.
7.11. ARBITRATION.
(a) (i) Any controversy or claim arising out of or relating to this
Agreement shall be solely and finally settled by arbitration administered by the
American Arbitration Association (the "AAA") in accordance with its Commercial
Arbitration Rules as then in effect (the "RULES"), except to the extent such
Rules vary from the following provisions. Notwithstanding the previous sentence,
the parties hereto may seek provisional remedies in courts of appropriate
jurisdiction, and such request shall not be deemed a waiver of the right to
compel arbitration of a dispute hereunder, provided however, that the parties
shall seek any permanent injunctive relief, and any such proceeding shall be
resolved, pursuant to this Section.
(ii) If any controversy or claim arising out of or relating to
this Agreement also arises out of or relates to the employment of any Member by
Buyer or any Affiliate of Buyer, the provisions of this Agreement governing
dispute resolution shall govern resolution of such controversy or claim. The
provisions of this Agreement governing dispute resolution supersede any
provisions relating to such matters in any employment agreement between any
Member and Buyer or any Affiliate of Buyer.
(iii) The arbitration shall be heard and determined by three (3)
arbitrators as provided herein (such arbitrators are hereinafter referred to as
the "ARBITRATORS"). The judgment of the award rendered by the Arbitrators may be
entered in any court having jurisdiction thereof.
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The arbitration proceedings shall be held in Orange County, California unless
the parties to the arbitration agree to another location.
(b) If a party hereto determines to submit a dispute for arbitration
pursuant to this Section 7.11, such party shall furnish the other party with
whom it has the dispute with a notice of arbitration as provided in the Rules
(an "ARBITRATION NOTICE") which, in addition to the items required by the Rules,
shall include a statement of the nature, with reasonable detail, of the dispute.
A copy of the Arbitration Notice shall be concurrently provided to the AAA,
along with a copy of this Agreement. If a party has a counterclaim against the
other party, such party shall furnish the party with whom it has the dispute a
notice of such claim as provided in the Rules (a "NOTICE OF COUNTERCLAIM")
within ten (10) days of receipt of the Arbitration Notice, which, in addition to
the items required by the Rules, shall include a statement of the nature, with
reasonable detail, of the dispute. A copy of the Notice of Counterclaim shall be
concurrently provided to the AAA. Within fifteen (15) days after receipt of the
Arbitration Notice or the Notice of Counterclaim as applicable, each party shall
select one person to act as Arbitrator and the two (2) selected shall select a
third Arbitrator within ten (10) days of their appointment. If the Arbitrators
selected by the parties are unable or fail to agree upon the third Arbitrator
within such time, the third Arbitrator shall be selected by the AAA. Each
Arbitrator shall be a practicing attorney or a retired or former judge with at
least fifteen (15) years experience with and knowledge of securities laws,
complex business transactions, and mergers and acquisitions.
(c) Once the Arbitrators are assigned to hear the matter, the
Arbitrators shall schedule a pre-hearing conference to reach agreement on
procedural and scheduling matters, arrange for the exchange of information,
obtain stipulations and attempt to narrow the issues.
(d) At the pre-hearing conference, the Arbitrators shall have the
discretion to order, to the extent the Arbitrators deem relevant and
appropriate, that each party may (i) serve a maximum of one set of no more than
twenty (20) requests for production of documents and one set of ten (10)
interrogatories (without subparts) upon the other parties; and (ii) depose a
maximum of five (5) witnesses. All objections to discovery are reserved for the
arbitration hearing except for objections based on privilege and proprietary or
confidential information. The responses to the document demand, the documents to
be produced thereunder, and the responses to the interrogatories shall be
delivered to the propounding party thirty (30) days after receipt by the
responding party of such document demand or interrogatory. Each deposition shall
be taken on reasonable notice to the deponent, and must be concluded within
eight (8) hours and all depositions must be taken within forty-five (45) days
following the pre-hearing conference. Any party deposing an opponent's expert
must pay the expert's fee for attending the deposition. All discovery disputes
shall be decided by the Arbitrators.
(e) The parties must file briefs with the Arbitrators at least three (3)
days before the arbitration hearing, specifying the facts each intends to prove
and analyzing the applicable law. The parties have the right to representation
by legal counsel throughout the arbitration proceedings. The presentation of
evidence at the arbitration hearing shall be governed by the Federal Rules of
Evidence. Oral evidence given at the arbitration hearing shall be given under
oath. Any party desiring a stenographic record may secure a court reporter to
attend the arbitration proceedings. The party requesting the court reporter must
notify the other parties and the Arbitrators of the arrangement in advance of
the hearing, and must pay for the cost incurred.
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(f) Any arbitration can be consolidated with one or more arbitrations
involving other parties, which arise under agreement(s) between the Buyer and
such other parties, if more than one such arbitration is commenced and any party
thereto contends that two or more arbitrations are substantially related and
that the issues should be heard in one proceeding, the Arbitrators selected in
the first-filed of such proceedings shall determine whether, in the interests of
justice and efficiency, the proceedings should be consolidated before those
Arbitrators.
(g) The Arbitrators' award shall be in writing, signed by the
Arbitrators and shall contain a concise statement regarding the reasons for the
disposition of any claim.
(h) To the extent permissible under applicable law, the award of the
Arbitrators shall be final. It is the intent of the parties that the arbitration
provisions hereof be enforced to the fullest extent permitted by applicable law.
7.12. SUBMISSION TO JURISDICTION. All actions or proceedings arising in
connection with this Agreement for preliminary or injunctive relief or matters
not subject to arbitration, if any, shall be tried and litigated exclusively in
the state or federal courts located in the County of Orange, State of
California. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than that specified in this paragraph. Each party
hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this paragraph, and stipulates that the
State and Federal courts located in the County of Orange, State of California
shall have in personam jurisdiction over each of them for the purpose of
litigating any such dispute, controversy, or proceeding. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this Section by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in Section 7.1. Nothing herein shall affect
the right of any party to serve process in any other manner permitted by law.
7.13. ATTORNEYS' FEES. If Buyer or any of its Affiliates, successors or
assigns brings any action, suit, counterclaim, cross-claim, appeal, arbitration,
or mediation for any relief against the Company or any of its Affiliates,
successors or assigns or any Member, or if the Company or any of its Affiliates,
successors or assigns or any Member brings any action, suit, counterclaim,
cross-claim, appeal, arbitration, or mediation for any relief against Buyer or
any of its Affiliates, successors or assigns, declaratory or otherwise, to
enforce the terms hereof or to declare rights hereunder (collectively, an
"ACTION"), in addition to any damages and costs which the prevailing party
otherwise would be entitled, the non-prevailing party shall pay to the
prevailing party a reasonable sum for attorneys' fees and costs (at the
prevailing party's attorneys' then-prevailing rates) incurred in bringing and
prosecuting such Action and/or enforcing any judgment, order, ruling, or award
(collectively, a "DECISION") granted therein, all of which shall be deemed to
have accrued on the commencement of such Action and shall be paid whether or not
such action is prosecuted to a Decision. Any Decision entered in such Action
shall contain a specific provision providing for the recovery of attorneys' fees
and costs incurred in enforcing such Decision.
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For the purposes of this Section, attorneys' fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
For purposes of this paragraph, "PREVAILING PARTY" includes, without
limitation, a party who agrees to dismiss an action on the other party's payment
of the sum allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it. If there are multiple claims,
the prevailing party shall be determined with respect to each claim separately.
The prevailing party shall be the party who has obtained the greater relief in
connection with any particular claim, although, with respect to any claim, it
may be determined that there is no prevailing party.
7.14. ENFORCEMENT OF THE AGREEMENT. The Company, the Members and Buyer
acknowledge that irreparable damage would occur if any of the obligations of the
Company and the Members under this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Buyer will be entitled to
an injunction or injunctions to prevent breaches of this Agreement by the
Company or the Members and to enforce specifically the terms and provisions
hereto, this being in addition to any other remedy to which Buyer is entitled at
law or in equity.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
EPS SOLUTIONS CORPORATION eFOX, LLC
By: /s/ XXXX X. XXXXXXX By: /s/ XXXXX X. XXXXXX
----------------------------- --------------------------------
Name: Xxxx X. Xxxxxxx Name: Xxxxx X. Xxxxxx
----------------------------- --------------------------------
Title: SVP Title: President
----------------------------- --------------------------------
ENTERPRISE PROFIT SOLUTIONS MEMBERS
CORPORATION /s/ XXXXX X. XXXXXX
----------------------------------------
By: /s/ XXXX X. XXXXXXX Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx /s/ XXXXXXXXX X. XXXXXX
----------------------------- ----------------------------------------
Title: SVP Xxxxxxxxx X. Xxxxxx
-----------------------------
MEMBERS' REPRESENTATIVE
----------------------------------------
Xxxxx X. Xxxxxx
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