Exhibit 2.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is entered into as of
October 12, 2004 by and among Spheris Holdings LLC, a Delaware limited liability
company (the "SELLER"), and Spheris Holding, Inc., a Delaware corporation (the
"BUYER").
INTRODUCTION
The Seller owns all of the issued and outstanding shares of capital stock
of Spheris Inc., a Delaware corporation (the "COMPANY"). The Seller wishes to
sell, and the Buyer wishes to buy, all of the outstanding shares of capital
stock of the Company on the terms and conditions set forth herein.
An index of defined terms is set forth in Article 10.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
PURCHASE AND SALE; CLOSING
1.1 PURCHASE AND SALE. Subject to the terms and conditions hereof, at the
Closing, the Seller shall sell, transfer, assign and deliver to the Buyer, and
the Buyer shall purchase from the Seller, all outstanding shares of capital
stock of the Company (the "PURCHASED SECURITIES").
1.2 PURCHASE PRICE; PAYMENTS AT CLOSING.
(A) As used herein, "CLOSING PURCHASE PRICE" means $227,700,000.
(B) At least three days prior to the Closing, the Seller will furnish
to the Buyer (i) a payoff letter from each holder of Borrowed Indebtedness
indicating the amount required to discharge such indebtedness on the Closing
Date and including wire transfer instructions and (ii) a reasonably detailed
schedule setting forth the calculation of the amounts to be paid pursuant to
Section 1.2(c) below.
(C) At the Closing, the Buyer shall make, or cause to be made, the
following payments in an amount, in the aggregate, equal to the Closing Purchase
Price, by wire transfer of immediately available funds:
(I) first, to each holder of Borrowed Indebtedness, the amount of
such Borrowed Indebtedness specified in the payoff letter from such holder;
(II) second, the Sale Bonuses (which shall be paid by the
Company);
(III) third, to any payee of the Selling Expenses identified by
the Seller to the Buyer in writing prior to the Closing; and
(IV) fourth, the remainder to the Seller.
1.3 ROLLOVER SHARES.
(A) Upon the written request of the Buyer and employees of the Company
who hold limited liability company interests in the Seller (a "ROLLOVER
NOTICE"), the Seller shall distribute to such employees (the "MANAGEMENT
HOLDERS") all or any portion of the Purchased Securities allocable to the
Management Holders in accordance with the terms of the Seller's limited
liability company operating agreement or other organizational documents
(collectively, the "LLC AGREEMENT"). Such amount shall be determined by the
Seller based on the Management Holder's right under the LLC Agreement to the
distribution of the net proceeds payable to the Seller under Section 1.2(c)(iv)
(including any portion of such proceeds to be retained by Seller to satisfy the
indemnification obligations hereunder). The shares so distributed are referred
to herein as the "ROLLOVER SHARES." The Rollover Notice shall be given at least
three business days prior to the Closing Date and shall specify the employees to
whom the Rollover Shares are to be distributed and the amount of Rollover Shares
to be distributed to each such employee; provided that the total number of
Rollover Shares to be distributed to any such employee shall not exceed the
maximum number of Purchased Securities allocable to such employee in accordance
with the terms of the LLC Agreement. In the event the Buyer delivers a Rollover
Notice, (a) on or prior to the Closing Date, the Seller shall cause the Company
to issue certificates evidencing the Rollover Shares in the name of each
Management Holder as provided in the Rollover Notice, which certificates shall
be in proper form for transfer, (b) the Rollover Shares shall be free and clear
of any lien or other encumbrance, and (c) the certificates for the Rollover
Shares shall be delivered to the Buyer at the Closing, in proper form for
transfer. As a condition precedent to any distribution of Rollover Shares to a
Management Holder, such Management Holder must agree in writing with the Seller
that (y) the distribution of such Rollover Shares by the Seller to such
Management Holder is in exchange for a proportionate amount of such Management
Holder's limited liability company interests in the Seller and (z) if the Seller
is required to make any indemnification payment to the Buyer, such Management
Holder's right to further distributions under the LLC Agreement shall be reduced
by such Management Holder's proportionate share of such payment, which will be
determined without giving effect to the exchange of Rollover Shares for limited
liability company interests contemplated by clause (y) and shall be determined
as if no rollover had occurred.
(B) To the extent any Rollover Shares are issued to the employees as
provided in this Section 1.3, the net proceeds to the Seller under Section
1.2(c)(iv) shall be reduced to the amount obtained by multiplying such amount by
a fraction, the numerator of which is the number of shares of common stock of
the Company owned by
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the Seller (after giving effect to the distribution of the Rollover Shares) and
the denominator of which is the total number of shares of common stock of the
Company issued and outstanding as of the Closing.
1.4 THE CLOSING. The consummation of the transactions contemplated hereby
(the "CLOSING") will take place at Xxxxxxx Xxxx & Xxxxxxxxx LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx on the later of (a) November 5, 2004 or (b) if the
conditions set forth in Article 6 are not then satisfied or waived (other than
those conditions that are normally satisfied at the Closing), at such later date
as is two (2) business day after satisfaction or waiver of such conditions or
such other date that is agreed to in writing by the Seller and the Buyer (the
"CLOSING DATE").
1.5 DELIVERIES AT CLOSING BY THE SELLER AND THE COMPANY. At the Closing,
and upon satisfaction or waiver of the conditions set forth in Section 6.2, the
Seller and the Company will deliver or cause to be delivered the instruments,
consents, opinions, certificates and other documents required of them by Section
6.1.
1.6 DELIVERIES AT CLOSING BY THE BUYER. At the Closing, and upon
satisfaction or waiver of the conditions set forth in Section 6.1, the Buyer
will deliver or cause to be delivered the instruments, consents, opinions,
certificates and other documents required of it by Section 6.2.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLER
The Seller hereby represents and warrants to the Buyer that each of the
statements contained in this Article 2 is true and correct.
2.1 TITLE. Subject to Section 1.3, the Seller (a) is the record owner of
the Purchased Securities and (b) has good title to the Purchased Securities free
and clear of all Liens (other than restrictions under applicable securities laws
and Liens which will be terminated in connection with the Closing). Subject to
Section 1.3, on the Closing Date, the Seller shall transfer to the Buyer good
title to the Purchased Securities, free and clear of all Liens (other than
restrictions pursuant to applicable securities laws). The Seller has not granted
any option or right, and is not a party to any other agreement that requires or,
upon the passage of time, the payment of money or occurrence of any other event,
would require the Seller to transfer any of the Purchased Securities to anyone
other than the Buyer.
2.2 ORGANIZATION AND AUTHORITY. The Seller is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware, and the Seller has the requisite limited liability company power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Seller and the consummation by the Seller of the transactions
contemplated hereby have been duly and
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validly authorized by all requisite limited liability company action, and no
other limited liability company action on the part of the Seller is necessary to
authorize its execution, delivery or performance of this Agreement.
2.3 VALIDITY AND ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Seller and is, and each of the other agreements and instruments
of the Seller contemplated hereby will be when executed and delivered, the valid
and binding obligations of the Seller, enforceable against the Seller in
accordance with its and their respective terms, subject to applicable
bankruptcy, insolvency and other Laws affecting the rights and remedies of
creditors, and except that the remedies of specific performance and injunctive
relief may be subject to equitable defenses and the discretion of the court
before which any proceeding therefor may be brought. The execution, delivery and
performance of this Agreement and the other instruments and agreements
contemplated hereby by the Seller will not (a) result in any violation of or be
in conflict with any law, statute, regulation ordinance, judgment, decree or
order by which the Seller is bound, or any provision of the Seller's certificate
of formation or limited liability company agreement, or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration of
or create in any party the right to accelerate, terminate, modify, cancel, or
require any notice under any contract, agreement or instrument to which the
Seller is a party or by which the Seller is bound or to which any of its assets
is subject, except for such conflicts, breaches, defaults or rights that have
not had, and would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
2.4 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 2.4, no
consent, order, license, permit, authorization, registration, certification,
declaration, filing or other approval from or with any Governmental Entity or
third party is required on the part of the Seller for the execution, delivery
and performance of this Agreement by the Seller and the consummation by the
Seller of any of the transactions contemplated by this Agreement and the other
documents and instruments to be executed by the Seller pursuant to this
Agreement, other than such consents, orders, licenses, permits, authorizations,
registrations, certifications, declarations, filings or other approvals the
absence of which would not be reasonably expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
The Seller represents and warrants to the Buyer that each of the statements
contained in this Article 3 is true and correct.
3.1 ORGANIZATION, POWER AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full corporate power and authority to own, lease and
operate its
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properties and to carry on its business as such business is now conducted. The
copies of the Certificate of Incorporation and By-Laws of the Company, each as
amended to date (the "COMPANY CHARTER DOCUMENTS"), that have been made available
to the Buyer by the Seller are complete and correct copies thereof.
3.2 SUBSIDIARIES. SCHEDULE 3.2 sets forth a list of the direct and indirect
subsidiaries of the Company. The entities indicated on such Schedule as
subsidiaries are referred to herein as the "SUBSIDIARIES" and each as a
"SUBSIDIARY." Except as set forth on SCHEDULE 3.2, neither the Company nor any
Subsidiary owns or has the right to acquire directly or indirectly any equity
interest in any corporation, limited liability company, partnership, joint
venture, trust or other business organization. The record owners of all of the
issued and outstanding capital stock or other equity interests of each
Subsidiary are as listed on SCHEDULE 3.2. Each Subsidiary is duly organized or
formed, validly existing and in good standing under the laws of its state of
organization, as set forth on SCHEDULE 3.2. Each of the Subsidiaries has full
corporate or other organizational power and authority to own, lease and operate
its properties and to carry on its business as such business is now conducted.
All of the issued and outstanding shares of capital stock of each Subsidiary are
duly and validly issued and outstanding, and are fully paid and non-assessable.
All of the issued and outstanding shares of capital stock of each Subsidiary are
directly or indirectly owned by the Company, free and clear of all Liens (other
than Liens which will be released at the Closing and restrictions pursuant to
applicable securities laws). There are no outstanding subscriptions, options,
warrants, convertible or exchangeable securities or other agreements,
commitments or rights of any kind that would obligate any Subsidiary to issue
shares of capital stock or other equity securities.
3.3 CAPITALIZATION. SCHEDULE 3.3 sets forth a complete and accurate list of
all outstanding shares of capital stock of the Company and the record holders
thereof. All issued and outstanding shares of capital stock of the Company are
duly and validly issued and outstanding, and are fully paid and non-assessable.
There are no outstanding subscriptions, options, warrants, convertible or
exchangeable securities or other agreements, commitments or rights of any kind
that would obligate the Company to issue shares of its capital stock or other
equity securities. Upon the consummation of the transactions contemplated by
this Agreement, the Buyer will own all of the issued and outstanding capital
stock of the Company, free and clear of all Liens (other than restrictions
pursuant to applicable securities laws).
3.4 FOREIGN QUALIFICATIONS. SCHEDULE 3.4 sets forth a complete and accurate
list of each jurisdiction in which the Company or any Subsidiary is qualified to
do business as a foreign entity. Each of the Company and each Subsidiary is
qualified to do business as a foreign entity in every jurisdiction in which the
character of the properties owned or leased or the nature of the activities
conducted by such entity makes such qualification or licensing necessary, except
for any jurisdiction(s) in which the failure to so qualify has not had, and
would not be reasonably expected to have, a Company Material Adverse Effect.
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3.5 FINANCIAL STATEMENTS. The Seller has delivered to the Buyer (a) audited
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 2003 and December 31, 2002, and audited consolidated statements of income,
stockholders' equity and cash flows for the fiscal years then ended
(collectively, the "AUDITED FINANCIAL STATEMENTS"), and (b) an unaudited
consolidated balance sheet of the Company (the "BALANCE SHEET") as of August 31,
2004 (the "BALANCE SHEET DATE") and an unaudited consolidated statement of
income for the eight month period then ended (collectively, the "UNAUDITED
FINANCIAL STATEMENTS" and, together with the Audited Financial Statements, the
"FINANCIAL STATEMENTS"). The Financial Statements and the notes thereto, if any,
fairly present, in all material respects, the financial position, results of
operations and changes in cash flows of the Company and its Subsidiaries as of
the dates and for the periods then ended and were prepared in accordance with
the books and records of the Company and its Subsidiaries determined in
accordance with GAAP, consistently applied with the Company's past practices
(except as otherwise stated therein or in the case of unaudited financial
statements for the omission of footnotes and subject to year end audit
adjustments (which adjustments would not be reasonably expected to be material,
either individually or in the aggregate)).
3.6 ABSENCE OF MATERIAL UNDISCLOSED LIABILITIES. Except as disclosed in
SCHEDULE 3.6, neither the Company nor any Subsidiary has any material
indebtedness or material liability, absolute or contingent, direct or indirect,
which is not shown or provided for in the Audited Financial Statements or on the
face of the Balance Sheet, other than liabilities incurred or accrued in the
ordinary course of business (including Liens for current taxes and assessments
not in default) since December 31, 2003.
3.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.7, (a)
since the Balance Sheet Date, (i) neither the Company nor any Subsidiary has
declared, set aside or paid any dividend or other distribution with respect to
the Company's capital stock or that of its Subsidiaries (other than dividends
declared, set aside or paid after the date hereof in accordance with Section
5.2(b)(iii) of this Agreement), (ii) redeemed, purchased or otherwise acquired
directly or indirectly any of the Company's capital stock or that of its
Subsidiaries, paid any management, consulting or other similar fee to any
Affiliate of the Seller, the Company or any Subsidiary (other than compensation
paid in the ordinary course to employees who are Affiliates and other than
scheduled payments of Parthenon Management Fees for the period through September
30, 2004), (iii) the Company and its Subsidiaries have conducted their business
in all material respects in the ordinary course consistent with past practice,
(iv) there has been no event, circumstance or condition which has had, or would
be reasonably expected to have, a Company Material Adverse Effect, (v) no Lien
has been placed upon any asset of the Company or any Subsidiary other than
Permitted Liens, and (vi) the Company and each Subsidiary has complied with the
covenants and restrictions set forth in Sections 5.2(b)(ii), (v), (vii), (viii),
(x), (xi) and (xiv) of this Agreement (and Section 5.2(b)(xv) in respect of such
covenants and restrictions) as if this Agreement had been executed on, and in
effect since, the Balance Sheet Date, and (b) since December 31, 2003, the
Company and each Subsidiary has complied with the covenants and restrictions set
forth in Sections 5.2(b)(i), (iii)(b), (iii)(c), (iv), (vi), (ix) and (xii) of
this Agreement (and Section
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5.2(b)(xv) in respect of such covenants and restrictions) as if this Agreement
had been executed on, and in effect since, December 31, 2003.
3.8 TAXES. The representations set forth in this Section 3.8 are subject to
the qualifications set forth on SCHEDULE 3.8.
(A) The Buyer has been provided with true and correct copies of all
the Tax Returns of the Company and its Subsidiaries for all open years. The
Company and its Subsidiaries have prepared and filed when due all material Tax
Returns and have paid when due all material Taxes shown to be due thereon, other
than those not yet delinquent. All such Tax Returns are true and correct in all
material respects. All material Taxes relating to periods ending on or before
the Closing Date which the Company or any of its Subsidiaries may be liable
under Treasury Regulations Section 1.1502-6 (or analogous state or foreign
provisions) by virtue of having been a member of any "affiliated group" within
the meaning of Section 1504(a) of the Code or other group filing on a combined
or unitary basis at any time on or prior to the Closing Date (other than an
affiliated group, the common parent of which is the Company), if required to
have been paid, have been paid (except for Taxes which are being contested in
good faith). Any liability of the Company or any of its Subsidiaries for Taxes
not yet due and payable, or which are being contested in good faith, has been
provided for on the financial statements of the Company in accordance with GAAP,
consistently applied. Neither the Company nor any Subsidiary has ever executed
any waiver that would have the effect of extending any applicable statute of
limitations in respect of any Tax. The Seller does not know of any unpaid
assessment against the Company or any Subsidiary of any material additional
Taxes for any fiscal period or any pending or threatened tax examination or
audit by any federal, state or local taxing authority. To the knowledge of the
Seller, all material Taxes that the Company and each Subsidiary is required by
law to withhold or to collect for payment have been duly withheld and collected
and, to the extent required, paid to the proper Governmental Entity. There are
no material Tax Liens or claims pending or, to the knowledge of the Seller,
threatened against the Company, any Subsidiary, or their respective assets or
property, other than Permitted Liens. There are no outstanding Tax sharing
agreements or other such arrangements between the Seller, the Company, any
Subsidiary or any other Person.
(B) Seller is not a "foreign person" within the meaning of Section
1445 of the Code. Neither the Company nor any of its Subsidiaries 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 Section 355 or Section 361 of the Code.
(C) For purposes of this Agreement, "TAXES" shall mean any and all
federal, state, local, foreign and other taxes, levies, fees, imposts, duties
and charges of whatever kind (including any interest, penalties or additions to
the tax imposed in connection therewith or with respect thereto), whether or not
imposed on the Company, including, without limitation, taxes imposed on, or
measured by, income, franchise, profits or gross receipts, and also ad valorem,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, employment, social
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security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes and customs, duties, whether disputed or not, and including any
obligations to indemnify or otherwise assume or succeed to the Tax liability of
any other Person; and "TAX RETURNS" shall mean returns, reports, information
statements and other documentation filed or maintained, or required to be filed
or maintained, in connection with the calculation, determination, assessment,
claim for refund or collection of any Tax and shall include any amended returns.
3.9 PERSONAL PROPERTY. Except as set forth on SCHEDULE 3.9 hereto, the
Company and each of its Subsidiaries has good title to, or a valid leasehold,
license or other similar interest in, each item of tangible personal property
used primarily by it and which is material to the Company or any Subsidiary free
and clear of all Liens, except for Permitted Liens. Except as set forth on
SCHEDULE 3.9, the material operating assets of the Company and its Subsidiaries
are in adequate condition to conduct the business of the Company and its
Subsidiaries as the same is conducted on the date hereof, normal wear and tear
excepted. As used herein, "PERMITTED LIENS" means (a) such imperfections of
title, easements, encumbrances or restrictions which do not materially impair
the current use of the Company's or any Subsidiary's assets, (b) materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's and other like
Liens arising in the ordinary course of business, (c) Liens for Taxes not yet
due and payable, or being contested in good faith, (d) purchase money Liens
incurred in the ordinary course of business, and (e) the Liens listed on
SCHEDULE 3.9.
3.10 REAL PROPERTY.
(A) The Company and its Subsidiaries do not own any real property.
(B) SCHEDULE 3.10 describes each interest in real property leased by
the Company and its Subsidiaries, including the lessor of such leased property,
and identifies each lease or any other arrangement under which such property is
leased and all amendments and modifications thereto, true and complete copies of
which have been made available to the Buyer. The Company and each of its
Subsidiaries enjoys peaceful and quiet possession of its leased premises and
have performed all material obligations required to be performed by them
thereunder, and none of the Seller, the Company and each of its Subsidiaries
have received any written notice asserting the existence of a material default
under any such leasehold or been informed in writing that the lessor under any
of the leases has taken action or, to the knowledge of the Seller, threatened to
terminate the lease before the expiration date specified in the lease, and,
except as shown on SCHEDULE 3.10, the transactions contemplated by this
Agreement will not constitute a default thereunder or be the basis for the
lessor to terminate the lease prior to that expiration date. The Company and its
Subsidiaries have a valid leasehold interest in each leased real property
material to its business free and clear of all Liens other than Permitted Liens.
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3.11 INTELLECTUAL PROPERTY.
(A) As used herein "INTELLECTUAL PROPERTY" means all (i) patents,
patent applications and patent disclosures, (ii) trademarks, service marks,
trade dress, trade names and corporate names and other designations of source
(in each case, whether registered or unregistered) and registrations and
applications for registration thereof together, to the extent applicable, with
all of the goodwill associated therewith, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) computer software, data, databases and documentation
thereof, (v) trade secrets and other confidential information (including,
without limitation, ideas, formulae, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vi) domain names and (vii) Internet web sites
and all intellectual property used in connection therewith. As used herein
"COMPANY INTELLECTUAL PROPERTY" means Intellectual Property owned or used by the
Company or any Subsidiary.
(B) SCHEDULE 3.11 hereto contains a complete and current list of all
material Company Intellectual Property included in clauses (i), (ii) (iii) and
(vi) of the definition of Company Intellectual Property which the Company or any
Subsidiary has registered with a Governmental Entity or other appropriate
authority, or with respect to which the Company or any Subsidiary has filed an
application for such a registration (which has not otherwise been abandoned by
the Company). SCHEDULE 3.11 also contains a list of all material licenses and
other rights granted by the Company or any Subsidiary to any third party with
respect to any Company Intellectual Property and all material licenses and other
rights granted by any third party to the Company with respect to any Company
Intellectual Property (excluding "off-the-shelf" programs or products or other
software licensed in the ordinary course of business) identifying the subject
Intellectual Property. There is no threatened loss or expiration of any material
Company Intellectual Property nor will the transactions contemplated by this
Agreement result in such loss or expiration. The Company and each Subsidiary has
taken commercially reasonable and appropriate actions to maintain and protect
the material Company Intellectual Property.
(C) The Company and each Subsidiary own all right, title and interest
in and to or possess sufficient legal rights to use all material Intellectual
Property necessary for their business as now conducted. Neither the Company nor
any Subsidiary is violating or infringing any Intellectual Property of any other
Person, and, to the knowledge of the Seller, no third party is violating or
infringing on any material Company Intellectual Property except for such
violations and infringements that have not had, and would not be reasonably
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(D) Other than with respect to copyrightable works that are "works
made for hire" within the meaning of the Copyright Act of 1976, the Company and
its Subsidiaries have obtained from all individuals who participated in the
invention or
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authorship of any material Company Intellectual Property owned by the Company or
a Subsidiary (the "OWNED INTELLECTUAL PROPERTY") effective waivers of any and
all ownership rights of such individuals in the Owned Intellectual Property and
written assignments to the Company or a Subsidiary of all rights with respect
thereto, except where the failure to obtain such waivers and assignments have
not had, and would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
3.12 INFORMATION RELATING TO MATERIAL CONTRACTS. SCHEDULE 3.12 hereto sets
forth a complete and correct list and, if such Contract is not in writing, a
summary description of the following Contracts, as in effect on the date hereof
(collectively, "MATERIAL CONTRACTS"):
(A) Contracts with respect to which the Company or any Subsidiary has
any stated liability or obligation, contingent or otherwise, requiring payment
by the Company or such Subsidiary of more than $250,000, other than purchase
orders entered into in the ordinary course of business;
(B) Contracts of the Company or any Subsidiary relating to the
borrowing of money or lines of credit (including security and pledge
agreements), or the guaranty of any obligation for the borrowing of money or
lines of credit;
(C) Contracts which place any material limitation on the method of
conducting or scope of the Company's or any Subsidiary's business, including
agreements containing covenants not to compete;
(D) Contracts under which the amount payable by the Company or any
Subsidiary is dependent on the revenue, income or similar financial measure of
the Company, any Subsidiary or any other Person;
(E) Contracts with the top eleven customers of the Company and its
Subsidiaries for the one-month period ending June 30, 2004 based on the amount
of consolidated revenue represented by such customer for such period;
(F) Contracts with the top ten suppliers of the Company and its
Subsidiaries for the eighteen month period ending June 30, 2004 based on the
consolidated dollar amount of purchases from such supplier for such period;
(G) Contracts for employment, severance, consulting or deferred
compensation;
(H) Contracts of the Company or any Subsidiary with officers,
directors, managers or employees of the Company or any Subsidiary involving
annual payments in excess of $125,000;
(I) shareholders' Contracts and Contracts relating to the issuance or
ownership of any equity securities, or securities convertible into or
exchangeable for
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equity securities, of the Company or any Subsidiary or the granting of
registration rights with respect thereto;
(J) Contracts for the sale or purchase of any assets, property or
rights of the Company or any Subsidiary for a purchase price of $250,000 or more
(other than purchase orders entered into in the ordinary course of business), or
for the grant of any options or preferential rights to purchase any such assets,
property or rights for a purchase price of $250,000 or more (other than purchase
orders entered into in the ordinary course of business);
(K) partnership and joint venture Contracts to which the Company or
any Shareholder is a party; and
(L) amendments, modifications, extensions and renewals of the items
set forth in (a) through (k) hereof.
The Company has made available to the Buyer true and correct copies of all
Material Contracts. Each Material Contract is valid, binding and enforceable
against the Company and each Subsidiary party thereto, and, to the knowledge of
the Seller, each third party thereto, in accordance with its terms, and each
Material Contract is in full force and effect. Each of the Company and the
Subsidiaries has performed all obligations required to be performed by it to
date under, and is not in default in connection with, any Material Contract, and
no event has occurred which, with due notice or lapse of time or both, would
constitute such a default, except for such non-performance and defaults as have
not had, and would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect. To the knowledge of the Seller, no
other party to any Company Material Contract is in default in respect thereof,
and no event has occurred which, with due notice or lapse of time or both, would
constitute such a default, except for such defaults as have not had, and would
not be reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
3.13 LITIGATION. Except as disclosed on SCHEDULE 3.13, there is no claim,
action, suit, proceeding, arbitration, litigation or investigation, whether
civil, criminal or administrative (each, a "PROCEEDING") pending or, to the
knowledge of the Seller, threatened against the Company or any Subsidiary, by or
before any Governmental Entity or by any third party, which (taken with all
other such Proceedings) has had or, if adversely determined, would be reasonably
expected to have, a Company Material Adverse Effect and neither the Company nor
any Subsidiary is subject to any outstanding judgment, decree or order of any
Governmental Entity.
3.14 REQUIRED CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 3.14
and except for applicable filings and approvals under the HSR Act, (a) no
consent, order, license, permit, authorization, registration, certification,
declaration, filing or other approval of any Governmental Entity or any third
party is required on the part of the Company or any Subsidiary for or in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for those which, if not
obtained, would not be reasonably expected to have, individually or in
11
the aggregate, a Company Material Adverse Effect and (b) the execution, delivery
and performance of this Agreement and consummation of the transactions
contemplated hereby will not 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
Contract, except for such breaches, defaults or rights that have not had, and
would not be reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
3.15 LICENSES AND PERMITS. SCHEDULE 3.15 hereto sets forth a list of all
material consents, orders, licenses, permits, authorizations, registrations,
certifications, declarations, filings and other approvals of, from or with any
Governmental Entity issued or granted to the Company and each Subsidiary
(collectively, the "AUTHORIZATIONS") (except for Authorizations relating to
Environmental Laws, as to which Section 3.21 only applies) and all pending
applications therefor. Each Authorization has been duly obtained, is valid and
in full force and effect, and is not subject to any pending or, to the knowledge
of the Seller, threatened administrative or judicial proceeding to revoke,
cancel, suspend or declare such Authorization invalid in any respect. All
Authorizations are sufficient and adequate in all material respects to permit
the continued lawful conduct of the businesses of the Company and its
Subsidiaries in the manner now conducted, and none of the operations of the
Company or any Subsidiary is being conducted in a manner that violates in any
material respect any of the terms or conditions under which any Authorization is
granted. None of such Authorizations is subject to termination by its terms as a
result of the execution and delivery of this Agreement by the Company or by the
consummation of the transactions contemplated by this Agreement.
3.16 COMPLIANCE WITH LAWS. The operations of the Company and each
Subsidiary have been conducted in compliance with all foreign, federal, state or
local statutes, laws, ordinances, judgments, decrees, orders or governmental
rules, regulations and requirements of all Governmental Entities, domestic or
foreign (collectively, "LAWS"), having jurisdiction over the Company or any
Subsidiary or any of their respective assets, properties or operations, except
where failure to so comply has not had, and would not be reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect (and
except as to Environmental Laws, as to which Section 3.21 only applies). Since
April 10, 2003 and, to Seller's knowledge, from December 31, 2001 to April 9,
2003, neither the Company nor any Subsidiary has received written notice of any
material violation of any such Laws, or is in default with respect to any
material order, writ, judgment, award, injunction or decree of any Governmental
Entity, domestic or foreign, applicable to the Company or any Subsidiary or any
of their respective assets, properties or operations.
3.17 EMPLOYEES AND COMPENSATION.
(A) Except as described on SCHEDULE 3.17 hereto, no employees of the
Company or any Subsidiary are represented by any union and there is no labor
strike, slowdown, stoppage or organizational effort pending or, to the knowledge
of the Seller, threatened against the Company or any Subsidiary.
12
(B) SCHEDULE 3.17 sets forth (i) a true and correct list of the name
and current annual salary of each officer or employee of the Company or any
Subsidiary whose annual cash compensation exceeds $125,000 and (ii) any other
form of compensation (other than salary, bonuses or customary benefits) paid or
payable by the Company or any Subsidiary to each such person for the current
fiscal year.
3.18 BENEFIT PLANS.
(A) SCHEDULE 3.18 hereto sets forth all material employee benefit
plans, agreements and arrangements (including, but not limited to, plans
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) sponsored, maintained or contributed by the Company
or any Subsidiary for the benefit of their respective employees, or with respect
to which the Company or any Subsidiary has had, or would be reasonably expected
to have, any material liability (including, but not limited to, liabilities
arising from affiliation under Section 414(b), (c), (m) or (o) of the Code, or
Section 4001 of ERISA) (the "BENEFIT PLANS").
(B) With respect to each Benefit Plan, the Company has made available
to the Buyer true and complete copies of: (i) any and all plan texts and
agreements; (ii) any and all summary plan descriptions and material
modifications thereto; (iii) the most recent annual report, if applicable; (iv)
the most recent annual and periodic accounting of plan assets, if applicable;
and (v) the most recent determination letter received from the Internal Revenue
Service (the "SERVICE"), if applicable.
(C) None of the Benefit Plans is a "multiemployer plan," as defined in
Section 3(27) of ERISA. Neither the Company nor any Subsidiary has withdrawn
from any multiemployer plan or incurred any withdrawal liability, and no
circumstances exist that have resulted or would be reasonably expected to
result, individually or in the aggregate, in any such withdrawal liability.
(D) Except as set forth on SCHEDULE 3.18, with respect to each Benefit
Plan: (i) such plan has been administered and enforced in accordance with its
terms and all applicable Laws in all material respects; (ii) no breach of
fiduciary duty has occurred with respect to which the Company, any Subsidiary or
any Benefit Plan may be liable or otherwise damaged in any material respect;
(iii) no material disputes are pending or threatened; (iv) no "prohibited
transaction" (within the meaning of either Section 4975(c) of the Code or
Section 406 of ERISA) has occurred with respect to which the Company, any
Subsidiary or any Benefit Plan would be liable or otherwise damaged in any
material respect; (v) if intended to qualify under Section 401(a) of the Code,
such plan is either a so-called "proto-type plan" or the Company has received a
determination letter from the Service stating that it so qualifies and that its
trust is exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such determination letter (or the date of adoption of
such plan, in the case of a proto-type plan) that has resulted, or would
reasonably be expected to result, in the loss of such qualification or exempt
status; and (vi) all contributions required to be made under any such plan have
been made by the due date thereof, and all contributions for any period ending
on or before the Closing Date which are not yet due will have been paid or
accrued by the Closing Date.
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(E) No Benefit Plan nor any "employee benefit pension plan" (as
defined in Section 3(2) of ERISA) sponsored, maintained or contributed to, or
required to be contributed to, by any entity required to be aggregated with the
Company under Section 414(b), (c), (m) or (o) of the Code, whether or not for
the benefit of employees of the Company or any Subsidiary, is subject to Title
IV of ERISA, and no circumstances exist that have resulted, or would reasonably
be expected to result, in any liability to the Company or any Subsidiary under
Title IV of ERISA.
(F) Except as set forth in SCHEDULE 3.18, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will: (i) result in any payment becoming due to any employee or former
employee of the Company or any Subsidiary, (ii) increase any benefits otherwise
payable under any of the Benefit Plans, (iii) result in any payment that will
not be deductible by the Company or any of its Subsidiaries under Section 280G
of the Code, or (iv) result in the acceleration of the time of payment or
vesting of any benefits provided under any of the Benefit Plans.
3.19 INSURANCE. The Company and its Subsidiaries, and their respective
businesses, properties and/or employees, are insured under the insurance
policies listed on SCHEDULE 3.19 (each an "INSURANCE POLICY" and, collectively,
the "INSURANCE POLICIES"), all of which are valid and in full force and will
continue in full force and effect after the Closing Date. Neither the Company
nor any of its Subsidiaries is in material default under any provisions of any
Insurance Policy nor has the Company or any of its Subsidiaries received written
notice of cancellation of any Insurance Policy. The current aggregate annual
premium for the directors' and officers' liability insurance of the Company and
its Subsidiaries is $52,330.00.
3.20 BROKERS. Except as set forth on SCHEDULE 3.20, neither the Company nor
any Subsidiary has dealt with any broker, finder or similar agent with respect
to the transactions contemplated by this Agreement, and the Company and its
Subsidiaries are under no obligation to pay any broker's fee, finder's fee or
commission in connection with the transactions contemplated by this Agreement as
a result of any agreement of the Company or any Subsidiary.
3.21 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(A) All of the Company's and each Subsidiary's operations are, and
have been, in compliance with all Environmental Laws, except for such failures
to comply as have not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
and each of its Subsidiaries have obtained all permits, licenses and
authorizations required under applicable Environmental Laws, and the Company and
its Subsidiaries and their operations are in compliance with the terms and
conditions of any required permits, licenses and authorizations, in each case
except where such failures to comply have not had, and would not be reasonably
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. The transaction contemplated by this Agreement will
14
not require the transfer or amendment of any environmental permits, licenses or
authorizations or require any notification in respect thereof.
(B) The operations of the Company and its Subsidiaries involving the
use, handling, manufacture, treatment, processing, storage, generation, release,
discharge or disposal of any Hazardous Substances are in compliance in all
respects with all applicable Environmental Laws, except for such failures to
comply as have not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(C) There is no pending or, to the knowledge of the Seller, threatened
Environmental Claim against the Company or any Subsidiary.
(D) There has been no release by the Company or any Subsidiary of any
Hazardous Substances at, on or under any property leased by it, except for such
releases as have not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(E) The Seller has provided the Buyer copies of all material
environmental studies, investigations, reports or assessments concerning the
Company and each of its Subsidiaries and real property within the possession of
the Company or any Subsidiary.
As used herein, the following terms shall have the meanings indicated
below:
"ENVIRONMENTAL LAWS" shall mean all foreign, federal, state and local
statutes, regulations, rules, judgments, decrees, orders, codes and ordinances
relating to pollution, health and safety, natural resources, Hazardous
Substances or the discharge of materials into the Environment.
"ENVIRONMENT" shall mean soil, surface waters, groundwaters, land, surface
or subsurface strata and air.
"HAZARDOUS SUBSTANCES" shall mean any substance which is a "hazardous
substance," "hazardous waste," "toxic substance," "toxic waste," "pollutant,"
"contaminant" or words of similar import under any Environmental Law, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), and the Clean Air Act (42 U.S.C.
Section 7401 et seq.), and including without limitation, which contains
polychlorinated biphenyls or gasoline, diesel fuel or other petroleum
hydrocarbons or volatile organic compounds or mold, fungi or bacterial matter.
"ENVIRONMENTAL CLAIM" shall mean any litigation, arbitration, proceeding,
order, directive, summons, complaint or citation, from any governmental
authority or any third person relating to Environmental Laws or Hazardous
Substances.
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3.22 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 3.22
hereto, neither the Company nor any Subsidiary is a party to any agreement or
arrangement with any Affiliate of the Seller, the Company or any Subsidiary
under which they: (i) lease any real or personal property (either to or from
such Person), (ii) license technology (either to or from such Person), (iii) are
obligated to purchase any tangible or intangible asset from or sell such asset
to such Person, (iv) purchase products or services from such Person, (v) pay or
receive commissions, rebates or other payments or (vi) provide or receive any
other material benefit. No Affiliate of the Seller, the Company or any
Subsidiary owns any rights in or to any of the material assets, properties or
rights used by the Company or any Subsidiary in the ordinary course of business.
3.23 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties set forth in Article 2 and this Article 3, the
Seller makes no other representation or warranty (either express or implied)
with respect to the transaction contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller and the Company that
each of the statements contained in this Article 4 is true and correct:
4.1 ORGANIZATION, POWER AND STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite power and authority to own its properties and to
carry on its business as such business is now conducted and presently proposed
to be conducted. As of the date of this Agreement, Buyer is a wholly owned
subsidiary of Warburg Pincus Private Equity VIII, L.P.
4.2 POWER AND AUTHORITY RELATIVE TO TRANSACTION. The Buyer has full power
and authority and has taken all required action necessary to permit it to
execute and deliver and to carry out the terms of this Agreement and all other
documents or instruments required hereby and none of such actions will result in
any violation of, be in conflict with or constitute a default under any charter,
by-laws, law, statute, regulation, ordinance, contract, agreement, instrument,
judgment, decree or order to which the Buyer is a party or by which the Buyer or
its assets may be bound.
4.3 VALID AND BINDING OBLIGATION. This Agreement constitutes, and each
other instrument or agreement to be executed and delivered by the Buyer in
accordance herewith will constitute, the valid and legally binding obligation of
the Buyer, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and other Laws affecting the rights
and remedies of creditors, and except that the remedies of specific performance
and injunctive relief may be subject to equitable defenses and the discretion of
the court before which any proceeding therefor may be brought.
16
4.4 CONSENTS AND APPROVALS. Except for any applicable filings under the HSR
Act, no consent, order, approval, authorization, declaration or filing from or
with any governmental authority or third party is required on the part of the
Buyer for the execution, delivery and performance of this Agreement by the Buyer
and the consummation by the Buyer of any of the transactions contemplated by
this Agreement and the other documents and instruments to be executed by the
Buyer pursuant to this Agreement.
4.5 BROKERS. The Buyer has not dealt with any broker, finder or similar
agent with respect to the transactions contemplated by this Agreement, and the
Buyer is not under any obligation to pay any broker's fee, finder's fee,
commission or similar amount in connection with the consummation of the
transactions contemplated by this Agreement.
4.6 INVESTMENT REPRESENTATIONS.
(A) The Buyer is acquiring the Purchased Securities for its own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Purchased Securities in violation of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), any rule or
regulation under the Securities Act, or any state securities laws.
(B) The Buyer has had such opportunity as it has deemed adequate to
obtain from management of the Company such information about the business and
affairs of the Company and its Subsidiaries as is necessary to permit the Buyer
to evaluate the merits and risks of its investment in the Company.
(C) The Buyer has sufficient experience in business, financial and
investment matters to be able to evaluate the merits and risks involved in the
purchase of the Purchased Securities and to make an informed investment decision
with respect to such purchase. The Buyer is an "accredited investor" within the
meaning of Rule 501 promulgated under the Securities Act.
(D) The Buyer understands that the Purchased Securities have not been
registered under the Securities Act or any other securities laws and are
therefore "restricted securities" within the meaning of Rule 144 under the
Securities Act, and the Purchased Securities cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act and applicable securities laws, or an exemption from registration
is then available.
4.7 FINANCING.
(A) The Buyer has delivered to the Seller complete and correct
executed copies of the documents listed in SCHEDULE 4.7 hereto at or prior to
the execution of this Agreement and all other letters, agreements and other
documents, excluding any agreements or understandings with respect to fees or
expenses (collectively, the "FINANCING COMMITMENTS"), issued to the Buyer or to
which the Buyer or any of its Affiliates is a party in connection with (i) the
debt financing of the
17
transactions contemplated hereby (the "DEBT FINANCING") and (ii) the equity
investment by Warburg Pincus Private Equity VIII, L.P. in the Buyer (the "EQUITY
FINANCING"). Assuming satisfaction of the conditions to transactions
contemplated by this Agreement, the Buyer will have sufficient funds to
consummate the transactions contemplated hereby and pay all its related fees and
expenses.
(B) As of the date of this Agreement, the Financing Commitments are in
full force and effect and have not been amended or modified in any respect, all
commitment fees required to be paid thereunder have been paid in full or will be
duly paid in full when due, and no event has occurred which (with or without
notice, lapse of time or both) would constitute a default thereunder on the part
of the Buyer, the lender(s) or investor(s), as the case may be.
(C) There are no conditions to the closing of the Equity Financing,
other than the satisfaction of the conditions set forth in Section 6.1 hereof.
(D) There are no facts and circumstance known to the Buyer that would,
or would be reasonably likely to, (i) prevent the conditions described in the
Financing Commitments from being satisfied, (ii) prevent the Buyer from
receiving financing pursuant to the terms of the Financing Commitments or (iii)
make any of the assumptions set forth in the Financing Commitments unreasonable.
Neither the lender(s) nor the investor(s) have advised the Buyer of any facts
which cause the Buyer to believe that the financing contemplated by the
Financing Commitments will not be consummated substantially in accordance with
the terms thereof.
4.8 NO OTHER AGREEMENTS. Except for the agreements expressly contemplated
hereby, the Buyer has no other agreements, arrangements or understandings with
any director, officer, employee, consultant, stockholder or Affiliate of the
Company or any Subsidiary in respect of the transactions contemplated hereby,
other than employment and similar arrangements that take effect at or after the
Closing.
4.9 NO OTHER REPRESENTATIONS OR WARRANTIES OF THE SELLER. The Buyer
acknowledges that none of the Seller, any Affiliate of the Seller, or any of
their respective directors, officers, managers, members, employees, consultants,
agents or advisors makes or has made any representation or warranty to the
Buyer, its Affiliates or its financing sources, except for the representations
and warranties of the Seller expressly set forth in Articles 2 and 3 of this
Agreement. In particular, and without limiting the generality of the foregoing,
the Buyer acknowledges that no representation or warranty is made with respect
to the information (including any financial projections) contained in the
Confidential Information Memorandum made available to the Buyer or any of its
Affiliates or financing sources on behalf of the Company or the Seller.
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ARTICLE 5
COVENANTS
5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(A) The Seller shall, and shall cause the Company and each Subsidiary
to, permit the Buyer and its counsel, accountants, potential lenders and equity
investors and their representatives and other representatives access, upon
reasonable notice and during normal business hours throughout the period prior
to the Closing, to the properties, books and records of the Company and its
Subsidiaries and shall, and use its reasonable efforts to cause its
representatives to furnish promptly to the Buyer such additional financial and
operating data and other information as to its business and properties as the
Buyer or its duly authorized representatives may from time to time reasonably
request. Any such access shall be managed by and conducted through the Seller,
and shall be subject to such additional limitations as the Seller may reasonably
require to prevent disclosure of the transactions contemplated hereby and/or the
unreasonable disruption of the business of the Company or any Subsidiary.
(B) The confidentiality agreement between the Company and the Buyer or
an Affiliate of the Buyer dated June 29, 2004 shall remain in full force and
effect and shall be applicable to the Buyer.
5.2 CONDUCT OF BUSINESS. Between the date of this Agreement and prior to
the Closing, or earlier termination of this Agreement, unless the Buyer shall
otherwise consent in writing (such consent not to be unreasonably withheld or
delayed):
(A) REQUIRED ACTIONS. The Seller shall cause the Company and each
Subsidiary to:
(I) maintain its corporate existence; and
(II) conduct the business of the Company and each of its
Subsidiaries only in the ordinary course of business and consistent with
past practice (including, without limitation, making capital expenditures
in the ordinary course of business and collecting accounts receivable and
paying accounts payable in the ordinary course of business), and use
reasonable efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships
(contractual or otherwise) with customers, suppliers and others having
business dealings with them, in each case to the end that their ongoing
businesses shall not be impaired in any material respect at the Closing.
(B) PROHIBITED ACTIONS. The Seller shall not permit the Company or any
Subsidiary to do any of the following without the consent of the Buyer (such
consent not to be unreasonably withheld or delayed):
19
(I) effect any change to the Company Charter Documents or the
articles of incorporation or by-laws, or other similar organizational
documents of the Subsidiaries;
(II) acquire or dispose of any material properties or assets,
except in the ordinary course of business and consistent with past
practice;
(III) (a)(i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of its Subsidiaries, except that a
Subsidiary of the Company may declare, set aside and pay a dividend or
other distribution or make advances to its parent or the Company or (ii)
redeem, purchase or otherwise acquire directly or indirectly any of the
Company's capital stock or that of its Subsidiaries; (b) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock
of any class or alter any term of any of the outstanding securities or make
any change in the outstanding shares of capital stock or other ownership
interests or in the capitalization of the Company or its Subsidiaries; or
(c) split, combine or reclassify the outstanding capital stock of the
Company or of any of the Subsidiaries of the Company;
(IV) issue any capital stock or equity interests, other than
pursuant to securities that are currently outstanding or securities that
become Purchased Securities and are purchased hereunder;
(V) except to the extent required by law or as set forth in
SCHEDULE 3.8, make or change any material election, file any amended Tax
Return, enter into any closing agreement, settle any material Tax claim or
assessment relating to the Company or any of its Subsidiaries, surrender
any right to claim a refund of Taxes, consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to
the Company or any of its Subsidiaries, or take any other similar action
relating to the filing of any Tax Return or the payment of any Tax;
(VI) make any change in its material accounting practices or
procedures, other than any change required by applicable Law or GAAP;
(VII) (i) adopt any new employee benefit plan or amend any
existing employee benefit plan in any material respect, except for changes
which are less favorable to participants in such plans or as may be
required by applicable Law or (ii) increase any compensation or enter into
or amend any employment, severance, termination or similar agreement with
any of its present officers, directors or employees, except, in the case of
employees (other than officers) for normal increases in the ordinary and
usual course of business and the payment of cash bonuses to employees
(including officers) pursuant to and consistent with existing plans or
programs; provided, however, that the Company and its Subsidiaries may pay
sale bonuses (the "SALE BONUSES") to employees in
20
connection with the Closing of the transactions contemplated hereby, so
long as the aggregate amount of such Sale Bonuses does not exceed
$1,500,000 and such amount is paid at Closing in accordance with, and
reduces the net proceeds required to be paid by Buyer to Seller pursuant
to, Section 1.2 hereof.
(VIII) (i) incur or assume any long-term or short-term debt for
borrowed money or issue any debt securities, guarantees, loans, notes,
bonds, advances or other corporate securities, or issue any option or other
rights to acquire from the Company or any Subsidiary any option, warrant or
right to purchase any securities convertible or exchangeable for debt
securities of the Company or any Subsidiary, except for borrowings under
existing lines of credit in the ordinary course of business consistent with
past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person except in the ordinary course of business
consistent with past practice in an amount not material to the Company and
its Subsidiaries, taken as a whole; (iii) make any loans, advances or
capital contributions to, or investments in, any other Person other than in
the ordinary course of business consistent with past practice in an amount
not material to the Company and its Subsidiaries, taken as a whole; (iv)
pledge or otherwise encumber the Purchased Securities, except for Permitted
Liens; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create any Lien on any such asset, except for Permitted
Liens;
(IX) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein;
(X) commence or settle any action, suit, investigation or other
proceeding, except for: (i) protest actions on contract awards, (ii)
collection or enforcement actions under current or former contracts, (iii)
any action, suit, investigation or other proceeding settled in the ordinary
course of business, (iv) any other action, suit, investigation or other
proceeding, the settlement of which would either be covered by insurance,
or the uninsured and unreserved portion of which would not exceed $100,000
(after taking into account insurance proceeds, available reserves and any
other recovery resulting from such matter) for any such individual claim
and (v) such specific matters, if any as agreed to between the Company and
the Buyer;
(XI) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except the payment, discharge or satisfaction of (i)
liabilities or obligations in the ordinary course of business consistent
with past practice or in accordance with the terms thereof as in effect on
the date hereof or (ii) claims settled or compromised to the extent
permitted by Section 5.2(b)(x);
21
(XII) change or modify in any material respect existing credit
and collection policies, procedures and practices with respect to accounts
receivable;
(XIII) pay any management, consulting or other similar fee to any
Affiliate of the Seller, the Company or any Subsidiary including, without
limitation, any Parthenon Management Fee;
(XIV) pay or pre-pay any Borrowed Indebtedness, other than the
payments set forth on SCHEDULE 5.2(B)(XIV); or
(XV) enter into an agreement to do any of the foregoing.
5.3 EXCLUSIVITY. From and after the date hereof to the Closing Date or the
earlier termination of this Agreement in accordance with its terms, each of the
Seller, the Company and its Subsidiaries will not, and will not authorize or
permit any of their respective directors, officers, controlling equity holders,
investment bankers and counsel to, directly or indirectly, solicit or engage in
discussions or negotiations with, or provide any information to, any Person,
firm or other entity or group (other than the Buyer or its representatives)
concerning any sale of the Seller, the Company or any of its Subsidiaries,
whether by merger, sale of substantially all of the assets of the Seller or the
Company, sale of shares of capital stock of the Company or of LLC interests of
the Seller (other than pursuant to existing options or warrants), or other
business combination involving the Seller or the Company. The Seller and the
Company shall promptly communicate to the Buyer any offer for any such
transaction which is received in writing by the Seller, the Company or any
Subsidiary or any of their respective Affiliates.
5.4 CONSENTS AND APPROVALS. The Seller and the Buyer shall cooperate and
use reasonable efforts to obtain (a) all governmental and regulatory approvals
and actions necessary to consummate the transactions contemplated hereby which
are required to be obtained by applicable Law or regulations or otherwise and
(b) all consents and approvals which are listed on SCHEDULE 2.4 or 3.13 and
marked by an asterisk.
5.5 FINANCING. The Buyer shall use reasonable efforts to obtain the Debt
Financing contemplated in the Financing Commitments or to obtain financing on
terms reasonably satisfactory to the Buyer, in either case in an amount which,
together with the Equity Financing, is sufficient to enable the Buyer to
consummate the transactions contemplated by this Agreement. The Seller agrees to
cooperate, and to cause the Company and its Subsidiaries to cooperate, in good
faith with any reasonable and customary request of the Buyer in connection with
the arrangement of the Debt Financing. In no event, however, will the Seller or
any of its Affiliates (other than, after the Closing, the Company and its
Subsidiaries) be liable to the Buyer or any other Person for any matter relating
to the Buyer's Debt Financing including, without limitation, any representation,
warranty, covenant, agreement, undertaking or promise made in connection with
such Debt Financing.
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5.6 HSR ACT FILINGS. To the extent required in connection with the
transactions contemplated by this Agreement, within five (5) business days
following the date of execution of this Agreement each of the Seller and the
Buyer shall promptly make or cause to be made any and all required filings under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and will request early termination of the waiting period required under
the HSR Act. The parties agree to cooperate and promptly respond to any
inquiries or investigations initiated by the Federal Trade Commission or the
Department of Justice in connection with any such filings.
5.7 REASONABLE EFFORTS. All parties hereto agree to act in good faith and
use reasonable efforts to obtain the satisfaction of the conditions specified in
this Agreement necessary to consummate the transactions contemplated hereby.
5.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(A) In the event of any threatened or actual Proceeding in which any
person who is now, or has been at any time prior to the Closing, a director or
officer of the Company or any of its Subsidiaries (the "INDEMNIFIED PERSONS")
is, or is threatened to be, made a party thereto based in whole or in part on
the fact that such person is or was a director or officer of the Company or any
of its Subsidiaries, whether in any case asserted or arising before, on or after
the Closing, the Company and its Subsidiaries shall indemnify and hold harmless
such person from and against such Proceeding as provided in this Section 5.8.
After the Closing Date, the Company and its Subsidiaries shall indemnify and
hold harmless each Indemnified Person, to the same extent as such Indemnified
Person is entitled to indemnification under the Company Charter Documents or
Subsidiaries' charter, by-laws or other organizational documents, in each case,
in effect as of the date of this Agreement. An Indemnified Person shall notify
the Company and/or its Subsidiary(ies) of the existence of such Proceeding for
which such Indemnified Person is entitled to indemnification hereunder as
promptly as reasonably practicable after such Indemnified Person learns of such
Proceeding; provided, that the failure to so notify shall not affect the
obligations of the Company and its Subsidiaries under this Section 5.8 except to
the extent such failure to notify actually prejudices the Company and its
Subsidiaries. The Company, at its expense, shall have the right to control the
defense of such Proceeding with counsel selected by the Company and reasonably
acceptable to the Indemnified Person. The Indemnified Person and the Company and
its Subsidiaries shall cooperate fully with each other in connection with the
defense of such Proceeding. No settlement of such Proceeding may be made by the
Company or any Subsidiary without the Indemnified Person's consent, except for a
settlement which requires no more than a monetary payment for which the
Indemnified Person is fully indemnified. No settlement of such Proceeding may be
made by an Indemnified Person without the consent of the Company.
(B) The Buyer shall cause the Company to obtain and maintain "run-off"
directors' and officers' liability insurance covering persons who are currently
covered by directors' and officers' liability insurance on terms no less
favorable than those of the current directors' and officers' liability insurance
in effect on the date hereof, provided, however, that in no event shall the
Buyer be required to cause the Company to
23
expend in any one year in excess of $78,500.00; and provided, further, that if
the premium for the insurance exceeds such amount, the Buyer shall cause the
Company to maintain a policy with the greatest coverage available for
$78,500.00.
(C) The provisions of this Section 5.8 are intended to be for the
benefit of, and enforceable by, each Indemnified Person and such Indemnified
Person's heirs and representatives, and nothing herein shall affect any
indemnification rights that any Indemnified Person or such Indemnified Person's
heirs and representatives may have under the Company Charter Documents, the
respective organizational documents of the Subsidiaries, any contract or
applicable Law.
(D) The obligations of the Company and its Subsidiaries under this
Section 5.8 shall continue in full force and effect for a period commencing as
of the Closing and ending as of the six (6) year anniversary of the Closing,
provided, that all rights to indemnification in respect of any claim for
indemnification under this Section 5.8 asserted or made within such period shall
continue until the final disposition of such claim.
(E) In the event that all or substantially all of the business or
assets of the Company or any of its Subsidiaries is sold, whether by merger,
consolidation, sale of assets or securities or otherwise, in one transaction or
a series of transactions, then the Company shall, in each such case, take action
to ensure that the successors and assigns of the Company or such Subsidiary(ies)
assume the obligations set forth in this Section 5.8. The provisions of this
Section 5.8 shall apply to all of the successors and assigns of the Company and
each Subsidiary.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS. The obligation of the
Buyer to purchase the Purchased Securities and to consummate the other
transactions contemplated by this Agreement is expressly subject to the
fulfillment or express written waiver of the following conditions on or prior to
the Closing Date:
(A) REPRESENTATIONS AND WARRANTIES TRUE; OBLIGATIONS PERFORMED. The
representations and warranties of the Seller contained in this Agreement shall
be true and correct at and as of the Closing Date as if again made on and as of
such date (other than any representation or warranty that expressly relates to
an earlier date, in which case such representation or warranty shall be true and
correct as of such date, and without giving effect to any limitations or
qualifications as to "materiality" (including, without limitation, the word
"material") or "Company Material Adverse Effect"), except, in respect of all
representations and warranties other than those contained in Section 3.2 and
Section 3.3, to the extent that failures to be so true and correct have not had,
and would not be reasonably expected to have, individually or in the aggregate,
a Company Material Adverse Effect; and the Buyer shall have received a
certificate dated the Closing Date signed by an authorized officer of the Seller
to such effect. The Seller shall have
24
performed, on or before the Closing Date, all obligations contained in this
Agreement which by the terms hereof are required to be performed by the Seller
on or before the Closing Date, except to the extent that failures to perform
such obligations have not had, and would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and the
Buyer shall have received a certificate dated the Closing Date signed by an
authorized officer of the Seller to such effect.
(B) FINANCING. The Buyer shall have obtained the Debt Financing
contemplated in the Financing Commitments or otherwise obtained financing on
terms reasonably satisfactory to the Buyer, in either case, in an amount
sufficient to enable the Buyer to consummate the transaction contemplated by
this Agreement; provided, however, that this condition shall be deemed satisfied
unless the failure to obtain the Debt Financing is a result of, in whole or in
part, the occurrence of (i) any event which has resulted in or could reasonably
be expected to result in a material adverse change in the business, assets,
operations, properties, financial condition or liabilities of the Company and
its Subsidiaries, taken as a whole since December 31, 2003 or (ii) a material
disruption of or material adverse change in conditions in the financial, banking
or capital markets that, in the reasonable judgment of the lender to such Debt
Financing, could materially impair the syndication of the Debt Financing.
(C) NO INJUNCTION, ETC. There shall not be any order of any court or
Governmental Entity restraining or invalidating the transactions which are the
subject of this Agreement.
(D) PAYOFF LETTERS. The Seller shall have delivered to Buyer a payoff
letter from each holder of Borrowed Indebtedness of the Company and each
Subsidiary indicating the amount of such Borrowed Indebtedness and including
wire instructions. The Liens granted under the Amended and Restated Credit
Agreement and Liens otherwise securing the obligations of the Company and
Subsidiaries in respect of any other Borrowed Indebtedness shall terminate prior
to or concurrently with the Closing
(E) INSTRUMENTS OF TRANSFER. The Seller shall have delivered to the
Company instruments of transfer sufficient to transfer to the Buyer all right,
title and interest in the Purchased Securities.
(F) LEGAL OPINIONS FROM COUNSEL FOR THE SELLER AND THE COMPANY. The
Buyer shall have received the written opinion of Xxxxxx, Hall & Xxxxxxx, counsel
for the Seller and the Company, dated as of the Closing Date and in the form of
EXHIBIT 6.1(F).
(G) TERMINATION OF MANAGEMENT CONTRACT. The engagement of Parthenon
Capital, LLC's services under the letter agreement, dated as of August 17, 2001,
as amended (the "PARTHENON MANAGEMENT AGREEMENT"), shall terminate concurrently
with the Closing of the transactions contemplated hereby and the Buyer shall
have received a termination letter in the form of EXHIBIT 6.1(G) executed by the
parties to the Parthenon Management Agreement and in full force and effect.
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(H) ABSENCE OF MATERIAL ADVERSE CHANGE. From the date of this
Agreement through the Closing Date, there shall not have occurred any event
which has had, or would be reasonably expected to have a Company Material
Adverse Effect.
(I) HSR ACT. The waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement shall have expired or been
terminated.
6.2 CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The obligation of the
Seller to consummate the transactions contemplated by this Agreement is
expressly subject to the fulfillment or express written waiver of the following
conditions on or prior to the Closing Date:
(A) REPRESENTATIONS AND WARRANTIES TRUE; OBLIGATIONS PERFORMED. Each
of the representations and warranties of the Buyer contained in this Agreement
shall be true and correct in all material respects at and as of the Closing Date
as if again made on and as of such date (other than any representation or
warranty that expressly relates to an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such date), except for representations and warranties set forth in this
Agreement which are qualified as to materiality, which shall be true and correct
in all respects at and as of the Closing Date as if again made on and as of such
date (other than any such representation or warranty that expressly relates to
an earlier date, in which case such representation or warranty shall be true and
correct in all material respects as of such date); and the Seller shall have
received a certificate dated the Closing Date signed by an authorized officer of
the Buyer to such effect. The Buyer shall have performed in all material
respects, on or before the Closing Date, all obligations contained in this
Agreement which by the terms hereof are required to be performed by the Buyer on
or before the Closing Date, and the Seller shall have received a certificate
dated the Closing Date signed by an authorized officer of the Buyer to such
effect.
(B) NO INJUNCTION, ETC. There shall not be any order of any court or
Governmental Entity restraining or invalidating the transactions which are the
subject of this Agreement.
(C) CLOSING PAYMENTS. The Buyer shall have made the payments
contemplated by Section 1.2.
(D) LEGAL OPINION FROM COUNSEL FOR THE BUYER. The Seller shall have
received the written opinion of Xxxxxxx Xxxx & Xxxxxxxxx LLP, counsel for the
Buyer, dated the Closing Date, in the form of EXHIBIT 6.2(D).
(E) HSR ACT. The waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement shall have expired or been
terminated.
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ARTICLE 7
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. The parties agree that the representations and warranties and
pre-Closing covenants and agreements contained in this Agreement shall survive
the Closing until the 18 month anniversary of the Closing, except that (x) the
representations and warranties contained in Sections 2.1 (Title), 2.2
(Organization and Authority), 3.2 (Subsidiaries), 3.3 (Capitalization), 4.2
(Power and Authority Relative to Transaction) or 4.6 (Investment
Representations) shall survive until the expiration of the applicable statute of
limitations, (y) the representations and warranties contained in Section 3.21
(Compliance with Environmental Laws) shall survive until the second anniversary
of the Closing Date and (z) the representations and warranties contained in
Section 3.8 (Taxes) shall survive until March 15, 2008. The date of expiration
with respect to any such representation, warranty, covenant or agreement is
sometimes referred to herein as its "CUT-OFF DATE." No claim for indemnification
hereunder for breach of any representation or warranty or breach of any
pre-Closing covenant or pre-Closing agreement may be brought after its Cut-Off
Date, except for any claims (a) of which the Seller has been notified in writing
with reasonable specificity by the Buyer prior to its Cut-Off Date and (b) of
which the Buyer has been notified in writing with reasonable specificity by the
Seller prior to its Cut-Off Date. The Cut-Off Date for the pre-Closing covenant,
pre-Closing agreement, representation or warranty on which such claim is based
shall survive such expiration until mutually resolved or otherwise determined
pursuant to this Agreement and the expiration date of such pre-Closing covenant,
pre-Closing agreement, representation or warranty shall automatically be
extended with respect to such claim until such claim is so resolved or
determined. Each post-Closing covenant shall survive the Closing in accordance
with its terms until the expiration of the applicable statute of limitation.
7.2 INDEMNIFICATION OF THE BUYER. Subject to the other provisions of this
Article 7, from and after the Closing, the Seller agrees to indemnify the Buyer,
the Company and each Subsidiary and hold each harmless against and in respect of
any and all damages, claims, demands, losses, expenses, costs, obligations and
liabilities, including without limitation reasonable attorney's fees and any
expenses resulting from the enforcement of this indemnity (collectively,
"LOSSES"), which arise or result from any breach of any of the representations
or warranties of the Seller contained in Articles 2 or 3 of this Agreement or
contained in any certificate delivered by the Seller pursuant to this Agreement,
or the failure of the Seller to perform any of its covenants or agreements
contained herein.
For purposes of determining whether or not a representation or warranty of
the Seller has been breached (other than those set forth in Sections 3.5
(Financial Statements), 3.6 (Absence of Material Undisclosed Liabilities) or 3.7
(Absence of Certain Changes)) and the amount of the related Losses, the
representations and warranties of the Seller contained in this Agreement shall
be interpreted without giving effect to any limitations or qualifications as to
"materiality" (including, without limitation, the word "material") or "Company
Material Adverse Effect." For greater certainty, where a representation or
warranty requires the Seller to set forth certain items on a Schedule to
27
this Agreement (e.g. the Material Contracts Schedule), it is not the intent of
the parties that the prior sentence would broaden the scope of the disclosures
required to be set forth on such schedule.
Notwithstanding the foregoing or any other term in this Agreement, the
obligation of the Seller to indemnify or hold harmless the Buyer, the Company or
any Subsidiary for breach of any representation or warranty or any pre-Closing
covenant or pre-Closing agreement shall be limited and qualified as follows:
(A) the Seller shall have no indemnification obligation in respect of
such breaches except to the extent that the aggregate amount of Losses incurred
by the Buyer, the Company and its Subsidiaries exceeds, on a cumulative basis,
one percent (1.0%) of the Closing Purchase Price;
(B) the Seller's obligation for Losses from all such breaches shall
not exceed in the aggregate ten percent (10.0%) of the Closing Purchase Price;
(C) the Seller shall have no indemnification obligation with respect
to Losses arising out of any breach to the extent that the Company has made a
corresponding reserve for such Losses on the Balance Sheet; and
(D) the Seller shall have no indemnification obligation for
consequential damages, punitive damages, lost profits or unrealized
expectations.
In determining the foregoing thresholds and in otherwise determining the amount
of any Losses for which the Buyer, the Company or any Subsidiary is entitled to
assert a claim for indemnification hereunder, the amount of any such Losses
shall be determined after deducting therefrom the amount of any proceeds
actually recovered under any insurance policies (after giving effect to any
deductible, retention or equivalent loss rated premium adjustment) and actually
recovered from third parties by the Buyer, the Company or any Subsidiary in
respect of such Losses (which recoveries the Buyer agrees to use, or to cause
the Company or any such Subsidiary to use, reasonable efforts to obtain) and the
amount of any tax benefit related thereto. If an indemnification payment is
received by the Buyer, the Company or any Subsidiary, and the Buyer, the Company
or any such Subsidiary later receives insurance proceeds, other third party
recoveries or tax benefits in respect of the related Losses, the Buyer shall
promptly pay to the Seller a sum equal to the lesser of (y) the actual amount of
such insurance proceeds (after giving effect to any deductible, retention or
equivalent loss rated premium adjustment), other third party recoveries and tax
benefits or (z) the actual amount of the indemnification payment previously paid
by the Seller with respect to such Losses.
7.3 INDEMNIFICATION OF THE SELLER. Subject to the other terms of this
Article 7, from and after the Closing, the Buyer agrees to indemnify the Seller
and hold the Seller harmless against and in respect of any and all Losses which
arise or result from or are related to any breach of any of the Buyer's
representations or warranties, or the failure of the Buyer to perform any of its
covenants or agreements set forth herein.
28
In determining the foregoing thresholds and in otherwise determining the
amount of any Losses for which the Seller is entitled to assert a claim for
indemnification hereunder, the amount of any such Losses shall be determined
after deducting therefrom the amount of any proceeds actually recovered under
any insurance policies (after giving effect to any deductible, retention or
equivalent loss rated premium adjustment) and actually recovered from third
parties by the Seller in respect of such Losses (which recoveries the Seller
agrees to use reasonable efforts to obtain) and the amount of any tax benefit
related thereto. If an indemnification payment is received by the Seller, and
the Seller later receives insurance proceeds, other third party recoveries or
tax benefits in respect of the related Losses, the Seller shall promptly pay to
the Buyer a sum equal to the lesser of (y) the actual amount of such insurance
proceeds (after giving effect to any deductible, retention or equivalent loss
rated premium adjustment), other third party recoveries and tax benefits or (z)
the actual amount of the indemnification payment previously paid by the Buyer
with respect to such Losses.
7.4 PROCEDURE FOR INDEMNIFICATION. Any party making a claim for
indemnification hereunder (the "INDEMNIFIED PARTY") shall promptly notify the
party whom indemnification is sought (the "INDEMNIFYING PARTY") of the claim in
writing, describing in reasonable detail the claim and the amount thereof (to
the extent known); provided, that the failure to provide prompt notice shall not
relieve the Indemnifying Party of its indemnification obligations hereunder
except to the extent that the Indemnifying Party is actually prejudiced by the
failure to give such prompt notice. The Indemnifying Party shall respond to each
such claim within thirty (30) days of receipt of such notice. No action shall be
taken pursuant to the provisions of this Agreement or otherwise by the
Indemnified Party (unless reasonably necessary to protect the rights of the
Indemnified Party) until the later of (a) the expiration of the 30-day response
period, or (b) thirty (30) days following the termination of the 30-day response
period if a response, received within such 30-day response period by the
Indemnified Party, requests an opportunity to cure the matter giving rise to
indemnification (and, in such event, the amount of such claim for
indemnification shall be reduced to the extent so cured within such 30-day cure
period). If such demand is based on a claim by a third party, the Indemnifying
Party shall have the right to assume the entire control of the defense thereof,
including at its own expense, employment of counsel reasonably satisfactory to
the Indemnified Party, and, in connection therewith, the Indemnified Party shall
cooperate fully with the Indemnifying Party and make available to the
Indemnifying Party all pertinent information under its control; provided, that
the Indemnified Party may participate in any proceeding with counsel of its
choice at its expense. In such event, the Indemnifying Party shall have the
right to settle or resolve any such claim by a third party; provided, that any
such settlement or resolution contemplated by the Indemnifying Party that
involves any action by the Indemnified Party other than the payment of money
which is paid in full by the Indemnifying Party shall not be concluded without
the prior written approval of the Indemnified Party, which approval shall not be
unreasonably withheld, delayed or conditioned. If the Indemnifying Party fails
timely to defend against such Proceeding, the Indemnified Party shall have the
right to do so, including, without limitation, the right to make any compromise
or settlement thereof, and the Indemnified Party shall be entitled to recover
the cost thereof from the Indemnifying Party, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the
29
result of such Proceeding (but subject, in all cases, to the applicable
conditions and limits contained in this Article 7).
7.5 REMEDIES EXCLUSIVE. The rights and remedies provided in this Article 7
shall be the exclusive rights and remedies of the parties hereto after the
Closing in connection with the transactions contemplated by this Agreement,
including, without limitation, any breach, inaccuracy or non-performance of any
representation, warranty, covenant or agreement contained in this Agreement or
in any exhibit or schedule hereto or any certificate delivered hereunder, except
in the case of fraud, in which case the defrauded party shall have all rights
and remedies hereunder and provided by law against the party that committed the
fraud. After the Closing, no party may commence any suit, action or proceeding
with respect to the transactions contemplated by this Agreement, whether in
contract, tort or otherwise, except (a) to enforce such party's express rights
under Section 5.8 or this Article 7, (b) to initiate a claim of fraud in
accordance with this Section 7.5, or (c) for any action seeking injunctive or
other equitable relief to enforce specifically the performance by the other
party of its obligations under this Agreement to the extent permitted by law.
ARTICLE 8
TERMINATION
8.1 TERMINATION. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time prior to the Closing Date:
(A) by mutual written consent of the Seller and the Buyer;
(B) by the Buyer, if (i) the Seller shall have breached or failed to
perform any of its obligations, covenants or agreements under this Agreement, or
if any of the representations and warranties of the Seller set forth in this
Agreement shall not be true, in all cases, for purposes of this Section 8.1(b),
to the extent set forth in Section 6.1(a), and (ii) such breach, failure or
misrepresentation is not cured to the Buyer's reasonable satisfaction within
thirty (30) days after the Buyer gives the Seller written notice identifying in
reasonably detail such breach, failure or misrepresentation;
(C) by the Seller, if (i) the Buyer shall have breached or failed to
perform any of its obligations, covenants or agreements under this Agreement, or
if any of the representations and warranties of the Buyer set forth in this
Agreement shall not be true, in all cases, for purposes of this Section 8.1(c),
to the extent set forth in Section 6.2(a), and (ii) such breach, failure or
misrepresentation is not cured to the Seller's reasonable satisfaction within
thirty (30) days after the Seller gives the Buyer written notice identifying in
reasonable detail such breach, failure or misrepresentation;
(D) by the Buyer, if the conditions set forth in Section 6.1 become
incapable of satisfaction (except as covered by Sections 8.1(b) and (c) above);
30
(E) by the Seller, if the conditions set forth in Section 6.2 become
incapable of satisfaction (except as covered by Sections 8.1(b) and (c) above);
(F) by either the Seller or the Buyer if the Closing has not occurred
on November 17, 2004, or such other date, if any, as the Seller and the Buyer
may agree in writing provided, however, that the right to terminate this
Agreement under this Section 8.1(f) shall not be available to any party who
intentionally failed to fulfill any material obligation under this Agreement and
such failure caused the failure of the Closing to occur on or prior to such
date; or
(G) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use reasonable efforts to remove), in each case
permanently restraining, enjoining or otherwise prohibiting the consummation of
the sale and purchase of the Purchased Securities contemplated by this Agreement
and such order, decree, ruling or other action shall have become final and
nonappealable.
8.2 EFFECT OF TERMINATION.
(A) If this Agreement is terminated as provided above, the parties
shall have no further obligations hereunder (including, without limitation, for
costs and expenses incurred by other parties in connection with this Agreement
and the transactions contemplated hereby), except as provided below, and except
that each party shall be liable for any willful breach of this Agreement and the
other party shall be entitled to all rights and remedies provided by law in
respect of such breach.
(B) The obligations of the Buyer under Section 5.1(b) shall survive
the termination of this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 NOTICES. All notices and communications to a party hereunder shall be
made in writing and shall be deemed to have been adequately given if (a)
delivered in person (in a manner through which delivery may be verified), (b)
sent by nationally recognized overnight delivery service, (c) mailed, certified
mail, return receipt requested or (d) facsimile transmission (which is
confirmed), to such party at its address (in the case of clauses (a), (b) or (c)
above) or facsimile number (in the case of clause (d) above) set forth below (or
such other address or facsimile number as the party may from time to time
designate in writing to the other parties hereto):
(A) If to the Seller or, prior to the Closing, to the Company or any
Subsidiary, to:
Spheris Holdings, LLC
c/o Parthenon Capital, Inc.
31
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
with copies (which shall not constitute notice), to:
Spheris Inc.
Xxxxx 000
000 Xxxx Xxxxxxx Xxxx.
Xxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
and
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. X. Xxxxx, P.C.
Facsimile No.: (000) 000-0000
(B) If to the Buyer, to:
Spheris Holding, Inc.
c/o Warburg Pincus Private Equity VIII, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx Xxxxxxxx and Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice), to:
Xxxxxxx Xxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
9.2 NO WAIVER. No failure to exercise and no delay in exercising, on the
part of the Seller or the Buyer, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder.
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9.3 AMENDMENTS AND WAIVERS. This Agreement may be modified or amended only
by a writing signed by the Seller and the Buyer. No waiver of any term or
provision hereof shall be effective unless signed in writing by the party
waiving such term or provision.
9.4 CHOICE OF LAW; FORUM. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without regard to
the choice of law provisions thereof that would require the application of the
Laws of another jurisdiction.
9.5 BINDING EFFECT AND BENEFITS. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, successors
and assigns, but may not be assigned by any party without the written consent of
the other party. Notwithstanding the foregoing, the Buyer and the Seller, as the
case may be, shall each have the unrestricted right to assign its rights and
obligations under this Agreement to any of its Affiliates, or collaterally
assign its rights under this Agreement to its lender or lenders, provided,
however, that such party shall remain liable for the performance of all of such
obligations in the manner prescribed in this Agreement.
9.6 INTEGRATION; SCHEDULES. This writing, together with the Exhibits and
Schedules attached hereto, embodies the entire agreement and understanding among
the parties with respect to this transaction and supersedes all prior
discussions, understandings and agreements concerning the matters covered
hereby, including without limitation the letter dated September 29, 2004,
between the Seller, the Company Warburg Pincus LLC and certain other parties,
except as set forth in Section 5.1(b). Information set forth on any Schedule to
this Agreement shall be deemed to qualify each other section of this Agreement
to which such information is applicable (regardless of whether or not such other
section is qualified by reference to a Schedule), unless expressly provided
otherwise, so long as application to such section is reasonably discernible from
such disclosure. No information set forth on any of the Schedules shall be
deemed to broaden in any way the scope of the Seller's representations and
warranties in this Agreement. The inclusion of any item by the Seller on a
Schedule is not evidence of the materiality of such item for purposes of the
Agreement, or that such item is a disclosure required under the Agreement. Any
descriptions of any Contract, agreement, document, instrument, plan, arrangement
or other item set forth in a Schedule provided by the Seller are summaries only
and are qualified in their entirety by the terms of such Contracts, agreements,
documents, instruments, plans, arrangements or items, copies of which have been
made available to the Buyer.
9.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and counterparts by facsimile, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart.
9.8 LIMITATION ON SCOPE OF AGREEMENT. If any provision of this Agreement is
unenforceable or illegal, such provision shall be enforced to the fullest extent
permitted by law and the remainder of the Agreement shall remain in full force
and effect.
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9.9 HEADINGS. The headings of Articles and Sections herein are inserted for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
9.10 EXPENSES. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses; provided that, if and only
to the extent that, the Closing occurs, all Selling Expenses shall be paid by
the Seller, it being understood and agreed that the amount of such Selling
Expenses may be deducted from the Closing Purchase Price as contemplated by
Section 1.2 hereof. No costs, fees or expenses related to this Agreement, the
preparation hereof or the consummation of the transactions contemplated hereby
shall be paid, payable or otherwise borne by the Company or any Subsidiary other
than such costs, fees or expenses paid prior to the Balance Sheet Date and the
Sale Bonuses paid in accordance with Section 1.2 hereof.
9.11 NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
in this Agreement, nothing in this Agreement will be construed as giving any
Person, other than the parties hereto and their respective heirs, successors and
permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provision hereof.
9.12 FURTHER ASSURANCES. Following the Closing, the parties shall execute
and deliver to each other such documents and take such other actions as may
reasonably be requested in order to consummate more effectively the transactions
contemplated hereby.
9.13 "KNOWLEDGE" DEFINED. As used herein, "to the knowledge of the Seller,"
"to the Seller's knowledge" or any other similar phrase shall mean (i) the
actual knowledge of Xxxxxx Xxxxxxx, Xxxxxxx Xxxxx or Xxxx Xxxxxxx or (ii) that
which would have been known after reasonable inquiry by such persons.
9.14 PUBLICITY. Pending the Closing, no party shall, nor shall they permit
their Affiliates to, issue a press release or make any other public announcement
concerning the transactions contemplated by this Agreement without the prior
written consent of the Seller and the Buyer, except to the extent required by
Law, in which case the other party shall have the opportunity to review and
comment prior to disclosure.
9.15 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur if (a) all of the Seller's conditions to Closing
have been satisfied or expressly waived by Seller in writing (other than those
conditions that are normally satisfied at Closing), (b) the Buyer is ready,
willing and able to close the transactions contemplated hereby and pay the
Closing Purchase Price in accordance with Section 1.2 hereof and (c) Seller
breaches its obligation to consummate the transactions contemplated hereby. It
is accordingly agreed that, in such event, the Buyer shall be entitled to
injunctive relief and to enforce specifically the terms and provisions hereto
and require the Closing of the purchase and sale of the Purchased Securities
pursuant to the terms of this Agreement.
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9.16 NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and the other agreements and
documents contemplated herein. In the event an ambiguity or question of intent
or interpretation arises under any provision of this Agreement or any other
agreement or documents contemplated herein, this Agreement and such other
agreements or documents shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authoring any of the provisions of this
Agreement or any other agreements or documents contemplated herein.
9.17 ADDITIONAL DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(A) "AFFILIATE" means (except as otherwise specifically defined
herein), as to any Person, any other Person which, directly or indirectly,
controls, or is controlled by, or is under common control with, such Person. As
used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of management or
policies of a Person, whether through the ownership of securities or partnership
or other ownership interests, by contract or otherwise.
(B) "AMENDED AND RESTATED CREDIT AGREEMENT" shall mean the Amended and
Restated Credit Agreement dated April 30, 2004, by and among Spheris Inc.,
Madison Capital Funding LLC, Keybank National Association, Xxxxxxx Xxxxx Capital
and the other financial institutions from time to time parties thereto.
(C) "BORROWED INDEBTEDNESS" means the aggregate principal amount of
indebtedness for money borrowed by the Company and its Subsidiaries pursuant to
the Amended and Restated Credit Agreement or otherwise plus accrued and unpaid
interest thereon, and fees and other amounts payable thereunder, the aggregate
amount of which equals $44,268,475.29 as of the date of this Agreement.
(D) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(E) "CONTRACT" shall mean any agreement, contract, lease, sublease,
note, loan, evidence of indebtedness, letter of credit, franchise agreement,
employment agreement, license agreement, instrument, indenture or undertaking,
whether written or oral, (i) to which the Company or any Subsidiary is a party
or (ii) by which the Company, any Subsidiary or any of their respective assets
is bound.
(F) "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse change
in or effect with respect to the business, results of operations, properties or
financial condition of the Company and its Subsidiaries, taken as a whole;
provided, however, that in no event shall any adverse change or effect resulting
from conditions affecting the industry in which the Company or any of its
Subsidiaries operates or from changes in general business or economic conditions
(to the extent that any such adverse change or effect does not affect the
Company and its Subsidiaries to a degree or in a
35
manner proportionally greater than it affects other companies in the industry)
constitute a Company Material Adverse Effect.
(G) "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
(H) "GOVERNMENTAL ENTITY" means any foreign or United States court,
legislative, executive or regulatory authority or agency, any state or political
subdivision thereof or any entity or body (including, without limitation, any
arbitration panel) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
(I) "LIEN" means, with respect to any asset, any mortgage, claim,
lien, pledge, charge, security interest, restriction, conditional sales
contract, encroachment, limitation or encumbrance of any kind in respect of such
asset.
(J) "PARTHENON MANAGEMENT FEE" means any fees payable pursuant to the
existing management agreement with Parthenon Capital, LLC.
(K) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or any agency or instrumentality thereof.
(L) "SELLING EXPENSES" means the fees, expenses, charges and other
payments incurred or otherwise payable by the Company or any of its Subsidiaries
to outside counsel, accountants, financial advisors or investment bankers of the
Company and its Subsidiaries specifically related to the transactions
contemplated by this Agreement.
9.18 WAIVER OF JURY TRIAL. To the fullest extent permitted by applicable
law, each of the parties hereto hereby irrevocably and expressly waives all
right to a trial by jury in any Proceeding (whether based on contract, tort or
otherwise) arising out of, or relating to, this Agreement, the transactions
contemplated thereby or the negotiation, preparation or enforcement thereof.
ARTICLE 10
DEFINITIONS
The following terms, as used in this Agreement, have the meanings given to
them in the section or place indicated below:
SECTION OR PLACE
TERM: WHERE DEFINED:
----- ----------------
Affiliate Section 9.17
Agreement Preamble
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Amended and Restated Credit Agreement Section 9.17
Audited Financial Statements Section 3.5
Authorizations Section 3.15
Balance Sheet Section 3.5
Balance Sheet Date Section 3.5
Benefit Plans Section 3.18
Borrowed Indebtedness Section 9.17
Buyer Preamble
Cash and Cash Equivalents Section 1.2
Closing Section 1.4
Closing Date Section 1.4
Closing Purchase Price Section 1.2
Code Section 9.17
Company Introduction
Company Charter Documents Section 3.1
Company Intellectual Property Section 3.11
Company Material Adverse Effect Section 9.17
Contract Section 9.17
Cut-Off Date Section 7.1
Debt Financing Section 4.7
Environment Section 3.21
Environmental Claim Section 3.21
Environmental Laws Section 3.21
Equity Financing Section 4.7
ERISA Section 3.18
Financial Statements Section 3.5
Financing Commitments Section 4.7
GAAP Section 9.17
Governmental Entity Section 9.17
HSR Act Section 5.6
Hazardous Substances Section 3.21
Indemnified Party Section 7.4
Indemnified Person Section 5.8
Indemnifying Party Section 7.4
Insurance Policy Section 3.19
Intellectual Property Section 3.11
Knowledge Section 9.13
Laws Section 3.16
Lien Section 9.17
LLC Agreement Section 1.3
Losses Section 7.2
Management Holders Section 1.3
Material Contracts Section 3.12
Owned Intellectual Property Section 3.11
Parthenon Management Agreement Section 6.1(g)
Parthenon Management Fee Section 9.17
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Permitted Liens Section 3.9
Person Section 9.17
Proceeding Section 3.13
Purchased Securities Section 1.1
Rollover Notice Section 1.3
Rollover Shares Section 1.3
Sale Bonuses Section 5.2(b)
Securities Act Section 4.6
Seller Preamble
Selling Expenses Section 9.17
Service Section 3.18
Subsidiary Section 3.2
Taxes Section 3.8
Tax Returns Section 3.8
Unaudited Financial Statements Section 3.5
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
SPHERIS HOLDINGS LLC
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
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Title: Chief Compliance Officer and
General Counsel
---------------------------------
SPHERIS HOLDING, INC.
By: /s/ Tenno Tsai
------------------------------------
Name: Tenno Tsai
----------------------------------
Title: President
---------------------------------
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
