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EXHIBIT 10.7
AGREEMENT AND PLAN OF EXCHANGE
BY AND AMONG
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
SOFTWARE INNOVATORS, INC.
DECEMBER 18, 1997
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TABLE OF CONTENTS
Page
1. AGREEMENT FOR EXCHANGE........................................................................................1
1.1 Exchange of Shares and Other Consideration......................................................1
1.2 Aggregate Exchange Consideration from Parent....................................................1
1.2.1 Closing Exchange Consideration.........................................................1
1.2.2 Earnout Consideration..................................................................2
1.2.3 Certain Definitions....................................................................2
1.3 Payment of Closing Exchange Consideration.......................................................3
1.3.1 Closing Before Receipt of the 1997 Audit Report........................................3
1.3.2 Closing After Receipt of the 1997 Audit Report.........................................4
1.4 Determination of Earnout........................................................................4
1.4.1 Review of Earnout Statement............................................................4
1.4.2 Payment of Earnout Consideration.......................................................4
1.5 No Fractional Shares............................................................................4
2. THE CLOSING...................................................................................................5
2.1 Closing.........................................................................................5
2.2 Delivery of Company Common Stock................................................................5
2.2.1 Assignments of Company Common Stock....................................................5
2.2.2 Payment In Full Satisfaction of All Rights.............................................5
3. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS......................................................................................5
3.1 Stock Ownership.................................................................................5
3.2 Shareholder Authority...........................................................................6
3.3 Shareholders Consents...........................................................................6
3.4 Organization, Etc...............................................................................6
3.5 Capitalization of the Company...................................................................6
3.6 Company Authority...............................................................................7
3.7 Company Consents................................................................................7
3.8 Intellectual Property...........................................................................7
3.9 Title...........................................................................................7
3.10 Defaults........................................................................................8
3.11 Other Disclosures...............................................................................8
3.12 Investment Company.............................................................................10
3.13 Financial Statements...........................................................................10
3.14 Undisclosed Liabilities........................................................................10
3.15 Tax Matters....................................................................................11
3.16 Full Authority.................................................................................12
3.17 Legal Actions..................................................................................12
3.18 Company Contracts, Company Plans...............................................................13
3.19 Access.........................................................................................13
3.20 No Material Adverse Change.....................................................................13
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3.21 Subsidiaries; Predecessors.....................................................................14
3.22 Affiliate Relationships........................................................................14
3.23 Disclosure.....................................................................................14
3.24 Company Material Adverse Effect................................................................14
3.25 Restricted Securities..........................................................................15
4. REPRESENTATIONS AND WARRANTIES
OF THE PARENT...........................................................................................15
4.1 Organization...................................................................................15
4.2 Capitalization of the Parent...................................................................16
4.3 Authority......................................................................................16
4.4 Consents.......................................................................................16
4.5 Defaults.......................................................................................16
4.6 Investment Company.............................................................................16
4.7 Financial Statements...........................................................................17
4.8 Taxes..........................................................................................17
4.9 Full Authority.................................................................................17
4.10 Access.........................................................................................17
4.11 Disclosure.....................................................................................17
4.12 Parent Material Adverse Effect.................................................................17
5. CERTAIN COVENANTS AND AGREEMENTS OF SHAREHOLDERS.............................................................18
5.1 Conduct of Business............................................................................18
5.2 Cooperation....................................................................................20
5.3 Filings, Etc...................................................................................20
5.4 Access.........................................................................................20
5.5 Satisfaction of Conditions.....................................................................21
5.6 Capital Budget.................................................................................21
5.7 Exclusivity....................................................................................21
5.8 Agreements of Shareholders to be Effective Upon Closing........................................21
5.8.1 Covenant Not to Compete...............................................................21
5.8.2 Release...............................................................................22
5.9 Shareholder Indebtedness and Receivables.......................................................23
6. CERTAIN AGREEMENTS...........................................................................................23
6.1 Audit..........................................................................................23
6.2 Company Plans..................................................................................23
6.3 Confidentiality................................................................................23
6.4 Tax-Free Exchange..............................................................................23
6.5 Certain Tax Matters............................................................................23
6.5.1 Tax Periods Ending on or Before the IPO Closing Date..................................23
6.5.2 Cooperation on Tax Matters............................................................24
6.5.3 Tax Sharing Agreements................................................................24
6.6 Sale of Motor Vehicles.........................................................................24
6.7 Chief Executive Officer of Company.............................................................25
6.8 Parent Insurance...............................................................................25
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6.9 Parent Stock Option Plan.......................................................................25
6.10 Parent Advances to Company.....................................................................25
7. CONDITIONS PRECEDENT; CLOSING DELIVERIES.....................................................................25
7.1 Conditions Precedent to the Obligations of the Parent..........................................25
7.1.1 Accuracy of Representations and Warranties............................................25
7.1.2 Performance of Covenants..............................................................25
7.1.3 Legal Actions or Proceedings..........................................................25
7.1.4 Approvals.............................................................................26
7.1.5 Closing Deliveries....................................................................26
7.1.6 No Loss or Damage.....................................................................26
7.1.7 Licenses, etc.........................................................................26
7.1.8 No Material Adverse Change............................................................26
7.1.9 Certain Corporate Actions.............................................................26
7.2 Conditions Precedent to the Obligations of the Shareholders and the Company....................26
7.2.1 Accuracy of Representations and Warranties............................................26
7.2.2 Performance of Covenants..............................................................26
7.2.3 Approvals.............................................................................26
7.2.4 Closing Deliveries....................................................................27
7.3 Deliveries by the Shareholders at the Closing..................................................27
7.3.1 Closing Certificates..................................................................27
7.3.2 Stock Transfer Restriction Agreement..................................................27
7.3.3 Employment Agreements.................................................................27
7.3.4 Opinion of Counsel for the Shareholders and the Company...............................27
7.3.5 Documents, Stock Certificates.........................................................27
7.4 No Waiver by Parent............................................................................27
7.5 Deliveries by the Parent at the Closing........................................................28
7.5.1 Closing Certificates..................................................................28
7.5.2 Opinion of Counsel for the Parent.....................................................28
7.6 No Waiver......................................................................................28
7.7 Conditions Precedent to Completion of the Closing..............................................28
7.7.1 Legal Actions or Proceedings..........................................................28
7.7.2 IPO...................................................................................28
7.8 Delivery of the Exchange Consideration.........................................................28
8. SURVIVAL, INDEMNIFICATIONS...................................................................................29
8.1 Survival.......................................................................................29
8.2 Indemnification................................................................................29
8.2.1 Parent Indemnified Parties............................................................29
8.2.2 Minimum Losses........................................................................30
8.2.3 Parent Indemnity......................................................................30
8.3 Limitations....................................................................................31
8.4 Procedures for Indemnification.................................................................31
8.4.1 Notice................................................................................31
8.4.2 Legal Defense.........................................................................31
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8.4.3 Settlement............................................................................31
8.4.4 Cooperation...........................................................................32
8.5 Subrogation....................................................................................32
9. TERMINATION..................................................................................................32
9.1 Grounds for Termination........................................................................32
9.1.1 Prior to Closing......................................................................32
9.1.2 After the Closing Date................................................................33
9.2 Effect of Termination..........................................................................33
10. MISCELLANEOUS...............................................................................................33
10.1 Notice.........................................................................................33
10.2 Further Documents..............................................................................34
10.3 Assignability..................................................................................34
10.4 Exhibits and Schedules.........................................................................35
10.5 Sections and Articles..........................................................................35
10.6 Entire Agreement...............................................................................35
10.7 Headings.......................................................................................35
10.8 CONTROLLING LAW................................................................................35
10.9 Public Announcements...........................................................................35
10.10 No Third Party Beneficiaries...................................................................35
10.11 Amendments and Waivers.........................................................................35
10.12 No Employee Rights.............................................................................36
10.13 No Personal Liability of Representatives of Parent.............................................36
10.14 When Effective.................................................................................36
10.15 Takeover Statutes..............................................................................36
10.16 Number and Gender of Words.....................................................................36
10.17 Invalid Provisions.............................................................................36
10.18 Multiple Counterparts..........................................................................36
10.19 No Rule of Construction........................................................................37
10.20 Expenses.......................................................................................37
10.21 No Brokers.....................................................................................37
10.22 Section 351 Plan of Exchange...................................................................37
Exhibit 1.1 List of Shareholders
Exhibit 2.1 Escrow Agreement
Exhibit 2.2 Letter of Transmittal from Shareholders
Exhibit 5.6 Budgeted Capital Expenditures of Company
Exhibit 7.3.2 Stock Transfer Restriction Agreement
Exhibit 7.3.3 Certain Employees of the Company
Exhibit 7.3.3A Employment Agreement
Exhibit 7.3.4 Opinion of Counsel for the Shareholders and the
Company
Exhibit 7.5.2 Opinion of Counsel for the Parent
Exhibit 10.22 Section 351 Plan of Exchange
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AGREEMENT AND PLAN OF EXCHANGE
This AGREEMENT AND PLAN OF EXCHANGE (this "Agreement") made effective
as of December 18, 1997, by and among BRIGHTSTAR INFORMATION TECHNOLOGY GROUP,
INC., a Delaware corporation (the "Parent"), AND THE UNDERSIGNED HOLDERS (the
"Shareholders") OF ALL OF THE OUTSTANDING CAPITAL STOCK OF SOFTWARE INNOVATORS,
INC., an Arkansas corporation (the "Company").
WHEREAS, Parent and the Shareholders desire to provide for the
transfer by the Shareholders to Parent of the outstanding shares of capital
stock of the Company in exchange for common stock and cash of Parent (the
"Exchange");
WHEREAS, the Exchange is one of several related transactions involving
the assignment of property to Parent in exchange for common stock and cash of
Parent as part of an overall plan that includes an initial public offering of
parent common stock ("Parent Common Stock"); and for federal income tax
purposes, it is intended that this Exchange and the other related exchange
transactions with Parent shall qualify as exchanges under the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, and intending to
be legally bound hereby, the parties agree as follows:
1. AGREEMENT FOR EXCHANGE
1.1 Exchange of Shares and Other Consideration. Shareholders agree to
assign, transfer and deliver to Parent all right, title and interest in and to
all of the outstanding shares of common stock of the Company ("Company Common
Stock") in exchange for the "Aggregate Exchange Consideration" (as defined
below) which Parent hereby agrees to pay, assign, transfer and deliver to the
Shareholders in accordance with this Agreement, and among them in proportion to
the number of shares of Company Common Stock owned by the Shareholders and
assigned to Parent by the Shareholders as set forth in Exhibit 1.1 hereto.
1.2 Aggregate Exchange Consideration from Parent. The Aggregate
Exchange Consideration to be delivered to the Shareholders by the Parent shall
be an amount equal to the sum of the Closing Exchange Consideration and the
Earnout Consideration as defined below.
1.2.1 Closing Exchange Consideration. The Closing Exchange
Consideration shall be equal to the amount of revenue recognized by the
Company, less allowances for doubtful accounts and sales returns, as determined
in accordance with GAAP (as defined below) with respect to the period from
January 1, 1997 through December 31, 1997, reduced by: (i) Long-Term Debt (as
defined below) of the Company at the Closing Date; amounts owed by the Company
under that certain promissory note payable to Xxxxx X. Xxxxx in the original
principal amount of $550,000; (iii) federal, state or local income taxes
payable by the Company with respect to all periods prior to the Closing not
included in Long-Term Debt; and (iv) the amount of any reduction in the
Company's Net Working Capital (as defined below) from July 31, 1997 to the
Closing Balance Sheet Date; but increased by the amount by which cash on hand
in the Company as of the Closing Balance Sheet Date
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is in excess of $500,000, (such amount to include as cash the amount of any
loans payable to the Company by Parent) but not greater than the amount that
Net Working Capital as of the Closing Balance Sheet Date is in excess of Net
Working Capital as of July 31, 1997.
1.2.2 Earnout Consideration. The Earnout Consideration shall
be equal to one-third of the amount that net income of the Company before
taxes, as determined in accordance with GAAP, for the period January 1, 1998
through December 31, 1998 exceeds $1,238,000. The parties acknowledge that net
income before taxes for the purpose of the Earnout Consideration is net of all
expenses and deductions of the Company in accordance with GAAP other than
income tax expense and before any allocation or deduction of overhead expense
or goodwill from the Parent.
1.2.3 Certain Definitions. The following terms shall have the
meaning ascribed below for purposes of this Agreement:
(i) "Closing Balance Sheet Date" means the end of the most
recent monthly accounting period of the Company preceding the Closing
Date.
(ii) "Current Assets" means the current assets of the Company
determined as of the Closing Balance Sheet Date in accordance with
GAAP.
(iii) "Current Liabilities" means the current liabilities of
the Company determined as of the Closing Balance Sheet Date in
accordance with GAAP excluding those current liabilities included in
Long-Term Debt and federal, state and local income taxes payable by
the Company with respect to all periods prior to Closing not included
in Long-Term Debt, and the $550,000 promissory note payable to Xxxxx
X. Xxxxx by the Company for the redemption of his Company Common
Stock, and expressed as a positive number; provided, however, that all
expenses of the Company or the Shareholders incurred in connection
with the transactions contemplated hereby which are payable by the
Company shall be included in Current Liabilities.
(iv) "GAAP" means U.S. generally accepted accounting
principles consistently applied.
(v) "IPO"means the Parent's first underwritten public
offering of Parent Common Stock resulting in net cash proceeds
sufficient to fund the use of proceeds of such offering as described
in the PPM (and any supplements thereto) referenced in Section 3.25
herein (other than any offering pursuant to any registration statement
(i) relating to any capital stock of Parent or options, warrants or
other rights to acquire any such capital stock issued or to be issued
primarily to directors, officers or employees of the Parent or any of
its subsidiaries, (ii) relating to any employee benefit plan or
interest therein, (iii) relating principally to any preferred stock or
debt securities of the Parent, or (iv) filed pursuant to Rule 145
under the Securities Act of 1933, as amended ("Securities Act"), or
any successor or similar provision).
(vi) "IPO Closing Date" means the date that the Parent
receives funds in consideration for the sale of its securities in the
IPO.
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(vii) "IPO Price" means the initial price per share to the
public for shares of Parent Common Stock in IPO.
(viii) "Long-Term Debt" means all long-term liabilities of
the Company as of Closing Date, including capitalized lease
obligations, as applicable to a corporation taxable under Subchapter C
of the Code, as determined under GAAP, plus current portions of such
long-term liabilities and pre-payment penalties as of the Closing
Date.
(ix) "Net Working Capital" means the Current Assets of the
Company minus the Current Liabilities of the Company as of the Closing
Balance Sheet Date, all as determined under GAAP.
1.3 Payment of Closing Exchange Consideration. Parent shall deliver
payment of the Closing Exchange Consideration by delivery of cash and Parent
Common Stock such that $450,000 is delivered to the Shareholders in cash and
the balance is delivered in Parent Common Stock. For purposes of this Section
1.3, such shares of Parent Common Stock shall have a per share value equal to
the IPO Price. The Closing Exchange Consideration shall be paid as follows:
1.3.1 Closing Before Receipt of the 1997 Audit Report. If the
IPO Closing Date occurs prior to receipt by the Parent and the Company of the
1997 Audit Report (defined below), then the Closing Exchange Consideration
shall be paid by the Parent in two installments.
(i) The first installment shall be paid and
delivered to the Shareholders on the IPO Closing Date and shall be
equal to that portion of the Closing Exchange Consideration payable
with respect to the period from January 1, 1997 through December 31,
1997 based on revenue recognized by the Company, less adjustments as
provided in Section 1.2.1, as reported on the Company's unaudited
Balance Sheet and Income Statement, prepared in accordance with GAAP,
as of and for the year ending December 31, 1997 (the "Unaudited
Financial Statements"). This first installment shall be paid by
delivery of $450,000 in cash and the balance by delivery of Parent
Common Stock in accordance with Section 1.3 above.
(ii) The second installment of the Exchange
Consideration shall be paid within ten days after receipt by the
Parent and the Company from the independent certified public
accountants for the Company of an audit report (the "1997 Audit
Report") on the Balance Sheet and Income Statement of the Company as
of December 31, 1997 and for the year then ended ("1997 Financial
Statements"), certifying that such Balance Sheet and Income Statement
are in accordance with GAAP. The second installment of the Exchange
Consideration shall be equal to the difference between (A) the
Exchange Consideration based on the 1997 Financial Statements (for the
period from January 1, 1997 through December 31, 1997, including
adjustments as provided in Section 1.2.1), reduced by (B) the amount
of the first installment of the Exchange Consideration actually paid
to the Shareholders pursuant to Subsection 1.3.1(i) above. In the
event that the second installment is a positive number, then Parent
shall pay and deliver such amount to the Shareholders, and in the
event that the second installment is a negative number, the
Shareholders shall pay and deliver, pro-rata in accordance with their
percentage ownership of the Company, the absolute value of such
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amount to the Parent. Any payment under this Section 1.3.1(ii) shall
be made by delivery of shares of Parent Common Stock with a per share
value equal to the IPO Price.
1.3.2 Closing After Receipt of the 1997 Audit Report. If the
Closing occurs after receipt of the 1997 Audit Report by Parent and the
Company, all of the Closing Exchange Consideration shall be paid and delivered
by the Parent to the Shareholders on the IPO Closing Date based on revenue
recognized by the Company, modified by adjustments in Section 1.2.1, as
reported on the Company's audited 1997 Financial Statements.
1.4 Determination of Earnout. Parent shall prepare and deliver to the
Shareholders, on or before January 31, 1999, a statement (the "Earnout
Statement") based on the financial statements of the Company for the period
from January 1, 1998 through December 31, 1998, prepared in accordance with
GAAP, and showing the amount of Net Income Before Taxes determined in
accordance with GAAP, together with Parent's calculation of the Earnout
Consideration.
1.4.1 Review of Earnout Statement. The Shareholders shall
have the right to review the Earnout Statement (and supporting work papers) and
provide written notice to the Parent of Shareholder's objections with respect
to any error, omission or other discrepancy in the Earnout Statement (the
"Discrepancy Notice") for 20 days following Parent's delivery of the Earnout
Statement. Parent and Shareholders shall work together in good faith to resolve
any such dispute and agree on the final Earnout Statement. In the event that
Parent and Shareholders cannot agree on the final Earnout Statement within 10
days after delivery of Shareholder' s Discrepancy Notice, Parent and
Shareholders shall refer the disputed issue or issues to a national independent
public accounting firm (other than the regular accountants for any party or the
accountants who prepared the Earnout Statement) which is reasonably acceptable
to each party (the "Arbitrating Accountants") within 15 days following delivery
of Shareholder's Discrepancy Notice. The Arbitrating Accountants shall be
instructed to render a decision, which shall be binding upon both parties,
within 20 days. Each party shall be entitled to present any information or
analysis concerning the matter in good faith to the Arbitrating Accountants
with a copy provided to the other party. Parent and Shareholders shall each
bear their own fees and expenses, and the fees and expenses of the Arbitrating
Accountants shall be shared equally by Parent and Shareholders.
1.4.2 Payment of Earnout Consideration. Within thirty days
following delivery of the Earnout Statement, Parent shall deliver payment of
the Earnout Consideration to the Shareholders by delivery of Parent Common
Stock (the "Earnout Shares") at a per share value equal to the IPO Price.
1.5 No Fractional Shares. Notwithstanding the foregoing, no fractional
shares of Parent Common Stock will be issued pursuant to this Section 1, and if
any Shareholder would be entitled hereunder to receive a fractional share of
Parent Common Stock but for this paragraph, that Shareholder shall receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
nearest whole cent) equal to that Shareholder's fractional interest in a share
of Parent Common Stock multiplied by the IPO Price.
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2. THE CLOSING
2.1 Closing. A closing into Escrow ("Closing") will take place at the
offices of Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx in Houston, Texas at
the time and on the day that the Parent and its underwriters agree on the IPO
Price for shares of Parent Common Stock offered in the Parent's IPO (the
"Pricing Date") as set forth in an executed underwriting agreement, but in no
event later than April 23, 1998 (the "Closing Date"); provided that each of the
conditions precedent to the obligations of the parties to effect the Closing
are then satisfied or waived by the applicable party. The parties may agree in
writing on another date, time or place for the Closing. At the Closing, the
parties will deliver or cause to be delivered into escrow with the escrow agent
("Escrow Agent") under the Escrow Agreement set forth in Exhibit 2.1 hereto,
the documents described in Sections 7.3 and 7.5 below. On the IPO Closing Date,
such documents shall be delivered out of escrow to the parties designated to
receive such documents under this Agreement in accordance with the Escrow
Agreement, and Parent shall pay and deliver the Exchange Consideration due to
the Shareholders on the IPO Closing Date as prescribed in this Agreement.
2.2 Delivery of Company Common Stock. Prior to the Closing, the Parent
will deliver to each of the Shareholders a Letter of Transmittal, in
substantially the form attached hereto as Exhibit 2.2, to be used by each
Shareholder for surrendering to Parent certificates representing all the
Company Common Stock in exchange for the right to receive the Exchange
Consideration and the Earnout Consideration. On the Closing Date, certificates
for all of the Company Common Stock held by each Shareholder will be delivered
by such Shareholder to the Escrow Agent in accordance with the Escrow Agreement
for the benefit of the Parent together with properly completed and executed
Letters of Transmittal.
2.2.1 Assignments of Company Common Stock. It is agreed that
no assignment, transfer or other disposition of record or beneficial ownership
of any shares of Company Common Stock may be made on or after the date hereof
other than as provided herein.
2.2.2 Payment In Full Satisfaction of All Rights. The
delivery of the Exchange Consideration to the Shareholders with respect to
their shares shall be deemed to be payment in full satisfaction of all rights
pertaining to the outstanding shares except for the right to receive the
Earnout Consideration.
3. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder separately, and with respect only to his matters and
circumstances, hereby represents and warrants to the Parent that the following
statements in Section 3.1 through 3.3 and 3.25 are true and correct; and the
Shareholders, jointly and severally, hereby represent and warrant to the Parent
that the following statements in Sections 3.4 through 3.24 and are true and
correct:
3.1 Stock Ownership. Exhibit 1.1 accurately sets forth the names of
each Shareholder, the number of shares of Company Common Stock owned by each
Shareholder, and the percentage of total outstanding shares of Company Common
Stock owned by each Shareholder. Each Shareholder owns, beneficially and of
record, with full power to vote, transfer and assign the number
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of shares of Company Common Stock set forth beside such Shareholder's name on
Exhibit 1.1 and such shares are so held by the Shareholders free and clear of
all liens, encumbrances and adverse claims whatsoever.
3.2 Shareholder Authority. Each Shareholder has full right, power,
legal capacity and authority to (i) execute, deliver and perform this
Agreement, and all other documents and instruments referred to herein or
contemplated hereby to be executed, delivered and/or performed by the
Shareholders (each a "Shareholder Related Document") and (ii) consummate the
transactions contemplated herein and thereby. This Agreement has been duly
executed and delivered by each Shareholder and constitutes, and each
Shareholder Related Document, when duly executed and delivered by each
Shareholder who is a party thereto will constitute, legal, valid and binding
obligations of such Shareholder enforceable against such Shareholder in
accordance with their respective terms and conditions, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
3.3 Shareholders Consents. Except as provided on Schedule 3.3, no
approval, consent, order or action of or filing with any court, administrative
agency, governmental authority or other third party is required for the
execution, delivery or performance by the Shareholders of this Agreement or any
Shareholder Related Document other than filings related to the IPO. The
execution, delivery and performance by each Shareholder of this Agreement and
the Shareholder Related Documents do not violate any mortgage, indenture,
contract, agreement, lease or commitment or other instrument of any kind to
which such Shareholder is a party or by which such Shareholder or such
Shareholder's assets or properties may be bound or affected or any law, rule or
regulation applicable to such Shareholder or any court injunction, order or
decree or any valid and enforceable order of any governmental agency in effect
as of the date hereof having jurisdiction over such Shareholder.
3.4 Organization, Etc. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arkansas
and is duly qualified or licensed as a foreign corporation authorized to do
business in all other states in which any of its assets or properties may be
situated or where the business of the Company is conducted except where the
failure to obtain such qualification or license will not have a Company
Material Adverse Effect (as defined in Section 3.24 below). Except as disclosed
on Schedule 3.4 of the Disclosure Schedule previously provided to the Parent by
the Company ("Disclosure Schedule"), the Company does not own, of record or
beneficially, directly or indirectly, any of the outstanding capital stock,
voting interests or ownership interests in any corporation, partnership, joint
venture, limited liability company, trust, limited partnership or other entity.
3.5 Capitalization of the Company. The total authorized capital stock
of the Company is (i) 1,000 shares of Company Common Stock, $1.00 par value, of
which 600 shares are issued and outstanding and held of record and beneficially
by the Shareholders as set forth on Exhibit 1.1 hereto and 150 of which are
held in the treasury of the Company, and (ii) 9,000 shares of non-voting common
stock, $1.00 par value, none of which are issued and outstanding and none of
which are held in the treasury of the Company. Each issued and outstanding
share of Company Common Stock is duly and validly authorized and issued, fully
paid and non-assessable, and was not issued in violation of the
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preemptive rights of any past or present shareholder. Except for the shares of
Company Common Stock owned beneficially and of record by the Shareholders as
set forth on Exhibit 1.1 hereto, there are no outstanding shares of capital
stock, convertible or exchangeable securities, subscriptions, calls, options,
warrants, rights or other agreements or commitments of any character relating
to the issuance or sale of any shares of capital stock of, or other equity
ownership interest in, the Company. The Company has no liability, contingent or
otherwise, to any person or entity in connection with preemptive or contractual
subscription rights or the offer, sale, purchase, surrender or cancellation of
any shares of capital stock, warrants, options or other equity or voting
interests or securities of the Company.
3.6 Company Authority. The Company has full right, power, legal
capacity and authority to execute, deliver and perform all documents and
instruments referred to herein or contemplated hereby to be executed, delivered
and/or performed by the Company (the "Company Related Documents") and to
consummate the transactions contemplated thereby. All of the Company Related
Documents, when duly executed and delivered by the Company, will constitute,
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding at law or in
equity).
3.7 Company Consents. No approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by the
Company of the Company Related Documents.
3.8 Intellectual Property. The Company owns or is licensed to use, and
has sufficient rights to use, all trade names, trademarks, logos, service
marks, copyrights, patents, writings, literary works, licenses, mask works,
trade secrets, patented ideas, schematics, sketches, drawings, designs,
notebooks, reports, memoranda, drafts, worksheets, formulas, processes,
inventions, procedures, knowhow, computer software programs, computer
technology, databases, operating systems, source and object codes, flowcharts,
algorithms, coding sheets, routines, sub-routines, compilers, assemblers,
design concepts, plans, documentation, manuals, production processes, marketing
techniques and arrangements, mailing lists, purchasing information, pricing
policies, customer and supplier lists and data and other intellectual property
(collectively "Intellectual Property") necessary for the operation of the
Company's business as presently conducted and the marketing, sale, use and
application of the services and products sold by the Company. Each item of such
Intellectual Property will be owned or licensed to be used and available for
use by the Company after the IPO Closing Date on the same terms and conditions
as prior to Closing. None of the ownership, access to, or use of the
Intellectual Property by the Company infringes on the rights of any other party
and the Company's rights to the Intellectual Property are valid and
enforceable. No person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with the Intellectual Property rights of the
Company. The Company has not interfered with, infringed upon, misappropriated
or otherwise come into conflict with any intellectual property rights of
others, and the Company has not received any charge, complaint, demand or
notice alleging any such interference, infringement, misappropriation or
conflict.
3.9 Title. Except as set forth in Schedule 3.9 of the Disclosure
Schedule, the Company owns outright, and has full legal and beneficial title to
all of its assets free and clear of all liens, pledges, mortgages, security
interests, conditional sales contracts and encumbrances, including good and
marketable
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title to all of its real property interests, free and clear of any mortgages,
security agreements, liens or encumbrances.
3.10 Defaults. Neither the Company nor any Company Plan (as defined
below) is in default under or in violation of, and the execution and delivery
of the Agreement, the Company Related Documents and the Shareholder Related
Documents and the consummation of the transactions contemplated hereby and
thereby will not result in a default by the Company or any Company Plan under
or a violation of (i) any mortgage, indenture, charter or bylaw provision,
provision of any Company Plan, contract, agreement, lease, commitment or other
instrument of any kind to which the Company or any Company Plan is a party or
by which the Company or any Company Plan or any of its properties or assets may
be bound or affected or (ii) any law, rule or regulation applicable to the
Company or any Company Plan or any court injunction, order or decree, or any
valid and enforceable order of any governmental agency in effect having
jurisdiction over the Company or any Company Plan, which default or violation
could adversely affect the ability of the Company to consummate the
transactions contemplated hereby or will have a Company Material Adverse
Effect.
3.11 Other Disclosures. The following disclosures pertaining to the
Company are set forth in Schedule 3.11 of the Disclosure Schedule. Such
disclosures are complete and accurate.
(i) Schedule 3.11(i) is a list of the products of the Company
and all product registrations used by the Company, including all products
licensed by the Company to customers and products licensed to the Company from
licensors, and a description of the parties to and principal terms of such
license arrangements, and a list of all material safety data sheets, toxicology
studies and environmental studies of the Company.
(ii) Schedule 3.11(ii) is a list of the names, titles, start
dates and current annual salary and wage rates of all salaried and hourly
regular full-time and part-time employees of the Company as of the date hereof,
together with a summary of the bonuses, additional compensation and other like
benefits and any decrease in compensation, if any, paid or payable to each
employee during the twelve months prior to the date hereof, and the last date
on which each employee received (a) any change in annual salary or hourly wage
and (b) any bonus or additional compensation or benefits.
(iii) Schedule 3.11(iii) includes the legal descriptions of
all real property owned in fee or leased as lessee by the Company and a list of
documents reflecting any other real property interests owned of record or
beneficially or leased as lessee by the Company.
(iv) Schedule 3.11(iv) includes (a) a list of assets owned by
the Company as of the date hereof which have been capitalized and have an
unamortized value of $5,000 or more, including vehicles and rolling stock, (b)
a list of all leased equipment of the Company, including leased vehicles and
rolling stock and (c) the Company's most recent depreciation schedule with
respect to the assets of the Company. The Shareholders represent and warrant
that all of the machinery, equipment, vehicles and rolling stock of the Company
are in good working order and condition, ordinary wear and tear excepted.
(v) Schedule 3.11(v) is a list of raw materials or other
property located at any property owned or leased as lessee by the Company, that
has been consigned to the Company, or is otherwise owned by a third party, and
has a market value exceeding $5,000.
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(vi) Attached to and listed on Schedule 3.11(vi) is each
policy of insurance maintained by the Company together with information on
premiums, coverages, insurers, expiration dates and deductibles, an accurate
list of all insurance loss runs and workers' compensation claims received for
the past three policy years. The Shareholders represent and warrant that (a)
such insurance is currently in full force and effect, (b) the Company's
insurance has never been canceled, (c) the Company has never been denied
coverage or experienced a substantial increase in premiums or a substantial
reduction in coverage from one policy period to the next policy period, (d)
such coverage is adequate in character and amount and (e) such coverage is
placed with financially sound and reputable insurers unaffiliated with either
the Shareholders or the Company.
(vii) Schedule 3.11(vii) is a list of each bank, brokerage
firm, trust company or other financial institution in which the Company has an
account and the identity of each such account, and each bank in which the
Company has a safe deposit box, together with the names of all persons
authorized to draw on any such account or have access to any such safe deposit
box.
(viii) Schedule 3.11(viii) is a list and summary description
of, or copies of, all governmental licenses and permits of the Company.
(ix) Schedule 3.11(ix) is a list of each debt, note,
mortgage, security agreement, pledge agreement, guaranty, bond, letter of
credit, lease or other instrument creating any debt or contingent obligation of
the Company or a lien or claim on any of its assets (other than unsecured trade
accounts payable incurred in the ordinary course of business) and each claim,
lawsuit, investigation, audit or legal proceeding involving the Company or any
of its assets.
(x) Schedule 3.11(x) is a list of all of the Company's
Intellectual Property and a description of all license fees and royalties
(including the basis of calculation thereof) required to be paid now or in the
future by the Company for the use of any of its Intellectual Property.
(xi) Schedule 3.11(xi) is a list naming each Company Contract
(as defined below). The Shareholders represent and warrant that (a) none of the
Company's customers or suppliers have canceled or substantially reduced, or are
currently attempting or threatening to cancel or substantially reduce, service
or products; (b) except to the extent set forth on Schedule 3.11(xi), the
Company has complied with all commitments and obligations and is not in default
under any such contracts and agreements, no notice of default has been received
by the Company, and the Company is not aware of any defaults by customers,
suppliers and other parties to such contracts and agreements; (c) the Company
has not experienced labor interruptions over the past three years and the
Shareholders consider the relationship between the Company and its employees to
be good; and (d) the Company has never been a party to any governmental
contracts subject to price redetermination or renegotiation. The term "Company
Contract" means each contract, lease, undertaking, commitment, mortgage,
indenture, note, security agreement, license and other agreement of the Company
in effect on the date hereof (a) involving the expenditure or receipt of more
than $10,000 over the term thereof, (b) containing provisions calling for the
sale or purchase of raw materials, products or services at prices that vary
from the market prices of such raw materials, products or services generally
prevailing in customary third party markets, (c) which include "take or pay",
"meet or release", "most favored nations" or similar pricing or delivery
arrangements, (d) requiring the Company to indemnify or hold harmless any other
person or entity, (e) evidencing any warranty obligation of the Company with
respect to goods, services or products sold or leased by it, (other than
warranties given in
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the ordinary course of business), (f) imposing on the Company any
confidentiality, non-disclosure or non-compete obligation or containing any
acceleration or termination provisions effective upon a change of control of
the Company, or a merger of the Company into another entity, or (g) involving
collective bargaining or agreements with any labor union or employee group.
(xii) Schedule 3.11(xii) is a list of all powers of attorney
presently in effect granted by the Company and all investments of the Company
in any equity securities, partnership interests, indebtedness or other
interests in any other corporation, or any person, partnership, joint venture,
limited liability company, trust, limited partnership or other legal entity.
(xiii) Schedule 3.11(xiii) is a list of all obligations,
contingent or otherwise, covering any of the Company's employees under any
employment or consulting agreement or under any executive or employee's
compensation plan, agreement or arrangement including, without limitation, any
"employee welfare benefit plan" as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), "employee pension
benefit plan" as defined in Section 3(2) of ERISA or any other pension,
retirement, profit sharing, stock option, stock purchase, bonus, fringe
benefit, incentive, vacation, savings plan, health, welfare or other employee
or former employee benefit plan, program, policy or arrangement (collectively
referred to as "Company Plans").
3.12 Investment Company. The Company is not an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.13 Financial Statements. The Shareholders have listed in Schedule
3.13 of the Disclosure Schedule and have delivered to the Parent copies of the
following audited financial statements of the Company: Balance Sheets as of
July 31, 1996 and 1997, and Statements of Income, Stockholders Equity and Cash
Flows for the years ended July 31, 1996 and 1997; plus the unaudited Balance
Sheet as of September 30, 1997 ("Balance Sheet Date") and Statements of Income
and Cash Flows for the nine months ended September 30, 1996 and 1997. Such
financial statements are collectively referred to herein as "Company Financial
Statements". The Company Financial Statements, except as described in the notes
thereto, have been prepared from the Company's records in accordance with GAAP.
The Company Financial Statements present accurately and fairly in all material
respects the financial condition of the Company as of the dates indicated
thereon, and present accurately and fairly in all respects the results of the
Company's operations for the periods indicated thereon. The Company Financial
Statements do not omit any liabilities or obligations of a type which should be
included in or reflected in such financial statements in accordance with GAAP,
whether related to tax or non-tax matters, accrued or contingent, due or not
yet due, liquidated or unliquidated, or otherwise, except as and to the extent
disclosed or reflected in the Company Financial Statements, or in Schedule 3.14
of the Disclosure Schedule.
3.14 Undisclosed Liabilities. To the best knowledge of Shareholders
and the Company, except as and to the extent disclosed in Schedule 3.14 of the
Disclosure Schedule or in the Company Financial Statements, the Company has no
liabilities or obligations of any nature (whether absolute, contingent or
otherwise). In the case of any liabilities which are not fixed, an estimate of
the maximum amount which may be payable is set forth on Schedule 3.14 of the
Disclosure Schedule.
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3.15 Tax Matters.
(i) All federal, state, local and foreign tax returns
required to be filed by the Company (and, if applicable, its subsidiaries)
prior to the date hereof have been filed on a timely basis with the appropriate
governmental authorities in all jurisdictions in which such tax returns are
required to be filed, and all such returns are correct and complete. The
Shareholders have delivered to Parent, and Schedule 3.15(i) of the Disclosure
Schedule includes, correct and complete copies of all federal, state, local and
foreign income and franchise tax returns filed by, examination reports received
by, and statements of deficiencies asserted against or agreed to by the Company
(and, if applicable, its subsidiaries) since January 1, 1991. The Company
(including any of its subsidiaries) is not currently the subject of any audit,
examination or any similar investigation by any governmental authority.
Schedule 3.15(i) of the Disclosure Schedule sets forth all audits, examinations
or similar investigations of the Company (including any of its subsidiaries) by
any governmental authority.
(ii) All federal, state, local and foreign income, franchise,
sales, use, property, and all other taxes, fees, assessments, or other
governmental charges (including withholding taxes), and all interest and
penalties thereon (all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company (including any of its subsidiaries) have been
fully and timely paid or, in the cases of Taxes for which payment is not yet
required, properly and fully accrued for on the Company Financial Statements
with respect to all taxable periods ending on or prior to the date hereof and
interim periods through the date hereof.
(iii) The Company (including any of its subsidiaries) has not
filed a consent under Section 341(f) of the Internal Revenue Code of 1986
("Code") concerning collapsible corporations. The Company (including any of its
subsidiaries) and each of the Shareholders is not a party to any agreement,
contract or arrangement that would, by reason of the consummation of any of the
transactions contemplated by this Agreement, individually or in the aggregate,
result in the payment of any "excess parachute payment" within the meaning of
Section 280G of the Code. None of the assets of the Company (including any of
its subsidiaries) is required to be treated as being owned by any other person
pursuant to the "safe harbor" leasing provisions of Section 168 of the Internal
Revenue Code of 1954, as in effect prior to the repeal of such provisions.
(iv) The Company (including any of its subsidiaries) is not a
party to any Tax allocation or sharing agreement. The Company (including any of
its subsidiaries): (A) has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was the Company); and (B) does not have any liability for the taxes of
any person (other than the Company or any of its subsidiaries) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(v) Schedule 3.15(v) of the Disclosure Schedule sets forth
the following information with respect to the Company (including any of its
subsidiaries) as of the most recent practicable date: (A) the basis of the
Company (and any of its subsidiaries) in its assets; (B) the basis of the
stockholder(s) of any subsidiary of the Company in its stock of the subsidiary
(or the amount of any excess loss account); (C) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign tax,
or excess charitable contribution allocable to the Company (and any of its
subsidiaries); and (D) the
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amount of any deferred gain or loss allocable to the Company (or any of its
subsidiaries) arising out of any Deferred Intercompany Transaction (as defined
in Treas. Reg. Section 1.1502-13).
(vi) The Company (including any of its subsidiaries) has not
waived any statute of limitations, or agreed to any extension of time with
respect to an assessment or deficiency, with respect to any Taxes.
(vii) The amount of Company's (including any of its
subsidiaries) liability for unpaid Taxes for all periods ending on or before
the date of this Agreement do not, in the aggregate, exceed the amount of the
current liability accruals for Taxes (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) solely
with respect to Company as of the date of this Agreement, and the amount of
Company's liability for unpaid Taxes for all periods ending on or before the
IPO Closing Date shall not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) as such
accruals are reflected on the face of the Company Financial Statements.
(viii) With respect to the qualification of the Exchange as
an exchange transaction within the meaning of Section 351 of the Code, there is
no specific plan or intention on the part of any Shareholders to sell, exchange
or otherwise dispose of any shares of Parent Common Stock received in the
Exchange.
3.16 Full Authority. The Company has full power, authority and legal
right and has all licenses, permits, qualifications, and other documentation
(including permits required under applicable Environmental Law (as defined
below)) necessary to own and/or operate its businesses, properties and assets
and to carry on its businesses as being conducted on the date hereof, and such
businesses are now being conducted and such assets and properties are being
owned and/or operated, and the Company Plans have been implemented and
maintained, in compliance with all applicable laws (including Environmental
Law), ordinances, rules and regulations of any governmental agency of the
United States, any state or political subdivision thereof, or any foreign
jurisdiction, all applicable court or administrative agency decrees, awards and
orders and all such licenses, permits, qualifications and other documentation,
except where the failure to comply will not have a Company Material Adverse
Effect, and there is no existing condition or state of facts which would give
rise to a violation thereof or a liability or default thereunder, except where
a violation, liability or default will not have a Company Material Adverse
Effect. The term "Environmental Law" means any law, rule, regulation, approval,
decision, decree, ordinance, by-law having the force of law or order of any
federal, state or local executive, legislative, judicial, regulatory or
administrative agency, board or authority, which relate to (i) noise; (ii)
pollution or protection of the air, surface water, ground water or land; (iii)
solid, gaseous or liquid waste generation, treatment, storage, use, processing,
disposal or transportation; (iv) exposure to hazardous or toxic substances; (v)
the safety or health of employees or (vi) regulation of the manufacture,
processing, distribution in commerce, use, or storage of chemical substances.
3.17 Legal Actions. Except as described in Schedule 3.17 of the
Disclosure Schedule, no legal action, suit, audit, investigation, unfair labor
practice charge, complaint, claim, grievance, or proceeding by or before any
court, arbitration panel, governmental authority or third party is pending or,
to the best knowledge of the Company or the Shareholders threatened, which
involves or may involve the Company or its now or previously owned or operated
assets, operations, properties or businesses.
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3.18 Company Contracts, Company Plans. Neither the Company nor any
other party thereto is in default under or in violation of any Company Contract
or Company Plan.
3.19 Access. The Company has cooperated fully in permitting the Parent
and the Parent's lenders, underwriters and placement agents and their
respective representatives to make a full investigation of the properties,
operations and financial condition of the Company; and afforded the Parent and
the Parent's lenders, underwriters and placement agents and their respective
representatives reasonable access to the offices, buildings, real properties,
machinery and equipment, inventory and supplies, records, files, books of
account, tax returns, agreements and commitments and personnel of the Company.
3.20 No Material Adverse Change. Except as specifically set forth on
Schedule 3.20 of the Disclosure Schedule, since the Balance Sheet Date, there
has not been: (a) any change in the Company's Articles of Incorporation or
Bylaws, (b) any material adverse change of any nature whatsoever in the
financial condition, assets, liabilities (contingent or otherwise), income,
business or prospects of the Company; (c) any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting the
properties or business of the Company; (d) any change in the authorized capital
of the Company or in its securities outstanding or any change in its ownership
interests; (e) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company; (f) any contract
or commitment entered into by the Company or any incurrence by the Company or
agreement by the Company to incur any liability or make any capital
expenditures in excess of $3,000, except in the normal course of business; (g)
any increase in the compensation, bonus, sales commissions or fee arrangement
payable or to become payable by the Company to any of its officers, directors,
stockholders, employees, consultants or agents; (h) any work interruptions,
labor grievances or claims filed, proposed law or regulation (the existence of
which is known, or under the normal course of business should be known, to the
Shareholder) or any event or condition of any character materially adversely
affecting the business of future prospects of the Company; (i) any creation,
assumption or permitting to exist any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired, except as set forth in Schedules 3.11(ix), 3.11(xi) and 3.14 of the
Disclosure Schedule; (j) any sale or transfer, or any agreement to sell or
transfer, any material assets, properties or rights of the Company to any
person, including, without limitation, the Shareholders and their respective
affiliates; (k) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including, without limitation, any
indebtedness or obligation of the Shareholders or any of their affiliates; (1)
any plan, agreement or arrangement granting any preferential rights to purchase
or acquire any interest in any of the assets, properties or rights of the
Company or requiring consent of any party to the transfer and assignment of any
such assets, properties or rights; (m) any purchase or acquisition, or
agreement, plan or arrangement to purchase or acquire, any property, rights or
assets of the Company; (n) any negotiation for the acquisition of any business
or start-up of any new business; (o) any merger or consolidation or agreement
to merge or consolidate with or into any other corporation (except the
transactions contemplated by this Agreement); (p) any waiver of any material
rights or claims of the Company; (q) any breach, amendment or termination of
any material contract, agreement, license, permit, permit application or other
right to which the Company is a party; (r) any discharge, satisfaction,
compromise or settlement of any claim, lien, charge or encumbrance or payment
of any obligation or liability, contingent or otherwise, other than current
liabilities as of the Balance Sheet Date, current liabilities incurred since
the Balance Sheet Date in the ordinary course of business and prepayments of
obligations in accordance with normal and customary
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past practices; or (s) any transaction by the Company outside the ordinary
course of its business or prohibited hereunder.
3.21 Subsidiaries; Predecessors. Schedule 3.21 of the Disclosure
Schedule lists the name of the Company's subsidiaries and the securities of any
other corporation, partnership, firm, association or business organization,
entity or enterprise owned by the Company or any of the Company's subsidiaries.
Except as disclosed in Schedule 3.21 of the Disclosure Schedule, all the issued
shares of the capital stock of the subsidiaries of the Company are directly or
ultimately owned by the Company, free and clear of all liens, encumbrances or
adverse claims of every kind. All such shares are duly and validly authorized
and issued, fully paid and nonassessable, and were not issued in violation of
the preemptive rights of any past or present stockholder. Also set forth in
Schedule 3.21 of the Disclosure Schedule is a listing of all names under which
the Company has done business as well as the names of all predecessors of the
Company, including the names of any entities from which the Company previously
acquired significant assets.
3.22 Affiliate Relationships.
(i) Except as set forth on Schedule 3.22 of the Disclosure
Schedule, neither the Shareholders nor any affiliate of the Shareholders, and
no director, officer or employee of or consultant to the Company owns, directly
or indirectly, in whole or in part, any property, assets or right, tangible or
intangible, which is associated with any property, asset or right owned by the
Company or which the Company is operating or using or the use of which is
necessary for its business. Also included in Schedule 3.22 of the Disclosure
Schedule is the disclosure of any relationships which any Shareholder or any
director, officer, employee, agent or consultant of the Company has with any
other corporation, partnership, firm, association or business organization,
entity or enterprise which is a competitor, potential competitor (based upon
the nature of such potential competitor's business as of the Closing Date),
supplier or customer of the Company.
(ii) The term "affiliate" means with respect to any person,
any other person which directly or indirectly, by itself or through one or more
intermediaries, controls, or is controlled by, or is under direct or indirect
common control with, such person. The term "control" means the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
3.23 Disclosure. No representation or warranty by the Company or any
Shareholder in the Agreement (including the Exhibits hereto) and no statement
contained in the Disclosure Schedule or any certificate delivered by the
Company or the Shareholders to the Parent pursuant to the Agreement, contains
or will contain any untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements herein or therein,
in light of the circumstances under which they are or were made, not
misleading.
3.24 Company Material Adverse Effect. The term "Company Material
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, other indebtedness,
cash flows or contingent liabilities of the Company in an amount of $25,000 or
more.
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3.25 Restricted Securities.
(1) Each Shareholder acknowledges that the shares of Parent
Common Stock to be acquired by the Shareholder hereunder, have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are being acquired for the Shareholder's own
account for investment and not with a view to the distribution
thereof, and the Parent Common Stock will be subject to the Stock
Transfer Restriction Agreement in Exhibit 7.3.2 hereto.
(2) Each Shareholder and its representatives have the
knowledge and experience in financial and business matters to enable
them to evaluate the merits and risks of entering this Agreement and
the transactions contemplated hereby and acquiring shares of Parent
Common Stock.
(3) Each Shareholder is able to bear the economic risks of
its investment in the Parent Common Stock, including the risk of a
loss of the value of the Parent Common Stock.
(4) Each Shareholder has been represented by legal counsel in
this transaction and such Shareholder and its representatives,
including such counsel, have been given the opportunity to ask
questions of, and receive answers from, the officers of the Parent
concerning the terms of the transactions contemplated by this
Agreement and the affairs and the business and financial condition of
the Parent.
(5) Each Shareholder has received a Confidential Private
Placement Memorandum ("PPM") concerning the Parent and an investment
in shares of Parent Common Stock, and such Shareholder and its
representatives have been given such access to all documents, books
and additional information concerning Parent which they have requested
regarding Parent.
(6) Each Shareholder and its representatives have conducted
such investigations in making a decision to approve this Agreement and
the transactions contemplated hereby as they have deemed necessary and
advisable.
(7) Each Shareholder acknowledges and agrees that the Parent
Common Stock to be issued to such Shareholder may not be disposed of
except in accordance with the requirements of the Securities Act and
any applicable state securities laws and the Stock Transfer
Restriction Agreement in Exhibit 7.3.2 hereto.
4. REPRESENTATIONS AND WARRANTIES
OF THE PARENT
The Parent hereby represents and warrants to the Shareholders as
follows:
4.1 Organization. The Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
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or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined in Section 4.12 below).
4.2 Capitalization of the Parent. The total authorized capital stock
of Parent is as set forth and described in Parent's Confidential Private
Placement Memorandum ("PPM") delivered to Shareholders in connection with the
transactions contemplated by this Agreement. The outstanding shares of Parent
Common Stock have been duly and validly issued and are fully paid and
non-assessable.
4.3 Authority. The Parent has the requisite, power and authority to
execute, deliver and perform this Agreement and all documents and instruments
referred to herein or contemplated hereby (the "Parent Related Documents") and
to consummate the transactions contemplated herein and thereby. This Agreement
has been duly executed and delivered by the Parent and constitutes, and all the
Parent Related Documents, when executed and delivered by the Parent will
constitute, legal, valid and binding obligations of the Parent, enforceable in
accordance with their respective terms and conditions except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
4.4 Consents. No approval, consent, order or action of or filing with
any court, administrative agency, governmental authority or other third party
is required for the execution, delivery or performance by the Parent of this
Agreement or the Parent Related Documents or the consummation by the Parent of
the transactions contemplated hereby, except as may be described in the PPM and
except for the filing of the Parent's registration statement with respect to
the IPO ("Registration Statement") with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act and the SEC's declaration of
effectiveness of such Registration Statement and the completion of all
necessary filings required under, and the obtaining of all necessary consents
and approvals required pursuant to, state securities or "blue sky" laws in
connection with the IPO.
4.5 Defaults. The Parent is not in default under or in violation of,
and the execution, delivery and performance of this Agreement and the Parent
Related Documents and the consummation by the Parent of the transactions
contemplated hereby and thereby will not result in a default under or in
violation of (i) any mortgage, indenture, charter or bylaw provision, contract,
agreement, lease, commitment or other instrument of any kind to which the
Parent is a party or by which the Parent or any of its properties or assets may
be bound or affected or (ii) any law, rule or regulation applicable to the
Parent or any court injunction, order or decree, or any valid and enforceable
order of any governmental agency in effect as of the date hereof having
jurisdiction over the Parent, which default or violation prevents the Parent
from consummating the transactions contemplated hereby or is reasonably likely
to have a Parent Material Adverse Effect.
4.6 Investment Company. The Parent is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
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4.7 Financial Statements. The Parent has provided certain financial
statements to the Shareholders in the PPM ("Parent Financial Statements") and
such Parent Financial Statements have been prepared in accordance with GAAP and
fairly present the consolidated financial position, results of operations and
cash flows of the Parent and its then existing consolidated subsidiaries as of
the dates and for the periods indicated, subject to normal year-end adjustments
and any other adjustments described therein or in the notes or schedules
thereto. The books and records of the Parent have been kept in reasonable
detail and accurately and fairly reflect the transactions of the Parent.
4.8 Taxes. The Parent has either accrued, discharged or caused to be
discharged, as the same have become due, or the Parent Financial Statements
contain adequate accruals and reserves for, all taxes, interest thereon, fines
and penalties of every kind and character for such taxes, attributable or
relating to the properties and business of the Parent.
4.9 Full Authority. The Parent has the corporate power and authority
and has obtained all licenses, permits, qualifications, and other documentation
(including permits required under applicable environmental law) necessary to
own and/or operate its businesses, properties and assets and to carry on its
businesses as being conducted on the date of this Agreement, except such
licenses, permits, qualifications or other documentation, the failure to obtain
which is not reasonably likely to result in a Parent Material Adverse Effect,
and such businesses are now being conducted and such assets and properties are
being owned and/or operated in compliance with all applicable laws (including
environmental law), ordinances, rules and regulations of any governmental
agency of the United States, any state or political subdivision thereof, or any
foreign jurisdiction, all applicable court or administrative agency decrees,
awards and orders and all such licenses, permits, qualifications and other
documentation, except where the failure to comply will not have a Parent
Material Adverse Effect, and there is no existing condition or state of facts
that would give rise to a violation thereof or a liability or default
thereunder that is reasonably likely to have a Parent Material Adverse Effect.
4.10 Access. The Parent has cooperated fully in permitting the
Shareholders and their representatives to make a full investigation of the
properties, operations and financial condition of the Parent and has afforded
the Shareholders and their representatives reasonable access to the offices,
buildings, real properties, machinery and equipment, inventory and supplies,
records, files, books of account, tax returns, agreements and commitments and
personnel of Parent.
4.11 Disclosure. No representation or warranty by the Parent in this
Agreement, and no statement contained in any certificate delivered by the
Parent to the Shareholders pursuant to this Agreement, contains any untrue
statement of a material fact or omits any material fact necessary in order to
make the statements herein or therein, in light of the circumstances under
which they are or were made, not misleading.
4.12 Parent Material Adverse Effect. The term "Parent Material Adverse
Effect" shall mean an adverse effect on the properties, assets, financial
position, results of operations, long-term debt, other indebtedness, cash flows
or contingent liabilities of the Parent and its consolidated subsidiaries,
taken as a whole in an amount of $25,000 or more.
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5. CERTAIN COVENANTS AND AGREEMENTS OF SHAREHOLDERS
The Shareholders further jointly and severally agree with the Parent
that from the date hereof through the Closing Date:
5.1 Conduct of Business. The Shareholders shall cause the Company to
conduct its operations according to its ordinary and usual course of business
to preserve substantially intact its business organization, keep available the
services of its officers and employees, and maintain its present relationships
with licensors, suppliers, distributors, customers and others having
significant business relationships with it. The Shareholders agree to cause
representatives of the Company to confer with representatives of the Parent to
keep it informed with respect to the general status of the on-going operations
of the business of the Company. Without limiting the generality of the
foregoing, and except as otherwise contemplated herein or agreed to in writing
by Parent, the Shareholders will cause the Company to:
(i) carry on its business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(ii) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(iii) perform all of its obligations under all debt and lease
instruments and other agreements (including the Company Contracts)
relating to or affecting its business, assets, properties, equipment
and rights, and pay all vendors, suppliers, and other third parties
(including mechanics and materialmen) as and when their bills are due
and pay in full all payroll obligations when due;
(iv) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(v) use its best efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and other having
business relations with the Company;
(vi) refrain from effecting any change in the capital
structure of the Company and from incurring any expenditures outside
the ordinary course of business;
(vii) refrain from starting or acquiring any new businesses;
(viii) refrain from adding or deleting personnel outside the
ordinary course of business and maintain its present salaries and
commission levels for all officers, directors, employees or agents,
except for the usual and customary merit increases for employees;
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(ix) refrain from declaring or paying any bonuses, fees,
extraordinary commissions, dividends or any other distributions to the
Shareholders, directors, management, sales agents, employees or other
personnel inconsistent with past practice;
(x) promptly notify the Parent of the receipt by it or any
Shareholder of any notice or claim, written or oral, of (a) default or
breach by the Company under, or of any termination (other than at the
end of the stated term thereof) or cancellation, or threat of
termination (other than at end of the stated term thereof) of
cancellation, of any Company Contract, (b) any loss of, damage to or
disposition of, any of the properties, assets or the products of the
Company of a value of $10,000 or more, singly or in the aggregate
(other than the sale or use of inventories in the ordinary course of
business), (c) any claim or litigation threatened or instituted, or
any other adverse event or occurrence involving or affecting the
Company or any of its assets, properties, operations, businesses or
employees, and (d) any proposal made by any third party received by
the Company or of which any Shareholder obtains knowledge in respect
of any sale or other disposition, direct or indirect, of the assets
(other than the sale or use of inventories in the ordinary course of
business), businesses or outstanding capital stock or other ownership
or voting interests of the Company;
(xi) comply with and cause to be complied with all applicable
laws, rules, regulations and orders of all federal, state and local
governments or governmental agencies affecting or relating to the
Company or its assets, properties, operations, businesses or employees
except where the failure to comply will not have a Company Material
Adverse Effect;
(xii) refrain from any sale, disposition, distribution or
encumbrance of any of its properties or assets and refrain from
entering into any agreement or commitment with respect to any such
sale, disposition, distribution or encumbrance (other than the sale or
use of inventories in the ordinary course of business);
(xiii) refrain from any purchase or redemption of any capital
stock, other ownership interest or other voting interest of the
Company and refrain from issuing any capital stock or other ownership
interest;
(xiv) refrain from making any change in any accounting
principle, classification, policy or practice;
(xv) refrain from effecting any amendment to the certificate
or articles of incorporation or bylaws or other governing instruments
of the Company;
(xvi) refrain from entering into or agreeing to enter into
any merger or consolidation by the Company with or into, and refrain
from acquiring all or substantially all of the assets, capital stock
or business of, any person, corporation, partnership, association or
other business organization or division of any thereof;
(xvii) maintain and comply with its debt and lease agreements
and instruments (except those that expire on their stated maturity or
lease termination dates); refrain from entering into any amendment
thereto or new debt or lease agreements or instruments; refrain from
increasing any
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indebtedness for borrowed money or issuing or selling any debt
securities or letters of credit; and refrain from making any payments
of any indebtedness or interest or other amounts thereon or with
respect thereto (other than regularly scheduled principal and interest
payments and payments of principal, interest and fees under revolving
lines of credit);
(xviii) manage working capital in the ordinary course
consistent with past practice and refrain from introducing any new
method of management or operation, providing any discounted services
or products, discounting any receivables or taking any action to
accelerate payment of any receivable prior to its due date (except in
the ordinary course of business consistent with past practices); and
(xix) refrain from entering into any contract, lease,
undertaking, commitment, mortgage, indenture, note, security
agreement, license or other agreement (a) involving the receipt or
expenditure of more than $25,000 over the term thereof (other than
consulting or service contracts with customer entered in the ordinary
course of business), (b) containing provisions calling for the sale or
purchase of raw materials, product or service at prices that vary from
the market prices of such raw materials, products or services
generally prevailing in customary third-party markets, (c) which
include "take or pay", "meet or release", "most favored nations" or
similar pricing or delivery arrangements, (d) with any officer,
director, shareholder or affiliate of the Company, (e) requiring the
Company to indemnify or hold harmless any other person or entity
(other than consulting or service contracts with customer entered in
the ordinary course of business), (f) evidencing any warranty
obligation of the Company with respect to goods, services or products
sold or leased by it (other than warranties given in the normal course
of business containing substantially the same terms as those presently
in effect), or (g) imposing on the Company any confidentiality,
non-disclosure or non-compete obligation (other than consulting or
service contracts with customers entered in the ordinary course of
business).
5.2 Cooperation. Each Shareholder will cooperate fully with the
Parent, and will cause the Company to cooperate fully with the Parent, as to
arrangements for the consummation of the transactions contemplated hereby in an
orderly fashion.
5.3 Filings, Etc. Each Shareholder will make, and cause the Company to
make, all filings which are required to be made by them to lawfully consummate
the transactions contemplated hereby.
5.4 Access. The Shareholders will, and will cause the Company to,
cooperate fully in permitting the Parent and the Parent's lenders, underwriters
and placement agents and their respective representatives, advisers,
consultants, appraisers, auditors, engineers and other experts to make a full
investigation of the properties, operations and financial condition of the
Company and will afford the Parent and the Parent's lenders, underwriters and
placement agents and their respective representatives, advisers, consultants,
appraisers, auditors, engineers and other experts reasonable access to the
offices, buildings, real properties, machinery and equipment, inventory and
supplies, records, files, books of account, tax returns, agreements and
commitments and personnel of the Company. Without limitation of the foregoing,
the Shareholders and the Company shall provide the Parent with such reasonably
available financial information (and schedules with respect thereto) with
respect to the Company as the Parent may reasonably request and will cooperate
with and assist representatives of the Parent in the preparation of such
financial information (and any opinions or reports with respect thereto) with
respect to the Company
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as the Parent may reasonably request. Notwithstanding the above, the Parent and
its respective lenders, underwriters and placement agents and their respective
representatives, advisers, consultants, appraisers, engineers and other experts
shall incur no liability with respect to control, operation or management (or
alleged control, operation or management) of the Company as a result of the
covenants in this Section 5.4.
5.5 Satisfaction of Conditions. The Shareholders shall (i) use their
reasonable efforts to obtain, as soon as possible, all governmental approvals
required to be obtained by the Company and make, as soon as possible, all
filings with any governmental authority required on the part of the Company to
consummate the transactions contemplated hereby, (ii) use their reasonable
efforts to obtain, as soon as possible, all other consents to and approvals
required to be obtained by the Company to consummate the transactions
contemplated hereby, and (iii) otherwise use their reasonable efforts to
satisfy the conditions set forth in this Agreement to the extent that such
satisfaction is within their control; provided, however, that this Section 5.5
shall not be construed to limit the rights of the Company to terminate this
Agreement as provided in Article 9 of this Agreement.
5.6 Capital Budget. Exhibit 5.6 hereto contains the budgeted capital
expenditures of the Company from July 1, 1997 through December 31, 1998. Unless
otherwise consented to by the Parent, the Company will make capital
expenditures in accordance with such budget and shall not make any additional
capital expenditures.
5.7 Exclusivity. The Shareholders shall not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person or entity
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets of the Company (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate
in any negotiations or discussions regarding, furnishing any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person or entity in favor of any such acquisition. The
Shareholders will (and shall cause the Company to) promptly notify the Parent
if any person or entity makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
5.8 Agreements of Shareholders to be Effective Upon Closing. Effective
upon Closing, and without further action on the part of any party or other
person, each Shareholder covenants and agrees as follows:
5.8.1 Covenant Not to Compete.
(i) For the consideration specified in this Agreement and in
recognition that the covenants by the Shareholders in this Section are
a material inducement to the Parent to enter into and perform this
Agreement, (a) each Shareholder who is not an employee of the Company
prior to the date hereof agrees that during the one-year period after
the Closing Date, Shareholder will comply with the provisions of
Section 5.8.1(ii) below, and (b) each Shareholder who is an employee
of the Company agrees to comply with the provisions of Section
5.8.1(ii) below until the date which is the later to occur of two (2)
years after the Closing Date or one year from and after the date of
termination of such Shareholder's employment by the Company regardless
of the reason for such termination.
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(ii) Each Shareholder agrees that for the applicable time
period in Section 5.8.1(i) above ("Restricted Period"), such
Shareholder will not represent, engage in or carry on, directly or
indirectly, any business with any person or entity who was a customer
or client of the Company during the one year period preceding the
beginning of the Restricted Period (or any customer or client of an
affiliate of the Company for which the Shareholder has materially
assisted such affiliate in serving such customer or client ("Assisted
Affiliate")) or any business within 100 miles of the city or county
limits of any city or county in the United States or foreign countries
where the Company or any Assisted Affiliates has an office or in which
the Company provides services which produce Company revenues of an
amount equal to 2% or more of the Company's revenues for the twelve
complete calendar months preceding the time of termination, which
business competes with any business, services or products produced,
sold, conducted, developed, or in the process of development by the
Company or jointly by the Company and an Assisted Affiliate, including
any business that involves the furnishing of information technology
services that are the type of services furnished by the Company,
either for himself, as a member or equity owner of a partnership or
limited liability company, or as a shareholder (other than as a
shareholder of less than one percent (1%) of the issued and
outstanding stock of a publicly-held company whose gross revenues
exceed $100 million), investor, owner, officer, or director of a
company or other entity, or as an employee, agent, trustee, manager,
associate or consultant of any person, partnership, corporation or
other entity.
(iii) Each Shareholder agrees that the limitations set forth
herein on such Shareholder's rights to compete with the Parent and its
affiliates as set forth above are reasonable and necessary for the
protection of Parent and its affiliates. In this regard, each
Shareholder specifically agrees that the limitations as to period of
time and geographic area, as well as all other restrictions on the
Shareholder's activities specified herein, are reasonable and
necessary for the protection of the Parent and its affiliates. Each
Shareholder agrees that, in the event that the provisions of this
Section should ever be deemed to exceed the scope of business, time or
geographic limitations permitted by applicable law, such provisions
shall be and are hereby reformed to the maximum scope of business,
time or geographic limitations permitted by applicable law.
(iv) Each Shareholder agrees that the remedy at law for any
breach by such Shareholder of this Section 5.8.1 will be inadequate
and that the Parent shall be entitled to injunctive relief.
5.8.2 Release. Effective as of the Closing Date, the
Shareholders do hereby (i) release, acquit and forever discharge the Company
from any and all liabilities, obligations, claims, demands, actions or causes
of action arising from or relating to any event, occurrence, act, omission or
condition occurring or existing on or prior to the Closing Date, including,
without limitation, any claim for indemnity or contribution from the Company in
connection with the obligations or liabilities of the Shareholders hereunder,
except for salary and benefits payable to a Shareholder as an employee in the
ordinary course of business; (ii) waive all breaches, defaults or violations of
any agreement applicable to the Company Common Stock and agree that any and all
such agreements are terminated as of the Closing Date, and (iii) waive any and
all preemptive or other rights to acquire any shares of capital stock of the
Company and release any and all claims arising in connection with any prior
default, violation or failure to comply with or satisfy any such preemptive or
other rights.
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5.9 Shareholder Indebtedness and Receivables. On or prior to Closing,
the Shareholders shall cause to be paid in full in cash all accounts payable,
notes payable and advances payable by any Shareholder to the Company and the
Company shall pay in full in cash all accounts payable, notes payable and
advances payable by the Company to any Shareholder.
6. CERTAIN AGREEMENTS
The parties hereto further agree as follows:
6.1 Audit. Prior to Closing, at the expense of Parent, Deloitte &
Touche LLP may complete an audit of the Company through December 31, 1997 and
such additional review work as may be requested by the Parent through and
including the Closing Date (or other periods subsequent to December 31, 1997),
and provide its report to the Parent and the Shareholders.
6.2 Company Plans. Except as otherwise provided in this Agreement, the
Company Plans (within the meaning of Section 3.11 (xiii) hereto), in effect at
the date of this Agreement, shall remain in effect unless otherwise determined
by Parent after the Closing Date.
6.3 Confidentiality. Prior to the Closing Date, none of the Parent,
the Company or the Shareholders will disclose the terms of this Agreement or
the Exchange to any person other than their respective directors, officers,
agents or representatives, except as otherwise provided herein or unless
required by law. The Company may make appropriate disclosures of the general
nature of the Exchange to its employees, vendors and customers to protect the
Company's goodwill and to facilitate the Closing. The Parent may disclose
pertinent information regarding the Exchange to its existing and prospective
investors, lenders, or investment bankers or financial advisors for the purpose
of obtaining financing, including, without limitation, financing related to the
IPO or other offerings of its securities may describe this Agreement and the
transactions contemplated hereby in any registration statement filed by the
Parent under the Securities Act and in reports filed by the Parent under the
Securities Exchange Act of 1934, and may file this Agreement as an exhibit to
any thereof. The Parent may also make appropriate disclosures of the general
nature of the Exchange and the identity, nature and scope of the Company's
operations to prospective acquisition candidates in connection with the
Parent's efforts to effect additional acquisitions. Each party will have mutual
approval rights with respect to written employee presentations concerning the
prospective Exchange.
6.4 Tax-Free Exchange. Unless the other parties shall otherwise agree
in writing, none of the Shareholders, the Parent or the Company shall knowingly
take or fail to take any action, which action or failure to act would
jeopardize the qualification of the Exchange as an exchange within the meaning
of Section 351 of the Code.
6.5 Certain Tax Matters.
6.5.1 Tax Periods Ending on or Before the IPO Closing Date.
Parent shall prepare or cause to be prepared and file or cause to be filed all
returns, declarations, reports, claims for refund, or information returns or
statements relating to Taxes, including any schedule, attachment, or amendment
thereto ("Tax Returns") for the Company (including any of its subsidiaries) for
all periods ending on or prior to the IPO Closing Date which are filed after
the IPO Closing Date. Parent shall permit Shareholders
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to review and comment on each such Tax Return described in the preceding
sentence prior to filing and shall make such revisions to such Tax Returns as
are reasonably requested by Shareholders. Shareholders shall reimburse Parent
for Taxes of the Company (including any of its subsidiaries) with respect to
such periods within fifteen (15) days after payment by Parent or the Company
(including any of its subsidiaries) of such Taxes to the extent such Taxes are
not reflected in the reserve for Tax liability (other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the Company Financial Statements.
6.5.2 Cooperation on Tax Matters.
(i) Parent, Company (including any of its subsidiaries) and
Shareholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Company (and any of
its subsidiaries) and Shareholders agree: (A) to retain all books and
records with respect to Tax matters pertinent to Company (including
any of its subsidiaries) relating to any taxable period beginning
before the IPO Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Parent or Shareholders,
any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing
authority; and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Company (including any of
its subsidiaries) or Shareholders, as the case may be, shall allow the
other party to take possession of such books and records.
(ii) Parent and Shareholders further agree, upon request, to
use their best efforts to obtain any certificate or other document
from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Taxes that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) The Company and each of the Shareholders shall
cooperate fully in the preparation and delivery to Parent and its
counsel of tax certificates, representations, or similar documents
that may be reasonably necessary or appropriate in connection with the
preparation of tax opinions or other items regarding the tax matters
impacting this Agreement, the Parent, or the Company that are prepared
with respect to the IPO.
6.5.3 Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving Company (including any of its
subsidiaries) shall be terminated as of the IPO Closing Date and, after the IPO
Closing Date, Company (including any of its subsidiaries) shall not be bound
thereby or have any liability thereunder.
6.6 Sale of Motor Vehicles. The Shareholders agree to cause the
Company to effect the sale of any Company-owned motor vehicle primarily used by
an executive management employee to such
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employee prior to the Closing at a price equal to the depreciated book value of
the vehicle as included in the Company financial statements at the time of
purchase.
6.7 Chief Executive Officer of Company. The parties hereto shall take
such steps as are appropriate to cause Xxxx X. Xxxxx to continue as Chief
Executive Officer of the Company in accordance with the terms of an Employment
Agreement between the Company and Xx. Xxxxx pursuant to Section 7.3.3 hereof.
6.8 Parent Insurance. Prior to the Closing, Parent and its Board of
Directors shall have obtained and put in place adequate and customary insurance
coverage for errors, omissions and/or negligence covering the actions and
activities of its officers and directors.
6.9 Parent Stock Option Plan. Prior to or within six (6) months of the
IPO Closing Date, Parent shall use its commercially reasonable efforts to adopt
an employee stock option plan for the benefit of Company employees.
6.10 Parent Advances to Company. Parent shall advance $550,000 to the
Company after the IPO Closing Date in order to provide funds to the Company to
pay when due the $550,000 promissory note to Xxxxx X. Xxxxx.
7. CONDITIONS PRECEDENT; CLOSING DELIVERIES
7.1 Conditions Precedent to the Obligations of the Parent. The
obligations of the Parent to effect the Closing under this Agreement are
subject to the satisfaction of each of the following conditions, unless waived
by Parent in writing to the extent permitted by applicable law. Provisions in
this Section 7.1 requiring the delivery of documents and certificates to Parent
shall be deemed satisfied by the delivery of such materials to the Escrow Agent
for later release to Parent upon satisfaction of the conditions contained in
the Escrow Agreement.
7.1.1 Accuracy of Representations and Warranties. The
representations and warranties of the Shareholders contained in this Agreement,
and the Disclosure Schedule referred to herein and the Exhibits provided by the
Shareholders pursuant to this Agreement or in any closing certificate or
document delivered to the Parent pursuant hereto shall be true and correct at
and as of the Closing Date as though made at and as of that time other than
such representations and warranties as are specifically made as of another
date, and the Shareholders shall have delivered to the Parent a certificate to
that effect.
7.1.2 Performance of Covenants. The Shareholders shall have
performed and complied with all covenants of this Agreement to be performed or
complied with by them at or prior to the Closing Date, and the Shareholders
shall each have delivered to the Parent a certificate to that effect.
7.1.3 Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against the Company
or the Shareholders which is reasonably likely (i) to restrain, prohibit or
invalidate the consummation of the transactions contemplated by this Agreement,
(ii) to have a Company Material Adverse Effect or (iii) to have a Parent
Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, and the Shareholders shall each
have delivered to the Parent a certificate to that effect.
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7.1.4 Approvals. The Shareholders shall have procured all of
the consents, approvals and waivers of third parties or any regulatory body or
authority, whether required contractually or by applicable law or otherwise
necessary for the execution, delivery and performance of this Agreement
(including the Company Related Documents and the Shareholder Related Documents)
by the Shareholders prior to the Closing Date, and Shareholders shall have
delivered to the Parent a certificate to that effect.
7.1.5 Closing Deliveries. All documents required to be
executed or delivered at Closing by the Shareholders pursuant to Section 7.3 of
this Agreement shall have been so executed and delivered.
7.1.6 No Loss or Damage. No loss or damage which could
reasonably be expected to have a Company Material Adverse Effect shall have
occurred on or prior to the Closing Date to any of the properties or assets of
the Company.
7.1.7 Licenses, etc. The Company shall have obtained all such
licenses and permits as are legally required for the continued operation of the
business after the IPO Closing Date, except such licenses and permits, the
absence of which will not have a Company Material Adverse Effect.
7.1.8 No Material Adverse Change. Since the Balance Sheet
Date, there shall not have been any event that in the reasonable judgment of
the Parent adversely affects the properties, assets, financial condition,
results of operations, cash flows, businesses or prospects of the Company.
7.1.9 Certain Corporate Actions. All necessary director and
shareholder resolutions, waivers and consents required to consummate the
transactions contemplated hereunder shall have been executed and delivered.
7.2 Conditions Precedent to the Obligations of the Shareholders and
the Company. The obligations of the Shareholders to effect the Closing under
this Agreement are subject to the satisfaction of each of the following
conditions, unless waived by the Shareholders in writing. Provisions in this
Section 7.2 requiring the delivery of documents and certificates to the
Shareholders shall be deemed satisfied by the delivery of such materials to the
Escrow Agent for later release to Shareholders upon satisfaction of the
conditions contained in the Escrow Agreement.
7.2.1 Accuracy of Representations and Warranties. The
representations and warranties of the Parent contained in this Agreement or in
any closing certificate or document delivered to the Shareholders pursuant
hereto shall be true and correct on and as of the Closing Date as though made
at and as of that date other than such representations and warranties as are
specifically made as of another date, and the Parent shall have delivered to
the Shareholders a certificate to that effect.
7.2.2 Performance of Covenants. The Parent shall have
performed and complied with all covenants of this Agreement to be performed or
complied with by them at or prior to the Closing Date and the Parent shall have
delivered to the Shareholders a certificate to such effect.
7.2.3 Approvals. The Parent shall have procured prior to the
Closing Date all of the consents, approvals and waivers required of it for
entering into this Agreement without violating any requirements to which it is
subject, and the Parent shall deliver to the Shareholders a certificate to that
effect.
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7.2.4 Closing Deliveries. All documents required to be
executed or delivered at Closing by the Parent pursuant to Section 7.5 of this
Agreement shall have been so executed and delivered.
7.3 Deliveries by the Shareholders at the Closing. In accordance with
Section 2.1 above, at the Closing, simultaneously with the deliveries by the
Parent specified in Section 7.5 below, and in addition to any deliveries
required to be made by the Shareholders pursuant to any other transaction
document at the Closing, the Shareholders shall deliver or cause to be
delivered to the Escrow Agent the following:
7.3.1 Closing Certificates. The Shareholders shall deliver
the certificates required pursuant to Sections 7.1.1, 7.1.2, 7.1.3 and 7.1.4.
7.3.2 Stock Transfer Restriction Agreement. Each Shareholder
shall execute and deliver a Stock Transfer Restriction Agreement on the Closing
Date substantially in the form set forth in Exhibit 7.3.2.
7.3.3 Employment Agreements. Each employee of the Company
specified on Exhibit 7.3.3. shall execute and deliver an Employment Agreement
with the Company on the Closing Date substantially in the form of the
applicable form of the three forms of Employment Agreement set forth in
Exhibits 7.3.3A, as stated by employee's name on Exhibit 7.3.3.
7.3.4 Opinion of Counsel for the Shareholders and the
Company. The Shareholders shall deliver the favorable opinion of Nichols,
Wolff, Xxxxxxxxx & Xxxxxxxx, counsel to the Shareholders and the Company, dated
as of the Closing Date, substantially in the form and to the effect set forth
in Exhibit 7.3.4 attached hereto.
7.3.5 Documents, Stock Certificates. The Shareholders shall
execute and deliver, and shall cause the Company to execute and deliver, the
documents, certificates, opinions, instruments and agreements required to be
executed and delivered by the Company or its officers or directors or any
Shareholder at the Closing as contemplated hereby or as may be reasonably
requested by the Parent and shall deliver or cause to be delivered the
documents and evidence required under this Agreement. Stock Certificates
representing all of the outstanding Company Common Stock and properly executed
and completed Letters of Transmittal shall be delivered by the Shareholders to
the Escrow Agent.
7.4 No Waiver by Parent. The consummation of the Closing shall not be
deemed to be a waiver by the Parent or the Company of any of their rights or
remedies against the Shareholders hereunder for any breach of warranty,
covenant or agreement by the Shareholders herein irrespective of any knowledge
of or investigation made by or on behalf of the Parent; provided, however, that
if the Shareholders shall disclose in writing to the Parent prior to the
Closing Date a specified breach of a specifically identified representation,
warranty, covenant or agreement of the Shareholder herein, and requests a
waiver thereof by the Parent, and the Parent shall waive any such specifically
identified breach in writing prior to the Closing Date, the Parent and the
Company, for themselves and for each Parent Indemnified Party (as defined
below) shall be deemed to have waived their respective rights and remedies
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hereunder for, and the Shareholders shall have no liability with respect to,
any such specifically identified breach, to the extent so identified by the
Shareholders and so waived by the Parent.
7.5 Deliveries by the Parent at the Closing. In accordance with
Section 2.1 above, at the Closing, simultaneously with the deliveries by the
Shareholders specified in Section 7.3 above, and in addition to any other
deliveries to be made by the Parent pursuant to any other transaction document
at the Closing, the Parent shall deliver or cause to be delivered to the Escrow
Agent the following:
7.5.1 Closing Certificates. The Parent shall deliver the
certificates required pursuant to Sections 7.2.1, 7.2.2, and 7.2.3.
7.5.2 Opinion of Counsel for the Parent. The Parent shall
deliver the favorable opinion of Chamberlain, Hrdlicka, White, Xxxxxxxx &
Xxxxxx, counsel to the Parent, dated as of the Closing Date, substantially in
the form and to the effect set forth in Exhibit 7.5.2.
7.6 No Waiver. The consummation of the Closing shall not be deemed to
be a waiver by the Shareholders of any of their rights or remedies hereunder
for breach of any warranty, covenant or agreement herein by the Parent
irrespective of any knowledge of or investigation with respect thereto made by
or on behalf of any Shareholder; provided, however, that if the Parent shall
disclose in writing to the Shareholders prior to the Closing a specified breach
of a specifically identified representation, warranty, covenant or agreement of
the Parent contained herein by the Parent, and requests a waiver thereof by the
Shareholders, and the Shareholders shall waive any such specifically identified
breach in writing prior to the Closing, the Shareholders shall be deemed to
have waived their rights and remedies hereunder for, and the Parent shall have
no liability or obligation to the Shareholders with respect to, any such
specifically identified breach, to the extent so identified by the Parent and
waived the Shareholders.
7.7 Conditions Precedent to Completion of the Closing. The obligations
of the parties to consummate the share exchange transaction under this
Agreement on the IPO Closing Date are subject to the satisfaction of each of
the following conditions (unless waived by each of the parties in writing):
7.7.1 Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against the Company
or the Shareholders which is reasonably likely (i) to restrain, prohibit or
invalidate the consummation of the transactions contemplated by this Agreement,
(ii) to have a Company Material Adverse Effect or (iii) to have a Parent
Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement.
7.7.2 IPO. The Parent shall have completed the IPO on terms
described in the Registration Statement, and the net proceeds thereof shall
have been received by the Parent.
7.8 Delivery of the Exchange Consideration. On the IPO Closing Date,
the Parent shall deliver the portion of the Exchange Consideration due to the
Shareholders at that time, and the Escrow Agent shall release and deliver all
documents and certificates held in escrow to the appropriate parties.
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8. SURVIVAL, INDEMNIFICATIONS
8.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of the Shareholders and the Company herein and
in the Shareholder Related Documents and the Company Related Documents, other
than those in Sections 3.9 and 3.15, shall survive for a period of 24 months
after the date hereof and the representations and warranties of the
Shareholders and the Company contained in Sections 3.9 and 3.15 shall survive
for the maximum period permitted by applicable law. The representations and
warranties of the Parent herein and in the Parent Related Documents shall
survive for a period of 24 months after the date hereof. The periods of
survival of the representations and warranties as stated above in this Section
8.1 are referred to herein as the "Survival Period." The liabilities of the
parties under their respective representations and warranties shall expire as
of the expiration of the applicable Survival Period and no claim for
indemnification may be made with respect to any breach of any representation or
warranty, the applicable Survival Period of which shall have expired, except to
the extent that written notice of such breach shall have been given to the
party against which such claim is asserted on or before the date of such
expiration. The covenants and agreements of the parties herein and in other
documents and instruments executed and delivered in connection with the closing
of the transactions contemplated hereby shall survive for the maximum period
permitted by law.
8.2 Indemnification.
8.2.1 Parent Indemnified Parties. Subject to the provisions
of Sections 8.1 and 8.3 hereof, the Shareholders shall indemnify, save and hold
harmless the Parent, the Company and any of their assignees (including lenders)
and all of their respective officers, directors, employees, representatives,
agents, advisors and consultants and all of their respective heirs, legal
representatives, successors and assigns (collectively the "Parent Indemnified
Parties") from and against any and all damages, liabilities, losses, claims,
deficiencies, penalties, interest, expenses, fines, assessments, charges and
costs, including reasonable attorneys' fees and court costs (collectively
"Losses") arising from, out of or in any manner connected with or based on:
(i) any breach of any covenant of any Shareholder or the
Company or the failure by any Shareholder or the Company to perform
any obligation of any Shareholder or the Company contained herein or
in any Company Related Document or Shareholder Related Document;
(ii) any inaccuracy in or breach of any representation or
warranty of any Shareholder contained herein or in any Shareholder
Related Document;
(iii) any inaccuracy in or breach of any representation or
warranty of the Company contained herein or in any Company Related
Document;
(iv) indemnification payments made by the Company to the
Company's present or former officers, directors, employees, agents,
consultants, advisors or representatives in respect of actions taken
or omitted to be taken prior to the Closing; and
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(v) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time on or before the
Closing Date and involving or related to the assets, properties,
business or operations now or previously owned or operated by the
Company and not (a) disclosed in the Disclosure Schedule or (b)
disclosed in the Company Financial Statements excluding liability for
decisions made in the exercise of the Company's reasonable business
judgement and in the ordinary course of business.
Notwithstanding the foregoing, the foregoing indemnities shall not apply to the
extent that such Losses are reimbursed to the Parent Indemnified Parties under
provisions of any errors and omissions or professional liability insurance
policy containing waiver of subrogation provisions applicable to claims
relating to such Losses. The foregoing indemnities shall not limit or otherwise
adversely affect the Shareholder Indemnified Parties' rights of indemnity for
Losses under Section 8.2.3.
8.2.2 Minimum Losses. For purposes of this Section 8.2.2,
Losses shall be calculated with respect to any inaccuracy or breach of any
representation or warranty of any Shareholder contained herein or in any
Shareholder Related Document without giving effect to any clause which would
permit such inaccuracy or breach up to an amount which would be deemed a
Company Material Adverse Effect. The Shareholders shall have no obligation
under Section 8.2.1 until the aggregate amount of all such Losses equal or
exceed $75,000 (whether or not resulting in a Company Material Adverse Effect),
at which time the Shareholders shall be subject to the provisions of Section
8.2.1 with respect to all Losses of the Parent Indemnified Parties in excess of
the first $75,000 of Losses.
8.2.3 Parent Indemnity. Subject to the provisions of Sections
8.1 and 8.3, the Parent shall indemnify, save and hold harmless the
Shareholders and the Shareholders' heirs, legal representatives, successors and
assigns (the "Shareholder Indemnified Parties") from and against all Losses
arising from, out of or in any manner connected with or based on:
(i) any breach of any covenant of the Parent or the failure by
the Parent to perform any of its obligations contained herein or in the
Parent Related Documents;
(ii) any inaccuracy in or breach of any representation or
warranty of the Parent contained herein or in the Parent Related
Documents; and
(iii) any act, omission, event, condition or circumstance
occurring or existing at any time after (but not on or before) the
Closing Date and involving or relating to the assets, properties,
businesses or operations of the Company; provided, however, that this
clause (iii) shall not apply to any Losses to the extent that such
Losses result from any Shareholder's acts or omissions after the
Closing Date as an officer, director and/or employee of the Parent,
the Surviving Corporation and/or any other affiliate of the Parent.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Section 8.2.1.
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8.3 Limitations. The aggregate liability of each Shareholder under
Section 8.2.1 shall not exceed an amount equal to the portion of the Exchange
Consideration and Earnout Consideration payable to such Shareholder, with the
Parent Common Stock being valued at the IPO Price for such purpose. The
aggregate liability of the Parent under Section 8.2.3 shall not exceed the
amount of the Exchange Consideration and Earnout Consideration paid with Parent
Common Stock.
8.4 Procedures for Indemnification.
8.4.1 Notice. The party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to the party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought hereunder. Any failure on the part of any
Indemnified Party to give the notice described in this Section 8.4.1 shall
relieve the Indemnifying Party of its obligations under this Article 8 only to
the extent that such Indemnifying Party has been prejudiced by the lack of
timely and adequate notice (except that the Indemnifying Party shall not be
liable for any expenses incurred by the Indemnified Party during the period in
which the Indemnified Party failed to give such notice). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, promptly (and in any
event within 10 days thereof) after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to such claim, action, suit or proceeding.
8.4.2 Legal Defense. The Parent shall have the obligation to
assume the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder, provided that
(i) the Shareholders shall at all times have the right, at their option, to
participate fully therein, and (ii) if the Parent does not proceed diligently
to defend the third-party claim, suit, action or proceeding within 10 days
after receipt of notice of such third-party claim, suit, action or proceeding,
the Shareholders shall have the right, but not the obligation, to undertake the
defense of any such third-party claim, suit, action or proceeding.
8.4.3 Settlement. The Indemnifying Party shall not be
required to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any third-party suit, action, proceeding or investigation entered
into without the written consent of the Indemnifying Party; provided, however,
that if the Indemnified Party is a Parent Indemnified Party, such third-party
suit, action, proceeding or investigation may be settled without the consent of
the Indemnifying Party on 10 days' prior written notice to the Indemnifying
Party if such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company and the
settlement is commercially reasonable under the circumstances; and provided
further, that if the Indemnifying Party gives 10 days' prior written notice to
the Indemnified Party of a settlement offer which the Indemnifying Party
desires to accept and to pay all Losses with respect thereto ("Settlement
Notice") and the Indemnified Party fails or refuses to consent to such
settlement within 10 days after delivery of the Settlement Notice to the
Indemnified Party, and such settlement otherwise complies with the provisions
of this Section 8.4, the Indemnifying Party shall not be liable for Losses
arising from such third-party suit, action, proceeding or investigation in
excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, if such
judgment or settlement imposes any obligation or liability upon
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the Indemnified Party other than the execution, delivery or approval thereof
and customary releases of claims with respect to the subject matter thereof.
8.4.4 Cooperation. The parties shall cooperate in defending
any such third-party suit, action, proceeding or investigation, and the
defending party shall have reasonable access to the books and records, and
personnel in the possession or control of the Indemnified Party that are
pertinent to the defense. The Indemnified Party may join the Indemnifying Party
in any suit, action, claim or proceeding brought by a third party, as to which
any right of indemnity created by this Agreement would or might apply, for the
purpose of enforcing any right of the indemnity granted to such Indemnified
Party pursuant to this Agreement.
8.5 Subrogation. Each Indemnifying Party hereby waives for itself
and its affiliates any rights to subrogation against any Indemnified Party or
its insurers for Losses arising from any third-party claims for which it is
liable or against which it indemnifies any Indemnified Party and, if necessary,
each Indemnifying Party shall obtain waivers of such subrogation from its, his
or her insurers.
9. TERMINATION
9.1 Grounds for Termination. This Agreement may be terminated
only as provided below.
9.1.1 Prior to Closing. The parties may terminate this
Agreement at any time prior to the Closing only as provided below:
(i) Mutual Consent. Parent and Xxxx X. Xxxxx
("Xx. Xxxxx") may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Termination by Parent. Parent may terminate
this Agreement by giving written notice thereof to Xx. Xxxxx
at any time prior to the Closing: (a) in the event that the
Shareholders or the Company has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Parent has notified Xx.
Xxxxx of the breach, and the breach has continued without
cure until the earlier of 20 days after the notice of such
breach or the Closing Date, whichever is earlier, (b) if the
Registration Statement for the IPO has not been filed with
the Securities and Exchange Commission on or before December
31, 1997, or (c) if the IPO Closing Date shall not have
occurred on or before April 30, 1998, by reason of the
failure of any condition precedent under Section 7.1 hereof
(unless the failure results primarily from Parent itself
materially breaching any material representation, warranty,
or covenant contained in this Agreement); and
(iii) Termination by Xx. Xxxxx. Xx. Xxxxx may
terminate this Agreement by giving written notice thereof to
Parent at any time prior to the Closing: (a) in the event the
Parent has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Shareholders have notified Parent of the breach, and the
breach has continued without cure until the earlier of 20
days after the
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notice of such breach or the Closing Date, whichever is
earlier, (b) if the Registration Statement for the IPO has
not been filed with the Securities and Exchange Commission on
or before December 31, 1997, or (c) if the IPO Closing Date
shall not have occurred on or before April 30, 1998, by
reason of the failure of any condition precedent under
Section 7.2 hereof (unless the failure results primarily from
any Shareholder materially breaching any material
representation, warranty, or covenant contained in this
Agreement).
9.1.2 After the Closing Date. This agreement may be
terminated after the Closing only as follows:
(i) Termination of Underwriting Agreement. Upon
termination, prior to the successful completion of the IPO,
of the agreement between Parent and certain investment
banking firms (the "Underwriting Agreement") under which such
firms agree to purchase shares of Parent Common Stock from
Parent on a firm commitment basis for resale to the public
initially at the IPO Price, Parent or the Shareholders may
each terminate this Agreement by providing written notice to
the other.
(ii) Automatic Termination. This Agreement shall
terminate automatically and without action on the part of any
party hereto if the IPO is not consummated within 10 business
days after the Closing.
9.2 Effect of Termination. If this Agreement is terminated as
permitted under Section 9.1, such termination shall be without liability of any
party to any other party, except that such termination shall be without
prejudice to any and all remedies the parties may have against each other for
breach of this Agreement. Upon termination, documents delivered by one party to
another party pursuant hereto shall be promptly returned.
10. MISCELLANEOUS
10.1 Notice. Any notice, delivery or communication required or
permitted to be given under this Agreement shall be in writing, and shall be
mailed, postage prepaid, or delivered, to the addresses given below, or sent by
telecopy to the telecopy numbers set forth below, as follows:
To the Shareholders:
Xxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
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Copy to:
Xxxxx X. Xxxxx
Nichols, Wolff, Xxxxxxxxx & Xxxxxxxx
Attorneys at Law
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
To the Parent:
BrightStar Information Technology Group, Inc.
Attn: President
00000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Copy to:
Xxxxxx X. Xxxxxx, Xx.
Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
or other such address as shall be furnished in writing by any such party to the
other party, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument
or document required to be executed or executed by the parties in connection
with the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 10.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
10.2 Further Documents. Each party shall, at any time and from time to
time after the date hereof, upon reasonable request by another party and
without further consideration, execute and deliver such instruments or other
documents and take such further action as may be reasonably required in order
to perfect any other undertaking made by the party hereunder.
10.3 Assignability. No Shareholder shall assign this Agreement in
whole or in part without the prior written consent of the Parent, except by the
operation of law. The Parent may assign its rights under this Agreement, the
Company Related Documents and the Shareholder Related Documents without the
consent of either Shareholder; provided, however, that no such assignment shall
affect the Shareholders right to receive the Aggregate Exchange Consideration.
After the Closing Date, the Company may assign
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its rights under this Agreement, the Company Related Documents and the
Shareholder Related Documents without the consent of any of the Shareholders.
10.4 Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
10.5 Sections and Articles. Unless the context otherwise requires, all
Sections, Articles and Exhibits referred to herein are, respectively, sections
and articles of, and exhibits to, this Agreement and all Schedules referred to
herein are schedules constituting a part of the Disclosure Schedule.
10.6 Entire Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement,
no conditions, usage of trade, course of dealing or performance, understanding
or agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
any party with respect to any breach or default or of any right or remedy and
no course of dealing shall be deemed to constitute a continuing waiver of any
other breach or default or of any other right or remedy, unless such waiver be
expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
10.7 Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
10.8 CONTROLLING LAW. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF
THIS AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE
EXTENT THE APPLICABLE CORPORATE LAW MANDATORILY APPLIES WITH RESPECT THERETO.
10.9 Public Announcements. No Shareholder shall make any press
release, public announcement, or public confirmation or disclose any other
information regarding this Agreement or the contents hereof.
10.10 No Third Party Beneficiaries. Except as set forth in Article 8,
no person or entity not a party to this Agreement shall have rights under this
Agreement as a third party beneficiary or otherwise.
10.11 Amendments and Waivers. This Agreement may be amended by the
Parent and the Shareholders; provided that all amendments to this Agreement
must be by an instrument in writing signed on behalf of the Parent and the
Shareholders. Any term or provision of this Agreement (other than the
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requirements for shareholder approvals) may be waived in writing at any time by
the party which is, or whose shareholders are, entitled to the benefits
thereof.
10.12 No Employee Rights. Nothing herein expressed or implied shall
confer upon any employee of the Company, any other employee or legal
representatives or beneficiaries of any thereof any rights or remedies,
including any right to employment or continued employment for any specified
period, of any nature or kind whatsoever under or by reason of this Agreement,
or shall cause the employment status of any employee to be other than
terminable at will.
10.13 No Personal Liability of Representatives of Parent. No recourse
for the payment of any amounts due hereunder or for any claim based on this
Agreement or the transactions contemplated hereby or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Parent in this Agreement shall be had against any incorporator, organizer,
promoter, shareholder, officer, director, employee or representative as such
(other than the Shareholders as set forth herein), past, present or future, of
the Parent or of any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such obligations
are those of the Parent as a separate corporate entity.
10.14 When Effective. This Agreement shall become effective only upon
the execution and delivery of one or more counterparts of this Agreement by
each of the Parent and the Shareholders.
10.15 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, Parent and the
Company and their respective members of their Boards of Directors shall grant
such approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated herein.
10.16 Number and Gender of Words. Whenever herein the singular number
is used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
10.17 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws, such
provisions shall be fully severable as if such invalid or unenforceable
provisions had never comprised a part of the Agreement; and the remaining
provisions of the Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
10.18 Multiple Counterparts. This Agreement may be executed in a
number of identical counterparts. If so executed, each of such counterparts is
to be deemed an original for all purposes and
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all such counterparts shall, collectively, constitute one agreement, but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
10.19 No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship
of this Agreement.
10.20 Expenses. Each of the parties shall bear all of their own
expenses in connection with the negotiation and closing of this Agreement and
the transactions contemplated hereby; provided that the Company shall pay the
costs of any attorney engaged by the Shareholders; and provided further that
all fees, costs and expenses incurred or payable by the Company (other than
accounting and auditing fees and expenses) in connection with the negotiation
and closing of this Agreement and the transactions contemplated hereby and the
costs of any such attorney shall be included in current liabilities for
purposes of determining Net Working Capital.
10.21 No Brokers. Each party represents and warrants to the other
party that such representing party has not engaged a broker, finder or similar
party in connection with this Agreement and the transactions contemplated
hereunder, and each representing party will indemnify the other party for any
costs or expenses resulting from the representing party's misrepresentation in
this section.
10.22 Section 351 Plan of Exchange. Simultaneously with the execution
hereof, the parties hereto shall execute the Section 351 Plan of Exchange in
the form set forth in Exhibit 10.22 hereto.
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IN WITNESS WHEREOF, this Agreement and Plan of Exchange has been duly
executed and delivered effective as of the date first hereinabove written.
PARENT:
BRIGHTSTAR INFORMATION
TECHNOLOGY GROUP, INC.
By: /s/ XXXXXXXX X. XXXX
---------------------------------------
Xxxxxxxx X. Xxxx, President
SHAREHOLDERS:
/s/ XXXX X. XXXXX
-------------------------------------------
Xxxx X. Xxxxx
/s/ XXXXXXX X. XXXXXX
-------------------------------------------
Xxxxxxx X. Xxxxxx
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