EXHIBIT 2(e)
AGREEMENT OF PURCHASE AND SALE
By and Among
PHOENIX MARKETING GROUP, INC.,
XXXXXXX XXXXX,
XXXXXX XXXXXXXX
and
CULTURALACCESSWORLDWIDE, INC.
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT dated as of the 1st day of October, 1997 by and
among Phoenix Marketing Group, Inc., a New Jersey corporation (the "Company"),
Xxxxxxx Xxxxx and Xxxxxx Xxxxxxxx (each a "Shareholder" and, collectively the
"Shareholders") and CulturalAccessWorldwide, Inc., a Delaware corporation (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is engaged, among other things, in the
business of database driven support and sample fulfillment to meet the rapidly
changing needs of sales and marketing executives in the healthcare industry and
related services including those set forth on Annex A attached hereto (such
activities being hereinafter referred to as the "Business");
WHEREAS, the Shareholders are the holders of an aggregate of 155
shares of the class A common stock, no par value (the "Common Stock"), of the
Company, which shares constitute all of the issued and outstanding voting shares
of capital stock of the Company;
WHEREAS, effective on the date of the Closing (as hereinafter
defined), the Purchaser, through its indirect wholly owned subsidiary PM
Acquisition Corp., a Delaware corporation (the "Designee"), desires to acquire
from the Company certain assets of the Company as described in Section I(C)(i)
hereof (the "Assets") and, through the Designee, to assume certain liabilities
and contractual obligations of the Company as described in Section I(C)(ii)
hereof (the "Assumed Liabilities"), and the Company desires to sell or assign
the Assets and to assign the Assumed Liabilities to the Purchaser, through the
Designee, on the terms and subject to the conditions hereinafter set forth; and
WHEREAS, to induce the Purchaser to enter into this Agreement
and perform its obligations hereunder, each of the Shareholders has agreed to
make the representations, warranties, covenants and agreements of the
Shareholders (including the indemnification and non-competition agreements) set
forth herein.
NOW, THEREFORE, in consideration of the premises
and the mutual covenants and agreements hereinafter set
2
forth, and intending to be legally bound, the parties hereto
hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE ASSETS
A. Purchase and Sale of the Assets. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained:
(i) The Company hereby sells, assigns and
conveys to the Purchaser, and the Purchaser hereby purchases, acquires and
accepts from the Company, the Assets.
(ii) The Company hereby assigns to the Purchaser
and the Purchaser hereby accepts and assumes from the
Company, the Assumed Liabilities.
(iii) The designation of the Designee to acquire
the Assets and assume the Assumed Liabilities will in no event affect or limit
in any respect the Purchaser's payment obligations hereunder.
B. Purchase Price. The purchase price (the "Purchase Price")
for the Assets is: (i) $10,000,000, payable in cash; (ii) $2,500,000, by
delivery of a 6.0% subordinated redeemable promissory note of the Purchaser (the
"Redeemable Note"), substantially in the form of Exhibit A-1 attached hereto,
payable to the order of the Company; (iii) $2,500,000, by delivery of a 6.0%
convertible subordinated promissory note of the Purchaser (the "Convertible
Note," and together with the Redeemable Note, the "Notes"), substantially in the
form of Exhibit A-2 attached hereto, payable to the order of the Company; and
(iv) the contingent payments, if earned (the "Contingent Payments"), payable as
provided in Section I(D) hereof. The Purchase Price payable at the Closing shall
be made by delivery to the Company of (a) a wire transfer in immediately
available funds to an account designated by the Company in the amount of
$7,920,898.50 and, at the direction of the Company, a wire transfer in
immediately available funds to accounts designated by Xxxxxxx Xxxxx and Xxxxxx
Xxxxxxxx in the amounts of $1,396,080.41 and $683,021.09, respectively, (in
repayment of amounts owed by the Company to the Shareholders) and (b) the Notes.
3
C. Assets; Assumed Liabilities.
(i) The Assets shall consist of all assets,
business, contract rights, financial books and records and goodwill of every
kind and nature, real, personal, and mixed, tangible and intangible, wherever
located, of the Company used in or in any way related to the Business as
conducted by the Company including but not limited to those Assets listed in
Schedule I hereto. The Assets shall not include the assets listed in Schedule II
hereto (hereinafter, the "Excluded Assets").
(ii) The Assumed Liabilities shall consist of
and shall be limited solely to the obligations and liabilities of the Company
incurred in connection with the Business listed in Schedule III hereto. The
Company shall remain liable for, and shall pay when due, any and all obligations
and liabilities of the Company, other than the Assumed Liabilities.
D. Contingent Payments. In accordance with the provisions of
Schedule V hereto, within ninety (90) days after December 31, 1998, December 31,
1999 and December 31, 2000, the Purchaser shall deliver to the Company the
Contingent Payments, if earned, payable with respect to the twelve-month periods
ending December 31, 1998, December 31, 1999 and December 31, 2000, respectively.
The amount of the Contingent Payments payable to the Company with respect to
each such twelve-month period (each, a "Contingent Period") shall be based upon
the EBITA (as defined in Section I(E) hereof) achieved by the Business during
such Contingent Period. Each of the Contingent Payments, if any, shall be made
by delivery to the Company of a certificate representing shares of common stock,
$.01 par value ("Purchaser Common Stock"), of the Purchaser, registered in the
name of the Company, in such numbers of shares as are determined in accordance
with Schedule V hereto.
E. Computation of EBITA; Certain Adjustments. The Purchaser
shall, within ninety (90) days after the end of each Contingent Period, compute
the amount of the EBITA of the Business for such Contingent Period. The amount
so computed shall be the EBITA for purposes of determining whether or not
Contingent Payments shall be due and payable. Notwithstanding the determination
of EBITA for any applicable period by the Purchaser, the Company shall receive
the information upon which such determination was made, and shall, in the event
of a dispute as to the amount or method of calculation of such net revenues and
EBITA have the right to review all work papers relating to the determination of
EBITA. For purposes of this Agreement,
4
"EBITA" shall mean the earnings before interest, taxes and amortization of the
Business (or, in the event that all or substantially all the assets and business
of the Business shall have been transferred to another entity or entities, the
allocable portion of the EBITA of such other entity or entities) for the
applicable Contingent Period as determined in accordance with generally accepted
accounting principles consistent with the Purchaser's accounting practices. For
purposes of calculating EBITA for any Contingent Period, no deduction will be
made for amortization of goodwill, corporate overhead charges and the Executive
Expenses (as hereinafter defined).
Numbers of shares of Purchaser Common Stock
set forth herein shall be appropriately adjusted for any stock split, stock
dividend, reverse stock split or other similar event affecting the Purchaser
Common Stock. Fractional shares shall be rounded to the nearest whole share.
In the event (a "Reorganization") of the consolidation or
merger of the Purchaser with or into another person or the acquisition of all or
substantially all the Purchaser Common Stock or all or substantially all of the
assets of the Purchaser by another person (other than a consolidation or merger
in which the Purchaser is the continuing corporation and which does not result
in any change in the Purchaser Common Stock), the Purchaser shall have the
option to pay the Company at such time as a payment is due pursuant to Section
I(D) hereof, in lieu of the Purchaser Common Stock provided for in such Section,
the consideration (the "Reorganization Consideration") per share in the form (in
stock or cash or other consideration) payable to the other holders of Purchaser
Common Stock in connection with such transaction, multiplied by the number of
shares of Purchaser Common Stock deliverable to the Company provided for in
Section I(D) hereof.
F. Allocation. The Purchase Price for the Assets (including
the Assumed Liabilities assumed by the Purchaser (or the Designee)) shall be
allocated to the Assets and the Assumed Liabilities at their fair market values.
The portion of the Purchase Price not allocated to specific Assets and Assumed
Liabilities shall be allocated to goodwill.
5
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and each of the Shareholders, jointly and
severally, hereby represent and warrant to, and covenant and agree with, the
Purchaser, as of the date of the Closing, that:
A. Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has full corporate power and authority to own its properties and
to conduct the businesses in which it is now engaged. The Company is in good
standing in each other jurisdiction wherein the failure so to qualify would have
a material adverse effect on the financial condition, operations, assets and
properties of the Business taken as a whole (a "Material Adverse Effect"). The
Company has no subsidiaries, owns no capital stock or other proprietary
interest, directly or indirectly, in any other corporation, association, trust,
partnership, joint venture or other entity and has no agreement with any person,
firm or corporation to acquire any such capital stock or other proprietary
interest. The Company has full power, authority and legal right, and all
necessary approvals, permits, licenses and authorizations, to own its properties
and to conduct the Business and to enter into and consummate the transactions
contemplated under this Agreement, except for such approvals, permits, licenses
and authorizations, the absence of which would not have a Material Adverse
Effect. The copies of the articles of incorporation and by-laws of the Company
which have been delivered to the Purchaser are complete and correct.
B. Authority. The execution and delivery of this Agreement by
the Company, the performance by the Company of its covenants and agreements
hereunder and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action. This
Agreement constitutes a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally.
C. No Legal Bar; Conflicts. Neither the
execution and delivery of this Agreement, nor the
6
consummation of the transactions contemplated hereby, violates any provision of
the certificate of incorporation or by-laws of the Company or any statute,
ordinance, regulation, order, judgment or decree of any court or governmental
agency or board, or conflicts with or will result in any breach of any of the
terms of or constitute a default under or result in the termination of or the
creation of any lien pursuant to the terms of any contract or agreement to which
the Company is a party or by which the Company or any of the Assets is bound,
except where such violation, conflict, breach, default, termination or lien
creation would not have a Material Adverse Effect. No consents, approvals or
authorizations of, or filings with, any governmental authority or any other
person or entity are required in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
except for required consents, if any, to assignment of permits, certificates,
contracts, leases and other agreements as set forth in Exhibit B attached
hereto.
D. Financial Statements; No Undisclosed Liabilities. The
Company and the Shareholders have delivered to the Purchaser balance sheets of
the Company as of December 31, 1996, 1995 and 1994 and as of June 30, 1997 and
the related statements of income, retained earnings and cash flows and the notes
thereto for the periods then ended (hereinafter referred to as the "Financial
Statements"). The Financial Statements with respect to the periods ended
December 31, 1996, 1995 and 1994 have been audited by Price Waterhouse L.L.P.,
the Company's independent accountants, and the Financial Statements with respect
to the period ended June 30, 1997 has been compiled by Simon, Tapper and
Company, P.A., independent accountants. The Financial Statements are true and
correct in all material respects and have been prepared in accordance with
generally accepted accounting principles applied consistently throughout the
periods involved. The Financial Statements fully and fairly present the
financial condition of the Company as at the dates thereof and the results of
the operations of the Company for the periods indicated. The balance sheets
contained in the Financial Statements fairly reflect all liabilities of the
Company of the types normally reflected in balance sheets as at the dates
thereof. Except to the extent set forth in or provided for in the balance sheet
of the Company as of December 31, 1996 included in the Financial Statements (the
"1996 Balance Sheet") or as identified in Exhibit B, and except for current
liabilities incurred in the ordinary course of business consistent with past
practices (and not materially different in type or amount), the Company has no
material liabilities or
7
obligations of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due, whether properly reflected under generally
accepted accounting principles as a liability or a charge or reserve against an
asset or equity account, and whether the amount thereof is readily ascertainable
or not. A true and correct copy of the Financial Statements is attached hereto
as Exhibit C.
E. Absence of Certain Changes. Except as set forth in Exhibit
B, subsequent to the date of the 1996 Balance Sheet, there has not been any (i)
material adverse or prospective material adverse change in the condition of the
Business, financial or otherwise, or in the results of the operations of the
Company which has or could reasonably be expected to have a Material Adverse
Effect; (ii) material damage or destruction (whether or not insured) affecting
the properties or business operations of the Company; (iii) labor dispute or, to
the best of the knowledge of the Company and each of the Shareholders,
threatened labor dispute involving the employees of the Company; (iv) actual or,
to the best of the knowledge of the Company and each of the Shareholders,
threatened disputes pertaining to the Business with any major accounts of the
Company, or actual or, to the best of the knowledge of the Company and each of
the Shareholders, threatened loss of business from any of the major accounts of
the Company; (v) changes in the methods or procedures for billing or collection
of customer accounts or recording of customer accounts receivable or reserves
for doubtful accounts with respect to the Company; or (vi) other event or
condition of any character, known to the Company or either of the Shareholders
or which in the exercise of reasonable diligence should be known to the Company
or either of the Shareholders, not disclosed in this Agreement pertaining to and
materially adversely affecting the Assets or the Business.
F. Liabilities Incurred. Except as disclosed in Exhibit B,
subsequent to the date of the 1996 Balance Sheet, the Company has not (i)
incurred any bank indebtedness, entered into any leases, loan agreements or,
except in the ordinary course of business consistent with past practices,
contracts, obligations or arrangements of any kind, including, without
limitation, for the payment of money or property to any person, or (ii)
permitted any liens or encumbrances to attach to the Assets.
G. Real Property Owned or Leased. A list and description of
all real property owned by or leased to or by the Company or in which the
Company has any interest is set forth in Exhibit B. All such leased real
property is held
8
subject to written leases or other agreements which are valid and effective in
accordance with their respective terms, and there are no existing defaults or
events of default, or events which with notice or lapse of time or both would
constitute defaults, thereunder on the part of the Company, except for defaults,
if any, which would not have a Material Adverse Effect. Neither the Company nor
either of the Shareholders has any knowledge of any material default or claimed
or purported or alleged material default or state of facts which with notice or
lapse of time or both would constitute a material default on the part of any
other party in the performance of any obligation to be performed or paid by such
other party under any lease referred to in Exhibit B. Neither the Company nor
either of the Shareholders has received any written or oral notice to the effect
that any lease will not be renewed at the termination of the term thereof or
that any such lease will be renewed only at a substantially higher rent.
H. Title to Assets; Condition of Property. The
Company has good and valid title to the Assets, including,
without limitation, the properties and assets reflected in
the 1997 Balance Sheet (except for assets leased under
leases set forth in Exhibit B, assets sold or retired and
accounts receivable collected upon, since the date of the
1997 Balance Sheet in the ordinary course of business
consistent with past practices). The Company has the right,
power and authority to sell and transfer the Assets to the
Purchaser (or the Designee) and upon such transfer, the
Purchaser (or the Designee), will acquire good and
marketable title to the Assets, free and clear of all liens,
charges, encumbrances, security interests or claims
whatsoever. The Assets include all properties and assets
used in the operations of the Business as currently
conducted. All such properties and assets are in good
condition and repair, consistent with their respective ages,
and have been maintained and serviced in accordance with the
normal practices of the Company and as necessary in the
normal course of business. None of the Assets is subject to
any liens, charges, encumbrances or security interests,
except as set forth in Exhibit B. None of the Assets (or
uses to which they are put) fails to conform with any
applicable agreement, law, ordinance or regulation in a
manner which could reasonably be expected to have a Material
Adverse Effect. The books and records of the Company
accurately reflect the materials of customers and clients
held on the premises of the Company.
I. Taxes. Except as set forth in Exhibit B, the
Company has filed or caused to be filed on a timely basis
all federal, state, local, foreign and other tax returns,
9
reports and declarations (collectively, "Tax Returns") required to be filed by
it. All Tax Returns filed by or on behalf of the Company are true, complete and
correct in all material respects. The Company has paid all income, estimated,
excise, franchise, gross receipts, capital stock, profits, stamp, occupation,
sales, use, transfer, value added, property (whether real, personal or mixed),
employment, unemployment, disability, withholding, social security, workers'
compensation and other taxes, and interest, penalties, fines, costs and
assessments (collectively, "Taxes"), due and payable with respect to the periods
covered by such Tax Returns (whether or not reflected thereon). There are no Tax
liens on any of the properties or assets, real, personal or mixed, tangible or
intangible, of the Company. The accrual for Taxes reflected in the Financial
Statements accurately reflects the total amount of all unpaid Taxes, whether or
not disputed and whether or not presently due and payable, of the Company as of
the close of the period covered by the Financial Statements, and the amount of
the Company's unpaid Taxes does not exceed the accrual for Taxes reflected in
the Financial Statements for the period ended December 31, 1996. Since the date
of the 1996 Balance Sheet, the Company has not incurred any tax liability other
than in the ordinary course of business. No Tax Return of the Company has ever
been audited. No deficiency in Taxes for any period has been asserted by any
taxing authority which remains unpaid at the date hereof (the results of any
settlement being set forth in Exhibit B), no written inquiries or notices have
been received by the Company from any Taxing authority with respect to possible
claims for Taxes, the Company has no reason to believe that such an inquiry or
notice is pending or threatened, and there is no basis for any additional claims
or assessments for Taxes. The Company has not agreed to the extension of the
statute of limitations with respect to any Tax Return or Tax period. The Company
has delivered to the Purchaser copies of the federal and state income Tax
Returns filed by the Company for the past three years and for all other past
periods as to which the appropriate statute of limitations has not lapsed.
J. Permits; Compliance with Applicable Law.
(i) General. The Company is not in default
under any, and has complied with all applicable, statutes, ordinances,
regulations and laws, orders, judgments and decrees of any court or governmental
entity or agency, relating to the Business or the Assets as to which a default
or failure to comply might have a Material Adverse Effect. Neither the Company
nor either of the Shareholders has any knowledge of any basis for assertion of
any violation of the
10
foregoing or for any claim for compensation or damages or otherwise arising out
of any violation of the foregoing. Neither the Company nor either of the
Shareholders has received any notification of any asserted present or past
failure to comply with any of the foregoing which has not been satisfactorily
responded to in the time period required thereunder.
(ii) Permits; Intellectual Property. Set
forth in Exhibit B is a complete and accurate list of all material permits,
licenses, approvals, franchises, patents, registered and common law trademarks,
service marks, tradenames, copyrights (and applications for each of the
foregoing), notices and authorizations issued by governmental entities or other
regulatory authorities, federal, state or local (collectively the "Permits"),
held by the Company in connection with the Business. The Permits set forth in
Exhibit B are all the Permits required for the conduct of the Business. All the
Permits set forth in Exhibit B are in full force and effect, and the Company has
not engaged in any activity which would cause or permit revocation or suspension
of any such Permit, and, to the best of the knowledge of the Company and each of
the Shareholders, no action or proceeding looking to or contemplating the
revocation or suspension of any such Permit is pending or threatened. There are
no existing material defaults or events of default or event or state of facts
which with notice or lapse of time or both would constitute a default by the
Company under any such Permit. Neither the Company nor either of the
Shareholders has any knowledge of any default or claimed or purported or alleged
default or state of facts which with notice or lapse of time or both would
constitute a material default on the part of any other party in the performance
of any obligation to be performed or paid by any other party under any Permit
set forth in Exhibit B. The use by the Company of any proprietary rights
relating to any Permit does not involve any claimed infringement of such Permit
or rights. Except as set forth in Section II(J)(iii) below, the Company is not
required to be licensed by, nor is it subject to the regulation of, any
governmental or regulatory body by reason of the conduct of the Business.
(iii) Environmental. (a) The Company has
duly complied in all material respects with and the real estate subject to the
leases listed on Exhibit B and improvements thereon, and all other real estate
leased by the Company, and the improvements thereon (all such owned or leased
real estate hereinafter referred to collectively as the "Premises") are in
compliance in all material respects with, the provisions of all federal, state
and local
11
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, except where the failure to so comply would
not have a Material Adverse Effect.
(b) The Company has not received any
notice of, and neither the Company nor either of the Shareholders knows of any
facts which might constitute, violations of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder, which relate to the use, ownership or
occupancy of any of the Premises or of any premises formerly owned, leased or
occupied by the Company.
K. Accounts Receivable; Accounts Payable.
(i) The accounts receivable of the Company are in their
entirety valid accounts receivable, arising in the ordinary course of business.
(ii) The accounts and notes payable and other accrued expenses
reflected in the Financial Statements, and the accounts and notes payable and
accrued expenses incurred by the Business subsequent to the date of the 1996
Balance Sheet, are in all respects valid claims that arose in the ordinary
course of business. Since the date of the 1996 Balance Sheet, the accounts and
notes payable and other accrued expenses of the Business have been paid in a
manner consistent with past practice.
L. Contractual and Other Obligations. Set
forth in Exhibit B is a list and brief description of all
material (i) contracts, agreements, licenses, leases,
arrangements (written or oral) and other documents to which
the Company is a party or by which the Company or any of the
Assets is bound (including, in the case of loan agreements,
a description of the amounts of any outstanding borrowings
thereunder and the collateral, if any, for such borrowings);
(ii) obligations and liabilities of the Company pursuant to
uncompleted orders for the purchase of materials, supplies,
equipment and services for the requirements of the Business
with respect to which the remaining obligation of the
Company is in excess of $50,000; and (iii) material
contingent obligations and liabilities of the Company; all
of the foregoing being hereinafter referred to as the
"Contracts". Neither the Company nor, to the best of the
knowledge of the Company and each of the Shareholders, any
other party is in default in the performance of any covenant
or condition under any Contract and no claim of such a
default has been made and no event has occurred which with
the giving of notice or the lapse of time would constitute a
12
default under any covenant or condition under any Contract, except where such
default would not have a Material Adverse Effect. The Company is not a party to
any Contract which would terminate or be materially adversely affected by
consummation of the transactions contemplated by this Agreement. The Company is
not a party to any Contract expected to be performed at a loss. Originals or
true, correct and complete copies of all written Contracts have been provided to
the Purchaser.
M. Compensation. Set forth in Exhibit D attached hereto is a
list of all material agreements between the Company and each person employed by
or independently contracting with the Company with regard to compensation,
whether individually or collectively, and set forth in Exhibit D is a list of
all employees of the Company entitled to receive annual compensation in excess
of $40,000 and their respective salaries. The transactions contemplated by this
Agreement will not result in any liability for severance pay to any employee or
independent contractor of the Company. The Company has not informed any employee
or independent contractor providing services to the Company that such person
will receive any increase in compensation or benefits or any ownership interest
in the Company or the Business.
N. Employee Benefit Plans. Except as set forth in Exhibit E
attached hereto, the Company does not maintain or sponsor, nor does it
contribute to, any pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance, welfare or other
employee benefit plan. All pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance, welfare or other
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (hereinafter referred to as
"ERISA"), in which the employees participate (such plans and related trusts,
insurance and annuity contracts, funding media and related agreements and
arrangements being hereinafter referred to as the "Benefit Plans") comply with
all requirements of the Department of Labor and the Internal Revenue Service,
and with all other applicable laws, and the Company has not taken or failed to
take any action with respect to the Benefit Plans which might create any
liability on the part of the Company or the Purchaser. Each "fiduciary" (within
the meaning of Section 3(21)(A) of ERISA) as to each Benefit Plan has complied
with all requirements of ERISA and all other applicable laws in respect of each
such Benefit Plan. The Company has furnished to the Purchaser copies of all
Benefit Plans and
13
all financial statements, actuarial reports and annual reports and returns filed
with the Internal Revenue Service with respect to such Benefit Plans prior to
the date hereof. Such financial statements and actuarial reports and annual
reports and returns are true and correct in all material respects, and none of
the actuarial assumptions underlying such documents have changed since the
respective dates thereof. In addition:
(i) Each Benefit Plan intended to qualify under Section
401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service as to its qualification;
(ii) The Company does not maintain, sponsor or contribute
to, and has never maintained, sponsored or contributed to a "defined
benefit plan" (within the meaning of Section 3(35) of ERISA) or a
Multiemployer Plan (within the meaning of Section 3(37) of ERISA);
(iii) No "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975(c) of the Code) has occurred with
respect to any Benefit Plan;
(iv) No provision of any Benefit Plan or of any agreement,
and no act or omission of the Company in any way limits, impairs,
modifies or otherwise affects the right of the Company or the Purchaser
unilaterally to amend or terminate any Benefit Plan after the Closing,
subject to the requirements of applicable law;
(v) There are no contributions which are or hereafter will
be required to have been made to trusts in connection with any Benefit
Plan that would constitute a "defined contribution plan" (within the
meaning of Section 3(34) of ERISA);
(vi) Other than claims in the ordinary course for benefits
with respect to the Benefit Plans, there are no actions, suits or
claims (including claims for income taxes, interest, penalties, fines
or excise taxes with respect thereto) pending with respect to any
Benefit Plan, or any circumstances which might give rise to any such
action, suit or claim (including claims for income taxes, interest,
penalties, fines or excise taxes with respect thereto);
(vii) Except as set forth in Exhibit E, all reports, returns
and similar documents with respect to the Benefit Plans required to be
filed with any
14
governmental agency have been so filed on or before
their due date; and
(viii) The Company does not have any obligation to provide
health or other welfare benefits to former, retired or terminated
employees, except as specifically required under Section 4980B of the
Code or Section 601 of ERISA. The Company has complied with the notice
and continuation requirements of Section 4980B of the Code or Section
601 of ERISA and the regulations thereunder.
O. Labor Relations. There have been no violations of any
federal, state or local statutes, laws, ordinances, rules, regulations, orders
or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, the Company, or the terms and
conditions of employment, wages and hours, which violations would have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
in Exhibit B, the Company is not engaged in any unfair labor practice or other
unlawful employment practice and there are no charges of unfair labor practices
or other employee-related complaints pending or, to the best of the knowledge of
the Company and each of the Shareholders, threatened against the Company before
the National Labor Relations Board, the Equal Employment Opportunity Commission,
the Occupational Safety and Health Review Commission, the Department of Labor or
any other federal, state, local or other governmental authority. There is no
strike, picketing, slowdown or work stoppage or organizational attempt pending,
or, to the best of the knowledge of the Company and each of the Shareholders,
threatened against or involving the Business. No issue with respect to union
representation is pending or threatened with respect to the employees of the
Company. No union or collective bargaining unit or other labor organization has
ever been certified or recognized by the Company as the representative of any of
the employees of the Company.
P. Increases in Compensation or Benefits. Except as set forth
in Exhibit D, subsequent to the date of the 1996 Balance Sheet, there have been
no increases in the compensation payable or to become payable to any of the
employees of the Company and there have been no payments or provisions for any
awards, bonuses, loans, profit sharing, pension, retirement or welfare plans or
similar or other disbursements or arrangements for or on behalf of such
employees (or related parties thereof), in each case, other than pursuant to
currently existing plans or arrangements, if any, set forth in Exhibit E;
provided, however, that in no event was any such increase in compensation or any
15
such payment or provision made with respect to either of the Shareholders (or
any members of the families of either of the Shareholders). Except as set forth
in Exhibit D, all bonuses heretofore granted to employees of the Company have
been paid in full to such employees. The vacation policy of the Company is set
forth in Exhibit E. Except as set forth in Exhibit E, no employee of the Company
is entitled to vacation time in excess of three weeks during the current
calendar year and no employee of the Company has any accrued vacation or sick
time with respect to any prior period.
Q. Insurance. A list and brief description of the insurance
policies maintained by the Company with respect to the Business is set forth in
Exhibit B. Such insurance policies are in full force and effect and all premiums
due thereon prior to or on the date of the Closing have been paid. The Company
has adequate insurance and reserves to cover any liability that may arise out of
any claims, including but not limited to workers compensation and health
insurance claims, that may be asserted against the Business for occurrences
prior to the date of the Closing.
R. Conduct of Business. The Company is not
restricted from conducting the Business in any location by
agreement or court decree.
S. Allowances. The Company has no obligation outside of the
ordinary course of business to make allowances to any customers with respect to
the Business.
T. Use of Names. All names under which the Company currently
conducts the Business are listed in Exhibit B. To the best of the knowledge of
the Company and each of the Shareholders, there are no other persons or
businesses conducting businesses similar to those of the Company in the State of
New Jersey having the right to use or using the names set forth in Exhibit B or
any variants of such names; and no other person or business has ever attempted
to restrain the Company or either of the Shareholders from using such names or
any variant thereof.
U. Power of Attorney. The Company has not granted any power of
attorney (revocable or irrevocable) to any person, firm or corporation for any
purpose whatsoever.
V. Litigation; Disputes. Except as set forth in
Exhibit B, there are no material claims, disputes, actions,
suits, investigations or proceedings pending or, to the best
of the knowledge of the Company and each of the
Shareholders, threatened against or affecting the Company,
16
the Business or any of the Assets, no such claim, dispute, action, suit,
proceeding or investigation has been pending, or, to the best of the knowledge
of the Company and each of the Shareholders, threatened during the five-year
period preceding the date of the Closing and, to the best of the knowledge of
the Company and each of the Shareholders, there is no basis for any such claim,
dispute, action, suit, investigation or proceeding. Neither the Company nor
either of the Shareholders has any knowledge of any default under any such
action, suit or proceeding. The Company is not in default in respect of any
judgment, order, writ, injunction or decree of any court or of any federal,
state, municipal or other government department, commission, bureau, agency or
instrumentality or any arbitrator.
W. Location of Business and Assets. Set forth in Exhibit B is
each location (specifying state, county and city) where the Company (i) has a
place of business, (ii) owns or leases real property and (iii) owns or leases
any other property, including equipment and furniture.
X. Computer Software. The Company has the right to use all
computer software, including all property rights constituting part of that
computer software, used in connection with the Company's business operations
(the "Computer Software"). A list of all written licenses pertaining to the
Computer Software is set forth in Exhibit B (the "Licenses"). The Company has no
knowledge that any of the Licenses may not be valid or enforceable by the
Company or that the use of the Computer Software or any of the Licenses may
infringe upon or conflict with the rights of any third party. The Company has
not granted any licenses to use the Computer Software or any sub-licenses with
respect to any of the Licenses, except with respect to its electronic territory
management systems (ETMS) business.
Y. Disclosure. No representation or warranty made under any
Section hereof and none of the information furnished by the Company or either of
the Shareholders set forth herein, in the exhibits hereto or in any document
delivered by the Company or either of the Shareholders to the Purchaser, or any
authorized representative of the Purchaser, pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein or therein not misleading.
Z. Investment. (i) The Company has had access
to such information relating to the business and affairs of
the Purchaser which the Company and the Shareholders have
reasonably requested, and all additional information which
17
the Company and the Shareholders have considered necessary to verify the
accuracy of the information so received. The Company and the Shareholders have
had the opportunity to ask questions of and receive answers from the Purchaser
concerning the terms and conditions of the transactions contemplated by this
Agreement. On the basis of the foregoing, each of the Company and the
Shareholders is familiar with the operations, business plans and financial
condition of the Purchaser.
(ii) Each of the Company and each of the
Shareholders understands that the Purchaser may issue and deliver to the
Company, as part of the Contingent Payments and upon conversion of the
Convertible Note, shares of Purchaser Common Stock pursuant to this Agreement,
without compliance with the registration requirements of the Securities Act;
that for such purpose the Purchaser will rely upon the representations,
warranties, covenants and agreements contained herein; and that such
non-compliance with registration is not permissible unless such representations
and warranties are correct and such covenants and agreements performed. Each of
the Company and each of the Shareholders is an "accredited investor" as such
term is defined in Rule 501 under the Securities Act.
(iii) Each of the Company and each of the
Shareholders understands that, under existing rules of the Securities and
Exchange Commission (the "SEC") the Company, may be unable to sell its shares of
Purchaser Common Stock except to the extent that its shares of Purchaser Common
Stock may be sold (i) pursuant to an effective registration statement covering
such shares pursuant to the Securities Act or (ii) in a bona fide private
placement to a purchaser who shall be subject to the same restrictions on any
resale or (iii) subject to the restrictions contained in Rule 144 under the
Securities Act ("Rule 144"). Each of the Company and each of the Shareholders
understands that the Purchaser is under no obligation to effect a registration
of their shares of Purchaser Common Stock under the Securities Act.
(iv) Each of the Company and each of the
Shareholders is familiar with the provisions of Rule 144 and the limitations
upon the availability and applicability of such rule.
(v) Each of the Company and each of the
Shareholders is a sophisticated investor familiar with the type of risks
inherent in the acquisition of restricted securities such as the shares of
Purchaser Common Stock and their financial position is such that they can afford
to retain the shares of Purchaser Common Stock for an
18
indefinite period of time without realizing any direct or indirect cash return
on their investment.
(vi) The Company is acquiring its shares of
Purchaser Common Stock for its account and not with a view to, or for sale in
connection with, the distribution thereof within the meaning of the Securities
Act.
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants to,
and covenants and agrees with, the Purchaser, as of the date of the Closing,
that:
A. Authority. Such Shareholder is fully able to execute and
deliver this Agreement and to perform such Shareholder's covenants and
agreements hereunder, and this Agreement constitutes a valid and legally binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium
and similar laws from time to time in effect affecting the enforcement of
creditors' rights generally.
B. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
violates any statute, ordinance, regulation, order, judgment or decree of any
court or governmental agency, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which such Shareholder is a party or by which such Shareholder or
any of such Shareholder's assets is bound.
SECTION IV
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANY,
THE SHAREHOLDERS AND THE PURCHASER
A. Publicity. Each of the Company and each of
the Shareholders covenants and agrees, jointly and
severally, that any and all publicity (whether written or
19
oral) and notices to third parties (other than employees of the Company)
concerning the sale of the Assets and other transactions contemplated by this
Agreement shall be subject to the prior written approval of the Purchaser, which
approval may be withheld in the sole discretion of the Purchaser.
B. Correspondence, etc. Each of the Company and each of the
Shareholders covenants and agrees, jointly and severally, that each of them will
deliver to the Purchaser, promptly after the receipt thereof, all inquiries,
correspondence and other materials received by either of them from any person or
entity relating to the Business or the Assets.
C. Books and Records. Each of the Company and each of the
Shareholders represents and warrants, jointly and severally, that the books and
records of the Company are in all respects complete and correct, have been
maintained in accordance with good business practices and accurately reflect the
basis for the financial position and results of operations of the Company set
forth in the Financial Statements. All of such books and records have been
available for inspection by the Purchaser and its representatives. Each of the
Company and each of the Shareholders covenants and agrees, jointly and
severally, that each of them shall give the Purchaser reasonable access to the
historical financial books and records of the Company, to the extent such books
and records are not included in the Assets, for a period of five years from the
date of the Closing. The Company and each of the Shareholders shall retain all
such books and records in substantially their condition at the time of the
Closing. None of such books and records shall be destroyed without the prior
written approval of the Purchaser or without first offering such books and
records to the Purchaser.
D. Discharge of Obligations. Each of the Company and each of
the Shareholders covenants and agrees, jointly and severally, to pay promptly
and otherwise to fulfill and discharge all obligations and liabilities of the
Company which are not Assumed Liabilities hereunder when due and payable and
otherwise prior to the time at which any of such obligations or liabilities
could in any way result in or give rise to a claim against the Assets, the
Business or the Purchaser, result in the imposition of any lien, charge or
encumbrance on any of the Assets, or adversely affect the Purchaser's title to
or use of any of the Assets.
E. Delivery of Funds. Each of the Company
and/or the Shareholders shall deliver on a daily basis any
20
funds and any checks, notes, drafts and other instruments for the payment of
money, duly endorsed to the Purchaser, received by any of them (i) comprising
payment of any of the accounts receivable of the Company constituting a part of
the Assets and (ii) comprising payment of any amounts due from customers of the
Company or others for services rendered by the Company prior to the Closing,
including pursuant to any agreements constituting part of the Assets.
F. Pass Through of Rights and Obligations. To
the extent that the Company and the Shareholders are unable
to obtain any necessary consents of third parties prior to
the consummation of the transactions contemplated hereby
under the contracts, agreements, leases, insurance policies
and other instruments of the Company which are part of the
Assets and are set forth in Exhibit B (the "Exhibit B
Contracts"), each of the Company and each of the
Shareholders covenants and agrees to use their best efforts
to obtain such consents within thirty (30) days after the
Closing. The Company and the Shareholders covenant and
agree (i) not to assign any such Exhibit B Contract to any
party other than the Purchaser (or the Designee), (ii) to
use their best efforts to keep such Exhibit B Contract in
full force and effect, except as otherwise directed by the
Purchaser, (iii) to operate under such Exhibit B Contract
only under the direction of the Purchaser, (iv) to the
extent such Exhibit B Contract requires by its terms the
performance of services by the Company, that the Purchaser
is hereby subcontracted and employed to perform all such
services on behalf of the Company, (v) to remit or otherwise
provide to the Purchaser all revenues and other benefits
derived from such Exhibit B Contract immediately upon
receipt thereof and (vi) in the case of any Exhibit B
Contract, in the event that such consent cannot be obtained,
to cooperate with the Purchaser and the other party to such
Exhibit B Contract to enable the Purchaser to enter into a
contract directly with such other party.
G. Working Capital. On or before 270 days from the date of the
Closing (the "Reconciliation Date"), the Purchaser shall calculate the amount of
the actual collections by the Purchaser after the date of the Closing and prior
to 180 days from the date of Closing (the "Collection Period") of the accounts
receivable of the Business which were outstanding on the date of the Closing
(the "Pre-Closing Receivables"). In the event that the sum of the collections of
Pre-Closing Receivables during the Collection Period plus the amount of cash of
the Company on the date of the Closing available to the Purchaser (the "Closing
Cash") exceeds (the "Excess") the sum of $1,800,000 plus the aggregate amount of
the accounts payable and
21
accrued expenses of the Company included in the Assumed Liabilities as of the
date of the Closing (such sum is herein after referred to as the "Target
Amount"), the Purchaser shall pay to the Company the amount of such Excess on or
before the Reconciliation Date. In the event that the sum of the amount
collected plus the Closing Cash shall be less (the "Shortfall") than the Target
Amount, each of the Company and the Shareholders, jointly and severally, shall
be obligated to pay on or before the Reconciliation Date to the Purchaser the
amount of the Shortfall. The Purchaser shall permit the Company to review the
Purchaser's calculations of collections of Pre-Closing Receivables and the
amounts of the Closing Cash, the accounts payable and accrued expenses of the
Business and the parties agree to negotiate in good faith to resolve any
controversies relating to such calculations.
H. Post-Closing Operations. Subsequent to the Closing, the
Shareholders shall assist the Purchaser and do all things reasonably requested
by the Purchaser in connection with the recruitment of an executive (the
"Executive") who will be groomed to manage the day-to-day operations of the
Business. The Executive shall report to the President of the Phoenix Marketing
Group Division of the Purchaser. In addition, the Purchaser agrees to pay all
recruiting related costs with respect to the Executive and the Executive's
salary for the first six months of his employment (such expenses, the "Executive
Expenses"). The Purchaser agrees that, subsequent to the Closing, the Business
shall have its offices at Xxx Xxxxxxx Xxxxx, Xxxxxxx Xxxx, Xxx Xxxxxx and 00
Xxxxxx Xxxxx Xxxx, Xxxxxxx Xxxx, Xxx Xxxxxx. In addition, the Purchaser agrees
to cause its Phoenix Marketing Group Division to offer employment to Xxxxxx
Xxxxxx under a three-year employment agreement.
I. Note Payments. The Purchaser hereby acknowledges that it
will have sufficient resources to pay the Notes, if a cash payment thereunder is
required, and a sufficient number of authorized but unissued shares of Purchaser
Common Stock to issue the number of shares of Purchaser Common Stock required to
be issued upon conversion of the Convertible Note.
SECTION V
CLOSING
A. Time and Place of Closing. The closing
of the purchase and sale of the Assets as set forth herein
22
(the "Closing") shall be held at the offices of Xxxxxx & Xxxxxx, 20th Floor, 000
Xxxx Xxxxxx, Xxx Xxxx, XX 00000, on October 16, 1997 or such other time and
place as the parties
mutually agree upon.
B. Delivery of Assets. Delivery of the Assets shall be made by
the Company to the Purchaser (or the Designee) at the Closing by delivering such
deeds, bills of sale, assignments and other instruments of conveyance and
transfer, and such powers of attorney, as shall be effective to vest in the
Purchaser (or the Designee) title to or other interest in, and the right to full
custody and control of, the Assets, free and clear of all liens, charges,
encumbrances and security interests whatsoever.
C. Sales and Use Taxes. Any and all sales or
use Taxes or any other Taxes or charges assessed in
connection with this transaction shall be paid by the
Company.
SECTION VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE
The obligation of the Company to sell the Assets and the
obligation of the Company otherwise to consummate the transactions contemplated
by this Agreement at the Closing are subject to the following conditions
precedent, any or all of which may be waived by the Company in writing in its
sole discretion, and each of which the Purchaser hereby agrees to use its best
efforts to satisfy at or prior to the Closing:
A. No Litigation. No action, suit or proceeding against the
Company, either of the Shareholders or the Purchaser relating to the
consummation of any of the transactions contemplated by this Agreement or any
governmental action seeking to delay or enjoin any such transactions shall be
pending or threatened.
B. Representations and Warranties. The representations and
warranties made by the Purchaser herein shall be correct as of the date of the
Closing in all respects with the same force and effect as though such
representations and warranties had been made as of the date of the Closing, and,
on the date of the Closing, the Purchaser shall deliver to the Company a
certificate dated the date of the Closing to such effect. All the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Purchaser on or before the date of
23
the Closing shall have been duly complied with and performed in all material
respects, and, on the date of the Closing, the Purchaser shall deliver to the
Company a certificate dated the date of the Closing to such effect.
C. Other Certificates. The Company shall have received such
additional certificates, instruments and other documents in form and substance
satisfactory to it and its counsel, as it shall have reasonably requested in
connection with the transactions contemplated hereby.
D. Deliveries. All deliveries by the Purchaser
required hereunder, including the Purchase Price deliverable
at the Closing, shall have been made.
E. Employment Agreements. The Purchaser (or the Designee) and
each of the Shareholders shall have entered into employment agreements (the
"Employment Agreements") substantially in the form of Exhibits F-1 and F-2,
respectively, attached hereto.
F. Lease. The Purchaser (or the Designee) and
Phoenix Realty Partners shall have entered into a lease (the
"Lease") substantially in the form of Exhibit I attached
hereto.
G. Opinion of the Purchaser's Counsel. The Company and the
Shareholder shall have received an opinion of Xxxxxx & Xxxxxx, counsel for the
Purchaser, delivered to the Company and the Shareholders, pursuant to the
instructions of the Purchaser, dated the date of Closing, in form and substance
reasonably satisfactory to counsel for the Company and the Shareholders.
H. Security Agreement. The Purchaser (or the
Designee) and the Company shall have entered into a security
agreement (the "Security Agreement") substantially in the
form of Exhibit J attached hereto.
SECTION VII
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Assets and
otherwise to consummate the transactions contemplated by this Agreement at the
Closing is subject to the following conditions precedent, any or all of which
may be waived by the Purchaser in its sole discretion, and each of which the
Company hereby agrees to use its best efforts to satisfy at or prior to the
Closing:
24
A. Opinion of the Company's Counsel. The Purchaser shall have
received an opinion of Xxxxx, Banta, Rizzi, Xxxxxxxxxxxx & Xxxxxxxxx P.C.,
counsel for the Company and the Shareholders, delivered to the Purchaser
pursuant to the instructions of the Company and the Shareholders, dated the date
of the Closing, substantially to the effect set forth in Exhibit G attached
hereto.
B. No Litigation. No action, suit or proceeding against the
Company, either of the Shareholders or the Purchaser relating to the
consummation of any of the transactions contemplated by this Agreement nor any
governmental action seeking to delay or enjoin any such transactions shall be
pending or threatened.
C. Representations and Warranties. The representations and
warranties made by the Company and each of the Shareholders herein shall be
correct as of the date of the Closing in all respects with the same force and
effect as though such representations and warranties had been made as of the
date of the Closing, and, on the date of the Closing, the Company and the
Shareholders shall deliver to the Purchaser a certificate dated the date of the
Closing to such effect. All the terms, covenants and conditions of this
Agreement to be complied with and performed by the Company and each of the
Shareholders on or before the date of the Closing shall have been duly complied
with and performed in all material respects and, on the date of the Closing, the
Company and each of the Shareholders shall deliver to the Purchaser a
certificate dated the date of the Closing to such effect.
D. Other Certificates. The Purchaser shall have received such
other certificates, instruments and other documents, in form and substance
satisfactory to the Purchaser and its counsel, as it shall have reasonably
requested in connection with the transactions contemplated hereby.
E. Third Party Consents. The Purchaser shall have received all
necessary consents of third parties under the contracts, agreements, leases,
insurance policies and other instruments of the Company or each of the
Shareholders to the consummation of the transactions contemplated hereby which
consents shall not provide for the acceleration of any liabilities or any other
detriment to the Purchaser or the Business.
F. Employment Agreements. The Purchaser (or the
Designee) and the Shareholders shall have entered into the
Employment Agreements.
25
G. Deliveries. All deliveries by the Company and the
Shareholders required hereunder shall have been made, including such deeds,
bills of sale, assignments and other instruments of conveyance and transfer, and
such powers of attorney, as shall be effective to vest in the Purchaser (or the
Designee) title to or other interest in, and the right to full custody and
control of, the Assets, free and clear of all liens, charges, encumbrances and
security interests whatsoever.
H. Change of Name. The Company acknowledges that the Company's
name is included in the Assets being purchased hereunder, and accordingly, the
Purchaser shall have received evidence that the Company has taken all steps
necessary to change its name to a corporate name other than Phoenix Marketing
Group, Inc. and a written consent duly executed by the Company evidencing its
consent to the use by the Purchaser and any subsidiaries, affiliated companies
or assigns of the Purchaser of the name "Phoenix Marketing" and variants
thereof.
I. Shareholder Agreement. The Company and the
Purchaser shall have entered into a Shareholder Agreement in
the form of Exhibit H attached hereto.
J. Key Employee Options. The Purchaser shall grant to the Key
Employees options to acquire an aggregate of up to 25,000 shares of Purchaser
Common Stock pursuant to the Purchaser's Stock Option Plan.
K. Lease. The Purchaser (or the Designee) and Phoenix Realty
Partners shall have entered into the Lease.
L. Release of Liens. The Purchaser shall have received
evidence satisfactory to the Purchaser and its counsel of the release of the
liens and security interests related to the Assets described in Exhibit B
attached hereto, including, but not limited to, the release of any liens and
security interests of Fleet Bank, for itself and as successor in interest to
National Westminster Bank, against receipt by Fleet Bank from the Purchaser of
$1,046,247.51.
SECTION VIII
INDEMNIFICATION
A. Indemnification by the Company and the
Shareholders. Each of the Company and each of the
Shareholders, jointly and severally, shall indemnify and
26
hold harmless the Purchaser from and against any and all losses, claims,
assessments, demands, damages, liabilities, obligations, costs and/or expenses
whatsoever (hereinafter referred to collectively as the "Purchaser's Damages"),
including, without limitation, Purchaser's Counsel Expenses (as hereinafter
defined), sustained or incurred by the Purchaser (or the Designee) as a result
of or arising from (a) the breach of any of the obligations, covenants or
provisions of, or the inaccuracy of any of the representations or warranties
made by the Company or each of the Shareholders herein or (b) any liabilities or
obligations of the Company which are not Assumed Liabilities. For purposes
hereof "Purchaser's Counsel Expenses" shall mean reasonable fees and
disbursements of counsel howsoever sustained or incurred by the Purchaser (or
the Designee), including, without limitation, in any action or proceeding
between the Purchaser and either of the Shareholders and/or the Company or in
any action or proceeding between the Purchaser and any third party. In addition
to the right of the Purchaser to indemnification hereunder, the Purchaser shall
have the right from time to time to set off the amount of any of the Purchaser's
Damages against any payment of principal of or interest on the Convertible Note
and, after conversion of the Convertible Note, against the Escrowed Stock (as
hereinafter defined); provided, however, that the Purchaser shall not have the
right to set-off under this Section VIII(A) the amount of the Purchaser's
Damages which it may sustain or incur by reason of a breach of either of the
Shareholders' covenants contained in Section IX hereof. Upon conversion of the
Convertible Note in accordance with the terms thereof, the Company and the
Shareholders agree that the Company shall place in escrow with the Purchaser
such number of shares of Purchaser Common Stock (the "Escrowed Stock") issued
upon conversion of the Convertible Note such that the value of the Escrowed
Stock multiplied by the Market Value (as hereinafter defined) shall equal
$1,500,000 on the date of conversion. For purposes hereof, "Market Value" shall
mean the price per share to the public in the IPO (as defined in the Convertible
Note) of the Purchaser Common Stock. The Purchaser shall be entitled to set off
the amount of any Purchaser's Damages against the Escrowed Stock (either by
cancelling such number of shares of Escrowed Stock equal in value (based on the
average closing price of the Purchaser Common Stock as reported in The Wall
Street Journal, Eastern Division) to the amount of the Purchaser's Damages or by
causing the Company to sell shares of Escrowed Stock, the net proceeds of which
shall be equal to the amount of the Purchaser's Damages and to remit the net
proceeds thereof to the Purchaser). The Purchaser shall hold the Escrowed Stock
in escrow for a period commencing on the date of conversion
27
and ending one year from the date of Closing, unless prior to such date notice
has been given by the Purchaser to the Company of a claim for Purchaser's
Damages, in which case Purchaser shall be entitled to retain an amount of
Escrowed Stock equal in value (based on the average closing price of the
Purchaser Common Stock as reported in the Wall Street Journal, Eastern Division)
to the amount of such claim until the resolution of such claim.
B. Indemnification by the Purchaser. The
Purchaser shall indemnify and hold harmless each of the
Company and either of the Shareholders from and against any
and all losses, claims, assessments, demands, damages,
liabilities, obligations, costs and/or expenses whatsoever
(hereinafter referred to as the "Shareholders' Damages"; the
Shareholders' Damages and the Purchaser's Damages are
sometimes referred to herein as the "Damages"), including,
without limitation, Shareholders' Counsel Expenses (as
hereinafter defined), sustained or incurred by the Company
and/or either of the Shareholders as a result of or arising
from (a) the breach of any of the obligations, covenants or
provisions of, or the inaccuracy of any of the
representations or warranties made by, the Purchaser herein
or (b) the Assumed Liabilities. For purposes hereof
"Shareholders' Counsel Expenses" shall mean reasonable fees
and disbursements of counsel howsoever sustained or incurred
by the Company and/or either of the Shareholders, including,
without limitation, in any action or proceeding between
either of the Shareholders and/or the Company and the
Purchaser or in any action or proceeding between either of
the Shareholders and/or the Company and any third party.
C. Procedure for Indemnification. In the event that any party
hereto shall incur any Damages in respect of which indemnity may be sought by
such party pursuant to this Section VIII, the party from whom such indemnity may
be sought (the "Indemnifying Party") shall be given written notice thereof by
the party seeking such indemnity (the "Indemnified Party"), which notice shall
specify the amount and nature of such Damages and include the request of the
Indemnified Party for indemnification of such amount. The Indemnifying Party
shall within 30 days pay to the Indemnified Party the amount of the Damages so
specified
D. Agreements Concerning Indemnification. It is
specifically understood and agreed that:
(i) The Company and the Shareholders shall not
be obligated to indemnify the Purchaser for the Purchaser's Damages unless and
until the aggregate amount of all claims for such Purchaser's Damages exceeds
$50,000 (the "Basket")
28
at which time claims may be asserted for the excess of such
amount.
(ii) The Company and the Shareholders shall not
be obligated to indemnify the Purchaser for the Purchaser's Damages in excess of
an aggregate of $1,500,000 (the "Cap") and the obligations of the Company and
the Shareholders for indemnification hereunder shall terminate when the Cap has
been paid.
SECTION IX
NON-COMPETITION AGREEMENT
Following the consummation of the transactions contemplated
hereby, and in consideration thereof, neither the Company nor either of the
Shareholders shall, (a) subsequent to the date of the Closing and until five
years after the date of the Closing, directly or indirectly, (i) engage, whether
as principal, agent, investor, distributor, representative, stockholder,
employee, consultant, volunteer or otherwise, with or without pay, in any
activity or business venture which is competitive with the business of database
driven support and sample fulfillment to meet the rapidly changing needs of
sales and marketing executives in the healthcare industry and related services
including those set forth on Annex A attached hereto, (ii) solicit or entice or
endeavor to solicit or entice away from any member of the Purchaser Group (as
hereinafter defined) any person who was or is at the time of the solicitation or
enticement a director, officer, employee, agent or consultant of such member of
the Purchaser Group, either on the Company's or the Shareholder's own account or
for any person, firm, corporation or other organization, whether or not such
person would commit any breach of such person's contract of employment by reason
of leaving the service of such member of the Purchaser Group, (iii) solicit or
entice or endeavor to solicit or entice away any person who was or is at the
time of the solicitation or enticement a client or customer of any member of the
Purchaser Group, either on the Company's or the Shareholder's own account or for
any other person, firm, corporation or organization, or (iv) employ any person
who was a director, officer or employee of any member of the Purchaser Group or
any person who is or may be likely to be in possession of any confidential
information or trade secrets relating to the business of any member of the
Purchaser Group, or (b) at any time, take any action or make any statement the
effect of which would be, directly or indirectly, to impair the good will of any
member of the Purchaser Group or the business reputation or good name of
29
any member of the Purchaser Group, or be otherwise detrimental to the Purchaser,
including any action or statement intended, directly or indirectly, to benefit a
competitor of any member of the Purchaser Group. Because the remedy at law for
any breach of the foregoing provisions of this Section IX would be inadequate,
the Company and each of the Shareholders hereby consent, in case of any such
breach, to the granting by any court of competent jurisdiction of specific
enforcement, including, but not limited to pre-judgment injunctive relief, of
such provisions, as provided for in Section XI(F) hereof.
The parties hereto agree that if, in any proceeding, the court
or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
For purposes hereof, "Purchaser Group" shall mean,
collectively, the Purchaser and its subsidiaries, affiliates and parent entities
operating in the same lines of business.
SECTION X
BROKERS AND FINDERS
A. The Company's and the Shareholders' Obligation. The
Purchaser shall not have any obligation to pay any fee or other compensation to
any person, firm or corporation dealt with by the Company or either of the
Shareholders in connection with this Agreement and the transactions contemplated
hereby, and the Company and each of the Shareholders, jointly and severally,
hereby agree to indemnify and save the Purchaser harmless from any liability,
damage, cost or expense arising from any claim for any such fee or other
compensation.
B. The Purchaser's Obligation. Neither the Company nor either
of the Shareholders shall have any obligation to pay any fee or other
compensation to any person, firm or corporation dealt with by the Purchaser in
connection with this Agreement and the transactions contemplated hereby, and the
Purchaser hereby agrees to indemnify and save the Company and each of the
Shareholders harmless from any liability, damage, cost or expense arising from
any claim for any such fee or other compensation.
30
SECTION XI
MISCELLANEOUS
A. Notices. All notices, requests or
instructions hereunder shall be in writing and delivered
personally, sent by telecopy or sent by registered or
certified mail, postage prepaid, as follows:
(1) If to the Company or the Shareholders:
c/o Phoenix Realty Partners
Xxx Xxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx
with a copy to:
Xxxxx, Xxxxx, Xxxxx,
Xxxxxxxxxxxx & Xxxxxxxxx, X.X.
Xxxxx Xxxxx Xxxxx
00 Main Street, 5th Floor
Hackensack, New Jersey 07602
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
(2) If to the Purchaser:
c/o Foster Management Company
0000 Xxxx Xxxxx Xxxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy No: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or telecopied, and two business days after the date of
mailing, if mailed.
31
B. Survival of Representations. Each representation, warranty,
covenant and agreement of the parties hereto herein contained shall survive the
Closing, notwithstanding any investigation at any time made by or on behalf of
any party hereto, for a period of twelve (12) months, except (a) for covenants
and agreements to be performed subsequent to the Closing and (b) that nothing in
the foregoing shall be deemed to diminish any Indemnifying Party's
indemnification obligations to an Indemnified Party respecting (x) any claim for
Damages under Section VIII hereof for which notice to the Indemnifying Party has
been given prior to the end of such twelve (12) month period, (y) the
representations and warranties contained in Sections II(H), (I), (V) and (Z) and
claims for common law fraud, each of which shall survive for the duration of the
applicable statutes of limitations or (z) claims based upon the Purchaser's
failure to pay any Assumed Liabilities or the Company's failure to pay any of
its liabilities (other than the Assumed Liabilities), which shall survive for
the duration of any applicable statutes of limitations governing third party
claims made with respect thereto.
C. Entire Agreement. This Agreement and the documents referred
to herein contain the entire agreement among the parties hereto with respect to
the transactions contemplated hereby, and no modification hereof shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
D. Further Assurances. Each of the parties hereto shall use
such party's best efforts to take such actions as may be necessary or reasonably
requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement. Each of the Shareholders agrees to
execute and deliver any reasonable and customary management representation
letter requested by the Purchaser's independent certified public accountants in
connection with their audit of the S-X Financial Statements.
E. Expenses. Each of the parties hereto shall bear such
party's own expenses in connection with this Agreement and the transactions
contemplated hereby.
F. Injunctive Relief. Notwithstanding the provisions of
Section XI(G) hereof, in the event of a breach or threatened breach by the
Company or either of the Shareholders of the provisions of Section IX of this
Agreement, each of the Company and each of the Shareholders hereby consents and
agrees that the Purchaser shall be entitled in order to maintain the status quo
ante pending the outcome of any arbitration pursuant to XI(G) to an
32
injunction or similar equitable relief restraining the Company or either of the
Shareholders, as the case may be, from committing or continuing any such breach
or threatened breach or granting specific performance of any act required to be
performed by the Company or either of the Shareholders, as the case may be,
under any such provision, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the necessity
of posting any bond or other security. The parties hereto hereby consent to the
jurisdiction of the federal courts for the District of New Jersey and the New
Jersey state courts located in such District for any proceedings under this
Section XI(F). The parties hereto agree that the availability of arbitration in
Section XI(G) hereof shall not be used by any party as grounds for the dismissal
of any injunctive actions instituted by the Purchaser pursuant to this Section
XI(F).
G. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof shall, except as provided in
Section XI(F) hereof, be settled by arbitration in accordance with the rules of
the American Arbitration Association for a single arbitrator then in effect and
judgment upon such award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitration shall be held in the Hackensack,
New Jersey area. The arbitrator shall award attorney's fees to the prevailing
party.
H. Invalidity. Should any provision of this Agreement be held
by a court or arbitrator of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitrator is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as modified by the court or the arbitrator shall be binding upon
and enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect, such invalidity,
33
illegality or unenforceability shall not affect any other provisions hereof, and
if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
I. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the successors
and assigns of the Company and the Purchaser, respectively,
and the legal representatives and heirs of the Shareholders.
J. Governing Law. The validity of this Agreement and of any of
its terms or provisions, as well as the rights and duties of the parties under
this Agreement, shall be construed pursuant to and in accordance with the laws
of the State of New Jersey, without regard to conflict of laws principles.
K. Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original,
but all of which taken together shall constitute one and the
same instrument.
* * *
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
PHOENIX MARKETING GROUP, INC.
By: /s/ Xxxxxxx Xxxxx
___________________________
Name: Xxxxxxx Xxxxx
Title: President
/s/ Xxxxxxx Xxxxx
------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxx
------------------------------
Xxxxxx Xxxxxxxx
CULTURALACCESSWORLDWIDE, INC.
By:____________________________
Name: ______________________
Title:______________________
35
