Exhibit 2.2
STOCK PURCHASE AGREEMENT
by and among
BANKRUPTCY MANAGEMENT SOLUTIONS, INC.,
its STOCKHOLDERS and WARRANT HOLDER,
and
BMS HOLDINGS, INC.
May 23, 2006
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................................1
1.01 Definitions..................................................................1
ARTICLE II PURCHASE AND SALE OF SHARES AND CANCELLATION OF WARRANTS........................10
2.01 Purchase and Sale of Shares.................................................10
2.02 Cancellation of Warrants....................................................10
2.03 Payment for and Surrender of Shares and Cancellation of Warrants............10
2.04 Pre-Closing Adjustment to Base Purchase Price...............................11
2.05 Post-Closing Adjustment to the Estimated Adjusted Purchase Price............11
2.06 The Closing.................................................................13
ARTICLE III CONDITIONS TO CLOSING..........................................................13
3.01 Conditions to Buyer's Obligations...........................................13
3.02 Conditions to Sellers' Obligations..........................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EACH SELLER...................................16
4.01 Authority...................................................................16
4.02 Execution and Delivery; Valid and Binding Agreement.........................16
4.03 Noncontravention............................................................17
4.04 Ownership of Capital Stock and Warrants.....................................17
4.05 Brokers Fees................................................................17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................17
5.01 Organization; Qualification; Corporate Power; Officers and Directors,
Authorization...............................................................18
5.02 Capitalization; Subsidiaries...............................................18
5.03 Non-contravention...........................................................19
5.04 Brokers' Fees...............................................................19
5.05 Title to Assets.............................................................19
5.06 Financial Statements........................................................20
5.07 Events Subsequent to Most Recent Fiscal Year End............................20
5.08 Legal Compliance............................................................21
5.09 Tax Matters.................................................................22
5.10 Real Property...............................................................23
5.11 Intellectual Property.......................................................24
5.12 Contracts...................................................................25
5.13 Insurance...................................................................27
5.14 Litigation..................................................................27
5.15 Employees...................................................................28
5.16 Employee Benefits...........................................................28
5.17 Environmental, Health, and Safety Matters...................................29
5.18 Trustees....................................................................29
5.19 Undisclosed Liabilities.....................................................30
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5.20 Transactions with Affiliates................................................30
5.21 Illegal Payments............................................................30
5.22 Depository Institution Relationship.........................................31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.........................................31
6.01 Organization and Power......................................................31
6.02 Authorization; Valid and Binding Agreement..................................31
6.03 No Breach...................................................................32
6.04 Governmental Consents, etc..................................................32
6.05 Litigation..................................................................32
6.06 Brokerage...................................................................32
6.07 Investment Representation...................................................32
6.08 Financing...................................................................33
6.09 No Knowledge of Buyer of Misrepresentations or Omissions....................33
ARTICLE VII PRE-CLOSING COVENANTS..........................................................33
7.01 Conduct of the Business.....................................................33
7.02 Access to Books and Records.................................................34
7.03 Regulatory Filings..........................................................35
7.04 Conditions..................................................................35
7.05 Exclusive Dealing...........................................................36
7.06 Notification................................................................36
7.07 Management Co-Investment....................................................37
ARTICLE VIII ADDITIONAL COVENANTS OF BUYER.................................................37
8.01 Access to Books and Records.................................................37
8.02 Director and Officer Liability and Indemnification..........................38
8.03 Contact with Customers and Suppliers........................................38
8.04 Employee Benefits...........................................................38
8.05 Commitment Letters..........................................................39
ARTICLE IX INDEMNIFICATION.................................................................39
9.01 Survival of Representations, Warranties and Covenants.......................39
9.02 Indemnification by the Sellers and LEF II for the Benefit of Buyer..........40
9.03 Indemnification by Buyer for the Benefit of the Sellers.....................41
9.04 Limitations on Indemnification..............................................42
9.05 Exclusive Remedy; No Punitive Damages.......................................43
9.06 Manner of Payment...........................................................44
9.07 Defense of Third Party Claims...............................................44
9.08 Determination of Loss Amount................................................44
9.09 Non-Rescission..............................................................45
9.10 Treatment of Indemnity Payments.............................................45
ARTICLE X TERMINATION......................................................................45
10.01 Termination.................................................................45
10.02 Effect of Termination.......................................................46
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ARTICLE XI SELLER REPRESENTATIVE...........................................................46
11.01 Designation.................................................................46
11.02 Authority...................................................................46
ARTICLE XII ADDITIONAL COVENANTS AND AGREEMENTS............................................47
12.01 Disclosure Generally........................................................47
12.02 Acknowledgment by Buyer.....................................................47
12.03 Tax Matters.................................................................47
12.04 Further Assurances..........................................................48
12.05 Release.....................................................................48
12.06 Nonsolicitation.............................................................49
12.07 Confidentiality.............................................................49
ARTICLE XIII MISCELLANEOUS.................................................................50
13.01 Non-Survival of Representations and Warranties..............................50
13.02 Press Releases and Communications...........................................50
13.03 Expenses....................................................................50
13.04 Notices.....................................................................51
13.05 Assignment..................................................................52
13.06 Severability................................................................52
13.07 References..................................................................53
13.08 Interpretation..............................................................53
13.09 Amendment and Waiver........................................................53
13.10 Complete Agreement..........................................................53
13.11 Counterparts................................................................54
13.12 Governing Law...............................................................54
13.13 Waiver of Jury Trial........................................................54
13.14 Exclusive Jurisdiction......................................................54
13.15 No Third Party Beneficiaries................................................54
13.16 Guarantee of Obligations....................................................55
13.17 Specific Performance........................................................55
13.18 Delivery by Electronic Means................................................55
EXHIBITS
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Exhibit A - Debt Commitment Letter
Exhibit B - Equity Commitment Letters
Exhibit C - Form of Xxxxxxxx & Xxxxx LLP Opinion
Exhibit D - Form of FIRPTA Certificate
Exhibit E - Form Trustee Agreements
Exhibit F - Form of Xxxxxxx Procter LLP Opinion
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated May
23, 2006, is made by and among BMS Holdings, Inc., a Delaware corporation
("Buyer"), Bankruptcy Management Solutions, Inc., a Delaware corporation (the
"Company"), the Persons indicated on Schedule I attached hereto as holding
Shares (the "Stockholders") and the Person indicated on Schedule I attached
hereto as holding Warrants (the "Warrant Holder" and, together with the
Stockholders, "Sellers" and each individually a "Seller"), and Lincolnshire
Equity Fund II, L.P., a Delaware limited partnership ("LEF II"), solely with
respect to Sections 2.05, 9.02 and 9.04 hereof. Each of Charlesbank Equity Fund
VI, Limited Partnership and Ocwen Financial Corporation (each, a "Guarantor") is
executing this document solely as guarantor of the obligations of Buyer as
provided in Section 13.16 below. Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article I.
WHEREAS, as of the date hereof (i) the Stockholders own all of
the issued and outstanding shares of capital stock of the Company (the
"Shares"), and (ii) the Warrant Holder owns all of the issued and outstanding
warrants to acquire shares of capital stock of the Company (the "Warrants"); and
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, Buyer desires to purchase from the Stockholders, and
the Stockholders desire to sell to Buyer, all of the Shares; and
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, Buyer desires that any Warrants not exercised on or
prior to the Closing be canceled, and the Warrant Holder agrees to cancel such
Warrants, in exchange for the consideration specified herein.
NOW, THEREFORE, in consideration of the premises,
representations and warranties and mutual covenants contained herein and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Definitions.
-----------
For purposes hereof, the following capitalized terms shall have the
respective meanings set forth in this Article I:
"30-day Revenue Target" means an amount equal to sum of the
Revenue for each day during the 30-day period ending on and including the
Closing Date.
"Accountants" has the meaning set forth in Section 2.05(b).
"Accounting Principles" means the principles, policies,
procedures, practices, applications and methodologies used in preparing the Most
Recent Balance Sheet.
"Adjustment Amount" means the net amount of all sums that are
an increase or decrease to the Estimated Adjusted Purchase Price pursuant to
Section 2.05(a) calculated using the final Closing Statement as provided in
Section 2.05(b).
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through contract, the ownership of voting securities or otherwise.
"Affiliated Group" shall mean an affiliated group as defined
in Section 1504 of the Code (or any analogous combined, consolidated or unitary
group defined under state, local or non-U.S. income tax law) of which the
Company is or has been a member.
"Agreement" has the meaning set forth in the preamble hereto.
"Base Purchase Price" has the meaning set forth in Section
2.03(a).
"BMS LLC" has the meaning set forth in Section 11.01.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which commercial banks are required or authorized by applicable
Law to be closed in New York, New York or Irvine, California.
"Buyer" has the meaning set forth in the preamble hereto.
"Buyer Adjustment Amount" has the meaning set forth in Section
2.05(c).
"Buyer Causes of Action" has the meaning set forth in Section
12.05.
"Buyer Indemnified Parties" has the meaning set forth in
Section 9.02(a).
"Buyer Released Parties" has the meaning set forth in Section
12.05.
"Cap" has the meaning set forth in Section 9.04(b).
"Cash" means cash and cash equivalents (including marketable
securities and short-term investments) calculated in accordance with GAAP.
"Class B Common Shares" has the meaning set forth in Section
5.02(a).
"Class C Common Shares" has the meaning set forth in Section
5.02(a).
"Closing" has the meaning set forth in Section 2.06.
"Closing Balance Sheet" has the meaning set forth in Section
2.05(b).
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"Closing Cash Balance" means the amount of Cash held by the
Company and the Company Subsidiary as of immediately prior to the Closing (but
after giving effect to any payment by the Company at the Closing of (i) any
Indebtedness of the Company as contemplated by Section 3.01(e), (ii) any Sale
Bonus and (iii) any Closing Expenses).
"Closing Date" has the meaning set forth in Section 2.06.
"Closing Expenses" means (i) all out-of-pocket fees, costs and
expenses of any Person (other than employees of the Company or the Company
Subsidiary) incurred by the Company, the Company Subsidiary or any Sellers (to
the extent the Company or the Company Subsidiary is responsible for payment
thereof) prior to or on the Closing Date in connection with the negotiation,
documentation and consummation of the transactions contemplated by this
Agreement, including all legal fees and expenses of Xxxxxxxx & Xxxxx LLP, the
fees and expenses of the Company's accountants, and any fees of Lincolnshire
Management, Inc., and (ii) the fees and expenses of Credit Suisse First Boston
LLC pursuant to the letter agreement referred to in Schedule 5.04.
"Closing Indebtedness" means all Indebtedness of the Company
and the Company Subsidiary as of immediately prior to the Closing (but after
giving effect to the payment by the Company at the Closing of any Indebtedness
of the Company and the Company Subsidiary as contemplated by Section 3.01(e)).
"Closing Statement" means the statement derived from the
Closing Balance Sheet, which shall set forth (i) the Closing Indebtedness, (ii)
the Closing Cash Balance, (iii) the Revenue Adjustment Amount and (iv) the
calculation of the Adjustment Amount based on the items described in clauses
(i), (ii) and (iii) of this definition.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Section 4980B of the Code and of any similar state Law.
"Company" has the meaning set forth in the preamble hereto.
"Company Intellectual Property Rights" has the meaning set
forth in Section 5.11(b).
"Company Subsidiary" means American Debtor Education, Inc., a
Delaware corporation.
"Confidentiality Agreement" has the meaning set forth in
Section 7.02.
"Debt Commitment Letter" has the meaning set forth in Section
6.08.
"Deductible" has the meaning set forth in Section 9.04(b).
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"Depository Agreement" means that certain Referral Fee and
Deposit Services Agreement dated as of December 16, 2003, by and between the
Company and the Depository Institution, as amended by Amendment No. 1 dated as
of October 29, 2004 and as further amended, supplemented or modified from time
to time.
"Depository Institution" means JPMorgan Chase Bank or any
Affiliate of JPMorgan Chase Bank acting as the Bank (as such term is defined in
the Depository Agreement) under the Depository Agreement.
"Dispute Notice" has the meaning set forth in Section 2.05(b).
"Employee Benefit Plan" means each "employee benefit plan" (as
such term is defined in ERISA Section 3(3)) and each other material benefit
plan, program, policy or arrangement which the Company or the Company Subsidiary
maintains, sponsors or contributes to.
"Environmental, Health, and Safety Requirements" shall mean
all federal, state, local, and foreign statutes, regulations, ordinances, and
other provisions having the force or effect of law, and all judicial and
administrative orders and determinations, concerning occupational health and
safety, pollution or protection of the environment, as the foregoing are enacted
or in effect prior to or on the Closing Date.
"Equity Commitment Letters" has the meaning set forth in
Section 6.08.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published interpretations
thereunder.
"Estimated Adjusted Purchase Price" means an amount,
calculated by Seller Representative in good faith, equal to the sum of (i) the
Base Purchase Price minus (ii) the Estimated Closing Indebtedness plus (iii) the
Estimated Closing Cash Balance plus (iv) the Estimated Revenue Adjustment Amount
(which may be negative) minus (v) any unpaid Closing Expenses (if any), in the
case of clauses (ii), (iii) and (iv), as set forth in the Pre-Closing Statement
in accordance with Section(degree)2.04.
"Estimated Closing Cash Balance" means an estimate of the
Closing Cash Balance as determined pursuant to Section 2.04.
"Estimated Closing Indebtedness" means an estimate of the
Closing Indebtedness as determined pursuant to Section 2.04.
"Estimated Revenue Adjustment Amount" means an estimate of the
Revenue Adjustment Amount as determined pursuant to Section 2.04.
"Financial Statements" has the meaning set forth in Section
5.06.
"Form Trustee Agreements" has the meaning set forth in Section
5.18(c).
"Fundamental Buyer Representations" has the meaning set forth
in Section 9.01.
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"Fundamental Company Representations" has the meaning set
forth in Section 9.01.
"Fundamental Seller Representations" has the meaning set forth
in Section 9.01.
"GAAP" means generally accepted accounting principles in the
United States as set forth in pronouncements of the Financial Accounting
Standards Board (and its predecessors) and the American Institute of Certified
Public Accountants.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" means, with respect to any Person, at any
particular time, without duplication, (i) any obligations of such Person under
any indebtedness for borrowed money (including all obligations for principal,
interest, premiums, penalties, fees, make-whole payments, expenses, indemnitees,
breakage costs and bank overdrafts thereunder), (ii) any indebtedness of such
Person evidenced by any note, bond, debenture or other debt security, (iii) any
written commitment by which such Person assures a creditor against loss
(including contingent reimbursement obligations with respect to letters of
credit), (iv) any indebtedness of such Person pursuant to a guarantee to a
creditor of another Person, (v) any obligations under capitalized leases, (vi)
any borrowing of money secured by a Lien on such Person's assets and (vii) all
obligations of such Person for the deferred and unpaid purchase price of
property or services (other than trade payables, deferred capital expenditures
and accrued expenses incurred in the Ordinary Course of Business).
"Indemnified Party" means either a Buyer Indemnified Party or
Seller Indemnified Party, as applicable.
"Indemnitee" has the meaning set forth in Section 9.07.
"Indemnitor" has the meaning set forth in Section 9.07.
"Intellectual Property Rights" means all of the following in
any jurisdiction throughout the world: (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos,
slogans, designs, trade names, corporate names, and Internet domain names,
together with all translations, adaptations, derivations, and combinations
thereof, all applications, registrations, and renewals in connection therewith,
and including all goodwill associated with any of the foregoing, (iii) all works
of authorship, all copyrights, and all applications, registrations, and renewals
in connection therewith, (iv) all trade secrets and other proprietary
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals) and all
trade secret rights therein, (v) all computer software (including source code,
executable code, data, databases, and related documentation), (vi) all other
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proprietary and intellectual property rights, and (vii) all copies and tangible
embodiments of any of the foregoing (in whatever form or medium).
"IRS" has the meaning set forth in Section 5.16(b).
"Knowledge of Buyer" means the actual knowledge, as of the
date hereof, of Xxx Xxxxxx, Xxxx Xxxxx, Xxxxxxx Xxxx and J. Xxxx Xxxxxxx.
"Knowledge of the Company" means the actual knowledge, as of
the date hereof, of Xxxxx Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxxx Jasz and Xxx Xxxxxxx.
"Law" means any binding statute, law, treaty, rule,
regulation, order, decree or writ of any court or governmental authority.
"Leased Real Property" means all leasehold or subleasehold
estates and other rights to use or occupy any land, buildings, structures,
improvements, fixtures, or other interest in the real property held by the
Company or the Company Subsidiary.
"Leases" means all leases, subleases, licenses, and other
agreements (written or oral), including all amendments, extensions, renewals,
and other agreements with respect thereto, pursuant to which the Company holds
any interest in Leased Real Property, including the right to all security
deposits and other amounts and instruments deposited by or on behalf of the
Company or the Company Subsidiary thereunder.
"Lien" means any mortgage, pledge, lien, encumbrance, charge
or other security interest. For the avoidance of doubt, a license of
Intellectual Property Rights shall not be deemed a "Lien" hereunder.
"Losses" has the meaning set forth in Section 9.02(a).
"Material Adverse Effect" means any change or effect that is
materially adverse to the business, condition (financial or otherwise) or
results of operations of the Company and the Company Subsidiary taken as a
whole; provided, however, that none of the following shall be deemed in and of
itself, either alone or in combination, to constitute, and none of the following
shall be taken into account in determining whether there has been or will be, a
Material Adverse Effect: (a) any failure by the Company and the Company
Subsidiary to meet internal projections or forecasts or published revenue or
earnings predictions for any period ending (or for which revenues or earnings
are released) on or after the date of this Agreement; (b) any adverse change,
effect, event, occurrence, state of facts or development attributable to the
announcement or pendency of the transactions contemplated by this Agreement; (c)
any adverse change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the bankruptcy or banking industry
(including a change in interest rates), the U.S. economy as a whole or the
capital markets in general; (d) any adverse change, effect, event, occurrence,
state of facts or development resulting from or relating to compliance with the
terms of, or the taking of any action required by, this Agreement; (e) any
adverse change, effect, event, occurrence, state of facts or development arising
from or relating to any change in GAAP; (f) any adverse change, effect, event,
occurrence, state of facts or development arising from or relating to any change
in applicable laws, rules or regulations or the interpretation thereof; (g) any
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adverse change, effect, event, occurrence, state of facts or development caused
by acts of terrorism or war (whether or not declared) occurring after the date
hereof; (h) any reduction in the aggregate Trustee Deposits that is less than
twelve percent (12%) of the aggregate amount of Trustee Deposits as of the date
hereof or (i) any change, effect, occurrence or development of any nature with
respect to (including loss or termination of) the NEGT Balances and/or the Refco
Balances.
"Material Contract" has the meaning set forth in Section 5.12.
"Most Recent Balance Sheet" has the meaning set forth in
Section 5.06.
"Most Recent Balance Sheet Date" has the meaning set forth in
Section 5.06.
"NEGT Balances" means any deposits relating to that certain
case titled In re National Energy & Gas Transmission Inc. (f/k/a PG&E National
Energy Group, Inc.) et. al.
"New Plan" has the meaning set forth in Section 8.04(b).
"Old Plan" has the meaning set forth in Section 8.04(b).
"Ordinary Course of Business" means the ordinary course of
business of the Company and the Company Subsidiary consistent with past custom
and practice (including with respect to quantity and frequency).
"Participating Sellers" has the meaning set forth in Section
7.07.
"Party" means any Person who is a party to this Agreement.
"Permitted Lien" means with respect to any asset or property
of the Company or the Company Subsidiary: (i) taxes, assessments and other
governmental levies, fees, or charges imposed with respect to such asset or
property that are (A) not due and payable as of the Closing Date or (B) being
contested in good faith and for which appropriate reserves have been established
in accordance with GAAP; (ii) mechanics' Liens and similar Liens for labor,
materials, or supplies provided with respect to such asset or property incurred
in the Ordinary Course of Business for amounts that are (A) not due and payable
as of the Closing Date and which shall be paid in full and released at Closing
or (B) being contested in good faith and for which appropriate reserves have
been established in accordance with GAAP; (iii) zoning, building codes and other
land use laws regulating the use or occupancy of Leased Real Property or the
activities conducted thereon that are imposed by any governmental authority
having jurisdiction over such Leased Real Property that are not violated by the
current use or occupancy of such Leased Real Property or the operation of the
Company's or the Company Subsidiary's businesses as currently conducted thereon;
(iv) easements, covenants, conditions, restrictions, and other similar matters
of record affecting title to Leased Real Property that do not impair the use or
occupancy of Leased Real Property in the operation of the Company's or the
Company Subsidiary's business as currently conducted thereon and (v) matters
that would be disclosed on an accurate survey of Leased Real Property.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof."
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"Post-Signing Matter" has the meaning set forth in Section
7.06(a).
"Pre-Closing Agreement" means any agreement, arrangement or
understanding entered into on or before the Closing to make a payment or take
any other action which is subject to the disallowance provisions of Section
280G(a) of the Code other than any agreement, arrangement or understanding
entered into with the Company, the Company Subsidiary or any Affiliate of the
Company or the Company Subsidiary when such Person is controlled by the Buyer or
any Affiliate of the Buyer.
"Pre-Closing Statement" has the meaning set forth in Section
2.04.
"Pre-Signing Matter" has the meaning set forth in Section
7.06(a).
"Pre-Signing Matters Cap" has the meaning set forth in Section
9.04(b).
"Pro Rata Portion" means, with respect to any Seller, the
percentage set forth opposite such Seller's name on Schedule III attached
hereto.
"Products" means those computer programs and/or services and
related documentation developed, manufactured, marketed, licensed, sold and/or
distributed by the Company or the Company Subsidiary as its own products.
"Proprietary Information" has the meaning set forth in Section
12.07.
"Refco Balances" means any deposits relating to any portion of
the estate of Refco LLC.
"Revenue" means, for any day or period of days, the sum of the
aggregate fees earned by the Company and the Company Subsidiary under (i) the
Depository Agreement and (ii) any other agreement for such day or such period of
days. For purposes of determining the aggregate fees earned by the Company under
Article IV of the Depository Agreement for any period of days that is less than
a calendar month, each reference to "month" in the definitions and formulas set
forth in the Depository Agreement for calculating such aggregate fees shall be
deemed to be a reference to such period of days.
"Revenue Adjustment Amount" means an amount, which may be
negative, equal to (i) the unpaid Revenue, if any, for the month ending prior to
the month in which the Closing occurs plus (ii) the unpaid Revenue for the days
that have elapsed in the month in which the Closing occurs as of the Closing
(including the Closing Date), minus (iii) the 30-day Revenue Target.
"Sale Bonuses" means any bonus payable to an employee of the
Company or the Company Subsidiary in connection with the consummation of the
transactions contemplated by this Agreement pursuant to the bonus agreements or
arrangements listed on Schedule 5.16.
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"Sale Bonus Losses" has the meaning set forth in Section
9.02(e).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the preamble hereto.
"Seller Adjustment Amount" has the meaning set forth in
Section 2.05(c).
"Seller Indemnified Party" has the meaning set forth in
Section 9.03.
"Seller Releasing Parties" has the meaning set forth in
Section 12.05.
"Seller Representative" has the meaning set forth in Section
11.01.
"Shares" means, collectively, the Class B Common Shares and
the Class C Common Shares.
"Stockholders" has the meaning set forth in the preamble
hereto.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof or
(ii) if a limited liability company, partnership, association, or other business
entity (other than a corporation), a majority of the partnership or other
similar ownership interests thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof and for this purpose, a Person or Persons own a majority
ownership interest in such a business entity (other than a corporation) if such
Person or Persons shall be allocated a majority of such business entity's gains
or losses or shall be or control any managing director or general partner of
such business entity (other than a corporation). The term "Subsidiary" shall
include all Subsidiaries of such Subsidiary.
"Subsidiary Shares" has the meaning set forth in Section
5.02(a).
"Tax" or "Taxes" means any U.S. federal, state, local, or
non-U.S. income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax, whether computed on a separate or consolidated, unitary or combined basis,
including any interest, penalty, or addition thereto.
"Tax Benefit" has the meaning set forth in Section 9.08.
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"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transfer Taxes" has the meaning set forth in Section 12.03.
"Trustee" means a trustee under Title 11 of the United States
Code or other Person to whom the Company or the Company Subsidiary provides
bankruptcy management services.
"Trustee Deposits" means, with respect to any Trustee as of
any time of determination, the available aggregate amount of the cash balances
deposited by such Trustee with the Depository Institution as of such time
pursuant to the Depository Agreement. For the avoidance of doubt, "Trustee
Deposits" shall not include any cash balances described on Schedule II attached
hereto.
"Warrant Holder" has the meaning set forth in the preamble
hereto.
"Warrants" has the meaning set forth in the recitals hereto.
ARTICLE II
PURCHASE AND SALE OF SHARES AND
-------------------------------
CANCELLATION OF WARRANTS
------------------------
2.01 Purchase and Sale of Shares.
---------------------------
At the Closing, upon the terms and subject to the conditions set forth
in this Agreement, the Stockholders shall sell, assign, transfer and convey to
Buyer, and Buyer shall purchase and acquire from the Stockholders, all of the
Shares, free and clear of any Lien other than restrictions pursuant to
applicable securities laws, for the consideration specified in Section 2.03
below.
2.02 Cancellation of Warrants.
------------------------
At the Closing, each outstanding Warrant shall be cancelled and
extinguished and the Warrant Holder shall be entitled to receive, in complete
satisfaction of any and all obligations owing from the Company to the Warrant
Holder on account of such outstanding Warrant, the consideration specified in
Section 2.03 below.
2.03 Payment for and Surrender of Shares and Cancellation of
-------------------------------------------------------
Warrants.
--------
(a) Upon the terms and subject to the conditions set
forth in this Agreement, Buyer shall pay to Sellers, in consideration for the
Shares and the cancellation of any outstanding Warrants, the aggregate purchase
price of $384,500,000 (Three Hundred and Eighty Four Million and Five Hundred
Thousand) (the "Base Purchase Price"), subject to the adjustments set forth
herein. Adjustments to the consideration paid to Sellers hereunder shall be
estimated prior to the Closing pursuant to Section 2.04 and adjusted after the
Closing pursuant to Section 2.05.
10
(b) At the Closing, each Seller holding any Shares shall
receive payment by Buyer in cash equal to such Seller's Pro Rata Portion of the
Estimated Adjusted Purchase Price (less any amounts reduced pursuant to any
agreement among the Sellers). Payment for such Seller's Shares shall be made by
wire transfer of immediately available funds to an account or accounts specified
by Seller Representative in writing at least two (2) Business Days prior to the
Closing.
(c) At the Closing, each Seller holding any Warrants
shall receive payment by Buyer of an amount in cash equal to such Seller's Pro
Rata Portion (with respect to such Warrants) of the Estimated Adjusted Purchase
Price (less any amounts reduced pursuant to any agreement among the Sellers) in
exchange for the delivery to the Company, for cancellation, of one or more
certificates representing all of the outstanding Warrants held by such holder.
Payment at the Closing to such Warrant Holder in consideration of cancellation
of such Warrants shall be made by wire transfer of immediately available funds
to an account or accounts specified in writing by Seller Representative at least
two (2) Business Days prior to the Closing.
(d) For the avoidance of doubt, the aggregate amount of
cash payments to be made by Buyer pursuant to Sections 2.03(b) and 2.03(c) shall
equal the Estimated Adjusted Purchase Price. Each Seller hereby authorizes Buyer
to pay the aggregate Estimated Adjusted Purchase Price to Sellers in accordance
with Sections 2.03(b) and 2.03(c) and agrees that, following such payment in
full, Buyer shall have no liability to any Seller in respect of the allocation
of the Estimated Adjusted Purchase Price among Sellers made by Seller
Representative pursuant to Sections 2.03(b) and 2.03(c).
(e) At the Closing, Buyer shall pay an amount equal to
the Estimated Closing Indebtedness to such person as may be directed by the
Seller Representative.
2.04 Pre-Closing Adjustment to Base Purchase Price.
---------------------------------------------
At least two (2) Business Days prior to the Closing Date, Seller
Representative shall in good faith and in consultation with Buyer, prepare and
deliver to Buyer a written statement (the "Pre-Closing Statement"), based upon
the books and records of the Company and the Company Subsidiary, which shall set
forth (i) the Estimated Closing Indebtedness, (ii) the Estimated Closing Cash
Balance, (iii) the Estimated Revenue Adjustment Amount and (iv) the Estimated
Adjusted Purchase Price based upon the items described in clauses (i), (ii) and
(iii). The Pre-Closing Statement and the Estimated Adjusted Purchase Price set
forth therein shall be binding on Buyer and Sellers, subject to any adjustments
to the Estimated Adjusted Purchase Price made after the Closing pursuant to
Section 2.05(a).
2.05 Post-Closing Adjustment to the Estimated Adjusted Purchase
----------------------------------------------------------
Price.
-----
(a) The Estimated Adjusted Purchase Price shall be
adjusted after the Closing as follows: (i)(A) reduced by the amount, if any, by
which the Closing Indebtedness is greater than the Estimated Closing
Indebtedness or (B) increased by the amount, if any, by which Closing
Indebtedness is less than the Estimated Closing Indebtedness, (ii)(A) increased
by the amount, if any, by which the Closing Cash Balance is greater than the
Estimated Closing Cash Balance or (B) decreased by the amount, if any, by which
the Closing Cash Balance is less than the Estimated Closing Cash Balance, and
11
(iii) (A) increased by the amount, if any, by which the Revenue Adjustment
Amount is greater than the Estimated Revenue Adjustment Amount or (B) decreased
by the amount, if any, by which the Revenue Adjustment Amount is less than the
Estimated Revenue Adjustment Amount.
(b) After the Closing Date, Buyer shall cause to be
prepared a balance sheet of the Company and the Company Subsidiary on a
consolidated basis as of immediately prior to the Closing (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in accordance with GAAP and
utilizing the Accounting Principles; provided, however, that if there is a
conflict between GAAP and the Accounting Principles, GAAP shall be applied.
Buyer shall deliver the Closing Balance Sheet, together with the Closing
Statement, to Seller Representative within thirty (30) days after the Closing
Date. If within thirty (30) days following the delivery of the Closing Balance
Sheet, Seller Representative has not given Buyer written notice (a "Dispute
Notice") of its objection to any item in the Closing Balance Sheet and/or the
Closing Statement (such notice, if given, must contain a statement reasonably
detailing the basis of Seller Representative's objection to each disputed item),
then the Closing Balance Sheet and the Closing Statement shall be deemed final
and binding on Buyer and Sellers. If Seller Representative delivers a Dispute
Notice, then Buyer and Seller Representative shall consult in good faith to
resolve the disputed items set forth in the Dispute Notice and, if any disputed
items have not been resolved within thirty (30) days following delivery of the
Dispute Notice, the issues that remain in dispute will be submitted to an
accounting or valuation firm mutually agreed between the Seller Representative
and Buyer (each acting reasonably) (the "Accountants") for resolution. Any item
not specifically referred to the Accountants for resolution shall be final and
binding on Buyer and Sellers. If any items in dispute are submitted to the
Accountants for resolution: (A) Buyer and Seller Representative shall furnish to
the Accountants and each other such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that Party (or its accountants) or within the control of such
parties, and shall be afforded the opportunity to present to the Accountants any
materials relating to the determination and to discuss the determination with
the Accountants; (B) the Accountants shall be authorized to resolve each item in
dispute by choosing a value between Buyer's position for such item (as set forth
in the Closing Balance Sheet and/or the Closing Statement) and Seller
Representative's position for such item (as set forth in the Dispute Notice
delivered to Buyer by Seller Representative) or within such other range of
numbers as Buyer and Seller Representative may agree in writing and shall
thereafter deliver to the Accountants in writing; and (C) the determination by
the Accountants of the Closing Balance Sheet, the Closing Statement and the
Adjustment Amount, as set forth in a written notice delivered to both parties by
the Accountants, shall be binding and conclusive on the parties. The fees of the
Accountants for such determination shall be borne by Buyer, on the one hand, and
Sellers, on the other hand, in inverse proportion to the manner in which such
parties prevail on the items resolved by the Accountants, which proportionate
allocation shall be calculated on an aggregate basis based on the relative
dollar values of the amounts in dispute and shall be computed by the Accountants
at the time the determination of the Accountants is rendered.
(c) On the tenth (10th) Business Day following the final
determination of the Adjustment Amount, (i) if the Adjustment Amount is positive
(the "Buyer Adjustment Amount"), Buyer shall pay (or shall cause the Company to
pay) the Adjustment Amount to Sellers, as directed in writing by Seller
Representative, or (ii) if the Adjustment Amount is negative (the "Seller
12
Adjustment Amount"), LEF II (on behalf of the Sellers) shall pay the Seller
Adjustment Amount to the Company up to a maximum of $5,000,000 (Five Million
Dollars) with any excess amount payable by each Seller on a several basis based
on such Seller's Pro Rata Portion of such excess amount. The Adjustment Amount
shall be treated as an adjustment to the Estimated Adjusted Purchase Price.
(d) Each Seller hereby (i) authorizes Buyer to pay any
Buyer Adjustment Amount required to be paid by Buyer pursuant to clause (i) of
Section 2.05(c) as directed by Seller Representative and agrees that, following
such payment in full, Buyer shall have no liability to any Seller in respect of
the allocation of the Adjustment Amount among Sellers made by Seller
Representative pursuant to Section 2.05(c) and (ii) authorizes LEF II to pay the
portion of the Seller Adjustment Amount required to be paid by LEF II pursuant
to clause (ii) of Section 2.05(c) as determined by Seller Representative and
agrees that, following such payment or earlier demand by LEF II, each Seller
shall promptly pay its Pro Rata Portion of such payment to LEF II.
2.06 The Closing.
-----------
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxxxxx & Xxxxx LLP located at
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. on the day that is the
later of (i) July 31, 2006 and (ii) on or prior to the second (2nd) Business Day
following satisfaction or waiver of all of the closing conditions set forth in
Article III (other than those to be satisfied at the Closing itself) or on such
other date as Buyer and Seller Representative may agree in writing. The date on
which the Closing occurs is referred to herein as the "Closing Date."
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.01 Conditions to Buyer's Obligations.
---------------------------------
The obligation of Buyer to consummate the transactions contemplated by
this Agreement is subject to the satisfaction or waiver in writing by Buyer of
the following conditions as of the Closing Date:
(a) The representations and warranties set forth in
Articles IV and V (other than those representations and warranties that address
matters as of particular dates) shall be true and correct at and as of the
Closing Date as though then made and as though the Closing Date were substituted
for the date of this Agreement throughout such representations and warranties,
except where the failure of such representation and warranties to be so true and
correct would not, in the aggregate, have a Material Adverse Effect;
(b) The Company and Sellers shall have performed in all
material respects all of the covenants and agreements required to be performed
by them under this Agreement at or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR
Act shall have expired or been terminated;
13
(d) No action or proceeding before any court or
government body shall be pending wherein an unfavorable judgment, decree or
order would prevent the performance of this Agreement or the consummation of any
of the transactions contemplated hereby;
(e) Buyer shall have received fully executed payoff
letters or UCC-3 termination statements and other terminations, pay-offs and/or
releases, necessary to terminate or release, as the case may be, all Liens on
the Company's and the Company Subsidiary's properties and assets (other than
Permitted Liens), and the Company shall have satisfied in full the Indebtedness
giving rise to such Liens (or made adequate provision in a manner reasonably
acceptable to Buyer for such Indebtedness to be paid at the Closing (including
out of proceeds paid by Buyer at the Closing));
(f) The Company shall have paid in full all Sale Bonuses
and all Closing Expenses (or made adequate provision in a manner reasonably
acceptable to Buyer for such Sale Bonuses and Closing Expenses to be paid at the
Closing (including out of proceeds paid by Buyer at the Closing));
(g) Subject to the second to last sentence of Section
7.06(a), no event or events shall have occurred or failed to have occurred since
the date of this Agreement that together with any Pre-Signing Matter(s),
individually or in the aggregate, have had a Material Adverse Effect;
(h) That certain Amended and Restated Stockholders Rights
Agreement, dated as of December 16, 2003, among the Company and the Sellers,
that certain Amended and Restated Consulting Agreement, dated as of December 29,
2004, between the Company and Lincolnshire Management, Inc. and all other
agreements among the Sellers or the Sellers (or their Affiliates) and the
Company shall have been terminated; and
(i) The Company or Seller Representative (on behalf of
Sellers), as the case may be, shall have delivered to Buyer each of the
following:
(A) a certificate of the Company, dated the
Closing Date, stating that the conditions specified in subsections (a),
(b) and (d) of this Section 3.01, as they relate to the Company and the
Company Subsidiary, have been satisfied;
(B) a certificate of Seller Representative (on
behalf of Sellers), dated the Closing Date, stating that the conditions
specified in subsections (a), (b) and (d) of this Section 3.01, as they
relate to Sellers, have been satisfied;
(C) evidence of the receipt of the governmental
and other third party consents set forth on Schedule 3.01;
(D) the stock certificates representing the
outstanding Shares, in each case duly endorsed for transfer or
accompanied by duly executed stock powers or transfer documents;
(E) the Warrants duly marked "CANCELLED";
14
(F) all minute books, stock books, ledgers and
registers, corporate seals, if any, and other corporate records
relating to the organization, ownership and maintenance of the Company
and the Company Subsidiary, if not already located on the premises of
the Company or the Company Subsidiary;
(G) resignations effective as of the Closing
Date from all non-employee officers and directors of the Company and
the Company Subsidiary as Buyer shall have requested in writing and
delivered to Seller Representative not less than five (5) Business Days
prior to the Closing Date;
(H) a copy of the certificate of incorporation
of the Company and the Company Subsidiary, in each case, certified by
the Secretary of State of Delaware, and a certificate of good standing
from Delaware for each of the Company and the Company Subsidiary, in
each case, dated within five (5) days of the Closing Date;
(I) certified copies of the resolutions duly
adopted by the Company's board of directors authorizing the Company's
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby, and the consummation of all
transactions contemplated hereby and thereby;
(J) a certified copy of the Company's and the
Company Subsidiary's by-laws, in each case, with all amendments
thereto;
(K) any back up copies of any source code of any
Products in the possession of Lincolnshire Management, Inc. or any of
its Affiliates;
(L) an opinion of Xxxxxxxx & Xxxxx LLP, counsel
to the Company, dated as of the Closing Date, covering the matters set
forth in Exhibit C hereto; and
(M) a copy of a statement issued by the Company
satisfying the requirements of Treasury Regulations Section
1.1445-2(c), certifying that the Shares are not a United States real
property interest within the meaning of Code Section 897, a form of
which is attached as Exhibit D hereto.
3.02 Conditions to Sellers' Obligations.
----------------------------------
The obligations of Sellers to consummate the transactions contemplated
by this Agreement are subject to the satisfaction or waiver in writing by the
Seller Representative of the following conditions as of the Closing Date:
(a) Receipt by the Sellers of the Estimated Adjusted
Purchase Price pursuant to Section 2.03;
(b) The representations and warranties set forth in
Article VI (other than those representations and warranties that address matters
as of particular dates) shall be true and correct at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties, except where
15
the failure of such representation and warranties to be so true and correct
would not, in the aggregate, have a Material Adverse Effect;
(c) Buyer shall have performed in all material respects
all the covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing;
(d) The applicable waiting periods, if any, under the HSR
Act shall have expired or been terminated;
(e) No action or proceeding before any court or
government body shall be pending wherein an unfavorable judgment, decree or
order would prevent the performance of this Agreement or the consummation of any
of the transactions contemplated hereby;
(f) Buyer shall have made adequate provision for any
Estimated Closing Indebtedness (based on the amount specified in the Pre-Closing
Statement) to be paid at or immediately following the Closing pursuant to
Section 2.03(e));
(g) Buyer shall have delivered to Seller Representative
certified copies of the resolutions duly adopted by Buyer's board of directors
(or its equivalent governing body) authorizing Buyer's execution, delivery and
performance of this Agreement and the other agreements contemplated hereby, and
the consummation of all transactions contemplated hereby and thereby;
(h) Buyer shall have delivered to Seller Representative
(on behalf of Sellers) a certificate, dated the Closing Date, stating that the
conditions specified in subsections (b), (c) and (e) of this Section 3.02 have
been satisfied; and
(i) an opinion of Xxxxxxx Procter LLP, counsel to Buyer,
dated as of the Closing Date, covering the matters set forth in Exhibit F
hereto.
ARTICLE IV
REPRESENTATIONS AND
-------------------
WARRANTIES OF EACH SELLER
-------------------------
Each Seller, solely for himself, herself or itself (on a
several and not joint basis), represents and warrants to Buyer as follows:
4.01 Authority.
---------
Such Seller has all requisite power and authority and full legal
capacity to execute and deliver this Agreement and to perform his, her or its
obligations hereunder.
4.02 Execution and Delivery; Valid and Binding Agreement.
---------------------------------------------------
This Agreement has been duly executed and delivered by such Seller. The
execution, delivery and performance of this Agreement by such Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite action, and no other proceedings on its part are
16
necessary to authorize the execution, delivery or performance of this Agreement.
Assuming that this Agreement is the valid and binding agreement of Buyer, the
Company and the other Sellers, this Agreement constitutes the valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as enforceability may be limited by bankruptcy laws, other
similar laws affecting creditors' rights and general principles of equity
effecting the availability of specific performance and other equitable remedies.
4.03 Noncontravention.
----------------
Neither the execution and the delivery of this Agreement nor the
consummation of the transactions contemplated hereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Seller is subject or, if such Seller is a corporation, any
provision of its charter or bylaws or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which such Seller is a party or by which he, she or it is bound or to which
any of his, her or its assets is subject.
4.04 Ownership of Capital Stock and Warrants.
---------------------------------------
Such Stockholder or Warrant Holder, as the case may be, is the record
owner of the number of Shares or Warrants, as applicable, set forth opposite
his, her or its name on Schedule 5.02 attached hereto. Such Seller has good and
marketable title to (i) the Shares which are to be sold, transferred and
assigned by such Seller pursuant to this Agreement and (ii) the Warrants owned
by such Seller, if any, in each case, free and clear of any and all Liens. Other
than as set forth on Schedule 5.02, such Seller does not own any of the
Company's capital stock or other equity securities of the Company or any
options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of the Company's capital stock or other
equity securities of the Company , whether vested or unvested. All Shares of
such Seller will be sold, transferred and conveyed to Buyer, pursuant to the
procedures set forth in this Agreement, free and clear of all Liens (including,
without limitation, claims of spouses, former spouses and other family members).
4.05 Brokers Fees.
------------
Such Seller has no liability for or any obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Buyer, the Company or the Company
Subsidiary could become liable or obligated.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Buyer as follows:
17
5.01 Organization; Qualification; Corporate Power; Officers and
----------------------------------------------------------
Directors, Authorization.
------------------------
The Company and the Company Subsidiary are each a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Delaware. The Company and the Company Subsidiary are each qualified to conduct
business and are in good standing under the Laws of each jurisdiction where such
qualification is necessary, expect to the extent where failure to so qualify
would not result in a Material Adverse Effect. Each of the Company and the
Company Subsidiary has all corporate power and authority to own, lease and use
its properties and carry on its business as currently conducted.
(a) Schedule 5.01 lists the names of the directors and
the names and titles of the officers of each of the Company and the Company
Subsidiary. The Company has delivered to Buyer correct and complete copies of
the certificate of incorporation and bylaws for the Company and the Company
Subsidiary (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books for
the Company and the Company Subsidiary are correct and complete in all material
respects.
(b) Neither the Company nor the Company Subsidiary is in
default under or in violation of any provision of its charter or bylaws.
(c) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.
(d) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all requisite action, and no
other proceedings on its part are necessary to authorize the execution, delivery
or performance of this Agreement. This Agreement has been duly executed and
delivered by the Company and assuming the due authorization, execution and
delivery by the other parties hereto constitutes a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy laws, other similar laws affecting
creditors' rights and general principles of equity effecting the availability of
specific performance and other equitable remedies.
5.02 Capitalization; Subsidiaries.
-----------------------------
(a) The entire authorized capital stock of the Company
consists of (i) 5,500,000 shares of Class B Common Stock, par value $0.01 per
share, of which 911,298.70 shares are issued and outstanding as of the date
hereof (the "Class B Common Shares"), and (ii) 5,500,000 shares of Class C
Common Stock, par value $0.01 per share (the "Class C Common Shares"), of which
4,221,012.20 shares are issued and outstanding as of the date hereof. The Shares
are owned beneficially and of record by the Stockholders as set forth on
Schedule 5.02 attached hereto. The entire authorized capital stock of the
Company Subsidiary consists of 1,000 shares of common stock, par value $0.01 per
share, of which 100 shares, constituting the "Subsidiary Shares", are issued and
outstanding and are owned beneficially and of record by the Company. All of the
Shares and the Subsidiary Shares have been duly authorized and are validly
18
issued, fully paid, and non-assessable. The Warrants, in the aggregate, are
exercisable for 101,130.60 shares of Class B Common and are held by the Warrant
Holder as set forth on Schedule 5.02 attached hereto. Except for the Warrants or
as set forth in the Company's certificate of incorporation, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company or the Company Subsidiary to issue, sell, or
otherwise cause to become outstanding any of their respective capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights (excluding any employee bonus plan) with
respect to the Company or the Company Subsidiary. Except as set forth on
Schedule 5.02 attached hereto, there are no voting trusts, proxies, or other
similar agreements or understandings with respect to voting the Shares or the
Subsidiary Shares.
(b) Other than the Company Subsidiary, the Company does
not have any Subsidiary. Neither the Company nor the Company Subsidiary has any
ownership interest in or right to acquire any ownership interest in any other
Person.
5.03 Non-contravention.
-----------------
Except as set forth on Schedule 5.03 attached hereto, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company or the Company Subsidiary is subject or any provision of the charter or
bylaws of the Company or the Company Subsidiary or (ii) constitute a default
under or result in the acceleration of any Material Contract, license, permit or
authorization to which the Company or the Company Subsidiary is a party or by
which either is bound or to which any of their respective assets are subject (or
result in the imposition of any Lien upon any of their respective material
assets). Except as set forth on Schedule 5.03 or as required pursuant to the HSR
Act, neither the Company nor the Company Subsidiary needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or other third party or Person in order for
the parties hereto to consummate the transactions contemplated by this
Agreement.
5.04 Brokers' Fees.
-------------
Except as set forth on Schedule 5.04, neither the Company nor the
Company Subsidiary has any liability to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which Buyer could become liable or obligated.
5.05 Title to Assets.
---------------
Except as set forth on Schedule 5.05, each of the Company and the
Company Subsidiary has good and valid title to or a valid leasehold interest in,
free and clear of all Liens (other than Permitted Liens), the material tangible
properties and assets used by it as of the date hereof, except for properties
and assets disposed of in the Ordinary Course of Business since the date hereof
in accordance with Section 7.01. Each such tangible asset is free from defects
19
(latent and patent), has been maintained in accordance with normal industry
practice and is in good operating condition and repair (subject to normal wear
and tear). The properties and assets of each of the Company and the Company
Subsidiary are sufficient in all material aspects for the conduct of its
business as presently conducted.
5.06 Financial Statements.
--------------------
The Company has furnished to Buyer prior to the date hereof the
following financial statements (collectively, the "Financial Statements"):
audited consolidated balance sheets and statements of operation, stockholders'
equity and cash flows as of and for the fiscal years ended December 31, 2004 and
December 31, 2005 (the "Most Recent Balance Sheet Date") and an unaudited
consolidated balance sheet and statements of operation, stockholders equity and
cash flows as of and for the three (3) months ended March 31, 2006. The balance
sheet of the Company as of the Most Recent Balance Sheet Date is referred to
herein as the "Most Recent Balance Sheet". The Financial Statements have been
prepared in accordance with GAAP throughout the periods covered thereby, present
fairly the financial condition of the Company and the Company Subsidiary on a
consolidated basis as of such dates and the results of operations of the Company
and the Company Subsidiary on a consolidated basis for such periods, are correct
and complete and are consistent with the books and records of the Company (which
books and records are correct and complete in all material respects), subject,
in the case of the unaudited Financial Statements, to the absence of footnotes
and normal year end adjustments (which will not be material, individually or in
the aggregate).
5.07 Events Subsequent to Most Recent Fiscal Year End.
------------------------------------------------
Since December 31, 2005, there has not been any Material Adverse
Effect. Without limiting the generality of the foregoing, since that date,
except as set forth on Schedule 5.07 or after the date hereof in accordance with
Section 7.01:
(a) neither the Company nor the Company Subsidiary has
sold, leased, transferred or assigned any assets, tangible or intangible, with
an aggregate value in excess of $250,000 (other than the sale of inventory and
property, plant and equipment in the Ordinary Course of Business);
(b) neither the Company nor the Company Subsidiary has
entered into, modified or terminated any Material Contract (other than any
contract with any customer in the Ordinary Course of Business);
(c) no party (including the Company and the Company
Subsidiary) has provided written notice of its election to accelerate,
terminate, modify in a manner adverse to the Company or the Company Subsidiary
or cancel any Material Contract;
(d) neither the Company nor the Company Subsidiary has
experienced any material damage or destruction to any of its assets taken as a
whole;
(e) neither the Company nor the Company Subsidiary has
increased in any respect the compensation (including bonuses) or fringe benefits
of, or paid any bonus to, any director, officer or employee by more than, or in
an amount exceeding, $50,000 individually outside the Ordinary Course of
Business (excluding annual salary increases and annual bonuses consistent with
past practice);
20
(f) neither the Company nor the Company Subsidiary has
amended, adopted or modified any Employee Benefit Plan, other than to comply
with applicable Law;
(g) neither the Company nor the Company Subsidiary has
made any capital expenditure (or series of related capital expenditures)
involving more than $250,000 in the aggregate (other than capital expenditures
in connection with the purchase of computers and related equipment in the
Ordinary Course of Business or other budgeted capital expenditures);
(h) neither the Company nor the Company Subsidiary has
incurred, assumed or guaranteed any Indebtedness;
(i) there has been no change in the charter or bylaws of
the Company or the Company Subsidiary;
(j) neither the Company nor the Company Subsidiary has
issued, sold or otherwise disposed of any of its capital stock or granted any
option, warrant, or other right to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;
(k) neither the Company nor the Company Subsidiary has
experienced any resignation, termination or removal of any key officer or
material loss of personnel or material change in the terms and conditions of the
employment of the any key officer;
(l) neither the Company nor the Company Subsidiary has
changed its accounting methods or practices, or made material changes to its
collection policies, pricing policies or payment policies;
(m) neither the Company nor the Company Subsidiary has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased or
otherwise acquired any of its capital stock (except that the Company may declare
a distribution or a dividend subsequent to the date hereof in compliance with
Section 7.01(a)); and
(n) neither the Company nor the Company Subsidiary has
committed to any of the foregoing.
5.08 Legal Compliance.
----------------
Except as set forth in Schedule 5.08, the Company and the Company
Subsidiary, in connection with the operation of their businesses, are and have
heretofore been in compliance in all material respects with all applicable Laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder and including the Foreign Corrupt
Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state, local, and foreign
governments (and all agencies thereof). Except as set forth on Schedule 5.08,
neither the Company nor the Company Subsidiary has ever entered into or been
subject to any judgment, consent decree, compliance order or administrative
order with respect to any aspect of the business, affairs, properties or assets
21
of the Company or the Company Subsidiary or received any material request for
information, notice, demand letter, administrative inquiry or formal complaint
or claim from any regulatory agency with respect to any aspect of the business,
affairs, properties or assets of the Company or the Company Subsidiary.
5.09 Tax Matters.
-----------
(a) Except as set forth on Schedule 5.09:
(i) each of the Company and the Company Subsidiary has
filed all income Tax Returns and material non-income Tax Returns that
it was required to file when due (taking into account extensions), and
all such Tax Returns are true, complete and correct in all material
respects;
(ii) each of the Company and the Company Subsidiary has
paid all Taxes due and owing by it (whether or not shown on any Tax
Return), and has withheld and timely paid over to the appropriate
taxing authority all Taxes which it is required to withhold from
amounts paid or owing to any employee, shareholder or creditor;
(iii) neither the Company nor the Company Subsidiary has
waived any statute of limitations with respect to any Taxes of the
Company or the Company Subsidiary, as applicable, agreed to any
extension of time with respect to any Tax assessment or deficiency, or
agreed to any extension of time for filing any Tax Return which has not
been filed;
(iv) no U.S. federal, state or local or non-U.S. tax
audits or assessments or administrative or judicial proceedings are
being conducted or, to the Knowledge of the Company, threatened with
respect to the Company or the Company Subsidiary;
(v) there are no Liens on any of the assets of the
Company or the Company Subsidiary that arose in connection with any
failure to pay any Tax;
(vi) other than the group comprised of the Company and the
Company Subsidiary, since the formation of the Company Subsidiary,
neither the Company nor the Company Subsidiary has ever been a member
of an Affiliated Group or filed a combined, consolidated or unitary
income Tax Return and neither the Company nor the Company Subsidiary is
a party to nor is bound by any Tax allocation or Tax sharing agreement;
(vii) Neither the Company nor the Company Subsidiary has
any liability for the Taxes of any Person (other than the Company and
the Company Subsidiary) under Treasury Regulations Section 1.1502-6 (or
any similar provision of state, local, or non-U.S. law), as a
transferee or successor or by contract;
(viii) No claim has ever been made by an authority in a
jurisdiction where the Company or the Company Subsidiary does not file
Tax Returns that the Company or the Company Subsidiary is or may be
subject to taxation by that jurisdiction; and
22
(ix) Neither the Company nor the Company Subsidiary is a
party to any agreement, contract, arrangement, or plan that has
resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section
280G of the Code (or any corresponding provision of state, local, or
non-U.S. Tax law).
(b) Neither the Company nor the Company Subsidiary has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(c) Schedule 5.09(c) lists all federal, state, local, and
non-U.S. income Tax Returns filed with respect to any of the Company or the
Company Subsidiary for taxable periods ended on or after January 1, 2003 and
indicates those Tax Returns that have been audited. The Seller Representative
has delivered to Buyer correct and complete copies of all U.S. federal income
Tax Returns and statements of deficiencies agreed to, by the Company or the
Company Subsidiary since January 1, 2003.
(d) To the Knowledge of the Company, neither the Company
nor the Company Subsidiary has participated, within the meaning of Treasury
Regulations Section 1.6011-4(c), in any "reportable transaction" within the
meaning of Code Section 6011 and the Treasury Regulations thereunder.
(e) Neither the Company nor the Company Subsidiary has
distributed stock of another Person, or has had its stock distributed by another
Person, in a transaction that was purported or intended to be governed in whole
or in part by Code Section 355 or Code Section 361.
(f) Each of the Company and the Company Subsidiary is and
always has been an accrual method taxpayer.
5.10 Real Property.
-------------
(a) Neither the Company nor the Company Subsidiary owns
any real property.
(b) Schedule 5.10 attached hereto sets forth the address
of each Leased Real Property, and a true and complete list of all Leases for
each such Leased Real Property (including the date and name of the parties to
such Lease document). The Company has delivered to Buyer prior to the date
hereof a true and complete copy of each such Lease document, and in the case of
any oral Lease, a written summary of the material terms of such Lease. Except as
set forth on Schedule 5.10 attached hereto, with respect to each of the Leases:
(i) such Lease is legal, valid, binding and in full force
and effect, subject to proper authorization and execution of such Lease
by the other party thereto and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting the rights of creditors generally;
23
(ii) the Company's or the Company Subsidiary's possession
and quiet enjoyment of the Leased Real Property, as applicable, under
such Lease has not been disturbed and, to the Knowledge of the Company,
there are no disputes with respect to such Lease;
(iii) neither the Company or the Company Subsidiary, as
applicable, nor, to the Knowledge of the Company, any other party to
the Lease is in breach of or default under such Lease, and, to the
Knowledge of the Company, no event has occurred or circumstance exists
that, with the delivery of notice, the passage of time or both, would
constitute such a breach or default, or permit the termination,
modification or acceleration of rent under such Lease; and
(iv) neither the Company nor the Company Subsidiary has
subleased, licensed or otherwise granted any Person the right to use or
occupy the Leased Real Property or any portion thereof.
5.11 Intellectual Property.
---------------------
(a) Schedule 5.11(a)(i) contains a list of all: (i)
patented or registered Intellectual Property Rights and (ii) pending patent
applications or other applications for registrations of other Intellectual
Property Rights, in each case, owned by the Company or the Company Subsidiary
and material to their respective businesses. Schedule 5.11(a)(ii) contains a
complete and accurate list of all written agreements under which (x) any third
party is granted a license with respect to any Company Intellectual Property
Rights (other than any agreement with a Trustee pursuant to which the Company
grants such Trustee a license to use the Company's software products in the
Ordinary Course of Business) and (y) any third party grants to the Company or
the Company Subsidiary a license with respect to any Intellectual Property
Rights (other than mass-marketed software) material to the conduct of their
respective businesses. With respect to each agreement set forth on Schedule
5.11(a)(ii), except as set forth on 5.11(a)(iii): (i) the agreement is and
immediately following the Closing, subject to the receipt of any required third
party consent or the giving of any required notice as set forth on Schedule
5.03, will continue to be, in full force and effect, legal, valid, binding, and
enforceable against the Company or the Company Subsidiary, as applicable, and,
to the Knowledge of the Company, the other parties thereto, in accordance with
its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Law affecting the rights of
creditors generally; and (ii) neither the Company nor the Company Subsidiary, as
applicable, is in breach or default in any material respect, and, to the
Knowledge of the Company, no other party to any of such agreements is in breach
or default in any material respect thereunder.
(b) Except as set forth on Schedule 5.11(b), the Company
or the Company Subsidiary, as applicable, owns, free and clear of all Liens
(other than Permitted Liens), all right, title and interest in and to, or has a
valid right to use, without further payment to a third party (except with
respect to any licenses), all Intellectual Property Rights material to the
operation of their respective businesses as presently conducted (collectively,
the "Company Intellectual Property Rights"), and no current or former employee
or consultant of the Company or the Company Subsidiary owns any rights in or to
any of the Company Intellectual Property Rights. All of the Company Intellectual
Property Rights are valid and subsisting, and, to the Knowledge of the Company,
enforceable.
24
(c) Except as set forth on Schedule 5.11(c), (i) neither
the Company nor the Company Subsidiary has received any written notice
contesting the validity, use, ownership or enforceability of any of the Company
Intellectual Property Rights, and (ii) neither the operation of the business of
the Company or the Company Subsidiary, as applicable, as currently conducted,
nor any activity of the Company or the Company Subsidiary, as applicable,
infringes, misappropriates or otherwise violates, or to the Knowledge of the
Company in the past infringed, misappropriated or otherwise violated, any
Intellectual Property Rights of other Persons in any material respect other than
the rights of any other Person under any patent, and to the Knowledge of the
Company, neither the operation of the business of the Company or the Company
Subsidiary, as applicable, as currently conducted, nor any activity of the
Company or the Company Subsidiary, as applicable, infringes, misappropriates or
otherwise violates (or in the past infringed, misappropriated or otherwise
violated), any Intellectual Property Rights of other Persons in any material
respect under any patent.
(d) To the Knowledge of the Company, there is no
infringement, misappropriation or violation by any Person of any of the Company
Intellectual Property Rights.
(e) The Company and the Company Subsidiary have taken
reasonable security measures to protect the confidentiality of all trade secrets
included in the Company Intellectual Property Rights owned by the Company or the
Company Subsidiary, or used or held for use by the Company or the Company
Subsidiary in their respective businesses.
(f) Except as set forth on Schedule 5.11(f), neither the
Company nor the Company Subsidiary has directly or indirectly granted any
rights, licenses or interests in the source code of any Products, and since the
Company or the Company Subsidiary developed the source code of the Products,
neither the Company nor the Company Subsidiary has provided or disclosed the
source code of the Products to any Person other than its employees and
consultants.
(g) Except as set forth on Schedule 5.11(g), the Products
do not contain, incorporate, link or call or otherwise use any software (in
source or object code form) licensed from another Person under a license
commonly referred to as an open source, free software, copyleft or community
source code license (including but not limited to any library or code licensed
under the GNU General Public License, GNU Lesser General Public License), and
the incorporation, linking or calling or other use by the Products of any such
software listed on Schedule 5.11(g) does not obligate the Company or the Company
Subsidiary to make available, offer or deliver the source code of any Product or
component thereof to any third party.
5.12 Contracts.
---------
Schedule 5.12 lists the following contracts and other agreements to
which the Company or the Company Subsidiary is a party (collectively, the
"Material Contracts"):
(a) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments in excess of $250,000 per annum;
25
(b) any agreement (or group of related agreements) for
the purchase or sale of supplies, products, or other personal property, or for
the furnishing or receipt of services, the performance of which will extend over
a period of more than one (1) year and involve consideration in excess of
$250,000 (other than any agreement with any Trustee in the Ordinary Course of
Business);
(c) any agreement concerning a partnership or joint
venture or which involves a sharing of revenues, profits, losses, costs or
liabilities by the Company or the Company Subsidiary with any other Person;
(d) any contract containing covenants directly or
explicitly prohibiting the Company or the Company Subsidiary to compete in any
line of business or with any Person;
(e) any royalty, dividend or similar arrangement based on
the revenues or profits of the Company or the Company Subsidiary or any contract
or agreement involving fixed price or fixed volume arrangements;
(f) any acquisition, merger or similar agreement;
(g) any contract with any governmental entity;
(h) any agreement (or group of related agreements) under
which the Company or the Company Subsidiary has incurred, assumed, or guaranteed
any Indebtedness or under which it has imposed a Lien (other than a Permitted
Lien) on any of its assets, tangible or intangible;
(i) any agreement with any Affiliate of the Company or
the Company Subsidiary (other than any such agreement that will be terminated at
or prior to Closing);
(j) any written agreement for the employment of any
employee on a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $100,000 or providing severance benefits;
(k) any agreement under which the Company or the Company
Subsidiary has advanced or loaned any amount to any employee (other than
advances in the Ordinary Course of Business); or
(l) any settlement, conciliation or similar agreement,
the performance of which will involve payment by the Company or the Company
Subsidiary in excess of $250,000 after the Closing Date.
The Company has delivered to Buyer prior to the date hereof a
correct and complete copy of each Material Contract (as amended to date) and a
written summary setting forth the material terms and conditions of each oral
Material Contract. With respect to each Material Contract, except as set forth
on Schedule 5.12: (i) the agreement is and immediately following the Closing,
subject to the receipt of any required third party consent or the giving of any
required notice as set forth on Schedule 5.03, will continue to be, legal,
valid, binding, and enforceable against the Company or the Company Subsidiary,
26
as applicable, and, to the Knowledge of the Company, the other parties thereto,
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Law affecting the
rights of creditors generally; and (ii) neither the Company nor the Company
Subsidiary, as applicable, is in breach or default in any material respect, and,
to the Knowledge of the Company, no other party to any of the Material Contracts
is in breach or default in any material respect thereunder. To the Knowledge of
the Company, the Company has not received any notice or threat to terminate any
Material Contract, which termination could reasonably be expected to have a
Material Adverse Effect.
5.13 Insurance.
---------
Schedule 5.13 sets forth the following information with respect to each
material insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
maintained by the Company or the Company Subsidiary:
(a) the name of the insurer and the name of the
policyholder;
(b) the policy number and the period of coverage; and
(c) a brief description of the coverage provided under
such policy.
The Company has delivered to Buyer prior to the date hereof a true and
correct copy of each insurance policy required to be disclosed on Schedule 5.13.
Each such insurance policy is, and immediately following the Closing, subject to
the receipt of any required third party consent or the giving of any required
notice as set forth on Schedule 5.03, will continue to be, legal, valid,
binding, and enforceable against the Company or the Company Subsidiary, as
applicable, and, to the Knowledge of the Company, the other parties thereto, in
accordance with its terms except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Law affecting the
rights of creditors generally. To the Knowledge of the Company, and except as
set forth on Schedule 5.13, the Company has in full force and effect general
commercial, general liability, product liability, professional liability,
specified director's and officer's liability, workers compensation and
employee's liability, fire and casualty and such other appropriate insurance
policies with coverages customary for similarly situated companies in the same
or similar industries in all material respects and as required by applicable law
or any Material Contract. Except as set forth on Schedule 5.13, there are
currently no claims pending against the Company or the Company Subsidiary under
any insurance policies currently in effect and covering the property, business
or employees of the Company and the Company Subsidiary, and all premiums due and
payable with respect to the policies maintained by the Company and the Company
Subsidiary have been paid to date. To the Knowledge of the Company, there is no
threatened termination of any such policies or arrangements.
5.14 Litigation.
----------
Schedule 5.14 sets forth each instance in which the Company or the
Company Subsidiary, as applicable, (i) is subject to any outstanding injunction,
judgment, order, decree, administrative proceeding, ruling, or charge or (ii)
is, or since December 16, 2003 was, a party, or, to the Knowledge of the
Company, is, or since December 16, 2003 was, threatened to be made a party to,
27
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator (other than any immaterial
employment related disputes).
5.15 Employees.
---------
With respect to the Company's and the Company Subsidiary's employees:
(a) there is no collective bargaining agreement or
relationship with any labor organization;
(b) the Company is not delinquent in payments to any of
its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for the Company or the Company
Subsidiary as of the date hereof or amounts required to be reimbursed to such
employees other than in the Ordinary Course of Business;
(c) to the Knowledge of the Company, no executive officer
has any present intention to terminate his or her employment;
(d) to the Knowledge of the Company, no labor
organization or group of employees has filed any representation petition or made
any written or oral demand for recognition;
(e) to the Knowledge of the Company, as of the date
hereof, no union organizing or decertification efforts are underway or
threatened; and
(f) as of the date hereof, no labor strike, work
stoppage, slowdown, or other material labor dispute is underway or, to the
Knowledge of the Company, threatened.
5.16 Employee Benefits.
-----------------
(a) Schedule 5.16 lists (i) each Employee Benefit Plan
and (ii) each employee of the Company and the Company Subsidiary who is entitled
to receive a Sale Bonus.
(b) With respect to each Employee Benefit Plan, the
Company has made available to Buyer the most recent plan documents and summary
plan descriptions, the most recent determination letter or opinion letter
received from the Internal Revenue Service ("IRS"), and the most recent annual
reports (Form 5500).
(c) Each Employee Benefit Plan has been maintained,
funded and administered in all material respects in accordance with its terms
and with the applicable requirements of ERISA and the Code. The Company has
complied in all material respects with COBRA. Each Employee Benefit Plan that is
intended to meet the requirements of a "qualified plan" under Section 401(a) of
the Code has received a favorable determination letter or opinion letter from
the IRS.
(d) Neither the Company nor the Company Subsidiary
maintains, sponsors, or contributes to (i) any "defined benefit plan" as defined
in Section 3(35) of ERISA (or any other plan subject to the funding requirements
28
of Section 412 of the Code or Section 302 or Title IV of ERISA), (ii) any
"multiemployer plan" as defined in Section 3(37) or 4001(a)(3) of ERISA, or
(iii) any employee benefit plan, program or arrangement that provides for
post-retirement medical, life insurance or other welfare-type benefits (other
than health continuation coverage required by COBRA).
(e) With respect to each Employee Benefit Plan, (i) to
the Knowledge of the Company there have been no non-exempt "prohibited
transactions" (as defined in Section 406 of ERISA or Section 4975 of the Code),
(ii) to the Knowledge of the Company no "fiduciary" (as defined in Section 3(21)
of ERISA) has any material liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of such Employee Benefit Plan and (iii) no action, investigation,
suit, proceeding, hearing or claim with respect to the assets thereof (other
than routine claims for benefits) is pending or, to the Knowledge of the
Company, threatened.
5.17 Environmental, Health, and Safety Matters.
-----------------------------------------
(a) Each of the Company and the Company Subsidiary is in
compliance in all material respects with all Environmental, Health, and Safety
Requirements.
(b) The Company and the Company Subsidiary are not
required to possess any permits, licenses or other authorizations pursuant to
Environmental, Health, and Safety Requirements for the occupation of the Leased
Real Property or the operation of the business of the Company and the Company
Subsidiary as currently conducted.
(c) Neither the Company nor the Company Subsidiary has
received any notice of any actual or alleged violation of Environmental, Health,
and Safety Requirements, or any liability, including any investigatory, remedial
or corrective obligations, under Environmental, Health, and Safety Requirements,
in each case relating to the business of the Company or the Company Subsidiary
or the Leased Real Property.
(d) The Company has delivered to Buyer prior to the date
hereof all environmental audits, reports and other material environmental
documents relating to the Leased Real Property, any other current or former
properties or facilities of the Company or the Company Subsidiary, or the
operation of the business of the Company and the Company Subsidiary as currently
conducted that are in its possession.
(e) This Section 5.17 sets forth the sole and exclusive
representations and warranties of the Company and the Company Subsidiary with
respect to environmental, health or safety matters, including all matters
relating to Environmental, Health, and Safety Requirements.
5.18 Trustees.
--------
(a) Schedule 5.18 attached hereto lists the Trustees with
the twenty (20) largest Trustee Deposits as of December 31, 2005. As of May 18,
2006, the aggregate amount of the Trustee Deposits for all Trustees, as reported
by the Depository Institution, is $2,079,039,889.
29
(b) Since the date of the Most Recent Balance Sheet and,
as of the date hereof, (i) no Trustee listed on Schedule 5.18 attached hereto
has indicated in writing that it will cease doing business with the Company or
the Company Subsidiary and (ii) to the Knowledge of the Company no Trustee
listed on Schedule 5.18 attached hereto has threatened to cease doing business
with the Company or the Company Subsidiary.
(c) The Company is party to agreements substantially in
the form of the agreements attached hereto as Exhibit E (the "Form Trustee
Agreements") with each of the Trustees. No agreements with any Trustee deviate
in any material respect from the Form Trustee Agreements. Except as set forth on
Schedule 5.18, the Company is not party to any contract or agreement with any
Trustee other than agreements that are not materially different from the Form
Trustee Agreements. With respect to each agreement with each of the Trustees
listed on Schedule 5.18, except as set forth on Schedule 5.18: (i) the agreement
is, and immediately following the Closing will continue to be, legal, valid,
binding, and enforceable against the Company or the Company Subsidiary, as
applicable, and, to the Knowledge of the Company, the other parties thereto, in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Law affecting the
rights of creditors generally; and (ii) neither the Company nor the Company
Subsidiary, as applicable, is in breach or default in any material respect, and,
to the Knowledge of the Company, no Trustee is in breach or default in any
material respect thereunder (other than failure from time to time of a Trustee
to deposit substantially all of its bankruptcy deposits with the Depository
Institution).
5.19 Undisclosed Liabilities.
-----------------------
Neither Company nor the Company Subsidiary has any liability which is
required to be reflected on a balance sheet prepared in accordance with GAAP,
except for (i) liabilities set forth in the Most Recent Balance Sheet, (ii)
liabilities that have arisen after the Most Recent Balance Sheet Date in the
Ordinary Course of Business or (iii) liabilities listed on Schedule 5.19 or (iv)
liabilities arising with respect to the subject areas covered by the other
representations and warranties set forth in this Article V.
5.20 Transactions with Affiliates.
----------------------------
Except as disclosed on Schedule 5.20, there are no loans, leases or
other agreements between the Company or the Company Subsidiary and any present
or former stockholder, director or officer of the Company or the Company
Subsidiary, or to the Knowledge of the Company any member of such officer's,
director's or stockholder's immediate family, or any person controlled by such
officer, director or stockholder (other than stockholders of any Seller that is
a publicly traded entity or an Affiliate of a publicly traded entity). Except as
disclosed on Schedule 5.20, no stockholder, director or officer of the Company
or the Company Subsidiary, or to the Knowledge of the Company any of their
respective spouses or family members, owns directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director or in another similar capacity of, any competitor, customer or supplier
of the Company or the Company Subsidiary, or any organization which is a party
to a Material Contract with the Company or the Company Subsidiary.
30
5.21 Illegal Payments.
----------------
None of the Company, the Company Subsidiary or, to the Knowledge of the
Company, any Person affiliated with the Company or the Company Subsidiary
(acting on behalf of the Company) has ever offered, made or received on behalf
of the Company or the Company Subsidiary any illegal payment or contribution of
any kind, directly or indirectly, including, without limitation, illegal
payments, gifts or gratuities, to any person, entity, or United States or
foreign national, state or local government officials, employees or agents or
candidates therefor or other persons.
5.22 Depository Institution Relationship.
-----------------------------------
To the Knowledge of the Company, as of the date hereof, in all material
respects:
(i) since October 29, 2004, the Depository Institution
has not notified the Company that it intends to terminate its existing
depository business relationship (the "Relationship") with the Company;
(ii) the Relationship is in good standing;
(iii) the Depository Institution has been notified that the
Company is considering a potential sale of the Company; and
(iv) there is no reasonable basis to believe that the
Depository Institution would terminate or adversely modify the
Depository Agreement as a result of a sale of the Company.
The representations set forth in this Section 5.22 are not intended to
guarantee any future outcome or result.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers and the Company as follows:
6.01 Organization and Power.
----------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has all requisite power
and authority to execute and deliver this Agreement and perform its obligations
hereunder.
6.02 Authorization; Valid and Binding Agreement.
------------------------------------------
The execution, delivery and performance of this Agreement by Buyer and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite action, and no other proceedings on its part
are necessary to authorize the execution, delivery or performance of this
Agreement. This Agreement has been duly executed and delivered by Buyer and
assuming the due authorization, execution and delivery by the other parties
hereto constitutes a legal, valid and binding obligation of Buyer, enforceable
31
in accordance with its terms, except as enforceability may be limited by
bankruptcy laws, other similar laws affecting creditors' rights and general
principles of equity effecting the availability of specific performance and
other equitable remedies.
6.03 No Breach.
---------
Buyer is not subject to or obligated under its certificate of
incorporation, its bylaws, or similar organizational or governing documents, any
applicable Law, or any agreement, instrument, license, franchise or permit, or
any order, writ, injunction or decree, which would be breached or violated by
Buyer's execution, delivery or performance of this Agreement or the consummation
of the transactions contemplated hereby.
6.04 Governmental Consents, etc.
--------------------------
Except as pursuant to the applicable requirements of the HSR Act, Buyer
is not required to submit any notice, report or other filing with any
governmental authority in connection with the execution, delivery or performance
by it of this Agreement or the consummation of the transactions contemplated
hereby. No consent, approval or authorization of any governmental or regulatory
authority or any other party or Person is required to be obtained by Buyer in
connection with its execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. Buyer is not subject to
any outstanding judgment, order or decree of any court of governmental body.
6.05 Litigation.
----------
There are no actions, suits or proceedings pending or, to the Knowledge
of Buyer, overtly threatened against or affecting Buyer at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Buyer's performance under this Agreement or the
consummation of the transactions contemplated hereby.
6.06 Brokerage.
---------
There are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Buyer.
6.07 Investment Representation.
-------------------------
Buyer is purchasing the Shares for its own account for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
laws. Buyer is an "accredited investor" as defined in Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended. Buyer acknowledges that it is informed as to the risks of the
transactions contemplated hereby and of ownership of the Shares. Buyer
acknowledges that the Shares have not been registered under the Securities Act
or any state or foreign securities laws and that the Shares may not be sold,
transferred, offered for sale, pledged hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
32
disposition is pursuant to the terms of an effective registration statement
under the Securities Act and are registered under any applicable state or
foreign securities laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities laws.
6.08 Financing.
---------
Attached hereto as Exhibit A are one or more debt financing commitment
letters (collectively, the "Debt Commitment Letters"). Attached hereto as
Exhibit B are equity commitment letters (the "Equity Commitment Letters" and,
together with the Debt Commitment Letters, the "Commitment Letters"). The
Commitment Letters are in full force and effect, subject to proper authorization
and execution of each such Debt Commitment Letter by the other party thereto.
Upon receipt of the financing contemplated by the Commitment Letters at or prior
to the Closing, Buyer will have sufficient funds necessary to pay the full
consideration payable to Sellers hereunder, to make all other necessary payments
by it in connection with transactions contemplated hereby and to pay all of its
related fees and expenses. Buyer has no reason to believe that the proceeds
contemplated by the Commitment Letters will not be funded, and Buyer has not
made any misrepresentation to any lender or provider of equity financing in
connection with obtaining the financing commitments contemplated by the
Commitment Letters.
6.09 No Knowledge of Buyer of Misrepresentations or Omissions.
--------------------------------------------------------
To the Knowledge of Buyer, as of the date of this Agreement, the
representations and warranties of the Company or Sellers in this Agreement and
the schedules are not untrue or incorrect in any respect, and to the Knowledge
of Buyer, there are no material errors in, or material omissions from, the
schedules to this Agreement; provided, however, that the Knowledge of Buyer of a
fact or circumstance shall not be construed as evidence that Buyer had actual
knowledge that the existence of such fact or circumstance would constitute a
breach of a particular representation or warranty set forth in Article IV or
Article V of this Agreement or that such fact or circumstance was or was not
appropriately reflected in the schedules; provided, further, that the Company
and the Sellers shall have the burden of proving that, prior to the date hereof,
Buyer (1) had actual knowledge of such fact or circumstance and (2) had actual
knowledge that the existence of such fact or circumstance would constitute a
breach of a particular representation or warranty set forth in Article IV or
Article V of this Agreement or that such fact or circumstance was or was not
appropriately reflected in the schedules.
ARTICLE VII
PRE-CLOSING COVENANTS
---------------------
7.01 Conduct of the Business.
-----------------------
(a) From the date hereof until the Closing Date, the
Company shall use its commercially reasonable efforts to carry on its and the
Company Subsidiary's businesses in the Ordinary Course of Business unless Buyer
shall have consented in writing, which consent will not be unreasonably withheld
or delayed; provided that, the foregoing notwithstanding, the Company may prior
to the Closing use all available cash to repay any Indebtedness, pay dividends
and make other distributions to the Stockholders and Warrant Holders and pay
33
Sale Bonuses so long as the Company is able to pay its debts and expenses when
they become due and payable prior to Closing consistent with past practice.
(b) Without limiting the generality of Section 7.01(a),
from the date hereof until the Closing Date, except as otherwise provided for by
this Agreement or as set forth in Schedule 7.01(b) or consented to in writing by
Buyer which consent will not be unreasonably withheld or delayed, the Company
shall not, and shall not permit any Subsidiary to, (i) issue or sell any shares
of its or any Subsidiary's capital stock, (ii) issue or sell any securities
convertible into, or options with respect to, warrants to purchase or rights to
subscribe for any shares of its or any Subsidiary's capital stock, (iii) effect
any recapitalization, reclassification, stock dividend, stock split or like
change in its capitalization, (iv) amend its or the Company Subsidiary's
certificate or articles of incorporation or bylaws, (v) delay or postpone the
payment of accounts receivable or accounts payable other than in the Ordinary
Course of Business, (vi) sell, lease, transfer or assign any assets, tangible or
intangible, with an aggregate value in excess of $250,000 (other than the sale
of inventory and property, plant and equipment in the Ordinary Course of
Business), (vii) enter into, modify or terminate any Material Contract (other
than (A) any contract with any customer or trustee in the Ordinary Course of
Business and (B) in connection with the Refco Deposits (including any agreement
with the Union Bank of California or any other depository with respect thereto);
(viii) increase in any respect the compensation (including bonuses) or fringe
benefits of, or pay any bonus to, any director, officer or employee (other than
in the Ordinary Course of Business); (ix) amend, adopt or modify any Employee
Benefit Plan, other than to comply with applicable Law; (x) make any capital
expenditure (or series of related capital expenditures) involving more than
$250,000 in the aggregate (other than capital expenditures in connection with
the purchase of computers and related equipment in the Ordinary Course of
Business or other budgeted capital expenditures); (xi) incur, assume or
guarantee any Indebtedness, (xii) change its accounting methods or practices, or
make material changes to collection policies, pricing policies or payment
policies, (xiii) except as required by applicable Law, make or change any
material election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, file any amendment to a material Tax Return, settle any
material claim or assessment in respect of Taxes, surrender any right to any Tax
refund, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes, (xiv) redeem,
purchase or otherwise acquire any of its capital stock, or (xv) commit to any of
the foregoing.
(c) From the date hereof until the Closing Date, the
Company shall promptly inform the Buyer if it receives any material request for
information, notice, demand letter, administrative inquiry or formal complaint
or claim (and if oral, provide a summary of the material terms of such request,
inquiry or claim) from any regulatory agency with respect to any aspect of the
business, affairs, properties or assets of the Company or the Company
Subsidiary.
7.02 Access to Books and Records.
---------------------------
From the date hereof until the Closing Date, the Company shall provide
Buyer and its authorized representatives ("Buyer's Representatives") with
reasonable access at all reasonable times and upon reasonable notice to the
offices, properties, personnel, books and records of the Company and the Company
Subsidiary in order for Buyer to have the opportunity to make such investigation
as it shall reasonably desire to make of the affairs of the Company and the
34
Company Subsidiary. Notwithstanding anything to the contrary in the letter
agreement, dated January 11, 2006, between Charlesbank Equity Fund VI, Limited
Partnership ("Charlesbank VI") and the Company (the "Confidentiality
Agreement"), Buyer shall remain bound by the Confidentiality Agreement and the
letter agreement dated April 20, 2006 between Charlesbank VI and the Company
until the earlier to occur of the Closing or the expiration of the term of the
Confidentiality Agreement and the letter agreement as applicable.
7.03 Regulatory Filings.
------------------
(a) Each Party hereto shall make an appropriate filing,
if necessary, pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement promptly after the date hereof and shall supply
as promptly as practicable to the appropriate Governmental Authorities any
additional information and documentary material that may be requested pursuant
to the HSR Act. The fees and expenses associated with any such filing shall be
borne by Buyer. Without limiting the generality of the foregoing, the Company,
Buyer and their respective Affiliates shall not extend any waiting period or
comparable period under the HSR Act or enter into any agreement with any
governmental authority not to consummate the transactions contemplated hereby,
except with the prior written consent of the Company, Buyer and Seller
Representative.
(b) The Company and Buyer will (i) promptly notify the
other Party of any written or oral communication to that Party or its Affiliates
from any governmental authority and, subject to applicable Law, permit the other
Party to review in advance any proposed written communication to any
governmental authority, in each case concerning the review, clearance or
approval of the transactions contemplated hereby under the HSR Act; (ii) not
participate, agree to participate, or permit its Affiliates to participate, in
any substantive meeting or discussion with any governmental authority in respect
of any filings, investigation or inquiry concerning the review, clearance or
approval of any of the transactions contemplated hereby under the HSR Act unless
it consults with the other Party in advance and, to the extent permitted by such
governmental authority, gives the other Party or its counsel the opportunity to
attend and participate in such meeting; and (iii) furnish the other Party with
copies of all correspondence, filings, and communications (and memoranda setting
forth the substance thereof) drafted by or in conjunction with outside counsel
between it and its Affiliates and its respective representatives on the one
hand, and any governmental authority or members of such governmental authority's
staff on the other hand, concerning the review, clearance or approval of any of
the transactions contemplated hereby under the HSR Act, except to the extent
prohibited by applicable Law or the instructions of such governmental authority.
7.04 Conditions.
----------
Each of the Parties hereto shall use his, her or its reasonable best
efforts to take all actions and to do all things necessary in order to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, (i) Buyer shall use reasonable
best efforts to cause the conditions set forth in Section 3.02 to be satisfied
and (ii) the Company shall use reasonable best efforts to cause the conditions
set forth in Section 3.01 to be satisfied; provided that none of the Company,
the Company Subsidiary or any Stockholder or Warrant Holder shall be required to
expend any funds to obtain any governmental or other third-party consents.
35
7.05 Exclusive Dealing.
-----------------
During the period from the date of this Agreement through the Closing
or the earlier termination of this Agreement pursuant to Section 10.01 hereof,
no Seller shall take or permit any other Person on his, her or its behalf to
take, and neither the Company nor the Company Subsidiary shall take or permit
any of its directors, officers, employees, bankers, brokers or any other Person
acting on its behalf to take, any action to encourage, initiate or engage in
discussions or negotiations with, or provide any information to, any Person
(other than Buyer and Buyer's Representatives) concerning any acquisition of the
Company or the Company Subsidiary, purchase of the Shares or Warrants, any
merger involving the Company or the Company Subsidiary, any sale of all or
substantially all of the assets of the Company and the Company Subsidiary, on a
consolidated basis, or similar transaction involving the Company (other than
assets sold in the Ordinary Course of Business).
7.06 Notification.
------------
(a) From the date hereof until the Closing Date, the
Company and each Seller shall disclose to Buyer in writing (in the form of
updated schedules, if applicable) any material variances from the
representations and warranties contained in Article IV (but only with respect to
the representations and warranties made by such Seller in Article IV) and
Article V, as applicable, promptly upon such Seller becoming aware of such
variances with respect to Article IV and promptly upon such variances with
respect to Article V coming to the attention of the Knowledge of the Company.
Such disclosures shall amend and supplement the appropriate schedules delivered
on the date hereof. Notwithstanding any provision in this Agreement to the
contrary, unless Buyer provides the Company or Seller Representative with an
objection notice within five (5) Business Days after delivery by the Company or
Seller Representative of an updated disclosure schedule pursuant to this Section
7.06(a), Buyer shall be deemed to have accepted and agreed to the updated
disclosure schedule. Any fact, matter or occurrence disclosed in such updated
Schedule that should have been disclosed in the Disclosure Schedules with
respect to the representations and warranties contained in Article IV or Article
V as of the date hereof is referred to herein as a "Pre-Signing Matter" and any
fact, matter or occurrence that occurs after the date hereof and that is
disclosed pursuant to the first sentence of this Section 7.06(a) with respect to
the representations and warranties contained in Article IV or Article V in an
updated Schedule is referred to herein as a "Post-Signing Matter". Buyer may not
terminate this Agreement pursuant to Section 10.01(b) due to the failure to
satisfy the Closing condition specified in Section 3.01(g) on account of a
Pre-Signing Matter or a Post-Signing Matter unless a decision to so terminate
has been communicated in writing to Seller Representative along with the
objection notice referred to in this Section 7.06(a) relating to such
Pre-Signing Matter or Post-Signing Matter, as applicable; provided, however, if
any Pre-Signing Matter or Post-Signing Matter is subsequently disclosed, any
previously disclosed Pre-Signing Matter or Post-Signing Matter may be considered
in determining if the condition set forth in Section 3.01(g) may be satisfied or
not. For the avoidance of doubt, any decision by Buyer or the Seller
Representative to terminate this Agreement pursuant to Section 3.01 or 3.02, as
applicable, may be challenged by the Seller Representative or Buyer, as
applicable, pursuant to all available remedies.
36
(b) From the date hereof until the Closing Date, Buyer
shall disclose to the Company and Seller Representative in writing any material
variances from Buyer's representations and warranties contained in Article VI
promptly upon discovery thereof, and Buyer shall promptly notify Seller
Representative if, to the Knowledge of Buyer, the representations and warranties
of Sellers or the Company in this Agreement and the schedules (including updated
schedules) are not true and correct in all material respects, or if, to the
Knowledge of Buyer, there exists any material errors in, or omissions from, the
schedules (including updated schedules) to this Agreement.
7.07 Management Co-Investment.
------------------------
The Parties acknowledge and agree that Buyer may, in its sole
discretion, offer certain Sellers (other than BMS LLC) (the "Participating
Sellers") the opportunity to contribute up to an aggregate of $15,000,000 in
Shares to Buyer in exchange for equity securities of Buyer immediately prior to
or at the Closing. The Parties hereto agree to negotiate reasonably and in good
faith any amendment to this Agreement necessary to reflect such contribution(s)
and to effect the foregoing in a tax-efficient manner for such Sellers,
including, without limitation, by amending Schedule 5.02 (to reflect the fact
that such contribution may be structured to occur immediately prior to Closing)
and permitting Buyer to assign its interest (or a portion of its interest) in
this Agreement to a wholly-owned subsidiary of Buyer (but such assignment shall
not relieve Buyer or the Guarantors of any of their obligations under this
Agreement or the Commitment Letters); provided, that, any such amendment shall
not reduce any consideration payable hereunder to any Seller that is not a
Participating Seller or increase any obligation of such Seller hereunder. Each
of the Sellers acknowledges and agrees that the foregoing offer may not be
extended to all Sellers (including such Seller). The Seller Representative shall
have the authority to act behalf of the Sellers with respect to the matters
contemplated by this Section 7.07. Notwithstanding anything to the contrary
herein, if Buyer and the Participating Sellers, if any, are not able to agree to
the terms of such Participating Sellers' investment in Buyer, nothing in this
Section 7.07 shall in any way provide any Party with the right to terminate this
Agreement or seek any recourse or indemnification from any Party.
ARTICLE VIII
ADDITIONAL COVENANTS OF BUYER
-----------------------------
8.01 Access to Books and Records.
---------------------------
From and after the Closing, Buyer shall, and shall cause the Company
and the Company Subsidiary to, provide Seller Representative, Sellers and their
authorized representatives with reasonable access (for the purpose of examining
and copying), during normal business hours, to the books and records of the
Company and the Company Subsidiary with respect to periods beginning on or prior
to the Closing Date in connection with any Tax filings, or for the purposes of
defending any claim brought by any Person involving the Company or pursuant to
this Agreement or for any other reasonable purpose. Unless otherwise consented
to in writing by Seller Representative, Buyer shall not permit the Company or
the Company Subsidiary, for a period of seven (7) years following the Closing
Date, to destroy, alter or otherwise dispose of any books and records of the
Company or the Company Subsidiary, relating to periods beginning on or prior to
37
the Closing Date without first giving reasonable prior written notice to Seller
Representative and offering to surrender to Seller Representative such books and
records or such portions thereof.
8.02 Director and Officer Liability and Indemnification.
--------------------------------------------------
(a) For a period of six (6) years after the Closing,
Buyer shall not, and shall not permit the Company or the Company Subsidiary to,
amend, repeal or modify any provision in the Company's or the Company
Subsidiary's certificate or articles of incorporation or bylaws (or other
organizational documents) relating to the exculpation or indemnification of any
officers and directors (unless required by law), it being the intent of the
parties that the officers and directors of the Company and the Company
Subsidiary shall continue to be entitled to such exculpation and indemnification
to the full extent of the law.
(b) At the Closing, Buyer will purchase, and pre-pay in
full any premiums with respect to, a six (6) year "tail" on the current
directors' and officers' liability insurance maintained by the Company in form
and substance substantially similar to that in existence immediately prior to
the Closing.
8.03 Contact with Customers and Suppliers.
------------------------------------
Prior to the Closing, Buyer and Buyer's Representatives may contact or
communicate with the customers and suppliers of the Company and the Company
Subsidiary in connection with the transactions contemplated hereby only with the
prior written consent of Seller Representative.
8.04 Employee Benefits.
-----------------
(a) Buyer and its Affiliates shall, for a period of at
least one year following the Closing Date, provide employees of the Company or
the Company Subsidiary with compensation and benefits (other than any stock
option or stock incentive benefits) that are substantially similar, in the
aggregate, to compensation and benefits provided by the Company and the Company
Subsidiary immediately prior to the Closing. Notwithstanding anything to the
contrary in this Section 8.04(a), (i) Buyer shall have the same rights to amend,
modify or terminate any Benefit Plan as the Company or the Company Subsidiary
has to amend, modify or terminate such Benefit Plan and (ii) Buyer will have
sole discretion, to the extent permitted under applicable law, to terminate the
employment of any "at-will" employee of the Company or the Company Subsidiary.
(b) For all purposes under the employee benefit plans of
Buyer and its Affiliates providing benefits after the Closing Date, each
employee who is as of the Closing Date an employee of the Company or the Company
Subsidiary shall be credited with his or her years of service with the Company
or the Company Subsidiary, as applicable, before the Closing Date, to the same
extent as such employee was entitled, before the Closing Date, to credit for
such service under any similar Employee Benefit Plans, except to the extent such
credit would result in a duplication of benefits. In addition, and without
limiting the generality of the foregoing: (i) each employee shall be immediately
eligible to participate, without any waiting time, in any and all employee
benefit plans sponsored by Buyer and its Affiliates for the benefit of employees
38
(such plans, collectively, the "New Plans") to the extent coverage under such
New Plan replaces coverage under a comparable Employee Benefit Plan in which
such employee participated immediately before the Closing Date (such Plans,
collectively, the "Old Plans"); and (ii) for purposes of each New Plan providing
medical, dental, pharmaceutical or vision benefits to any employee, Buyer shall
cause all pre-existing condition exclusions and actively-at-work requirements of
such New Plan to be waived for such employee and his or her covered dependents,
and Buyer shall cause any eligible expenses incurred by such employee and his or
her covered dependents during the portion of the plan year of the Old Plan
ending on the date such employee's participation in the corresponding New Plan
begins to be taken into account under such New Plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan. Buyer shall be
solely responsible for any obligations arising under COBRA with respect to all
"M&A qualified beneficiaries" as defined in Treasury Regulation Section
54.4980B-9.
(c) Nothing in this Section 8.04 shall cause any employee
of the Company or any Company Subsidiary (or any of their eligible dependants or
other beneficiaries) to be a third party beneficiary of, or have any right or
claim under, this Agreement.
8.05 Commitment Letters.
------------------
Buyer shall not terminate, amend or otherwise modify any of the
Commitment Letters in any manner that would reasonably be expected to adversely
affect Buyer's ability to obtain the financings contemplated thereby without the
consent of Seller Representative.
ARTICLE IX
INDEMNIFICATION
---------------
9.01 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
The representations and warranties of the Company, Sellers and Buyer in
this Agreement and in any certificate delivered pursuant hereto by any such
party shall terminate as of the Closing or upon termination of this Agreement
pursuant to Article X, as the case may be; provided that:
(i) the representations and warranties of each Seller in
Sections 4.01, 4.02, 4.04 and 4.05 (collectively, the "Fundamental
Seller Representations") shall survive the Closing for a period of one
year;
(ii) the representations and warranties of the Company in
Sections 5.01(c), 5.01(d), 5.02 and 5.04 (collectively, the
"Fundamental Company Representations") shall survive the Closing for a
period of one year; and
(iii) the representations and warranties of Buyer in
Sections 6.01 (but only the second sentence thereof), 6.02 and 6.06
(collectively, the "Fundamental Buyer Representations") shall survive
the Closing for a period of one year.
39
The covenants in this Agreement that apply to any period ending on the Closing
shall terminate as of the Closing (other than the covenants set forth in
Sections 7.01 and the first sentence of 7.06(a) which shall also terminate at
Closing but with respect to which a claim for breach may be brought within 60
days of the Closing). The covenants in this Agreement that apply to any period
after the Closing shall survive the Closing in accordance with their terms. Any
claim for indemnification with respect to (A) any Pre-Signing Matter must be
made within 60 days of the Closing and (B) Sale Bonus Losses must be made prior
to December 31, 2009. No claim for indemnification hereunder for breach of any
representation, warranty or covenant may be made after the expiration of the
survival period applicable to such representation, warranty or covenant;
provided, that any representation or warranty in respect of which indemnity may
be sought under Section 9.02 or under Section 9.03, and the indemnity with
respect thereto, shall survive the time at which it would otherwise terminate
pursuant to this Section 9.01 if reasonably detailed written notice of the
breach or potential breach thereof giving rise to such right or potential right
of indemnity shall have been given to the Person against whom such indemnity may
be sought prior to such time; provided, that, it shall be sufficient for any
Buyer Indemnified Party to give notice with respect to any breach or potential
breach to the Seller Representative so long as such notice identifies the
Seller(s) against whom such indemnity is sought.
9.02 Indemnification by the Sellers and LEF II for the Benefit of
------------------------------------------------------------
Buyer.
-----
(a) After the Closing, subject to the limitations set
forth in this Article IX, each Seller (other than BMS LLC), individually and not
severally with any other Seller shall indemnify the Company, Buyer and Buyer's
officers, directors, employees, agents, representatives, affiliates, successors
and permitted assigns (collectively, the "Buyer Indemnified Parties") and save
and hold them harmless against any loss, liability, damage or expense
(collectively, "Losses"), which the Buyer Indemnified Parties may suffer or
sustain as a result of:
(i) any breach by such Seller of any Fundamental Seller
Representation made by such Seller under Article IV; and
(ii) any Pre-Signing Matter arising from a representation
made by such Seller under Article IV.
(b) After the Closing, the Sellers (other than BMS LLC),
severally and not jointly (based upon their respective Pro Rata Portions) shall
indemnify the Buyer Indemnified Parties and save and hold them harmless against
any Losses which the Buyer Indemnified Parties may suffer or sustain as a result
of any breach of any Fundamental Company Representation made by the Company
under Article V.
(c) After the Closing, each Seller (other than BMS LLC)
shall indemnify the Buyer Indemnified Parties and save and hold them harmless
against any Losses which the Buyer Indemnified Parties may suffer or sustain as
a result of any breach by such Seller:
(i) of any covenant in this Agreement that applies to any
period after the Closing; and
40
(ii) of the covenant set forth in the first sentence of
Section 7.06(a) with respect to any representation made by such Seller
in Article IV; provided, that, no Seller shall be liable for any
liability or obligation of any other Seller under this Section 9.02(c).
(d) After the Closing, the Sellers (other than BMS LLC),
severally and not jointly (based upon their respective Pro Rata Portions), shall
indemnify the Buyer Indemnified Parties and save and hold them harmless against
any Losses which the Buyer Indemnified Parties may suffer or sustain as a result
of any Pre-Signing Matter arising from a representation made by the Company
under Article V and any breach by the Company of its obligations under Section
7.01 or the first sentence of Section 7.06(a);
(e) After the Closing, the Sellers (other than BMS LLC)
severally and not jointly (based on their respective Pro Rata Portions) shall
indemnify the Buyer Indemnified Parties and save and hold them harmless against
any Losses (including Taxes) which the Buyer Indemnified Parties may incur,
suffer or sustain because of the application of Section 280G and/or 4999 (or the
related withholding provisions) of the Code (and any corresponding provisions of
state law) to any payment (or other action) made by the Company, the Company
Subsidiary (or any Affiliate of either the Company or the Company Subsidiary) on
or before the Closing or pursuant to a Pre-Closing Agreement (such Losses, the
"Sale Bonus Losses").
(f) After the Closing, BMS LLC and LEF II, jointly and
severally with each other, shall indemnify the Buyer Indemnified Parties and
save and hold them harmless against:
(i) any Losses which the Buyer Indemnified Parties may
suffer or sustain as a result of any breach by BMS LLC (solely in its
capacity as a Seller) of any Fundamental Seller Representation made by
BMS LLC under Article IV;
(ii) BMS LLC's Pro Rata Portion of any Losses which the
Buyer Indemnified Parties may suffer or sustain as a result of any
breach of any Fundamental Company Representation made by the Company
under Article V;
(iii) BMS LLC's Pro Rata Portion of any Losses which the
Buyer Indemnified Parties may suffer or sustain as a result of any
Pre-Signing Matter arising from a representation made by the Company
under Article V and any breach by the Company of its obligations under
Section 7.01 or the first sentence of 7.06(a) ;
(iv) any Losses which the Buyer Indemnified Parties may
suffer or sustain as a result of any breach by BMS LLC of its
obligations under the first sentence of Section 7.06(a) with respect to
any representation made by BMS LLC in Article IV and any Pre-Signing
Matter arising from a representation made by BMS LLC under Article IV;
(v) BMS LLC's Pro Rata Portion of any Sale Bonus Losses;
and
(vi) any Losses which the Buyer Indemnified Parties may
suffer or sustain as a result of any breach by BMS LLC (solely in its
capacity as a Seller) of any covenant in this Agreement that applies to
any period after the Closing.
41
9.03 Indemnification by Buyer for the Benefit of the Sellers.
-------------------------------------------------------
After the Closing, Buyer and the Company, jointly and severally, shall
indemnify the Sellers and their respective officers, directors, employees,
agents, representatives, affiliates, successors and permitted assigns
(collectively, the "Seller Indemnified Parties") and hold them harmless against
any Losses which the Seller Indemnified Parties may suffer or sustain, as a
result of:
(a) any breach of any Fundamental Buyer Representation
made by Buyer under Article VI; and
(b) any breach by Buyer or the Company of any covenant in
this Agreement that applies to any period after the Closing.
9.04 Limitations on Indemnification.
------------------------------
Notwithstanding anything to the contrary contained in this Agreement,
the obligations of the Sellers or Buyer under Section 9.02 or Section 9.03, as
applicable, shall subject to the following limitations:
(a) No Indemnitee shall be entitled to any
indemnification pursuant to Article IX with respect to any Loss resulting from
any single claim or aggregated claims arising out of the same facts, events or
circumstances unless such Loss equals or exceeds $50,000 (Fifty Thousand
Dollars); provided, this limitation shall not apply to any breach by any Party
of a covenant that applies to any period after the Closing.
(b) None of the Indemnitors shall have any liability or
obligation to indemnify any Indemnitee under Section 9.02(a), 9.02(b),
9.02(c)(ii), 9.02(d), 9.02(f)(i), 9.02(f)(ii), 9.02(f)(iii) and 9.02(f)(iv) and
Section 9.03(a), as applicable, unless the aggregate amount of all Losses
relating thereto for which the Sellers or Buyer, as applicable, would, but for
this Section 9.04(b), be liable exceeds on a cumulative basis an amount equal to
$7,690,000 (Seven Million Six Hundred and Ninety Thousand Dollars) (the
"Deductible"), and then only to the extent such Losses exceed the Deductible. In
addition, (i) the Sellers' and LEF II's aggregate liability and obligation to
indemnify the Buyer Indemnified Parties under Sections 9.02(a)(ii), 9.02(c)(ii),
9.02(d), 9.02(f)(iii) and 9.02(f)(iv) (collectively, the "Limited Cap
Provisions") shall in no event exceed $25,000,000 (Twenty Five Million Dollars)
(the "Limited Cap") in the aggregate; (ii) the Sellers' and LEF II's aggregate
liability and obligation to indemnify the Buyer Indemnified Parties under
Sections 9.02(a)(i), 9.02(b), 9.02(f)(i) and 9.02(f)(ii) (collectively, the
"General Cap Provisions") and the Limited Cap Provisions shall in no event
exceed $96,125,000 (Ninety Six Million One Hundred and Twenty Five Thousand
Dollars) (the "General Cap") in the aggregate; (iii) the Sellers' and LEF II's
aggregate liability and obligation to indemnify the Buyer Indemnified Parties
under Sections 9.02(e) and 9.02(f)(v) (collectively, the "Tax Cap Provisions")
shall in no event exceed $4,500,000 (Four Million Five Hundred Thousand Dollars)
(the "Tax Cap"); (iv) the maximum liability and obligation of any Seller (and of
BMS LLC and LEF II taken together) to indemnify the Buyer Indemnified Parties
(A) under the Limited Cap Provisions shall in no event exceed an amount in the
aggregate equal to the product of such Seller's Pro Rata Portion and the Limited
Matters Cap, (B) under the Limited Cap Provisions and the General Cap
Provisions, taken together, shall in no event exceed an amount in the aggregate
equal to the product of such Seller's Pro Rata Portion and the General Cap, (C)
42
under the Tax Cap Provisions shall in no event exceed an amount in the aggregate
equal to the product of such Seller's Pro Rata Portion and the Tax Matters Cap
(which with respect to BMS LLC and LEF II taken together shall not in the
aggregate exceed an amount equal to the product of BMS LLC's Pro Rata Portion of
the Limited Matters Cap, the General Matters Cap or the Tax Cap (as applicable))
and (D) with respect to all matters contemplated by this Article IX shall not in
the aggregate exceed an amount equal to the product of such Seller's Pro Rata
Portion and the Base Purchase Price (which in the case of BMS LLC and LEF II
taken together shall be equal to the product of BMS LLC's Pro Rata Portion and
the Base Purchase Price); (v) each Seller and LEF II shall be a credited a
portion of the Deductible equal to the product of such Seller's Pro Rata Portion
and the Deductible (which in the case of BMS LLC and LEF II taken together shall
be an amount equal to the product of BMS LLC's Pro Rata Portion and the
Deductible); and (vi) Buyer's liability and obligation to indemnify the Seller
Indemnified parties (A) under Section 9.03(a) shall in no event exceed
$96,125,000 (Ninety-six Million One Hundred Twenty-five Thousand Dollars) and
(B) with respect to all matters contemplated by this Article IX shall not in the
aggregate exceed the Base Purchase Price.
(c) Notwithstanding anything in this Article IX to the
contrary and except with respect to Pre-Closing Matters, no Indemnitee shall be
entitled to indemnification under Section 9.02(a)(i), 9.02(b), 9.02(f)(i),
9.02(f)(ii) or 9.03(a), as applicable, and no Indemnitor shall be liable for,
any Loss suffered by any Indemnitee as a result of a breach of any particular
representation or warranty set forth in Article IV, Article V or Article VI, as
applicable, of this Agreement if, prior to the date hereof, such Indemnitee (i)
had actual knowledge of any fact or circumstance and (ii) had actual knowledge
that the existence of such fact or circumstance would constitute a breach of the
particular representation or warranty set forth in Article IV, Article V or
Article VI, as applicable, of this Agreement; provided, however, that the
knowledge of a Indemnitee of a fact or circumstance shall not be construed as
evidence that the relevant Indemnitee had actual knowledge that the existence of
such fact or circumstance would constitute a breach of a particular
representation or warranty set forth in Article IV, Article V or Article VI, as
applicable, of this Agreement or that such fact or circumstance was or was not
appropriately reflected in the schedules; provided, further, that the Indemnitor
shall have the burden of proving that, prior to the date hereof, the relevant
Indemnitee (1) had actual knowledge of such fact or circumstance and (2) had
actual knowledge that the existence of such fact or circumstance would
constitute a breach of a particular representation or warranty set forth in
Article IV, Article V or Article VI, as applicable, of this Agreement or that
such fact or circumstance was or was not appropriately reflected in the
schedules.
(d) The parties hereby agree that LEF II shall have no
liabilities of any kind or nature whatsoever (including, without limitation, in
respect of rights of indemnification or other payment obligations) to any Buyer
Indemnified Person under this Agreement or any other agreement delivered in
connection with the Agreement, other than as expressly set forth in Section
9.02.
9.05 Exclusive Remedy; No Punitive Damages.
-------------------------------------
Notwithstanding anything contained in this Agreement to the contrary,
after the Closing, other than with respect to fraud, the indemnification
provisions of this Article IX shall constitute the sole and exclusive remedy of
the parties hereto for any and all Losses or other claims relating to or arising
from this Agreement or any certificate or other instrument delivered pursuant
43
hereto and the transactions contemplated hereby. In no event shall any
Indemnitee be entitled to recover or make a claim for any amounts in respect of
punitive damages. The Parties agree that with respect to any breaches of any
covenants occurring prior to the Closing, the Parties shall have prior to the
Closing, in addition to the right to seek specific performance, the right to
seek damages with respect to any such breach.
9.06 Manner of Payment.
-----------------
Any indemnification of a Buyer Indemnified Party pursuant to Section
9.02(a) shall be effected by wire transfer of immediately available funds from
the applicable individual Seller to an account designated by Buyer within 15
days after the final determination thereof. Any indemnification of a Buyer
Indemnified pursuant to Section 9.02(b) shall be effected by wire transfer of
immediately available funds from the Sellers (pro rata based upon their
respective Pro Rata Portions) to an account designated by Buyer within 15 days
after the final determination thereof. Any indemnification of a Seller
Indemnified Party pursuant to Section 9.03 shall be effected by wire transfer of
immediately available funds from Buyer or the Company to an account designated
by Seller Representative within 15 days after the final determination thereof.
9.07 Defense of Third Party Claims.
-----------------------------
Any Person making a claim for indemnification under Section 9.02 or
Section 9.03 (an "Indemnitee") shall notify the indemnifying party (an
"Indemnitor") of the claim in writing promptly after receiving written notice of
any action, lawsuit, proceeding, investigation or other claim against it (if by
a third party), describing the claim, the amount thereof (if known and
quantifiable) and the basis thereof. Any Indemnitor shall be entitled to
participate in the defense of such action, lawsuit, proceeding, investigation or
other claim giving rise to an Indemnitee's claim for indemnification at such
Indemnitor's expense, and at its option shall be entitled to assume the defense
thereof by appointing a reputable counsel reasonably acceptable to the
Indemnitee to be the lead counsel in connection with such defense; provided that
the Indemnitee shall be entitled to participate in the defense of such claim and
to employ counsel of its choice for such purpose; provided, however, that the
fees and expenses of such separate counsel shall be borne by the Indemnitee. If
the Indemnitor shall control the defense of any such claim, the Indemnitor shall
obtain the prior written consent of the Indemnitee (which consent shall not be
unreasonably withheld) before entering into any settlement of a claim or ceasing
to defend such claim if, pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief will be imposed against the
Indemnitee or if such settlement does not expressly and unconditionally release
the Indemnitee from all liabilities and obligations with respect to such claim,
without prejudice except for payments that would be required to be paid by Buyer
representing the Deductible.
9.08 Determination of Loss Amount.
----------------------------
The amount of any Loss subject to indemnification under Section 9.02 or
Section 9.03 shall be calculated net of (i) any Tax Benefit inuring to the
Indemnitee on account of such Loss and (ii) any insurance proceeds received by
the Indemnitee on account of such Loss. If the Indemnitee receives a Tax Benefit
after an indemnification payment is made to it, the Indemnitee shall promptly
pay to the Person or Persons that made such indemnification payment the amount
44
of such Tax Benefit at such time or times as and to the extent that such Tax
Benefit is realized by the Indemnitee. For purposes hereof, "Tax Benefit" shall
mean any refund of Taxes paid or reduction in the amount of Taxes which
otherwise would have been paid, in each case computed at the highest marginal
tax rates applicable to the recipient of such benefit. The Indemnitee shall seek
full recovery under all insurance policies covering any Loss to the same extent
as it would if such Loss were not subject to indemnification hereunder. In the
event that an insurance or other recovery is obtained by any Indemnitee with
respect to any Loss for which any such Indemnitee has been indemnified
hereunder, then a refund equal to the aggregate amount of the recovery shall be
made promptly to the Person or Persons that provided such indemnity payments to
such Indemnitee. Each Indemnitee shall have the obligation to mitigate any Loss
in accordance with general law.
9.09 Non-Rescission.
--------------
Notwithstanding anything in this Agreement to the contrary, no breach
of any representation, warranty, covenant or agreement contained herein or in
any document, certificate or other instrument delivered pursuant hereto shall
have rise to any right on the party of Buyer, the Company or any Seller to
rescind this Agreement, in whole or in part, or any of the transactions
contemplated hereby.
9.10 Treatment of Indemnity Payments.
-------------------------------
Any payments made to a Buyer Indemnified Party or a Seller Indemnified
Party pursuant to this Article IX shall be treated as an adjustment to the
Estimated Adjusted Purchase Price for tax purposes.
ARTICLE X
TERMINATION
-----------
10.01 Termination.
-----------
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of Buyer, the Company
and Seller Representative (on behalf of Sellers);
(b) by Buyer, if there has been a material violation or
breach by the Company or any Seller of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of Buyer at the Closing and such violation or
breach has not been waived by Buyer or, in the case of a covenant breach, cured
by the Company or such Seller within fifteen (15) days after written notice
thereof from Buyer;
(c) by Seller Representative, if there has been a
material violation or breach by Buyer of any covenant, representation or
warranty contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of Sellers at the Closing and such violation or
breach has not been waived by Seller Representative or, with respect to a
covenant breach, cured by Buyer within fifteen (15) days after written notice
45
thereof by Seller Representative (provided that neither a breach by Buyer of
Section 6.08 nor the failure of Buyer to deliver the consideration pursuant to
Section 2.03 at the Closing as required hereunder shall be subject to cure
hereunder unless otherwise agreed to in writing by Seller Representative); or
(d) by Seller Representative or Buyer if the transactions
contemplated hereby have not been consummated by August 7, 2006; provided that
(i) Seller Representative shall not be entitled to terminate this Agreement
pursuant to this Section 10.01(d) if the Company's, the Company Subsidiary's or
any Seller's knowing or willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby and (ii) Buyer shall not be
entitled to terminate this Agreement pursuant to this Section (d) if Buyer's
knowing or willful breach of this Agreement has prevented the consummation of
the transactions contemplated hereby.
10.02 Effect of Termination.
---------------------
In the event of termination of this Agreement as provided above, the
provisions of this Agreement shall immediately become void and of no further
force and effect (other than this Section 10.02 and Article XIII, both of which
shall survive the termination of this Agreement), and there shall be no
liability on the part of Buyer, the Company, the Company Subsidiary or any
Seller to one another, except for breaches of this Agreement prior to the time
of such termination.
ARTICLE XI
SELLER REPRESENTATIVE
---------------------
11.01 Designation.
-----------
Bankruptcy Management Solutions, LLC ("BMS LLC" or the "Seller
Representative") is hereby designated by each Seller to serve as the
representative of Sellers with respect to the matters expressly set forth in
this Agreement to be performed by Seller Representative.
11.02 Authority.
---------
Each of the Sellers, by the execution of this Agreement, hereby
irrevocably appoints the Seller Representative as the agent, proxy and
attorney-in-fact for such Seller for all purposes of this Agreement (including
the full power and authority on such Seller's behalf (i) to consummate the
transactions contemplated herein; (ii) to pay such Seller's expenses incurred in
connection with the negotiation and performance of this Agreement (whether
incurred on or after the date hereof); (iii) to disburse any funds received
hereunder to such Seller and each other Seller; (iv) to endorse and deliver any
certificates or instruments representing the Shares and execute such further
instruments of assignment as Buyer shall reasonably request; (v) to execute and
deliver on behalf of such Seller any amendment or waiver hereto; (vi) to take
all other actions to be taken by or on behalf of such Seller in connection
herewith including; (vii) to withhold funds to pay Seller-related expenses and
obligations and (viii) to do each and every act and exercise any and all rights
which such Seller of the Sellers collectively are permitted or required to do or
exercise under this Agreement). Each of the Sellers agrees that such agency and
proxy are coupled with an interest, are therefore irrevocable without the
consent of the Seller Representative and shall survive the death, incapacity,
bankruptcy, dissolution or liquidation of any Seller. All decisions and actions
46
by the Seller Representative (to the extent authorized by this Agreement) shall
be binding upon all of the Sellers, and no Seller shall have the right to
object, dissent, protest or otherwise contest the same.
ARTICLE XII
ADDITIONAL COVENANTS AND AGREEMENTS
-----------------------------------
12.01 Disclosure Generally.
--------------------
If and to the extent any information required to be furnished in a
particular schedule attached hereto is contained in this Agreement or in any
other schedule (or updated schedule), such information shall be deemed to be
included in such particular schedule to the extent that it is reasonably
apparent on its face that the disclosure in such other schedule (or updated
schedule) applies to the information requirement for the particular schedule.
The inclusion of any information in any schedule (or updated schedule) shall not
be deemed to be an admission or acknowledgment by the Company or Sellers, in and
of itself, that such information is material to or outside the Ordinary Course
of Business.
12.02 Acknowledgment by Buyer.
-----------------------
Buyer acknowledges that it has conducted to its satisfaction, an
independent investigation and verification of the financial condition, results
of operations, assets, liabilities, properties and projected operations of the
Company and the Company Subsidiary and, in making its determination to proceed
with the transactions contemplated by this Agreement, Buyer has relied only on
the results of its own independent investigation and verification and the
representations and warranties of the Company and the Company Subsidiary
expressly and specifically set forth in this Agreement, including the schedules
(and updated schedules). SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND
SELLERS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND SELLERS TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY, AND BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER
REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED
(INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE
COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY AND SELLERS.
12.03 Tax Matters.
-----------
Buyer will pay, and will indemnify and hold Sellers harmless against,
any real property transfer or gains tax, stamp tax, stock transfer tax, or other
similar Tax imposed on the Company, the Company Subsidiary or one or more
Sellers as a result of the transactions contemplated by this Agreement
(collectively, "Transfer Taxes"), and any penalties or interest with respect to
the Transfer Taxes. Sellers agree to cooperate with Buyer in the filing of any
returns with respect to the Transfer Taxes, including promptly supplying any
information in their possession that is reasonably necessary to complete such
returns.
47
12.04 Further Assurances.
------------------
From time to time, as and when requested by any party hereto and at
such party's expense, any other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as the requesting party may
reasonably deem necessary or desirable to evidence and effectuate the
transactions contemplated by this Agreement.
12.05 Release.
-------
(a) Subject to the consummation of the transactions
contemplated by Section 2.01, for and in consideration of the amount to be paid
to each Seller under this Agreement, and the additional covenants and promises
set forth in this Agreement, each Seller, on behalf of itself and its assigns,
heirs, beneficiaries, representatives, agents and Affiliates (the "Seller
Releasing Parties"), hereby, effective as of the Closing, fully, finally and
irrevocably releases, acquits and forever discharges the Company and the Company
Subsidiary, and each of their officers, directors, partners, general partners,
limited partners, managing directors, members, stockholders, trustees,
shareholders, representatives, employees, principals, agents, Affiliates,
parents, subsidiaries, predecessors, successors, assigns, beneficiaries, heirs
and executors (collectively, the "Buyer Released Parties") from any and all
commitments, actions, debts, claims, counterclaims, suits, causes of action,
damages, demands, liabilities, obligations, costs, expenses, and compensation of
every kind and nature whatsoever, past, present, or future, at law or in equity,
whether known or unknown, contingent or otherwise, which such Seller Releasing
Parties, or any of them, had, has, or may have had at any time in the past until
and including the date of this Agreement against Buyer Released Parties, or any
of them, including but not limited to any claims which relate to or arise out of
such Seller Releasing Party's prior relationship with the Company or its rights
or status as a stockholder, officer or director of the Company (collectively,
for the purposes of this Section 12.05, "Buyer Causes of Action"); provided,
however, the term Buyer Causes of Action shall not include, and nothing
contained herein shall operate to release (i) any obligation of Buyer or any
Buyer Released Party under this Agreement or any agreement delivered in
connection herewith (including the Commitment Letters), (ii) any rights a Seller
Releasing Party may have (A) under this Agreement or any agreement delivered in
connection herewith or under any agreement with a Buyer Released Party with the
subject matter not related in any way to the Company or the Company Subsidiary,
or (B) any accrued salary, bonus, wages, benefits or other compensation earned
and unpaid through the date of the Closing or reimbursement of expenses arising
out of any Seller Releasing Party's employment with the Company or the Company
Subsidiary or (iii) any right of any Seller Releasing Party to be indemnified by
the Company or the Company Subsidiary according to the terms of the applicable
certificate of incorporation or bylaws, directors' and officers' liability
insurance and state corporate law.
(b) Each Seller hereby represents to Buyer Released
Parties that such party (i) has not assigned any Causes of Action or possible
Causes of Action against any Released Party, (ii) fully intends to release all
Causes of Action against the applicable Released Parties including, without
limitation, unknown and contingent Causes of Action (other than those
specifically reserved above), and (iii) has consulted with counsel with respect
to the execution and delivery of this general release and has been fully
48
apprised of the consequences hereof. Furthermore, each Seller further agrees not
to institute any litigation, lawsuit, claim or action against any Buyer Released
Party with respect to the released Causes of Action.
12.06 Nonsolicitation.
---------------
Subject to the consummation of the transactions contemplated by Section
2.01, each of the Sellers will not, and will cause each of their Affiliates not
to, for a period beginning on the Closing Date and ending on the date which is
three (3) years from and after the Closing Date (such period, the "Restricted
Period"), (i) recruit, solicit, lure or entice away any Person who is an
employee of the Company or the Company Subsidiary as of the date hereof to leave
the employ of the Company of any of its Subsidiaries, or hire any such Person,
or (ii) request or advise any Person who is a customer or supplier of the
Company or any of its Subsidiaries to withdraw, curtail or cancel any such
customer's or supplier's business with the Company or any of its Subsidiaries;
provided, that, the limitations set forth in clause (i) above with respect to
any non-key officer or employee of the Company or the Company Subsidiary shall
not apply to the portfolio companies of any fund managed by Lincolnshire
Management, Inc.; provided, further, that the foregoing shall not be construed
to prohibit the Sellers or any of their Affiliates after the Closing Date from
hiring or interviewing any Person who responds to any general advertisements
seeking for employees or consultants in newspapers, periodicals or other media
of general circulation (including through a recruiting firm) or any Person who
makes an unsolicited approach to any Seller or its Affiliates. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 12.06 is invalid or unenforceable, the parties hereto
agree that the court making the determination of invalidity or unenforceability
will have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement will be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
12.07 Confidentiality.
---------------
From the date hereof until the date that is three (3) years after the
Closing Date, each Party will treat and hold as confidential all of the
information, whether or not in writing, concerning the business, technology,
business relationships or financial affairs of the other Party (collectively,
"Proprietary Information") and refrain from using any of the Proprietary
Information except in connection with this Agreement; provided that LEF II and
its Affiliates may disclose to investors, potential investors, potential
portfolio companies and investment bankers or brokers the amount invested by LEF
II and its Affiliates in the Company, related investment return information, a
general description of the business of the Company and the Company Subsidiary
and describe in general terms the financial progress made by the Company during
their ownership and any strategies or enhancements implemented or suggested by
LEF II or its Affiliates (other than proprietary trade secrets). If any Party is
requested or required (by oral question or request for information or documents
in any Action) to disclose any Proprietary Information, that Party will notify
the other Party in writing promptly of the request or requirement so that such
other Party may seek an appropriate protective order or waive compliance with
this Section 12.07. If, in the absence of a protective order or the receipt of a
waiver hereunder, any Party is, on the written advice of counsel, compelled to
49
disclose any Proprietary Information to any governmental authority, arbitrator,
or mediator or else stand liable for contempt, that Party may disclose the
Proprietary Information to the governmental authority, arbitrator, or mediator;
provided, however, that the disclosing Party shall use its commercially
reasonable efforts to obtain, at the request and sole cost and expense of the
other Party, a court order or other assurance that confidential treatment will
be accorded to such portion of the Proprietary Information required to be
disclosed as such other Party shall designate; provided, further, any Party may
disclose any such Proprietary Information as follows: (i) to the extent that the
Proprietary Information is or becomes generally available to the public through
no fault of the Party or its Affiliates making such disclosure; (ii) to the
extent that the same information is already known by the Party making such
disclosure prior to receipt of such Proprietary Information; (iii) to the extent
that the Party that received the Proprietary Information independently develops
the same information without in any way relying on any Proprietary Information;
or (iv) to the extent that the same information becomes available to the Party
making such disclosure on a nonconfidential basis from a source other than
another Party or its Affiliates, which source, to the Knowledge of the
disclosing Party, is not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation to the other Party. For purposes of this
Section 12.07 only, the term "Party" shall refer to the Sellers, on the one
hand, and Buyer (and, after the Closing, the Company and its Subsidiaries), on
the other hand.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Non-Survival of Representations and Warranties.
----------------------------------------------
Except as set forth in Section 9.01, the representations and warranties
in this Agreement and any certificate delivered pursuant hereto by any party
hereto shall terminate at the Closing or upon termination of this Agreement
pursuant to Article X, as the case may be, and all post-closing covenants set
forth in this Agreement shall survive the Closing in accordance with their
respective terms.
13.02 Press Releases and Communications.
---------------------------------
No press release or public announcement related to this Agreement or
the transactions contemplated herein, or prior to the Closing, any other
announcement or communication to the employees, customers, suppliers or
depository institutions of the Company and the Company Subsidiary related to
this Agreement or the transactions contemplated herein, shall be issued or made
by any Party hereto without the joint approval of Buyer and Seller
Representative, unless required by law (in the reasonable opinion of counsel) in
which case Buyer and Seller Representative shall have the right to review such
press release, announcement or communication prior to its issuance, distribution
or publication.
13.03 Expenses.
--------
Buyer shall pay all of its own expenses (including attorneys' and
accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated by this Agreement (whether consummated or not).
50
13.04 Notices.
-------
All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been given (i) when personally delivered, (ii) one (1)
Business Day after deposit with Federal Express or similar overnight courier
service or (iii) three (3) Business days after being mailed by first class mail,
return receipt requested. Notices, demands and communications to Buyer, the
Company, Sellers and Seller Representative shall, unless another address is
specified in writing, be sent to the addresses indicated below:
Notices to Buyer:
BMS Holdings, Inc.
c/o Charlesbank Capital Partners
000 Xxxxxxxxx Xx., 00xx xxxxx
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attn: Xxx X. Xxxxxx and Xxxxxxx Xxxx
and
Ocwen Financial Corporation
X.X. Xxx 00000
Xxxx Xxxx Xxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
with a copy (which shall not constitute notice to Buyer) to:
Xxxxxxx Procter LLP
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxx X. Xxxxxx
Notices to Sellers or to Seller Representative:
c/o Lincolnshire Management, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxx X.X. Xxxxxxxxx
51
with a copy (which shall not constitute notice to any Seller
or Seller Representative) to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxxxx
Notices to Company:
Bankruptcy Management Solutions, Inc.
0 Xxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
with a copy (which shall not constitute notice to the Company)
to:
Lincolnshire Management, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxx X.X. Xxxxxxxxx
and:
Xxxxxxxx & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxxxx
13.05 Assignment.
----------
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned or delegated (i) by Buyer
without the prior written consent of Seller Representative or (ii) by the
Company or any Seller without the prior written consent of Buyer; provided,
that, the Buyer may assign its rights under this Agreement for collateral
security purposes to any lender providing financing to Buyer or its Affiliates
but such assignment shall not in any way relieve Buyer of its obligations
hereunder.
52
13.06 Severability.
------------
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.07 References.
----------
The table of contents and the section and other headings and
subheadings contained in this Agreement and the exhibits hereto are solely for
the purpose of reference, are not part of the agreement of the parties hereto,
and shall not in any way affect the meaning or interpretation of this Agreement
or any exhibit hereto. All references to days or months shall be deemed
references to calendar days or months. All references to "$" shall be deemed
references to United States dollars. Unless the context otherwise requires, any
reference to a "Section," "Exhibit," or "Schedule" shall be deemed to refer to a
section of this Agreement, exhibit to this Agreement or a schedule to this
Agreement, as applicable. The words "hereof," "herein" and "hereunder" and words
of similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. The use of the term
"including" herein shall mean "including without limitation". The phrases "made
available to Buyer" or "furnished to Buyer" or similar phrases as used in this
Agreement will mean all documents to which Buyer, its Affiliates or advisers
have been provided with either through access to the documents posted to the
"ace2006" data room at xxxxxxxx.xxxxxxxxxxx.xxx or delivered otherwise to such
Persons on or prior to the date hereof.
13.08 Interpretation.
--------------
The parties hereto acknowledge and agree that (a) each party hereto and
its counsel reviewed and negotiated the terms and provisions of this Agreement
and have contributed to its revision, (b) the rule of construction to the effect
that any ambiguities are resolved against the drafting Party shall not be
employed in the interpretation of this Agreement and (c) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which Party was generally responsible for the preparation of this
Agreement. Any statute, regulation, or other Law defined or referred to herein
(or in any agreement or instrument that is referred to herein) means such
statute, regulation or other Law as, from time to time, may be amended, modified
or supplemented, including (in the case of statutes) by succession of comparable
successor statutes. References to a Person also refer to its predecessors and
permitted successors and assigns.
13.09 Amendment and Waiver.
--------------------
Any provision of this Agreement or the schedules or exhibits may be
amended or waived only in a writing signed by Buyer, the Company and Seller
Representative. No waiver of any provision hereunder or any breach or default
thereof shall extend to or affect in any way any other provision or prior or
subsequent breach or default.
53
13.10 Complete Agreement.
------------------
This Agreement and the documents referred to herein (including the
Confidentiality Agreement) contain the complete agreement between the parties
hereto and supersede any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related to the subject
matter hereof in any way.
13.11 Counterparts.
------------
This Agreement may be executed in multiple counterparts (including by
means of telecopied signature pages), any one of which need not contain the
signatures of more than one Party, but all such counterparts taken together
shall constitute one and the same instrument.
13.12 Governing Law.
-------------
ALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION, VALIDITY AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
13.13 Waiver of Jury Trial.
--------------------
THE PARTIES HEREBY EXPRESSLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT BY OR AGAINST ANY OF THEM RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
13.14 Exclusive Jurisdiction.
----------------------
EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES THAT ALL
CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
SUCH COURT. EACH PARTY HERETO ALSO AGREES NOT TO BRING ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT. EACH OF THE
PARTIES HERETO WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER
SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO.
13.15 No Third Party Beneficiaries.
----------------------------
This Agreement shall not confer any rights or remedies upon any Person
other than (i) the parties hereto and their respective successors and permitted
assigns, (ii) the officers and directors of the Company and the Company
Subsidiary, who shall be third party beneficiaries of Section 8.02 and (iii) the
54
Seller Released Parties and Buyer Released Parties, who shall be third party
beneficiaries of Section 12.05.
13.16 Guarantee of Obligations.
------------------------
By its execution and delivery of this Agreement, each Guarantor hereby
unconditionally guarantees to and for the benefit of the Company and the Sellers
the performance of this Agreement by Buyer; provided, however, that this Section
13.16 will terminate, and be of no further force and effect, upon the occurrence
of the Closing.
13.17 Specific Performance.
--------------------
Each of the Parties recognizes and acknowledges that a breach by it of
any covenant or agreement contained in this Agreement will cause the relevant
Parties to sustain damages for which they would not have an adequate remedy at
law for money damages, and therefore each of the Parties agree that in the event
of any such breach, in addition to any other remedy they may have at law or in
equity, the Parties (including the Seller Representative (on behalf of any
Seller)) shall be entitled to the remedy of specific performance of this
Agreement without any requirement that a bond or other security be posted. Each
of the Parties, to the maximum extent permitted by law, hereby waives any
defenses it may have to the remedy of specific performance provided for herein.
13.18 Delivery by Electronic Means.
----------------------------
This Agreement, the agreements referred to herein, and each other
agreement or instrument entered into in connection herewith or therewith or
contemplated hereby or thereby, and any amendments hereto or thereto, to the
extent signed and delivered by means of a facsimile machine or other electronic
means, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any Party hereto or to any such agreement or instrument, each other Party
hereto or thereto shall reexecute original forms thereof and deliver them to all
other parties. No Party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine or other electronic means to deliver a
signature or the fact that any signature or agreement or instrument was
transmitted or communicated through the use of a facsimile machine or other
electronic means as a defense to the formation or enforceability of a contract
and each such Party forever waives any such defense.
* * * *
55
IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement on the day and year first above written.
EXHIBIT B
Equity Commitment Letter
[Charlesbank / Ocwen Letterhead]
[date]
[Buyer]
[Buyer Address]
[Buyer Address]
Re: Acquisition of Bankruptcy Management Solutions, Inc. (the "Company")
Gentlemen:
[Charlesbank Equity Fund VI, Limited Partnership / Ocwen Financial
Corp.] ("[Charlesbank/Ocwen]") is pleased to confirm its agreement to purchase
(the "[Charlesbank/Ocwen] Investment") equity securities of [_______] ("Buyer"),
on the terms and subject to the conditions contained herein. Capitalized terms
used but not otherwise defined herein shall have the meanings assigned to such
terms in the Stock Purchase Agreement, dated as of the date hereof, by and among
Buyer, the Company and the stockholders and warrant holder of the Company
parties thereto (as amended, restated or otherwise modified from time to time,
the "Purchase Agreement").
1. Investment. Subject to the terms and conditions herein,
[Charlesbank/Ocwen] agrees to purchase, immediately prior to the Closing,
securities of Buyer (the "Buyer Securities") for an aggregate purchase price
equal to $[Charlesbank and Ocwen shall commit to $80 million each] in cash
(reduced on a dollar-for-dollar basis by the value of shares of the Company's
capital stock contributed to Buyer by certain management stockholders of the
Company in exchange for equity securities of Buyer) (the "Purchase Price"). The
proceeds therefrom will be used by Buyer to pay at the Closing the Estimated
Adjusted Purchase Price and for Buyer to make all other payments required by it
under the Purchase Agreement and to pay all of Buyer's related fees and
expenses. The Purchase Price shall be paid by [Charlesbank/Ocwen] in cash by
wire transfer of immediately available funds. Buyer agrees to sell and issue
Buyer Securities to [Charlesbank/Ocwen] and to use the proceeds from the
[Charlesbank/Ocwen] Investment solely for the purposes described in this
paragraph 1. In no event shall [Charlesbank/Ocwen] be under any obligation under
any circumstances to contribute or cause to be contributed more than the
Purchase Price to Buyer.
2. Conditions to Consummation of the [Charlesbank/Ocwen]
Investment. The obligations of [Charlesbank/Ocwen] and Buyer to consummate the
[Charlesbank/Ocwen] Investment shall be absolute and not subject to any
condition precedent other than the satisfaction or waiver in writing by Buyer of
the conditions precedent to Buyer's obligation to consummate the transactions
contemplated by the Purchase Agreement set forth in Article III of the Purchase
Agreement.
3. Term of this Letter Agreement. This letter agreement shall
expire on the earlier to occur of (i) the Closing Date and (ii) the date on
which the Purchase Agreement is terminated in accordance with its terms.
4. Third Party Beneficiary. Each Seller (including the Seller
Representative in its capacity as a Seller and as the Seller Representative) is
an express third party beneficiary of the terms hereof and may enforce this
letter to the same extent as if it were a party hereto.
5. Specific Performance. Each of [Charlesbank/Ocwen] and Buyer
recognizes and acknowledges that a breach by it of any covenant or agreement
contained in this letter agreement will cause the Company and the Sellers to
sustain damages for which they would not have an adequate remedy at law for
money damages, and therefore each of [Charlesbank/Ocwen] and Buyer agrees that
in the event of any such breach, in addition to any other remedy the Company or
any Seller may have at law or in equity, the Company or the Seller
Representative (on behalf of any Seller) shall be entitled to the remedy of
specific performance of this letter agreement without any requirement that a
bond or other security be posted. Each of [Charlesbank/Ocwen] and Buyer, to the
maximum extent permitted by law, hereby waives any defenses it may have to the
remedy of specific performance provided for herein.
6. Miscellaneous. This letter agreement may be executed in any
number of counterparts each of which when so executed shall be an original, but
all of which together shall constitute one and the same agreement. This letter
agreement may be amended only by a written instrument signed by
[Charlesbank/Ocwen] and Buyer and only with the prior written consent of the
Company. This letter agreement may not be assigned by [Charlesbank/Ocwen] or
Buyer without the prior written consent of the Company. The provisions of this
letter agreement contain the entire understanding of [Charlesbank/Ocwen] and
Buyer with respect to the subject matter hereof and supersede any prior written
instruments executed by such parties. This letter agreement shall be construed
in accordance with and governed by the internal substantive laws of the State of
New York (without giving effect to any conflicts of law provisions thereof).
Very truly yours,
[CHARLESBANK EQUITY FUND VI, LIMITED
PARTNERSHIP / OCWEN FINANCIAL CORP.]
By:
---------------------------------
Name:
Title:
Acknowledged and agreed to as of the date hereof by:
[BUYER]
By:
-------------------------------
Name:
Title:
