EXHIBIT 10.6
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STOCK PURCHASE AGREEMENT
by and among
ETELECARE INTERNATIONAL, INC.,
PHASE 2 SOLUTIONS, INC.
(for purposes of Sections 2.4, 5.7 and 8.2(b) only)
and
THE SHAREHOLDERS OF PHASE 2 SOLUTIONS, INC.
Relating to the Purchase of all the outstanding Capital Stock of
PHASE 2 SOLUTIONS, INC.
Dated as of March 31, 2004
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TABLE OF CONTENTS
Page
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ARTICLE 1 CERTAIN DEFINITIONS................................................... 2
1.1 Certain Definitions.................................................. 2
1.2 Interpretation....................................................... 10
ARTICLE 2 PURCHASE AND SALE OF THE SHARES....................................... 11
2.1 Purchase and Sale of the Shares...................................... 11
2.2 Cash Purchase Price.................................................. 11
2.3 Post-Closing Adjustment of Cash Purchase Price....................... 12
2.4 Contingent Consideration............................................. 13
2.5 Final Closing Balance Sheet, Final Tax Distribution Reports,
Final US Performance Report and Final Manila Performance Report... 14
2.6 2004 Tax Distribution................................................ 15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS............................. 16
3.1 Corporate Organization............................................... 16
3.2 Qualification to Do Business......................................... 16
3.3 Equity Investments and Books and Records............................. 16
3.4 Capital Structure.................................................... 16
3.5 Validity of Transaction Documents.................................... 16
3.6 No Violations........................................................ 17
3.7 Consents and Approvals............................................... 17
3.8 Financial Statements................................................. 17
3.9 Absence of Certain Changes........................................... 18
3.10 Tax Matters.......................................................... 18
3.11 Accounts Receivable.................................................. 19
3.12 Properties........................................................... 19
3.13 Insurance Coverage................................................... 19
3.14 Licenses and Permits................................................. 20
3.15 Material Contracts................................................... 20
3.16 Legal Proceedings.................................................... 21
3.17 Employees............................................................ 21
3.18 Environmental Matters................................................ 22
3.19 No Undisclosed Liabilities........................................... 22
3.20 Finders' Fees........................................................ 22
3.21 Compliance With Law.................................................. 22
3.22 Technology and Intellectual Property................................. 23
3.23 Filing Documents..................................................... 23
3.24 Customer and Suppliers............................................... 23
3.25 Proper Business Conduct.............................................. 23
3.26 Representations Complete............................................. 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER........................... 24
4.1 Corporate Organization............................................... 24
4.2 Qualification to do Business......................................... 24
4.3 Authorization and Validity of Transaction Documents.................. 24
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4.4 No Violations...................................................... 25
4.5 Consents and Approvals............................................. 25
ARTICLE 5 COVENANTS OF THE PARTIES............................................ 25
5.1 Activity in the Ordinary Course.................................... 25
5.2 Access and Confidentiality......................................... 26
5.3 Further Assurances................................................. 27
5.4 Notices of Default................................................. 27
5.5 Appointment of Directors........................................... 27
5.6 No Disposition of the Company Common Stock......................... 28
5.7 Employee Bonus Pool................................................ 28
5.8 Right of First Refusal............................................. 28
5.9 Tax Election under Section 338(h)(10).............................. 28
5.10 Price Allocation................................................... 28
5.11 Access to Xxxxxx X. Xxxxxx......................................... 28
5.12 Complete and General Release....................................... 28
5.13 Release of Seller Guarantees....................................... 29
5.14 Transitioning Work to Manila....................................... 29
5.15 Manila Revenue..................................................... 29
5.16 Accounts Receivable................................................ 30
5.17 Compliance with MBE/WBE and DVBE Requirements...................... 30
ARTICLE 6 CONDITIONS TO CLOSING............................................... 31
6.1 Conditions to Obligations of Purchaser............................. 31
6.2 Conditions to Obligations of Sellers............................... 33
ARTICLE 7 CLOSING PROCEDURE................................................... 34
7.1 Closing Date and Place............................................. 34
7.2 Procedure at the Closing........................................... 34
ARTICLE 8 TERMINATION......................................................... 35
8.1 Termination........................................................ 35
8.2 Effect of Termination; Reimbursement of Expenses................... 36
ARTICLE 9..................................................................... 37
9.1 Indemnification by Sellers......................................... 37
9.2 Indemnification by Purchaser....................................... 37
9.3 Indemnification Procedures......................................... 38
9.4 Exclusive Remedies; Limitations Upon Indemnification; Escrow Amount 39
9.5 Computation of Indemnifiable Losses................................ 40
9.6 Escrow............................................................. 40
ARTICLE 10 MISCELLANEOUS...................................................... 42
10.1 Assignment......................................................... 42
10.2 Binding Effect..................................................... 43
10.3 Public Notice...................................................... 43
10.4 Notices............................................................ 43
10.5 Incorporation...................................................... 44
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10.6 Governing Law...................................................... 44
10.7 Entire Agreement................................................... 44
10.8 Counterparts....................................................... 44
10.9 Headings........................................................... 44
10.10 Waiver............................................................. 44
10.11 Expenses........................................................... 44
10.12 Arbitration........................................................ 45
10.13 Third Party Beneficiaries.......................................... 46
10.14 Severability....................................................... 46
10.15 Time............................................................... 46
10.16 Action by Sellers.................................................. 46
EXHIBITS
A Shareholders of PHASE 2 SOLUTIONS, INC.
B Form of Contingent Consideration Promissory Note
C Form of Noncompetition Agreement
D Employee Bonus Payments
E Calculation of Manila Profits and Manila Revenue
F Form of Opinion of Sellers' Counsel
G Calculation of Net Debt and Working Capital
SCHEDULES
3.3 Equity Investments and Books and Records
3.4 Capital Structure
3.6 Notices, Consents and Approvals for Material Contracts
3.7 Consents and Approvals (Seller)
3.9 Absence of Certain Changes
3.10 Tax Matters
3.12 Properties
3.13 Insurance Coverage
3.15 Material Contracts
3.16 Legal Proceedings (Seller)
3.17 Employees
3.18 Environmental Matters
3.19 No Undisclosed Liabilities
3.21 Compliance with Law
3.22 Technology and Intellectual Property
4.5 Consents and Approvals (Purchaser)
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of March 31, 2004, by and among
eTelecare International, Inc., a Metro-Manila, Philippines corporation
("Purchaser"), PHASE 2 SOLUTIONS, INC., an Arizona corporation for purposes of
Sections 2.4, 5.7 and 8.2(b) only (the "Company") and the shareholders of the
Company listed on Exhibit A hereto (collectively the "Sellers").
RECITALS
A. Purchaser. Purchaser is a Metro-Manila, Philippines corporation with
its principal executive offices located in Monrovia, California.
X. Xxxxxxx. Sellers own all of the issued and outstanding shares of
capital stock of the Company (the "Shares").
C. The Company. The Company is an Arizona corporation with its principal
executive offices located in Scottsdale, Arizona.
D. Sale and Purchase of the Company Shares. Purchaser desires to purchase
from each Seller either directly or through an Affiliate as permitted by Section
10.1 hereof and each Seller desires to sell, assign and transfer to Purchaser or
Purchaser's Affiliate, all of such Seller's right, title and interest in and to
that number of shares of the Company common stock set forth opposite such
Seller's name on Exhibit A hereto, on the terms and conditions contained herein.
As more fully described in Section 10.4, Sellers are appointing Xxxxxx X. Xxxxxx
to serve as Sellers' Representative on behalf of all the Sellers for the certain
matters described herein.
E. Purchase Price. Each Seller shall be entitled to receive the cash
consideration at Closing described in Section 2.2 subject to the adjustments
described in Section 2.3. Additionally, the Sellers' Representative, on behalf
of all Sellers may receive additional consideration from Purchaser contingent
upon the future performance of the Company described in Section 2.4. Sellers'
right to receive such contingent consideration shall be evidenced by the "Note"
(defined in Section 2.4) substantially in the form of Exhibit B in favor of the
Sellers' Representative which will be partially secured by a letter of credit to
be issued as of Closing or some other credit enhancement as described herein.
Purchaser has provided Sellers with letters of interest from external funding
sources with respect to Purchaser's ability to obtain sufficient debt financing
for the payments referred to in Sections 2.2 - 2.4.
F. At Closing (hereinafter defined), Purchaser shall pay the Escrow Amount
(hereinafter defined) to the Escrow Agent (hereinafter defined) as partial
security for the Sellers' indemnification obligations set forth in Article 9
hereof. The Escrow Amount shall be paid in accordance with the terms of the
Escrow Agreement to be determined before the Closing by the Purchaser, the
Sellers' Representative and the Escrow Agent.
G. Employment Agreements. Prior to April 15, 2004, Purchaser, and the
Company shall enter into an employment agreement with Xxxxx X. Xxxxxxx (the
"Xxxxxx Employment Agreement") and on the Closing Date, Purchaser, the Company
or their Affiliates shall enter into
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employment agreements (collectively, with the Xxxxxxx Employment Agreement, the
"Employment Agreements") with each of Art Xxxx, Xxxxx Xxxxx, Buzz Xxxxxxx, Xxxx
Xxxxxx, Xxxxxx Xxxx, Xxxxxx Schollimeyer, Xxxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxxxxx
Xxxxxx and Xxxxx Xxxxxxxxx, Xxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxx
Xxxxxxxx and Xxxx Xxxxxx, (collectively with Xxxxx X. Xxxxxxx, the "Key
Employees") and Noncompetition Agreements with each of the Sellers substantially
in the form of Exhibit C (collectively, the "Noncompetition Agreements").
NOW, THEREFORE, in consideration of their mutual promises and obligations
and intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the terms below shall
have the meanings set forth below.
"Accounts Receivable" has the meaning specified in Section 3.11.
"Affiliate" of any person means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlling" and "controlled") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise. The Company and any
assignee of Purchaser and/or the Company permitted by Section 10.1 hereof, shall
be deemed to be an Affiliate of Purchaser post-Closing.
"Agreement" means this Stock Purchase Agreement as from time to time
amended.
"Articles" has the meaning specified in Section 3.6.
"Balance Sheet" means the balance sheet included in the Calendar 2003
Financial Statements.
"Bank Agreement" has the meaning set forth in Section 6.1(b).
"Burdensome Condition" means any condition or restriction imposed upon
Purchaser or the Company by any Governmental Body in connection with the grant
of a Regulatory Approval which might reasonably be expected to (i) have a
Material Adverse Effect after the Closing Date upon the Company, (ii) prevent
Purchaser from realizing a material portion of the economic benefit of the
transactions contemplated by this Agreement, (iii) impair the ability of
Purchaser to conduct its operations in the same manner in which such operations
shall be conducted prior to closing, and (iv) materially impair the ability of
Sellers or Purchaser to exercise their respective rights under the Transaction
Documents.
"Business Day" means a day other than a Saturday, Sunday or other legal
holiday or a day on which the banks in California or the Philippines are closed.
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"By-Laws" has the meaning specified in Section 3.6.
"Calendar 2003 Financial Statements" shall have the meaning specified in
Section 3.8.
"Cash Purchase Price" shall have the meaning specified in Section 2.2(a).
"Claim Notice" shall have the meaning set forth in Section 9.3(a).
"Claim Notice" shall have the meaning specified in Section 9.6(b).
"Closing" and "Closing Date" refer to the closing for the sale and
purchase provided for herein to be held at such time and date as provided for in
Article 7 hereof.
"Closing Balance Sheet" shall have the meaning specified in Section
2.3(c).
"Closing Net Debt" shall have the meaning specified in Section 2.3(a).
"Closing Working Capital" shall have the meaning specified in Section
2.3(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the preface to this
Agreement.
"Company Benefit Plans" shall have the meaning set forth in Section
3.17(c).
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Consideration Claims" shall have the meaning specified in Section
5.12(a).
"Contingent Consideration" shall have the meaning specified in Section
2.4.
"Deal Protection Insurance" means insurance in form and substance
satisfactory to Purchaser and Sellers insuring Purchaser Indemnified Parties
with respect to Sellers' indemnification obligations set forth in Article 9.
Such Insurance shall be issued by an insurance company satisfactory to
Purchaser.
"Depreciation Recapture" mean the amount of any depreciation recapture
(net of any losses) on property, plant and equipment resulting from the election
under Section 338(h)(10) of the Code described in Section 5.9.
"Dispute Notice" shall have the meaning specified in Section 9.6(b).
"EBITDA" means GAAP earnings of the Company before interest, taxes,
depreciation, amortization and Excluded Costs. Notwithstanding the foregoing,
the following amounts shall be excluded for the calculation of EBITDA: (i)
amounts paid or received in connection with the New Mexico Subsidy and (ii)
revenue which is required to be excluded from EBITDA pursuant to Section 5.18.
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"EBITDA Shortfall" means the amount (if any) by which $18,000,000 exceeds
four (4) times the sum of (i) EBITDA for the twelve months ended June 30, 2004
as set forth in the Final US Performance Report and (ii) one half of the Manila
Revenue for the six months ended June 30, 2004 as set forth in the Final US
Performance Report.
"Employee Benefit Plans and Other Fringe Benefits" means any employee
benefit plan or other fringe benefit including, without limitation, pension and
profit sharing plans, retirement and post retirement welfare benefits, health
insurance benefits (medical, dental and vision), disability, life and accident
insurance, sickness benefits, vacation, employee loans and banking privileges.
"Employees" means those employees employed by the Company on the Closing
Date, including without limitation, those employees who on the Closing Date are
on medical leave, family leave, educational leave, military leave.
"Employee Bonus Pool" means, collectively, the US Bonus Pool and the
Manila Bonus Pool.
"Employment Agreements" shall have the meaning set forth in the Recitals.
"Environmental Law" means any Legal Requirement pertaining to health,
industrial hygiene, or the environment in effect as of the date of this
Agreement, including but not limited to, Title 42 of the United States Code,
Section 6901 et seq. (commonly known as "RCRA") or Section 9601 et seq.
(commonly known as "CERCLA" or "Superfund").
"Environmental Release" shall have the meaning specified in Section
3.18(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow" shall have the meaning specified in Section 9.6(a).
"Escrow Agent" means an entity to be determined before the Closing by and
between the Purchaser and the Sellers' Representative.
"Escrow Amount" shall have the meaning specified in Section 2.2(b).
"Escrow Agreement" means the Escrow Agreement among Purchaser, Sellers'
Representative and the Escrow Agent, the terms of which shall be determined by
the Purchaser, the Sellers' Representative and the Escrow Agent.
"Escrow Contributing Seller" shall have the meaning specified in Section
2.2.
"Escrow Fund" means the funds on deposit with the Escrow Agent pursuant to
the terms of the Escrow Agreement.
"Estimated Tax Distribution" means the $400,000 payable to the Sellers
prior to April 15, 2004 with respect to S Corporation income tax distributions.
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"Excluded Claims" means (i) claims arising pursuant to this Agreement and
the Transaction Documents (other than Consideration Claims), (ii) any claims for
accrued and unpaid salaries, wages, bonuses, vacation reflected on the Final
Closing Balance Sheet, or (iii) any claims of a Seller Indemnified Party for
indemnification by Purchaser pursuant to Section 9.2. Additionally, to the
extent covered by insurance, claims against the Sellers arising solely from
their actions while acting as an officer, director, or shareholder of the
Company in good faith and in accordance with the standards established by A.R.S.
Section 10-3851.
"Excluded Costs" means amounts (i) relating to Purchaser's transaction
costs and the costs of the March 31, 2004 audit of the Company and other
expenses incurred by the Company in connection with the transactions
contemplated by this Agreement including Transaction Costs (other than the costs
relating to the audit of the Company's December 31, 2003 financial statements)
and (ii) determined to be Excluded Costs as provided in Section 5.18.
"Final Closing Balance Sheet" shall have the meaning specified in Section
2.5(b).
"Final Manila Performance Report" shall have the meaning specified in
Section 2.5(b).
"Final Retention Resolution Period" shall have the meaning specified in
Section 9.6(b)
"Final Tax Distribution Report" shall have the meaning specified in
Section 2.5(b).
"Final US Performance Report" shall have the meaning specified in Section
2.5(b).
"Finders' Fees" means the Xxxxx Finder's Fee and the Sese Finder's Fee.
"First Anniversary Escrow Disbursement" shall have the meaning specified
in Section 9.6(c)(i).
"First Resolution Period" shall have the meaning specified in Section
9.6(c)(i).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States and applied on a basis consistent with past
practice.
"Governmental Authorization" means any approval, consent, license, order,
filing, registration, decree, permit, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Governmental Body" means any: (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature;(b) federal, state,
local, municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Historical Financial Statements" shall have the meaning specified in
Section 3.8.
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"Indemnified Party" shall have the meaning specified in Section 9.3(a).
"Indemnifying Party" shall have the meaning specified in Section 9.3(a).
"Information" shall have the meaning specified in Section 5.2(b).
"Intellectual Property" shall have the meaning specified in Section
3.22(a).
"IRS" means the Internal Revenue Service.
"Key Employees" has the meaning specified in the recitals.
"Xxxxx Finder's Fee" means the fee payable to Xxxxxxxxx, Gay & Xxxxx, LLC
and its respective Affiliates pursuant to the terms of that certain letter
agreement, dated January 7, 2004, by and between Xxxxxxxxx, Gay & Xxxxx, LLC and
the Company.
"Leases" shall have the meaning specified in Section 3.12(b).
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, court order,
injunction, constitution, law, ordinance, principle of common law, regulation,
statute, or treaty including without limitation the Telemarketing and Consumer
Fraud Prevention Act 15 U.S.C. 6101-6108, as amended.
"Letter of Credit" means the irrevocable letter of credit issued pursuant
to the Bank Agreement in an amount not less than $5,000,000 with terms and
conditions acceptable to Sellers as partial security for (i) the Note; (ii) the
Working Capital post closing adjustments under Section 2.2(b) below; and (iii)
the indemnification obligations of Purchaser and the Company to the Sellers
under Section 9.2. Such Letter of Credit shall remain outstanding until the
earlier of (i) payment in full of the Note and (ii) the date that such Letter of
Credit has been fully drawn or paid.
"Lien" means any mortgage, pledge, security interest, option, encumbrance,
lien (statutory or other), conditional sale agreement or other adverse claim of
any kind.
"Losses" means losses, liabilities, damages, expenses (including
reasonable expenses of defense and investigation related to any claim of any
loss), costs and reasonable legal fees and disbursements collectively.
"Manila Bonus Pool" means 12.7265% of the Manila Performance Results
payable to those employees of the Company set forth in Columns E and F of
Exhibit D in accordance with Section 5.7. The amounts set forth in Columns E and
F assume that the maximum Manila Performance Results were earned. If less than
the maximum Manila Performance Results are earned, the amount payable to the
employees referred to in such columns shall be reduced proportionately.
"Manila Performance Based Payment" means 87.2735% of the Manila
Performance Results.
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"Manila Performance Report" shall have the meaning specified in Section
2.4(b).
"Manila Performance Results" means an amount equal to (a) lesser of (i)
$10,000,000 less the US Performance Results and (ii) the total Manila Revenue
for calendar year 2004 multiplied by 1.45 minus (b) the amount of the EBITDA
Shortfall.
"Manila Profits" means profits earned by the Company from work performed
for the Company's customers in Purchaser's facilities in Manila as calculated in
accordance with the formula set forth on Exhibit E-1.
"Manila Revenue" means revenue earned by Purchaser from work performed for
the Company's customers in Purchaser's facilities in Manila, including, but not
limited to, revenue generated by (i) those customers listed on Exhibit E
attached hereto, (ii) those potential customers described on Exhibit E and (iii)
those other individuals described on Exhibit E. If a Key Employee is employed by
Purchaser or any of its Affiliates, any revenue generated by such Key Employee
that is serviced out of Purchaser's Manila facility shall be included in Manila
Revenue.
"March 31 Balance Sheet" means the balance sheet of the Company as of
March 31, 2004 which has been audited by the Company's independent auditors.
"March 31 Net Debt" shall have the meaning specified in Section
2.2(a)(ii).
"March 31 Financial Statements" shall have the meaning specified in
Section 3.8.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the condition (financial or otherwise), results of operations,
business, assets, liabilities or prospects of such Person.
"Material Contracts" shall have the meaning specified in Section 3.15.
"Net Debt" means as of a particular date, an amount equal to the
difference between (a) the sum of current and non-current portions of all
indebtedness for borrowed money (including all interest thereon) from any bank,
financial institution or shareholder of the Company, capital lease obligations,
the Estimated Tax Distribution, plus any other non-current liabilities and (b)
the sum of all cash, marketable securities and cash equivalents, Transaction
Costs plus Sese Finders' Fee. Net Debt shall be calculated in a manner
consistent with Exhibit G.
"New Mexico Subsidy" means the Industrial Development Training Program of
the State of New Mexico (the "Training Program") under which there is payable to
the Company from the State of New Mexico equal to (i) 50% of salaries and wages
paid to Employees of the Company who work at least 640 hours in a calendar year
in such state minus (ii) any Taxes payable by the Company on amounts paid under
the Training Program. The New Mexico Subsidy shall be payable to the Sellers and
the Company in accordance with the provisions of Section 2.4(e).
"Neutral Auditor" shall have the meaning specified in Section 2.5(b).
"Note" shall have the meaning set forth in Section 2.4(c).
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"Notice Period" shall have the same meaning set forth in Section 9.3(a).
"Order" shall have the meaning specified in Section 6.1(c).
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization or any government or agency or political subdivision
thereof.
"Post Closing New Mexico Subsidy" means that portion of any New Mexico
Subsidy attributable to hours worked after the Closing Date.
"Pre-Closing New Mexico Subsidy" means that portion of any New Mexico
Subsidy attributable to hours worked through and including the Closing Date.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Pro Rata Share" of any payment to any particular Seller means the
percentages set forth in Column C of Exhibit A with respect to Tier One
Distributions (as defined in Exhibit A) and in Column E of Exhibit A with
respect to Tier Two Distributions (as defined in Exhibit A).
"Purchaser" shall have the meaning set forth in the preface to this
Agreement.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 9.1.
"Regulatory Approvals" means all those Governmental Authorizations
specified in Schedule 3.7.
"Released Claims" shall have the meaning specified in Section 5.12(a).
"Releasees" shall have the meaning specified in Section 5.12(a).
"Resolution Period" shall have the meaning specified in Section 2.5(a).
"Retained Escrow" shall have the meaning set forth in Section 9.6(b).
"Retention Resolution Period" shall have the meaning specified in Section
9.6(b).
"Seller Guarantee" shall have the meaning set forth in Section 5.13.
"Seller Indemnified Party" shall have the meaning set forth in Section
9.2.
"Sellers" shall have the meaning set forth in the preface to this
Agreement.
"Sellers' Knowledge" or similar phrases shall mean actual knowledge of any
Seller after a reasonable investigation or inquiry of the subject matter thereof
having been conducted by or on behalf of Sellers.
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"Sellers' Letter of Credit" means an irrevocable letter of credit in the
sum of $3,000,000 delivered by Sellers to Purchaser as partial security for the
Sellers' indemnification obligation set forth in Article 9. The Sellers' Letter
of Credit shall be in form and substance acceptable to Purchaser from a bank or
financial institution acceptable to Purchaser. Sellers may elect to post such
Letter of Credit as an alternative to the Escrow Funds, which may be partially
released to Sellers upon delivery of the Sellers' Letter of Credit in accordance
with Section 9.6(c)(iii).
"Sellers' Representative" shall have the meaning specified in Section
10.4.
"Sese Finder's Fee" means the fee payable to Xxxxxx Xxxx in connection
with the consummation of the Transactions contemplated by this agreement, which
shall equal to 4% (four percent) of the amount calculated pursuant to Section
2.2(a)(i) through (v).
"Shareholder Loans" shall have the meaning set forth in Section 3.15(j).
"Shares" shall have the meaning set forth in the recitals to this
Agreement.
"Subcontractor Regulations" means the executive orders, federal laws,
state laws, and other Legal Requirements described in Appendix 2 to the Master
Services Agreement No. TH120103 between Cingular Wireless LLC and Phase 2
Solutions, Inc. dated February 24, 2004; provided, however, that the use of the
term "Subcontractor Requirements" shall not apply solely to Cingular Wireless
LLC but to any Person referred to in the context.
"Subsidiary" means, with respect to any Person, any other Person, whether
incorporated or unincorporated, which is required by GAAP to be consolidated
with such Person for financial reporting purposes.
"Tax Distribution" shall have the meaning specified in Section 2.6.
"Tax Distribution Report" shall have the meaning specified in Section 2.6.
"Tax Returns" means any return or other report (including any related or
supporting information) filed or required to be filed with any Taxing
Governmental Body in connection with the determination, assessment or collection
of any Tax, including declaration of estimated Tax and information returns.
"Taxes" means any federal, state, local, or foreign taxes, including but
not limited to taxes on or measured by income, estimated income, franchise,
capital stock, employee's withholding, non-resident alien withholding, backup
withholding, social security, occupation, unemployment, disability, value added
taxes, taxes on services, real property, personal property, sales, use, excise,
transfer, gross receipts, inventory and merchandise, business privilege, and
other Taxes or governmental fees or charges or amounts required to be withheld
and paid over to any Governmental Body in respect of any Tax or governmental fee
or charge, including any interest, penalties, or additions to Tax on the
foregoing whether or not disputed.
"Transaction Costs" means the costs and expenses paid by the Company and
the Sellers pre-Closing in connection with the transactions contemplated by this
Agreement including, (i) the Xxxxx Finder's Fee, (ii) employees bonuses payable
prior to Closing which are described in
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Column B of Exhibit D, (iii) attorneys fees and costs, (iv) accounting and audit
fees, (v) the first $50,000 of cost and expense incurred in connection with the
issuance of the Letter of Credit and one half of the cost and expense incurred
in connection with the issuance of the Letter of Credit above $50,000, (vi) one
half the cost and expense in excess of $50,000 incurred in connection with the
Escrow, and (vii) one half the cost and expense in excess of $50,000 incurred in
connection with obtaining and maintaining "deal protection" insurance or
Seller's Letter of Credit, including any agent's fees and premiums thereon.
Sellers' Representative shall deliver a certificate setting forth all such
Transaction Costs no later than five (5) Business Days prior to Closing.
"Transaction Documents" shall mean this Agreement, the Bank Agreement, the
Employment Agreements, the Noncompetition Agreements and the Note.
"US Bonus Pool" means 12.7265% of the US Performance Results payable to
the employees noted in Column C of Exhibit D in accordance with Section 5.7. The
amounts set forth in Column C assume that the maximum US Performance Results
were earned. If less than the maximum US Performance Results are earned, the
amount payable to the employees referred to in Column C of Exhibit D shall be
reduced proportionately.
"US Performance Based Payment" means 87.2735% of the US Performance
Results.
"US Performance Report" shall have the meaning specified in Section
2.4(a).
"US Performance Results" means the amount equal to four times EBITDA for
the twelve months ended June 30, 2004 less $18,000,000 provided, however, in no
event shall the US Performance Results exceed $4,000,000. For purposes of this
calculation, one half of any Manila Revenue for the six months ended June 30,
2004 and the Manila Profits for the six months ended June 30, 2004 would be
included in EBITDA in calculating the US Performance Results.
"Xxxxxxx Employment Agreement" shall have the meaning set forth in the
recitals.
"Working Capital" as of a particular date shall mean the current assets of
the Company less the current liabilities of the Company determined in accordance
with GAAP; provided, however, that, notwithstanding the requirements of GAAP
with respect to Closing Working Capital, the aggregate amount of any employment
bonuses payable on December 15, 2004 set forth in Column D of Exhibit D shall be
included in current liabilities and the New Mexico Subsidy shall be excluded
from current assets. Subject to clauses (a) and (b) of the immediately preceding
sentence, Working Capital shall be determined in a manner consistent with
Exhibit G. No amounts included in Net Debt for the same period shall also be
included in this calculation of Working Capital.
1.2 Interpretation. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
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The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. Any agreement referred to herein shall include
reference to all exhibits, schedules and other documents or agreements attached
thereto.
Article 2
PURCHASE AND SALE OF THE SHARES
2.1 Purchase and Sale of the Shares. On the Closing Date, subject to the
terms and conditions set forth below, each Seller shall sell to Purchaser, and
Purchaser shall purchase from each such Seller, the number of Shares set forth
opposite such Seller's name on Exhibit A attached hereto, for each Seller's Pro
Rata Share of the aggregate consideration specified in Section 2.2. Sellers may
also receive additional consideration payable by the Purchaser under the Note
based upon the post-Closing performance of Company as more fully described in
Section 2.4. On the Closing Date, each Seller shall deliver to Purchaser stock
certificates representing all of the Shares set forth opposite such Seller's
name on Exhibit A hereto accompanied by duly endorsed stock powers, spousal
consents, irrevocable instructions to release such stock certificates and stock
powers to Purchaser and duly executed IRS Form W-9 and any other documents
required with respect to Tax withholding. Purchaser shall not be obligated to
purchase and pay for any Shares unless it shall simultaneously purchase and take
delivery of certificates evidencing all of the Shares accompanied by duly
endorsed stock powers and necessary spousal consents at the Closing. All
payments by Purchaser or the Company shall be subject to any applicable Tax
withholding.
2.2 Cash Purchase Price.
(a) Consideration payable to the Sellers at Closing. Subject to
Sections 2.2(b) and 2.3, at the Closing, as consideration for the purchase of
the Shares, Purchaser agrees to pay to Sellers the following aggregate
consideration:
(i) Eighteen Million Dollars ($18,000,000);
(ii) minus the amount of Net Debt reflected on the March 31,
2004 audited financials of the Company ("March 31 Net Debt");
(iii) minus the amount (if any) by which Working Capital
reflected on the March 31 Balance Sheet is less than $4,125,010;
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(iv) plus the amount (if any) by which the Working Capital on
the March 31 Balance Sheet is more than $4,125,010;
(v) minus the Transaction Costs; and
(vi) minus the Sese Finder's Fee.
The above consideration, in the aggregate, is hereinafter referred to from time
to time as the "Cash Purchase Price." Each Seller shall receive on the Closing
Date his or her Pro Rata Share of the Cash Purchase Price (subject to applicable
withholdings) by check or wire transfer of immediately available funds to the
respective account or accounts designated by each such Seller in a written
notice to Purchaser given at least five (5) Business Days prior to the Closing
Date.
(b) Escrow. Notwithstanding Section 2.2(a), and subject to Section
9.6(c)(iii), Purchaser shall withhold an aggregate amount equal to $1,500,000
from that portion of the Cash Purchase Price to be paid at the Closing to
each of Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx (the "Escrow Contributing
Sellers"). The aggregate withholding of $3,000,000 (the "Escrow Amount")
shall be delivered to the Escrow Agent at Closing to be held in escrow in
accordance with the terms of Section 9.6 and the Escrow Agreement.
2.3 Post-Closing Adjustment of Cash Purchase Price.
(a) Net Debt Post-Closing Adjustment. The Cash Purchase Price shall
be (i) increased by the amount that the March 31 Net Debt is greater than the
Closing Net Debt; or (ii) decreased by the amount that the March 31 Net Debt
is less than the Closing Net Debt. The term "Closing Net Debt" as used herein
shall mean the Net Debt of the Company as set forth on the Final Closing
Balance Sheet (as hereinafter defined) determined in accordance with the
procedures set forth in Sections 2.3(c) and 2.5.
(b) Working Capital Post-Closing Adjustment. The Cash Purchase Price
shall be (i) increased by the amount that the Closing Working Capital is
greater than the March 31 Working Capital; or (ii) decreased by the amount
that the Closing Working Capital is less than the March 31 Working Capital.
The term "Closing Working Capital" as used herein shall mean the Working
Capital of the Company as set forth on the Final Closing Balance Sheet (as
hereinafter defined) determined in accordance with the procedures set forth
in Sections 2.3(c) and 2.5. The amount of any decrease or increase to the
Cash Purchase Price pursuant to Sections 2.3(a) and 2.3(b) shall be paid by
the Sellers or Purchaser, as the case may be, by wire transfer in immediately
available funds within five (5) business days after the Final Closing Balance
Sheet is agreed to by Sellers and Purchaser or is determined by the Neutral
Auditor (as hereinafter defined) in accordance with the procedures set forth
in Section 2.5. Subject to the procedures set forth in Section 2.5, the
parties shall make commercially reasonable efforts to make such payments
within sixty (60) days of the Closing Date.
(c) Preparation of Closing Balance Sheet. As soon as practicable,
and in any event within thirty (30) days after the Closing Date, Purchaser
shall cause a balance sheet of the Company as of the Closing Date to be
prepared in accordance with GAAP (the "Closing Balance Sheet"). The Closing
Balance Sheet shall be audited by Ernst & Young LLP and
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accompanied by Ernst & Young LLP's report stating the such statement presents
fairly, in all material respects, the assets and liabilities presented on
such statement as provided for in this Agreement at the Closing Date in
conformity with GAAP, except as modified by any modifications which are
mutually agreed upon by the parties hereto. Sellers and Purchaser shall
provide Ernst & Young LLP access to the books, records, ledgers, files,
documents, correspondence, lists, advertising and promotional materials,
studies, reports, and other printed or written materials of the Company as
may reasonably be required for the preparation of the Closing Balance Sheet.
The Closing Balance Sheet shall be subject to the dispute resolution
mechanisms set forth in Section 2.5.
2.4 Contingent Consideration. As further consideration for the Shares,
Purchaser agrees that it shall pay certain additional consideration, subject to
the offset rights described in Section 9.4(c) ("Contingent Consideration") to
Sellers following the Closing in accordance with the following terms:
(a) US Performance Based Payment. The Company shall prepare and
deliver to the Sellers' Representative a statement detailing the calculation
of the US Performance Results (the "US Performance Report") no later than
July 31, 2004. The US Performance Report shall include supporting detail as
to Xxxxxx Xxxxxxxx, Xxxxxx Profits, any EBITDA Shortfall and a schedule of
Excluded Costs. The Company shall pay the Sellers' Representative an
aggregate amount equal to the US Performance Based Payment within ten (10)
days after the Final US Performance Report is agreed or is determined by the
Neutral Auditor in accordance with the procedures set forth in Section 2.5.
(b) Manila Performance Based Payment. The Company and Purchaser
shall prepare and deliver to the Sellers' Representative a statement
detailing the calculation of Manila Performance Results no later than January
31, 2005 (the "Manila Performance Report"). The Manila Performance Report
shall include supporting detail as to Manila Revenues and EBITDA Shortfall
(if any). Purchaser shall pay the Sellers' Representative an amount equal to
the Manila Performance Based Payment within ten (10) days after the Final
Manila Performance Report (defined in Section 2.5(b)) is agreed or is
determined by the Neutral Auditor in accordance with the procedures set forth
in Section 2.5.
(c) Note Evidencing Contingent Consideration. At Closing, Purchaser
shall issue a promissory note evidencing the potential payments for
Contingent Consideration pursuant to this Section 2.4 substantially in the
form of Exhibit B hereto (the "Note"). The Note shall be issued in favor of
the Sellers' Representative for the benefit of the Sellers and partially
secured by the Letter of Credit. Payments of Contingent Consideration shall
be solely an obligation of Purchaser and any payments made by Purchaser to
the Sellers' Representatives pursuant to the Note shall be deemed in
satisfaction of Purchaser's obligation under the Note and this Section 2.4 to
the extent of such aggregate payments. Subject to any payments required to be
made to the Escrow Agent pursuant to Section 9.6, the Company shall direct
its bank to pay all amounts owed pursuant to the Note in excess of the amount
of the Letter of Credit directly to the Sellers' Representative.
(d) Payment by the Sellers' Representative. Each Seller shall be
entitled to receive his or her Pro Rata Share of any Contingent Consideration
from the Sellers'
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Representative, subject to the offset rights described in Section 9.4(d);
provided, however, that any Seller that fails to pay Purchaser after five
Business Days notice that he or she owes amounts to Purchaser pursuant to
Sections 2.3(a) and 2.3(b) based upon the Final Closing Balance Sheet shall
forfeit their right to receive any Contingent Consideration from the Company
through the Sellers' Representative and the Company's payment obligation
pursuant to Section 2.4 shall be reduced by such Seller's Pro Rata
Percentage. Each Seller shall receive his or her Pro Rata Share of the
Contingent Consideration by wire transfer of immediately available funds to
the respective account or accounts designated by each such Seller in a
written notice to the Sellers' Representative given at least five (5)
Business Days prior to the date of payment.
(e) Payment of New Mexico Subsidy. The Company shall pay to the
Sellers' Representative within five (5) Business Days after the end of each
month (i) all the Pre-Closing New Mexico Subsidy received in the immediately
preceding month and (ii) one half of the Post-Closing New Mexico Subsidy
received in the immediately preceding month. Purchaser and the Company shall
timely file any and all necessary reports and other documents required by the
State of New Mexico in order to fulfill any conditions under the Training
Program to payment of the New Mexico Subsidy.
2.5 Final Closing Balance Sheet, Final Tax Distribution Reports, Final US
Performance Report and Final Manila Performance Report.
(a) Review of the Closing Balance Sheet, Tax Distribution Report, US
Performance Report and Manila Performance Report. After receipt of the
Closing Balance Sheet, Tax Distribution Report, US Performance Report and the
Manila Performance Report, Sellers' Representative shall have fifteen (15)
days to review the same. Sellers' Representative shall have full access to
all books and records and employees of the Company and auditors working
papers, if applicable used in preparation of such reports. Unless Sellers'
Representative delivers written notice to the Company and Purchaser on or
prior to the fifteenth (15th) day after receipt of the Closing Balance Sheet,
the Tax Distribution Report, US Performance Report or the Manila Performance
Report as the case may be, specifying in reasonable detail all disputed items
and the basis therefor, the parties shall be deemed to have accepted and
agreed to the Closing Balance Sheet, the Tax Distribution Report, the US
Performance Report or the Manila Performance Report, as the case may be,
submitted to the Sellers' Representative. The parties shall, within fifteen
(15) days following the date of such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by item as to any
disputed amount shall be final, binding, conclusive and nonappealable for all
purposes under this Agreement.
(b) Resolution. If at the conclusion of the Resolution Period
(unless either Purchaser and the Company, on the one hand, or the Sellers
through the Sellers' Representative on the other hand, have made an election
pursuant to the last sentence of this Section 2.5(b)) the parties have not
reached an agreement on the objections, then all amounts remaining in dispute
may be submitted to either PricewaterhouseCoopers LLP or KPMG as sole
arbitrator (the "Neutral Auditor") at the election of either Purchaser and
the Company, on the one hand, or the Sellers' through the Sellers'
Representative on the other hand. Each of Purchaser and the Company on the
one hand, and Sellers through the Sellers'
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Representative on the other hand, agrees to execute, if requested by the
Neutral Auditor, a customary engagement letter. In the arbitration, Purchaser
and the Company on the one hand, and the Sellers through the Sellers'
Representative, on the other hand shall each submit their position with
respect to all items in dispute and all supporting documentation. The Neutral
Auditor shall act as an arbitrator to determine, based solely on the
information presented by Purchaser and the Company on the one hand, and the
Sellers through the Sellers' Representative on the other hand, and not by
independent review, only those issues still in dispute. The Neutral Auditor
shall select either Purchaser's and the Company's position with respect to
all disputed items or the Sellers' position with respect to all disputed
items. All costs and expenses incurred by both parties (including without
limitation the fees and expenses of the Neutral Auditor) in connection with
resolving any dispute hereunder before the Neutral Auditor shall be borne by
the losing party. The Neutral Auditor's determination shall be made within
twenty (20) days of its engagement (which engagement shall be made no later
than five (5) Business Days after an election by either party to submit the
objections to the Neutral Auditor) or as soon thereafter as possible, shall
be set forth in a written statement delivered to Purchaser, the Company and
the Sellers' Representative and shall be final, binding, conclusive and
nonappealable for all purposes hereunder. For purposes of this Agreement, the
terms "Final Closing Balance Sheet," "Final Tax Distribution Report," "Final
US Performance Report" and "Final Manila Performance Report" shall mean the
definitive Closing Balance Sheet, the definitive Tax Distribution Report, the
definitive US Performance Report and the definitive Manila Performance Report
agreed to in accordance with Section 2.5(a) or the definitive Closing Balance
Sheet, the definitive Tax Distribution Report, the definitive US Performance
Report and the definitive Manila Performance Report resulting from the
determination made by the Neutral Auditor in accordance with this Section
2.5(b). Notwithstanding the foregoing, if either Purchaser and the Company,
on the one hand, or the Sellers through the Sellers Representative on the
other hand, disputes the calculation of the Manila Revenue in the US
Performance Report or the Manila Performance Report, then either such party
or parties may elect to arbitrate those amounts in accordance with the
arbitration provisions set forth in Section 10.12 by delivering written
notice to the other party or parties prior to the third Business Day
following the end of the Resolution Period.
2.6 2004 Tax Distribution. Purchaser shall cause the Company to prepare
and deliver to the Sellers' Representative a statement (the "Tax Distribution
Report") no later than thirty (30) days after Closing setting forth a
calculation of pre-tax income of the Company for US tax purposes determined by
Xxxxxxx, Xxxxxxx & Xxxxxx, P.C. (subject to the approval of Deloitte & Touche
LLP). Purchaser shall pay the Sellers' Representative an aggregate amount equal
to 20% of such pre-tax income (excluding any Depreciation Recapture) for the
period beginning January 1, 2004 through the Closing Date (the "Tax
Distribution") within ten (10) days after the Final Tax Distribution Report
(defined in Section 2.5(b)) is agreed or is determined by the Neutral Auditor in
accordance with the procedures set forth in Section 2.5; provided, however, in
no event shall such aggregate payment exceed $200,000. Any dispute concerning
the foregoing calculations of Xxxxxxx, Xxxxxxx & Xxxxxx, P.C. shall be resolved
in the manner mutandis set forth in Section 2.5.
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Article 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers jointly and severally hereby represent and warrant to
Purchaser on the date hereof and as of the Closing Date as follows:
3.1 Corporate Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted.
3.2 Qualification to Do Business. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its businesses or the ownership or leasing of their
respective properties makes such qualification necessary (except for
jurisdictions in which the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect on the Company).
3.3 Equity Investments and Books and Records. Except as disclosed on
Schedule 3.3 hereto, the Company does not own (ownership meaning the right to
economic benefits of receipt of proceeds upon sale or distribution of dividends)
any shares of, or control or participate as a partner or joint venturer in, any
Person. The Company does not have, and since its inception, has not had, any
Subsidiaries. The books of account, minute books, stock record books, and other
records of the Company all of which have been made available to Purchaser are
complete and correct and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of internal controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the shareholders, the Boards of
Directors, and committees of the Boards of Directors of the Company, and no
meeting of any such shareholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records will be in the possession
of the Company.
3.4 Capital Structure. Sellers own all of the Shares, free and clear of
any and all Liens, and each Seller owns such number of Shares as is set forth
opposite such Seller's name on Exhibit A. The authorized capital stock of the
Company consists of 1,000,000 shares of common stock $0.01 par value per share
of which 100,000 shares are issued and outstanding. All of the issued and
outstanding shares of capital stock of the Company are duly and validly issued,
fully paid, nonassessable and free of preemptive rights. Except as set forth on
Schedule 3.4 and for this Agreement, there are no understandings, arrangements,
restrictions, commitments or agreements of any kind relating to the Shares or
any securities outstanding representing the right to purchase or otherwise
receive shares of common stock or any other capital stock or equity security of
the Company. The stock certificates, endorsements and other documents to be
delivered to Purchaser at the Closing will transfer to and vest in Purchaser
good, valid and indefeasible title to the Shares, free and clear of any and all
Liens.
3.5 Validity of Transaction Documents. Each of the Transaction Documents
has been duly and validly executed and delivered by the appropriate Sellers or
the Company, as the case
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may be, and constitutes a valid and binding obligation of each such Seller or
the Company, as the case may be, enforceable against each such Seller or
Company, as the case may be, in accordance with its terms, except as enforcement
may be limited by general principles of equity, whether applied in a court of
law or a court of equity, and by bankruptcy, insolvency, moratorium, and similar
laws affecting creditors' rights and remedies generally.
3.6 No Violations. Neither the execution and delivery of each of the
Transaction Documents by each Seller or the Company nor the consummation by each
Seller or the Company of the transactions contemplated hereby and thereby, will
(i) violate any provision of the Articles of Incorporation (the "Articles") or
by-laws (the "By-Laws") of the Company or (ii) assuming that consents and
approvals referred to in Section 6.2(a) and Schedule 3.6 are obtained, violate
or constitute a breach of, or a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, any Material Contract or
any Legal Requirements to which any Seller, or the Company is subject or is a
party or by which any Seller or the Company or their respective properties are
otherwise bound.
3.7 Consents and Approvals. Except for such as may be set forth in
Schedule 3.7, no Governmental Authorizations with any Governmental Body are
required to be obtained in connection with the execution and delivery by Sellers
of this Agreement and the consummation by Sellers of the transactions
contemplated hereby.
3.8 Financial Statements. Sellers have previously delivered to Purchaser
the reviewed balance sheets of the Company as of the fiscal years ended December
31, 2001 and 2002 and the related reviewed statements of operations, cash flows
and changes in shareholder's equity for the 2001 and 2002 fiscal years together
with the notes thereto (the "Historical Financial Statements"). Sellers have
previously delivered to Purchaser the audited balance sheet of the Company as of
December 31, 2003, and the related audited statements of operations, cash flow
and changes in shareholder's equity for the calendar year then ended together
with the notes thereto (the "Calendar 2003 Financial Statements"). The Calendar
2003 Financial Statements and the Historical Financial Statements have been
prepared in accordance with GAAP consistently applied during the periods
involved, and the Historical Financial Statements and the Calendar 2003
Financial Statements fairly present the financial condition and the results of
operations of the Company as of the dates thereof and for the periods involved.
Sellers shall deliver to Purchaser as soon as they are available the audited
balance sheet of the Company for the three months ended March 31, 2004 and the
related audited consolidated statements of operations, cash flows and changes in
shareholder's equity for the three months then ended (the "March 31 Financial
Statements") which will fairly present the financial condition and the results
of operation of the Company as of, and for, the three months ended March 31,
2004. Both the Calendar 2003 Financial Statements and the March 31 Financial
Statements shall be accompanied by the opinion of Xxxxxxx, Xxxxxxx & Xxxxxx,
P.C. to the effect that the March 31 Financial Statements have been prepared in
accordance with GAAP consistently applied during the periods involved and fairly
present the financial condition and the results of operations of the Company as
of the dates thereof and for the periods involved. Such opinion of Xxxxxxx,
Xxxxxxx & Xxxxxx, P.C. shall not contain any qualifications.
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3.9 Absence of Certain Changes.
(a) Except as set forth in Schedule 3.9, since December 31, 2003,
(i) there has been no material damage, destruction, loss or claim, whether or
not covered by insurance, or condemnation or other taking of any property of
the Company, and (ii) the Company has operated its businesses only in the
ordinary course of business consistent with past practice.
(b) Except as set forth on Schedule 3.9 or as expressly permitted by
this Agreement, between December 31, 2003 and the date hereof, the Company
has not: (i) purchased, sold, leased, transferred or assigned, or agreed
lease, transfer or assign, any of its assets, tangible or intangible,
involving more than $25,000; (ii) entered into any contract, lease, sublease,
license or sublicense (or series of related contracts, leases, subleases,
licenses or sublicenses) involving more than $50,000; (iii) accelerated,
terminated, modified or canceled any contract (including any Material
Contract) or lease or made any capital expenditure (or series of related
capital expenditures) involving more than $25,000; (iv) made any capital
investment in, any loan to, or any acquisition of the securities or assets of
any other person (or series of related capital investments, loans, and
acquisitions) involving more than $25,000; (v) created, incurred, assumed, or
guaranteed any indebtedness for borrowed money (including capitalized lease
obligations) involving more than $10,000, singly, or $25,000 in the
aggregate; (vi) issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion or exercise) any of its capital stock or
any securities owned by the Company; (vii) made any loan to, or entered into
any other transaction with, any of its directors, officers or employees
giving rise to any claim or right on its part against the Person or on the
part of the Person against the Company; (viii) entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing employment contract; (ix) granted any increase in the
base compensation of any of its directors, officers, and key employees; (x)
adopted any (A) bonus, (B) profit-sharing, (C) incentive compensation, (D)
pension, (E) retirement, (F) medical, hospitalization, life, or other
insurance or (G) severance plan; (xi) made any other material change in
employment terms for any of its directors, officers or employees; (xii) made
or pledged to make any charitable contribution or contributions in excess of
$10,000, individually, or $25,000 in the aggregate; or (xiii) contractually
committed to do any of the foregoing.
3.10 Tax Matters. Except as set forth in Schedule 3.10, the Company has
duly and timely filed all federal, state, local and foreign Tax Returns required
to be filed by it, all such Tax Returns are true and correct in all material
respects, and the Company has duly paid all Taxes which are due and payable with
respect to the periods covered by such Tax Returns. Sellers have provided to
Purchaser a true and complete copy of each federal, state, local and foreign Tax
Returns filed by the Company since its inception. The liability for Taxes
reflected in the Calendar 2003 Financial Statements (i) is sufficient for the
payment of all unpaid Taxes, whether or not disputed, that are accrued or
applicable for the period ended December 31, 2003, and for all years and periods
ended prior thereto and (ii) adjusted for the passage of time in a manner
consistent with the past practice of the Company, is sufficient for the payment
of all unpaid Taxes, whether or not disputed, that are accrued or applicable for
all years or periods ending on or prior to the Closing Date. All deficiencies
asserted as a result of any examinations by the IRS or any other Taxing
Governmental Body have been paid, fully settled or adequately
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provided for in the Calendar 2003 Financial Statements. There are no Liens
(other than for Taxes not yet due and payable) on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax. For all periods since its inception, the Company at all times has been
an S Corporation as that term is defined in Section 1361(a) of the Code and has
never had any Subsidiaries. There are no pending claims asserted for Taxes of
the Company or outstanding agreements or waivers extending the statutory period
of limitation applicable to any Taxes of the Company for any period. The Company
has not filed a consent to the application of Section 341(f) of the Code. The
Company is not a party to any Tax sharing, allocation or indemnification
agreement or arrangement. The Company has not been a member of a consolidated
federal income tax return or has any liability for the Taxes of any Person
(other than the Company) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law). The Company has made all
estimated income Tax deposits and all other required Tax payments or deposits
(including withholding Taxes) and have complied for all prior periods in all
material respects with the Tax provisions of all applicable Legal Requirements.
3.11 Accounts Receivable. All accounts receivable of the Company that are
reflected on the Balance Sheet or the March 31 Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the Balance Sheet or the March 31 Balance Sheet or on the
accounting records of the Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable either has been or will be collected
in full, without any set-off, within ninety days after the day on which it first
becomes due and payable. Except as set forth in Schedule 3.11, there is no
contest, claim, or right of set-off, other than returns in the ordinary course
of business, under any agreement, contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
3.12 Properties.
(a) The Company has good and marketable title to, or valid leasehold
interests in, all of the properties and assets used in its businesses, free
and clear of any Liens, except Liens for Taxes not yet due and payable. The
properties and assets of the Company are in good operating condition and
repair, and are adequate for the uses to which they are being put, and none
of such properties and assets are in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost.
(b) Schedule 3.12 sets forth a list as of the date hereof of all
leases or subleases of real property to which the Company is a party
(collectively, the "Leases"). The Company owns no real property. The Leases
are in full force and effect in all material respects and, to Sellers'
Knowledge, neither the Company nor any of its Affiliates has received a
notice of default or termination with respect to any such Lease.
3.13 Insurance Coverage. The Company is presently insured for reasonable
amounts against such risks as companies engaged in similar businesses would, in
accordance with good business practice, customarily be insured. Schedule 3.13
sets forth a true and complete list and
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brief description of all material insurance policies (and fidelity or similar
bonds) maintained by or for the benefit of the Company or its directors,
officers, employees or agents.
3.14 Licenses and Permits. The Company has all Governmental Authorizations
that are necessary for the lawful conduct of its businesses as presently
conducted, and all such Governmental Authorizations are in full force and effect
in all material respects.
3.15 Material Contracts. Schedule 3.15 lists the following agreements,
contracts, commitments, licenses, instruments and understandings (whether or not
in writing) to which the Company is a party or is bound (each, a "Material
Contract" and collectively, the "Material Contracts"):
(a) agreements, contracts and commitments that cannot be terminated
upon 30 days' or less notice without penalty or that have an unexpired term
of one year or more and involve annual commitments in excess of $10,000;
(b) agreements, contracts and commitments with any Seller or any of
their Affiliates or any officer, director, employee or Affiliate of the
Company;
(c) agreements, contracts and commitments with all customers and
clients;
(d) agreements, contracts and commitments with the Company's
offshore partners (including franchise agreements);
(e) agreements, contracts and commitments that constitute an
obligation in respect of a borrowing of money;
(f) agreements, contracts and commitments that constitute a guaranty
or indemnity;
(g) agreements, contracts and commitments providing for the
extension of credit, other than in the ordinary course of business from
vendors;
(h) agreements, contracts and commitments materially limiting the
ability of the Company to conduct its business, including as to manner or
place;
(i) agreements, contracts and commitments that are for the
employment, severance or retention or any director, officer, employee, agent,
consultant or advisor providing for compensation or payments or any other
contract or understanding with any director, officer, employee, agent,
consultant or advisor, which provides for termination only for cause by the
Company as of or at any time after the date of this Agreement;
(j) agreements, contracts and commitments with respect to loans from
any Sellers to the Company ("Shareholder Loans");
(k) agreements, contracts and commitments that are for capital
expenditures in an amount exceeding $5,000 in any individual case or $10,000
in the aggregate;
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(l) agreements, contracts and commitments not otherwise set forth on
Schedule 3.15, that are in the nature of a profit sharing, bonus, stock
option, stock purchase, pension, deferred compensation or retirement,
severance, hospitalization, insurance or other plan or contract providing
benefits to any Person or former director, officer, employee, agent,
shareholder, consultant or advisor or such Persons' dependents, beneficiaries
or heirs;
(m) agreements, contracts, commitments that are joint venture,
partnership or other similar agreement (however named) involving a sharing of
profits, losses, costs or liabilities; and
(n) agreements, contracts and commitments that are agreements with
current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the confidential information.
True, correct and complete copies of all Material Contracts have been
delivered to Purchaser. Each Material Contract is a valid and binding obligation
of the Company in accordance with its terms and the Company are not in breach of
any Material Contract in any material respect and, to the Sellers' Knowledge, no
event has occurred which could be expected to constitute such a breach.
3.16 Legal Proceedings. Except as set forth in Schedule 3.16, Company is
not a party to any, and there are no pending or to Sellers' Knowledge,
threatened, proceedings of any nature against the Company or challenging the
validity or propriety of the transactions contemplated by this Agreement, and
there is no injunction, order, judgment, decree or regulatory restriction
imposed upon the Company. The Company is not in violation of any Legal
Requirements to which any of its businesses, properties or operations is
subject.
3.17 Employees.
(a) Except as set forth on Schedule 3.17, there are no written or
oral contracts or arrangements with any of the Employees regarding employment
or the payment of benefits, including separation pay or separation benefits.
Each contract of employment set forth on Schedule 3.17 is a legal, valid and
binding obligation of the Employee that is a party thereto, in full force and
effect and enforceable against such Employee in accordance with its terms. To
the Sellers' Knowledge, no director, officer or Key Employee of the Company
intends to terminate his employment with the Company post Closing.
(b) No union is currently certified, and there is no union or other
organizational activity that would be subject to the National Labor Relations
Act (29 U.S.C. Section 151 et seq.) with respect to the Employees. The
Company is in material compliance with all applicable federal, state and
local laws, rules and regulations affecting employment and employment
practices with respect to the Company, including terms and conditions of
employment, employment discrimination and harassment and wages and hours, and
the Company is not engaged in any unfair or unlawful labor or employment
practices with respect to its employees. Except as set forth on Schedule
3.17, there are no complaints against the Company pending before the National
Labor Relations Board, the Equal Employment Opportunities Commission or any
similar state or local labor agency. There are no labor
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strikes, slow-downs or stoppages or other labor troubles pending or, to the
Sellers' Knowledge, threatened with respect to any employees of the Company;
to the Sellers' Knowledge, no labor organization activities have occurred
with respect to employees of the Company during the past five years. There
are no collective bargaining agreements binding on the Company. No grievances
have been asserted against the Company by or with respect to its Employees;
and the Company has not experienced any work stoppage by their employees
during the last five years.
(c) There are no Employee Benefit Plans and Other Fringe Benefits
which are sponsored by the Company or which relate to the Employees, except
as set forth on Schedule 3.17 (collectively, the "Company Benefit Plans").
3.18 Environmental Matters. Except as set forth on Schedule 3.18,
(a) The Company is in material compliance with all applicable
Environmental Laws.
(b) The Company possesses and is in compliance with all Governmental
Authorizations required by any Environmental Laws for the operation of its
businesses.
(c) To the Sellers' Knowledge, the operations of the Company has not
caused any release of hazardous substances (as defined by the Comprehensive
Environmental Response Compensation and Liability Act, as amended, or
hazardous waste, as defined by the Resource Conservation and Recovery Act, as
amended, but also including crude oil or any fraction thereof)
("Environmental Release") on any real property owned, leased or operated by
the Company.
(d) The Company does not own or operate any underground storage
tanks and, to the Sellers' Knowledge, no underground storage tanks are
located or have been located on property owned, leased or operated by the
Company.
(e) There are no complaints, notices or claims related to any
Environmental Release that are pending, or to the Sellers' Knowledge,
threatened against the Company.
3.19 No Undisclosed Liabilities. Except as set forth in Schedule 3.19, the
Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the March 31 Balance Sheet and current liabilities incurred in the ordinary
course of business since the respective dates thereof.
3.20 Finders' Fees. Other than the Persons receiving the Finders' Fees,
there is no investment bank, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Sellers or the Company who
might be entitled to any fee or commission in connection with this Agreement or
the transactions contemplated hereby.
3.21 Compliance With Law. Except as disclosed in Schedule 3.21, the
businesses and operations of the Company are being conducted in compliance with
all Legal Requirements of any Governmental Body applicable to the Company and
the Company has not received written
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notice of any alleged violation of any of the foregoing. All Governmental
Authorizations required by the Company in connection with the conduct of its
businesses have been obtained and are in full force and effect and are being
complied with in all material respects.
3.22 Technology and Intellectual Property.
(a) Attached hereto as Schedule 3.22 is a list of all material (i)
domestic and foreign registered trademarks and service marks, registered
copyrights and patents, (ii) applications for registration or grant of any of
the foregoing, (iii) unregistered trademarks, service marks, trade names,
logos and assumed names, and (iv) computer applications, programs and
software, and (v) licenses for any of the foregoing, in each case, owned by
the Company. The items on Schedule 3.22, together with all other trademarks,
service marks, trade names, logos, assumed names, patents, copyrights, trade
secrets, computer applications, programs and software, licenses, formulae,
customer lists or other databases, designs and inventions currently used in
or necessary to conduct the businesses of the Company constitute the
"Intellectual Property."
(b) The Company has ownership of, or such other rights by license,
lease or other agreement in and to, the Intellectual Property as is necessary
to conduct its business as presently conducted all of which is set forth on
Schedule 3.22. To Sellers' Knowledge, the Company has not infringed or
violated any trademark, trade name, copyright, patent, trade secret right or
other proprietary right of others, except to the extent that any infringement
or violation is not, individually or in the aggregate, reasonably expected to
have a Material Adverse Effect on the Company. The Company has not received
written notice of any claim respecting any such violation or infringement.
Other than as set forth in Schedule 3.22, to Sellers' Knowledge, there is no
reason to believe that upon consummation of the transactions contemplated
hereby the Company will be in any way more restricted than as of the date
hereof in the use of any of the Intellectual Property under any applicable
Legal Requirement, contract or otherwise, or that use of such Intellectual
Property by the Company will as a result of such consummation violate or
infringe the rights of any Person, or subject the Company to liability of any
kind, under any applicable Legal Requirement or otherwise.
3.23 Filing Documents. None of the information regarding the Company,
Sellers or any of their respective Affiliates supplied or to be supplied by the
Company or Sellers included or for inclusion in any documents to be filed with
any Governmental Body in connection with the transactions contemplated hereby
will, at the respective times such documents are filed with any Governmental
Body, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.24 Customer and Suppliers. Since December 31, 2003, no material supplier
of the Company has indicated that it shall stop, or materially decrease the rate
of supplying materials, products or services to the Company and no customer
(other than Nextel) has indicated that it shall stop or materially decrease the
rate of, buying products or services from the Company.
3.25 Proper Business Conduct. None of the activities or types of conduct
below have been or may have been engaged in by the Company, either directly or
indirectly: (i) any bribes or
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kickbacks to government officials or their relatives, or any other payments to
such persons, whether or not legal, to obtain or retain business or to receive
favorable treatment with regard to business; (ii) any bribes or kickbacks to
persons other than government officials, or to relatives of such persons, or any
other payments to such persons or their relatives, whether or not legal, to
obtain or retain business or to receive favorable treatment with regard to
business; (iii) any illegal contributions made to any political party, political
candidate or holder of governmental office; (iv) any bank accounts, funds or
pools of funds created or maintained without being reflected on the corporate
books of account, or as to which the receipts and disbursements therefrom have
not been reflected on such books; (v) any receipts or disbursements, the actual
nature of which has been "disguised" or intentionally misrecorded on the
corporate books of account; (vi) fees paid to consultants or commercial agents
which exceeded the reasonable value of the services purported to have been
rendered; and (vii) Company has never represented to any Governmental Body or
other Person that it is a "small business concern owned and controlled by
socially and economically disadvantaged individuals" or a "small business
concern owned and controlled by women" in each case within the meaning of the
Subcontractor Regulations.
3.26 Representations Complete. None of the representations or warranties
made by the Sellers herein or in any Schedule hereto when all such documents are
read together in their entirety, contains or will contain as of the date hereof
or at the Closing Date any untrue statement of a material fact, or omits or will
omit, as of the date hereof or at the Closing Date, to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
Article 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represent and warrant to Sellers on the date hereof and
as of the Closing Date as follows:
4.1 Corporate Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdictions of
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted.
4.2 Qualification to do Business. Purchaser is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its businesses or the ownership or leasing of its
properties makes such qualification necessary (except for jurisdictions in which
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect on Purchaser).
4.3 Authorization and Validity of Transaction Documents. Purchaser has
full corporate power and authority to execute and deliver this Agreement, and to
consummate the transactions contemplated hereby. The execution and delivery of
each of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by
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all requisite corporate action on the part of Purchaser, and no other corporate
proceedings on the part of Purchaser is necessary to approve each of this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Purchaser and (assuming the
due authorization, execution and delivery thereof by each Seller) constitutes a
valid and binding obligation of Purchaser, enforceable against it in accordance
with its terms, except as enforcement may be limited by general principles of
equity, whether applied in a court of law or a court of equity, and by
bankruptcy, insolvency, moratorium, and similar laws affecting creditors' rights
and remedies generally.
4.4 No Violations. Neither the execution and delivery of this Agreement by
Purchaser, nor the consummation by Purchaser of the transactions contemplated
hereby will (i) violate any provision of the Certificate of Incorporation or
by-laws or comparable organizational documents of Purchaser or (ii) assuming
that the consents and approvals referred to in Section 6.1(a) are obtained,
violate or constitute a breach of, or a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, any Legal
Requirement of any Governmental Body to which Purchaser is subject, or under any
agreement or instrument of Purchaser or to which Purchaser is subject or is a
party or by which Purchaser or any of its properties is otherwise bound, which
violation, breach or default referred to in this clause (ii) could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate, on
Purchaser.
4.5 Consents and Approvals. Except for such Governmental Authorizations as
may be set forth in Schedule 4.5, no Governmental Authorizations with any
Governmental Body are required to be obtained by or on behalf of Purchaser in
connection with the execution and delivery by Purchaser of this Agreement and
the consummation by Purchaser of the transactions contemplated hereby.
Article 5
COVENANTS OF THE PARTIES
5.1 Activity in the Ordinary Course. From the date hereof, and until the
Closing Date or earlier termination hereof, Sellers shall cause the Company to
conduct its businesses in the ordinary and usual course and shall cause the
Company to refrain from entering into any material transaction or make any
material commitments without the prior written consent of Purchaser, except in
the ordinary course of business consistent with past practice or as contemplated
by this Agreement. Without limiting the generality of the foregoing, from the
date hereof and until the Closing Date, without the prior written consent of
Purchaser, Sellers shall not permit the Company to:
(a) engage or participate in any material transaction or incur or
sustain any material obligation except in the ordinary course of business
consistent with past practice;
(b) increase or agree to increase the salary, remuneration or
compensation of persons employed by the Company (or make any material
increase or decrease in the number of such persons) other than as required by
law or by any Material Contract listed on Schedule 3.15;
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(c) amend its Articles or By-Laws;
(d) make any change in its respective authorized, issued or
outstanding capital stock or other equity security;
(e) grant, issue, sell, pledge, assign or otherwise encumber or
dispose of, or purchase, redeem or otherwise retire or acquire (except in a
fiduciary capacity), any shares of capital stock or other equity security of
the Company or any security convertible into or representing a right to
acquire such shares of the Company or enter into any agreement, call or
commitment of any character that would obligate it to do any of the
foregoing;
(f) enter into any shareholder agreement, understanding or
commitment relating to the right of Sellers to vote or dispose of the capital
stock of the Company;
(g) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of the Company (including, without limitation,
any stock dividend or distribution), except for the Estimated Tax
Distribution;
(h) authorize or make any material change in its businesses, or its
operational policies, activities or practices or its accounting policies
except as may be required by changes in GAAP after the date hereof;
(i) authorize or pay any bonuses or other special payments to any
directors, officers or employees or enter into, adopt, amend or terminate any
the Company Benefit Plan or any other employee benefit plan or other
agreement between the Company and one or more of its directors, officers or
employees, in each case so as to increase the benefits or payments
thereunder, except as required by law;
(j) lease, sell, pledge, assign, encumber or otherwise dispose of
any material assets of the Company except (A) as required by any Material
Contract, or (B) for ordinary repairs, renewals or replacement;
(k) breach any representation and warranty set forth in Article 3;
(l) amend or extend the statutory period of limitations applicable
to any Taxes of the Company for any period; or
(l) agree or commit to take any of the foregoing actions.
5.2 Access and Confidentiality.
(a) Between the date of this Agreement and the Closing Date, Sellers
shall and shall cause the Company to afford to Purchaser and its officers and
authorized agents and representatives reasonable access to the properties,
books, records, contracts, documents, files and other information of or
relating to the Company. In addition, Sellers will use reasonable efforts to
arrange for Purchaser to have reasonable access to similar information held
by third parties, if any, for or on Sellers' behalf or for or on behalf of
the Company. Sellers shall cause personnel of the Company to be reasonably
available during normal
-26-
business hours, to an extent not disruptive of ongoing operations, for the
same purposes. Between the date of this Agreement and the Closing Date,
Sellers shall furnish Purchaser with such additional financial and operating
data and other information about the business operations of the Company as
Purchaser may reasonably request.
(b) Each of the parties hereto shall hold, and shall cause its
respective directors, officers, employees, agents, consultants and advisors
to hold, in strict confidence, unless disclosure to a regulatory authority is
necessary or desirable in connection with any Regulatory Approval or unless
compelled to disclose by a Proceeding or, in the written opinion of its
counsel, by other requirements of law of the applicable requirements of any
Governmental Body all non-public records, books, contracts, instruments,
computer data and other data and information (collectively, "Information")
concerning the other party (or, if required under a contract with a third
party, such third party) furnished it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
Information can be shown to have been (a) previously known by such party on a
non-confidential basis, (b) in the public domain through no fault of such
party or (c) later lawfully acquired from other sources by the party to which
it was furnished), and neither party shall release or disclose such
Information to any other person, except its auditors, attorneys, financial
advisors, bankers, other consultants and advisors and, to the extent
permitted above, to Governmental Bodies. Each of the parties hereto shall not
issue and shall not permit the issuance of any public statement concerning
the relationship of the Company to Purchaser and its Affiliates without the
prior written consent of the other parties hereto, which consent shall not be
unreasonably withheld.
5.3 Further Assurances. Between the date of this Agreement and the Closing
Date, each of the parties hereto agrees that it shall execute and deliver such
other certificates, documents and instruments and take such other action as may
reasonably be requested by any other party hereto to carry out the transactions
contemplated by this Agreement. After the Closing Date, Purchaser and Sellers
shall, and shall cause their respective Affiliates to, assist and cooperate with
the other, including making available to the other, at reasonable times and upon
reasonable advance notice, relevant records and appropriate personnel in
connection with any investigation or the preparation of or participation in a
defense, negotiation or settlement relating to any pending, future or threatened
Proceeding involving the conduct or interest of such other party or its
Affiliates or predecessors, including employee and Tax matters.
5.4 Notices of Default. Each of the parties hereto shall promptly give
written notice to the other parties hereto upon becoming aware of the impending
or threatened occurrence of any event which could reasonably be expected to
cause or constitute a breach of any of their respective representations,
warranties, covenants or agreements contained in any of the Transaction
Documents.
5.5 Appointment of Directors. Sellers shall effect the appointment to the
Board of Directors of the Company the individuals identified by Purchaser prior
to or at Closing. Such appointments shall be effective as of the Closing Date.
Sellers shall also effect the resignation of all directors of the Company
(unless otherwise directed by Purchaser in writing prior to the Closing Date)
effective as of the Closing Date.
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5.6 No Disposition of the Company Common Stock. Each Seller agrees that
between the date of this Agreement and the Closing Date such Seller will not
voluntarily sell, transfer, assign or otherwise dispose of any Shares held of
record by such Seller or any beneficial interest in such Shares.
5.7 Employee Bonus Pool. The Company shall pay the Employee Bonus Pool to
the employees of the Company set forth on Exhibit D in accordance with the
payment schedule set forth on Exhibit D; provided, however, that if there is a
dispute regarding the US Performance Report or the Manila Performance Report,
then no bonuses otherwise due shall be paid until after such dispute is finally
resolved pursuant to Section 2.5 or Section 10.12, as the case may be.
5.8 Right of First Refusal. Each of the Sellers waive their rights of
first refusal with respect to the other Seller's stock set forth in Article VII
of the By-Laws.
5.9 Tax Election under Section 338(h)(10). The Sellers and Purchaser shall
jointly make an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local, and foreign Tax law) for the Company
to recognize gain or loss with respect to the transactions contemplated herein
as if it sold all of its assets in a single transaction. The Sellers shall
include any income, gain, loss, deduction, or other tax item resulting from the
Section 338(h)(10) Election on their Tax Returns to the extent required by
applicable law. Such election shall be jointly executed at Closing.
5.10 Price Allocation. Sellers shall timely and properly prepare, execute,
file and deliver all such documents, forms and other information as Purchaser
may reasonably request to prepare such allocation. Within ten (10) days after
completion of the Closing Balance Sheet, Purchaser shall deliver the closing
purchase price allocation to the Sellers' Representative which shall be binding
and conclusive on the Sellers. None of Purchaser, Sellers or the Company shall
take any position (whether in audits, Tax Returns or otherwise) which is
inconsistent with such allocation unless required to do so by applicable law.
5.11 Access to Xxxxxx X. Xxxxxx. Mr. Xxxxxx Xxxxxx hereby covenants and
agrees to use his best efforts to assist Purchaser from time to time on
financial and other matters relating to the Company as may be reasonably
requested by the Company on or prior to December 31, 2005, provided, however, in
no event shall Xx. Xxxxxx be required to spend more than 3 hours a week on
Company related matters. Purchaser agrees to give Xx. Xxxxxx at least one day
notice that his services will be needed.
5.12 Complete and General Release.
(a) For valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Sellers, on behalf of themselves, their past,
present and future, heirs, spouses, personal representatives, executors,
children (by blood or otherwise), descendants (by blood or otherwise),
relatives (by blood or otherwise), successors and assigns and all of their
past, present and future heirs, spouses, personal representatives, executors,
children (by blood or otherwise), descendants (by blood or otherwise),
relatives (by blood or otherwise), successors and assigns as of the Closing
Date do hereby release and forever discharge the Company and its Affiliates,
and each of their past and present and future parents, subsidiaries,
Affiliates
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(including Purchaser and its Affiliates), members, partners, limited
partners, predecessors and successor entities and all of its past and present
officers, directors, principals, partners, members, managers, shareholders,
employees, consultants ( collectively, the "Releasees") of and from any and
all claims, causes of action, suits, debts, liens, contracts, judgments,
agreements, promises, liabilities, demands, damages, losses, costs, or
expenses of any nature whatsoever, known or unknown, fixed or contingent from
the beginning of the world through the date hereof other than Excluded Claims
("Released Claims") including any claims directly or indirectly relating to
the consideration paid to the Sellers hereunder being disproportionate to the
actual proportion of capital stock of the Company owned by the Sellers
("Consideration Claims"), which Sellers now has or may hereafter have against
the Releasees.
(b) Sellers expressly waives all rights under Section 1542 of the
Civil Code of California, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS
SETTLEMENT WITH THE DEBTOR.
Sellers understand and agree that they may know or suspect that there may exist
claims at this time or in the future, which claims are covered by the terms of
this Section 5.12, the nature of which it has not yet discovered. It is
expressly understood and agreed that the possibility that such claims exist was
explicitly taken into account by Sellers in determining the amount of
consideration to be received by them for the giving of this release, and a
portion of said consideration, having been bargained for between the parties
with the knowledge of the possibility of such unknown claims, was given in
exchange for a full accord, satisfaction and discharge of all such Released
Claims.
5.13 Release of Seller Guarantees. Following the Closing, Purchaser shall
make good faith, commercially reasonable efforts to obtain the release of any
guarantee by a Seller (a "Seller Guarantee") to any third party of any
obligation or liability of the Company.
5.14 Transitioning Work to Manila. Purchaser shall use commercially
reasonable efforts to transition the servicing of customers to Purchaser's
facility in Manila, Philippines; provided, however, that Purchaser shall not be
required to transition services to the Purchaser's Manila facility (i) to the
extent that such transfer would require Purchaser to hire more than 100
individuals per month and/or (ii) if the revenue earned by the Purchaser with
respect to such services is less than $16 per agent per hour worked in
connection with such service (excluding North American telephony and data costs
but including all telephony and data costs between North America and the
Philippines).
5.15 Manila Revenue. Purchaser and the Shareholders' Representative shall
modify Exhibit E to add such additional names and contacts prior to Closing as
mutually agreed.
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5.16 Accounts Receivable. After the Closing Date, Purchaser shall cause
the Company to use commercially reasonable efforts to collect all Accounts
Receivable in the ordinary course of business without resorting to litigation.
5.17 Compliance with MBE/WBE and DVBE Requirements. Sellers shall cause
the Company to begin instituting processes and procedures necessary for the
Company to be in compliance with all Subcontractor Regulations or similar Legal
Requirements as required by any agreement or contract with any Person.
5.18 Company's Activity in the Ordinary Course. Costs and expenses
incurred by the Company resulting from the actions of the Company or Purchaser
outside of the ordinary course of business from the Closing Date until June 30,
2004 shall be Excluded Costs for purposes of determining the US Performance
Based Results. If the Company merges consolidates or otherwise combines with or
into any other entity then Purchaser shall nevertheless maintain separate
accounting records from the Closing Date through June 30, 2004 of the earnings,
assets and liabilities of the Company, so that the revenue and expenses
unrelated to the business of the Company may be accounted for and such revenue
and expenses shall be excluded for purposes of the calculating US Performance
Based Results. Purchaser shall notify Sellers' Representative of any material
changes to the business of the Company outside the ordinary course of business
through June 30, 2004. Without limiting the generality of the foregoing from the
date hereof until June 30, 2004, if the Company were to take any of the
following actions of the Company or Purchaser outside the ordinary course of
business, the related costs and expense incurred by the Company in connection
with such actions shall be Excluded Costs for purposes of determining the US
Performance Based Results:
(a) Engage or participate in any material transaction or incur or
sustain any material obligation except in the ordinary course of business
consistent with past practice;
(b) Transfer of personnel or operating expenses relating to
Purchaser's current operations and the operations of its current Affiliates;
(c) increase or agree to increase the salary, remuneration or
compensation of persons employed by the Company other than as required by
law, any Employment Agreement or Material Contract listed on Schedule 3.15;
(d) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of the Company (including, without limitation,
any stock dividend or distribution), if such declaration, dividend, or
distribution would have a negative effect on the US Performance Base Payment.
(e) authorize or pay any bonuses or other special payments to any
directors, officers or employees or enter into, adopt, amend or terminate any
the Company Benefit Plan or any other employee benefit plan or other
agreement between the Company and one or more of its directors, officers or
employees, in each case so as to increase the benefits or payments
thereunder, except as required by law;
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(f) lease, sell, pledge, assign, encumber or otherwise dispose of
any material assets of the Company except (A) as may be required to service
customers, (B) as required by any Material Contract, or (B) for ordinary
repairs, renewals or replacement; or
(g) agree or commit to take any of the foregoing actions to the
extent such agreement or commitment negatively impacts the US Performance
Based Results.
Any disputes regarding whether any of the foregoing shall be settled
pursuant to Section 10.12.
Article 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchaser. Unless waived in writing by
Purchaser, the obligation of Purchaser to consummate the transactions
contemplated by this Agreement to be consummated at the Closing is conditioned
upon fulfillment, at or before the Closing, of each of the following conditions:
(a) Governmental and Regulatory Consents. All Governmental
Authorizations required to be obtained prior to the Closing from Governmental
Bodies in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby to be consummated at
the Closing shall have been made or obtained without the imposition of any
Burdensome Condition as to the Company, or as to Purchaser or any of their
respective Affiliates, and shall remain in full force and effect, all waiting
periods applicable to the consummation of the transactions contemplated
hereby shall have expired or been terminated and all required regulatory
filings shall have been made.
(b) Bank Agreement. Purchaser, the Company and/or any of their
Affiliates shall have entered into a loan agreement and related documents
(collectively the "Bank Agreement") with a bank or other financial
institution providing for loans to the Company of up to $35,000,000 in form
and substance satisfactory to Purchaser, and the Bank Agreement shall be in
full force and effect as of the Closing and shall not have been amended or
modified. As of the Closing, Purchaser, the Company and/or any of their
Affiliates shall have caused to be issued the Letter of Credit in support of
the Purchaser's obligations under the Note.
(c) No Governmental Actions. No Governmental Body of competent
jurisdiction shall have enacted, issued, promulgated, decreed, enforced or
entered any Legal Requirement (whether temporary, preliminary or permanent)
(any of the foregoing, an "Order") which is in effect and which prohibits
consummation of the Closing or which would result in a Material Adverse
Effect on the Company.
(d) Representations and Warranties. Each of the representations and
warranties of Sellers contained in this Agreement shall be true and correct
in all material respects when made and as of the Closing Date, with the same
effect as though such representations and
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warranties had been made on and as of the Closing Date (except that
representations and warranties that are made as of a specific date need be
true in all material respects only as of such date and representations and
warranties which are qualified as to materiality need be true in all
respects); provided, however, that the representations and warranties of
Sellers set forth in Sections 3.1, 3.4 and 3.25 shall be true and correct in
all respects when made and as of the Closing Date, with the same effect as
though such representations and warranties had been made on and as of the
Closing Date. Purchaser shall have received a certificate signed by each
Seller and on behalf of the Company by its Chief Executive Officer and its
Chief Financial Officer to the foregoing effect.
(e) Performance of Obligations. Each of the covenants and agreements
of Sellers to be performed on or prior to the Closing Date shall have been
performed in all material respects, provided, however, that the covenants set
forth in Section 5.5 and 5.8 shall be performed in all respects. Purchaser
shall have received a certificate signed by each Seller and on behalf of the
Company by its Chief Executive Officer and its Chief Financial Officer to the
foregoing effect.
(f) Transaction Agreements. Each of the Transaction Documents and
the Escrow Agreement shall be in full force and effect. The form of the
Xxxxxxx Employment Agreement shall be in a form acceptable to Purchaser no
later than April 15, 2004.
(g) Continued Employment. The Key Employees continue to be employed
by the Company on the Closing Date and have executed their related employment
agreements in the forms acceptable to Purchaser.
(h) Opinion of Counsel. Purchaser shall have received an opinion of
Anderson, Brody, Xxxxxxxx, Xxxxxx & Xxxxxxx, P.A., counsel to Sellers, in the
form attached hereto as Exhibit F.
(i) Finders Fees payable. Any contract or agreements between Xxxxxx
Xxxx or his Affiliates and either the Company or the Sellers which entitle
Xx. Xxxx or any of his Affiliates to a fee or commission in connection with
this Agreement or the transactions contemplated hereby shall be amended in
form and substance satisfactory to Purchaser. Purchaser shall also receive a
written evidence in form and substance satisfactory to it that all Finders
Fees have been paid in full.
(j) Related Party Transactions. Sellers shall provide evidence in
form and substance satisfactory to Sellers that (i) all contracts and
agreements between the Company and R.C.M. Family Ltd. Partnership and Lone
Property LLC shall be terminated with no payments, premiums, or liquidated
damages due and owing and (ii) all other contracts and agreements between any
of the Sellers or their Affiliates, on the one hand, and the Company, on the
other hand, shall be either terminated (with no payments, premiums, or
liquidated damages and owing) or amended in form and substance satisfactory
to Purchaser.
(k) Intellectual Property Rights. Sellers shall provide evidence in
form and substance satisfactory to Purchaser that past and current employees
of the Company have assigned all their rights regarding Intellectual Property
to the Company.
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(l) South Dakota Sales Tax. Sellers shall provide evidence in form
and substance satisfactory to Purchaser that the Company is not liable to pay
any sales or use Taxes in the state of South Dakota.
(m) Other Documents and Instruments. Purchaser shall have received
the documents and instruments referred to in Section 2.1 and such other
documents and instruments it may reasonably have requested of the Company and
Sellers no less than two (2) Business Days prior to the Closing Date.
(n) No Material Adverse Effect. The Company has not suffered a
Material Adverse Effect.
(o) Payoff Letters. Purchaser shall have received evidence
reasonably satisfactory to it that the First Community Financial Corporation
will be paid in full and concurrently with such payment related liens shall
be released.
(p) Shareholder Loan Payoffs. Purchaser shall have received evidence
reasonably satisfactory to it that all of the Shareholder Loans will be paid
in full and concurrently with such payment related liens (if any) shall be
released.
(q) Transaction Costs. Purchaser shall have received evidence
reasonably satisfactory to it that all Transaction Costs have been paid by
the Company.
(r) Consents for Material Contracts. Purchaser shall have received
evidence reasonably satisfactory to it that the all payments required by
Section 21 of the Lease Agreement by and between ADEVCO CONTACT CENTERS Rio
Rancho, LLC and the Company dated as of January 22, 2004 Company have been
made and all other requirements of such section have been satisfied so that
such agreement remains in full force and effect post Closing.
6.2 Conditions to Obligations of Sellers. Unless waived in writing by
Sellers, the obligation of Sellers to consummate the transactions contemplated
by this Agreement to be consummated at the Closing, is conditioned upon
fulfillment, at or before the Closing, of each of the following conditions:
(a) Governmental and Regulatory Consents. All Governmental
Authorizations required to be obtained prior to the Closing from Governmental
Body in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby to be consummated at the
Closing shall have been made or obtained without the imposition of any
Burdensome Condition as to the Company, or as to Sellers, and shall remain in
full force and effect, all waiting periods applicable to the consummation of
the transactions contemplated hereby shall have expired or been terminated
and all required regulatory filings shall have been made.
(b) Bank Agreement. The Bank Agreement shall be in full force and
effect as of the Closing and shall not have been amended or modified. As of
the Closing, Purchaser, the Company and/or any of their Affiliates shall have
caused to be issued the Letter of Credit in support of the Purchaser's
obligations under the Note.
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(c) No Governmental Actions. No Governmental Body of competent
jurisdiction shall have enacted, issued, promulgated, decreed, enforced or
entered any Order which is in effect and which prohibits consummation of the
Closing or which would result in a Material Adverse Effect on the Company.
(d) Representations and Warranties. Each of the representations and
warranties of Purchaser contained in this Agreement shall be true in all
material respects when made and as of the Closing Date, with the same effect
as though such representations and warranties had been made on and as of the
Closing Date (except that representations and warranties that are made as of
a specific date need be true in all material respects only as of such date
and representations and warranties which are qualified as to materiality need
be there in all respects). Sellers shall have received a certificate signed
by a duly authorized officer on behalf of each of Purchaser to the foregoing
effect.
(e) Performance of Obligations. Each of the covenants and agreements
of Purchaser to be performed on or prior to the Closing Date shall have been
duly performed in all material respects. Sellers shall have received a
certificate signed by a duly authorized officer on behalf of each of
Purchaser to the foregoing effect.
(f) Transaction Agreements. Each of the Transaction Documents (other
than the Employment Agreements) and the Escrow Agreement shall be in full
force and effect.
(g) Other Documents and Instruments. Sellers shall have received
such other documents and instruments as they may reasonably have requested of
Purchaser no less than two (2) Business Days prior to the Closing Date.
Article 7
CLOSING PROCEDURE
7.1 Closing Date and Place. The closing for the transactions provided for
herein (the "Closing") will be held at the offices of Pillsbury Winthrop LLP,
0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, at a date and time (the
"Closing Date") as may be mutually designated by the parties hereto, following
the satisfaction or waiver by the appropriate party of all of the conditions
contained in Article 6; provided, however, that the parties shall agree upon a
date for Closing which shall be no more than five (5) Business Days following
such satisfaction or waiver and, in any event, on or prior to May 17, 2004. The
parties shall use commercially reasonable efforts to have the Closing take place
on or prior to May 17, 2004.
7.2 Procedure at the Closing.
(a) At the Closing, Purchaser shall deliver to Sellers:
(i) the Cash Purchase Price (less the Escrow Amount pursuant
to Section 2.2);
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(ii) any documents, certificates and approvals required
pursuant to Article 6 (including but not limited to the Note, the Letter
of Credit, and the Transaction Documents); and
(b) At the Closing, Sellers shall deliver or cause to be delivered
to Purchaser:
(i) certificates evidencing the Shares accompanied by valid
stock powers duly endorsed in blank by Sellers and by duly executed IRS
Form W-9's for each Seller;
(ii) any documents, certificates and approvals required
pursuant to Article 6; and
(iii) an IRS Form 8023 signed by all the Sellers.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) By the mutual consent of Purchaser and Sellers' Representative
in a written instrument;
(b) By either Sellers' Representative or Purchaser (provided that
the terminating party is not then in material breach of any representation,
warranty or agreement contained herein), in the event of a material breach by
the other of any representation, warranty or agreement contained herein which
is not cured or cannot be cured within fifteen (15) days after written notice
of such termination has been delivered to the breaching party; provided,
however, that termination pursuant to this Section 8.1(b) shall not relieve
the breaching party of liability for such breach or otherwise; provided,
further, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 8.1(b) unless the breach of any
representation, warranty or agreement, together with all such other breaches,
would entitle the party to whom such representation, warranty or agreement is
made not to consummate the transactions contemplated hereby pursuant to
Sections 6.1(d) and 6.1(e) (in case of a breach of a representation,
warranty, covenant or agreement by Sellers) or Section 6.2(d) and 6.2(e) (in
the case of a breach of a representation, warranty, covenant or agreement by
Purchaser);
(c) By either Sellers' Representative or Purchaser, in the event
that the Closing has not occurred on or before May 17, 2004, unless the
failure to so consummate by such time is due to a breach of this Agreement by
the party seeking to terminate;
(d) By Purchaser if at anytime on or April 15, 2004, if Purchaser
determines as a result of its evaluation of Schedule 3.22 and the related
documents referred to therein, that the consummation of the transactions
contemplated by this Agreement would not be in the best interests of the
Purchaser.
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(e) By Purchaser if the representations and warranties of Sellers
set forth in Sections 3.1, 3.4 and 3.25 shall not be true and correct in all
respects at any time up to and including the Closing Date.
(f) By Purchaser if the March 31 Financial Statements reflect EBITDA
of less than $1,001,250 or if the Company has accrued on such financial
statements or disclosed on any footnote thereto a material liability not
reflected in the Calendar 2003 Financial Statements and Purchaser provides
Sellers' Representative written notice by the fifth (5th) day after its
receipt of the March 31 Financial Statements, provided, however, liabilities
or obligations under Material Contracts reflected on Schedule 3.15 (other
than liabilities or obligations resulting from a breach thereunder) shall not
be deemed material liabilities.
(g) By Purchaser if the unaudited financial statements for the four
months ended April 30, 2004, reflect EBITDA of less than $1,681,560 or if the
Company has accrued on such financial statements or disclosed in any
footnotes thereto a material liability not reflected in the Calendar 2003
Financial Statements and Purchaser provides the Sellers' Representative
written notice by the fifth (5th) day after receipt of such financial
statements, provided, however, liabilities or obligations under Material
Contracts reflected on Schedule 3.15 (other than liabilities or obligations
resulting from a breach thereunder) shall not be deemed material liabilities.
(h) By Purchaser if the information provided to Purchaser in
connection with the transaction contemplated hereby by the Sellers, Sellers'
Representative or the Company, taken as a whole, is fraudulent, materially
incorrect, incomplete or misleading such that the commercial rationale of the
proposed transaction is undermined, or that the Company has failed to
disclose information which makes the information provided by it to Purchaser
misleading in any material respect.
(i) By Sellers if no Bank Agreement is obtained prior to the Closing
for reasons other than because of the Company's financial condition or
prospects.
(j) By Purchaser if the Sellers fail to deliver all the documents
required by Section 7.2(b) within five (5) Business Days (and in no event
later than May 17, 2004) after all other conditions to closing have been
satisfied or waived.
(k) By Sellers if Purchaser fails to deliver all of the documents
required by Section 6.1 on or before the Closing.
(l) By Purchaser if the Xxxxxxx Employment Agreement has not been
agreed to by Purchaser and Xx. Xxxxxxx by April 15, 2004.
(m) By Sellers if the Sellers and the Purchaser have not agreed to
the terms of the Letter of Credit on or before Closing.
8.2 Effect of Termination; Reimbursement of Expenses.
(a) In the event of termination of this Agreement and abandonment of
the transactions contemplated hereby pursuant to Section 8.1, no party hereto
(or any of its
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directors, officers, employees, agents or Affiliates) shall have any
liability or further obligation to any other party, except as provided in
subsection (b) below and in Section 10.11, and except that nothing herein
will relieve any party from liability for any breach of any provision of this
Agreement.
(b) In the event Purchaser terminates this Agreement pursuant to
Section 8.1(f)-(h), the Company shall reimburse Purchaser for all
out-of-pocket expenses reasonably incurred by Purchaser in connection with
this Agreement and the transactions contemplated hereby no later than five
(5) Business Days after Purchaser provides to Sellers' Representative a
written statement specifying in reasonable detail the nature and amount of
such expenses provided; however, in no event shall such reimbursement be more
than $250,000. In the event Sellers terminate this Agreement pursuant to
Section 8.1(i), Purchaser shall reimburse Sellers for all out-of-pocket
expenses reasonably incurred by Sellers' Representative in connection with
this Agreement and the transactions contemplated hereby no later than five
(5) Business Days after Sellers' Representative provides to Purchaser a
written statement specifying in reasonable detail the nature and amount of
such expenses provided; however, in no event shall such reimbursement be more
than $250,000.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Sellers. Subject to the other provisions of this
Article 9, from and after the Closing, Sellers jointly and severally shall
indemnify Purchaser and its Affiliates and each of their respective officers,
directors, employees, agents, representatives and Affiliates (the "Purchaser
Indemnified Parties") against, and shall hold them harmless from, any Loss
arising from or otherwise with respect to (i) any breach on the part of Sellers
and the Company of any representation or warranty made by them in Article 3,
(ii) any breach by Sellers of any agreement or covenant made by it contained in
this Agreement, (iii) with respect to any Proceeding asserted against Purchaser,
the Company or any of their Affiliates for events relating to the Company on or
prior to the Closing Date including the Proceedings set forth on Schedule 3.16,
(iv) obligations to pay any Taxes as a result of any terminations of the
Company's election to be taxed as an S Corporation within the meaning of Section
1361(a) of the Code, (v) any Finders Fees, liability or obligation to pay any
brokers, investment bankers or other intermediaries acting on behalf of the
Company and/or the Sellers in each case which are not subtracted in the
calculation of Closing Working Capital and (vi) Transaction Costs not included
in the Cash Purchase Price or Closing Working Capital.
9.2 Indemnification by Purchaser. Subject to the other provisions of this
Article 9, from and after the Closing, Purchaser shall indemnify Sellers and
their Affiliates and each of its officers, directors, employees, agents,
representatives and Affiliates (each, a "Seller Indemnified Party") against, and
shall hold them harmless from, (i) any Losses arising from or otherwise with
respect to any breach on the part of Purchaser of any representation, warranty,
covenant or agreement made by it contained in this Agreement, (ii) twenty
percent (20%) of the amount (if any) by which the Depreciation Recapture exceeds
$900,000, and (iii) any obligation of a Seller pursuant to any Seller Guarantee;
provided, however, that Purchaser shall not indemnify any Seller Indemnified
Party for any obligation of a Seller to a third party pursuant to any Seller
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Guarantee to the extent that the Purchaser would have a right to indemnification
by Seller under Section 9.1 if such third party had successfully brought a claim
under such Seller Guarantee directly against Purchaser.
9.3 Indemnification Procedures.
(a) All claims for indemnification by any party (the "Indemnified
Party") hereunder shall be asserted and resolved as set forth in this Article
9. In the event that any claim or demand for which the party from whom
indemnification is sought (an "Indemnifying Party") would be liable to any
Indemnified Party hereunder or any event or condition occurs or comes to the
attention of the Indemnified Party that could reasonably lead to such a claim
or demand, such Indemnified Party shall promptly, but in no event more than
30 days following such Indemnified Party receiving of such claim or demand or
such event or condition occurring or coming to the attention of the
Indemnified Party, notify the Indemnifying Party of such claim or demand or
event or condition, the amount or the estimated amount thereof, the method of
calculation thereof and any other available details (the "Claim Notice");
provided, however, that failure to give such notification shall not affect
the indemnification provided hereunder except to the extent the Indemnifying
Party shall have been actually prejudiced as a result of such failure. If the
Indemnifying Party does not object in writing to such indemnification claim
within thirty (30) days of receiving notice thereof (the "Notice Period") the
Indemnified Party shall be entitled to recover from the Indemnifying Party
the amount of such claim, and no later objection by the Indemnifying Party
shall be permitted. If the Indemnifying Party agrees that it has an
indemnification obligation but objects that it is obligated to pay only a
lesser amount, the Indemnified Party shall nevertheless be entitled to
recover promptly from the Indemnifying Party the lesser amount without
prejudice to the Indemnified Party's claim for the difference within two
Business Days of the Indemnified Party's receipt of the written objection.
The Indemnifying Party must notify the Indemnified Party in writing whether
or not it desires to defend the Indemnified Party against such claim or
demand. Except as hereinafter provided, in the event that the Indemnifying
Party notifies the Indemnified Party that it desires to defend the
Indemnified Party against such claim or demand, the Indemnifying Party shall
have the right and authority to defend the Indemnified Party and shall have
the sole power to direct and control such defense with counsel of its choice
and, subject to Section 9.3(b), to settle or compromise any such claim or
demand.
(b) If any Indemnified Party desires to participate in any such
defense it may do so at its sole cost and expense. The Indemnified Party
shall not settle a claim or demand for which it seeks or may seek to be
indemnified by the Indemnifying Party without the prior written consent of
the Indemnifying Party. If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party may undertake such defense, subject to the right of the
Indemnifying Party at any time to assume the defense, and the amount of any
such claim or demand (so long as it is a claim or demand in respect of which
indemnification is available hereunder) or, if the same be contested by the
Indemnified Party, then that portion thereof as to which such defense is
unsuccessful (and the reasonable costs and expenses pertaining to such
defense) shall be the liability of the Indemnifying Party hereunder. The
Indemnifying Party shall not settle any third party claim
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without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed), unless such settlement
includes an unconditional release of the Indemnified Party. The Indemnified
Party will cooperate with the Indemnifying Party and will give the
Indemnifying Party and its counsel access to the Indemnified Party's premises
and relevant business records and other documents, and all employees,
counsel, accountants and other agents and representatives of the Indemnified
Party.
9.4 Exclusive Remedies; Limitations Upon Indemnification; Escrow Amount.
(a) From and after the Closing, the remedies set forth in this
Article 9 shall be exclusive and in lieu of any other remedies that may be
available to the Indemnified Parties, including under any other agreement or
pursuant to any statutory or common law, with respect to any Losses or any
other damages, costs or expenses of any kind or nature or any other claim or
remedy directly or indirectly resulting from, arising out of or relating to
any of this Agreement (including alleged breaches of any representation,
warranty, covenant or other term or provision or for any alleged
misrepresentation), the transactions contemplated hereby, the Shares, the
business, operations, assets, properties and liabilities of the Company and
the Company Employees. Nothing herein shall preclude a party from bringing an
action for specific performance or other equitable remedy to require a party
to perform its obligations under this Agreement. Nothing in this Agreement
shall be construed as limiting in any way the remedies that may be available
to Purchaser in the event of fraud or willful and material misrepresentation
relating to any of the representations, warranties, agreements or covenants
made on behalf of the Company or Sellers in this Agreement.
(b) The representations and warranties in this Agreement shall
survive the Closing for a period of two (2) years after the Closing Date at
which time they shall terminate; provided, however, that the representations
and warranties set forth in Section 3.18 (Environmental) shall survive the
Closing for a period of seven (7) years; provided, further, that the
representations and warranties set forth in Section 3.10 (Taxes) shall
survive until the expiration of any applicable statutes of limitation;
provided, further, that the representations and warranties set forth in
Sections 3.1, 3.4 and 3.25 shall survive indefinitely; provided, further,
that such termination shall not affect any claim for breaches of
representations, warranties or covenants if written notice thereof, in
reasonable detail, is given to Sellers' Representative prior to such
termination date.
(c) Sellers shall not be obligated to provide any indemnification
under Article 9 with respect to breaches of representations and warranties
unless and until the aggregate amount for which it is obligated to provide
such indemnification exceeds the sum of $50,000, after which Sellers shall be
obligated to pay the amount of such claim in its entirety; provided, however,
that in no event shall the aggregate liability of Sellers hereunder for
breaches of representations and warranties set forth in Article 3 hereof
exceed the sum of the Cash Consideration, the Contingent Consideration and
the Escrow Amount. Any claim that is a breach of a representation and
warranty under Article 3 that is also indemnifiable hereunder notwithstanding
the breach of such representation and warranty, shall not be counted against
the aggregate liability limitation set forth in the immediately preceding
sentence.
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(d) If an Indemnified Party has a claim against Sellers pursuant to
Section 9.1, such Indemnified Party has the option, exercisable in its sole
discretion of (i) making a claim for payment under the Escrow Agreement and
pursuant to Section 9.6; (ii) offsetting such amount against the Contingent
Consideration or other amounts otherwise payable to Sellers' Representative
or any Seller; or (iii) proceeding directly against the Indemnifying Parties,
provided, however, that the Indemnified Party may not proceed directly
against the Indemnified Party unless the remaining Escrow Fund is
insufficient to cover the entire claim. Any indemnification payments made by
Sellers shall be treated as a reduction in the purchase price received by
Sellers for the Shares.
9.5 Computation of Indemnifiable Losses. Any amount payable pursuant to
this Article 9 shall be decreased to the extent (i) of any insurance proceeds or
contribution payments or other similar source of compensation received or
receivable by the Indemnified Party or its Affiliates in respect of an
indemnifiable Loss or (ii) of any indemnification proceeds received or
receivable by the Indemnified Party or its Affiliates from an unrelated party in
respect of an indemnifiable Loss. An Indemnified Party shall take all reasonable
steps to mitigate all Losses upon becoming aware of any event that could
reasonably be expected to give rise to an indemnifiable Loss.
9.6 Escrow.
(a) Escrow Funding. On the Closing Date, Purchaser shall deliver to
the Escrow Agent the Escrow Amount (the "Escrow") in accordance with this
Section 9.6 and the terms of the Escrow Agreement.
(b) Escrow Claims. If Purchaser desires to make a claim under the
Escrow, it must make such claim prior to the second anniversary of the
Closing Date. Purchaser Indemnified Parties may do so by either stating that
it intends to make a claim against the Escrow in the Claim Notice or pursuant
to a separate writing (in either case, the "Escrow Claim Notice"). Except as
otherwise provided herein, any claim by any Purchaser Indemnified Party
against the Escrow described in an Escrow Claim Notice shall be referred to
herein as an "Escrow Claim," or, if multiple, "Escrow Claims." Prior to the
expiration of the Notice Period, the Sellers' Representative shall either (x)
execute and deliver to Purchaser a certificate to be countersigned by
Purchaser to direct jointly the Escrow Agent to disburse promptly to
Purchaser, out of the Escrow Funds, the amount of such Losses, or (y) notify
Purchaser, with contemporaneous delivery to the Escrow Agent, in writing of
an intention to dispute the Escrow Claim(s) and the basis of such dispute (a
"Dispute Notice"). If Sellers' Representative does not take any action within
the Notice Period, Sellers shall be deemed to have accepted full liability
for such Escrow Claims. If the Sellers' Representative agrees that Sellers
have an indemnification obligation but object in writing on the basis that
they are obligated to pay only a lesser amount, then within two Business Days
after Purchaser's receipt of the Sellers' Representative written objection,
and without prejudice to Purchaser's claim for the difference, Sellers'
Representative shall execute and deliver to Purchaser a certificate to be
countersigned by Purchaser, to direct jointly the Escrow Agent to promptly
disburse to Purchaser, Escrow Funds equal to the lesser amount. If the
Sellers' Representative delivers a Dispute Notice in accordance with Section
9.6(b), Purchaser and Sellers' Representative shall attempt in good faith
until thirty (30) days after receipt of any
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Dispute Notice to agree upon the rights of the respective parties with
respect to each Escrow Claim. If Purchaser and Sellers' Representative should
so agree, a memorandum setting forth such agreement shall be prepared and
signed by the Sellers' Representative and Purchaser and Purchaser and
Sellers' Representative shall also execute a certificate jointly directing
the Escrow Agent to disburse promptly such Escrow Funds in the manner set
forth in such certificate which shall be consistent with the terms of such
memorandum. If Purchaser and Sellers' Representative are unable to agree
within such thirty (30) day period, then Escrow Funds valued at the amount in
dispute shall be retained in the Escrow until such dispute shall be resolved
in accordance with Section 10.12. Promptly after such resolution, Purchaser
and the Sellers' Representative shall execute and deliver to the Escrow Agent
a memorandum which directs the Escrow Agent to disburse such Funds in
accordance with such resolution and the terms of the Escrow Agreement.
(c) Release of Escrow.
(i) On the first anniversary of the Closing Date, the Sellers'
Representative, and any officer of Purchaser on the other hand, shall
jointly execute a certificate jointly directing the Escrow Agent to
disburse to the Sellers' Representative out of the available Escrow Funds,
if any, the lesser of (A) the lesser of (i) $1,000,000 and (ii) the amount
of the Escrow Fund less (B) that amount of the available Escrow Fund, if
any, which in the reasonable judgment of Purchaser are necessary to
satisfy any unsatisfied Escrow Claims on such date (such disbursement
being referred to as the "First Anniversary Escrow Disbursement")
provided, however, that if Xxxxx X. Xxxxxxx resigns as an employee of the
Purchaser or any of its Affiliates or is fired for cause (as that term is
defined in Xx. Xxxxxxx'x employment agreement) then the lesser of (i)
$1,000,000 and (ii) the amount of the Escrow Fund shall be released
immediately from the Escrow and returned to Purchaser in which case the
Escrow Contributing Sellers shall forfeit any rights with respect to the
funds release to Purchaser. If Sellers' Representative dispute the
retention of all or a portion of the amount retained from the First
Anniversary Escrow Disbursement, or the release of funds to Purchaser as
provided in the immediately preceding sentence, Purchaser and Sellers'
Representative shall attempt in good faith within 30 days after the first
anniversary of the Closing Date, as the case may be (the "First Resolution
Period"), to agree upon the amount to be retained from the First
Anniversary Escrow Disbursement. If Purchaser and Sellers' Representative
should so agree, a memorandum shall be prepared and signed by the Sellers'
Representative and Purchaser and delivered to the Escrow Agent directing
the Escrow Agent to disburse such Escrow Funds in accordance with such
agreement and the terms of the Escrow Agreement. If Purchaser and Sellers'
Representative cannot agree within the First Resolution Period, the First
Anniversary Escrow Disbursement shall be determined in accordance with
Section 10.12.
(ii) On the second anniversary of the Closing Date, the
Sellers' Representative, and any officer of Purchaser on the other hand,
shall jointly execute a certificate jointly directing the Escrow Agent to
disburse to each of the Escrow Contributing Sellers one half of the
difference between (a) the balance of the Escrow Funds less (b) any
Retained Escrow (defined below). In the event that there are any Escrow
Claims which have been disputed by Sellers' Representative and which are
unresolved on the second anniversary
-41-
of the Closing Date, subject to this Section 9.6 and Section 10.12, Escrow
Funds which in the reasonable judgment of Purchaser, are necessary to
satisfy any such unsatisfied Escrow Claims shall remain in the Escrow
until such Escrow Claims have been fully and finally resolved ("Retained
Escrow"). If Sellers' Representative dispute the retention of all or a
portion of the Retained Escrow, Purchaser and Sellers' Representative
shall attempt in good faith within 30 days after the second anniversary of
the Closing Date, as the case may be (the "Final Retention Resolution
Period"), to agree upon the Retained Escrow. If Purchaser and Sellers'
Representative should so agree, a memorandum shall be prepared and signed
by the Sellers' Representative and Purchaser and delivered to the Escrow
Agent directing the Escrow Agent to disburse such Escrow Funds one half to
each of the Escrow Contributing Sellers in accordance with such agreement
and the terms of the Escrow Agreement. If Purchaser and Sellers'
Representative cannot agree within the Final Retention Resolution Period,
the Retained Escrow shall be determined in accordance with Section 10.12.
(iii) At any time prior to the first anniversary of the
Closing Date upon delivery to Purchaser of the documents referred to in
clauses (A) and (B) below, one-half of all funds (other than $1,000,000
plus those Escrow Funds which in the reasonable judgment of Purchaser are
necessary to satisfy any unsatisfied Escrow Claims) shall be released to
each of the Escrow Contributing Sellers. All funds remaining in the Escrow
after the disbursement referred to in the immediately preceding sentence
shall be governed by Section 9.6(c)(i):
(A) (1) A Sellers' Letter of Credit for a maximum draw up to
the Escrow Amount which shall not expire prior to the second anniversary
of the Closing Date; or (2) a policy of Deal Protection Insurance
providing insurance up to the Escrow Amount; and
(B) Evidence satisfactory to Purchaser that the Transaction
Costs incurred in connection with such Sellers' Letter of Credit or the
Deal Protection Insurance, as the case may be, have been paid. If Sellers'
Representative does not agree with the amount withheld for unsatisfied
Escrow Claims, such dispute shall be settled in a manner mutatis mutandis
set for in Section 9.6(c)(ii) above with respect to the Retained Escrow.
Article 10
MISCELLANEOUS
10.1 Assignment. Neither this Agreement nor any of the rights, interests
or obligations of either Purchaser or the Company may be assigned without the
written consent of the Sellers' Representative except that Purchaser and/or the
Company may assign any or all of their rights hereunder without such consent to
any Affiliate of either Purchaser or the Company; provide, however, that in the
event of such an assignment, the Person or Persons making such assignment (i.e.,
Purchaser and/or the Company, as applicable) shall be responsible for all
obligations of the Affiliate and shall continue to be bound in all respects by
the provisions hereof. Neither this Agreement nor any of the rights, interests
or obligations of any of the Sellers may be assigned without the written consent
of Purchaser.
-42-
10.2 Binding Effect. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement shall
afford rights to any person other than the parties hereto.
10.3 Public Notice. Prior to the Closing Date, neither Purchaser nor
Sellers shall directly or indirectly, make, or cause to be made, any press
release for general circulation, public announcement or disclosure or issue any
notice or general communication to employees with respect to any of the
transactions contemplated hereby without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, each party may make such public disclosure regarding this Agreement
and the transactions contemplated thereby to the extent required by law or
necessary to obtain the Regulatory Approvals.
10.4 Notices. All notices, requests, demands, consents and other
communications given or required to be given under this Agreement and under the
related documents shall be in writing and delivered to the applicable party at
the address indicated below:
If to Sellers: Phase 2 Solutions, Inc.
0000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx
With a copy to: Anderson, Brody, Xxxxxxxx, Xxxxxx & Xxxxxxx, P.A.
0000 X. Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
If to Purchaser eTelecare International, Inc.
and/or the Company: 000 X. Xxxxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Attention: Xxx Xxxxxx
and to: Crimson
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
With a copy to: Pillsbury Winthrop LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
-43-
or, as to each party at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 10.4. All notices shall be in writing and may be sent by
facsimile, or registered or certified mail, return receipt requested, postage
prepaid. Notice shall be effective upon actual receipt thereof. Any and all
notices to be provided by Sellers to Purchaser hereunder shall be provided only
by the designated representative of Sellers (the "Sellers' Representative") and
Purchaser shall not be obligated to honor and each shall be free to disregard
any notice provided by any Seller other than the Sellers' Representative. Xxxxxx
X. Xxxxxx shall be the initial Sellers' Representative. In the event of the
death or incapacity of the Representative, Sellers shall designate a successor
Sellers' Representative by means of a writing signed by each Seller or such
Seller's legal representative that is delivered to Purchaser in accordance with
the terms of this Section 10.4.
10.5 Incorporation. All Exhibits and Schedules attached hereto and to
which reference is made herein are incorporated by reference as if fully set
forth herein.
10.6 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California (excluding its choice of law
rules).
10.7 Entire Agreement. This Agreement and the Transaction Documents
contain the entire understanding of and all agreements between the parties
hereto with respect to the subject matter hereof and supersedes any prior or
contemporaneous agreement or understanding, oral or written, pertaining to any
such matters which agreements or understandings shall be of no force or effect
for any purpose; including without limitation the letter agreement dated
February 26, 2004 by and among Purchaser, Sellers and the Company which was
binding upon the parties only to the extent described therein. Subject to the
provisions of Section 10.16, this Agreement may not be amended or supplemented
in any manner except by mutual agreement of the parties and as set forth in a
writing signed by the parties hereto or their respective successors in interest.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Headings. The headings used in this Agreement are inserted for
purposes of convenience of reference only and shall not limit or define the
meaning of any provisions of this Agreement.
10.10 Waiver. The waiver of any breach of any provision under this
Agreement by any party shall not be deemed to be a waiver of any preceding or
subsequent breach under this Agreement. No such waiver shall be effective unless
in writing.
10.11 Expenses. Unless specifically provided otherwise in this Agreement,
each party shall bear and pay all costs and expenses which it incurs, or which
may be incurred on its behalf in connection with the preparation of this
Agreement and consummation of the transactions described herein, and the
expenses, fees, and costs necessary for any approvals of the appropriate
Governmental Bodies; provided, however, that if Purchaser terminates this
Agreement pursuant to Section 8.1(j) then the Sellers shall reimburse Purchaser
for all its costs and expenses (including attorneys and accountants fees and
expenses) incurred by it in connection with this
-44-
Agreement and the transactions contemplated hereby in addition to and not in
lieu of any other claims Purchaser may have for breach hereunder. In case any
action or proceeding is brought under this Agreement, the prevailing party shall
be entitled to recover all costs and expense, including without limitation,
reasonable attorneys fees.
10.12 Arbitration.
(a) Except as otherwise provided in Sections 2.5, 5.10 and 9.6, any
controversy or claim between the parties arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith, including, but not limited to a claim based on or
arising from an alleged tort, will, at the request of any party be determined
by binding arbitration administered in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), and any
applicable State Uniform Arbitration Act as supplemented and modified by this
Section. The arbitration shall take place in either San Francisco,
California, or Phoenix, Arizona, as selected by the party instituting the
arbitration by notice to the AAA. The unsuccessful party in any arbitration
awarded shall be obligated to pay in addition to the other amounts awarded,
the travel and lodging costs (if any) of the prevailing party and, if
applicable, the arbitrator. The arbitration shall be administered by the AAA
which shall appoint a single arbitrator for the purpose of determining all
matters subject to arbitration. The arbitrator shall be a person who, by
virtue of background, training, or experience, is knowledgeable in matters of
the type covered by this Agreement. No arbitrator shall be an employee or
shareholder of any party of family member, shareholder, or employee of any
party or any of their Affiliates. The arbitrator shall give effect to
statutes of limitation in determining any claim, as well as the time period
limitations set forth in this Agreement. The award rendered by the arbitrator
shall set forth findings of fact and conclusions of law and shall be final,
and the judgment may be entered in any court having jurisdiction thereof. A
failure by the arbitrator to make findings of fact and conclusions of law
shall be grounds for overturning the award.
(b) Other remedies. No provision of nor the exercise of any rights under
this Section shall limit the rights of either party to employ the following
remedies: (i) exercising self-help remedies (including off-set rights if not
expressly disallowed); or (ii) obtaining provisional or ancillary remedies such
as injunctive relief, sequestration, attachment, garnishment, or the appointment
of a receiver from the Court having jurisdiction before, during, or after the
pendency of any arbitration. The exercise of self-help remedies or the
institution and maintenance of an action for provisional or ancillary remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit a dispute to arbitration, or render inapplicable the
compulsory arbitration provisions of this Agreement.
(c) Commencement. Any party may commence arbitration by serving upon the
adverse party written demand for arbitration with a copy to be delivered to the
local AAA office in Phoenix, Arizona or San Francisco, California, as selected
by the complaining party. To the maximum extent practicable, any arbitration
proceeding shall be concluded within one hundred twenty (120) days of filing the
dispute with AAA.
(d) Decision of Arbitrator. The decision of the arbitrator shall be
conclusive, final and binding upon the parties. Subject to the limitation on
liability set forth in this Agreement,
-45-
the arbitrator shall be entitled to award compensatory and equitable relief
only, and may not award exemplary damages. The arbitrator shall award reasonable
attorneys' fees and costs, including expert witness fees, in favor of the
prevailing party.
Third Party Beneficiaries. Except as expressly provided in this
Agreement, the parties hereto intend that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
10.13 Severability. If any provision of this Agreement, as applied to any
part or circumstance, shall be adjudged by a court of competent jurisdiction to
be void, invalid or unenforceable, the same shall in no way affect any other
provision of this Agreement, the application of any such provision and any other
circumstances or the validity or enforceability of the other provisions of this
Agreement.
10.15 Time. Time shall be of the essence for all purposes connected with
this Agreement.
10.16 Action by Sellers. This Agreement may be amended only by a writing
signed by Purchaser and by each Seller or the Sellers' Representative on behalf
of all Sellers, and any provision hereof for the benefit of Sellers may be
waived by a writing signed by each such Seller or by the Sellers' Representative
on behalf of all Sellers; provided, however, that no such amendment or waiver
shall be executed by the Sellers' Representative unless previously approved in
writing by Sellers holding a majority of the Shares; and provided further,
however, that no such amendment or waiver which reduces the aggregate
consideration payable hereunder to Sellers shall be executed by the Sellers'
Representative unless previously approved in writing by all Sellers. Purchaser
shall be entitled to require Sellers to cause the Sellers' Representative to
furnish Purchaser with such evidence as Purchaser may reasonably require as to
the authority of the Sellers' Representative regarding any matter subject to
this Section 10.16.
-46-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
PHASE 2 SOLUTIONS, INC. (for ETELECARE INTERNATIONAL, INC.
purposes of Sections 2.4, 5.7
and 8.2(b) only)
By By /s/ [ILLEGIBLE]
---------------------------------- ---------------------------------
Its Its
---------------------------------- ---------------------------------
SELLERS:
------------------------------------- -------------------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxxxxx Xxxx Xxxxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxxx Xxxxx Xxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxx Xxxx Xxxxxx
-------------------------------------
Xxxxx Xxxxxx
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
PHASE 2 SOLUTIONS, INC. (for purposes ETELECARE INTERNATIONAL, INC.
of Sections 2.4, 5.7 and 8.2(b) only)
By /s/ XXXXXX X. XXXXXX By
---------------------------------- ---------------------------------
Its VP Sec't Its
---------------------------------- ---------------------------------
SELLERS:
/s/ XXXXXX X. XXXXXX /s/ XXXXX X. XXXXXXX
------------------------------------- -------------------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxxxxx Xxxx Xxxxxxxx
/s/ XXXX XXXXXX /s/ XXXXX XXXXXX
------------------------------------- -------------------------------------
Xxxx Xxxxxx Xxxxx Xxxxxx
/s/ XXXX XXXXX /s/ XXXX XXXXXX
------------------------------------- -------------------------------------
Xxxx Xxxxx Xxxx Xxxxxx
/s/ XXXXX XXXXXX
-------------------------------------
Xxxxx Xxxxxx
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized officers as of the date first above
written.
PHASE 2 SOLUTIONS, INC. (for purposes ETELECARE INTERNATIONAL, INC.
of Sections 2.4, 5.7 and 8.2(b) only)
By By
---------------------------------- ---------------------------------
Its Its
---------------------------------- ---------------------------------
SELLERS:
------------------------------------- -------------------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
/s/ XXXX XXXXXXXX /s/ XXXX XXXXXXXX
------------------------------------- -------------------------------------
Xxxx Xxxxxxxx Xxxx Xxxxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxxx Xxxxx Xxxxxx
------------------------------------- -------------------------------------
Xxxx Xxxxx Xxxx Xxxxxx
------------------------------------- -------------------------------------
Xxxxx Xxxxxx
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
EXHIBIT A
PRO RATA SHARE
EXHIBIT B
FORM OF NOTE
EXHIBIT C
FORM OF NONCOMPETITION AGREEMENT
EXHIBIT D
EMPLOYEE BONUS PAYMENTS
EXHIBIT E-1
MANILA PROFITS
EXHIBIT F
FORM OF OPINION OF SELLERS' COUNSEL
EXHIBIT G
SCHEDULES TO THE STOCK PURCHASE AGREEMENT
[Image]
April 13, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (the "Agreement"), dated as of March 31, 2004, by
and among eTelecare International, Inc. ("Purchaser"), Phase 2 Solutions,
Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the "Company"),
and the shareholders of Phase 2 Solutions, Inc. (the "Sellers")
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date by which the Xxxxxxx Employment Agreement shall be in a form
acceptable to Purchaser under Section 6.1(f) of the Agreement shall hereafter be
April 22, 2004.
2. The date by which Exhibit A and Exhibit B to Schedule 3.22 of the Agreement
shall be provided to the Purchaser by the Company shall hereafter be April 20,
2004.
3. For purposes of Section 8.1(d) of the Agreement, Purchaser shall hereafter be
required to determine on or before April 22, 2004 that, as a result of its
evaluation of Schedule 3.22 of the Agreement and the related documents referred
to in Schedule 3.22, the consummation of the transactions contemplated by the
Agreement would not be in the best interest of the Purchaser.
Accept as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 4/14/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
April 21, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004,
between eTelecare and Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date by which the Xxxxxxx Employment Agreement shall be in a form
acceptable to Purchaser under Section 6.1(f) of the Agreement shall hereafter be
April 26, 2004.
2. The date by which Exhibit A and Exhibit B to Schedule 3.22 of the Agreement
shall be provided to the Purchaser by the Company shall hereafter be April 26,
2004.
3. For purposes of Section 8.1(d) of the Agreement, Purchaser shall hereafter be
required to determine on or before April 29, 2004 that, as a result of its
evaluation of Schedule 3.22 of the Agreement and the related documents referred
to in Schedule 3.22, the consummation of the transactions contemplated by the
Agreement would not be in the best interest of the Purchaser.
Accept as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
April 28, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004 and
the letter agreement dated April 21, 2004, between eTelecare and Xxxxxx X.
Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date by which Exhibit A and Exhibit B to Schedule 3.22 of the Agreement
shall be provided to the Purchaser by the Company shall hereafter be April 29,
2004.
3. For purposes of Section 8.1(d) of the Agreement, Purchaser shall hereafter be
required to determine on or before May 3, 2004 that, as a result of its
evaluation of Schedule 3.22 of the Agreement and the related documents referred
to in Schedule 3.22, the consummation of the transactions contemplated by the
Agreement would not be in the best interest of the Purchaser.
Accept as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 4/28/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 3, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase 2
Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the "Sellers"), as
amended by that letter agreement dated April 13, 2004, the letter agreement
dated April 21, 2004 and the letter agreement dated April 28, 2004, between
eTelecare and Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date by which Exhibit A and Exhibit B to Schedule 3.22 of the Agreement
shall be provided to the Purchaser by the Company shall hereafter be May 5,
2004.
3. For purposes of Section 8.1(d) of the Agreement, Purchaser shall hereafter be
required to determine on or before May 7, 2004 that, as a result of its
evaluation of Schedule 3.22 of the Agreement and the related documents referred
to in Schedule 3.22, the consummation of the transactions contemplated by the
Agreement would not be in the best interest of the Purchaser.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 7, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, and the letter agreement dated May 3, 2004 between eTelecare and
Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. For purposes of Section 8.1(d) of the Agreement, Purchaser shall hereafter be
required to determine on or before May 12, 2004 that, as a result of its
evaluation of Schedule 3.22 of the Agreement and the related documents referred
to in Schedule 3.22, the consummation of the transactions contemplated by the
Agreement would not be in the best interest of the Purchaser.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 5/7/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 12, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004 and the letter agreement
dated May 7, 2004 between eTelecare and Xxxxxx X. Xxxxxx, as the Seller's
Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. $150,000 of the outstanding Promissory Note dated July 24, 2003 in the
principal amount of $300,000 payable to Stratasoft, Inc. shall be deducted from
the Cash Purchase Price. Additionally, one half of any settlement with
Stratasoft, Inc. in connection with amounts owed under the Note that is in
excess of the $150,000 shall be either (i) deducted from Cash Purchase Price, if
such amount is known pre-Closing or (ii) deemed to be an indemnifiable
Transaction Cost referred to in clause (vi) of Section 9.1. Neither the $150,000
adjustment nor the adjustment referred to in the immediately preceding sentence
shall be used to calculate the Net Debt Post-Closing Adjustment or the Working
Capital Post-Closing Adjustment.
2. Attached hereto as Exhibit A is Schedule 3.22 which has been delivered by
Sellers. Purchaser hereby waives its right to terminate the Agreement pursuant
to Section 8.1(d).
3. $178,000 shall be added as an additional Transaction Cost to be deducted from
the Cash Purchase Price. This amount represents the expected cost of the
Company obtaining licenses disclosed on Exhibit A to Schedule 3.22 (licenses
used by the Company) which are not disclosed on Exhibit B to Schedule 3.22
(licenses owned by the Company). To the extent that the cost of obtaining
licenses disclosed on Exhibit A to Schedule 3.22 which are not also disclosed on
Exhibit B to Schedule 3.22 exceeds $178,000, such excess shall be deemed an
indemnifiable Transaction Cost referred to in clause (vi) of Section 9.1.
Neither the $178,000 adjustment nor the amounts deemed indemnifiable Transaction
Costs shall be used to calculate the Net Debt Post-Closing Adjustment or the
Working Capital Post-Closing Adjustment.
4. The spreadsheet attached to and incorporated as part of Exhibit D to the
Stock Purchase Agreement is hereby deleted and the spreadsheet attached as an
Exhibit B hereto is substituted in its place.
5. The Letter of Credit shall expire on the earlier of (i) the first anniversary
of the Closing Date and (ii) the date that the Note is paid in full. Sellers
hereby accept the Letter of Credit substantially in the form attached hereto as
Exhibit C including any changes required by the lender.
6. If upon expiration of the Letter of Credit, Xxxxxx X. Xxxxxx and/or Xxxxx X.
Xxxxxxx are personally guaranteeing any obligations of the Company, Purchaser
shall provide an additional letter of credit (an "Additional Letter of Credit")
equal to the lesser of (a) the amount of such personal guarantees, or (b)
$1,000,000 which shall secure such obligations of the Company's which are
personally guaranteed by Xxxxxx X. Xxxxxx and/or Xxxxx X. Xxxxxx. This
additional letter of credit shall expire upon the earlier of (i) the second
anniversary of the Closing Date and (ii) the date that each of Xx. Xxxxxx and
Xx. Xxxxxx is no longer a guarantor of any Company lease obligation. Xx. Xxxxxx
and Xx. Xxxxxx hereby agree, jointly and severally, to pay all fees levied by
the lender related to such lender's issuance of this Additional Letter of
Credit.
7. The date "May 17, 2004" in Section 8.1 (c) is hereby deleted and "May 20,
2004" inserted in its place.
8. The date "May 17, 2004" in Section 8.1 (j) is hereby deleted and "May 19,
2004" inserted in its place.
9. The Purchaser hereby waives the delivery of Noncompetition Agreements by each
of Xxxxx Xxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxx pursuant to Section
6.1 (f) of the Agreement, in so far as the delivery of such agreements is a
condition to Purchaser's obligations to consummate the transactions contemplated
by the Agreement.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 5/13/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 18, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004, the letter agreement
dated May 7, 2004, and the letter agreement dated May 12, 2004 between
eTelecare and Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Section 10.16 of the Agreement, the parties to the Agreement
agree as follows:
1. The date in Section 8.1 (c) is hereby deleted and "May 24, 2004" inserted in
its place.
2. The date in Section 8.1 (j) is hereby deleted and "May 21, 2004" inserted in
its place.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 5/19/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 21, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004, the letter agreement
dated May 7, 2004 and the letter agreement dated May 18, 2004 between
eTelecare and Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date in Section 8.1(j) is hereby deleted and "May 22, 2004" inserted in
its place.
2. Schedule 3.16 is hereby amended to include the disclosure set forth on
Exhibit A hereto.
3. Exhibit D to the Agreement is hereby deleted and replaced with the new
Exhibit D attached hereto as Exhibit B.
4. In the event that the Company is in default under, accelerates amounts due
under, or terminates any of the Company's equipment leases (an "Equipment Lease
Default") as a result of the transactions contemplated by the Agreement or the
Agreement and Plan of Merger to be entered into between the Company and
MacArthur Acquisition Corp., a Delaware corporation and subsidiary of Purchaser,
or the actions contemplated thereby, and Purchaser or an affiliate of Purchaser
purchases the equipment subject to such lease and in connection therewith is
required to pay prepaid interest, liquidated damages or other penalty (in each
case, a "Penalty"), then 50% of
such Penalty shall be indemnifiable Transaction Costs pursuant to Section 9.1 of
the Agreement.
5. The parties hereto agree to amend the Escrow Agreement to provide that in the
event of Equipment Lease Default, the Purchaser may borrow from the Escrow Fund
in order to purchase the equipment and pay any portion of a Penalty that is not
indemnifiable pursuant to paragraph 4 above. Any note evidencing such borrowing
will (a) be subordinate to any amounts owing under the Bank Agreement in the
manner required by lenders under the Bank Agreement, (b) shall be due and
payable on the first anniversary of the Closing, (c) and shall provide for a
reduction in the amount due and payable to offset any amounts Purchaser or a
Purchaser Indemnifiable Party is entitled under Section 9.6 of the Agreement.
Such note shall not contain any restrictive covenants regarding the operation of
the Company.
6. The form of note attached to and incorporated as part of Exhibit B to the
Stock Purchase Agreement is hereby deleted and the note attached as an Exhibit C
hereto is substituted in its place.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 5/21/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
EXHIBIT A
ADDITION TO SCHEDULE 3.16
EXHIBIT B
EXHIBIT D TO THE AGREEMENT
EXHIBIT C
FORM OF NOTE
[Image]
May 24, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004, the letter agreement
dated May 7, 2004, the letter agreement dated May 18, 2004 and the letter
agreement dated May 21, 2004 between eTelecare and Xxxxxx X. Xxxxxx, as
the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date in Section 8.1(c) is hereby deleted and "May 25, 2004" inserted in
its place.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 5/24/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
May 25, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004, the letter agreement
dated May 7, 2004, the letter agreement dated May 18, 2004, the letter
agreement dated May 21, 2004 and the letter agreement dated May 24, 2004
between eTelecare and Xxxxxx X. Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement, the parties to the
Agreement agree as follows:
1. The date in Section 8.1(c) is hereby deleted and "May 26, 2004" inserted in
its place.
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect.
If the foregoing is acceptable to the Sellers, please acknowledge such
acceptance by executing this letter agreement below and return the executed
letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX
----------------------------------------
Xxxxxx X. Xxxxxx Date
[Image]
September 27, 2004
Xxxxxx X. Xxxxxx
x/x Xxxxx 0 Solutions, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
RE: Stock Purchase Agreement (as amended, the "Agreement"), dated as of March
31, 2004, by and among eTelecare International, Inc. ("Purchaser"), Phase
2 Solutions, Inc. (for purposes of Sections 2.4, 5.7 and 8.2(b) only) (the
"Company"), and the shareholders of Phase 2 Solutions, Inc. (the
"Sellers"), as amended by that letter agreement dated April 13, 2004, the
letter agreement dated April 21, 2004, the letter agreement dated April
28, 2004, the letter agreement dated May 3, 2004, the letter agreement
dated May 7, 2004, the letter agreement dated May 12, 2004 (the "May 12
Side Letter"), the letter agreement dated May 18, 2004, the letter
agreement dated May 21, 2004, the letter agreement dated May 24, 2004 and
the letter agreement dated May 25, 2004 between eTelecare and Xxxxxx X.
Xxxxxx, as the Seller's Representative.
Dear Rob:
This letter agreement is being sent to you as Sellers' Representative under the
above referenced Agreement, in order to make effective certain amendments
thereto. Capitalized terms used but not defined herein shall have the meaning
assigned to them in said Agreement.
In accordance with Sections 10.7 and 10.16 of the Agreement the parties to the
Agreement agree as follows:
1. NET DEBT, WORKING CAPITAL AND TAX DISTRIBUTION ADJUSTMENTS. Purchaser shall
pay the Sellers' Representative $627,736.75 (less the amounts described in
paragraph 2 below) in satisfaction of the post Closing adjustments referred to
in Sections 2.3(a) (Closing Net Debt), Section 2.3(b) (Closing Working Capital)
and Section 2.6 (the Tax Distribution). Upon receipt of such payment, no further
amounts shall be due and owing pursuant to Section 2.3(a), Section 2.3(b) and
Section 2.6 and both the Purchaser and the Sellers' Representative, on behalf of
himself and all other Sellers, hereby waive any and all rights to contest the
calculation of such amounts under the Agreement including without limitation
pursuant to Section 2.5(b), Section 2.6 and Section 10.12. Purchaser
acknowledges and agrees that nothing in this letter agreement shall relieve it
of its obligation to pay the Manila Performance Based
Payment. Exhibit D of the Agreement is hereby deleted and the schedule attached
to this letter agreement as Exhibit A is substituted in its place.
2. STRATASOFT AND SOFTWARE LICENSE PAYMENTS. Sellers' Representative on behalf
of himself and all other Sellers, agrees to reduce the amount payable by
Purchaser in paragraph 1 above by $237,267.50 in satisfaction of the amounts
payable to Purchaser pursuant to the May 12 Side Letter relating to the
Stratasoft, Inc. and software license matters referred to therein.
3. CANCELLATION OF THE LETTER OF CREDIT. Purchaser hereby authorizes the
Sellers' Representative, on behalf of himself and all other Sellers to execute
Exhibit B to the Letter of Credit and deliver a copy of such document to Xxxxx
Fargo Bank N.A. to draw upon the Letter of Credit in full payment of the
$3,797,434.82, (the "True Up Balance") owed to Sellers pursuant to Sections
2.3(a), 2.3(b) and 2.4(a) less certain deductions described in the next
sentence. The True Up Balance is calculated by adding $4,000,000 (the US
Performance Based Payment), plus the amounts payable to Sellers pursuant to
paragraphs 1 ($627,736.75) less the amounts referred to in paragraph 2 above
($237,267.50) and less $604,087.72 (the $574,350 US Bonus Pool plus $29,737.72
which is the employers portion of FICA, medicare and other similar contributions
payable by the Company in connection with the payment of the US Bonus Pool) plus
$11,053.29 (representing interest on the foregoing net amount from September 1,
2004 to the date hereof at a rate of 4% per annum). Once the Sellers make such a
draw upon the Letter of Credit, the Letter of Credit shall be canceled and
surrendered and any additional amounts (if any) which may be due and owing the
Sellers under the Agreement shall be unsecured. Purchaser hereby notifies
Sellers' Representative that it is unable to pay in immediately available funds
the US Performance Based Payment due under the Note in accordance with the
provisions of Section 2.4(a) and 2.5 of the Agreement. Purchaser hereby waives
the requirement that the US Performance Report be delivered to Xxxxx Fargo Bank
N.A. in connection with the draw referred to above and hereby acknowledges
liability for the entire $3,797,434.82.
4. ESCROW RELEASE AND MODIFICATION. Section 9.6(c) is deleted in its entirety
and the following inserted in its place: "Sellers Representative, on behalf of
himself and all other Sellers, agree to jointly execute a certificate jointly
directing to release to one half of the Escrow Funds ($3,000,000 in the
aggregate) to each of the Escrow Contributing Sellers."
5. MANILA PERFORMANCE BASED PAYMENTS. The last sentence of Section 2.4(b) is
deleted and the following inserted in its place:
Purchaser shall pay the Sellers' Representative an amount equal to one
quarter the Manila Performance Based Payment on each of the following dates
(each a "Manila Payment Date"): (i) the tenth (10th) day after the Final
Manila Performance Report is agreed or is determined by the Neutral Auditor
in accordance with the procedures set forth in Section 2.5, (ii) May 31,
2005, (iii) August 31, 2005 and (iv) November 30, 2005. Purchaser shall also
pay Sellers' Representative on each of the Manila Payment Dates simple
interest at an eight percent (8%) annual rate on the unpaid portion of the
Manila Performance Payment for the period from the initial Manila Payment
Date to the applicable Manila Payment Date; provided, however, that if a
payment required to be made on a Manila Payment Date is more than 10 days
late
(a "Delinquent Payment"), simple interest shall begin accruing on amount of
the Delinquent Payment at a sixteen percent (16%) annual rate for the period
beginning from the Manila Payment Date that the Delinquent Payment was due
until the date that such Delinquent Payment is made. If the date that any
payment referred to in this Section 2.4 (c) is due falls on a day which is
not a Business Day, such payment shall instead be due on the next succeeding
Business Day. The following shall be deducted from the Manila Performance
Based Payment: (i) employer's portion of FICA, medicare and other similar
contributions payable by the Company in connection with any portion of the
Manila Bonus Payment, (ii) the cost and expense incurred in connection with
the issuance of the Letter of Credit which are included in Transaction Costs
and (iii) the aggregate December 15, 2004 bonuses set forth in Column D to
Exhibit A to this letter agreement.
6. SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. The phrase "The
representations and warranties in this Agreement shall survive the Closing
for a period of two (2) years after the Closing Date at which time they shall
terminate" in the first sentence of Section 9.4(b) shall be deleted and the
following inserted in its place: "The representations and warranties in this
Agreement shall survive the Closing until November 30, 2005."
Except as set forth herein, the terms and conditions of the Agreement shall
remain in full force and effect. If the foregoing is acceptable to the Sellers,
please acknowledge such acceptance by executing this letter agreement below and
return the executed letter agreement to me by facsimile at 0-000-000-0000.
Sincerely,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Chairman
eTelecare International, Inc.
As Sellers' Representative and on behalf
of the Sellers, I hereby agree to and
acknowledge the foregoing:
/s/ XXXXXX X. XXXXXX 09/28/04
----------------------------------------
Xxxxxx X. Xxxxxx Date
