EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into effective
as of September 4, 1997 by and among LITIGATION RESOURCES OF AMERICA, INC., a
Texas corporation (the "Parent"), LITIGATION RESOURCES OF AMERICA-NORTHEAST,
INC., a New York corporation (the "Buyer"), and XXXXXX X. BLOCK, an individual
("Mr. Block" or "Seller"). Seller is the sole shareholder of BLOCK COURT
REPORTING, INC., a District of Columbia corporation (the "Company"). The
Company is the sole shareholder of Block Tape Transcription Services, Inc., a
District of Columbia corporation ("Block Transcription"). Seller was the sole
shareholder of Block Court Reporting Services, Inc., a District of Columbia
corporation ("Block Predecessor") whose Certificate and Articles of
Incorporation were revoked by Proclamation. Buyer, Parent and Seller may be
hereinafter referred to collectively as the "Parties" and individually as a
"Party."
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller, and the Seller will sell to the Buyer, all of the outstanding
capital stock of the Company in return for cash and the other consideration set
forth in SECTION 2 (b) below.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. CERTAIN DEFINITIONS.
"Accounts Payable Report" means a report prepared as of the time specified
containing a summary of the outstanding accounts payable of the Company to each
of its suppliers, court reporters or other creditors by creditor and age of
each account payable.
"Accounts Receivable" means all amounts due and owing to the Company by
each of its customers.
"Accounts Receivable Report" means a report prepared as of the time
specified containing a summary of the outstanding Accounts Receivable of the
Company by customer and age of each Account Receivable.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Balance Sheet Report" means the balance sheet of the Company as of a given
date showing the assets, liabilities and equity of the Company prepared by the
Company in accordance with GAAP on a consistent basis as with prior time
periods.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or is reasonably likely to form the
basis for any specified consequences.
"Block Employment Agreement" means that certain Employment Agreement by and
between the Company and Mr. Block.
"Block Finder's Fee Agreement" means that certain Finder's Fee Agreement by
and between the Parent and Mr. Block.
"Block Noncompetition Agreement" means that certain Confidentiality and
Noncompetition Agreement by and between the Buyer and Mr. Block.
"Block Predecessor" means Block Court Reporting Services, Inc. a District
of Columbia corporation.
"Block Transcription" means Block Tape Transcription Services, Inc., a
District of Columbia corporation and a wholly-owned subsidiary of the Company.
"Buyer" shall mean Litigation Resources of America-Northeast, Inc., a New
York corporation.
"Buyer's Accountants" shall mean the independent certified public
accounting firm of Coopers & Xxxxxxx located in Houston, Texas.
"Buyer's Disclosure Schedule" has the meaning set forth in SECTION 4B
below.
"Buyer Financial Statements" has the meaning set forth in SECTION 4B(D)
below.
"Buyer Indemnified Parties" has the meaning set forth in SECTION 7(B)
below.
"Cash Payment" has the meaning set forth in SECTION 2(B) below.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
of a corporation's employees, payroll, income or gross receipts, (ii) any of a
corporation's ownership or use of any of its assets, or (iii) any other aspect
of a corporation's business.
"Closing" has the meaning set forth in SECTION 2(C) below.
"Closing Date" has the meaning set forth in SECTION 2(C) below.
"Code" means the Internal Revenue Code of 1986, as amended.
-2-
"Company" shall mean Block Court Reporting, Inc., a District of Columbia
corporation.
"Company's Accountants" shall mean the independent certified public
accounting firm of Klavsner, Xxxxxx & Xxxxxxxx, P.A.
"Confidential Information" means any information concerning the businesses
and affairs of the Company that is not (a) generally known or available to the
public; (b) after the date of this Agreement, generally known or readily
available through no violation of this Agreement; or (c) in or does not
hereafter become a part of the public domain through no violation of this
Agreement.
"Controlled Group" means the Company and any trade or business (whether or
not incorporated) which together with the Company would be deemed to be a
"single employer" within the meaning of ERISA Section 4001(b)(1) or subsections
(b), (c), (m) or (o) of Code Section 414.
"Customarily Permitted Liens" shall mean:
(a) Liens for ad valorem taxes, assessments or other governmental Charges
or levies, not yet due and payable;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other like Liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such Liens); and
(c) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, variations and other
restrictions, Charges or encumbrances customary to the type of real property
affected and which do not impair the current use, occupancy, value or the
marketability of title of the real property subject thereto.
"Damages" has the meaning set forth in SECTION 7(B) below.
"Effective Date" shall mean 12:01 a.m. on the Closing Date.
"Effective Date Accounts Payable Report" means the Accounts Payable Report
for the Company as of the Effective Date.
"Effective Date Accounts Receivable" shall mean the entire amount of
Accounts Receivable for the Company as of the Effective Date.
"Effective Date Accounts Receivable Report" means the Accounts Receivable
Report for the Company as of the Effective Date.
"Effective Date Balance Sheet Report" means the Balance Sheet Report for
the Company as of the close of business on the Effective Date.
-3-
"Employee Benefit Plan" means any (a) Employee Pension Benefit Plan, (b)
Employee Welfare Benefit Plan, or (c) personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or agreement,
deferred compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment agreement and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in clause (a) or (b) of this sentence.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA SECTION
3(2), including, but not limited to, employee pension benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA SECTION
3(1), including, but not limited to, employee welfare benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA SECTION 3(21).
"Final Net Worth" means the Net Worth as of the Effective Date as
determined in accordance with SECTION 2(E) below.
"Financial Statements" has the meaning set forth in SECTION 4A(e) below.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
"Guaranteed Net Worth" means $75,000.
"Income Statement Reports" means a statement of revenues and expenses of
the Company as of a specified date prepared by the Company on an accrual basis
and on a basis consistent with prior time periods.
"IRS" means the United States Internal Revenue Service or such equivalent
successor agency of the United States with the responsibility of assessing
and/or collecting Taxes.
"Investor" shall mean Pecks.
"Knowledge" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
-4-
(b) a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of
such fact or other matter.
A person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) has Knowledge of such fact or other matter.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Liens" means any mortgages, deeds of trust, liens, security interests,
pledges, claims, charges, liabilities, obligations, or other encumbrances.
"Net Worth" means the dollar amount of total assets minus the total
liabilities of the Company as of a given time period as determined by the
Balance Sheet Report as of such time period.
"Note 1" has the meaning set forth in SECTION 2(B)(II) below.
"Note 2" has the meaning set forth in SECTION 2(B)(III) below.
"Notice of Action" has the meaning set forth in SECTION 7(B) below.
"Notice of Election" has the meaning set forth in SECTION 7(B) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent" has the meaning set forth in the preamble of this Agreement.
"Party" shall mean, individually, the Buyer, the Parent or the Seller.
"Parent Shares" means any of the shares of common stock of the Parent.
"Parties" shall mean, collectively, the Buyer and the Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pecks" shall mean Pecks Management Partners Ltd., a New York limited
partnership.
"Permitted Encumbrances" with respect to property of a Party shall mean (i)
Security Interests expressly permitted, or consented in writing to by the other
Party; (ii) Purchase Money
-5-
Liens; (iii) Customarily Permitted Liens; and (iv) Liens of judgment creditors
provided such Liens do not exceed $3,000 individually or $15,000 in the
aggregate (other than Liens bonded or insured to the reasonable satisfaction of
the other Party).
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pledge Agreement" has the meaning set forth in SECTION 5(A) below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Public Offering" means the sale by the Parent of any of its securities for
cash in an underwritten public offering registered on the appropriate form with
the Securities and Exchange Commission.
"Purchase Money Liens" shall mean Liens incurred in connection with the
acquisition of any asset; provided that (i) each such Lien shall attach only to
the asset to be acquired, (ii) a description of the asset so acquired is
furnished to the other Party, and (iii) the indebtedness incurred in connection
with such acquisitions shall not individually exceed $3,000 or in the aggregate
exceed $15,000.
"Purchase Price" has the meaning described in SECTION 2(B) below.
"Registration Rights Agreements" has the meaning set forth in SECTION
7(A)(ix) below.
"Reportable Event" has the meaning set forth in ERISA SECTION 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
Purchase Money Liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" shall mean Mr. Block.
"Seller's Disclosure Schedule" has the meaning set forth in SECTION 4A
below.
-6-
"Senior Lender" shall mean Texas Commerce Bank, N.A.
"Shareholders' Agreement" shall mean that certain First Amended and
Restated Shareholders' Agreement by and among the Buyer and its shareholders, or
such other form of shareholders' agreement as may be required by Parent.
"Subject Shares" means all of the issued and outstanding capital stock of
the Company, all of which are described in SECTION 4A(b) of the Seller's
Disclosure Schedule.
"Subordination Agreements" means those certain Subordination Agreements of
even date herewith entered into among Seller and any of the Company, the Parent,
Affiliates, and holders of Senior Indebtedness (as such term is defined in
Note 1 or Note 2).
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors thereof.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium
windfall profits, environmental (including taxes under Code Section 5(A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. PURCHASE AND SALE OF SUBJECT SHARES.
A. BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell to the Buyer, all of the Subject Shares for the consideration specified
below in this SECTION 2.
B. PURCHASE PRICE. The purchase price is One Million, One Hundred
Thousand and No/100 Dollars ($1,100,000.00) to be paid and delivered by the
Buyer to the Seller on the Closing Date, subject to adjustments thereto under
this Agreement, as follows (collectively, the "Purchase Price"):
(i) Subject to the provisions of SECTION 2(F), by wire transfer to
the Gnessin & Xxxxxxx Escrow Account for the benefit of Seller, in the
amount of Six Hundred Thousand and No/100 Dollars ($600,000.00) (the "Cash
Payment")
-7-
(ii) Subject to the provisions of SECTION 2(F), a convertible
subordinated promissory note in substantially the form of EXHIBIT A-1 in
the amount of Two Hundred Forty Thousand and No/100 Dollars ($240,000.00),
bearing interest and being due, payable, convertible and subordinated as
provided therein ("Note 1"); and
(iii) Subject to the provisions of SECTION 2(F), a convertible
subordinated promissory note in substantially the form of EXHIBIT A-2 in
the amount of Three Hundred Sixty Thousand and No/100 Dollars
($360,000.00), bearing interest and being due, payable, convertible and
subordinated as provided therein ("Note 2").
C. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place effective as of the effective date
hereof by Seller delivering to Buyer, and Buyer delivering to Seller, by
overnight courier, the items described in SECTION 2(D) below, except for Seller
delivering the Cash Payment by wire transfer, unless otherwise mutually agreed,
on the effective date hereof (the "Closing Date").
D. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in SECTION 6(A) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in SECTION 6(B)
below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of the Subject Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the Seller the
Purchase Price.
E. DETERMINATION OF FINAL NET WORTH. The Effective Date Balance Sheet
Report, the Effective Date Accounts Receivable Report and the Effective Date
Accounts Payable Report (collectively, the "Effective Date Financial Reports")
shall be prepared by the Company and the Company's Accountants as promptly as
possible after the Closing, and the Seller shall deliver the Effective Date
Reports to the Buyer and the Buyer's Accountants as soon as possible but in no
event later than 30 days after the Closing Date. The Buyer's Accountants shall
review the Effective Date Financial Reports (including any corresponding work
papers of Company's Accountants) and report to the Company's Accountants in
writing within 15 days of receipt thereof of any discrepancy. If the Company's
Accountants and the Buyer's Accountants cannot resolve such discrepancy within
15 days after the Company's Accountants receipt of such report, then they shall
so notify the Seller and the Buyer, and the Seller and the Buyer shall attempt
to resolve the discrepancy within 15 days of such notice. If the Seller and the
Buyer cannot resolve the discrepancy to their mutual satisfaction, another
independent public accounting firm acceptable to the Seller and the Buyer shall
be retained to review the Effective Date Financial Reports. Such firm's
conclusions as to any accounting issues relating to the Effective Date Financial
Reports for purposes of determining the Final Net Worth of the Company shall be
conclusive. The Seller and the Buyer shall share equally in the expenses of
retaining such accounting firm. The Buyer shall pay the expenses of the Buyer's
Accountants for their review of the Effective Date Financial Reports, and the
Seller shall pay the expenses of Company's Accountants for their review of the
Effective Date Financial Reports.
-8-
F. POST-CLOSING ADJUSTMENT OF PURCHASE PRICE. After the Closing Date,
the Purchase Price set forth in SECTION 2(B) shall be adjusted as follows: (i)
if the Final Net Worth of the Company as finally determined pursuant to SECTION
2(E) shall be more than the Guaranteed Net Worth, then each element of the
Purchase Price (cash, principal of Note 1 and principal of Note 2) shall be
increased in proportion to the percentage it represents of the total Purchase
Price paid at Closing, and Buyer shall promptly pay to Seller the amount of the
increase of the cash portion of the Purchase Price and execute and deliver to
Seller such modifications of Note 1 and Note 2 as Seller may reasonably request,
and (ii) if the Final Net Worth of the Company as finally determined pursuant to
SECTION 2(E) shall be less than the Guaranteed Net Worth, then each element of
the Purchase Price (cash, principal of Note 1 and principal of Note 2) shall
be decreased in proportion to the percentage it represents of the Purchase Price
paid at Closing, and Seller shall promptly return any portion of cash
overpayment to Buyer, and execute and deliver such modifications of Note 1 and
Note 2 as Buyer may reasonably request.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
A. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this SECTION 3A are
correct and complete as of the date of this Agreement, except as set forth in
the schedules of exceptions attached hereto as SCHEDULE 3A.
(a) AUTHORIZATION OF TRANSACTION. Seller has full power and authority
to execute and deliver this Agreement and to perform his or her obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency or moratorium laws or
other laws or principles of equity affecting the enforcement of creditors'
rights. Seller represents and warrants that he need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(b) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Seller, nor the consummation of the transactions by the
Seller as contemplated hereby, will (i) to Seller's Knowledge violate any
constitution, statute, regulation, rule, charge or other restriction to
which Seller or the Company is subject, (ii) violate any injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller or the Company is
subject, or (iii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other arrangement
to which Seller or the Company is a party or by which he or it is bound or
to which any of his or its assets is subject.
(c) BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer or the
Company could become liable or obligated.
-9-
(d) INVESTMENT. Seller (i) understands that neither Note 1 nor
Note 2 has been registered under the Securities Act, or under any state
securities laws, and same are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, (ii) is acquiring Note 1 and Note 2 solely for his or her own
account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received such information
concerning the Buyer and the Parent as Seller has requested, and has had
the opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding Note 1 and Note 2,
(v) is able to bear the economic risk and lack of liquidity inherent in
holding Note 1 and Note 2, and (vi) is an Accredited Investor.
(e) SUBJECT SHARES. Seller holds of record and owns beneficially the
number of Subject Shares set forth next to his name in SECTION 4A(b) of the
Seller's Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase
rights, or other contracts or commitments that could require Seller to
sell, transfer, or otherwise dispose of any capital stock of the Company
(other than this Agreement)). Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of
any of the Subject Shares.
B. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this SECTION 3B are
correct and complete as of the date of this Agreement, except as set forth in
the schedule of exceptions attached hereto as SCHEDULE 3B.
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of New
York. The Buyer is qualified to do business in each jurisdiction in which
the nature of its business, the ownership of its assets or the lease of its
properties require it to be so qualified.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder, including
without limitation the issuance of Note 1 and Note 2. The Board of
Directors of the Buyer has duly authorized the execution, delivery and
performance of this Agreement and the other agreements and transactions
contemplated hereby, including, without limitation, the issuance of Note 1
and Note 2, and no other corporate proceedings on the Buyer's part are
necessary to authorize this Agreement or the transactions contemplated
hereby, including, without limitation, the issuance of Note 1 and Note 2.
Upon execution and delivery of this Agreement by the Parties hereto, this
Agreement shall constitute legal, valid and binding obligations of the
Buyer, enforceable against the Buyer in accordance with its terms, except
to the extent that enforcement hereof may be limited by applicable
bankruptcy, reorganization, insolvency or moratorium laws or other laws or
principles of equity affecting the enforcement of creditors' rights.
-10-
The Buyer represents and warrants that it need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or
any provision of its charter or bylaws.
(d) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could
become liable or obligated. Buyer shall pay all fees or commissions
payable to the Gulfstar Group, Inc.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARTIES.
A. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Seller
represents and warrants to the Buyer that the statements contained in this
SECTION 4 are correct and complete as of the date of this Agreement, except as
set forth in Seller's Disclosure Schedule attached hereto as SCHEDULE 4A
("Seller's Disclosure Schedule"). Factual matters disclosed in one section of
the Seller's Disclosure Schedule shall be deemed to be disclosed with respect
to all representations and warranties set forth in this SECTION 4 to the extent
but only to the extent that the disclosure is adequate in scope and detail to
alert the Buyer, without further investigation, that such disclosure applies to
other representations and warranties in this SECTION 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Except as set
forth in SECTION 4A(a) of the Seller's Disclosure Schedule, each of the
Company, Block Transcription and the Block Predecessor is a corporation
duly organized, validly existing, and in good standing under the laws of
the District of Columbia. The Block Predecessor has not conducted any
business in the preceding eighteen (18) months, and is currently in the
process of dissolution. The Company is not qualified to do business in any
other jurisdiction, and the nature of its business does not require such
qualification. The Company has full corporate power and authority and all
material licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and to own and use the properties owned
and used by it. SECTION 4A(a) of the Seller's Disclosure Schedule lists all
of the directors and officers of the Company. The Seller has delivered to
the Buyer correct and complete copies of the articles of incorporation and
bylaws of the Company, as amended to date. The minute book (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Company are correct and complete in all material
respects. The Company is not in default under or in violation of any
provision of its articles of incorporation or bylaws.
-11-
(b) CAPITALIZATION. The entire authorized capital stock, the issued
and outstanding shares and the treasury shares of the Company are
accurately set forth in SECTION 4A(b) of the Seller's Disclosure Schedule.
All of the issued and outstanding Subject Shares have been duly authorized,
are validly issued, fully paid, and nonassessable, and are held of record
by the Seller as set forth in SECTION 4A(b) of the Seller's Disclosure
Schedule. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or other contracts or commitments that would require the Company to issue,
sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Company. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of the Company.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Company is
subject, (ii) violate any provision of the articles of incorporation or
bylaws of the Company, or (iii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). The Company does not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement.
(d) SUBSIDIARIES. The Company does not have any ownership interest in
any Subsidiaries other than Block Transcription. The Company owns all of
the outstanding capital stock of Block Transcription free and clear of any
lien, claim, encumbrance, restriction or transfer, options, warrants,
purchase rights, voting agreements or other agreements of any type. The
Company does not control, directly or indirectly, or have any direct or
indirect equity participation in, any corporation, partnership, trust, or
other business association which is not a Subsidiary. Except as disclosed
in SECTION 4(A)(d) of the Seller's Disclosure Schedule, neither Block
Transcription nor the Block Predecessor has any liabilities in excess of
$2,500 individually nor $7,500 in the aggregate. Except as contemplated in
the following sentence, neither Block Transcription nor the Block
Predecessor has ever disposed of any of its assets other than for
reasonably equivalent value in the Ordinary Course of Business. The Company
has succeeded to all of the assets of the Block Predecessor.
(e) FINANCIAL STATEMENTS. The Seller has previously furnished the
Buyer with the following financial statements (collectively the "Financial
Statements"): (i) Balance Sheet Reports and Income Statement Reports for
the fiscal years ended December 31, 1995
-12-
and December 31, 1996 compiled by Company's Accountants; (ii) Balance Sheet
Reports and Income Statement Reports for the period ended June 30, 1997
prepared by the Company's Accountants, (iii) an Accounts Receivable Report
dated as of June 30, 1997, and (iv) an Accounts Payable Report dated as of
June 30, 1997. The Financial Statements (including the notes thereto) have
been prepared on an accrual basis, have been prepared on a consistent basis
throughout the periods covered thereby, present fairly the financial
condition of the Company as of such dates and the results of operations of
the Company for such periods, are correct and complete in all material
respects, and are consistent in all material respects with the books and
records of the Company (which books and records are correct and complete in
all material respects).
(f) EVENTS SUBSEQUENT TO JUNE 30, 1997. Except as disclosed on
SECTION 4A(f) of the Seller's Disclosure Schedule, since June 30, 1997,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Company. Without limiting the generality of the foregoing, since
June 30, 1997:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, lease,
and licenses) either involving more than $3,000 singly (exclusive of
agreements to perform court reporting or litigation support services
which do not extend beyond the Closing Date) or $15,000 in the
aggregate or outside the Ordinary Course of Business;
(iii) the Company has not accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $3,000 singly (exclusive of agreements to perform court reporting
or litigation support services which do not extend beyond the Closing
Date) or $15,000 in the aggregate to which the Company is a party or
by which it is bound;
(iv) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible, except for Permitted
Encumbrances;
(v) the Company has not made any capital expenditure (or series
of related capital expenditures) either involving more than $3,000
singly or $15,000 in the aggregate or outside the Ordinary Course of
Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series or related
-13-
capital investments, loans, and acquisitions) either involving more
than $3,000 singly or $15,000 in the aggregate;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $3,000 singly or $15,000 in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable or other Liabilities for a period of more than sixty
(60) days after the date of invoice;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $3,000 singly or $15,000 in the aggregate
or outside the Ordinary Course of Business;
(x) there has been no change made or authorized in the
articles of incorporation or bylaws of the Company;
(xi) the Company has not 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, exchange, or
exercise) any of its capital stock;
(xii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property valued,
individually or in the aggregate, in excess of (i) $10,000 for all
property which, at the time of such damage or destruction, was subject
to or covered by property, casualty or any other form of insurance,
and (ii) $3,000 for all property which, at the time of such damage or
destruction, was not subject to or covered by property, casualty or
any other form of insurance;
(xiv) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees;
(xv) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any such existing contract or agreement;
-14-
(xvi) the Company has not granted any increase in the base
compensation of any of its directors, officers, or employees outside
the Ordinary Course of Business;
(xvii) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers or employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xviii) the Company has not made any other change in the
employment terms of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xix) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xx) there has not been any adverse occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of or Business involving the Company which exceeds $3,000
individually or $15,000 in the aggregate; and
(xxi) the Company has not agreed or committed to any of the
foregoing.
(g) UNDISCLOSED LIABILITIES. Except as disclosed on SECTION 4A(g) of
the Seller's Disclosure Schedule, the Company does not have any Liability
(and, to the best of the Seller's Knowledge, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any
Liability), except for (i) Liabilities reflected in the then most current
Financial Statements (including any notes thereto) and (ii) Liabilities
which have arisen after June 30, 1997 in the Ordinary Course of Business
(none of which results from, arises, out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
(h) LEGAL COMPLIANCE. Except as disclosed in SECTION 4A(h) of the
Seller's Disclosure Schedule, to the Knowledge of Seller, the Company,
Block Transcription and the Block Predecessor have substantially complied
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), and, except as disclosed in SECTION 4A(h) of the Seller's
Disclosure Schedule, to the Seller's Knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against the Company, Block Transcription
or the Block Predecessor alleging any failure so to comply.
-15-
(i) TAX MATTERS. Except as disclosed on SECTION 4A(i) of the Seller's
Disclosure Schedule:
(i) The Company has filed all Tax Returns that it was required
to file, and all such Tax Returns were correct and complete in all
material respects. All Taxes shown to be due on the Tax Returns have
been paid or accrued for the Balance Sheet. The Company is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No written claim has ever been delivered to the
Seller or the Company, and to the Knowledge of Seller no other claim
has ever been made by a Tax authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on the
assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, stockholder, or other third party.
(iii) There is no dispute or claim concerning any Tax Liability
of the Company either (A) claimed or raised by any Tax authority in
writing to the Company or its agents or (B) as to which the Seller and
the directors and officers (and employees responsible for Tax matters)
of the Company has Knowledge. SECTION 4A(i) of the Seller's
Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for taxable
periods ended on or after December 31, 1996, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of an audit. The Seller has delivered to
the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The Company has not made an election under Section 341(f)
of the Code.
(vi) The Company's Financial Statements for the period from
July 1, 1996, through June 30, 1997, include accruals for Taxes not
yet due and payable in appropriate amounts based on the Company's
experience and its historical practices, which accruals are, to the
Knowledge of the Seller, adequate.
(j) TITLE TO ASSETS. The Company has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it, or
shown in the Financial
-16-
Statements or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since June 30, 1997, and except for Permitted
Encumbrances.
(k) REAL PROPERTY. The Company does not own any real property.
SECTION 4A(k) of the Seller's Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Company. The Seller
has delivered to the Buyer correct and complete copies of the leases and
subleases listed in SECTION 4A(k) of the Seller's Disclosure Schedule (as
amended to date). Except as disclosed on SECTION 4A(k) of the Seller's
Disclosure Schedule, with respect to each lease and sublease listed in
SECTION 4A(k) of the Seller's Disclosure Schedule:
(i) To the Knowledge of Seller, the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect;
(ii) To the Knowledge of Seller, the lease or sublease will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) The Company is not in material breach or default of any
lease or sublease, and to the Seller's Knowledge, no third party to
any such lease or sublease is in material breach or material default,
and to the Seller's Knowledge, no event has occurred which, with
notice or lapse of time or both, would constitute a material breach or
material default or permit termination, modification, or acceleration
thereunder;
(iv) with respect to each sublease, to the Seller's Knowledge,
the representations and warranties set forth in subsections (i)
through (iii) above are true and correct with respect to the
underlying lease; and
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold, except Customarily Permitted Liens.
(l) TANGIBLE ASSETS. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of its businesses as presently conducted. Each such tangible asset is
suitable for the purpose for which it is presently used.
(m) INVENTORY. The Company does not carry or maintain any inventory.
(n) CONTRACTS. SECTION 4A(n) of the Seller's Disclosure Schedule
lists the following contracts and other agreements currently in effect to
which the Company is a party:
-17-
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $15,000 per annum;
(ii) any agreement (or group of related agreements) for the
furnishing or receipt of services, the performance of which will
extend over a period of more than one year from the Closing Date or
involve consideration in excess of $15,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$15,000 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with Seller or any Affiliate of Seller
(other than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any written agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $15,000, or providing
severance benefits;
(ix) any agreement under which it has advanced or loaned any
amount to any of its directors, officers or employees outside the
Ordinary Course of Business;
(x) any agreement under which the consequences of a default or
termination would reasonably be expected to result in a $30,000
decrease in the Company's revenues during any 12-month period, or a
$10,000 reduction in the Company's earnings during any 12-month
period; or
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $15,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in SECTION 4A(n) of the Seller's Disclosure
Schedule (as amended to date) and a written summary setting forth the terms
and conditions of each oral agreement referred to in SECTION 4A(n) of the
Seller's Disclosure Schedule. With respect to each such agreement: (A) to
the Seller's Knowledge, the agreement is legal, valid, binding,
enforceable, and in full
-18-
force and effect; (B) the Company is not , nor to the Seller's Knowledge is
any other party in breach or default, and to the Seller's Knowledge, no
event has occurred which with notice or lapse of time or both would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement, and (C) the Company has not repudiated
any provision of any such agreement nor to the Seller's Knowledge has any
other party repudiated any provision of any such agreement.
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Company are properly recorded on each Accounts Receivable Report
delivered to the Buyer, reflected properly on the Company's books and
records and are properly due and owing.
(p) POWERS OF ATTORNEY. Except as disclosed on SECTION 4A(p) of the
Seller's Disclosure Schedule, there are no outstanding powers of attorney
executed on behalf of the Company.
(q) INSURANCE. SECTION 4A(q) of the Seller's Disclosure Schedule
lists each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Company is currently a party, copies of which
have been furnished to the Buyer.
(r) LITIGATION. SECTION 4A(r) of the Seller's Disclosure Schedule
sets forth each instance in which the Company (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the Knowledge of the Seller, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court of quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
(s) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
disclosed on SECTION 4A(s) of the Seller's Disclosure Schedule, neither the
Seller nor any of Seller's Affiliates has been involved in any business
arrangement or relationship with the Company within the past 12 months, and
neither the Seller nor any of Seller's Affiliates owns any asset, tangible
or intangible, with a replacement cost of $1,000 individually or $3,000 in
the aggregate, which is used in the business of the Company.
(t) GUARANTIES. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other
Person.
(u) EMPLOYEES. To the Seller's Knowledge, no executive, key employee,
or group of employees has any plans to terminate employment with the
Company. The Company has not committed any unfair labor practice. The
Seller does not have any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company. SECTION 4A(u) of the Seller's Disclosure Schedule
sets forth by number and employment classification the approximate numbers
of employees employed by the Company as of the date of this Agreement, and
none
-19-
of said employees are subject to union or collective bargaining agreements
with the Company.
(v) EMPLOYEE BENEFITS.
(i) SECTION 4A(v) of the Seller's Disclosure Schedule lists
each Employee Benefit Plan that the Company maintains or to which it
contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all material respects with the applicable
requirements of ERISA and its implementing laws, and the Code.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and
of Code Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each such Employee Benefit Plan which
is an Employee Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are not yet due
have been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the
Company. All premiums or other payments for all periods ending on
or before the Closing Date have been paid with respect to each
such Employee Benefit Plan.
(D) The Company has substantially performed all
obligations, whether arising by operation of law or by contract,
required to be performed by it in connection with such Employee
Benefit Plans, and to Seller's Knowledge, there has been no
default or violation by any other party to such Employee Benefit
Plans.
(E) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which relate to each such Employee Benefit Plan.
-20-
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A)
require the Company to make a larger contribution to, or pay greater
benefits under, any Employee Benefit Plan than it otherwise would or
(B) create or give rise to any additional vested rights or service
credits under any Employee Benefit Plan.
(iii) Each such Employee Benefit Plan has been terminated by the
Company in compliance with all applicable laws on or before the
Closing Date.
(w) BROKERS' FEES. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(x) OPERATION OF BUSINESS. To the Seller's Knowledge (i) all court
reporters that are or have been hired (including independent contractors)
by the Company are qualified to perform the jobs that they are hired to
perform and they are not required by law to obtain any certification to
perform their jobs, (ii) all documents that the Company is or has been
required to maintain, store or handle in connection with conducting its
business are or have been maintained, stored or handled in the manner
agreed to between the Company and its respective clients or in material
conformity with prevailing standards regarding such matters in the
Company's industry, and (iii) the Company performs all aspects and
operations of its business at or above the prevailing standards for the
Company's industry.
(y) DISCLOSURE. To the best knowledge of Seller, the representations
and warranties contained in this SECTION 4A do not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this SECTION
4A not misleading.
B. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARENT. The Parent and
the Buyer jointly and severally represent and warrant to the Seller that the
statements contained in this SECTION 4B are correct and complete as of the date
of this Agreement, except as set forth in the Buyer's Disclosure Schedule
attached hereto as SCHEDULE 4B (the "Buyer's Disclosure Schedule").
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Parent is a
corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Parent is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. Each of the Parent
and its Subsidiaries has full corporate power and authority and all
material licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and to own and use the properties owned
and used by it. SECTION 4B(a) of the Buyer's Disclosure Schedule lists the
directors and officers of the Parent. The Parent has delivered to the
Seller correct and complete copies of the articles of incorporation and
bylaws of the Parent (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the
-21-
stock certificate books, and the stock record books of the Parent are
correct and complete in all material respects. The Parent is not in default
under or in violation of any provision of its articles of incorporation or
bylaws.
(b) AUTHORIZATION OF TRANSACTION. The Parent has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder, including
without limitation with respect to Note 1 and Note 2. The Board of
Directors of the Parent has duly authorized the execution, delivery and
performance of this Agreement and the other agreements and transactions
contemplated hereby, including, without limitation, with respect to SECTION
6(G) hereof , and no other corporate proceedings on the Parent's part are
necessary to authorize this Agreement or the transactions contemplated
hereby. Upon execution and delivery of this Agreement by the Parties
hereto, this Agreement shall constitute legal, valid and binding
obligations of the Parent, enforceable against the Parent in accordance
with its terms, except to the extent that enforcement hereof may be limited
by applicable bankruptcy, reorganization, insolvency or moratorium laws or
other laws or principles of equity affecting the enforcement of creditors'
rights. The Parent represents and warrants that it need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(c) CAPITALIZATION. The entire authorized capital stock, the issued
and outstanding shares and the treasury shares of the Parent are
accurately set forth in SECTION 4B(c) of the Buyer's Disclosure Schedule
together with the changes thereto contemplated by the acquisition of the
Company. All of the issued and outstanding shares of the Parent have been
duly authorized, are validly issued, fully paid, and nonassessable, and all
of the Parent Shares to be issued upon conversion of Note 1 or Note 2 will,
upon conversion thereof in accordance with the terms thereof, and issuance
of the Parent Shares, be validly issued, fully paid and nonassessable.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Parent is subject,
(ii) violate any provision of the articles of incorporation or bylaws of
the Parent, or (iii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other arrangement
to which the Parent is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). The Parent does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
-22-
(e) PARENT FINANCIAL STATEMENTS. Parent has delivered to Seller the
unaudited consolidated balance sheet, unaudited consolidated income
statement, and unaudited consolidated cash flow statement of Parent for the
period commencing January 17, 1997, and ending June 30, 1997 (the "Parent
Financial Statements"). Each of the Parent Financial Statements (i) fairly
represents the financial position of Parent and its consolidated
subsidiaries as of each respective Parent Financial Statement date, and the
results of their operations for the respective periods indicated, and (ii)
were true and correct in all material respects as of the respective dates
thereof, subject to finalization of purchase accounting adjustments in
accordance with GAAP.
(f) LEGAL COMPLIANCE. To the Knowledge of Parent, the Parent has
substantially complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and, to the Parent's Knowledge, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against the Buyer or the
Parent alleging any failure so to comply.
(g) TAX MATTERS. Except as disclosed on SECTION 4B(g) of the Buyer's
Disclosure Schedule:
(i) The Parent has filed all Tax Returns that it was required
to file, and all such Tax Returns were correct and complete in all
material respects. All Taxes shown to be due on the Tax Returns have
been paid or accrued for the Balance Sheet. The Parent is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No written claim has ever been made, and to the
Knowledge of Parent no other claim has ever been delivered to the
Parent, by a Tax authority in a jurisdiction where the Parent does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on the assets of the
Parent that arose in connection with any failure (or alleged failure)
to pay any Tax.
(ii) The Parent has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, stockholder, or other third party.
(iii) There is no dispute or claim concerning any Tax Liability
of the Parent either (A) claimed or raised by any Tax authority in
writing to the Parent or its agents or (B) as to which the Parent and
the directors and officers (and employees responsible for Tax matters)
of the Parent has Knowledge. The Parent has not filed any federal,
state, local, or foreign income Tax Returns with respect to the
Parent.
(iv) The Parent has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
-23-
(v) The Parent has not made an election under Section 341(f) of
the Code.
(h) LITIGATION. SECTION 4B(h) of the Buyer's Disclosure Schedule sets
forth each instance in which the Parent or the Buyer (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the Knowledge of the Parent, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court of quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
(i) EMPLOYEE BENEFITS.
(i) SECTION 4B(i) of the Buyer's Disclosure Schedule lists each
Employee Benefit Plan that the Parent maintains or to which it
contributes. Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of ERISA and its
implementing laws, and the Code. The Company has substantially
performed all obligations, whether arising by operation of law or by
contract, required to be performed by it in connection with such
Employee Benefit Plans, and to Seller's Knowledge, there has been no
default or violation by any other party to such Employee Benefit
Plans.
(j) PARENT'S UNDISCLOSED LIABILITIES. Except as disclosed on SECTION
4B(j) of the Buyer's Disclosure Schedule, the Parent and the Buyer do not
have any Liability (and, to the best of the Parent's Knowledge, there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against either of them
giving rise to any Liability), except for (i) Liabilities reflected in the
then most current Parent Financial Statements (including any notes thereto)
and (ii) Liabilities which have arisen after June 30, 1997 in the Ordinary
Course of Business (none of which results from, arises, out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(k) DISCLOSURE. The representations and warranties contained in this
SECTION 4B do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this SECTION 4B not misleading.
(l) SECURITIES LAWS. Note 1 and Note 2 have not been issued, and upon
conversion thereof the Parent Stock will not be issued, in violation of the
registration requirements of the federal securities laws.
-24-
5. ITEMS TO BE DELIVERED AT CLOSING.
A. SELLER'S CLOSING DELIVERIES. At Closing, Seller shall deliver or cause
to be delivered to Buyer in form and content reasonably acceptable to the
Parties and their counsel:
(i) The stock certificates representing the Subject Shares,
together with appropriate stock powers or such other instruments of
assignment and transfer or otherwise as Buyer shall reasonably request;
(ii) Two (2) counterparts of the Block Employment Agreement executed
by Mr. Block;
(iii) Two (2) counterparts of the Block Noncompetition Agreement
executed by Mr. Block;
(iv) Two (2) counterparts of the Block Finder's Fee Agreement
executed by Mr. Block;
(v) From counsel to the Seller, an opinion in form and substance
acceptable to Buyer, addressed to the Buyer, and dated as of the Closing
Date containing such opinions, assumptions and qualifications as may be
reasonably acceptable to Buyer's legal counsel;
(vi) Two (2) counterparts of a Registration Rights Agreement
executed by Seller in a form similar to those previously entered into by
similarly situated shareholders of Buyer (the "Registration Rights
Agreement");
(vii) Two (2) counterparts of a Subordination Agreement in form and
content reasonably acceptable to Seller, Buyer and the senior lender for
Buyer, executed by Seller (the "TCB Subordination Agreement");
(viii) Two (2) counterparts of a Subordination Agreement in form and
content reasonably acceptable to Seller, Buyer and the Investor, executed
by the Seller (the "Pecks Subordination Agreement");
(ix) Two (2) counterparts of a Contingent Stock Pledge Agreement
executed by Mr. Block pursuant to which Mr. Block pledges the stock of
Buyer to be issued to Mr. Block under Note 1 and/or Note 2, in order to
secure performance of his obligations hereunder (the "Pledge Agreement");
(x) Investor Representation Letters in form and content reasonably
acceptable to Seller and Buyer, duly executed by the Seller;
(xi) Resignation Letters in form and content reasonably acceptable
to Buyer, duly executed by all of the directors and officers of the
Company, and by Xxxxxx X. Block and Xxxxxxx X. Block;
-25-
(xii) Evidence reasonably acceptable to Buyer of the acquisition of
Block Transcription by the Company;
(xiii) Evidence reasonably acceptable to Buyer that the Certificate
and Articles of Incorporation of Block Predecessor were revoked by
Proclamation;
(xiv) Such consents, waivers, estoppel letters or similar
documentation as Buyer shall request, in Buyer's sole discretion, in
connection with the transfer of the Subject Shares; and
(xv) All other items required to be delivered hereunder or as may be
requested which are necessary or would reasonably facilitate consummation
of the transactions contemplated hereby.
Notwithstanding any provisions in this Agreement to the contrary, and
notwithstanding the fact that the Company and Block Transcription are named
parties to the Subordination Agreements, the Subordination Agreements are to be
executed as of Closing by Seller individually and not on behalf of either the
Company or Block Transcription, and Buyer will, following Closing, cause the
Subordination Agreements to be executed by the Company and Block Transcription.
In addition, Seller will put Buyer into full and peaceful possession and
enjoyment of the Assets and the Leased Assets immediately upon the occurrence of
the Closing.
B. BUYER'S CLOSING DELIVERIES. At Closing, Buyer shall deliver or cause
to be delivered to Seller, or a designated by Buyer and the senior lender for
Buyer;
(i) The Cash Payment;
(ii) Note 1 executed by Buyer;
(iii) Note 2 executed by Buyer;
(iv) Two (2) counterparts of the TCB Subordination Agreement
executed by Buyer and the senior lender for Buyer;
(v) Two (2) counterparts of the Pecks Subordination Agreement
executed by Buyer and the Investor;
(vi) Two (2) counterparts of the Block Noncompetition Agreement
executed by Buyer;
(vii) Two (2) counterparts of the Block Employment Agreement executed
by Buyer;
(viii) Two (2) counterparts of the Block Finder's Fee Agreement
executed by Parent;
-26-
(ix) Two (2) counterparts of the Pledge Agreement executed by Buyer;
(x) Two (2) counterparts of the Registration Rights Agreement
executed by Buyer;
(xi) From counsel to Buyer, an opinion in form and substance
acceptable to Seller, addressed to the Seller, and dated as of the Closing
Date containing such opinions, assumptions and qualifications as may be
reasonably acceptable to Buyer's legal counsel;
(xii) Certified resolutions of the respective Boards of Directors of
Buyer and Parent, authorizing the execution, delivery and performance of
this Agreement and all documents, instruments and agreements contemplated
herein to be executed by the Buyer and Parent, respectively; and
(xiii) All other items required to be delivered hereunder or as may be
requested or which are necessary or would reasonably facilitate
consummation of the transactions contemplated
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing:
A. GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under SECTION 8 below).
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand to which the other
Party is not subject (either by virtue of the indemnification provisions
contained in SECTION 7 below or otherwise) in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company, the other Party will cooperate with him or it and his or
its counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under SECTION 8 below). The Buyer
acknowledges and agrees that if Seller is individually brought into any
litigation in connection with the Company, Seller shall be indemnified to the
maximum extent that directors and officers of corporations are permitted to be
indemnified under the laws of the District of Columbia, for all costs of
litigation as well as any judgments or settlement amounts paid. Notwithstanding
the foregoing, Seller shall not be entitled to indemnification to the extent of
any of the following:
-27-
(i) suit against Seller with respect to a matter for which Seller is
required to indemnify the Buyer pursuant to this Agreement; or
(ii) to the extent that Seller is found to have engaged in gross
negligence or willful misconduct.
C. CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement and all of the other
agreements executed in connection herewith and except in connection with
handling all of the litigation described on SECTION 4A(r) of the Seller's
Disclosure Schedule. In the event that Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, Seller will notify the Buyer promptly of
the request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this SECTION 6C. If, in the
absence of a protective order or the receipt of a waiver hereunder, Seller is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, Seller may disclose the
Confidential Information to the tribunal; PROVIDED, HOWEVER, that Seller shall
use his reasonable best efforts to obtain, at the reasonable request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate; provided, however that all of Seller's costs including
but not limited to legal fees shall be paid by the Buyer. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
D. ACCOUNTS RECEIVABLE. Seller shall, during the term of his employment
by the Company, use reasonable efforts to assist the Company in collecting the
Accounts Receivable in the Ordinary Course of Business.
E. PARENT'S SHAREHOLDERS' AGREEMENT. Notwithstanding any provision of
this Agreement, Note 1 or Note 2 to the contrary, the Parties hereby acknowledge
and agree that no Parent Shares can or will be issued upon conversion of Note 1
or Note 2 unless and until Seller becomes a party to a Shareholders' Agreement
in the form required by the Parent (the "Shareholders' Agreement") (provided
that this will not be required with respect to any Parent Stock issued after the
Public Offering), gives appropriate investment representations concerning
knowledge about the investment, and acknowledges applicable restrictions on
transferability, in form and content reasonably acceptable to the Parent, and
substantially in the form of the investor representation letter to be executed
by the Seller and delivered at Closing.
F. REMOVAL FROM GUARANTY. The Parties hereby acknowledge and agree that
the Company currently has a line of credit from Xxxxxx Xxxxx Bank in a maximum
principal amount of $25,000, and a term loan with an outstanding principal
amount of $31,250 or less. Buyer will cause the personal guaranty of Seller of
these credit facilities to be terminated at Closing.
-28-
G. FUNDING OF NOTE PAYMENTS. Parent hereby agrees that upon consummation
of any Public Offering resulting in proceeds to the Parent of at least forty
million dollars ($40,000,000), Parent will, subject to the terms and conditions
of the TCB Subordination Agreement, within five (5) business days after the
receirees to issue to Seller any Parent Shares then issuable upon conversion of
Note 2, in accordance with the terms and provisions thereof. Parent and Buyer
hereby acknowledge reliance by Seller upon the covenants and agreements of
Parent in this SECTION 6(G) in entering into the transactions contemplated
herein, and that Seller would not have entered into this Agreement but for the
covenants and agreements of Parent set forth in this SECTION 6G.
H. AUTOMOBILE DEBT. Seller hereby assumes as of the Effective Date, and
hereby agrees to pay and indemnify Buyer and the Company with respect to, all of
the outstanding indebtedness relating to the automobiles transferred to the
Seller on or about the Closing Date.
7. INDEMNIFICATION.
A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for two years thereafter except that the representations and warranties
contained in SECTION 4A(i), and SECTION 4A(j) which shall survive for three
years after the Closing.
B. INDEMNIFICATION PROVISIONS.
(i) BY THE SELLER. Seller shall indemnify, save, defend and hold
harmless the Buyer and the Buyer's shareholders, directors, officers, partners,
agents and employees (and in the event the Buyer assigns its right, title and
interest hereunder to a corporation, which shall be permitted hereunder, such
assignee) (collectively, the "Buyer Indemnified Parties") from and against any
and all costs, lawsuits, losses, Liabilities, deficiencies, claims and expenses,
including interest, penalties, reasonable attorneys' fees and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
(collectively referred to herein as "Damages"), incurred in connection with or
arising out of or resulting from or incident to any breach of (or in the event
any third party alleges facts that, if true, would mean the Seller has breached)
any covenant, warranty or representation made by the Seller in or pursuant to
this Agreement or any other agreement delivered pursuant to this Agreement or in
any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by the Seller or any of Seller's Affiliates pursuant to the terms of
this Agreement; provided, however, that the Seller shall not be liable for any
such Damages to the extent,
-29-
if any, such Damages result from or arise out of a breach or violation of this
Agreement by any Buyer Indemnified Parties.
(ii) BY THE BUYER. The Buyer and Parent, jointly and severally,
shall indemnify, save, defend and hold harmless the Seller and his agents,
assignees and heirs (collectively, the "Seller Indemnified Parties") from and
against any and all Damages incurred in connection with or arising out of or
resulting from or incident to any breach of (or in the event any third party
alleges facts that, if true, would mean the Buyer or Parent has breached), any
covenant, warranty or representation made by the Buyer or Parent in or pursuant
to this Agreement or any other agreement delivered pursuant to this Agreement
contemplated hereby or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by the Buyer or Parent under this
Agreement; provided, however, that neither the Buyer nor the Parent shall be
liable for any such Damages to the extent, if any, such Damages result from or
arise out of a breach or violation of this Agreement by the Seller.
(iii) DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days after the service of the
citation or summons) ("Notice of Action"); provided that the failure of any
indemnified Party to give timely notice shall not affect its rights to
indemnification hereunder to the extent that the indemnified Party demonstrates
that the amount the indemnified Party is entitled to recover exceeds the actual
damages to the indemnifying Party caused by such failure to so notify within ten
(10) days; provided further that a Notice of Action must be sent to the
indemnifying Party within ten (10) days after the applicable survival period as
provided in SECTION 7(A) of this Agreement. The indemnifying Party may elect to
compromise or defend any such asserted liability and to assume all obligations
contained in this SECTION 7(B) to indemnify the indemnified Party by a delivery
of notice of such election ("Notice of Election") within ten (10) days after
delivery of the Notice of Action. Upon delivery of the Notice of Election, the
indemnifying Party shall be entitled to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying Party's sole
cost, risk and expense, and such indemnified Party shall cooperate in all
reasonable respects, at the indemnifying Party's sole cost, risk and expense,
with the indemnifying Party and such attorneys in the investigation, trial, and
defense of such lawsuit or action and any appeal arising therefrom; provided,
however, that the indemnified Party may, at its own cost, risk and expense,
participate in such investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. If the Notice of Election is delivered to the
indemnified Party, the indemnified Party shall not pay, settle or compromise
such claim without the indemnifying Party's consent, which consent shall not be
unreasonably withheld. If the indemnifying Party elects not to defend the claim
of the indemnified Party or does not deliver to the indemnified Party a Notice
of Election within ten (10) days after delivery of the Notice of Action, the
indemnified Party may, but shall not be obligated to defend, or the indemnified
Party may compromise or settle (exercising reasonable business
-30-
judgment) the claim or other matter on behalf, for the account, and at the risk,
of the indemnifying Party.
(IV) THIRD PARTY CLAIMS. The provisions of this SECTION 7 are not
limited to matters asserted by the Parties, but cover costs, losses,
liabilities, damages, lawsuits, claims and expenses incurred in connection with
third party claims.
(V) LIMITATION ON CLAIMS. Notwithstanding any provision of this
Agreement neither the Buyer and Parent, collectively, nor the Seller shall be
required to pay the Seller Indemnified Parties collectively, or the Buyer
Indemnified Parties, collectively, respectively, any amount with respect to any
claim for Damages under this SECTION 7(B) or with respect to any claim for
Damages due to a claim of breach or default under this Agreement which is not a
claim for indemnification, until the Damages which the Buyer Indemnified
parties, collectively, or the Seller Indemnified Parties, collectively, as
applicable, suffered under this Agreement (including indemnification and other
claims) aggregate at least $25,000, at which time an in such event the Buyer
Indemnified Parties, collectively, or the Seller Indemnified Parties,
collectively, as applicable, shall be entitled to receive payment for the entire
amount of aggregate Damages to the extent they exceed $25,000. Neither the Buyer
Indemnified Parties, collectively, nor the Seller Indemnified Parties,
collectively, shall be entitled to indemnification or payment of other claims
hereunder in an aggregate amount in excess of the Purchase Price.
8. REMEDIES.
A. SPECIFIC PERFORMANCE. Each of the Parties hereby agrees that the
transactions comtemplated by this Agreement are unique, and that each Party
shall have, in addition to any other legal or equitable remedy available to it,
the right to enforce this Agreement by decree of specific performance. If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorney' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it, he or they may be entitled at law
or equity. The rights and remedies granted herein are cumulative and not
exclusive of any other right or remedy granted herein or provided by law.
B. OFFSET. To the extent permitted by applicable law, all amounts due
and owing to Seller or any Affiliate of Seller under this Agreement or any
document, instrument, or agreement executed in connection herewith or therewith,
including without limitation Note 1 and/or Note 2, shall be subject to offset by
the Buyer to the extent of any damages incurred as a result of the breach by
Seller or any Affiliate of Seller of this Agreement or any document, instrument,
or agreement executed by Seller or any Affiliate of a Seller in connection
herewith, upon the earlier to occur of (i) resolution of any disputes by
arbitration or mediation or a final ruling by a trial court in the event of
litigation, or (ii) the expiration of three (3) months after Buyer notifies
Seller of its damages and intent to offset, after which three-month period
payments shall be made into an escrow account on reasonably standard terms
(including indemnification and release of the escrow agent) pending final
resolution of the matters in controversy. All fees and expenses of the
-31-
escrow agent or otherwise arising out of the escrow arrangement, shall be
divided evenly by Seller, on the one hand, and Buyer and Parent, collectively,
on the other. In the event of a conversion of Note 1 and/or Note 2 prior to a
final resolution, only such number of Parent Shares as are reasonably required
to compensate the Buyer Indemnified Parties for their alleged Damages shall be
held in escrow, and in any event, such Parent Shares shall be held subject to
the Pledge Agreement. The Seller acknowledges and agrees that but for the right
of offset contained in this Agreement, the Buyer would not have entered into
this Agreement or any of the transactions comtemplated herein. If any legal
action or other proceeding is brought for the enforcement of this Agreement, or
any document, instrument, or agreement executed in connection herewith, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement or any document,
instrument, or agreement executed in connection herewith, the successful or
prevailing Party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding. For purposes of this SECTION
8(B), if the claimant recovers more than one-half of its alleged Damages, then
it shall be deemed the prevailing Party, and if the claimant recovers one-half
of its alleged Damages or less, then the other Party shall be deemed the
prevailing Party.
9. MISCELLANEOUS.
A. PUBLIC ANNOUNCEMENTS. No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement
(including the documents referred to herein) without the prior written approval
of the Buyer and the Seller; provided, however, that any Party may make any
public disclosure it believes in good faith upon the advice of legal counsel it
is required by applicable law (in which case the disclosing Party will use its
best efforts to advise the other Parties prior to making the disclosure).
B. 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.
C. ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understanding, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder (x) to one or more of
its Affiliates, and (y) to one or more financial institutions lending funds to
the Buyer for the purpose of financing the purchase of the Subject Shares
hereunder and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
-00-
X. XXXXXXXXXXXX. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. HEADINGS. 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.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claims or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by overnight courier, and addressed to the
intended recipient as set forth below:
If to Mr. Block: Xxxxxx X. Block
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000
With a copy to: Xx. Xxxx Xxxxxxx
Gnessin & Xxxxxxx
0000 00xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
If to the Buyer: Litigation Resources of America-Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attn: Xx. Xxxxxxx X. Xxxxxx, Chief Executive Officer
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attn: Xxxxx X. Xxxxx, Xx.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above 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 intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
-33-
H. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE DISTRICT OF
COLUMBIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
I. AMENDMENTS AND WAIVERS. No amendments of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
J. 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.
K. EXPENSES. Any costs or expenses (including legal or accounting fees
and expenses) to be paid by the Company in connection with this Agreement and
the transactions contemplated herein shall be paid by the Company prior to
Closing, or accrued in the Effective Date Financial Reports.
L. CONSTRUCTION. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
N. ARBITRATION. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if said dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this SECTION 9(N). Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions comtemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter
-34-
into this Agreement, shall be settled by binding arbitration. There shall be one
arbitrator to be mutually agreed upon by the Parties involved in the controversy
and to be selected from the National Panel of Commercial Arbitrators (or
successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this SECTION 9(N), the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages. Any arbitration
commenced by Seller hereunder shall be held at the offices of Xxxxx, Xxxxx &
Xxxxxx in Houston, Texas or such other location in metropolitan Houston, Texas,
as may be selected by Parent. Any arbitration commenced by Buyer or Parent
hereunder shall be held at the offices of Gnessin & Xxxxxxx in Washington, D.C.,
or such other location in metropolitan Washington, D.C. or Pittsburgh,
Pennsylvania, as may be selected by Seller. Expenses related to the arbitration,
including counsel fees, shall be borne by the Party incurring such expenses
except to the extent otherwise provided herein. The fees of the arbitrator and
of the American Arbitration Association, if any, shall be divided equally among
the Parties involved in the controversy. Judgment upon the award rendered by the
arbitrator (which may, if deemed appropriate by the arbitrator, include
equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The arbitrator
shall award the prevailing Party in any arbitration proceeding recovery of its
attorneys' fees and other costs in connection with the arbitration from the non-
prevailing Party. Injunctive relief can be sought in a court of appropriate
jurisdiction.
O. JURISDICTION AND VENUE. Each Party hereby agrees that venue for any
litigation commenced by the Seller shall be commenced in Houston, Xxxxxx County,
Texas, and that venue for any litigation commenced by Buyer or Parent with
respect to the subject matter of this Agreement shall be in Washington, D.C.
Each Party hereby irrevocably submits to personal jurisdiction in Houston,
Xxxxxx County, Texas and Washington, D.C., as applicable, for purposes of this
SECTION 9(O). Each Party hereby waives all objections to personal jurisdiction
and venue as described in this SECTION 9(O) for purposes of such litigation.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
BUYER:
-----
LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC.
a New York corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxx, Chief Executive Officer
-35-
SELLER:
------
/s/ Xxxxxx X. Block
----------------------------------------------
XXXXXX X. BLOCK
PARENT:
------
LITIGATION RESOURCES
OF AMERICA, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxx, Chief Executive Officer
SCHEDULES AND EXHIBITS
Schedule 3A - Exceptions to the Seller's Representations and Warranties
Schedule 3B - Exceptions to the Buyer's Representations and Warranties
Schedule 4A - Seller's Disclosure Schedule
Schedule 4B - Buyer's Disclosure Schedule
-36-
