EXCHANGE AGREEMENT
This Agreement is made this 11th day of November, 1999 by and among
Xxxxxxxx-Xxxx, Inc., a Delaware corporation ("WHI"), the members of Four
Points Digital, L.L.C., an Illinois limited liability company ("Four
Points"), (each individually a "Member" and collectively, the "Members"), and
Xxxxxxx Xxxxxxx XxXxxxxx, Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxx XxXxxxxx (the
"Beneficiaries"), beneficiaries, respectively, of the following Members:
PaineWebber Incorporated ("Xxxxx Xxxxxx") as Custodian of Individual
Retirement Account of Xxxxxx X. Xxxxxx, PaineWebber as Custodian of
Individual Retirement Account of Xxxxxxx Xxxxxxx XxXxxxxx, and PaineWebber as
Custodian of Individual Retirement Account of Xxxxxxx Xxxxx XxXxxxxx (the
"IRAs"). The Members, the Beneficiaries and WHI are collectively referred to
herein as the "Parties".
BACKGROUND
Four Points is engaged in the business of developing and selling online
marketing and electronic commerce programs, web site development, and other
consulting and systems integration (the "Business");
WHI desires to acquire from the Members all of the outstanding Interests
and other rights (collectively, "Membership Rights") in Four Points in
exchange for capital stock of WHI;
The Members and the Beneficiaries own beneficially and of record all of
the outstanding Membership Rights of Four Points and desire to transfer their
Membership Rights to WHI in exchange for shares of common stock in WHI;
NOW, THEREFORE, in consideration of the premises and promises made
herein, the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"ADJUSTED NET WORTH" means (i) all assets of Four Points excluding
receivables more than 90 days old minus (ii) all liabilities of Four Points
(other than legal and accounting expenses up to $202,248 an investment
banking fee payable to AdMedia Partners, Inc., an aggregate amount up to
$995,875 payable under the Non-Solicitation and Release Agreements, a
financial advisory fee payable to Xxxx Xxxxxx up to $120,000, all to the
extent incurred by Four Points but unpaid in connection with the transactions
contemplated hereby), determined in accordance with GAAP.
"AFFILIATE" of a Party shall mean:
(a) any corporation, partnership, trust or other entity which
controls, is controlled by, or is under common control with such
Party;
(b) as to Four Points, the Members and the Beneficiaries; and
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(c) as to the Members and the Beneficiaries, any Beneficiary or
any immediate family member not more remote than first cousin
"BENEFIT PLANS" has the meaning set forth in Schedule 3.21.
"BUSINESS" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in SECTION 2.1 below.
"CLOSING DATE" has the meaning set forth in Section 2.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations promulgated thereunder.
"DISPUTE NOTICE" has the meaning set forth in Section 2.6.
"EXCHANGE CONSIDERATION" has the meaning set forth in SECTION 2.4 below.
"EXCHANGE CONSIDERATION ADJUSTMENT" has the meaning set forth in SECTION
2.6.
"EXCHANGE RATIO" means a fraction: (i) the numerator of which shall be
$38,218,218 and (ii) the denominator of which shall be the Stock Price.
"FINANCIAL STATEMENTS" has the meaning set forth in Schedule 3.14.
"401(k) PLAN" has the meaning set forth in SECTION 5.9 below.
"GAAP" means generally accepted accounting principles in effect in the
United States of America as utilized by Four Points on a consistent basis.
"HELD BACK SHARES" has the meaning set forth in SECTION 2.5.
"INDEPENDENT AUDITOR" has the meaning set forth in SECTION 2.6.
"INSURANCE" has the meaning set forth in Schedule 3.9.
"INTELLECTUAL PROPERTY" has the meaning set forth in f Schedule 3.17.
"INVESTMENTS" has the meaning set forth in Schedule 3.8.
"INTEREST" means any Person's relative share of the profits and losses
of and rights to receive distributions from, Four Points.
"KNOWLEDGE" means actual knowledge of Xxxxxxx X. XxXxxxxx, Xxxxx
Xxxxxxxxx, Pierre St-Xxxxxxx, Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxx XxXxxxxx
following due inquiry including review and participation in preparation of the
Schedule 3 to this Agreement, and the actual knowledge of the other Members.
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"LAWS" means all laws, statutes, codes, rules, regulations, ordinances
or other requirements applicable to the Business
"LICENSES AND PERMITS" has the meaning set forth in Schedule 3.23.
"MATERIAL CONTRACT" has the meaning ascribed in Schedule 3.24.
"MATERIAL ADVERSE EFFECT" means an adverse effect which is material to
the business or properties of Four Points as a whole.
"MEMBERS' REPRESENTATIVE" has the meaning set forth in SECTION 12.12
below.
"MEMBERSHIP RIGHTS" has the meaning set forth in the preface above.
"MILLENIAL DATES" has the meaning set forth in Schedule 3.32.
"NET WORTH ADJUSTMENT PROPOSAL" has the meaning set forth in
SECTION 2.6(b) below.
"NON-SOLICITATION AND RELEASE AGREEMENTS" has the meaning set forth in
SECTION 6.2(f) below.
"NW DISPUTE NOTICE" has the meaning set forth in SECTION 2.6(b) below.
"ORDINARY COURSE OR ORDINARY COURSE OF BUSINESS: means the ordinary course
of business consistent with the past custom and practice (including with
respect to quantity and frequency).
"OWNED SOFTWARE" has the meaning set forth in Schedule 3.18.
"PARTICULAR INDEMNIFIED MATTER" has the meaning set forth in Section 8.1.
"PERSON" means and includes any individual, corporation, partnership,
association, limited liability company, trust, estate or other entity.
"PRELIMINARY SETTLEMENT STATEMENT" has the meaning set forth in
SECTION 2.6(b) below.
"REGISTER", "REGISTERED" AND "REGISTRATION" refer to a registration of
the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration statement.
"REGISTRATION SHARES" has the meaning set forth in SECTION 10.1 below.
"REGISTRATION STATEMENT" has the meaning set forth in SECTION 10.1 below.
"RESOLUTION" means (i) as to a Net Worth Adjustment Proposal for an
Exchange Consideration Adjustment, and agreement of WHI and the Members'
Representative, the passage of 60 days following a Net Worth Adjustment
Proposal without the delivery of a Dispute Notice or other determination
pursuant to SECTION 2.6, (ii) as to a claimed WHI Indemnification Amount,
agreement of WHI and the Members' Representative or final court judgement not
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subject to further appeal, or (iii) with respect to the Held Back Shares,
the passage of both 60 days following an initial claim of indemnification and
30 days following a second notice thereof (which may be made at any time
within or after the 60 day period following the first notice) without a
response by the other Party, and "RESOLVED" means any such matter which has
had a Resolution.
"RETURNS" has the meaning set forth in Schedule 3.29.
"RULE 144" has the meaning set forth in SECTION 9.3 below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, claim, charge or lien of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise.
"SOFTWARE" has the meaning set forth in Schedule 3.18.
"SPECIAL HOLDBACK" has the meaning set forth in SECTION 2.5(b) below.
"STOCK PRICE" means $34.80.
"TAX CLAIM" has the meaning set forth in SECTION 11.2(a) below.
"TAXES" has the meaning set forth in Schedule 3.29.
"TAX RECORDS" has the meaning set forth in SECTION 11.3 below.
"THIRD PARTY LICENSES" has the meaning set forth in Schedule 3.18.
"THIRD PARTY SOFTWARE" has the meaning set forth in Schedule 3.18.
"WARRANTIES" has the meaning set forth in Schedule 3.26.
"WHI INDEMNIFICATION AMOUNT" has the meaning set forth in SECTION 8.3
below.
"WHI SHARES" has the meaning set forth in SECTION 2.4 below.
ARTICLE II
EXCHANGE OF SHARES; CLOSING
2.1 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of XxXxxxxxx, Will
& Xxxxx, commencing at 9:00 a.m. local time on the third business day
following the satisfaction or waiver of all conditions to
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the obligations of the Parties to consummate the transactions contemplated
hereby or such other date as the Parties may mutually determine (the "Closing
Date"). The Parties intend that the Closing shall occur on or prior to
November 12, 1999.
2.2. ACTIONS AT THE CLOSING. At the Closing, (a) the Members shall
deliver, and shall cause Four Points to deliver, to WHI the various
certificates, instruments and documents referred to in SECTION 6.1 below, and
(b) WHI shall deliver to the Members the various certificates, instruments
and documents referred to in SECTION 6.2 below.
2.3. DELIVERY OF FOUR POINTS MEMBERSHIP RIGHTS. Each of the Members
agrees to and will sell, convey, transfer, assign and deliver to WHI at the
Closing (as defined in SECTION 2.1), on the terms and subject to the
conditions set forth in this Agreement, all his or her Membership Rights in
Four Points. After execution of this Agreement and prior to the close of
business on the Closing Date, no transfers of Membership Rights in Four
Points shall be registered other than as contemplated by this Agreement.
2.4. EXCHANGE FOR WHI SHARES. At and as of the Closing Date, WHI shall
issue to the Members in exchange for their Membership Rights (the "Exchange
Consideration") a number of shares of WHI's common stock ("WHI Shares") equal
to the Exchange Ratio multiplied by the percentage Membership Rights held by
each such Member (not exceeding 100% in the aggregate) in Four Points
(provided that no fractional shares shall be issued, and the value of any
fractional shares, valued at the Stock Price shall be payable in cash).
2.5. HOLD BACK.
(a) Subject to the provisions of SECTIONS 2.5(b) and 2.5(c), WHI
shall hold back from the Members, WHI Shares which constitute in
aggregate 10% of the total number of WHI Shares issued to the Members
("Held Back Shares"), with executed stock powers. Such holdback shall
be made on a pro rata basis so that 10% of each Member's portion of the
Exchange Consideration is held back. It is understood and agreed that
the Held Back Shares shall not be taken from the Registration Shares,
but rather shall be taken from the 50% of the WHI Shares that are not
among the Registration Shares. WHI may cause a number of Held Back
Shares (valued at the Stock Price) to be surrendered and cancelled in
satisfaction of any Exchange Consideration Adjustment or WHI
Indemnification Amount; provided, however, that except as provided in
SECTION 2.5(b), the Held Back Shares may be utilized to satisfy claims
for Exchange Consideration Adjustments and WHI Indemnification Amounts
for breach of representations and warranties regarding the existence
and/or value of assets and liabilities reflected on the Financial
Statements only if such claims are asserted by WHI by the earlier of (i)
one year following the Closing Date or (ii) the date of the issuance of
the first audited statements reflecting combined operations of Four
Points and WHI; provided further that WHI may only exercise such rights
after (A) there has been a Resolution. The Members grant WHI a security
interest in the Held Back Shares to secure claims for WHI
Indemnification Amounts and the Exchange Consideration Adjustment. Any
surrender of shares under this clause shall be effected on a pro-rata
basis among the Members. If there is a dispute regarding any Exchange
Consideration Adjustment alleged to be due which is not Resolved, in no
event shall any Held Back Shares be taken by WHI for surrender in
satisfaction of such
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Exchange Consideration Adjustment unless and until there is a Resolution
thereof. If there is a dispute regarding any WHI Indemnification Amount
alleged to be due which is not Resolved, in no event shall any Held Back
Shares be taken by WHI for surrender in satisfaction of such disputed
WHI Indemnification Amount unless and until there is a Resolution
thereof.
If as of the earlier of (i) the date of release of the audited
financial statements of WHI reflecting combined operations of Four
Points and WHI and (ii) the one-year anniversary of the Closing, there
is no dispute pending regarding an Exchange Consideration Adjustment or
claimed WHI Indemnification Amount (including for any Particular
Indemnified Matters) which have not been Resolved and satisfied through
the Held Back Shares, any remaining Held Back Shares will be released by
WHI to the Members on a pro rata basis. If, however, there is a dispute
pending regarding an Exchange Consideration Adjustment or claimed WHI
Indemnification Amount (including for any Particular Indemnified Matter)
which has not been Resolved and satisfied through the Held Back Shares
prior to the earlier of (i) the date of release of the audited financial
statements of WHI reflecting combined operations of Four Points and WHI
and (ii) the one-year anniversary of the Closing, then a number of Held
Back Shares reasonably sufficient (taking into consideration market
factors) to satisfy the maximum potential recovery for the Particular
Indemnified Matters and reasonably sufficient (taking into consideration
market factors) to satisfy any other claimed WHI Indemnification Amount
or pending Net Worth Adjustment Proposal ("Special Holdback") shall
continue to be held by WHI until such time that the disputes or open
Particular Indemnified Matters have been Resolved. If any such
Resolution results in an Exchange Consideration Adjustment or a right of
WHI to a WHI Indemnification Amount, then WHI shall cause a number of
shares of the Special Holdback (valued at the Stock Price) to be
surrendered and cancelled pursuant to SECTION 2.4(a) toward satisfaction
of such Exchange Consideration Adjustment or WHI Indemnification Amount.
If all claimed WHI Indemnification Amounts and any Net Worth Adjustment
Proposals have been Resolved and shares remain in the Special Holdback
after application by WHI toward any Resolved Net Worth Adjustment
Proposal or claimed WHI Indemnification Amount, the remaining shares (or
any cash held in escrow as provided below) shall be released to the
Members on a pro rata basis without unreasonable delay. If a Special
Holdback is made pursuant to this SECTION 2.5(b), any Held Back Shares
not subject to surrender in excess of the Special Holdback shall be
released to the Members. In the event of a Special Holdback, WHI shall
permit the Members to sell the Held Back Shares on a national securities
exchange or the Nasdaq Stock Market effected through a broker approved
by WHI, provided that WHI is reasonably satisfied that the arrangements
for such sales preserve its rights to the Held Back Shares or the
proceeds thereof for the purposes of this Section 2.5, including that
WHI be given a duly executed power of attorney in form reasonably
satisfactory to WHI to conduct all such sales, at the expense of the
Members. Such proceeds shall be segregated and, provided that WHI
receives sufficient taxpayer identification information signed by the
Members beneficially owning the Held Back Shares, deposited into a
separate interest bearing account in a federally insured bank chosen by
WHI and identified as the property of the Shareholders over which WHI
has control only pursuant to this Agreement. In the event of any such
sales all of WHI's
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rights to the proceeds of the Held Back Shares and interest thereon shall be
the same as its rights to the Held Back Shares hereunder.
(b) WHI agrees to hold and dispose of the Held Back Shares solely in
accordance with this SECTION 2.5. The Held Back Shares deposited by Members
pursuant hereto shall, until caused WHI to be surrendered and cancelled or
released to the Members pursuant to the terms hereof, remain registered in
the name of such Members, and such Members shall be entitled to vote the same
and WHI will take all reasonable steps to allow and facilitate the exercise
of such rights. Except for tax-free dividends paid in stock declared with
respect to the Held Back Shares pursuant to Section 305(a) of the Code, the
Members shall be entitled to receive any cash dividends, dividends payable in
securities or distributions of any kind made in respect of the Held Back
Shares. Any shares issued pursuant to a stock dividend or stock split with
respect to the Held Back Shares shall continue to be held during the period
the Held Back Shares are held by WHI pursuant hereto. Any certificates
received by the Members on account of stock dividends or stock splits with
respect to the Held Back Shares shall be promptly delivered to WHI. In the
event of any meeting of stockholders of WHI during the period in which the
Held Back Shares are held by WHI pursuant hereto, WHI shall send to each
Member promptly copies of any notices, proxies and proxy material in
connection with such meeting. Any claim made by WHI to any of the Held Back
Shares may only be made in good faith upon a reasonable basis in accordance
with WHI's rights under this Agreement. To make any claim to any of the
Held Back Shares, WHI must deliver to the Members' Representative written
notice specifying the basis upon which such claim is based, and the number of
Held Back Shares WHI believes is reasonably sufficient (taking into
consideration market factors) to satisfy the maximum potential recovery that
may be satisfied from the Special Holdback for the Particular Indemnified
Matters and reasonably sufficient (taking into consideration market factors)
to satisfy any other claimed WHI Indemnification Amount or pending Net Worth
Adjustment Proposal ("Special Holdback") an estimate of the dollars of such
claim and the number of Held Back Shares corresponding to such amount. Any
Held Back Shares that are not the subject of a timely notice so delivered
shall not be in dispute.
2.6. REIMBURSEMENT BY MEMBERS FOR FOUR POINTS NET LIABILITIES.
(a) ADJUSTMENT TO EXCHANGE CONSIDERATION. The Exchange Consideration is
premised upon the Adjusted Net Worth being at least $1,272,453 at the Closing
Date. In the event that the Adjusted Net Worth on the Closing Date is less
than $1,272,453, then the Exchange Consideration shall be reduced by a number
of WHI Shares equal to (x) the difference between the Adjusted Net Worth on
the Closing Date and $1,272,453 (y) divided by the Stock Price ("Exchange
Consideration Adjustment") (or if any additional amount is later determined
to be owed under this SECTION 2.6, WHI shall be entitled to set off against
Held Back Shares in accordance with SECTION 2.5).
(b) CALCULATION OF ADJUSTED NET WORTH. On the Closing Date, the Members
shall deliver to WHI a preliminary statement based on the October 31, 1999
balance sheet (the "Preliminary Settlement Statement") (see Schedule 2.6(b))
setting forth their estimate of the amount of Adjusted Net Worth, which shall
be the basis for any adjustment under
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SECTION 2.6(a). If at any time thereafter (but not later than the earlier of
one year following the Closing Date or the date of the issuance of the first
audited statements reflecting combined operations of Four Points and WHI),
WHI reasonably believes that the Preliminary Settlement Statement did not
fully describe Adjusted Net Worth on the Closing Date, then WHI may deliver
to the Members' Representative a statement (the "Net Worth Adjustment
Proposal") setting forth in detail its proposed adjustments to Adjusted Net
Worth on the Closing Date. WHI shall provide the Members' Representative and
his representatives with full access to all assets, records and work papers
necessary to compute and verify the accuracy of the Net Worth Adjustment
Proposal. This Net Worth Adjustment Proposal as delivered to the Members'
Representative shall be final for purposes of this Agreement unless, within
sixty (60) days after delivery to the Members' Representative, he shall
deliver to WHI a notice setting forth in detail his disagreement with the Net
Worth Adjustment Proposal ("NW Dispute Notice"). After delivery of a NW
Dispute Notice, WHI and the Members' Representative shall promptly negotiate
in good faith with respect to the subject of the NW Dispute Notice, and if
they are unable to reach an agreement within forty-five (45) days after
receipt by WHI of the NW Dispute Notice, the dispute (but only such disputed
items) shall be submitted to the Independent Auditor. The Independent
Auditor shall not have authority to re-determine any matter except those that
are in dispute. The Independent Auditor shall be directed to issue a final
and binding decision within sixty (60) days of submission of the NW
Dispute Notice, as to the issues of disagreement referred to in the NW Dispute
Notice and not resolved by the parties. The Independent Auditor shall
determine in its sole discretion to what extent it shall consult with the
Parties and the extent to which each side shall be entitled to submit
information, data, documents and materials it may believe pertinent to the
dispute. The Net Worth Adjustment Proposal, as so adjusted by agreement of
WHI and the Members' Representative or by the Independent Auditor (if
required), shall be final and binding on the parties.
(c) PRELIMINARY SETTLEMENT STATEMENT, NET WORTH ADJUSTMENT PROPOSAL AND
RELATED PROCEDURES. The Preliminary Settlement Statement, Adjusted Net Worth
on the Closing Date and Net Worth Adjustment Proposal shall be prepared in
accordance with GAAP, including the amount of all reserves.
The "Independent Auditor" shall mean one of the "Big Five U.S. public
accounting firms with no material relationship to either of the Parties
chosen by agreement of the Parties, or if they are unable to agree, shall
mean one of the "Big Five" firms with no such material relationship chosen by
lot. The fees and expenses of the Independent Auditor shall be equitably
allocated by the Independent Auditor based upon his decision. The decision
of the Independent Auditor with respect to a Net Worth Adjustment Proposal
shall be final and binding on the parties.
The full force and effect of the representations and warranties shall in
no way be diminished by the Preliminary Settlement Statement, a Net Worth
Adjustment Proposal or the determination of the Independent Auditor, provided
that neither the Members nor the Beneficiaries shall be liable for any breach
of representation or warranty to the extent that any liability giving rise to
the breach is fully reflected in the calculation of Adjusted
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Net Worth, as finally determined by agreement of the Members'
Representative and WHI or otherwise pursuant to this SECTION 2.6.
2.7. EMPLOYEE OPTIONS. After the Closing Date, WHI shall grant to the
employees of Four Points a number of WHI employee stock options commensurate
with their positions, as determined by the WHI compensation committee in its
sole discretion.
2.8 ACCOUNTING. It is the intention of the Parties that the
transactions contemplated herein shall constitute for accounting purposes a
pooling of interests business combination. The Parties agree to take no
position at any time which is inconsistent with such intention, except as
otherwise required by law. It is understood that none of the Parties warrant
to any of the others that the intended treatment will be obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEMBERS AND BENEFICIARIES
The Members and the Beneficiaries jointly and severally represent and
warrant to WHI that the statements contained in Schedule 3 are accurate,
correct and complete as of the date of this Agreement and as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout Schedule 3). WHI acknowledges that the
detailed representations and warranties by the Members and Beneficiaries set
forth in this Agreement have been carefully negotiated and prepared by the
Parties. Neither the Members nor the Beneficiaries make any representations
and warranties with respect to any projections, forecasts, or forward-looking
information otherwise provided to WHI (other than for the limited purposes of
agreeing to the liquidated damages amounts provided for in Section 8.6).
There is no assurance that any such projected or forecasted results will be
achieved. Except as to those matters expressly covered by the representations
and warranties set forth in this Agreement and in any of the schedules or
exhibits to this Agreement or in any of documents described in Section 6.1 of
this Agreement, the Members and the Beneficiaries disclaim all
representation and warranties whether expressed or implied, as to any other
information or matters. WHI acknowledges that neither the Members nor the
Beneficiaries nor anyone else acting in their behalf has made any
representation or warranty, expressed or implied, as to the accuracy or
completeness of any information which is not included or referred to in this
Agreement or any of the schedules or exhibits to this Agreement or in any of
documents described in Section 6.1 of this Agreement, and neither the Members
nor the Beneficiaries nor anyone else acting in their behalf shall have or be
subject to any liability to WHI or any Affiliate of WHI, resulting from the
distribution of any such information to, or use of any such information by,
WHI, any Affiliate thereof, or any of their agents, consultants, accountants,
counsel or representatives. Without limitation of the forgoing, to the extent
that any offering memoranda or summaries prepared by Four Points or the
Members (or anyone acting in their behalf) are or have been provided to WHI,
WHI acknowledges and agrees that no representation or warranty is made by the
Members or the Beneficiaries as to the accuracy or completeness of such
memoranda or summaries. Nothing in Schedule 3 shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however,
unless the disclosure identifies the exception with reasonable
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particularity. Without limiting the foregoing, the mere listing of a document
or other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHI
WHI represents and warrants to the Members and the Beneficiaries that
the statements contained in Schedule 4 are accurate, correct and complete as
of the date of this Agreement and as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout Schedule 4). Without limiting the foregoing, the mere
listing of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or
other item itself.
ARTICLE V
COVENANTS
The Parties agree as follows with respect to the period from and after
the execution of this Agreement.
5.1. GENERAL. Each of the Parties shall use its or her best efforts to
take all action and to do, or to cause to be done, all things necessary or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.2. NOTICES AND CONSENTS. The Members shall, and shall cause Four
Points to, give any required notices to third parties, and shall obtain any
third-party consents necessary to ensure the continued effectiveness of all
Material Contracts or otherwise necessary or advisable in connection with the
matters pertaining to Four Points disclosed in the Schedules. The Members
shall, and shall cause Four Points to, obtain the prior approval of WHI as to
the form and content of each such notice and consent, which consent shall not
be unreasonably withheld or delayed. WHI shall use commercially reasonable
efforts to procure the release and/or termination of any personal guarantees
or other personal undertakings of the Members regarding any indebtedness
(including any capitalized lease obligations) or other liability or
obligation of Four Points set forth on SCHEDULE 5.2 attached hereto at the
earliest possible date. Without limiting the generality of the foregoing, WHI
shall (at, or as soon as possible after, the Closing) use such efforts to
replace the letter of credit supplied by the Members to secure Four Points'
performance under Four Points' Chicago real estate lease.
5.3 REGULATORY MATTERS AND APPROVALS. Each of the Parties will take any
action that may be necessary or reasonably deemed advisable in connection
with any other notices to, filings with, and authorizations, consents and
approvals of governments and governmental agencies that it may be required to
give, make or obtain.
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5.4 OPERATION OF BUSINESS. Except as specifically set forth below or
elsewhere in this Agreement, the Members shall not (including in their
capacity, where applicable, as Managers and/or officers of Four Points)
permit Four Points to engage in any practice, take any action, embark on any
course of inaction, or enter into any transaction outside the Ordinary Course
of Business in each case until the Closing Date. Without limiting the
generality of the foregoing until the Closing Date:
(a) the Members shall not permit Four Points to authorize or
effect any change in its Articles of Organization or Operating
Agreement or pass further regulations or resolutions inconsistent
therewith;
(b) the Members shall not permit Four Points to grant any
options, warrants, or other rights to purchase or obtain any of its
Membership Rights or issue, sell, or otherwise dispose of any of its
Membership Rights;
(c) the Members shall not permit Four Points to redeem,
repurchase, or otherwise acquire any of its Membership Rights, pay
cash dividends or make any other distributions during the period
beginning upon the execution of this Agreement and ending upon the
earlier of (i) Closing or (ii) termination of this Agreement;
(d) the Members shall not permit Four Points to create, incur,
assume or guarantee any indebtedness (including any capitalized
lease obligations) or other obligation or liability other than in the
Ordinary Course of Business, provided, however, Four Points may
incur reasonable fees and expenses, to the extent provided in
SECTION 12.11 in connection with this Agreement and the transactions
contemplated hereby;
(e) the Members shall not permit Four Points to impose or
permit any new or additional Security Interest upon any of its
assets;
(f) the Members shall not permit Four Points to make any
capital expenditures or capital investment in, make any loan to, or
acquire the securities or assets of any other person;
(g) the Members shall not permit Four Points to make any change
in employment terms for any of its Managers, officers or employees;
(h) the Members shall not permit Four Points to enter into any
agreement that requires the payment of royalties or similar
arrangements, or renew any existing arrangements;
(i) the Members shall not permit Four Points to change its
fiscal year;
(j) the Members shall not permit Four Points to dispose of any
assets used in the Business other than in the ordinary course of
business;
(k) the Members shall not permit Four Points to commit to any
of the foregoing;
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(l) the Members shall cause Four Points to use its best efforts
to cause Four Points to preserve, protect and maintain the Business,
maintain and keep in effect all insurance on assets and property,
preserve intact the organization and reputation of the Business,
keep available the services of present executives, employees and
agents of the Business, and preserve the goodwill of suppliers,
subcontractors, customers and others having business relationships
with the Business through the Closing.
5.5 FULL ACCESS. Until the Closing Date, the Members shall cause
Four Points to permit representatives of WHI to have full access to all
premises, properties, books, records, contracts, tax records, documents and
third parties with relationships with Four Points, all on reasonable notice,
provided, however, that WHI will only contract third parties after receiving
approval from the Members of the manner, timing and form of any contract,
such approval not to be unreasonably withheld or delayed.
5.6 NOTICE OF DEVELOPMENTS. Until the Closing Date, the Members
shall give prompt written notice to WHI of any material development affecting
the assets, liabilities, business, financial condition, operations, results
or prospects of Four Points. Each Party shall give prompt written notice to
the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement.
5.7 EXCLUSIVITY. Neither the Members nor any person on their behalf
shall, nor shall the Members permit Four Points to, entertain, discuss,
solicit or respond to any offer or inquiry to purchase a signigicant portion
of Four Points' assets or capital stock, directly or indirectly, or effect
any business combination with Four Points during the period beginning upon
the execution of this Agreement and ending upon the earlier of (i) Closing or
(ii) termination of this Agreement. The Members shall notify WHI immediately
if any person makes any proposal, offer, inquiry or contact with respect to
any of the foregoing.
5.8 ACCOUNTING TREATMENT. The Members at any time will not, and will
not permit Four Points prior to the Closing to, take any action restricted or
fail to take any action required pursuant to Article IX after the date
hereof, to cause such transactions not to be accounted for as pooling of
interests business combinations.
5.9 FOUR POINTS 401(k) PLAN. Prior to Closing, Members shall cause
Four Points to (a) adopt resolutions of its Managers to terminate the Four
Points 401(k) Plan (""401(k) Plan") effective prior to Closing, and (b)
accumulate and provide to WHI the data necessary to complete IRS Form 5310
with respect to such termination of the 401(k) Plan.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF WHI. The obligation of WHI to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the Members shall have caused Four Points to have procured
all of the third party consents specified in SECTION 5.2 above;
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(b) the representations and warranties set forth in Article III
above shall be true and correct at and as of the Closing Date;
(c) the Members shall have performed and complied with all of
their covenants hereunder through the Closing.
(d) no action, suit or proceeding shall be in effect, pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge
would (i) prevent consummation of any of the transactions contemplated
by this Agreement, or (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation;
(e) the Parties shall have received all other required
authorizations, consents, and approvals of governments and governmental
agencies;
(f) WHI shall have received duly executed stock powers or
assignments in favor of WHI in respect of all Four Points Interests
together with all Four Points Interests;
(g) WHI shall have received the resignations, effective as of
the Closing Date (except as otherwise agreed), of each Manager and
officer of Four Points and a release from each officer and Manager in
the form of Exhibit A hereto;
(h) all amounts owed to Four Points by any Member or Beneficiary
of Four Points (or their Affiliates) shall have been paid in full;
(i) WHI shall have received the Inducement Agreement from
each of the Members in the form of Exhibit B hereto;
(j) Messrs. De Nunzio, Monkewicz and St-Jacques shall have
entered into an Employment Agreement with WHI in the form attached hereto
as Exhibit C;
(k) WHI shall have received a letter from each of the Members and
Beneficiaries relating to "pooling of interests" criteria in the form
attached hereto as Exhibit D;
(l) all actions to be taken by Four Points or the Members in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to WHI;
(m) WHI shall received from Xxxxxxxx & Xxxxxxx, counsel to Four
Points and the Members, an opinion in the form of Exhibit E attached
hereto, addressed to WHI and dated as the Closing Date;
(n) WHI shall have been advised by its auditors that to their
knowledge after due and diligent inquiry of management, there have been
no transactions or events with respect to Four Points which would, and
the ownership structure and attributes of Four Points and the Members
would not, proscribe the transactions contemplated hereby, if
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consummated, from being accounted for as pooling of interests business
combinations;
(o) URL transfer form, in form and substance satisfactory to WHI; and
(p) WHI shall have received resolutions, certified by the Secretary
of Four Points, of its Managers and the Members, authorizing this
Agreement and the transactions contemplated hereby.
WHI may waive in writing any condition specified in this SECTION 6.1.
6.2. CONDITIONS TO OBLIGATION OF THE MEMBERS. The obligation of the
Members to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
above shall be true and correct at and as of the Closing Date;
(b) WHI shall have performed and complied with all of its
covenants hereunder through the Closing;
(c) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(d) the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies;
(e) WHI shall have entered into an Employment Agreement in
the form attached hereto as Exhibit C with Messrs. De Nunzio, Monkewicz
and St-Jacques;
(f) Each of the individuals listed on Schedule 6.2(f) and WHI
shall have entered into executed and delivered to WHI a Non-Solicitation
and Release Agreement in the respective forms of Exhibit 6.2(i)-(viii)
(the "Non-Solicitation and Release Agreements") attached hereto, and WHI
shall have countersigned each such Agreement and delivered to the
Members' Representative on behalf of the Members an executed original of
each such Agreement along with the respective payments called for
therein;
(g) WHI shall have issued stock certificates for all the WHI
Shares (including the Held Back Shares) for delivery (excluding the Held
Back Shares, copies of which shall be provided) to the Members upon
closing;
(h) Four Points shall have received from XxXxxxxxx, Will & Xxxxx,
an opinion in the form of Exhibit F attached hereto, addressed to the
members and dated as of the Closing Date;
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(i) WHI shall have paid on behalf of Four Points: (a) $120,000 to
Xxxx Xxxxxx for financial advisory fees; (b) $559,341 to AdMedia Partners,
Inc. for investment banking fees; (c) $10,000 to Xxxxxx Xxxxxx for
accounting fees; and (d) $995,875 to the individuals listed on Schedule
6.2(f) payable under the Non-Solicitation and Release Agreements;
(j) Xxxxxxxx & Xxxxxxx shall have received one or more checks from
WHI and/or Four Points for an aggregate of $200,000; and
(k) all actions to be taken by WHI in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Members.
The Members may waive in writing any condition specified in this SECTION 6.2.
ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate this
Agreement as provided below:
(a) the Parties may terminate this Agreement by joint written consent
at any time prior to the Closing Date;
(b) WHI may terminate this Agreement by giving written notice to the
Members at any time prior to the Closing Date in the event that any Member
is in breach of any representation, warranty, covenant or agreement
contained in this Agreement in any material respect, the Members have been
notified of such breach and the breach has not been cured within fifteen
(15) days of such notice;
(c) WHI may terminate this Agreement by giving written notice to the
Members at any time prior to the Closing Date, if the Closing shall not have
occurred on or before November 15, 1999 by reason of the failure of any
condition precedent under SECTION 6.1 hereof (unless the failure results
primarily from WHI breaching any representation, warranty, covenant or
agreement contained in this Agreement);
(d) The Members may terminate this Agreement by giving written notice
to WHI at any time prior to the Closing Date in the event that WHI is in
breach of any representation, warranty, covenant or agreement contained in
this Agreement in any material respect. WHI has been notified of such breach
and the breach has not been cured within fifteen (15) days of such notice;
or
(e) The Members may terminate this Agreement by giving written notice
to WHI at any time prior to the Closing Date, if the Closing shall not have
occurred on or before November 15, 1999 by reason of the failure of any
condition precedent under SECTION 6.2
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hereof (unless this failure results primarily from Members breaching any
representation, warranty, covenant or agreement contained in this Agreement).
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 7.1 above, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party, provided
that the confidentiality provisions contained in that certain letter between
AdMedia Partners, Inc. (as Four Points' representative) and WHI dated June 30,
1999 shall survive the termination of this Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement or in any document delivered pursuant hereto
shall be deemed to be material and to have been relied upon by the Parties
hereto. All covenants and agreements shall survive the Closing and shall be
fully effective and enforceable until the covenant or agreement has been
fully performed. All representations and warranties shall survive the Closing
for a period of one year provided that claims for WHI Indemnification Amounts
for breach of representations or warranties regarding the existence and/or
value of assets and liabilities reflected on the Financial Statements must be
asserted by WHI by the date of the issuance of the first audited statements
reflecting combined operations of Four Points and WHI. A failure of the
representations and warranties set forth on Schedule 3.22 due to (i) faulty
information being provided on employee benefit tax filings, (ii) improper
corporate procedures regarding the adoption of employee benefit plans, (iii)
the failure of Four Points to have and properly maintain in compliance with
ERISA (x) insurance contracts for the funding of the Four Points 401(k) plan
or (y) the group term life and accidental death and dismemberment insurance
policies identified on Schedule 3.22, and (iv) any failure to timely filing
the annual information returns required under the Code and ERISA on Form 5500
(collectively, (i) through (iv), the "Particular Indemnified Matters") will
survive the Closing until the expiration of any applicable statute of
limitations. Notwithstanding anything to the contrary contained herein, the
representations and warranties made by any Party to this Agreement shall not
be affected by any investigation, verification or examination by any other
Party or by anyone on behalf of any such Party in connection with their due
diligence review or otherwise.
8.2 INDEMNIFICATION BY WHI. WHI shall indemnify and hold the Members and
the Beneficiaries harmless from and against any and all loss, cost, damage,
diminution in value, expense (including court costs and attorneys' fees)
suit, action, claim, deficiency, liability or obligation related to, caused
by or arising from (i) any breach of any representation or warranty in
Article IV or failure to fulfill any covenant or agreement of WHI contained
herein, and (ii) any and all claims of third parties made based upon facts
alleged that, if true, would have constituted such a breach or failure, and
(iii) any breach of WHI's covenant in Section 5.2 to use commercially
reasonable efforts to procure the release and/or termination of any personal
guarantees or other personal undertakings of the Members regarding any
indebtedness (including any capitalized lease obligations) or other liability
or obligation of Four Points set forth on SCHEDULE 5.2 attached hereto at the
earliest possible date or any failure of WHI or Four Points to pay such
obligations, and (iv) any claim by AdMedia Partners, Inc. for a brokers fee
pursuant to
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the June 18, 1999 letter agreement between Four Points and AdMedia. The
amount to which the Members shall be entitled hereunder which has not been
paid to the Members shall be referred to as the "Member Indemnification
Amount."
8.3 INDEMNIFICATION BY THE MEMBERS AND THE BENEFICIARIES. From and after
the Closing, subject to the limitations set forth in this Article VIII, the
Members and the Beneficiaries shall indemnify and hold WHI harmless from and
against any and all loss, cost, damage, diminution of value, expense
(including court costs and attorney's fees), suit, action, claim,
deficiency, liability or obligation related to, caused by or arising from
(i) any breach of representation or warranty in Article III or failure to
fulfill any covenant or agreement of the Members or the Beneficiaries
contained herein, (ii) any and all claims of third parties made based upon
facts alleged that, if true, would have constituted such a misrepresentation,
breach or failure, (iii) any liability or expense arising out of any
Particular Indemnified Matter, or (iv) if Four Points does not provide all
the information required by SECTION 5.9 and WHI waives this covenant as a
condition of Closing (such waiver to be evidenced by the actual Closing),
then the out of pocket attorneys fees and other expenses incurred in
completing all matters required for assuring compliance and termination of
the 401(k) Plan. The amount to which WHI shall be entitled hereunder which
has not been paid to WHI shall be referred to as the "WHI Indemnification
Amount."
8.4 NOTICE AND DEFENSE OF CLAIMS. Each indemnified Party agrees to give
the indemnifying Party prompt written notice of any event or matter for which
such indemnified Party intends to assert a right of Indemnification under
this Agreement; provided that any failure to provide such notice shall not
reduce the amount of indemnification to which the indemnified party is
otherwise entitled, except to the extent that such failure prejudices the
indemnifying party. If a third party claim is made for which an indemnified
party is entitled to indemnification pursuant to this Article VIII, then the
indemnifying party shall be entitled to participate in the defense of such
claim, and if the amount claimed pursuant to such third party claim, or the
potential liability arising out of such third party claim (in the judgement
of indemnified party), does not, after taking into account all other
indemnification obligations pursuant to SECTION 8.5 and if the indemnifying
party so chooses, and providing that the indemnifying party acknowledges its
obligations to indemnify the indemnified party for the entire amount claimed
by the third party, then the indemnifying party may assume primary
responsibility for the defense of such claim with counsel selected by the
indemnifying party and not reasonably objected to by the indemnified party.
If the indemnifying party assumes the defense of a third party claim as set
forth in this paragraph, then (i) in no event shall the indemnified party
admit any liability with respect to, or settle, compromise of discharge, any
such claim without the indemnifying party's prior written consent, which
shall not be unreasonably withheld, (ii) the indemnified Party shall be
entitled to participate in, but not control, the defense of such claim with
its own counsel at its own expense, and (iii) in no event shall the
indemnifying Party enter into any settlement or compromise without the
written consent of the indemnified Party, which shall not be unreasonably
withheld. If the indemnifying party does not assume the defense of any such
claim, the indemnified party may defend such claim in a manner as it may deem
appropriate (including, but not limited to, settling such claim on such terms
as the indemnified party may deem appropriate). Any claim by either Party for
indemnification hereunder (other than with respect to any Particular
Indemnified Matter must be asserted in writing prior to the earlier of the
first anniversary of the Closing Date or the date of the issuance of the
first audited statements
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reflecting combined operations of Four Points and WHI. Any claim for any
Particular Indemnified Matter must be asserted in writing prior expiration of
any applicable statute of limitations.
8.5 LIMITATION OF LIABILITY.
(a) Notwithstanding anything to the contrary contained herein,
(i) except as provided in subparagraph (ii) of this SECTION
8.5(a), the Members shall not have any liability to WHI for
indemnification hereunder until the total WHI Indemnification Amount
exceeds $100,000, whereupon the full amount of the WHI Indemnification
Amount shall be payable;
(ii) the limitation on liability in subparagraph (i) shall not
apply to (a) any liability due to a breach of the representations and
warranties set forth in Schedule 3.4 or the last two sentences of the
first paragraph of Schedule 3.14, (b) any Particular Indemnified
Matters, (c) any liability due to a breach of representations or
warranties concerning tax liability, (d) matters described in
SECTION 8.6, and (e) any liability due to the Members' breach of the
covenants in SECTION 5.9; and
(iii) except as provided in subparagraph (iv) of this SECTION
8.5(a), the WHI shall not have any liability to the Members for
breaches of representations or warranties until the total Member
Indemnification Amount exceeds $100,000, whereupon the full amount of
the Member Indemnification Amount shall be payable; and
(iv) the limitation on liability in subparagraph (iii) shall not
apply to (a) any breach of WHI's covenant in Section 5.2 to use
commercially reasonable efforts to procure the release and/or
termination of any personal guarantees or other personal undertakings of
the Members regarding any indebtedness (including any capitalized lease
obligations) or other liaiblity or obligation of Four Points set forth
on SCHEDULE 5.2 attached hereto at the earliest possible date or any
failure of WHI or Four Points to pay such obligations, and (b) any
claim by AdMedia Partners, Inc. for a brokers fee pursuant to the
June 18, 1999 letter agreement between Four Points and AdMedia.
(b) Any indemnification or recovery by WHI under Article VIII of this
Agreement, any agreement or instrument contemplated hereby, any document
relating hereto or thereto or any Exhibit or Schedule to this Agreement or
otherwise relating to the transactions contemplated hereby shall not exceed
an amount equal to the sum of the total number of WHI Shares issued to the
Members at Closing multiplied by the Stock Price. This limitation shall
apply both (i) individually to each Member (including the respective
Beneficiaries of any Members), so that his or its maximum liability would be
the number of WHI Shares issued to him or the entity as to which he is
Beneficiary in connection herewith multiplied by the Stock Price, and (ii) in
the aggregate as to all of the Members, so that the maximum liability of the
Members collectively would be the
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aggregate number of WHI Shares issued to them as a group multiplied
by an amount equal to the Stock Price.
(c) Any recovery payable under Article VIII hereof shall be
calculated after giving effect to (A) any proceeds received from
insurance policies paid for by Four Points prior to the Closing and
(B) the actual realized tax benefit to WHI or Four Points resulting
from the damage, loss, liability or expense that is the subject of
the indemnity; PROVIDED that to the extent that any tax benefit is
realized in a tax year other than the year in which the indemnity is
payable, the Indemnified Parties shall be obligated to make their
indemnification payments without regard to such benefit and WHI
shall reimburse the Indemnifying Members only in the amount of such
realized tax benefit in the year in which it is realized. For
purposes of this Article VIII, an actual realized tax benefit is an
actual reduction in taxes payable net of loss tax benefits or a
refund of taxes previously paid net of loss tax benefits.
8.6 LIQUIDATED DAMAGES. The Parties acknowledge that it would be
difficult, if not impossible, to determine damages for certain breaches of
representations and warranties. Accordingly, the Parties agree that as
liquidated damages, (i) for any breach of the representations and warranties
contained in Schedules 3.19(b) and 3.24 resulting in the loss or substantial
impairment of any customer relationship identified on EXHIBIT G attached
hereto, the WHI Indemnification Amount shall be an amount equal to the
product of (x) 04% of 12 months of projected revenue (calculated by
annualizing the projected "Currently Booked" revenues for such customer set
forth on EXHIBIT G) for each customer multiplied by (y) a fraction, the
numerator of which shall be the number of months remaining in the contract
term for each such customer (but in any event not less than 12 months) and
the denominator of which shall be 12; and (ii) for any breach of Schedule
3.20 due to the overstatement of the number of active employees, the WHI
Indemnification Amount shall be equal to 300% of any missing employee's
annual compensation or, if such employee's annual compensation cannot be
determined, 300% of the average consultant compensation.
8.7 EXCLUSIVE REMEDY. Except in the case of fraud, in the event of
a breach of this Agreement by WHI or the Members, including the breach by
such party of any representation or warranty made in this Agreement or the
failure to perform any obligation to be performed by such party pursuant to
this Agreement, the remedies of the indemnitee, and the procedures to be
followed by the indemnitee, shall be solely and exclusively those specified in
this Article VIII.
8.8 ACTION TAKEN AS CUSTODIAN. Xxxxx Xxxxxx as custodian is a
broker/dealer, and is holding the shares which are registered in its name
solely for the benefit of its account holder as directed custodian and not
for its own benefit or account. Notwithstanding anything herein to the
contrary, each party to this Agreement, by his, her or its execution hereof,
hereby agrees and acknowledges the foregoing and agrees and acknowledges that
Xxxxx Xxxxxx is not in its individual capacity acting or refraining from
acting nor making any representation, warranty, covenant or agreement
hereunder. Xxxxx Xxxxxx has executed and delivered this Agreement, not in its
individual capacity as signatory, buy solely as the custodian of the IRAs at
the direction of the beneficial owners of the shares. Xxxxx Xxxxxx does not
undertake nor shall it have any individual liability or obligation of any
nature whatsoever by virtue of the execution and delivery of this Agreement
or the representations, covenants or warranties contained herein. Each
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beneficiary of the XXX by his, her or its execution hereof, hereby agrees to
indemnify and hold harmless Xxxxx Xxxxxx as the custodian of his, her or its
XXX from and against any and all loss, costs, damages, expenses (including
court costs and attorneys' fees), claims, liabilities or obligations suffered
or incurred by Xxxxx Xxxxxx in connection with any aspect of this Agreement
or any related transactions. Each party to the Agreement hereby agrees to
hold harmless Xxxxx Xxxxxx from claims of such party only, in connection with
any aspect of this Agreement or any related transaction and agrees not to xxx
Xxxxx Xxxxxx as custodian for any claim arising in connection with any aspect
of this Agreement or any related transactions other than a willful breach of
its obligations under this Agreement as directed custodian.
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Closing Date of WHI Shares:
9.1 DISPOSITION OF SHARES.
(a) The Members acknowledge that they may be deemed to be
"affiliates" of Four Points for purposes of qualifying the
transactions contemplated hereby as pooling of interests business
combinations under applicable accounting and regulations. Each of
the Members agrees that prior to Closing they will not dispose of
any Interests of Four Points, and following the Closing they will
not sell, transfer or otherwise dispose of any of their WHI Shares
until such time as final results of operations of WHI covering at
least 30 days of combined operations of WHI and Four Points have
been published, which WHI anticipates, but does not represent or
warrant, will be on or before January 15, 2000.
(b) The Members agree that they will not sell, transfer or
otherwise dispose of any WHI Shares distributed to them, except
pursuant to (i) an exemption from the registration requirements
under the Securities Act, which does not require the filing by WHI
with the SEC of any registration statement, offering circular or
other document, in which case, each such Member shall first supply
to WHI an opinion of counsel, (which counsel and opinions shall be
satisfactory to WHI) that such exemption is available, or (ii) an
effective registration statement filed by WHI with the SEC under the
Securities Act.
(c) The Members agree that any sale of WHI Shares shall be
effected through a broker approved by WHI.
9.2 LEGENDS. The certificates representing WHI Shares shall bear
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN ADDITION, SHAREHOLDERS
ACKNOWLEDGE THAT THE WHI SHARES BEING ACQUIRED BY THEM HAVE BEEN ISSUED UNDER
APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER
EXCEPT.
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PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO,
OR IN ACCORDANCE WITH AN OPINION OF COUNSEL (WHI OR OTHER) IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
BY THE HOLDER WITHOUT COMPLIANCE WITH THE SECURITIES AND EXCHANGE
COMMISSION'S ACCOUNTING SERIES RELEASES 130 AND 135. LEGENDS SHALL BE AFFIXED
TO ALL SHARES RECEIVED TO THIS EFFECT.
WHI may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
9.3. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS.
WHI will (a) use reasonable efforts to have available adequate current public
information with respect to WHI as is required pursuant to Rule 144(c) in
connection with the sale and transfer by the Members under Rule 144
promulgated under the Securities Act of 1993, as amended ("Rule 144") during
the two year period after the Closing, (b) direct the transfer agent of WHI's
common stock to remove the restrictive legend provided for in SECTION 9.2 and
to deliver such certificates to a purchaser of WHI Shares from any Member in
connection with a sale under Rule 144, and (c) cause such shares of WHI
common stock to be received by such purchaser to be listed on the Nasdaq
Stock Market.
ARTICLE X
REGISTRATION RIGHTS
10.1. REGISTRATION RIGHTS FOR WHI SHARES: FILING OF REGISTRATION
STATEMENT. WHI will utilize its reasonable best efforts to cause a
Registration Statement of Form S-3 (or such other form that WHI is permitted
to use under the Securities Act if it is not eligible to use Form S-3) under
the Securities Act to become effective within 7 days of the date of final
results of operations of WHI covering at least 30 days of combined operations
of WHI and Four Points have been published, for the purpose of registering
50% of the WHI Shares to be issued hereunder to each Member (the
"Registration Shares") for resale by a Holder thereof (the "Registration
Statement") and use reasonable efforts to cause such Registration Statement
to be declared effective. For purposes of this ARTICLE X, a person is deemed
to be a "Holder" of Registration Shares whenever such person is the record
owner of Registration Shares. The Registration Shares shall not include any
of the Held Back Shares.
10.2. EXPENSES OF REGISTRATION. WHI shall pay all expenses incurred by
WHI in connection with the registration, qualification and/or exemption of
the Registration Shares, including any SEC and state securities law
registration and filing fees, printing expenses, fees and disbursements of
WHI's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by WHI in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses
contained therein. WHI shall not, however, be liable for any sales,
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broker's or underwriting commissions upon sale by any Holder of any of the
Registration Shares.
10.3 FURNISHING OF DOCUMENTS. WHI shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses
as are contained in the Registration Statement and such other documents as
the Holders may reasonably request in order to facilitate the offering of the
Registration Shares.
10.4 AMENDMENTS AND SUPPLEMENTS: RESTRICTIONS ON USE. WHI shall prepare
and promptly file with the SEC and promptly notify the Holders of the filing
of such amendments or supplements to the Registration Statement or
prospectuses contained therein as may be necessary to correct any statements
or omissions if, at the time when a prospectus relating to the Registration
Shares is required to be delivered under the Securities Act, any event shall
have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, provided, however, that WHI shall be entitled to delay any such
filing and the use of the prospectus if WHI determines that such filing or
use would impede, delay, or interfere with any significant financing,
acquisition, or other transaction involving WHI, or require disclosure of
material information which WHI has a bona fide business purpose for
preserving as confidential. WHI shall also advise the Holders promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose
and promptly use its reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued.
10.5 DURATION. WHI shall maintain the effectiveness of the Registration
Statement until the first anniversary of the Closing Date. WHI's obligations
contained in this ARTICLE X shall terminate on the later of (i) the first
anniversary of the Closing Date and (ii) the first date the Members are able
to sell Registration Shares pursuant to Rule 144.
10.6 FURTHER INFORMATION. If Registration Shares owned by a Holder are
included in any registration, such Holder shall furnish WHI such information
regarding itself as WHI may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
ARTICLE XI
TAX RETURNS
11.1. RETURNS. The Members shall prepare or cause to be prepared and
file or cause to be filed at their cost with the appropriate Tax authorities
all Returns required to be filed on behalf of Four Points for any taxable
period (or portion thereof) ending on or before the Closing Date. The Members
shall allow WHI an opportunity to review and comment upon any such Return at
least thirty (30) days prior to its filing. The Members will take no position
on any such Returns that is inconsistent with Four Points' past custom and
practice, except to the extent that such position is either required by law
or a taxing authority. The Members shall not make any amendment to any Return
that may affect the liability of Four Points or WHI without WHI's prior
written
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consent. In the event that the parties cannot agree as to any disputed item
on any Return within ten (10) business days after WHI gives the Members'
Representative a notice of objections, the parties shall jointly select a
firm of nationally recognized independent accountants (or, if they cannot
agree on the selection of such a firm within 5 business days, then WHI and
the Members' Representative shall, within an additional 3 business days, each
select their own nationally recognized independent accounting firm, which two
firms shall select a third nationally recognized accounting firm) to resolve
the dispute within an additional 5 business days. Such firm's determination
shall be final and binding on the parties, and any expenses relating to the
engagement of such firm shall be paid half by WHI and half by the Members.
11.2. TAX AUDITS RELATING TO FOUR POINTS.
(a) WHI shall promptly notify the Members' Representative in
writing of the commencement of any claim, audit, examination, or other
proposed change or adjustment of which it or any of its affiliates has
been informed of by any taxing authority that may affect the liability
of the Members under SECTION 8.3 (a "Tax Claim"). Such notice shall
describe the asserted Tax Claim in reasonable detail and shall include
copies of any notices and other documents received from any taxing
authority in respect of any such asserted Tax Claim. Failure of WHI to
comply with the notification requirement set forth in the preceding
two sentences shall not relieve the Members of their indemnification
obligations with respect to such liabilities, except to the extent that
the Members were prejudiced by such failure.
(b) The Members shall have the right to control any audits of or
administrative or court proceedings relating to income Tax Returns for
taxable periods of Four Points that would solely affect the Members. In
such matters, the Members shall have the right to employ counsel of
their own choice and WHI (and its counsel) shall have the right, at
their own expense, to participate in any audits or other proceedings,
and the Members shall have the right to settle issues and take any other
actions in connection with such audits or proceedings. Notwithstanding
the foregoing, the Members shall not be entitled to settle, either
administratively or after the commencement of litigation, any claim for
Taxes of Four Points, or otherwise bind Four Points, if such settlement
would adversely affect WHI (including, without limitation, the imposition
of income tax deficiencies, a change of accounting method, the reduction
of asset basis or cost adjustments, the lengthening of any amortization
or depreciation periods, the denial of amortization or depreciation
deductions or the reduction of loss or credit carry forwards), without
the prior written consent of WHI, which consent shall not be
unreasonably withheld.
(c) WHI shall have the right to control any audits of or
administrative or court proceedings relating to taxable periods of Four
Points that affect the liability of Four Points for Taxes relating to
taxable periods beginning after the Closing Date.
11.3. COOPERATION REGARDING TAX MATTERS. The Parties hereto shall
provide such necessary information as any other Party hereto may reasonably
request in connection with the preparation of such Party's Returns, or to
respond to or contest any audit, prosecute any claim for refund or credit or
otherwise satisfy any legal requirement relating to Taxes or which may affect
the liability of the Members under SECTION 8.3, including providing powers of
attorney to the
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Members' accountants, attorneys or other authorized representatives. WHI
recognizes that the Members and their agents and representatives may, from
time to time after the Closing Date, need access to accounting and tax books,
records and other information held by WHI, or information with respect to the
assets of Four Points, or operations, events, transactions or other items
occurring or accruing on or prior to the Closing Date ("Tax Records"). WHI
therefore agrees that it will retain, or cause Four Points to retain, all
such Tax Records until after the expiration of the applicable period of
assessment of Tax (including any extensions thereof) and agrees to give the
Members and their agents and representatives a reasonable opportunity to
inspect, review and make copies of the Tax Records.
ARTICLE XII
MISCELLANEOUS
12.1. PRESS RELEASES AND ANNOUNCEMENTS. During the period beginning
upon full execution of this Agreement and ending upon the earlier of (i) Closing
or (ii) termination of this Agreement, no Party shall issue any press
release, public announcement or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that the foregoing shall not prohibit disclosure
to a Party's attorneys, accountants, lenders or financial advisors (who shall
be bound by this provision), nor shall the foregoing prohibit WHI from making
any public disclosure it believes in good faith is required by law. After
Closing, WHI shall be entitled to make the first public disclosure regarding
the subject matter of this Agreement and WHI's consent shall be required
prior to any public disclosures made by the Members.
12.2. WAIVER OF RIGHTS OF FIRST REFUSAL, ETC. Each of the Members and
the Beneficiaries, constituting all the Members of Four Points, hereby waive
any and all (i) notice requirements set forth in Sections 7.1 and 7.2 of the
Operating Agreement of Four Points, dated as of January 21, 1997 (the
"Operating Agreement"), (ii) piggyback rights and rights of first refusal
pursuant to Sections 7.2 and 7.3, respectively, of the Operating Agreement,
and (iii) any other options set forth in, and granted pursuant to the
Operating Agreement; and the Operating Agreement shall and hereby is deemed
amended to the fullest extent necessary to permit the transactions
contemplated in this Agreement.
12.3. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
12.4. ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements or representations by or among the
Parties, written or oral, that may have related in any way to the subject
matter hereof, including but not limited to the letter of intent dated
September 16, 1999 except as otherwise set forth in SECTION 7.2 hereof.
12.5. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
heirs, executors, personal representatives, successors and permitted assigns.
Other than WHI, no Party may assign either
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this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the other Parties; provided that in the
event of an assignment by WHI, the assignor shall remain liable for all of
the obligations hereunder transferred to the Assignee. In no event shall any
assignment of this Agreement be made by WHI prior to Closing to a party other
than an Affiliate of WHI.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed as original but all of which
together will constitute one and the same instrument. Any reference herein to
an agreement or contract shall be deemed to refer also to the other (such
terms being interchangeable) and shall include commitments and
understandings, whether written or oral, including all amendments thereto.
12.7 HEADINGS; MEANING. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement. The term "including" shall
be interpreted to mean "including with limitation."
12.8 NOTICES. All notices, requests, demands, claims and other
communications hereunder must be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then three (3) business days after) it is sent by facsimile, overnight
courier, or registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to the Members: Xxxxxxx X. XxXxxxxx
000 Xxxx Xxxxxxxxxx Xxxxx, Xxxx #0
Xxxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Pierre St-Jacques
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx, Xxxx 000
Xxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxx XXX
c/x Xxxxx Xxxxxx as Custodian
000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx
Xxxxxxx Xxxxxxx XxXxxxxx XXX
c/x Xxxxx Xxxxxx as Custodian
000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx
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Xxxxxxx Xxxxx XxXxxxxx XXX
c/x Xxxxx Xxxxxx as Custodian
000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx
Davies Family Irrevocable Trust
c/o Xxxxxx X. Xxxxxx
Davies Family Irrevocable Trust
c/o Xxxxxx X. Xxxxxx
000 Xxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxxxxx, XX 00000
Copies to: Xxxxxxx X. Xxxxxxxx
Xxxxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: 312/000-0000
If to WHI: Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, President
Fax: 312/000-0000
Copies to: Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx Xxxxxx, Esq.
Fax: 312/000-0000
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxx, P.C.
Fax: 312/000-0000
Any Party may give any notice, request, demand, claim or other communications
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any Party may change its
address by giving the other Parties notice in the manner herein set forth.
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12.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Illinois.
12.10. AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing Date. No
amendment or waiver of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the appropriate Parties. No waiver
by any Party of any misrepresentation or breach of warranty, covenant or
agreement hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent misrepresentation or breach of warranty, covenant or
agreement hereunder.
12.11. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified.
12.12. EXPENSES. Except as otherwise specifically set forth herein,
WHI will bear the costs and expenses (including legal fees and expenses) of
WHI and incurred in connection with this Agreement and the transactions
contemplated hereby, and WHI shall bear the following costs and expenses of
the Members and Four Points incurred in connection with this Agreement and
the transactions contemplated hereby: (i) legal and accounting expenses of
$202,248; (ii) the investment banking fees of AdMedia Partners, Inc. pursuant
to the June 18, 1999 letter agreement between Four Points and AdMedia; (iii)
a financial advisory fee to Xxxx Xxxxxx of $120,000; and (iv) payments to the
individuals listed on Schedule 6.2(f) of $995,875. The Members shall bear all
of their other costs and expenses.
12.13. MEMBERS' REPRESENTATIVE. Xxxxxxx X. XxXxxxxx, or if he shall be
unable or unwilling at any time to so serve, Xxxxx Xxxxxxxxx (the
"Alternative Representative"), is hereby irrevocably appointed
attorney-in-fact, and authorized and empowered to act, for and on behalf of
any of all of the Members (with full power of substitution in the premises)
in connection with the indemnity provisions of Article VIII as they relate to
the Members generally, the Exchange Consideration Adjustment provisions of
SECTION 2.6, Article VII, the notice provisions of this Agreement, the
determination of the satisfaction or waiver of the Closing conditions of
Article VI and such other matters (other than any amendment or modification
of this Agreement) as are reasonably necessary for the consummation of the
transactions contemplated hereby (the above-named representative together
with the Alternate Representative being referred to herein as the "Members'
Representative"). By his execution hereof, Xxxxxxx X. XxXxxxxx hereby accepts
such appointment and agrees to act as the Members' Representative hereunder.
WHI and its representatives and agents shall be entitled to rely on such
appointment and treat such Members' Representative as the duly appointed
attorney-in-fact of each Member. Each Member, by such Member's execution
hereof, confirms such appointment and authority and acknowledges and agrees
that such appointment is irrevocable and coupled with an interest, it being
understood that
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the willingness of WHI to enter into this Agreement is based, in part, on the
appointment of a representative to act on behalf of the Members. Each Member,
for such Member and for such Member's successors and assigns, hereby agrees
to indemnify the Members' Representative, and to hold the Members'
Representative harmless from, any and all actions and forbearances that the
Members' Representative may take in his capacity as such, except for such
actions and forbearances as constitute gross negligence or willful misconduct
on the part of the Members' Representative.
12.14. CIVIL LIABILITY UNDER RICO. The Parties hereby waive all rights
to pursue civil remedies to which they may be entitled or may become entitled
with respect to this Agreement and the transactions contemplated hereby
against the other Parties hereto under the Racketeer Influenced and Corrupt
Organization Act of 1970, as amended, including specifically any rights to
treble damages which may be available to them pursuant to 18 U.S.C. Section
1964(c).
12.15. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
/s/ Xxxxxxx X. XxXxxxxx
-------------------------------
Xxxxxxx X. XxXxxxxx
/s/ Xxxxx Xxxxxxxxx
-------------------------------
Xxxxx Xxxxxxxxx
/s/ Pierre St-Jacques
-------------------------------
Pierre St-Xxxxxxx
Xxxxxx S. Xxxxxx XXX
By: Xxxxx Xxxxxx as Custodian
/s/ Xxxx Xxxxxxxxx
----------------------------
Xxxxxxx Xxxxxxx XxXxxxxx XXX
By: Xxxxx Xxxxxx as Custodian
/s/ Xxxx Xxxxxxxxx
----------------------------
Xxxxxxx Xxxxx XxXxxxxx XXX
By: Xxxxx Xxxxxx as Custodian
/s/ Xxxx Xxxxxxxxx
----------------------------
Davies Family Irrevocable Trust
By: /s/ Xxxxx Xxxxxxx
----------------------------
Trustee
Xxxxxxxx-Xxxx, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
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BENEFICIARIES
By: /s/ Xxxxxxx Xxxxxxx XxXxxxxx
----------------------------
Xxxxxxx Xxxxxxx XxXxxxxx
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx
By: /s/ Xxxxxxx Xxxxx XxXxxxxx
----------------------------
Xxxxxxx Xxxxx XxXxxxxx
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