Exhibit 2.35
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AMENDED AND RESTATED
MERGER AGREEMENT
by and among
CENTERPRISE ADVISORS, INC.,
XXXXXXX MERGERSUB INC.,
and
XXXXXXX XXXXXX & XXXXXXXXX,
CERTIFIED PUBLIC ACOUNTANTS,
A PROFESSIONAL CORPORATION
September 24, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER.........................................................2
1.1 The Merger...........................................2
1.2 Effects of the Merger................................2
1.3 Directors and Officers of the Surviving
Corporation..........................................3
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT................................3
2.1 Merger Consideration.................................3
2.1.1 Basic Purchase Consideration...................3
2.1.2 Treasury Stock.................................3
2.1.3 Dissenters.....................................3
2.1.4 Conversion of Mergersub Stock..................3
2.1.5 Exchange of Certificates.......................4
2.2 Purchase of AR.......................................4
2.3 Post-Closing Adjustments to Basic Purchase
Consideration........................................4
2.3.1 Adjustments for Net Working Capital
Shortfall/Excess...............................4
2.3.2 Preliminary Balance Sheet and Adjustment.......4
2.3.3 Interim Adjustment.............................4
2.3.4 Final Adjustment...............................4
2.3.5 Disputes.......................................5
2.3.6 Payment of Adjustments.........................5
2.4 Post-Closing Management of AR........................5
2.5 Assignment of Uncollected AR.........................6
2.6 Definitions..........................................6
ARTICLE III
THE CLOSING AND CONSUMMATION DATE..................................7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................7
4.1 Organization and Qualification.......................7
4.2 Company Subsidiaries.................................7
4.3 Authority; Non-Contravention; Approvals..............8
4.4 Capitalization.......................................9
4.5 Year 2000...........................................10
4.6 Financial Statements................................10
4.7 Absence of Undisclosed Liabilities..................10
4.8 Unbilled Fees and Expenses..........................11
4.9 Absence of Certain Changes or Events................11
4.10 Litigation..........................................13
4.11 Compliance with Applicable Laws.....................14
4.12 Licenses............................................14
4.13 Material Contracts..................................15
4.14 Properties..........................................17
4.15 Intellectual Property...............................19
(i)
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4.16 Taxes...............................................20
4.17 Employee Benefit Plans; ERISA.......................20
4.18 Labor Matters.......................................22
4.19 Environmental Matters...............................23
4.20 Insurance...........................................23
4.21 Interest in Customers and Suppliers; Affiliate
Transactions........................................24
4.22 Business Relationships..............................24
4.23 Compensation........................................24
4.24 Bank Accounts.......................................25
4.25 Professional Credentials............................25
4.26 Disclosure; No Misrepresentation....................25
ARTICLE V
[RESERVED]
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPRISE.....................28
6.1 Organization And Qualification......................28
6.2 Capitalization......................................28
6.3 No Subsidiaries.....................................29
6.4 Authority; Non-Contravention; Approvals.............29
6.5 Absence of Undisclosed Liabilities..................30
6.6 Litigation..........................................30
6.7 Compliance with Applicable Laws.....................31
6.8 No Misrepresentation................................31
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS.................................31
7.1 Conduct of Business by the Company Pending the
Acquisition.........................................31
7.2 No-Shop.............................................34
7.3 Schedules...........................................34
7.4 Company Stockholders Meeting........................35
7.5 Conversion..........................................35
ARTICLE VIII
ADDITIONAL AGREEMENTS.............................................36
8.1 Access to Information...............................36
8.2 Registration Statements.............................36
8.3 Expenses and Fees...................................38
8.4 Agreement to Cooperate..............................38
8.5 Public Statements...................................38
8.6 [Reserved]..........................................38
8.7 Centerprise Covenants. ............................40
8.8 Release of Guarantees...............................40
8.9 [Reserved]..........................................41
8.10 Preparation and Filing of Tax Returns...............41
8.11 Maintenance of Insurance............................41
8.12 Administration......................................41
8.13 Member Representative...............................41
(ii)
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ARTICLE IX
[RESERVED]
ARTICLE X
CLOSING CONDITIONS................................................50
10.1 Conditions to Each Party's Obligation to Effect
the Acquisition.....................................50
10.2 Conditions to Obligation of the Members, Seller
and the Company to Effect the Acquisition...........51
10.3 Conditions to Obligation of Centerprise to Effect
the Acquisition.....................................52
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER.................................54
11.1 Termination.........................................54
11.2 Effect of Termination...............................55
11.3 Amendment...........................................55
11.4 Waiver..............................................56
ARTICLE XII
[RESERVED]
ARTICLE XIII
[RESERVED]
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS................................................60
15.1 Brokers.............................................60
15.2 Notices.............................................60
15.3 Interpretation......................................61
15.4 Certain Definitions.................................61
15.5 Entire Agreement; Assignment........................61
15.6 Applicable Law......................................62
15.7 Counterparts........................................62
15.8 Parties in Interest.................................62
(iii)
LIST OF SCHEDULES
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Schedule 2.1 Consideration
Schedule 2.6 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
(iv)
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 Centerprise's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Employee Plans and Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Members' Guarantees
Schedule 8.13 Payees
Schedule 15.1 Brokers
(v)
LIST OF EXHIBITS
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Exhibit 10.2(c) Form of Opinion of Centerprise's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Seller, the Company
and Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Members' Release
Exhibit 10.3(R) Form of Company Stockholder Agreement
(vi)
DEFINED TERMS
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Accounting Licenses.............................................Section 4.12
Actions.......................................................Section 4.10.1
Acquisition.....................................................Introduction
Affiliate.......................................................Section 15.4
Affiliate Transactions..........................................Section 4.21
Agreement.......................................................Introduction
AR...............................................................Section 2.6
Arbitrator.....................................................Section 2.3.5
Attestation Practice............................................Introduction
Basic Purchase Consideration...................................Section 2.1.1
Business........................................................Introduction
Cash Consideration.............................................Section 2.1.1
Centerprise.....................................................Introduction
Centerprise Accountants........................................Section 2.3.2
Centerprise Common Stock.......................................Section 2.1.1
Centerprise Material Adverse Effect............................Section 6.4.3
Centerprise Representatives....................................Section 8.1.1
Centerprise Required Statutory Approvals.......................Section 6.4.3
Closing..........................................................Article III
Closing Balance Sheet..........................................Section 2.3.2
Closing Date.....................................................Article III
Code............................................................Introduction
Company.........................................................Introduction
Company Material Adverse Effect................................Section 4.3.3
(vii)
Company Representatives........................................Section 8.1.1
Company Shareholders' Agreement................................Section 7.1.4
Company Stock..................................................Section 2.1.1
Company Subsidiary(ies)..........................................Section 4.2
Contracts.......................................................Section 4.13
Conversion..................................................... Introduction
Copyrights......................................................Section 4.15
DGCL.............................................................Section 1.1
Disputed Item..................................................Section 2.3.5
Dissenting Shares..............................................Section 2.1.3
Effective Time...................................................Section 1.1
Employee Plan..............................................Section 4.17.5(a)
Environmental and Safety Requirements...........................Section 4.19
ERISA......................................................Section 4.17.5(b)
Excluded Assets................................................Section 7.1.4
Excluded Liabilities...........................................Section 7.1.4
Final Adjustment...............................................Section 2.3.4
Financial Statements.............................................Section 4.6
First Person...............................................Section 4.17.5(c)
Form S-1.......................................................Section 4.3.3
Form S-4.......................................................Section 4.3.3
Founding Companies..............................................Introduction
GAAP.............................................................Section 4.6
general increase................................................Section 4.23
Governmental Authority.........................................Section 4.3.2
(viii)
Hazardous Materials.............................................Section 4.19
herein..........................................................Section 15.3
hereof..........................................................Section 15.3
hereunder.......................................................Section 15.3
HSR Act........................................................Section 4.3.3
Incentive Compensation Agreement.............................Section 10.2(d)
Intellectual Property...........................................Section 4.15
Intellectual Property Licenses..................................Section 4.15
Interim Adjustment.............................................Section 2.3.3
IPO.............................................................Introduction
Knowledge.......................................................Section 15.4
Latest Balance Sheet.............................................Section 4.6
Laws............................................................Section 4.11
Leased Property...............................................Section 4.14.1
Licenses........................................................Section 4.12
Lien(s)........................................................Section 4.3.2
Liquidated Damages Amount........................................Section 7.3
Marks...........................................................Section 4.15
Material Contracts..............................................Section 4.13
Member(s).......................................................Introduction
Merger..........................................................Introduction
Mergersub.......................................................Introduction
Mergersub Stock................................................Section 6.2.1
Merger Documents.................................................Section 1.1
Net Working Capital..............................................Section 2.6
(ix)
1933 Act.......................................................Section 4.3.3
Organizational Documents.........................................Section 4.1
Other Agreements................................................Introduction
Other Acquisitions..............................................Introduction
Owned Property................................................Section 4.14.1
Patents.........................................................Section 4.15
Person..........................................................Section 15.4
Plan Affiliate.............................................Section 4.17.5(c)
Purchased AR.....................................................Section 2.2
Real Property.................................................Section 4.14.1
Registration Statements........................................Section 4.3.3
Resolution Period..............................................Section 2.3.5
Returns.......................................................Section 4.16.1
Schedules........................................................Section 7.3
SEC............................................................Section 4.3.3
Securities Act.................................................Section 4.3.3
Seller..........................................................Introduction
Special Bonus Plan...............................................Section 2.6
Stock Consideration............................................Section 2.1.1
Stockholders Agreement.......................................Section 10.2(f)
Surviving Corporation............................................Section 1.2
Target...........................................................Section 2.6
Tax Accrual......................................................Section 2.6
Taxes.........................................................Section 4.16.2
Territory....................................................Section 13.1(a)
(x)
Trade Secrets...................................................Section 4.15
Underwriters...................................................Section 8.1.1
Voting Agreement................................................Introduction
(xi)
AMENDED AND RESTATED
MERGER AGREEMENT
THIS AMENDED AND RESTATED MERGER AGREEMENT (this "Agreement") is made
as of September 24, 1999, by and among Centerprise Advisors, Inc., a Delaware
corporation ("Centerprise"), Xxxxxxx Mergersub Inc., a Delaware corporation and
wholly owned subsidiary of Centerprise ("Mergersub"), and Xxxxxxx Xxxxxx &
Xxxxxxxxx, Certified Public Accountants, A Professional Corporation, a Maryland
professional corporation (the "Company").
WITNESSETH:
WHEREAS, the Company engages directly, and indirectly through the
Company Subsidiaries, in the business of providing accounting, tax and other
related services (such business provided by the Company is referred to as the
"Business");
WHEREAS, prior to, and in anticipation of, completion of the
transactions contemplated hereby (a) the Company will cease to provide services
related to the practice of accounting that, pursuant to applicable laws and
regulations, may only be conducted by certified public accountants (the
"Attestation Practice", (b) the Company will be converted from a professional
corporation to a business corporation by amending the Company's Organizational
Documents (as defined in Section 4.1) such that it converts to a business
corporation, and (c) the Company's close corporation status will be terminated
(the actions described in the foregoing (a), (b) and (c), the "Conversion");
WHEREAS, the Boards of Directors of the Company, Centerprise and
Mergersub deem it advisable and in the best interests of their respective
shareholders to approve and consummate the business combination transaction
provided for herein in which Mergersub would merge with the Company, with the
Company being the surviving corporation in the merger (the "Acquisition" or
"Merger");
WHEREAS, Centerprise is entering into other agreements (the "Other
Agreements") substantially similar to this Agreement with each of Xxxxxx X.
Driver Company, Inc., Xxxx Frankfort Xxxxx & Xxxx, P.C., The Xxxxxxx Company,
Inc., Xxxxxxx Administrators, LLC, Verasource Excess Risk Ltd., Berry, Dunn,
XxXxxx & Xxxxxx, Chartered, Xxxxxx Xxxx & Xxxxxx PC, Self Funded Benefits, Inc.
d/b/a Insurance Design Administrators, Grace & Company, P.C., Simione, Scillia,
Xxxxxx & Xxxxxxx LLC and Xxxxxxx Rudzewicz & Co., P.C., (which companies
together with the Company are collectively referred to herein as the "Founding
Companies"), which agreements provide for the merger of a wholly owned
subsidiary of Centerprise with each such Founding Company (the "Other
Acquisitions") simultaneously with the Acquisition; Centerprise has provided a
side letter to each holder of equity interests of the Company to such effect;
WHEREAS, the Voting Agreement, dated as of March 31, 1999, among
Centerprise and certain stockholders of the Company has been terminated and is
no longer in force and effect;
WHEREAS, simultaneously with the consummation of the Acquisition,
Centerprise will close an initial public offering (the "IPO") of Centerprise
Common Stock (as defined in Section 2.1); and
WHEREAS, the parties intend the acquisition of Centerprise Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement and in reliance upon the representations and warranties set
forth herein, Mergersub shall be merged with and into the Company, the result of
which will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of Maryland. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"Merger Documents"), with the Secretary of State of the State of Maryland, as
provided in the Maryland General Corporation Law, as amended (the "MGCL"), and
with the Secretary of State of the State of Delaware, as provided in the General
Corporation Law of the State of Delaware (the "DGCL"). The Merger shall become
effective (the "Effective Time") upon the filing of the Merger Documents with
the Secretary of State of the State of Maryland and the Secretary of State of
the State of Delaware or at such later time, contemporaneously with the closing
of the IPO, as agreed by Centerprise and the Company and specified in the Merger
Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "Surviving Corporation"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to Centerprise and as specified in the
Merger Documents, (iii) the Merger shall have all the effects provided by
applicable law, and (iv) the Company shall be a wholly-owned subsidiary of
Centerprise.
2
1.3 Directors and Officers of the Surviving Corporation. From and after
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
2.1.1 Basic Purchase Consideration. At the Closing, by virtue
of the Merger and without any action on the part of the holder thereof, the
outstanding shares of capital stock, consisting of 2,900 shares of common stock,
no par value, of the Company (the "Company Stock") shall be converted into the
right to receive: (a) that number of shares of Centerprise common stock, par
value $.01 per share (the "Centerprise Common Stock") shown on line T of
Schedule 2.1; provided, however, that if the initial public offering price of
the Centerprise Common Stock is below $11.90 per share, the number of shares of
Centerprise Common Stock received at Closing shall be increased such that the
value of the shares, using the initial public offering price, equals the amount
shown on line U of Schedule 2.1 (the "Stock Consideration") and (b) the amount
of cash shown on line S of Schedule 2.1 (the "Cash Consideration"). The sum of
the Cash Consideration and the Stock Consideration is herein referred to as
"Basic Purchase Consideration."
2.1.2 Treasury Stock. Each share of capital stock of the
Company held in treasury of the Company shall be canceled and retired and no
payment shall be made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of
the Company the holder of which has perfected his right to dissent under
applicable law and has not effectively withdrawn or lost such right as of the
Effective Time (the "Dissenting Shares") shall not be converted into the right
to receive Basic Purchase Consideration, and the holder thereof shall be
entitled only to such rights as are granted by applicable law. The Company shall
give Centerprise prompt notice upon receipt by the Company of any such written
demands for payment of fair value of shares of capital stock of the Company and
any other instruments provided pursuant to applicable law. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time,
each share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of the Surviving Corporation. Such newly issued
shares shall thereafter constitute all of the issued and outstanding capital
stock of the Surviving Corporation.
3
2.1.5 Exchange of Certificates. At the Closing, Centerprise
shall receive the original Company Stock certificates, duly endorsed in blank by
the Company's stockholder(s) or accompanied by blank stock powers, in exchange
for the allocated share of (a) Centerprise Common Stock certificates
representing the Stock Consideration and (b) payment of the Cash Consideration
by certified check, cashier's check or wire transfer of immediately available
funds to a bank account or bank accounts in the amounts and manner specified by
the Company in a writing delivered to Centerprise at least three (3) business
days prior to the Closing Date. The shares represented by the Company Stock
certificates so delivered to Centerprise shall be canceled. Until surrendered as
contemplated by this Section 2.1.5, each certificate representing shares of
Company Stock represents only the right to receive Basic Purchase Consideration,
as adjusted in accordance with this Article II.
2.2 [Reserved]
2.3 Post-Closing Adjustments to Basic Purchase Consideration.
2.3.1 Adjustments for Net Working Capital Shortfall/Excess.
The Basic Purchase Consideration shall be (a) reduced dollar-for-dollar
to the extent Net Working Capital on the Closing Date is less than the
Target or (b) increased dollar-for-dollar to the extent Net Working
Capital on the Closing Date is greater than the Target.
2.3.2 Preliminary Balance Sheet and Adjustment. At or about
the Closing, the Company will prepare, and the firm
PricewaterhouseCoopers LLP (the "Centerprise Accountants") will review,
a balance sheet of the Company, as of the Closing Date, in accordance
with GAAP and consistent with the accounting policies and practices
used in connection with the preparation of the Financial Statements
(the "Closing Balance Sheet") along with a preliminary calculation of
any excess or shortfall of Net Working Capital as compared to the
Target.
2.3.3 Interim Adjustment. As soon as practicable, the Company
will prepare and deliver to Centerprise a revised calculation of Net
Working Capital reflecting all collections of AR up to the date 90 days
from the Closing Date. Within 10 days of receipt of such calculation,
Centerprise will deliver to the Member Representative a written report
indicating the amount and nature of any adjustment to the Basic
Purchase Consideration determined in accordance with Section 2.3.1 (the
"Interim Adjustment").
2.3.4 Final Adjustment. As soon as practicable, the Company
will prepare and deliver to Centerprise a final calculation of Net
Working Capital revised to reflect all collections of AR up to the date
180 days from the Closing Date. Centerprise will review such
calculation and any records, work papers and other documents related
thereto. Within 10 days of receipt of such calculation, Centerprise
will deliver to the Member Representative a written report indicating
the amount and nature of any adjustment to the Basic Purchase
Consideration determined in accordance with Section 2.3.1 (the "Final
Adjustment").
4
2.3.5 Disputes. The parties hereto shall not object to the
Interim Adjustment which shall be binding on the parties hereto, and
shall withhold all objections until delivery of the Final Adjustment
report. If the Member Representative does not object (or otherwise
respond) in writing to the Final Adjustment report within 30 days after
its delivery, the Final Adjustment shall automatically become final,
binding and conclusive on all parties hereto. Any objection to the
Final Adjustment report shall be in writing and shall specify the item
or items in dispute (each a "Disputed Item").
If the Member Representative and Centerprise are unable to
resolve any Disputed Item within 30 days after notice from the Member
Representative that a dispute exists (the "Resolution Period"), then a
representative from the office of a nationally recognized accounting
firm (the "Arbitrator") selected jointly by Centerprise and the Member
Representative will arbitrate the dispute. The Member Representative
and Centerprise shall, within 20 days after expiration of the
Resolution Period, present their respective positions with respect to
any Disputed Item to the Arbitrator together with such materials as the
Arbitrator deems appropriate. To the extent any Disputed Item is
similar to a disputed item under the Other Agreements, the Arbitrator
shall arbitrate the Disputed Item based on the submitted materials and
without regard to the disputed item under the Other Agreements. The
Arbitrator shall, after the submission of the materials, submit a
written decision on each Disputed Item to the Member Representative and
Centerprise and such determination shall be final and binding on the
parties hereto. The arbitration shall be conducted in Chicago,
Illinois. The parties hereto agree that the cost of the Arbitrator
shall be borne by the non-prevailing party or as determined by the
Arbitrator.
2.3.6 Payment of Adjustments. In the event Net Working Capital
is less than the Target, the Company's stockholders shall pay the
amount of the shortfall to Centerprise. In the event Net Working
Capital is greater than the Target, Centerprise shall pay the amount of
the excess to the Company's stockholders. Any payment required to be
made pursuant to this paragraph shall be made, within ten days of
delivery of the report indicating any adjustment, by wire transfer of
immediately available funds to an account designated in writing by the
party that is to receive payment of such adjustment. In respect of the
Final Adjustment, the party making a payment required by such
adjustment shall make such payment within ten days after the Final
Adjustment becomes final and shall receive credit for or return of any
amount previously paid in connection with the Interim Adjustment.
2.4 Post-Closing Management of AR. Following the Closing, the billing,
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to
5
an outstanding invoice, the payment will be applied to the corresponding
invoice; and, in any other case, the payment will be applied to satisfy AR
relating to such obligor in the order that such AR arose. Any adjustment,
modification or write-off affecting AR and fees and expenses receivable and
unbilled fees and expenses of the Company incurred after Closing with respect to
the same client engagement shall be allocated ratably to the pre-Closing and
post-Closing periods.
2.5 Assignment of Uncollected AR. If any AR remain uncollected by the
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to the Company's stockholders. Notwithstanding the foregoing, the
Company will retain the sole right to service, administer and collect the
uncollected AR in accordance with Section 2.4.
2.6 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled
fees and expenses of the Company on the Closing Date.
(b) "Net Working Capital" means an amount determined as of the
Closing Date, whenever calculated, equal to difference between: (i) the
sum of any AR, prepaid expenses and other current assets less (ii) the
sum of accounts payable, accrued current liabilities, the items listed
on Schedule 2.6, the Tax Accrual and the portion of employer-paid FICA
attributable to Medicare, payable in connection with accrued salary and
bonus accounts and the Special Bonus Plan. For purposes of this Section
2.6(b), the Special Bonus Plan accrual shall not constitute a current
liability.
(c) "Special Bonus Plan" means the Company's Special Bonus
Plan dated March 1, 1999.
(d) "Target" means an amount equal to 1% of the Company's net
revenues for the four quarter period ending on the last day of the
calendar quarter prior to Closing.
(e) "Tax Accrual" means an amount equal to the product of (i)
Net Working Capital (calculated before deduction of the Tax Accrual)
less an amount equal to any tax deductions realized by Centerprise as a
result of any payments pursuant to the Special Bonus Plan times (ii)
the sum of 34% plus the effective state tax rate on the Company (net of
any federal tax benefit). A negative Tax Accrual shall be treated as a
current asset for purposes of Section 2.6(b)(i).
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Xxxxxx & Xxxxx, Chicago,
6
Illinois, contemporaneously with the closing of the IPO, or at such other time
and date as the parties hereto may mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Centerprise, as of March 31,
1999 and, subject to Section 7.3, as of the date on which Centerprise and the
lead Underwriter (as defined in Section 8.1.1) execute and deliver the
Underwriting Agreement related to the IPO and as of the Closing Date, as
follows:
4.1 Organization and Qualification. The Company is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and, following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the State of Maryland. Each Company Subsidiary (as defined in
Section 4.2) is duly organized, validly existing and in good standing under the
laws of the state of its organization set forth on Schedule 4.2. Each of the
Company and the Company Subsidiaries has the requisite power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted, and is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary. True, accurate and complete copies of the Company's and each Company
Subsidiary's Organizational Documents, in each case as in effect on March 31,
1999 have heretofore been delivered to Centerprise. "Organizational Documents"
means (a) the articles or certificate of incorporation and the bylaws of a
corporation (professional or otherwise), (b) the partnership agreement and any
statement of partnership of a general partnership, (c) the limited partnership
agreement and the certificate of limited partnership of any limited partnership,
(d) the operating or limited liability company agreement and certificate of
formation of any limited liability company, (e) any charter or similar document
adopted and filed in connection with the creation, formation, organization or
governance (as applicable) of any Person and (f) any amendment to any of the
foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including
any assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "Company Subsidiary" and collectively, the "Company Subsidiaries").
Except as set forth on Schedule 4.2, the Company does not, directly or
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
7
4.3 Authority; Non-Contravention; Approvals.
4.3.1 The Company has full right, power and authority to enter
into this Agreement and, subject to the approval of the Merger and the
transactions contemplated hereby by the Company's stockholders, to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company have been
duly authorized by all necessary corporate action on the part of the
Company, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's stockholders. This Agreement has
been duly executed and delivered by the Company, and, assuming the due
authorization, execution and delivery hereof by Centerprise,
constitutes a valid and legally binding agreement of the Company,
enforceable against it in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
4.3.2 The execution and delivery of this Agreement by the
Company does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in
the creation of any claim, lien, privilege, mortgage, charge,
hypothecation, assessment, security interest, pledge or other
encumbrance, conditional sales contract, equity charge, restriction, or
adverse claim of interest of any kind or nature whatsoever (each a
"Lien" and collectively, the "Liens"), upon any of the properties or
assets of the Company or any Company Subsidiary under, any of the
terms, conditions or provisions of (i) the Organizational Documents of
the Company or any Company Subsidiary, (ii) following completion of the
Conversion, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
federal, state, provincial, local or foreign government, or any
subdivision, agency or authority of any thereof ("Governmental
Authority") applicable to the Company, any Company Subsidiary, or the
Business, properties or assets of the Company or any Company
Subsidiary, except for those items discussed in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy,
or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which any of the Company or any
Company Subsidiary is a party or by which any of the Company, any
Company Subsidiary or any of the properties or assets of the Company or
any Company Subsidiary may be bound or affected. The consummation by
the Company of the transactions contemplated hereby will not result in
a violation, conflict, breach, right of termination, creation or
acceleration of Liens under the terms, conditions or provisions of the
items described in clauses (i) through (iii) of the immediately
preceding sentence, subject in the case of the terms, conditions or
provisions of the items described in clause (iii) above, to obtaining
(prior to the Closing Date) such consents required from third parties
set forth on Schedule 4.3.2 and except for those items described in
(ii) and (iii) above, relating to regulating, licensing or permitting
the practice of public accountancy and any filing which may be required
under the HSR Act.
8
4.3.3 Except for (i) the declaration of effectiveness of a
registration statement on Form S-1 (the "Form S-1") and a
post-effective amendment to the registration statement on Form S-4 (the
"Form S-4") (Form S-1 and Form S-4 are collectively the "Registration
Statements") with the Securities and Exchange Commission (the"SEC")
pursuant to the Securities Act of 1933, as amended (the "Securities
Act"or the "1933 Act"), and filings, if required, with various state
securities or "blue sky" authorities, (ii) any filing which may be
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976,
as amended (the "HSR Act"), and (iii) any filing which may be required
by any Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy,
no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if
not made or obtained, as the case may be, would not, individually or in
the aggregate, have a "Company Material Adverse Effect," which, for
purposes of this Agreement means a material adverse effect on the
operations, assets, condition (financial or other), operating results,
employee or client relations, or prospects of the Company or any
Company Subsidiary.
4.4 Capitalization.
4.4.1 The authorized capital stock of the Company consists of
10,000 shares of Company Stock, of which 2,900 shares are issued and
outstanding. The authorized capital stock of each of the Company
Subsidiaries, if any, and the number of such shares issued and
outstanding is completely and accurately set forth in Schedule 4.4. All
of such issued and outstanding shares are validly issued and are fully
paid, nonassessable and free of preemptive rights. The Company owns all
shares of the Company Subsidiaries as indicated on Schedule 4.4, in
each case free and clear of all Liens, and the Company has good and
marketable title to such shares of the Company Subsidiaries. All of
such issued and outstanding shares are validly issued and are fully
paid, nonassessable and free of preemptive rights.
4.4.2 Except as set forth on Schedule 4.4, there are no
outstanding subscriptions, options, calls, contracts, commitments,
undertakings, restrictions, arrangements, rights or warrants, including
any right of conversion or exchange under any outstanding security,
instrument or other agreement to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of
the Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to grant, extend or enter into any such agreement or
commitment or obligating the Company or any Company Subsidiary to
convey or transfer any Company Stock or Company Subsidiary stock, as
the case may be. As of the Closing Date, there will be no voting
trusts, proxies or other agreements or understandings to which the
Company or any Company Subsidiary is a party or is bound
9
with respect to the voting of any shares of capital stock or other
equity interests of the Company or any Company Subsidiary.
4.5 Year 2000. To the Knowledge of the Company, all of the computer
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Company or any Company
Subsidiary in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20th) and twenty-first (21st) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20th) and
twenty-first (21st) centuries, except for any malfunctions or generations of
incorrect data or results that would not individually or in the aggregate have a
Company Material Adverse Effect. Nothing in this Section 4.5 is intended or
shall be construed as a representation or warranty with respect to embedded
systems.
4.6 Financial Statements. The Company has previously furnished to
Centerprise copies of the audited consolidated balance sheets of the Company as
of September 30 in each of the years 1997 and 1998 and an unaudited consolidated
balance sheet of the Company for the three month period ending December 31, 1998
(the "Latest Balance Sheet"), and the related audited consolidated statements of
income, stockholders' equity and cash flow for each of the years in the three
(3) year period ended September 30, 1998, including all notes thereto, and
related unaudited consolidated statements of income, stockholders' equity and
cash flow for the three month period ending December 31, 1998, including all
notes thereto (collectively, the "Financial Statements"). Each of the Financial
Statements is accurate and complete in all material respects, is consistent with
the books and records of the Company and the Company Subsidiaries (which, in
turn, are accurate and complete in all material respects), and fairly presents
in all material respects the financial condition, assets and liabilities of the
Company and the Company Subsidiaries as of its date and the results of
operations and cash flows for the periods related thereto, in each case in
accordance with generally accepted accounting principles, applied on a
consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary
10
course of business using normal collection practices and policies employed by
the Company and each Company Subsidiary (net of any allowance for doubtful
accounts determined in accordance with the Company's and the Company
Subsidiaries' past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.9, since the date of the Latest Balance Sheet, each of the Company
and the Company Subsidiaries has conducted its business only in the ordinary
course consistent with past custom and practices. Except as set forth on
Schedule 4.9, since the date of the Latest Balance Sheet, there has not been
any:
(a) material adverse change in the operations, condition
(financial or otherwise), operating results, assets, liabilities,
employee or client relations or prospects of the Company or any Company
Subsidiary;
(b) damage, destruction or loss of any property owned by the
Company or any Company Subsidiary, or used in the operation of the
Business, whether or not covered by insurance, having a replacement
cost or fair market value in excess of five percent (5%) of the amount
of net property, plant and equipment shown on the Latest Balance Sheet,
in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender,
cancellation, abandonment, waiver, release or other disposition of any
kind by the Company or any Company Subsidiary of any right, power,
claim, or debt, except the collection of accounts and billing of
work-in-process, each in the ordinary course of business consistent
with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union
organizational activity, allegation, charge or complaint of employment
discrimination or other labor dispute or similar occurrence that is
reasonably expected to adversely affect the Company, a Company
Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary
to any Person, other than as a result of services performed for, or
expenses properly and reasonably advanced for the benefit of, customers
in the ordinary course of business consistent with past custom and
practices;
(f) notice (formal or otherwise) of any liability, potential
liability or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or
other distribution in respect of the Company's capital stock or other
equity interests or any direct or indirect redemption, purchase, or
other acquisition of the Company's or any Company Subsidiary's capital
stock or other equity interests, or the payment of principal or
interest on any note, bond, debt instrument or debt to any Affiliate
(as defined in Section 15.4) of the Company or any Company Subsidiary,
except bonuses and distributions to employees and
11
stockholders of the Company disclosed to Centerprise in writing that
are consistent with the Company's past custom and practices or as
otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of
debts, liabilities or obligations except current liabilities incurred
in connection with or for services rendered or goods supplied in the
ordinary course of business consistent with past custom and practices,
liabilities on account of taxes and governmental charges (but not
penalties, interest or fines in respect thereof), and obligations or
liabilities incurred by virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any
notes, bonds, or other debt securities or any equity securities or
securities convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or
amendment or termination of, any material commitment, contract,
agreement, or transaction, other than in the ordinary course of
business and other than expiration of contracts in accordance with
their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the
Company or any Company Subsidiary that accounted for revenues during
the last twelve months in excess of one percent (1%) of the
consolidated net revenues of the Company and the Company Subsidiaries,
or change in the relationship of the Company or any Company Subsidiary
with any client or Governmental Authority that is reasonably expected
to adversely affect the Company, any Company Subsidiary or the
Business;
(l) change in accounting principles, methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) utilized by the Company or any Company
Subsidiary;
(m) discharge or satisfaction by the Company or any Company
Subsidiary of any material liability or encumbrance or payment by the
Company or any Company Subsidiary of any material obligation or
liability, other than current liabilities paid in the ordinary course
of its business consistent with past custom and practices;
(n) sale, lease or other disposition by the Company or any
Company Subsidiary of any tangible assets (having an aggregate
replacement cost or fair market value in excess of five percent (5%) of
the amount of net property, plant and equipment shown on the Latest
Balance Sheet) other than in the ordinary course of business, or the
sale, assignment or transfer by the Company or any Company Subsidiary
of any trademarks, service marks, trade names, corporate names,
copyright registrations, trade secrets or other intangible assets, or
disclosure of any proprietary confidential information of the Company
or any Company Subsidiary to any Person other than an employee, agent,
attorney, accountant
12
or other representative of the Company that has agreed to maintain the
confidentiality of any such proprietary confidential information;
(o) capital expenditures or commitments therefor by the
Company or any Company Subsidiary in excess of $50,000 individually or
$100,000 in the aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the
Company or any Company Subsidiary or creation of any easements, Liens
or other interests against or on any of the Real Property (as defined
in Section 4.14.1);
(q) adoption, amendment or termination of any Employee Plan
(as defined in Section 4.17.5(a)) or increase in the benefits provided
under any Employee Plan, or promise or commitment to undertake any of
the foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through
(q) that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material
Adverse Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
4.10.1 There is no suit, action, proceeding, investigation,
claim or order pending or, to the Knowledge of the Company, threatened
against the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any
such plan (or pending or, to the Knowledge of the Company, threatened
against any of the officers, directors, members, stockholders, partners
or employees of the Company or any Company Subsidiary with respect to
its business or proposed business activities), or to which the Company
or any Company Subsidiary is otherwise a party, or that is reasonably
expected to have a Company Material Adverse Effect, before any court,
or before any Governmental Authority (each an "Action" and
collectively, the "Actions"); nor, to the Knowledge of the Company, is
there any basis for any such Action.
4.10.2 Neither the Company nor any Company Subsidiary is
subject to any unsatisfied or continuing judgment, order or decree of
any court or Governmental Authority. Neither the Company nor any
Company Subsidiary, to the Knowledge of the Company, is otherwise
exposed, from a legal standpoint, to any liability or disadvantage that
is reasonably expected to result in a Company Material Adverse Effect,
and neither the Company nor any Company Subsidiary is a party to any
legal action to recover monies due it or for damages sustained by it,
other than collection of past due charges for services rendered or
expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered
by insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual
13
and aggregate policy limits for the insurance covering each insured
Action and the applicable policy deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation
matters to which the Company or any Company Subsidiary was a party
during the five (5) year period preceding the Closing Date, the date
such litigation was commenced and concluded, and the nature of the
resolution thereof (including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "Laws") applicable to it or to the
operation of the Business, and neither the Company nor any Company Subsidiary
has received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of the Company, no event has occurred or circumstances exist that
(with or without notice or lapse of time) is reasonably expected to constitute
or result in a violation by the Company or any Company Subsidiary of any Law
that gives rise to any liability on the part of the Company or any Company
Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and
the Company Subsidiaries that are material to the conduct of the Business.
"Licenses" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12 lists
all licenses, certificates, approvals, registrations and other similar documents
and authorizations, and applications therefor, relating to the practice of
public accountancy (the "Accounting Licenses") held by the Company or a Company
Subsidiary and issued by, or submitted by the Company or any Company Subsidiary
to, any Governmental Authority or other Person. All such Licenses and Accounting
Licenses are valid, binding and in full force and effect. Except as described on
Schedule 4.12, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
any such Licenses. To the Knowledge of the Company, the Company and the Company
Subsidiaries have taken all necessary action to maintain such Licenses. Except
as set forth on Schedule 4.12, no loss or expiration of any such License is
pending or, to the Company's Knowledge, threatened or reasonably foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
(such contracts, or those which should have been listed on Schedule 4.13, are
herein referred to as the "Material Contracts"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"Contract" and collectively, the "Contracts") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
14
(a) any consulting agreement pursuant to which the Company or
a Company Subsidiary is to receive consulting services (other than
consulting agreements that may be terminated by the Company or a
Company Subsidiary on not more than 30 days notice without penalty),
employment agreement, change-in-control agreement, or collective
bargaining arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition
or construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition,
or the sale or furnishing, of materials, supplies, merchandise,
machinery, equipment, parts or other property or services (except if
such Contract is made in the ordinary course of business and requires
aggregate future payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary
course of business, relating to the borrowing of money, or the guaranty
of another Person's borrowing of money, including, without limitation,
any notes, mortgages, indentures and other obligations, guarantees of
performance, agreements and instruments for or relating to any lending
or borrowing, including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part
of the assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions
in connection with Hazardous Materials (as defined in Section 4.19),
the remediation of any existing environmental liabilities or relating
to the performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first
refusal, first-offer or similar preferential right to purchase or
acquire any material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative
which is not terminable by the Company or a Company Subsidiary upon
ninety (90) calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company
Subsidiary is (A) a lessee or sublessee of any machinery, equipment,
vehicle or other tangible personal property, or (B) a lessor of any
tangible personal property owned by the Company or any Company
Subsidiary, in either case having an original purchase price or
requiring aggregate lease payments in excess of $50,000;
(j) any Contract under which the Company or any Company
Subsidiary has granted or received a license or sublicense or under
which it is obligated to pay or has the
15
right to receive a royalty, license fee or similar payment, in either
case which provides for payments over the life of such Contract in
excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as
defined in Section 4.21);
(l) any Contract providing for the indemnification or holding
harmless of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or
any Company Subsidiary of any real property on which the Company or any
Company Subsidiary conducts any aspect of the Business, (B) granting
any options to lease or purchase all or any portion of the Real
Property, or (C) providing for labor, services or materials to the Real
Property (including, without limitation, brokerage or management
services) involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the
Company or any Company Subsidiary from conducting business anywhere in
the United States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to
the Leased Property (as defined in Section 4.14.1);
(q) any Contract requiring prior notice, consent or other
approval upon a change of control in the equity ownership of the
Company or any Company Subsidiary, which, if amended, modified or
terminated as a result of, relating to or in connection with a failure
to provide prior notice, or gain such consent or approval, would result
in a Company Material Adverse Effect; or
(r) any other Contract, whether or not made in the ordinary
course of business, which involves future payments by the Company or
any Company Subsidiary in excess of $25,000.
The Company has provided Centerprise with a true and complete copy of
each written Material Contract and a true and complete summary of each oral
Material Contract, in each case including all amendments or other modifications
thereto. Except as set forth on Schedule 4.13, each Material Contract is a valid
and binding obligation of, and enforceable in accordance with its terms against,
the Company or a Company Subsidiary, as applicable, and, to the Knowledge of the
Company, the other parties thereto, and is in full force and effect, subject
only to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and equitable principles. Except as set forth on
Schedule 4.13, the Company or one of the Company Subsidiaries, as applicable,
has performed in all material respects all obligations required to be performed
by it as of the date hereof and will have performed in all material respects all
16
obligations required to be performed by it as of the Closing Date under each
Material Contract and neither the Company or Company Subsidiary, as applicable,
nor, to the Knowledge of the Company, any other party to any Material Contract
is in breach or default thereunder, and, to the Knowledge of the Company, there
exists no condition which would, with or without the lapse of time or the giving
of notice, or both, constitute a breach or default thereunder. The Company has
not been notified that any party to any Material Contract intends to cancel,
terminate, not renew, or exercise an option under any Material Contract, whether
in connection with the transactions contemplated hereby or otherwise.
4.14 Properties.
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a
brief description of, all real estate in which the Company or any of
the Company Subsidiaries has an ownership interest (the "Owned
Property") and all real property leased by the Company (the "Leased
Property"). Except as lessee of Leased Property, neither the Company
nor any Company Subsidiary is a lessee under or otherwise a party to
any lease, sublease, license, concession or other agreement, whether
written or oral, pursuant to which another Person has granted to the
Company or any Company Subsidiary the right to use or occupy all or any
portion of any real property.
The Company or one or more of the Company Subsidiaries has
good and marketable fee simple title to the Owned Property and,
assuming good title in the Landlord, a valid leasehold interest in the
Leased Property (the Owned Property and the Leased Property being
sometimes referred to herein as "Real Property"), in each case free and
clear of all Liens, assessments or restrictions (including, without
limitation, inchoate liens arising out of the provision of labor,
services or materials to any such real estate) other than (a) mortgages
shown on the Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists,
(b) Liens for current taxes not yet due, (c) (i) minor imperfections of
title, including utility and access easements depicted on subdivision
plats for platted lots that do not impair the intended use of the
property, if any, none of which materially impairs the current
operations of the Company, any Company Subsidiary or the Business, and
(ii) zoning laws and other land use restrictions or restrictive
covenants that do not materially impair the present use of the property
subject thereto, and (d) Liens, assessments, and restrictions pursuant
to and by virtue of the terms of the lease of the Leased Property. The
Real Property constitutes all real properties reflected on the
Financial Statements or used or occupied by the Company or any Company
Subsidiary in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on
Schedule 4.14.1-2(a):
(a) the Company or one of the Company Subsidiaries is in
exclusive possession thereof and no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which
exist as of the date hereof;
17
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority
materially adverse to the Owned Property and, to the Knowledge of the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition,
restriction, easement or agreement of any Governmental Authority that
affects the Owned Property or the ownership, operation, use or
occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject
to any roll-back tax, dual or exempt valuation tax, and no portion of
any Owned Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on
such Owned Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
4.14.1-2(b):
(i) the Company and/or one of the Company
Subsidiaries is in exclusive, peaceful and undisturbed possession
thereof and, to the Knowledge of the Company, no easements, licenses or
rights are necessary to conduct the Business thereon in addition to
those which exist as of the date hereof; and
(ii) to the Knowledge of the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding
by any public or quasi-public authority materially adverse to the
Leased Property and there is no threatened condemnation or proceeding
with respect thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect
all material tangible personal property owned by the Company or any
Company Subsidiary, except as sold or otherwise disposed of or acquired
in the ordinary course of business. Except as set forth on Schedule
4.14.2, the Company or one of the Company Subsidiaries has good and
marketable title to, or a valid leasehold interest in, or valid license
of, such personal property (including, without limitation, machinery,
equipment and computers), in each case free and clear of any Liens
(other than Liens that are part of such leasehold or license), and each
such asset is in working order and has been maintained in a
commercially reasonable manner and does not contain, to the Knowledge
of the Company, any material defect. Except as set forth in Schedule
4.14.2, no personal property (including, without limitation, software
and databases maintained on off-premises computers) used by the Company
or any Company Subsidiary in connection with the Business is held under
any lease, security agreement, conditional sales contract or other
title retention or security arrangement or is located other than on the
Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
inventions and discoveries that may be patentable (collectively, the "Patents"),
(ii) registered and unregistered
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trademarks, trade names, company names, assumed business names and service marks
(collectively, the "Marks"), (iii) copyrights (the "Copyrights"), and (iv) know
how, trade secrets, confidential information, client lists, software, technical
information, data, process technology, plans and drawings (collectively, the
"Trade Secrets") owned, used or licensed by the Company or any Company
Subsidiary (collectively, the "Intellectual Property") are all those necessary
to enable the Company and the Company Subsidiaries to conduct and to continue to
conduct the Business substantially as it is currently conducted. Schedule 4.15
contains a complete and accurate list of all material Patents, Marks and
Copyrights and a brief description of all material Trade Secrets owned, used by
or directly licensed to the Company or any Company Subsidiary, and a list of all
material license agreements and arrangements with respect to any of the
Intellectual Property to which the Company or any Company Subsidiary is a party,
whether as licensee, licensor or otherwise (collectively, the "Intellectual
Property Licenses"). Except as set forth on Schedule 4.15, (i) all of the
Intellectual Property is owned or, to the Knowledge of the Company, used under a
valid Intellectual Property License, by the Company or one of the Company
Subsidiaries, and is free and clear of all Liens and other adverse claims; (ii)
none of the Company nor any Company Subsidiary has received any written notice
that it is or has infringed on, misappropriated or otherwise conflicted with, or
otherwise has Knowledge that it is infringing on, misappropriating, or otherwise
conflicting with the intellectual property rights of any third parties; (iii)
there is no claim pending or, to the Knowledge of the Company, threatened
against the Company or any Company Subsidiary with respect to the alleged
infringement or misappropriation by the Company or Company Subsidiary, or a
conflict with, any intellectual property rights of others; (iv) the operation of
any aspect of the Business in the manner in which it has heretofore been
operated or is presently operated does not give rise to any such infringement or
misappropriation; and (v) there is no infringement or misappropriation of the
Intellectual Property by a third party or claim, pending or, to the Knowledge of
the Company, threatened, against any third party with respect to the alleged
infringement or misappropriation of the Intellectual Property.
4.16 Taxes.
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4.16.1 Except as set forth on Schedule 4.16.1-1, each of the
Company and the Company Subsidiaries has timely and accurately prepared
and filed or been included in or will timely and accurately prepare and
file or be included in all federal, state, local and foreign returns,
declarations and reports, information returns and statements
(collectively, the "Returns") for Taxes (as defined in Section 4.16.2)
required to be filed by or with respect to the Company or the Company
Subsidiaries before the Closing Date, and has paid or caused to be
paid, or has made adequate provision or set up an adequate accrual or
reserve for the payment of, all Taxes required to be paid in respect of
the periods for which Returns are due on or prior to the Closing Date,
and will establish an adequate accrual or reserve for the payment of
all Taxes payable in respect of the period, including portions thereof,
subsequent to the last of said periods required to be so accrued or
reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. The Company has delivered to Centerprise true and
complete copies of all Returns referred to in the first sentence of
this Section 4.16.1 (including any amendments thereof) for the five (5)
most recent taxable years. Neither the Company nor any Company
Subsidiary is delinquent in the payment of any Tax, and no material
deficiencies for any Tax, assessment or governmental charge have been
threatened, claimed, proposed or assessed. No waiver or extension of
time to assess any Taxes has been given or requested. No written claim,
or any other claim, by any taxing authority in any jurisdiction where
the Company or any Company Subsidiary does not file Tax returns is
pending pursuant to which the Company or Company Subsidiary, as
applicable, is or may be subject to taxation by that jurisdiction. The
Company's and the Company Subsidiaries' Returns were last audited by
the Internal Revenue Service or comparable state, local or foreign
agencies on the dates set forth on Schedule 4.16.1-2.
4.16.2 For purposes of this Agreement, the term "Taxes" shall
mean all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments, including, without
limitation, income, gross receipts, excise, property, sales,
employment, withholding, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and recording taxes,
fees and charges, windfall profits, severance, customs, import, export,
employment or similar taxes, charges, fees, levies or other
assessments, imposed by the United States, or any state, local, foreign
or provincial government or subdivision or any agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other
basis.
4.17 Employee Benefit Plans; ERISA.
4.17.1 Except as described in Schedule 4.17.1, neither the
Company nor any Company Subsidiary has or is reasonably expected to
have any liability (including contingent liability) whether direct or
indirect (and regardless of whether it would be derived from a current
or former Plan Affiliate, as defined in Section 4.17.5(c)) with respect
to any of the following (whether written, unwritten or terminated): (i)
any employee welfare benefit plan, as defined in Section 3(1) of
"ERISA," including, but not limited to, any medical plan, life
insurance plan, short-term or long-term disability plan
20
or dental plan; (ii) any "employee pension benefit plan," as defined in
Section 3(2) of ERISA (as defined in Section 4.17.5(b)), including, but
not limited to, any excess benefit plan, top hat plan or deferred
compensation plan or arrangement, nonqualified retirement plan or
arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program,
arrangement or agreement, including, but not limited to, any material
fringe benefit plan or program, personnel policy, bonus or incentive
plan, stock option, restricted stock, stock bonus, holiday pay,
vacation pay, sick pay, bonus program, service award, moving expense,
reimbursement program, tool allowance, safety equipment allowance,
deferred bonus plan, salary reduction agreement, change-of-control
agreement, employment agreement or consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as
defined in Section 4.17.5(a)) as amended to the Closing, together with
audited financial statements, if any, for the three (3) most recent
plan years; a copy of each trust agreement or other funding vehicle
with respect to each such plan; a copy of any and all determination
letters, rulings or notices issued by a Governmental Authority with
respect to such plan; a copy of the Form 5500 Annual Report for the
three (3) most recent plan years; and a copy of each and any general
explanation or communication which was required to be distributed or
otherwise provided to participants in such plan and which describes all
or any relevant aspect of each plan, including summary plan
descriptions and/or summary of material modifications, have been
delivered to Centerprise. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
4.17.3 Except as is not reasonably expected to give rise to
any liability (including contingent liability), whether direct or
indirect, to the Company or any Company Subsidiary, each Employee Plan
(i) has been and is operated and administered in compliance with its
terms; (ii) has been and is operated, administered, maintained and
funded in compliance with the applicable requirements of the Code in
such a manner as to qualify, where appropriate and intended, for both
Federal and state purposes, for income tax exclusions, tax-exempt
status, and the allowance of deductions and credits with respect to
contributions thereto; (iii) where appropriate, has received a
favorable determination letter from the Internal Revenue Service upon
which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable
reporting and disclosure requirements of Federal and state laws,
including but not limited to the requirement of Part 6 of subtitle B of
Title I of ERISA and Section 4980B of the Code. With respect to each
Employee Plan, no Person has: (i) entered into any nonexempt
"prohibited transaction," as such terms are defined in ERISA or the
Code; (ii) breached a fiduciary obligation or (iii) any liability for
any failure to act or comply in connection with the administration or
investment of the assets of such plan; and no Employee Plan has any
liability and there is no liability in connection with any Employee
Plan, other than a liability (i) which is expressly and adequately
reflected in the Latest Balance Sheets, (ii) which is discretionary or
terminable at will by the Company or one of the Company
21
Subsidiaries without incurring any such liability, or (iii) which is
adequately funded under a funding arrangement separate from the assets
of the Company, any Company Subsidiary or a Plan Affiliate (and only to
the extent of such funding). Any contribution made or accrued with
respect to any Employee Plan is fully deductible by the Company, a
Company Subsidiary or a Plan Affiliate.
4.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been
required to contribute to, or has any liability, whether direct or
indirect, with respect to any Employee Plan which is or has ever been
(i) a "multiemployer plan" as defined in Section 4001 of ERISA, (ii) a
"multi employer plan" within the meaning of Section 3(37) of ERISA,
(iii) a "multiple employer plan" within the meaning of Code Section
413(c), (iv) a "multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA, (v) subject to the funding
requirements of Section 412 of the Code or to Title IV of ERISA, or
(vi) provides for post-retirement medical, life insurance or other
welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall
have the following respective meanings:
(a) the term "Employee Plan" shall mean any plan,
policy, program, arrangement or agreement described in Section
4.17.1, whether or not scheduled;
(b) the term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended; and
(c) with respect to any Person ("First Person"), the
term "Plan Affiliate" shall mean any other Person with whom
the First Person constitutes or has constituted all or part of
a controlled group, or which would be treated or have been
treated with the First Person as under common control or whose
employees would be or have been treated as employed by the
First Person, under Section 414 of the Code or Section 4001(b)
of ERISA and any regulations, administrative rulings and case
law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no,
and within the last three (3) years neither the Company nor any Company
Subsidiary has experienced any, strike, picketing, boycott, work stoppage or
slowdown or other similar labor dispute, union organizational activity,
allegation, charge or complaint of unfair labor practice, employment
discrimination or other matters relating to the employment of labor pending or,
to the Knowledge of the Company, threatened against the Company or any Company
Subsidiary, or that is reasonably expected to affect the Company or any Company
Subsidiary; nor, to the Knowledge of the Company, is there any basis for any
such allegation, charge, or complaint. There is no request for representation
pending and, to the Knowledge of the Company, no question concerning
representation has been raised. There is no grievance pending that is reasonably
expected to result in a Company Material Adverse Effect nor any arbitration
proceeding arising out of a union agreement. To the Knowledge of the Company, no
employee who is key to the Business and no group of employees has announced or
otherwise indicated any plans to terminate employment with
22
the Company or any Company Subsidiary. Each of the Company and any Company
Subsidiary has complied with all applicable laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes.
Neither the Company nor any Company Subsidiary is liable for any arrears of
wages or any taxes or penalties for failure to comply with any such laws,
ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19,
(i) each of the Company and the Company Subsidiaries is operating and has
operated its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Board of Directors of the Company, without any duty to inquire
(notwithstanding the definition of "Knowledge" in Section 15.4), there are no
Hazardous Materials (as defined later in this Section) present at, on or under
any real property currently or formerly owned, leased or used by the Company or
Company Subsidiary (other than those present in office supplies and
cleaning/maintenance materials) for which the Company or a Company Subsidiary is
or is reasonably expected to be responsible, or otherwise have any liability,
for response costs under any Environmental and Safety Requirements; (iii) each
of the Company and the Company Subsidiaries has disposed of all waste materials
generated by the Company or such Company Subsidiary at any real property
currently or formerly owned, leased or used by the Company or Company Subsidiary
in compliance with applicable Environmental and Safety Requirements; and (iv)
there are and have been no facts, events, occurrences or conditions at or
related to any real property currently or formerly owned, leased or used by the
Company or Company Subsidiary that is reasonably expected to cause or give rise
to liabilities or response obligations of the Company or any Company Subsidiary
under any Environmental and Safety Requirements. The term "Environmental and
Safety Requirements" means any federal, state and local laws, statutes,
regulations or other requirements relating to the protection, preservation or
conservation of the environment or worker health and safety, all as amended or
reauthorized. The term "Hazardous Materials" means "hazardous substances," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., "hazardous wastes," as defined by the
Resource Conservation Recovery Act, 42 U.S.C. Section 6901 et seq., asbestos in
any form or condition, polychlorinated biphenyls and any other material,
substance or waste to which liability or standards of conduct may be imposed
under any Environmental and Safety Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To the
Company's Knowledge, each of the Company and the Company Subsidiaries has
complied with the provisions of all such policies and is not in default under
any of such policies. Schedule 4.20 contains a complete and correct list of all
such insurance policies. None of the Company nor any Company Subsidiary has
received any notice of cancellation or intent to cancel or increase premiums
with respect to such insurance policies. Schedule 4.20 also contains a list of
all claims or asserted claims reported to insurers under such policies relating
to the ownership or interest in the
23
Company's and the Company Subsidiaries' assets, or operation of the Business,
including all professional malpractice claims and similar types of claims,
actions or proceedings asserted against the Company or any Company Subsidiary
arising out of the Business at any time within the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions.
Except as described on Schedule 4.21 and except for ownership as an investment
of not more than one percent (1%) of any class of capital stock of any
publicly-traded company, none of Holdings, the Company, any member of Holdings,
any Affiliate of any such member nor any Affiliate of Holdings, the Company or
any Company Subsidiary (i) possesses, directly or indirectly, any financial
interest in, or is a director, officer, employee or affiliate of, any Person
that is a client, supplier, customer, lessor, lessee or competitor of the
Company or any Company Subsidiary, (ii) owns, directly or indirectly, in whole
or in part, or has any interest in any tangible or intangible property used in
the conduct of the Business, or (iii) is a party to an agreement or
relationship, that involves the receipt by such Person of compensation or
property from the Company or any Company Subsidiary other than through a
customary employment relationship or through distributions made with respect to
the Company Stock or equity interests in any Company Subsidiary (provided such
distributions have been made consistent with the Company's or any Company
Subsidiary's, as the case may be, past custom and practices). Schedule 4.21 sets
forth the parties to and the date, nature and amount of each transaction during
the last five years involving the transfer of any cash, property or rights to or
from the Company or any Company Subsidiary from, to or for the benefit of any
Affiliates (other than customary employment relationships or distributions made
with respect to the Company Stock) ("Affiliate Transactions"), and any existing
commitments of the Company or any Company Subsidiary to engage in the future in
any Affiliate Transactions. Except as disclosed, each Affiliate Transaction and
each transaction with former Affiliates of the Company or any Company Subsidiary
was effected on terms equivalent to those that would have been established in an
arm's-length transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenue for the twelve (12) months ended December 31,
1998. Except as set forth on Schedule 4.22, since December 31, 1998, none of
such clients has canceled or substantially reduced its business with the Company
or Company Subsidiary, as applicable, nor are any of such clients threatening to
do so. To the Knowledge of the Company, no client that accounts for one percent
(1%) or more of the Company's consolidated net revenue, or supplier of the
Company or any Company Subsidiary, will cease to do business with, or
substantially reduce its business with, the Company or any Company Subsidiary,
as applicable, after the consummation of the transactions contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set forth
in Schedule 4.23, no Person listed thereon has received any bonus or increase in
compensation and there has been no "general increase" in the compensation or
rate of
24
compensation payable to any employees, partners, members or owners of the
Company or any Company Subsidiary since the date of the Latest Balance Sheet,
other than in the Company's and Company Subsidiaries' ordinary course of
business, consistent with past custom and practices, nor since that date has
there been any oral or written promise to employees, partners, members or owners
of any bonus or increase in compensation, other than in the Company's and
Company Subsidiaries' ordinary course of business, consistent with past custom
and practices. The term "general increase" as used herein means any increase
generally applicable to a class or group, but does not include increases granted
to individuals for merit, length of service or change in position or
responsibility made on the basis of the custom and past practices of the Company
or any Company Subsidiary. Schedule 4.23 includes the date and amount of the
last bonus or similar distribution or increase in compensation for each listed
individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each
bank in which the Company or any Company Subsidiary has an account or safe
deposit box, the number of each such account or box, and the names of all
Persons authorized to draw thereon or to have access thereto.
4.25 Professional Credentials. Each Member is a Certified Public
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Members by any Governmental Authority or
self-regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to Centerprise as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to Centerprise herein that has or is reasonably expected to have
a Company Material Adverse Effect.
ARTICLE V
[RESERVED]
25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPRISE
Centerprise represents and warrants to the Company as of March 31, 1999
and, subject to Section 7.3, as of the date on which Centerprise and the lead
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of Centerprise and Mergersub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
Centerprise's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
6.2 Capitalization.
6.2.1 The authorized capital stock of Centerprise consists of
20,000 shares of Centerprise Common Stock, of which 17,500 shares are
outstanding as of the date hereof. All of the issued and outstanding
shares of Centerprise Common Stock are validly issued and are fully
paid, nonassessable and free of preemptive rights. Immediately prior to
the Closing Date, the authorized capital stock of Centerprise will
consist of 50,000,000 shares of Centerprise Common Stock, of which the
number of shares set forth in the Form S-1 will be issued and
outstanding, and 10,000,000 shares of Preferred Stock, par value $0.01
per share, none of which will be issued and outstanding. Other than (i)
shares of Centerprise Common Stock issued pursuant to a split of the
shares outstanding as of the date of this Agreement, (ii) shares of
Centerprise Common Stock issued in accordance with the Acquisition and
the Other Acquisitions, and (iii) shares of Centerprise Common Stock
that may be issued to new members of management in lieu of shares
previously issued to current members of management, but which will not
increase the number of shares of outstanding Centerprise Common Stock,
no shares of Centerprise Common Stock will be issued prior to the
consummation of the IPO. Mergersub's authorized capital stock consists
solely of 1,000 shares of common stock, par value $.01 per share (the
"Mergersub Stock"), all of which are issued and outstanding, are owned
free and clear of any Liens by Centerprise, and are fully paid,
nonassessable and free of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date
hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under
any outstanding security, instrument or other agreement obligating
Centerprise to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the capital stock of Centerprise or
obligating Centerprise to grant, extend or enter into any such
agreement or commitment. There are no voting trusts, proxies or other
26
agreements or understandings to which Centerprise is a party or is
bound with respect to the voting of any shares of capital stock of
Centerprise. The shares of Centerprise Common Stock issued to the
Company's stockholders in the Acquisition will at the Closing Date be
duly authorized, validly issued, fully paid and nonassessable and free
of preemptive rights and issued pursuant to a registration statement as
required by the 1933 Act or an exemption therefrom.
6.3 No Subsidiaries. Except for Centerprise's ownership of 100% of the
capital stock of Professional Service Group, Inc., a Delaware corporation, and
Mergersub (and similar entities created for similar purposes with respect to the
Other Agreements) Centerprise has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
6.4.1 Each of Centerprise and Mergersub has all requisite
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement has
been approved by the Boards of Directors of Centerprise and Mergersub,
and no other corporate proceedings on the part of Centerprise or
Mergersub are necessary to authorize the execution and delivery of this
Agreement or the consummation by Centerprise and Mergersub of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Centerprise and Mergersub and, assuming the due
authorization, execution and delivery hereof by the Company constitutes
a valid and legally binding agreement of Centerprise and Mergersub,
enforceable against each of them in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
6.4.2 The execution and delivery of this Agreement by
Centerprise and Mergersub does not violate, conflict with or result in
a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of
the properties or assets of Centerprise and Mergersub under any of the
terms, conditions or provisions of (i) the Certificate of Incorporation
or By-laws of Centerprise or Mergersub, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or Governmental Authority applicable to
Centerprise or Mergersub or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Centerprise or
Mergersub is now a party or by which Centerprise, Mergersub or any of
their respective properties or assets, may be bound or affected, except
those items described in clause (ii) relating to regulating, licensing
or permitting the practice of public accountancy. The consummation by
Centerprise and Mergersub of the
27
transactions contemplated hereby will not result in any violation,
conflict, breach, right of termination or acceleration or creation of
Liens under any of the terms, conditions or provisions of the items
described in clauses (i) through (iii) of the immediately preceding
sentence, subject, in the case of the terms, conditions or provisions
of the items described in clause (ii) above, to obtaining (prior to the
Closing Date) Centerprise Required Statutory Approvals and except for
those items described in (ii) above relating to regulating, licensing
or permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing
which may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy (the filings and approvals referred to in clauses (i)
through (iii) are collectively referred to as the "Centerprise Required
Statutory Approvals") no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental
or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Centerprise or Mergersub or the
consummation by Centerprise or Mergersub of the transactions
contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if
not made or obtained, as the case may be, are not reasonably expected
to, in the aggregate, have a material adverse effect on the business
operations, properties, assets, condition (financial or other), results
of operations or prospects of Centerprise and its subsidiaries, taken
as a whole (a "Centerprise Material Adverse Effect").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
6.5, neither Centerprise nor Mergersub has incurred any liabilities or
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither Centerprise nor Mergersub has engaged in any
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
pending or, to the Knowledge of Centerprise, threatened against, relating to or
affecting Centerprise or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the
Acquisition or the IPO or which could reasonably be expected, either alone or in
the aggregate with all such claims, actions or proceedings, to have a
Centerprise Material Adverse Effect. Centerprise is not subject to any
unsatisfied or continuing judgment, order or decree of any court or Governmental
Authority. Centerprise is not a party to any legal action to recover monies due
it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of Centerprise and Mergersub
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability
28
and, to the Knowledge of Centerprise, no event has occurred or circumstances
exist that (with or without notice or lapse of time) may constitute or result in
a violation by Centerprise or Mergersub of any Law or may give rise to any
liability on the part of the Centerprise or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
Centerprise or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to the Company as contemplated by any provision
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading. To the Knowledge of Centerprise, there is no fact or circumstance
that has not been disclosed to the Company herein that has or is reasonably
expected to have a Company Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Pending the Acquisition.
7.1.1 Except as otherwise contemplated by this Agreement,
after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Centerprise shall otherwise agree
in writing, the Company shall, and shall cause each Company Subsidiary
to:
(a) in all material respects conduct the Business in
the ordinary and usual course and consistent with past customs
and practices;
(b) not (i) amend its Organizational Documents except
as necessary to complete the Conversion, (ii) split, combine
or reclassify its outstanding capital stock or (iii) declare,
set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise except dividends or distributions
which (A) are consistent with past customs and practices and
(B) do not result in a Company Material Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of (i) any additional shares
of, or any options, warrants or rights of any kind to acquire
any shares of, its capital stock or equity interests of any
class, (ii) any debt with voting rights or (iii) any debt or
equity securities convertible into or exchangeable for, or any
rights, warrants, calls, subscriptions, or options to acquire,
any such capital stock, debt with voting rights or convertible
securities;
(d) not (i) incur or become contingently liable with
respect to any indebtedness for borrowed money other than (A)
borrowings in the ordinary course of business in a manner
consistent with past customs and practices or (B)
29
borrowings to refinance existing indebtedness on commercially
reasonable terms, (ii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of
its capital stock or equity interests or any security
convertible into or exchangeable for its capital stock or
equity interests, (iii) sell, pledge, dispose of or encumber
any assets or businesses other than dispositions in the
ordinary course of business in a manner consistent with past
customs and practices (iv) enter into any contract, agreement,
commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i)
preserve intact its business organizations and goodwill, (ii)
keep available the services of its present officers and key
employees, and (iii) preserve the goodwill and business
relationships with clients and others having business
relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the
transactions contemplated by this Agreement;
(f) confer on a regular and frequent basis with one
or more representatives of Centerprise to report operational
matters of materiality and the general status of ongoing
operations;
(g) except as contemplated by Schedule 4.9, not (i)
increase in any manner the base compensation of, or enter into
any new bonus or incentive agreement or arrangement with, any
of its employees, partners, members or owners, except in the
ordinary course of business in a manner consistent with past
customs and practices of the Company or any Company
Subsidiary, as applicable, (ii) pay or agree to pay any
additional pension, retirement allowance or other employee
benefit under any Employee Plan to any such Person, whether
past or present, (iii) enter into any new employment,
severance, consulting, or other compensation agreement with
any of its existing employees, partners, members or owners,
(iv) amend or enter into a new Employee Plan (except as
required by Law) or amend or enter into a new collective
bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all
applicable Laws;
(i) not make any material investment in, directly or
indirectly, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or by any
other manner, any businesses or any Person or division thereof
or otherwise acquire or agree to acquire any assets in each
case which are material to it other than in the ordinary
course of business in a manner consistent with past customs
and practices;
30
(j) not sell, lease, license, encumber or otherwise
dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets other than in the
ordinary course of business, consistent with past customs and
practices;
(k) maintain with financially responsible insurance
companies insurance on its tangible assets and its businesses
in such amounts and against such risks and losses in a manner
consistent with past customs and practices in all material
respects; and
(l) collect and xxxx receivables in the ordinary and
usual course and consistent with past custom and practices.
7.1.2 [Reserved]
7.1.3 Notwithstanding the fact that such action might
otherwise be permitted pursuant to this Article, the Company shall not
take, or permit any Company Subsidiary to take, any action that would
or is reasonably likely to result in any of the representations or
warranties of the Company set forth in this Agreement being untrue or
in any of the conditions to the consummation of the transactions
contemplated hereunder set forth in Article X (other than Section
10.1(i)) not being satisfied.
7.1.4 Prior to the Closing, (i) the Company shall terminate,
without any liability to the Company or the Company Subsidiaries, all
agreements relating to the voting of the Company's capital stock, and
all agreements and obligations of the Company and the Company
Subsidiaries relating to borrowed money and/or involving payments to or
for the benefit of a present or former stockholder of the Company, or
an Affiliate or family member of a Member or present or former
stockholder of the Company, including without limitation those set
forth on Schedule 7.1.4(i), but excluding (A) debt reflected on
Schedule 2.1 as Debt Assumed By Centerprise, (B) items reflected on
Schedule 2.6, (C) agreements and obligations to the extent such
agreements and obligations result in Indirect Costs under the Incentive
Compensation Agreement, (D) that certain Second Amended and Restated
Shareholders' and Non-Shareholder Officers' Agreement dated as of
December 31, 1998, a true and complete copy of which has been delivered
to Centerprise (the "Company Shareholders' Agreement"), and which
Company Shareholders' Agreement shall not be amended further, and (E)
items approved by Centerprise in writing; and (ii) notwithstanding
anything contained in this Section 7.1 to the contrary, the Company
will transfer and distribute the assets listed on Schedule 7.1.4(ii)
(the "Excluded Assets") to the Persons listed on Schedule 7.1.4(ii),
subject to all liabilities and obligations of any nature (whether known
or unknown, accrued, absolute, contingent, direct, indirect, perfected,
inchoate, unliquidated or otherwise) relating to the Excluded Assets
(collectively, the "Excluded Liabilities"); provided, however, that
prior to the Closing, the Company shall obtain novations or other
releases or agreements discharging the Company from all Excluded
Liabilities (so that the respective Excluded Liabilities will become
direct liabilities and obligations, of the assignee), and provide
copies thereof to Centerprise.
31
7.2 No-Shop.
(a) After the date hereof and prior to the Closing Date or
earlier termination of this Agreement, the Company shall (i) not, and
the Company shall use its diligent efforts to cause the Company
Subsidiaries and any officer, director or employee of, or any attorney,
accountant, investment banker, financial advisor or other agent
retained by the Company or any Company Subsidiary not to, initiate,
solicit, negotiate, encourage, or provide non-public or confidential
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business and properties of the Company or any
Company Subsidiary, or any capital stock or other equity interests the
Company or any Company Subsidiary, whether by merger, purchase of
assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture
or partnership or similar arrangement, and (ii) promptly advise
Centerprise of the terms of any communications the Company may receive
or become aware of relating to any bid for part or all of the Company
or any Company Subsidiary. Notwithstanding the foregoing, if the
underwriters' internal sales force presentation or "road show" for the
IPO has not started by October 15, 1999, then from and after such date,
the Company may (through its authorized agents) conduct limited
discussions with potential acquirers of the Company for the sole
purpose of assessing the potential terms and conditions of an
acquisition proposal involving the Company. Notwithstanding the
preceding sentence, the Company shall not (i) disclose any non-public
or confidential information regarding the Company to any such third
party or (ii) enter into any agreement (including a letter of intent or
term sheet) with such third party unless this Agreement has been
terminated pursuant to Article XI.
(b) The Company (i) acknowledges that a breach of any of its
covenants contained in this Section 7.2 will result in irreparable harm
to Centerprise which will not be compensable in money damages; and (ii)
agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly
available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "Schedules") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
however, that no amendment or supplement to a Schedule that constitutes or
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
or Schedule 8.8 may be made unless Centerprise and a majority of the Founding
Companies consent to such amendment or supplement. No amendment of or supplement
to a Schedule shall be made later than three (3) business days prior to the
anticipated effectiveness of the Form S-1. For all purposes of this Agreement,
including, without limitation, for purposes of determining whether the
conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
32
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
and (iii) Centerprise and a majority of the Founding Companies consent to such
amendment or supplement, but the Company does not, the Company may terminate
this Agreement at any time prior to the Closing Date. In the event that (i) the
Company seeks to amend or supplement a Schedule pursuant to this Section 7.3,
(ii) such amendment or supplement constitutes or reflects a Company Material
Adverse Effect or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii)
Centerprise and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to the Company's breach of a representation or
warranty as of March 31, 1999 in which case the Company shall pay to
Centerprise, as Centerprise's exclusive remedy (notwithstanding anything to the
contrary) and as liquidated damages, and not as a penalty, an amount equal to
$2,000,000 (the "Liquidated Damages Amount"). The Company agrees that in the
case of such termination Centerprise and the Founding Companies (excluding the
Company) will sustain immediate and irreparable economic harm and loss of
goodwill and that actual losses suffered by such parties will be difficult, if
not impossible, to ascertain, but the Liquidated Damages Amount set forth herein
is reasonable and has been arrived at after a good faith effort to estimate such
losses. Payment of the Liquidated Damages Amount shall be made in cash to
Centerprise within thirty (30) days of a termination pursuant to this Section
7.3 in connection with an amendment of or supplement to a Schedule relating to a
breach of a representation or warranty as of the date of this Agreement.
7.4 Company Stockholders Meeting. The Company shall take all action in
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Company's
stockholders to be held on the earliest practicable date determined in
consultation with Centerprise to consider and vote upon approval of the Merger,
this Agreement and the transactions contemplated hereby. The Company shall
solicit the approval of the Merger, this Agreement and the transactions
contemplated hereby by Company's stockholders, and the Company's Board of
Directors shall recommend approval of the Merger, this Agreement and the
transactions contemplated hereby by the Company's stockholders. If the Merger,
this Agreement and the transactions contemplated hereby are approved by the
Company's stockholders, the Company shall not call, give notice of, convene or
hold any other meeting of its stockholders to rescind or modify such approval or
to consider any other transaction.
7.5 Conversion. Prior to the Closing but effective only if, as and when
the Closing occurs, the Company shall complete the Conversion pursuant to
applicable law and present such evidence of the Conversion at the Closing, as
Centerprise or its counsel may require.
33
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
8.1.1 The Company shall and shall cause the Company
Subsidiaries to afford to Centerprise and its accountants, counsel,
financial advisors and other representatives, including without
limitation the underwriters engaged in connection with the IPO (each an
"Underwriter" and collectively, the "Underwriters") and their counsel
(collectively, the "Centerprise Representatives"), and to the other
Founding Companies and their accountants, counsel, financial advisors
and other representatives, and Centerprise shall afford to the Company
and their accountants, counsel, financial advisors and other
representatives (the "Company Representatives"), upon reasonable
notice, full access during normal business hours throughout the period
prior to the Closing Date to all of its respective properties, books,
contracts, commitments and records (including, but not limited to,
financial statements and Tax Returns) and, during such period, shall
furnish promptly to one another all due diligence information requested
by the other party. Centerprise shall hold and shall use its best
efforts to cause the Centerprise Representatives to hold, and the
Company shall hold and shall use their best efforts to cause the
Company Representatives to hold, in strict confidence all non-public
information furnished to it in connection with the transactions
contemplated by this Agreement, except that each of Centerprise, the
Company may disclose any information that it is required by law or
judicial or administrative order to disclose. In addition, Centerprise
will cause each of the other Founding Companies and their members and
stockholders to enter into a provision similar to this Section 8.1
requiring each such Founding Company to keep confidential any
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly return to the
disclosing party all non-public written material provided pursuant to
this Section 8.1 or pursuant to the Other Agreements and shall not
retain any copies, extracts or other reproductions of such written
material. In the event of such termination, all documents, memoranda,
notes and other writings prepared by Centerprise or the Company based
on the information in such material shall be destroyed (and Centerprise
and the Company shall use their respective reasonable best efforts to
cause their advisors and representatives to similarly destroy such
documents, memoranda and notes), and such destruction (and reasonable
best efforts) shall be certified in writing by an authorized officer
supervising such destruction.
34
8.2 Registration Statements.
8.2.1 Centerprise has filed the Registration Statements with
the SEC and shall use all reasonable efforts to have the Registration
Statements declared effective by the SEC as promptly as practicable.
Centerprise shall also take any action required to be taken under
applicable state "blue sky" or securities laws in connection with the
issuance of Centerprise Common Stock. Centerprise and the Company shall
promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with making such
filings. All information provided and to be provided by Centerprise and
the Company, respectively, for use in the Registration Statements shall
be true and correct in all material respects without omission of any
material fact which is required to make such information not false or
misleading as of the date thereof and in light of the circumstances
under which given or made. The Company agrees promptly to advise
Centerprise if at any time during the period in which a prospectus
relating to the offering or the Merger is required to be delivered
under the Securities Act, any information contained in the prospectus
concerning the Company or the Company Subsidiaries becomes incorrect or
incomplete in any material respect, and to provide the information
needed to correct such inaccuracy or remedy such incompletion.
8.2.2 Centerprise agrees that it will provide to the Company
and its counsel copies of drafts of the Registration Statements (and
any amendments thereto) containing material changes to the information
therein as they are prepared and will not (i) file with the SEC, (ii)
request the acceleration of the effectiveness of or (iii) circulate any
prospectus forming a part of, the Registration Statements (or any
amendment thereto) unless the Company and its counsel (x) have had at
least two days to review the revised information contained therein
(which changes shall be highlighted by computer generated marks
indicating the additions and deletions made from the prior draft
reviewed by the Company's counsel) and (y) have not objected to the
substance of the information contained therein. Any objections posed by
the Company or its counsel shall be in writing and state with
specificity the material in question, the reason for the objection, and
the Company's proposed alternative. If the objection is founded upon a
rule promulgated under the Securities Act, the objection shall cite the
rule. Notwithstanding the foregoing, during the five (5) business days
immediately preceding the date scheduled for the filing of the
Registration Statements and any amendment thereto, the Company and its
counsel shall be obligated to respond to proposed changes
electronically transmitted to them within two (2) hours from the time
the proposed changes (in the case of the initial filing of the
Registration Statements, from the last circulated draft of the
Registration Statements; and, in the case of any subsequent filing of
the Registration Statements or any amendment thereof, from the most
recently filed Registration Statements or amendment thereof) are
transmitted to the Company's counsel; provided, that, Centerprise has
provided to the Company or its counsel reasonable advance notice of
such proposed changes; provided, further, that such changes are
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Company's counsel.
35
8.2.3 Centerprise will advise the Member Representative of the
effectiveness of the Registration Statements, advise the Member
Representative of the entry of any stop order suspending the
effectiveness of the Registration Statements or the initiation of any
proceeding for that purpose, and, if such stop order shall be entered,
use its best efforts promptly to obtain the lifting or removal thereof.
Upon the written request of the Company Centerprise will furnish to the
Company a reasonable number of copies of the final prospectus
associated with the IPO.
8.3 Expenses and Fees. Centerprise shall pay the fees and expenses of
the independent public accountants and legal counsel to Centerprise and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. The Company will not be liable for any portion of the
above expenses in the event the IPO is not completed. Centerprise shall also pay
the underwriting discounts and commissions payable in connection with the sale
of Centerprise Common Stock in the IPO. All other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party
hereto nor any Affiliate of any party hereto shall issue any press release or
any written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of Centerprise and the Company.
8.6 [Reserved]
8.7 Centerprise Covenants. After the date hereof and prior to the
Closing Date or earlier termination of this Agreement in accordance with its
terms, Centerprise shall comply in all material respects with all applicable
Laws. Centerprise shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of Centerprise set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
satisfied.
8.8 Release of Guarantees. Centerprise shall use all commercially
reasonable efforts and good faith to have the Company's stockholders released
from any and all guarantees on any indebtedness and leases that they personally
guaranteed for the benefit of the Company as set forth on Schedule 8.8, with all
such guarantees on indebtedness and leases being assumed by Centerprise, if
necessary to achieve such releases. If any guaranteed indebtedness is repaid in
full with proceeds from the IPO and the Company's stockholders' guarantees
thereafter shall have no further force or effect, then Centerprise shall not be
obligated to use any efforts to obtain a release of such guarantee. In the event
that Centerprise cannot obtain such releases from the lenders of any such
guaranteed indebtedness or lessors of any guaranteed leases, Centerprise agrees
to
36
indemnify, defend and hold harmless the Company's stockholders against any and
all claims made by lenders or landlords under such guarantees.
8.9 [Reserved]
8.10 Preparation and Filing of Tax Returns.
8.10.1 The Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that Centerprise and its advisors
shall have the right to review and approve such returns prior to
filing, which approval shall not be unreasonably withheld. Centerprise
shall, and shall cause its Affiliates to, provide to the Company such
cooperation and information reasonably requested in filing any return,
amended return or claim for refund, determining a liability for Taxes
or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. The Company shall bear all costs of
filing such returns.
8.10.2 Each of the Company and Centerprise shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and shall treat the transaction
as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that
all insurance policies listed, or required to be listed, on Schedule 4.20 will
be maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of the Member
Representative, Centerprise shall, directly or through one or more of its
subsidiaries, administer and manage the collection of amounts referred to on
Schedule 7.1.4(ii) using reasonable care and in accordance with the Company's
policies in effect at Closing.
8.13 Member Representative. The Company appoints Xxxxxxx X. Xxxxxx (the
"Member Representative") as its agent and representative with full power and
authority to agree, contest or settle any claim or dispute affecting the Company
made under Article II and to otherwise act on behalf of the Company and its
stockholders in accordance with the terms of this Agreement.
ARTICLE IX
[RESERVED]
37
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Acquisition.
The respective obligations of each party to effect the Acquisition shall be
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) the Underwriting Agreement related to the IPO shall have
been executed and the closing of the sale of Centerprise Common Stock
to the Underwriters pursuant thereto shall have occurred simultaneously
with the Closing hereunder;
(b) the closings of the transactions contemplated under each
of the Other Agreements shall have occurred simultaneously with the
Closing hereunder, unless terminated in accordance with Section 7.3 of
the applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in
effect and no proceeding for that purpose shall have been instituted by
the SEC or any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or
decree shall be pending before or issued by any federal or state court
which seeks to prevent or prevents the consummation of the IPO, the
Acquisition or any of the Other Acquisitions shall have been issued and
remain in effect;
(e) the minimum price condition set forth on Schedule 2.1
shall have been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the
consummation of the Acquisition or any of the Other Acquisitions or
make the consummation of the Acquisition or any of the Other
Acquisitions illegal;
(g) all material governmental and third party waivers,
consents and approvals required for the consummation of the Acquisition
or any of the Other Acquisitions and the transactions contemplated
hereby and by the Other Agreements (including, without limitation, any
consents listed on Schedules 4.3.2 or 4.12) shall have been obtained
and be in effect;
(h) no action, suit or proceeding with respect to the
Acquisition has been filed or threatened by a third party and remains
threatened or remains pending before any court, Governmental Authority
or regulatory Person;
38
(i) this Agreement, the Merger and the transactions
contemplated hereby shall have been approved and adopted by the
Company's stockholders in the manner required by any applicable Law and
the Company's Organizational Documents and such approval shall remain
in full force and effect;
(j) Centerprise shall have entered into one or more credit
facilities providing for aggregate commitments of not less than $75
million;
(k) Xxxxxxx Xxxxxx & Xxxxxxxxx, C.P.A.s, L.L.C. ("Holdings")
shall have entered an agreement with the Company pursuant to which
Holdings shall purchase from the Company all AR ("Purchased AR") for
$16,898,500, less any collections of AR from date of Closing to the
date of such purchase, which purchase shall occur on or after the
second business day after the Closing, but no later than within five
business days after the Closing; and
(l) the members of Holdings shall have secured all licenses,
permits, approvals and authorizations necessary to conduct the
Attestation Practice in accordance with applicable laws and
regulations.
10.2 Conditions to Obligation of the Company to Effect the Acquisition.
Unless waived by the Company, the obligation of the Company to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing of
the following additional conditions:
(a) Centerprise, Mergersub and each of the Other Founding
Companies shall have performed in all material respects their
respective agreements contained in this Agreement and each Other
Agreement required to be performed on or prior to the Closing Date and
the representations and warranties of Centerprise contained in this
Agreement and each Other Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the
Closing Date as if made at and as of such date, and the Company shall
have received a certificate of the Chief Executive Officer or President
of Centerprise to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or
regulation which, when taken together with all such promulgations,
would materially impair the value to the Company of the Acquisition;
(c) the Company shall have received an opinion from Xxxxxx
Xxxxxx & Zavis, dated as of the Closing Date, containing the
substantive opinions set forth in Exhibit 10.2(c), the final form of
such opinion to be in form and substance reasonably acceptable to the
Company;
(d) each of the members of Holdings shall have been afforded
the opportunity to enter into an incentive compensation agreement (the
"Incentive Compensation Agreement") with Centerprise substantially in
the form attached hereto as Exhibit 10.2(d);
39
(e) Centerprise shall have delivered to the Company a
certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State, showing
that Centerprise is in good standing;
(f) each of the members of Holdings, the partners, members and
stockholders of the other Founding Companies who are to receive shares
of Centerprise Common Stock pursuant to the Other Agreements, and the
other stockholders of Centerprise other than those acquiring stock in
the IPO shall have entered into an agreement (the "Stockholders
Agreement") substantially in the form attached hereto as Exhibit
10.2(f);
(g) all conditions to the Acquisitions of the other Founding
Companies, on substantially the same terms as provided herein, shall
have been satisfied or waived by the applicable party and the Company;
(h) the Company shall have been afforded the opportunity to
review the executed employment agreement by and between Centerprise and
Xxxxxx X. Xxxxxx; and
(i) the Company shall have received an opinion of Xxxxxx
Xxxxxx & Zavis, dated as of the Closing Date and based upon certain
factual representations and assumptions, that for federal income tax
purposes there will be no gain or loss recognized with respect to the
Centerprise Common Stock received in exchange for Company Stock in the
Merger pursuant to Section 351 of the Code, the final form of such
opinion to be in form and substance reasonably acceptable to the
Company.
10.3 Conditions to Obligation of Centerprise to Effect the Acquisition.
Unless waived by Centerprise, the obligation of Centerprise and Mergersub to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing of the additional following conditions:
(a) the Company shall have performed in all material respects
its agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties of
the Company contained in this Agreement shall be true and correct in
all material respects on and as of the date made and on and as of the
Closing Date as if made at and as of such date, and Centerprise and the
Underwriters shall have received a Certificate of the Chief Executive
Officer or President of the Company to that effect;
(b) [Reserved];
(c) Centerprise and the Underwriters shall have received an
opinion from Long Xxxxxxx & Xxxxxx, counsel to the Company, dated the
Closing Date, in the form attached hereto as Exhibit 10.3(c), the final
form of such opinion to be in form and substance reasonably acceptable
to the Underwriters and Centerprise;
40
(d) the Company and the other parties thereto, as applicable,
shall have executed and delivered the Separate Practice Agreement
substantially in the form attached hereto as Exhibit 10.3(d)(A) and the
Services Agreement substantially in the form attached hereto as Exhibit
10.3(d)(B);
(e) each member of Holdings shall have executed and delivered
the Incentive Compensation Agreement substantially in the form attached
hereto as Exhibit 10.2(d);
(f) Centerprise and the Underwriters shall have received
"Comfort" letters in customary form from the Company's independent
public accountants, dated the effective date of the Form S-1 and the
Closing Date (or such other date reasonably acceptable to Centerprise),
with respect to certain financial statements and other financial
information included in the Form S-1 and any subsequent changes in
specified balance sheet and income statement items, including total
assets, working capital, total stockholders' equity, total revenues and
the total and per share amounts of net income;
(g) the Company shall have delivered to Centerprise and the
Underwriters a certificate, dated as of a date no later than ten days
prior to the Closing Date, duly issued by the appropriate Governmental
Authority in the state of organization of Seller, the Company and each
Company Subsidiary and, unless waived by Centerprise, in each state in
which the Company or any Company Subsidiary is authorized to do
business, showing the Company or Company Subsidiary (as applicable) is
in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or
regulation which, when taken together with all such promulgations,
would materially impair the value to Centerprise of the Acquisition;
(i) the members of Holdings shall have executed the
Stockholders Agreement;
(j) the Company's stockholders and the members of Holdings
shall have delivered to Centerprise an instrument in the form attached
hereto as Exhibit 10.3(j), dated the Closing Date, releasing the
Company (and the Company Subsidiaries) from any and all claims of such
persons against the Company (and the Company Subsidiaries) and
obligations of the Company (and the Company Subsidiaries) to such
persons;
(k) the Company's interest in RF&S Realty, Inc. and all
Excluded Liabilities related thereto shall have been distributed,
transferred, assigned and novated, as applicable on terms and
conditions in form and substance satisfactory to Centerprise;
(l) the Company shall have presented evidence satisfactory to
Centerprise of its compliance with the provisions of Section 7.1.4
hereof including, without limitation, that as of the Closing the amount
of debt of the Company and the Company Subsidiaries shall not exceed
the amount reflected on Schedule 2.1 as Debt Assumed By Centerprise;
41
(m) the Company shall have terminated or have caused the
termination of any voting trusts, proxies or other agreements or
understandings to which the Company is a party or is bound with respect
to any shares of capital stock or other equity interests of the Company
and the Company Subsidiaries and shall have provided Centerprise
evidence of such termination that is acceptable to Centerprise's
counsel;
(n) the Company shall have completed the Conversion and have
presented evidence of such conversion in accordance with Section 7.5;
(o) the Company shall have delivered payoff letters including
a statement of per diem interest amounts and other applicable release
documents from all institutional lenders and creditors of the Company
and the Company Subsidiaries regarding the payment in full of
indebtedness at Closing, in each case in form and substance
satisfactory to Centerprise (including, without limitation, applicable
UCC-3 termination statements);
(p) the secretary of the Company shall have delivered
certified copies of the resolutions of the board of directors and
shareholders of the Company approving execution and delivery of this
Agreement, the Conversion, the Merger and the other actions, agreements
and documents, necessary or desirable to complete the transactions
contemplated herein;
(q) the Company Shareholders' Agreement shall not have been
amended; and
(r) the Company's stockholders (including the members of
Holdings) shall have executed and delivered the Company Stockholder
letter substantially in the form of Exhibit 10.3(r) attached hereto.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) pursuant to Section 7.3;
(b) by the Company,
(i) if the Acquisition is not completed by November
15, 1999 other than on account of delay or default on the part
of the Company or any of its affiliates or associates;
42
(ii) if the Acquisition is enjoined by a final,
unappealable court order not entered at the request or with
the support of the Company or any of its affiliates or
associates;
(iii) if Centerprise (A) fails to perform in any
material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material
respects within thirty (30) days after written notice of such
default is given to Centerprise; or
(c) by Centerprise,
(i) if the Acquisition is not completed by November
15, 1999 other than on account of delay or default on the part
of Centerprise or any of its stockholders or any of their
affiliates or associates;
(ii) if the Acquisition is enjoined by a final,
unappealable court order not entered at the request or with
the support of Centerprise or any of its stockholders or any
of their affiliates or associates;
(iii) if the Company (A) fails to perform in any
material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material
respects within thirty (30) days after written notice of such
default is given the Company by Centerprise; or
(d) by mutual consent of the Company and the Board of
Directors of Centerprise.
11.2 Effect of Termination. In the event of termination of this
Agreement by either Centerprise or the Company, as provided in Section 11.1,
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Company, Centerprise, Mergersub or their
respective officers or directors (except the obligations set forth in this
Section 11.2 and in Sections 8.1, 8.3, and 8.5, all of which shall survive the
termination). Nothing in this Section 11.2 shall relieve any party from
liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action
taken by the Boards of Directors of Centerprise and the Company or duly
authorized committees thereof and then only by an instrument in writing signed
on behalf of each of the parties hereto and in compliance with applicable law.
Centerprise covenants and agrees that it shall not amend, modify or supplement
the material terms of any Other Agreement following the Closing without the
prior written consent of at least two thirds (2/3rds) of the members of
Centerprise's Board of Directors; provided that no waiver of any restriction set
forth in Article XII shall be of any effect unless consented to by a majority of
the members of Centerprise's Board of Directors who do not at the time of such
proposed waiver hold Restricted Shares within the meaning of this Agreement, any
Other Agreement or the Stockholders Agreement.
43
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XII
[RESERVED]
ARTICLE XIII
[RESERVED]
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
(except for any fee described in Schedule 15.1) or commission in connection with
the Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. Centerprise represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Centerprise or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
44
15.2.1 If to Centerprise or Mergersub, to:
Centerprise Advisors, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
15.2.2 If to the Company, to:
Xxxxxxx Xxxxxx & Xxxxxxxxx, Certified
Public Accountants,
A Professional Corporation
0000 Xxxx Xxxx Xxxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxxxx X. Xxxxxxxxx
Facsimile No: (000) 000-0000
with a copy to:
Xxxx Xxxxxxxx & Xxxxxx
0 Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile No: (000) 000-0000
15.3 Interpretation. The table of contents and headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
45
15.4 Certain Definitions. As used in this Agreement, (i) the term
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "Affiliate" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is a
partner, member or shareholder of such Person or who is otherwise serving, or
who has served, as a director, officer or trustee (or any capacity) of such
Person has, or at any time had, Knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise,
except that Centerprise may assign this Agreement to any wholly-owned subsidiary
of Centerprise.
15.6 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and their respective
successors, permitted assigns, heirs, legal representatives and executors and
except as expressly set forth in herein, nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
* * *
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46
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first written above.
CENTERPRISE ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name:
------------------------------
Its:
-------------------------------
XXXXXXX MERGERSUB INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name:
------------------------------
Its:
-------------------------------
XXXXXXX XXXXXX & XXXXXXXXX,
CERTIFIED PUBLIC ACCOUNTANTS,
A PROFESSIONAL CORPORATION
By: /s/ Xxxxx Xxxxxxx
--------------------------------
Name:
------------------------------
Its:
-------------------------------
