EXHIBIT 2
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER made as of August 1, 1998 (the
"Agreement") by and among XXXXX CAPITAL LTD., a Delaware corporation having its
registered office at Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle, Delaware ("Xxxxx"), XXXXX HOLDINGS LLC, a
Delaware limited liability company having its registered office at Corporate
Service Company, 0000 Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle,
Delaware ("Xxxxx Holdings"), CONVERSION SERVICES INTERNATIONAL, INC., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxx Xxxxxx,
Xxxx Xxxxxxx, Xxx Xxxxxx 00000 ("CSI"), XXXXX XXXXXX, an individual residing at
00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Xxxxxx") and XXXXX XXXXXXX,
an individual residing at 00 Xxxx Xxxxx, Xxxx Xxxxxx, Xxx Xxxxxx 00000
("Peipert"; Xxxxxx and Xxxxxxx are hereinafter jointly referred to as
"Sellers"),
WITNESSETH:
WHEREAS, Xxxxx Holdings, CSI, Xxxxxx and Xxxxxxx have entered into an
Agreement dated as of April 8, 1998, as amended by an Agreement dated July 21,
1998 (hereinafter jointly referred to as the "Preliminary Agreement"), pursuant
to which the parties thereto set forth, among other things, the main points
which the parties have agreed regarding the proposed amalgamation of the
business of CSI into Xxxxx Holdings, which points are included in this
Agreement; and
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WHEREAS, Xxxxx is a majority-owned subsidiary of Xxxxx Holdings, and
will be at the Closing (as hereinafter defined) a wholly-owned subsidiary of
Elligent Consulting Group, Inc., a Nevada corporation ("Elligent"); and
WHEREAS, Xxxxx Holdings has assigned its rights and duties under the
Preliminary Agreement to Xxxxx; and
WHEREAS, Xxxxx and Sellers have agreed that it is advisable and in
their best interests to provide that CSI be merged into Xxxxx pursuant to the
General Corporation Law of the State of Delaware and pursuant to the provisions
of this Agreement (the "CSI-Xxxxx Merger") and the Certificate of Merger (as
hereinafter defined); and
WHEREAS, Xxxxx Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Elligent, intends to merge into Xxxxx, with Xxxxx
being the surviving corporation and a wholly-owned subsidiary of Elligent
immediately after such merger (the "Xxxxx-Elligent Merger"); and
WHEREAS, Elligent has a class of its common stock registered under the
Securities Act of 1933 (the "Securities Act"), and will issue new unregistered
shares of its common stock, par value $.001 per share (such shares, whether
registered or not, hereinafter referred to as "Elligent Common Stock"), to Xxxxx
Holdings in connection with the Xxxxx-Elligent Merger; and
WHEREAS, Sellers own all of the Outstanding CSI Common Stock (as
hereinafter defined); and
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WHEREAS, the parties intend for the CSI-Xxxxx Merger to constitute in
part a tax-free exchange under Section 368 of the Internal Revenue Code of 1986,
as amended, and in compliance with applicable state law;
NOW, THEREFORE, to effect the CSI-Xxxxx Merger and in consideration of
the premises and the mutual agreements herein contained, the parties hereto
agree as follows:
Section 1. Merger of CSI into Xxxxx and Exchange of CSI Stock
1.01. Constituent and Surviving Corporations. Xxxxx and CSI will be
the constituent corporations to the CSI-Xxxxx Merger. At the Effective Time
(which shall mean the time at which the Certificate of Merger substantially in
the form attached hereto as Exhibit 1.01, duly executed in accordance with
Section 251(c) of the General Corporation Law of the State of Delaware, shall be
filed in the office of the Secretary of State of the State of Delaware) CSI
shall be merged into Xxxxx in accordance with the General Corporation Law of the
State of Delaware, and Xxxxx shall be the surviving corporation of the CSI-Xxxxx
Merger (hereinafter sometimes called the "Surviving Corporation"). The name,
identity, existence, rights, privileges, powers, franchises, properties and
assets of Xxxxx shall continue unaffected and unimpaired by the CSI-Xxxxx
Merger. At the Effective Time the identity and separate existence of CSI shall
cease, and all of the rights, privileges, powers, franchises, properties and
assets of CSI shall be vested in Xxxxx.
1.02. Certificate of Incorporation. The Certificate of Incorporation
of Xxxxx, as in effect immediately prior to the Effective Time, shall thereafter
continue in full force and effect as the Certificate of Incorporation of the
Surviving Corporation until further amended as provided therein or by law. The
By-Laws of Xxxxx in effect at the Effective Time shall be the By-Laws of the
Surviving Corporation, until amended or repealed as provided therein or by law.
1.03. Directors. At the Effective Time, the following persons shall
become directors of the Surviving Corporation, each of whom shall hold office
until his successor has been elected and qualified, or as otherwise provided in
the By-Laws of the Surviving Corporation:
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
1.04. Conversion of Common Stock of Constituent Corporations. At the
Effective Time, each of the shares of the Outstanding CSI Common Stock shall, by
virtue of the CSI-Xxxxx Merger and without any action on the part of the holder
thereof, be converted into the right to receive:
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(a) ONE THOUSAND FIVE HUNDRED DOLLARS ($1,500.00) per share in cash
(the "Cash"); for the avoidance of doubt, the aggregate amount of such cash
payment to be made pursuant to this clause (a) shall be ONE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($1,500,000);
(b) EIGHT THOUSAND FIVE HUNDRED DOLLARS ($8,500.00) in installment
debt of Elligent and Xxxxx, payable, with interest, in accordance with the
terms and conditions of two (2) Secured Installment Promissory Notes (the
"Installment Promissory Notes") attached hereto as Exhibit 1.04(b)-1 and
Exhibit 1.04(b)-2 (which provide, in part, that at the election of Elligent
one installment of such principal in the amount of $1,500.00 per share of
Outstanding CSI Common Stock may be paid by the delivery of newly issued
Restricted Shares [as hereinafter defined] of Elligent Common Stock [the
"Conversion Stock"] as determined in accordance with Section 1.05 hereof);
for the avoidance of doubt, the aggregate principal amount of the
Installment Promissory Notes to be made pursuant to this clause (b) shall
be EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000);
(c) ONE HUNDRED (100) shares of newly issued Restricted Shares of
Elligent Common Stock (the "Additional Stock"); for the avoidance of doubt,
the aggregate amount of such shares to be issued pursuant to this clause
(c) is ONE HUNDRED THOUSAND (100,000) shares; and
(d) ONE THOUSAND (1,000) shares of newly issued Restricted Shares of
Elligent Common Stock (the aggregate amount of such shares to be issued
pursuant to this clause (d) is herein referred to as the "Merger Stock");
for the avoidance of doubt, the aggregate amount of such shares to be
issued pursuant to this clause (d) is ONE MILLION (1,000,000) shares.
All of the foregoing consideration (i.e., the Cash, the Installment Promissory
Notes, the Conversion Stock, if any, and the Merger Stock) is hereinafter
sometimes referred to as the "Merger Consideration".
1.05. Elligent Common Stock.
(a) In the event that Elligent exercises its option under Sub-Section
1.04(b) to make payment in Conversion Stock the following shall apply:
(i) The value of the Conversion Stock for purposes of
determining the amount of shares thereof to be delivered to
Sellers pursuant to Sub-Section 1.04(b) shall be deemed to
be the average closing price per share, less twenty-five
percent (25%), of the publicly traded Elligent Common Stock
for the twenty (20) Business Days (as hereinafter defined)
immediately preceding the date on which payment is due
pursuant to Sub-Section 1.04(b).
(ii) Sellers shall have the right, upon twenty (20) Business Days
prior written notice to Elligent (such notice to be given
not earlier than December 15,
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1998 and not later than September 1, 1999), to require that
Elligent provide a purchaser for all (but not less than all)
of the shares of Conversion Stock delivered to Sellers
pursuant to Sub-Section 1.04(b) for an aggregate price of
ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000)
("Sellers' Notice"). Such purchase shall be effected within
the first fifteen (15) Business Days after the expiration of
the 20-day notice period set forth in Sellers' Notice.
(iii) Elligent shall have the right, upon twenty (20) Business
Days prior written notice to Sellers (such notice to be
given not earlier than February 1, 1999 and not later than
September 1, 1999), to require that Sellers sell to Elligent
all (but not less than all) of the shares of Conversion
Stock delivered to Sellers pursuant to Sub-Section 1.04(b)
for an aggregate price of ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000) ("Elligent's Notice"). Such sale shall
be effected within the first fifteen (15) Business Days
after the expiration of the 20-day notice period set forth
in Elligent's Notice.
(b) "Restricted Shares" for purposes of this Agreement shall mean
shares of Elligent Common Stock, the transfer of which shall be subject to (i)
the same restrictions and holding periods as the shares of Elligent Common Stock
received by Xxxxx Holdings in connection with the Xxxxx-Elligent Merger, and
(ii) the representations of Sellers set forth in Sub-Section 3.01(bb).
(c) "Business Day" for purposes of this Agreement shall mean any day
except Saturday, Sunday or a statutory holiday in the State of New York or the
State of New Jersey.
1.06. The Adjustment Shares. If during the ninety (90) days
immediately following the consummation of the CSI-Xxxxx Merger, the average
daily closing price (as reported by Bloomberg) of the publicly-traded shares of
Elligent Common Stock for the ten (10) Business Days with the ten (10) highest
closing prices during such period (the "Highest Average Price") is less than ten
dollars ($10) per share, then Sellers shall receive within five (5) Business
Days of the end of such 90-day period an amount of additional shares of Elligent
Common Stock (the "Adjustment Shares") such that Sellers shall have received an
amount of Merger Stock and Adjustment Shares having an aggregate value equal to
TEN MILLION DOLLARS ($10,000,000) calculated at such Highest Average Price;
notwithstanding the foregoing, the aggregate amount of Merger Stock, Additional
Stock and Adjustment Shares to be received by Sellers shall not exceed ten
percent (10%) of the aggregate amount of the shares of Elligent Common Stock
issued and outstanding at the Closing Date. Nothing in this Sub-Section 1.06
shall require Sellers to reduce their aggregate 1,100,000 shares of Elligent
Common Stock and shares of Conversion Stock, if any, which they are receiving as
part of the Merger Consideration.
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Section 2. Closing and Further Assurances
2.01. Closing Date; Time; Location. The "Closing Date" as such term is
used herein shall mean the date on which the consummation of the CSI-Xxxxx
Merger shall occur (such consummation herein referred to as the "Closing"),
which date shall be September 10, 1998 or at such other date as the parties
hereto shall agree upon. The parties shall cause the Effective Time to occur
contemporaneously with the Closing. The Closing shall take place at 10:00 a.m.
(New York Time) on the Closing Date, at the offices of Stairs Xxxxxxxxxx Xxxxxx
& Xxxxx, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx.
2.02. Further Assurances. If at any time and from time to time after
the Closing Date, the Surviving Corporation or Xxxxx Holdings shall consider or
be advised that any other instruments of sale, transfer, conveyance, assignment
or confirmation are necessary or desirable (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of CSI or (ii) otherwise
to carry out the purposes of this Agreement, CSI and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such instruments and to do all acts
necessary or desirable to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and the officers and directors of the
Surviving Corporation and Xxxxx Holdings are hereby authorized in the name of
CSI or otherwise to take any and all such action. At any time and from time to
time after the Closing Date, at the request of Sellers and without further
consideration, the Surviving Corporation and Xxxxx Holdings will execute and
deliver, and Xxxxx Holdings shall cause Elligent to execute and deliver, such
other instruments evidencing the Sellers' security interests under the Pledge
Agreement (as hereinafter defined), and such other instruments of sale,
transfer, conveyance, assignment and confirmation and take, or cause to be
taken, such other action as Sellers may reasonably deem necessary or desirable
in order to transfer, convey and assign more effectively to the Sellers, and to
confirm Seller's title to, the Merger Consideration.
Section 3. Representations and Warranties of Sellers and CSI
3.01. Representations and Warranties of Sellers. Sellers, and each of
them, and CSI jointly and severally represent and warrant to and agree with
Xxxxx and Xxxxx Holdings that:
(a) Corporate Existence. On the Closing Date, CSI will be a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, will have all requisite corporate power and
authority to conduct its business and will be entitled to carry on its
business as now being conducted and to own, lease and operate the
properties used in connection therewith as and in the places where the
business is now conducted and the properties are owned, leased or operated.
Prior to the Closing, the Certificate of Restoration and Revival of the
Certificate of Incorporation attached hereto as Exhibit 3.01(a)-1 shall
have been filed with the Secretary of State of the State of Delaware. CSI
is qualified, licensed or domesticated as a foreign corporation in the
States of New York and New Jersey, and there is no other jurisdiction in
which either the business of CSI as presently operated or property owned or
leased by CSI makes any such qualification or authorization necessary,
except states or jurisdictions where a failure to qualify can subsequently
be
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remedied without penalty, loss of right to enforce a claim or other loss or
liability to CSI or Xxxxx. Prior to the Closing, the Application for
Authority of CSI attached hereto as Exhibit 3.01(a)-2 shall have been filed
with the Secretary of State of the State of New York. The copies of the
Certificate of Incorporation and By-Laws of CSI attached hereto as Exhibit
3.01(a)-3 and Exhibit 3.01(a)-4 are true, correct and complete copies
thereof as now in full force and effect.
(b) Subsidiaries. Except for Doorways, Inc., a New York corporation
("Doorways"), CSI does not own or control, directly or indirectly, any
record or beneficial interest in any corporation, association or other
business enterprise. CSI is not a participant in any joint venture,
partnership or similar arrangement. The copies of the Certificate of
Incorporation and By-Laws of Doorways attached hereto as Exhibit 3.01(b)-1
and Exhibit 3.01(b)-2 are true, correct and complete copies thereof as now
in full force and effect.
(c) Capitalization and Voting Rights.
(i) The total authorized capital stock of CSI consists of 3,000
shares of Common Stock, without par value ("CSI Common
Stock"), of which 1,000 shares are, and on the Closing Date
will be, duly and validly authorized and issued, fully paid
and nonassessable, and free of restrictions on transfer
other than restrictions on transfer under federal and state
securities laws ("Outstanding CSI Common Stock"). CSI has
not authorized any capital stock or other securities other
than the CSI Common Stock. CSI has not issued any capital
stock or other securities other than the Outstanding CSI
Common Stock. There are no outstanding subscriptions,
options, warrants, calls, agreements or other rights
(including conversion or pre-emptive rights) to subscribe
for, purchase or otherwise acquire from either of Sellers or
CSI any shares of the Outstanding CSI Common Stock or other
securities of CSI.
(ii) CSI is not a party or subject to any agreement or
understanding, and, to the best of the knowledge of either
of Sellers, there is no agreement or understanding between
any persons and/or entities which affects or relates to
voting by a shareholder or director of CSI in such capacity.
(d) Ownership of Outstanding CSI Common Stock. Sellers own all of the
Outstanding CSI Common Stock, free and clear of any and all liens, pledges,
hypothecations, rights (including conversion or pre-emptive rights),
options, warrants, puts, calls, transfer restrictions and other charges and
encumbrances other than as set forth or provided for in this Agreement.
(e) No Conflict. Except as set forth on Schedule 3.01(e), neither the
execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement, nor the fulfillment of or
compliance with the terms, conditions or provisions thereof (i) will
conflict with or result in a breach of any relevant statute, law,
ordinance, rule or regulation applicable to either of Sellers or CSI, or
the terms, conditions or provisions of the Certificate of Incorporation or
By-Laws of CSI or any mortgage, indenture, lease, agreement, or other
instrument, or any permit, concession, grant, franchise, license, judgment,
order, or decree to which either of Sellers or CSI is
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a party or by which any of them is or may be bound, or (ii) will
constitute, with the giving of notice or the passage of time or both, a
default by either of Sellers or CSI under any of the foregoing, or (iii)
will accelerate the maturity of or otherwise modify any obligation of
either of Sellers or CSI under any of the foregoing.
(f) Authorization. All corporate action on the part of CSI, its
officers, directors and stockholders, and all action on the part of
Sellers, necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of CSI and Sellers under this
Agreement, and consummation of the CSI-Xxxxx Merger as contemplated in this
Agreement have been taken or will be taken prior to the Closing Date, and
this Agreement constitutes a valid and legally binding obligation of CSI
and each of Sellers, enforceable in accordance with its terms.
(g) Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any other person is
required in connection with the execution and delivery of this Agreement by
either of Sellers or by CSI, or the consummation of the transactions
contemplated by this Agreement other than as contemplated by this
Agreement.
(h) Permits. CSI has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect
the business, properties, prospects, or financial condition of CSI. CSI is
not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
(i) Compliance with Laws. Except as set forth on Schedule 3.01(i), CSI
has complied in all material respects with all applicable federal, state
and local laws, regulations and ordinances affecting its business,
including, but not limited to, such laws, regulations and ordinances
regarding air or water pollution, other environmental protection,
occupational safety and health or equal employment opportunity.
(j) Financial Statements. Attached hereto as Exhibit 3.01(j)-1 are
true, correct and complete copies of the Balance Sheets of CSI as at
December 31, 1995, 1996 and 1997, together with the Statements of Earnings
and Retained Earnings and the Statements of Cash Flows and Notes thereto
for each such 12 month period then ended (hereinafter collectively the
"Financial Statements"), all compiled by Xxxxx Xxxxxxxxx & Company LLC,
certified public accountants. Attached hereto as Exhibit 3.01(j)-2 are
true, correct and complete copies of the Balance Sheets of CSI and Doorways
as at June 30, 1998, together with the statements of Profit and Loss for
the six month period then ended (hereinafter collectively the "Interim
Financials"). The Financial Statements and the Interim Financials (i) are
in accordance with the books and records of CSI and Doorways (which books
and records are true, correct and complete in all material respects and
accurately reflect the transactions of the business of CSI and Doorways),
(ii) are true, correct and complete in all material respects and present
fairly the financial condition and results of operations of CSI and
Doorways as at the dates and for the periods indicated, and (iii) except
for the Interim Financials, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby and with each other, except that (y)
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unaudited financial statements may not contain all footnotes required by
generally accepted accounting principles and (z) the Interim Financials are
subject to normal year-end adjustments. CSI and Doorways each maintains,
and will continue to maintain through the Closing Date, a standard system
of accounting established and administered in accordance with generally
accepted accounting principles. The Financial Statements and Interim
Financials shall be subject to Exhibit 3.01(j)-3 and Schedule 3.01(j)-4
attached hereto.
(k) Absence of Liabilities. CSI and Doorways each does not have any
material liabilities, obligations or commitments of any nature, whether
accrued, absolute, contingent or otherwise, except as (i) reflected or
provided for in the Financial Statements and the Interim Financials,
including the Notes thereto, (ii) incurred since the date thereof in the
ordinary course of business or (iii) set forth on Schedule 3.01(k). Neither
CSI nor Doorways is a guarantor or indemnitor of any indebtedness of any
person, firm or corporation.
(l) Returns and Complaints. Except as set forth on Schedule 3.01(l),
CSI has received no customer complaints concerning its products or
services, nor has it had its products returned, or had to reperform or
otherwise correct its services, that taken together would constitute a
material adverse effect on CSI's business or prospects.
(m) Lawsuits. Except as set forth on Schedule 3.01(m), there is (i) no
action, suit, arbitration, governmental investigation, or other legal or
administrative proceeding pending or, to the knowledge of Sellers, or
either of them, threatened against CSI or against CSI's business or against
Sellers, or either of them, in any court or before any governmental agency
or arbitration tribunal and (ii) no action, suit or arbitration,
governmental investigation, or other legal or administrative proceeding
pending or, to the knowledge of Sellers, or either of them, threatened
against persons other than CSI which, in the case of either (i) or (ii), if
successful, might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs, or prospects of
CSI, financial or otherwise, or any change in the current equity ownership
of CSI, or which might create or impose a material lien or encumbrance on
any of CSI's assets or properties, or which might give rise to a material
liability of CSI or either of Sellers or might create or impose a material
lien or encumbrance on any of the assets or properties of either of
Sellers. Except as set forth on Schedule 3.01(m), neither CSI nor either of
Sellers is aware of any basis for any of the foregoing. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened, or any basis therefor known to CSI or either of
Sellers, involving the validity of this Agreement, or the right of CSI or
either of Sellers to enter into this Agreement, or to consummate the
transactions contemplated by this Agreement, or that relate to the prior
employment of any of CSI's employees, their use in connection with CSI's
business of any information or techniques allegedly proprietary to any of
their former employers, or their obligations under any agreements with
their former employers. Neither of Sellers nor CSI is in default with
respect to any order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal. There is no action, suit, proceeding or
investigation by or on behalf of CSI currently pending or that CSI intends
to initiate before any governmental agency or arbitration tribunal.
Sellers, or either of them, have no knowledge of any pending legislation,
governmental regulation or technological development which would materially
and adversely affect the assets, properties or business of CSI. There are
no material actions, suits, proceedings or investigations pending or, to
the knowledge of
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Sellers, or either of them, threatened against, nor are there any material
unpaid citations, fines or penalties heretofore asserted against, CSI or
either of Sellers under any federal, state or local law, ordinance or
regulation relating to air or water pollution or other environmental
protection matters, or relating to equal employment opportunity or
occupational health or safety.
(n) Taxes.
(i) CSI and Doorways have each duly and timely filed with the
appropriate government agencies all federal, state and local
tax returns and reports, the filing of which was required by
the conduct of their respective businesses (the "Tax
Returns"), and all such returns and reports properly
reflected the taxes due for the periods covered thereby.
True, correct and complete copies of the Tax Returns for the
three most recent fiscal periods are attached hereto as
Exhibit 3.01(n)(i)-1 and Exhibit 3.01(n)(i)-2. All income,
profits, franchise, sales, employment, property or other
taxes and all assessments, interest, penalties or
deficiencies, fees and other governmental charges or
impositions accrued during the periods covered by the Tax
Returns, or due to or claimed to be due by any taxing
authority with respect to the periods covered by the Tax
Returns, upon CSI and Doorways or upon or measured by their
respective purchases, sales, payments to employees and
others or other business activity, or by their respective
properties, assets, capital stock, surplus or income
(hereinafter the "Taxes" or a "Tax"), have been properly
accrued or paid, and neither CSI nor Doorways has received
any notice of deficiency or assessment or proposed
deficiency or assessment by the Internal Revenue Service or
any other taxing authority in connection with any Tax
Return. No federal or state income tax returns of either CSI
or Doorways have been audited or otherwise examined and
reported on by the relevant taxing authorities. Neither CSI
nor Doorways has consented to the extension of or waived,
and has not been asked to consent to the extension of or to
waive, any law or regulation fixing any period of time for
assessment of any Tax.
(ii) The Balance Sheets contained in the Financial Statements
accurately reflect (A) the amount of Taxes unpaid as of such
date with respect to the operations of CSI and Doorways, as
the case may be, for the respective fiscal years then ended,
(B) all taxes payable and/or all tax credits arising from
the taxable income of CSI or Doorways and (C) the amount of
Taxes and interest and penalties relevant thereto in respect
of periods subsequent to the respective dates of such
Balance Sheets for the periods then ended. The Tax Returns
for the fiscal years of CSI and Doorways ended December 31,
1995, 1996, and 1997 properly reflect the taxable income of
CSI and Doorways for the periods covered.
(iii) Proper and accurate amounts have been or will be withheld
by CSI and Doorways from employees for all periods ending on
or prior to the Closing
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Date in full and complete compliance with the tax
withholding provisions of all applicable federal, state and
local laws dealing with such matters.
(iv) Proper and accurate federal, state and local tax returns
have been or will be filed by CSI and Doorways as for all
periods ending on or prior to the Closing Date for which
returns were due with respect to employee income tax
withholding and social security and unemployment taxes, and
the amounts shown or to be shown on such returns to be due
and payable have been, or will be on or prior to the Closing
Date, paid in full.
(v) Proper and accurate state and local tax returns have been or
will be filed by CSI and Doorways for all periods ending on
or prior to the Closing Date for which returns were due with
respect to sales and use taxes, and the amounts shown or to
be shown on such returns to be due and payable have been, or
will be on or prior to the Closing Date, paid in full.
(vi) The foregoing representations in this Sub-Section 3.01(n)
are subject to the matters set forth on Schedule 3.01(n).
(o) Receivables. The trade accounts receivable of CSI, whether shown
on the Balance Sheets as part of the Financial Statements and the Interim
Financials or thereafter acquired, are valid, collectible to the knowledge
of Sellers and CSI (but without either the Sellers or CSI having carried
out an investigation of any account debtor's ability to pay such trade
accounts receivable), genuine and subsisting, arose out of bona fide sales
and deliveries of goods or the performance of services, and are subject to
no defenses, set-offs, or counterclaims, except to the extent reflected as
an allowance for doubtful accounts which allowance is reasonable and
appropriate on the basis of CSI's prior experience. Except for the security
interests granted by CSI to Summit Bank, such trade accounts receivable are
not subject to any lien or encumbrance.
(p) Absence of Changes. Since June 30, 1998, CSI has not:
(i) undergone any material adverse change in its condition
(financial or other), properties, assets, liabilities,
business or operations other than changes in the
ordinary course of business;
(ii) except as set forth on Schedule 3.01(p)(ii), declared,
set aside, made or paid any dividend or other
distribution in respect of its capital stock, or
purchased or redeemed, directly or indirectly, any
shares of its capital stock or made any payment of any
kind to or for the benefit of any stockholder or any
affiliate of any stockholder;
(iii) issued or sold or solicited the sale of any shares of
its capital stock of any class or any options, warrants,
conversion or other rights to purchase any such shares
or any securities convertible into or exchangeable for
such shares;
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(iv) incurred any material indebtedness for borrowed money
(except temporary short term borrowings in the ordinary
course of business) or issued or sold any material
amount of debt securities;
(v) mortgaged, pledged or subjected to any material lien,
lease, security interest, charge or encumbrance any of
its properties or assets, tangible or intangible, except
(A) liens for current taxes not due and payable or being
contested in good faith by appropriate proceedings, (B)
liens imposed by law and incurred in the ordinary course
of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like, and
(C) encumbrances, easements and security interests which
do not materially detract from the value or interfere
with the use of the properties affected thereby;
(vi) acquired or disposed of any assets or properties of
material value except in the ordinary course of
business;
(vii) except as set forth on Schedule 3.01(p)(vii), forgiven
or canceled any debts or claims, or waived any rights in
excess of $10,000;
(viii) entered into any material transaction except in the
ordinary course of business;
(ix) granted to any officer or salaried employee or any class
of other employees any material increase in compensation
in any form (other than ordinary merit increases or
increases called for by existing agreements) or any
severance or termination pay (other than in minor
amounts), or entered into any written employment
agreement with any person;
(x) adopted or amended in any respect any collective
bargaining agreement, or adopted or amended any bonus,
profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, insurance or other
similar plan, agreement, trust, fund or arrangement for
the benefit of employees (whether or not legally
binding);
(xi) participated in any plan of merger, consolidation,
reclassification, recapitalization or other
reorganization or any contribution to capital;
(xii) sold, assigned or transferred any interest in any
trademarks, service marks, trade names or copyrights;
(xiii) made or permitted any amendment to its Certificate of
Incorporation or By-Laws;
(xiv) made or permitted any amendment to or termination of any
material contract, agreement or license to which it is a
party otherwise than in the ordinary course of business;
(xv) suffered any damage, destruction or loss (whether or not
covered by insurance) which materially and adversely
affects the condition (financial or other), properties,
assets, business or operations of CSI;
(xvi) suffered any strike or other labor trouble or become
aware that any strike or other labor trouble is
threatened which might materially disrupt the operation
of CSI's business;
12
(xvii) suffered the loss of any director or officer of CSI;
(xviii) suffered a loss of customers that materially and
adversely affects CSI; or
(xix) incurred any material liability or obligation (whether
absolute, accrued or contingent) other than in the
ordinary course of business.
(q) Employees and Key Consultants. Attached hereto as Schedule
3.01(q)-1 is a complete and accurate list showing all persons employed by,
and all consultants engaged by, CSI and Doorways during calendar year 1997
whose annual compensation or fees exceeded $30,000 for such period. Such
list shows (i) the name, position and/or company, and location of such
persons, (ii) the current annual rate of compensation (including bonuses)
or fees payable to such persons, and (iii) the corporate credit cards
issued to such persons. Attached hereto as Exhibit 3.01(q)-2 are true,
correct and complete copies (or descriptions in the case of an oral
agreement) of all employment agreements and consulting agreements presently
in effect with respect to persons employed by, and consultants engaged by,
CSI and Doorways whose compensation or fees for calendar year 1998 are
expected to exceed $100,000.
(r) Absence of Certain Commercial Practices. Neither Sellers nor, to
the knowledge of Sellers, any officer, employee or agent of CSI or any
person acting on behalf of any of the foregoing, has since January 1, 1995,
directly or indirectly, given or agreed to give any gift or similar benefit
to any customer, supplier, governmental employee or other person who is or
may be in a position to help or hinder the business of CSI or assist CSI in
connection with any actual or proposed transaction, which, if not given in
the past, might have had a material adverse effect on the business of CSI,
or which, if not continued in the future, might materially and adversely
affect the business of CSI or which might subject CSI to any material
liability, or penalty in any private or governmental litigation or
proceeding.
(s) Officers and Directors. Attached hereto as Schedule 3.01(s)-1 is a
complete and accurate list of the officers and directors of CSI. Attached
hereto as Schedule 3.01(s)-2 is a complete and accurate list of the
officers and directors of Doorways.
(t) Bank Accounts, etc. Schedule 3.01(t)-1 attached hereto contains a
complete and accurate list showing (i) the name and address of each bank in
which CSI has an account, line of credit or other borrowing facility, or
safe deposit box and the name of each person authorized to draw thereon or
have the access thereto, and (ii) the name and address of each person
holding a
13
power of attorney on behalf of CSI. Schedule 3.01(t)-2 attached hereto
contains a complete and accurate list showing (i) the name and address of
each bank in which Doorways has an account, line of credit or other
borrowing facility, or safe deposit box and the name of each person
authorized to draw thereon or have the access thereto, and (ii) the name
and address of each person holding a power of attorney on behalf of
Doorways.
(u) Contracts. Attached hereto as Schedule 3.01(u) is a true, correct
and complete list as of the date hereof of all material agreements,
contracts and commitments of the following types, written or oral, to which
either CSI or Doorways is a party or by which any of its properties
(whether owned or leased) is bound as of the date hereof: (i) mortgages,
indentures, security agreements and other agreements and instruments
relating to the borrowing of money in an amount greater than $30,000; (ii)
employment and consulting agreements which are not cancelable by CSI or
Doorways without penalty on 30 or fewer days' notice; (iii) collective
bargaining agreements; (iv) bonus, profit sharing, compensation,
stockholders, stock transfer, stock option, stock purchase, pension,
retirement, deferred compensation, insurance or other similar plans,
agreements, trusts, funds or arrangements for the benefit of employees
(whether or not legally binding); (v) sales agency, manufacturers
representative or distributorship agreements which are not cancelable by
CSI or Doorways without penalty on 30 or fewer days' notice; (vi)
agreements, orders or commitments for the purchase by CSI or Doorways of
services, raw materials, supplies or finished goods in excess of $30,000
for any one agreement, order or commitment (it being warranted that the
commitment for all such agreements, orders and commitments does not exceed
$100,000 in the aggregate); (vii) agreements, orders or commitments for the
sale by CSI or Doorways of its products or services in excess of $30,000
for any one agreement; (viii) licenses of patent, trademark and other
industrial property rights; (ix) agreements or commitments for capital
expenditures in excess of $30,000 for any single project (it being
warranted that the commitment for all such agreements or commitments does
not exceed $100,000 in the aggregate for all projects); (x) brokerage or
finder's agreements which are not cancelable without penalty on 30 or fewer
days' notice; (xi) agreements or instruments relating to the extension of
credit not in the ordinary course of business which are not cancelable
without penalty on 30 or fewer days' notice; and (xii) other agreements
contracts and commitments which in any case involve payments or receipts of
more than $30,000. Such agreements, contracts and commitments are in full
force and effect and, to the knowledge of Sellers, and each of them, with
regard to third parties, all parties to such agreements, contracts and
commitments have in all material respects performed all obligations
required to be performed by them to date and are not in default in any
material respect.
(v) Absence of Breach. There has not been a breach or any default in
any material obligation to be performed by CSI under any material contract,
agreement or other instrument to which CSI is a party, and CSI has not
waived any substantial right under any such contract, agreement or
instrument.
(w) Related-Party Transactions. No shareholder, employee, officer, or
director of CSI or member of his or her immediate family is indebted to
CSI, nor is CSI indebted (or committed to make loans or extend or guarantee
credit) to any of them, nor has any such person guaranteed any obligation
of CSI except as indicated on Schedule 3.01(w) attached hereto. To the best
of the knowledge of either of Sellers, none of such persons has any direct
or indirect ownership interest in
14
any firm or corporation with which CSI is affiliated or with which CSI has
a business relationship, or any firm or corporation that competes with CSI,
except that shareholders, employees, officers, or directors of CSI and
members of their immediate families may own stock in publicly traded
companies that may compete with CSI. No member of the immediate family of
any shareholder, officer or director of CSI is directly or indirectly
interested in any material contract with CSI.
(x) Insurance. Schedule 3.01(x) attached hereto contains a complete
and accurate list and description for CSI of all its insurance policies and
bonding arrangements. All such policies and arrangements are in full force
and effect, and all premiums due thereon have been paid. Except as set
forth in Schedule 3.01(x), each of such insurance policies is owned solely
by CSI. All insurable properties of CSI are insured for its benefit under
valid and enforceable policies in reasonably sufficient amounts issued by
insurers of recognized responsibility.
(y) Intellectual Property. Schedule 3.01(y) attached hereto contains a
true, correct and complete list of all trademarks, service marks, trade
names, patents and copyrights owned by or licensed to CSI or Doorways. CSI
and Doorways own or have the right to use, free and clear of any payment or
encumbrance, all trademarks (whether registered or unregistered), service
marks, trade names, patents, copyrights, trade secrets, information,
proprietary rights, processes, designs, formulas, customer lists and other
industrial and intellectual property rights necessary for their respective
businesses as now conducted, without any conflict with or infringement of
the rights of others, except as otherwise shown on Schedule 3.01(y).
Neither of Sellers has knowledge of any claim or demand of any person
pertaining to, or any proceedings which have been instituted or are pending
or threatened which challenge, the right of CSI or Doorways in respect of
any such trademark, service xxxx, trade name, patent, copyright, trade
secrets, information, proprietary rights, processes, designs, formulas,
customer lists and other industrial and intellectual property rights. There
are no outstanding options, licenses, or agreements of any kind relating to
the foregoing, nor is CSI or Doorways bound by or a party to any options,
licenses or agreements of any kind with respect to the trademarks (whether
registered or unregistered), service marks, trade names, patents,
copyrights, trade secrets, information, proprietary rights, processes,
designs, formulas, customer lists and other industrial and intellectual
property rights of any other person or entity other than as indicated on
Schedule 3.01(y). Neither CSI nor Doorways has received any communications
(written or oral) alleging that CSI or Doorways has violated any of the
trademarks (whether registered or unregistered), service marks, trade
names, patents, copyrights, trade secrets, information, proprietary rights,
processes, designs, formulas, customer lists and other industrial and
intellectual property rights of any other person or entity. Neither CSI nor
Doorways is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement or subject to any judgement, decree or other of any court or
administrative agency that would interfere with the use of his or her best
efforts to promote the interests of CSI or Doorways. Neither the execution
and delivery of this Agreement, the consummation of the transactions
contemplated by this Agreement, nor the fulfillment of or compliance with
the terms, conditions or provisions thereof nor the carrying on of CSI's
business by the employees of CSI, nor the carrying on of Doorways's
business by the employees of Doorways, will, to the best of the knowledge
of either of Sellers, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
Neither of Sellers believes it is
15
or will be necessary to utilize any inventions of any of CSI's or
Doorways's employees (or people either of them currently intends to hire)
made prior to their employment by CSI or Doorways, as the case may be.
(z) Books and Records. The books and records of CSI fairly reflect the
transactions to which CSI is or was a party or by which its properties are
or were bound, and such books and records are and have been properly kept
and maintained in accordance with generally accepted accounting principles
consistently applied. All of the minutes and other corporate records of CSI
requested by Xxxxx to have been exhibited will have been exhibited by the
tenth Business Day prior to the Closing Date. The minute books, stock
records and other corporate records of CSI are and, at the time they are
exhibited to Xxxxx pursuant to this Sub-Section 3.01(z), will be complete,
accurate and current.
(aa) Disclosure. No representation or warranty by Sellers, or either
of them, hereunder and no list, certificate, document, books, record,
Exhibit or Schedule furnished or to be furnished pursuant hereto or in
connection with the transactions contemplated by this Agreement contains or
will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained therein
not misleading.
(bb) Acquisition for Investment. Sellers are receiving the Elligent
Common Stock (referred to in this Clause (bb) as the "Investment Stock"),
for their own account for investment, with no present intention of dividing
their interests with others or of reselling or otherwise disposing of all
or any portion of the Investment Stock. Sellers do not have in mind any
sale of the Investment Stock either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance. Sellers have no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for or which is likely to compel a
disposition of the Investment Stock other than as expressly provided in
this Agreement. Sellers are not aware of any circumstances presently in
existence which are likely in the future to prompt a disposition of the
Investment Stock. Sellers are "accredited investors" as defined in
Regulation D under the Securities Act. Sellers possess the business
experience to make an informed decision to acquire the Investment Stock,
and Sellers have the financial means to bear the economic risk of the
investment in the Investment Stock.
3.02.Continuation of Representations and Warranties of Sellers and
CSI. All of the representations and warranties of Sellers and CSI contained
herein shall be true in all respects on and as of the Closing Date and,
notwithstanding any investigation at any time made by or on behalf of Xxxxx, all
such representations and warranties shall survive the Closing Date and remain in
full force and effect (regardless of what investigations or verifications may be
made by Xxxxx or any of its agents or representatives) until the first
anniversary of the Closing Date; provided, however, that the representation and
warranty set forth in Sub-Section 3.01(n) shall survive for so long as any Tax
Return remains open and until the sixtieth day following the expiration of the
statute of limitations (including extensions thereof) provided by Section 6501
of the Internal Revenue Code of 1986, as amended, or the tax liability of CSI is
subject to adjustment by governmental authorities (federal, state or local) for
any tax period of CSI through the Closing Date, whichever is longer.
Section 4. Representations and Warranties of Xxxxx and Xxxxx Holdings
16
4.01.Representations and Warranties of Xxxxx. Xxxxx hereby represents,
warrants to and agrees with Sellers and CSI that:
(a) Corporate Existence. Xxxxx is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to conduct
its business as now being conducted. Until the date hereof, Xxxxx has not
engaged in any business other than that associated with its corporate
organization and the transactions contemplated by this Agreement and has no
liabilities of any kind or nature nor any liens or encumbrances against it.
The copies of the Certificate of Incorporation and By-Laws of Xxxxx
attached hereto as Exhibit 4.01(a)-1 and Exhibit 4.01(a)-2 are true,
correct and complete copies thereof as now in full force and effect.
(b) Authority. Xxxxx has all requisite power and authority to enter
into, execute and deliver this Agreement and has taken all necessary
corporate action to authorize the execution and delivery of this Agreement
and to consummate the transactions contemplated by this Agreement in
accordance with the provisions hereof. This Agreement constitutes the valid
and binding obligation of Xxxxx enforceable in accordance with its terms.
(c) No Conflict. Neither the execution and the delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor
the fulfillment of or compliance with the terms, conditions or provisions
hereof (i) will conflict with or result in a breach of any relevant
statute, law, ordinance, rule or regulation applicable to Xxxxx, or the
terms, conditions or provisions of the Certificate of Incorporation or the
By-Laws of Xxxxx or any mortgage, indenture, lease, agreement, or other
instrument, or any permit, concession, grant, franchise, license, judgment,
order, or decree to which Xxxxx is a party or by which it is or may be
bound, or (ii) will constitute, with the giving of notice or the passage of
time or both, a default under any of the foregoing, or (iii) will
accelerate the maturity of or otherwise modify any obligation of Xxxxx
under any of the foregoing.
(d) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental authority or any
other person is required in connection with the execution and delivery of
this Agreement by Xxxxx or the consummation of the transactions
contemplated hereby other than as contemplated by this Agreement.
(e) Restrictions on Elligent Common Stock. As of the Closing Date
Xxxxx Holdings will have not entered into any agreement pursuant to which
Xxxxx Holdings will have agreed to any restrictions or holding periods
applicable to Xxxxx Holdings with respect to the Elligent Common Stock.
(f) Amount of Elligent Shares to be Issued to Xxxxx Holdings. As a
result of the Xxxxx-Elligent Merger, Xxxxx Holdings shall receive shares of
Elligent Common Stock which shall constitute all of the Elligent Common
Stock to be received by Xxxxxxx Xxxxxxxx or Xxxxx Holdings, or any
affiliate of Xxxxx Holdings, in connection with the Xxxxx-Elligent Merger.
17
4.02. Continuation of Representations and Warranties of Xxxxx. All of
the representations and warranties by Xxxxx contained herein shall terminate
upon the payment of the last installment of the Installment Promissory Note and
shall be of no further force or effect whatsoever.
4.03. Representations and Warranties of Xxxxx Holdings. Xxxxx Holdings
hereby represents, warrants to and agrees with Sellers and CSI that:
(a) Corporate Existence. Xxxxx Holdings is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to conduct its
business as now being conducted. The copy of the Certificate of Formation
attached hereto as Exhibit 4.03(a) is a true, correct and complete copy
thereof as now in full force and effect.
(b) Authority. Xxxxx Holdings has all requisite power and authority to
enter into, execute and deliver this Agreement and has taken all necessary
action to authorize the execution and delivery of this Agreement and to
consummate the transactions contemplated by this Agreement in accordance
with the provisions hereof. This Agreement constitutes the valid and
binding obligation of Xxxxx Holdings enforceable in accordance with its
terms.
(c) No Conflict. Neither the execution and the delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor
the fulfillment of or compliance with the terms, conditions or provisions
hereof (i) will conflict with or result in a breach of any relevant
statute, law, ordinance, rule or regulation applicable to Xxxxx Holdings,
or the terms, conditions or provisions of the Certificate of Formation of
Xxxxx Holdings or any mortgage, indenture, lease, agreement, or other
instrument, or any permit, concession, grant, franchise, license, judgment,
order, or decree to which Xxxxx Holdings is a party or by which it is or
may be bound, or (ii) will constitute, with the giving of notice or the
passage of time or both, a default under any of the foregoing, or (iii)
will accelerate the maturity of or otherwise modify any obligation of Xxxxx
Holdings under any of the foregoing.
(d) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental authority or any
other person is required in connection with the execution and delivery of
this Agreement by Xxxxx Holdings or the consummation of the transactions
contemplated hereby other than as contemplated by this Agreement.
4.04. Continuation of Representations and Warranties of Xxxxx
Holdings. All of the representations and warranties by Xxxxx Holdings contained
herein shall terminate upon the payment of the last installment of the
Installment Promissory Note and shall be of no further force or effect
whatsoever.
Section 5. Covenants of Sellers and CSI
5.01. Covenants of Sellers and CSI. Sellers, and each of them, and CSI
hereby covenant and agree with Xxxxx and Xxxxx Holdings that:
18
(a) Continuance of Business. From the date hereof and through the
Closing Date, Sellers will cause CSI:
(i) to carry on the business of CSI in, and only in, the usual,
regular and ordinary course in substantially the same
manner as heretofore, and, to the extent consistent with
such business, they will exercise their best efforts to
preserve intact CSI's present business organization, to
keep available the services of CSI's present officers and
employees, and use their best efforts to preserve CSI's
relationships with customers, suppliers and others having
business dealings with CSI to the end that its goodwill and
going business shall be conducted on substantially the same
basis at the Closing Date as at the date hereof and
heretofore;
(ii) to maintain all its material structures, equipment and
other tangible personal property in good repair, order and
condition, except for depletion, depreciation, ordinary
wear and tear and casualty losses;
(iii) to keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by
it;
(iv) to perform in all material respects all of its obligations
under agreements, contracts and instruments relating to or
affecting its properties, assets and business;
(v) to maintain its books of account and records in the usual,
regular and ordinary manner;
(vi) to comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to it and to
the conduct of its business;
(vii) not to amend its Certificate of Incorporation or By-Laws or
any other documents of charter, franchise or organization,
except for amendments which may be necessary in order to
carry on the business of CSI or to consummate the
transaction contemplated by this Agreement, provided that
the documents, certificates and authorizing resolutions for
such amendments are submitted to Xxxxx and Xxxxx Holdings
within two (2) days after the approval thereof by the Board
of Directors of CSI;
(viii) not to enter into or assume outside of the ordinary course
of its business any agreement, contract or commitment
except with the prior written consent of Xxxxx and Xxxxx
Holdings;
(ix) not to merge or consolidate with, or agree to merge or
consolidate with, or to purchase substantially all of the
assets of, or otherwise to acquire any
19
business or any corporation, partnership, association or
other business organization or division thereof;
(x) not to take or permit to be taken any action which is
represented and warranted in clauses (ii) through (xiv) and
(xix) of Sub-Section 3.01(p) not to have been taken since
June 30, 1998; and
(xi) promptly to advise Xxxxx and Xxxxx Holdings in writing of
any material and adverse change in the financial condition,
operations or business of CSI.
(b) Access To Information. From and after the date hereof Sellers
will cause CSI to give to Xxxxx, Xxxxx Holdings and their respective
representatives, accountants and agents full access during normal
business hours to the properties, books, records, contracts and
commitments relating to CSI, including full access to the officers and
employees of CSI and, if requested, full opportunity to conduct a
physical inventory of CSI and an audit of its operations and financial
statements, and will furnish all such information and documents relating
to CSI as Xxxxx or Xxxxx Holdings may reasonably request and permit
Xxxxx, Xxxxx Holdings and their respective representatives, accountants
and agents to make copies and abstracts thereof. If the contemplated
transactions do not close, Xxxxx and Xxxxx Holdings will deliver to CSI
all originals and copies of documents, work papers and other material
obtained from CSI relating to CSI and the contemplated transactions,
whether obtained before or after the date hereof, and will promptly
destroy all documents based on material obtained from CSI. Xxxxx and
Xxxxx Holdings will use their best efforts to have all such material kept
confidential. Furthermore, Xxxxx and Xxxxx Holdings will hold all
proprietary information obtained with respect to CSI and its products,
processes and operations in confidence and will not use such information
or disclose the same to others except as permitted by CSI.
(c) Consents. Sellers will obtain or cause CSI to obtain the
consent or approval of each person or authority whose consent or approval
may be required in order to permit Sellers, CSI, Xxxxx and Xxxxx Holdings
to consummate the transactions contemplated hereby.
(d) Supplements. From time to time prior to the Closing Date,
Sellers shall deliver or cause CSI to deliver to Xxxxx and Xxxxx Holdings
supplemental information with respect to any matters or events arising or
discovered subsequent to the date hereof which, if existing or known on
the date hereof, would have rendered any statement, representation or
warranty made herein on the part of Sellers or any information contained
in the Schedules and Exhibits to this Agreement then materially
inaccurate or incomplete.
Section 6. Covenants of Xxxxx and Xxxxx Holdings
6.01. Covenants of Xxxxx. Xxxxx hereby covenants and agrees with
Sellers that Xxxxx shall use its continuing best efforts to have Sellers removed
as guarantors of the loans made to CSI listed on Schedule 6.01 attached hereto.
6.02. Covenants of Xxxxx Holdings. Xxxxx Holdings hereby covenants and
agrees with Sellers that:
20
(a) Stock Option Program for Key Employees. From the consummation
of the CSI-Xxxxx Merger and for so long as Sellers retain beneficial
ownership of not less than fifty percent (50%) of the Elligent Common
Stock received by Sellers pursuant to Section 1, Xxxxx Holdings shall
vote all shares of Elligent Common Stock which Xxxxx Holdings
beneficially owns from time to time to cause Elligent to include key
employees of CSI in any stock option program of Elligent to the same
extent and under the same terms and conditions as employees of similar
rank and responsibility of Elligent.
(b) Execution of Registration Rights Agreement. Xxxxx Holdings
shall vote all shares of Elligent Common Stock which Xxxxx Holdings
beneficially owns from time to time to cause Elligent promptly following
consummation of the CSI-Xxxxx Merger to execute the Registration Rights
Agreements substantially in the forms annexed hereto as Exhibit 6.02(b)-1
and 6.02(b)-2.
(c) Removal of Sellers as Guarantors. Xxxxx Holdings shall cause
Elligent promptly following consummation of the CSI-Xxxxx Merger to use
its continuing best efforts to have Sellers removed as guarantors of the
loans made to CSI listed on Schedule 6.01 attached hereto.
(d) Transfer of Elligent Common Stock Beneficially Owned by Xxxxx
Holdings. For so long as Xxxxx Holdings has any obligations under clauses
(a), (b) or (c) of this Sub-Section 6.02, Xxxxx Holdings shall not
transfer any of its shares of Elligent Common Stock unless the transferee
agrees to assume the obligations of Xxxxx Holdings under such clauses.
Section 7. Conditions to Closing
7.01. Conditions to Closing by the Parties. The obligations of
Sellers, Patra and Xxxxx Holdings to consummate the transactions contemplated
hereby are, at the option of either Sellers or Xxxxx and Xxxxx Holdings, subject
to the fulfillment of the conditions that on or before the Closing Date:
(a) Lawsuits. There shall not be pending or threatened any action,
proceeding or investigation for any injunction, writ, preliminary
restraining order or any order of any nature issued by any court or
governmental agency of competent jurisdiction directing that the
transactions contemplated by this Agreement or any of them not be
consummated; nor shall any such injunction, writ, preliminary restraining
order or such other order have been issued and be in effect.
(b) Xxxxx-Elligent Merger. The Xxxxx-Elligent Merger shall have
been consummated.
(c) CSI-Xxxxx Merger. The parties shall have executed the
Certificate of Merger.
7.02. Conditions to Closing by Xxxxx and Xxxxx Holdings. The
obligations of Xxxxx and Xxxxx Holdings to consummate the transactions
contemplated hereby are, at the option of Xxxxx and Xxxxx Holdings, subject to
the fulfillment of each of the conditions that on or before the Closing Date:
21
(a) Certain Legal Matters. All actions, proceedings, instruments
and documents required to carry out this Agreement, or incidental
thereto, and all other related legal matters, shall be reasonably
satisfactory to counsel for Xxxxx and Xxxxx Holdings, and such counsel
shall have received all documents, instruments or copies thereof,
certified if requested.
(b) Compliance. Sellers, and each of them, and CSI shall have
performed and complied with all agreements, covenants and conditions
required by this Agreement to have been performed or complied with prior
to or at the Closing Date and Xxxxx and Xxxxx Holdings shall receive a
certificate signed by Sellers and CSI to such effect.
(c) Consents. Sellers, and each of them, and CSI shall have
obtained all approvals or consents of other persons required to
consummate the transactions contemplated hereby, including but not
limited to any consents required from banks to continue in place a line
of credit or other borrowing facility notwithstanding a change in control
of CSI.
(d) Accuracy of Representations and Warranties. The
representations and warranties made by Sellers and CSI contained in this
Agreement or in any financial statement, Schedule or Exhibit hereto or
document delivered to Xxxxx and Xxxxx Holdings in connection herewith
shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, and Sellers and CSI shall have delivered to Xxxxx and Xxxxx
Holdings a certificate to such effect.
(e) Absence of Errors. Xxxxx or Xxxxx Holdings shall not have
discovered any material error, misstatement or omission in the
representations and warranties made hereunder by Sellers.
(f) Absence of Change. Since the date hereof, there shall not have
occurred any material adverse change in the financial condition, assets,
liabilities or business of CSI.
(g) Opinion of Counsel. Xxxxx and Xxxxx Holdings shall have
received a favorable opinion, addressed to it and dated the Closing Date,
of Messrs. Ellenoff Xxxxxxxx & Schole LLP, counsel for Sellers and CSI,
satisfactory in substance and form to Xxxxx, Xxxxx Holdings and their
counsel, to the effect that:
(i) CSI is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware, has all requisite corporate power
and authority to conduct its business and to own and
hold the properties used in connection therewith.
(ii) The total authorized capital stock of CSI consists
of 3,000 shares of Common Stock, without par value,
of which 1,000 shares are validly issued and
outstanding, fully paid and non-assessable.
(iii) The Outstanding CSI Common Stock is owned of record
and beneficially by Sellers, is fully paid and
nonassessable and, to the knowledge of such counsel,
is free and clear of any and all liens, pledges,
hypothecations,
22
options, puts, calls, transfer restrictions or other
charges and encumbrances other than as set forth or
provided for in this Agreement. CSI has obtained all
of the necessary shareholder and director approval
in order that upon the filing of the Certificate of
Merger, assuming that Xxxxx shall have complied with
all applicable law necessary to effect the CSI-Xxxxx
Merger, the CSI-Xxxxx Merger shall have been duly
consummated in accordance with the General
Corporation Law of the State of Delaware with the
effect provided therein, and the CSI Common Stock
shall have been canceled and converted as provided
in Section 1.04 of this Agreement.
(iv) To the knowledge of such counsel, Sellers have all
requisite power and authority to enter into, execute
and deliver this Agreement and to consummate the
transactions contemplated by this Agreement in
accordance with the provisions hereof. This
Agreement constitutes the valid and binding
obligation of Sellers and CSI, enforceable in
accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or
other laws or equitable principles affecting
creditors' rights generally.
(v) To the knowledge of such counsel, no consent,
approval, order or authorization of, or
registration, declaration or filing with, any
governmental authority or any other person is
required in connection with the execution and
delivery of this Agreement by Sellers or CSI or the
consummation of the transactions contemplated hereby
by Sellers or CSI.
(vi) Neither the execution and the delivery of this
Agreement, the consummation of the transactions
contemplated hereby, nor the fulfillment of or
compliance with the terms, conditions or provisions
hereof (a) will conflict with or result in a breach
of any relevant statute, law, ordinance, rule or
regulation applicable to either (to the knowledge of
such counsel) Sellers or CSI, or the terms,
conditions or provisions of the Certificate of
Incorporation or the By-Laws of CSI or any mortgage,
indenture, lease, agreement, or other instrument, or
any permit, concession, grant, franchise, license,
judgment, order or decree to which either (to the
knowledge of such counsel) Sellers or CSI is a party
or by which any of them is or may be bound, or (b)
will constitute, with the giving of notice or the
passage of time or both, a default by (to the
knowledge of such counsel) Sellers or CSI under any
of the foregoing, or (c) will accelerate the
maturity of or otherwise modify any obligation of
either (to the knowledge of such counsel) Sellers or
CSI under any of the foregoing.
(h) Absence of Loss. Prior to the Closing Date, CSI shall not have
sustained a loss on account of fire, flood, accident or other casualty
which materially and adversely affects the business or properties and
assets of CSI regardless of whether or not such loss shall have been
insured. No insured casualty loss shall be deemed material for purposes
hereof unless it causes or may reasonably be expected to cause a
materially adverse interruption of the operations of CSI.
23
(i) Employment. On or prior to the Closing Date Sellers shall have
executed Employment Agreements and Non-Competition Agreements,
substantially in the forms annexed hereto as Exhibits 7.02(i)-1 and
7.02(i)-2.
(j) Resignations. Prior to the Closing Date, Xxxxx and Xxxxx
Holdings shall have received the resignations of all officers and
directors of CSI other than those officers and directors identified on
Schedule 7.02(j) attached hereto.
(k) Ownership of Doorways. Prior to the Closing Date, Sellers
shall have effected the transfer of all of the issued and outstanding
capital stock of Doorways to CSI such that at the Closing Date Doorways
will be a wholly-owned subsidiary of CSI.
7.03. Conditions to Closing by Sellers. The obligations of Sellers to
consummate the transactions contemplated hereby are, at the option of Sellers,
subject to the fulfillment of each of the conditions that on or before the
Closing Date:
(a) Certain Legal Matters. All actions, proceedings, instruments
and documents required to carry out this Agreement, or incidental
thereto, and all other related legal matters, shall be reasonably
satisfactory to counsel for Sellers and such counsel shall have received
all documents, instruments or copies thereof, certified if requested, as
may be reasonably requested.
(b) Compliance. Xxxxx and Xxxxx Holdings shall have performed and
complied with all agreements, covenants and conditions required in this
Agreement to have been performed or complied with prior to or at the
Closing Date, and Sellers shall receive a certificate signed by duly
authorized officers of Xxxxx and Xxxxx Holdings to such effect.
(c) Accuracy of Representations and Warranties. The
representations and warranties made by Xxxxx and Xxxxx Holdings shall be
correct, on and as of the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date, and Xxxxx and Xxxxx Holdings shall have delivered to
Sellers certificates, signed by a duly authorized officer of Xxxxx and
Xxxxx Holdings, to such effect.
(d) Absence of Errors. Sellers shall not have discovered any
material error, misstatement or omission in the representations and
warranties made hereunder by Xxxxx and Xxxxx Holdings.
(e) Consents. Sellers shall have obtained all approvals or
consents of other persons required to consummate the transactions
contemplated hereby.
(f) Employment. Xxxxx and Sellers shall have executed Employment
Agreements and Non-Competition Agreements substantially in the forms
annexed hereto as Exhibit 7.02(i)-1 and Exhibit 7.02(i)-2.
24
(g) Election of Xxxxxx as a Director of Elligent. From the
consummation of the Xxxxx-Elligent Merger and for so long as Sellers
retain beneficial ownership of not less than fifty percent (50%) of the
Elligent Common Stock received by Sellers pursuant to Section 1, Xxxxx
Holdings shall vote all shares of Elligent Common Stock which Xxxxx
Holdings beneficially owns from time to time to elect Xxxxxx a member of
the Board of Directors of Elligent; provided, however, that Xxxxxx may be
removed as a director for cause, in accordance with the General
Corporation Law of the State of Delaware or if his employment with Xxxxx
shall terminate for Cause (as defined in the Employment Agreement
attached hereto as Exhibit 7.02(i)-1). Notwithstanding the foregoing, in
the event that Xxxxxx is removed as a director because, and only because,
his employment with Xxxxx has been terminated for Cause, Xxxxxx shall be
entitled to attend the meetings of the Board of Directors of Elligent as
a non-voting observer, and to receive notice of such meetings in
accordance with the By-Laws of Elligent until such time as the
Installment Promissory Notes have been fully paid; provided, however,
that Xxxxxx shall not be entitled to attend any such meeting (i) if
counsel to Elligent advise Elligent, such advice to be reasonable in
substance, prior to the meeting that Xxxxxx'x attendance as an observer
at such meeting might subject Elligent or its directors to liability for
any reason, or (ii) if Xxxxxx has been terminated for Cause pursuant to
Clause (iii) of Section 7 of such Employment Agreement.
(h) Opinion of Counsel to Xxxxx and Xxxxx Holdings. Sellers shall
have received a favorable opinion, addressed to it and dated the Closing
Date, of Messrs. Stairs Xxxxxxxxxx Xxxxxx & Xxxxx, counsel for Xxxxx and
Xxxxx Holdings, satisfactory in substance and form to Sellers and their
counsel, to the effect that:
(i) Xxxxx is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware, has all requisite corporate power
and authority to conduct its business and to own and
hold the properties used in connection therewith.
(ii) The total authorized capital stock of Xxxxx consists
of 1,000 shares of common stock, par value $1.00
each, of which all such shares are validly issued
and outstanding, fully paid and non-assessable.
(iii) Xxxxx and Xxxxx Holdings have all requisite
corporate power and authority to enter into, execute
and deliver this Agreement and to consummate the
transactions contemplated by this Agreement in
accordance with the provisions hereof. This
Agreement constitutes the valid and binding
obligations of Xxxxx and Xxxxx Holdings, enforceable
in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or
other laws or equitable principles affecting
creditors' rights generally.
(iv) To the knowledge of such counsel, no consent,
approval, order or authorization of, or
registration, declaration or filing with, any
governmental authority or any other person is
required in connection with the execution and
25
delivery of this Agreement by Xxxxx and Xxxxx
Holdings or the consummation of the transactions
contemplated hereby by Xxxxx and Xxxxx Holdings.
(v) Neither the execution and the delivery of this
Agreement, the consummation of the transactions
contemplated hereby, nor the fulfillment of or
compliance with the terms, conditions or provisions
hereof (a) will conflict with or result in a breach
of any relevant statute, law, ordinance, rule or
regulation applicable to Xxxxx or Xxxxx Holdings, or
the terms, conditions or provisions of the
Certificate of Incorporation or the By-Laws of Xxxxx
or the Certificate of Formation of Xxxxx Holdings or
any mortgage, indenture, lease, agreement, or other
instrument, or any permit, concession, grant,
franchise, license, judgment, order or decree to
which Xxxxx or Xxxxx Holdings is a party or by which
it may be bound, or (b) will constitute, with the
giving of notice or the passage of time or both, a
default by Xxxxx or Xxxxx Holdings under any of the
foregoing, or (c) will accelerate the maturity of or
otherwise modify any obligation of Xxxxx or Xxxxx
Holdings under any of the foregoing.
(i) Opinion of Counsel to Elligent. Sellers shall have received a
favorable opinion, addressed to it and dated the Closing Date, of counsel
to Elligent with respect to the matters set forth in Schedule 7.03(i).
Such opinion shall be satisfactory in substance and form to Sellers and
their counsel.
(j) Pledge Agreement. Pledge Agreement substantially in the form
annexed hereto as Exhibit 7.03(j) shall have been executed by the parties
thereto (herein referred to as the "Pledge Agreement").
(k) Perfection of Security Interests. The security interests of
Sellers under the Pledge Agreement shall be perfected in accordance with
the Uniform Commercial Code of each applicable jurisdiction (state and
county).
Section 8. Indemnification; Dispute Resolution and Arbitration.
8.01. Indemnification by Sellers and CSI. Sellers, and each of them,
and CSI shall jointly and severally indemnify and hold Xxxxx and Xxxxx Holdings
and each of its affiliates, officers, directors, stockholders, members and
managers ("Patra's Indemnified Parties") harmless against and in respect of any
and all damages, losses, costs and expenses (including reasonable attorneys'
fees and expenses) ("Damages") resulting from any breach of any representation
or warranty or nonfulfillment of any agreement, covenant or obligation on the
part of Sellers or CSI contained or provided for in this Agreement or in any
instrument, certificate, Exhibit, Schedule or opinion furnished or to be
furnished pursuant hereto or in connection with any of the transactions
contemplated hereby; provided, however, that Sellers shall not have any
liability for indemnity hereunder unless and until the aggregate amount of
claims for Damages by Patra's Indemnified Parties exceeds $100,000.00 (the
"Sellers' Threshold") and, in such event, Sellers shall be obligated to pay the
full amount of such Damages inclusive of Sellers' Threshold, but Sellers shall
not have any liability for indemnity hereunder in excess of the Merger
Consideration actually paid. Sellers, and each of them, and CSI agree to notify
Xxxxx and Xxxxx Holdings promptly in writing of any matter which reasonably
might give rise to a claim of indemnification hereunder. Sellers,
26
and each of them, hereby waive any right they may have for contribution from
CSI or the Surviving Corporation to the satisfaction of any claim for
indemnification under this Agreement.
8.02. Indemnification by Xxxxx and Xxxxx Holdings. Xxxxx and Xxxxx
Holdings, and each of them, shall indemnify and hold Sellers and each of
them, and CSI and its affiliates, officers and directors (the "Sellers'
Indemnified Parties") harmless against and in respect of any and all Damages
resulting from any breach of any representation or warranty or nonfulfillment
of any agreement, covenant or obligation on the part of Xxxxx or Xxxxx
Holdings contained or provided for in this Agreement or in any instrument,
certificate, Exhibit, Schedule or opinion furnished or to be furnished
pursuant hereto or in connection with any of the transactions contemplated
hereby; provided, however, that Xxxxx and Xxxxx Holdings shall not have any
liability for indemnity hereunder unless and until the aggregate amount of
claims for Damages by Sellers' Indemnified Parties exceeds $100,000.00
("Patra's Threshold") and, in such event, Xxxxx and Xxxxx Holdings shall be
obligated to pay the full amount of such Damages inclusive of Patra's
Threshold, but Xxxxx and Xxxxx Holdings shall not have any liability for
indemnity hereunder in excess of the Merger Consideration. Sellers agree to
notify Xxxxx and Xxxxx Holdings promptly in writing of any matter which
reasonably might give rise to a claim of indemnification hereunder.
8.03. Setoff and Non-Payment of Installment Promissory Note.
Elligent shall have the right to set off claims for Damages sustained by
Patra's Indemnified Parties hereunder against any obligation to pay principal
and/or interest under the Installment Promissory Notes; provided, however,
that prior to making any such setoff Elligent and/or Patra's Indemnified
Parties shall submit such claim for Damages in accordance with the provisions
of Sub-Section 8.04 hereof; further provided, that any such setoff shall not
exceed the amount of such claim. Any such claim shall be asserted by Elligent
and/or Patra's Indemnified Parties within a reasonable time of their becoming
aware of such claim.
8.04. Dispute Resolution and Arbitration.
(a) Arbitration. In the event of any dispute, controversy, claim or
difference that should arise between the parties out of or relating to or in
connection with this Agreement or any breach thereof, or any claim for
Damages, the parties shall endeavor to settle such conflicts amicably between
themselves. Should they fail to do so within a reasonable period of time not
to exceed ten (10) Business Days, the matter shall be settled by arbitration
in New York, New York.
(b) Notice and Response. Any party desiring to have recourse
pursuant to this provision (the "Claimant") shall serve a written notice (the
"Notice") on the other party (the "Respondent") setting forth the details of
its complaint or claim and the name and address of the Claimant's appointed
arbitrator as hereinafter set forth. The Respondent shall serve a written
statement of response on the Claimant (the "Response") within five (5)
Business Days from the receipt of the Notice which shall also provide the
name and address of the Respondent's appointed arbitrator.
27
(c) Appointment of Panel. Within five (5) Business Days from the
delivery of the Response, the designated arbitrators shall select a third
arbitrator who shall act as the Chairman of the panel. The third arbitrator
must be a practicing attorney, admitted to practice in the State of New York
who has experience of and familiarity with contracts and securities law.
(d) Procedures. The arbitrators shall decide all matters of
procedure including the amount, if any, of discovery to be conducted. The
parties shall cooperate with the arbitrators' requests for information and
other assistance to enable them to render an award within twenty (20)
Business Days from the date of the receipt of the Notice by Respondent. At
the request of the arbitration panel the time for rendering an award may be
extended for an additional ten (10) Business Days.
(e) Award. The award of the arbitrators will fix the costs of the
arbitration, including reasonable attorneys' fees of the Claimant and
Respondent which costs shall be borne by the losing party. Any award shall be
final and binding upon the parties and shall be enforceable by any court of
competent jurisdiction. The parties hereby waive any right they may have
under applicable law to appeal the award.
8.05. Liquidated Damages for Non-Payment of Installment Promissory
Note. In the event that Elligent or Xxxxx fails to make any payment of
principal and/or accrued interest due on either Installment Promissory Note
beyond any grace period for payment thereof, Sellers may jointly (but not
singly) elect, in their sole and absolute discretion, pursuant to the Pledge
Agreement to obtain transfer of all issued and outstanding capital stock of
the Surviving Corporation to them in the same proportions as their interests
in CSI on the date hereof (the "Sellers' Election"); provided, however, that
Sellers shall be required to return to Elligent (i) the amount of all cash
payments received by them pursuant to Section 1 hereof (including payments of
principal and interest on the Installment Promissory Notes) less the amount
of foregone salaries of Xxxxxx and Xxxxxxx (the "Foregone Salaries") which is
equal to the product of (x) $500,000 and (y) a fraction the numerator of
which is the number of days elapsed from the date of the Closing to the date
on which Sellers notify Elligent of the Sellers' Election (the "Xxxxx-CSI
Merger Period") and the denominator of which is three-hundred sixty-five
(365) minus any salary or bonus or other remuneration in excess of the
salaries paid to Xxxxxx and Xxxxxxx under the Employment Agreements attached
hereto as Exhibit 7.02(i)-1 and Exhibit 7.02(i)-2, provided that CSI's net
earnings during the Xxxxx-CSI Merger Period are in excess of the Foregone
Salaries, and (ii) all shares of Elligent Common Stock issued to Sellers
pursuant to Section 1 hereof. The exercise of the election by Sellers
pursuant to this Sub-Section 8.05 shall represent liquidated damages for all
claims Sellers may have against Xxxxx, Xxxxx Holdings, Elligent or any of
Patra's Indemnified Parties, shall be in lieu of any claim for Damages
against Xxxxx, Xxxxx Holdings, Elligent or any of Patra's Indemnified
Parties, and shall be in full and complete liquidation of any and all rights
of Sellers under this Agreement, the Installment Promissory Notes or any
other agreement contemplated by this Agreement. As a condition to the
transfer of shares and repayment of the Merger Consideration, (i) the parties
will exchange general releases, (ii) Sellers shall enter into an Indemnity
Agreement, satisfactory in form and substance to counsel for Elligent and
Xxxxx Holdings, pursuant to which Sellers shall indemnify Elligent and Xxxxx
Holdings, and their respective officers, directors, shareholders and
affiliates against any and all damages, losses, costs and expenses (including
reasonable attorneys' fees and expenses) resulting
28
from or attributable to the Surviving Corporation up to the end of the
Xxxxx-CSI Merger Period, (iii) Elligent shall enter into an Indemnity Agreement,
satisfactory in form and substance to counsel for Sellers, pursuant to which
Elligent shall indemnify Sellers and the Surviving Corporation, and the
Surviving Corporation's officers, directors, shareholders and affiliates against
any and all damages, losses, costs and expenses (including reasonable attorneys'
fees and expenses) resulting from or attributable to any stockholder's
derivative suit instituted by a present or former shareholder of Elligent or by
any other third party, asserting a claim against Sellers for having exercised
their rights under this Sub-Section 8.05, (iv) Elligent shall cause the
Surviving Corporation to cancel the Employment Agreements attached hereto as
Exhibit 7.02(i)-1 and Exhibit 7.02(i)-2, (v) Elligent shall cause the Surviving
Corporation to cancel all agreements by and between Elligent and its affiliates
and the Surviving Corporation, (vi) Sellers shall release, or cause others to
release, Elligent, Xxxxx Holdings and their respective officers, directors,
shareholders and affiliates and any third party guarantor acting at the request
of Elligent or Xxxxx Holdings from all guarantees and other obligations entered
into by such persons for the benefit of the Surviving Corporation, (vii) all
officers and directors of the Surviving Corporation (except Sellers) shall
resign, and (viii) the net amount of all cash transfers between the Surviving
Corporation and Elligent made during the Xxxxx-CSI Merger Period shall be paid
(A) by Sellers to Elligent (in the case of a balance in favor of Sellers) plus
an amount equal to 15% of the net profit of the Surviving Corporation
attributable to the Xxxxx-CSI Merger Period or (B) by Elligent to Sellers (in
the case of a balance in favor of Elligent), less an amount equal to 15% of the
net profit of the Surviving Corporation attributable to the Xxxxx-CSI Merger
Period.
Section 9. Confidentiality and Non-Disclosure
9.01. Confidentiality. Except as contemplated by this Agreement, as
required by law or otherwise expressly consented to in writing by Sellers, Patra
and Xxxxx Holdings, all information or documents furnished hereunder by any
party shall be kept strictly confidential by the party or parties to whom
furnished at all times prior to the Closing Date, and in the event the
transactions contemplated by this Agreement are not consummated, each shall
return to the other all documents furnished hereunder and copies thereof upon
request and shall continue to keep confidential all information furnished
hereunder and shall not thereafter use the same for its advantage.
9.02. Return of Documentation. In the event the Closing is not
consummated, each party hereto will return all documents obtained from the other
party and will hold in absolute confidence any information obtained from such
other party except to the extent (i) such party is required to disclose such
information by law or regulation, (ii) disclosure of such information is
necessary or desirable in connection with the pursuit or defense of a claim,
(iii) such information was known by such party prior to such disclosure or was
thereafter developed or obtained by such party independent of such disclosure,
or (iv) such information becomes generally available to the public or is
otherwise no longer confidential. Prior to any disclosure of information
pursuant to the exception in clauses (i) and (ii) of the preceding sentence, the
party intending to disclose the same shall so notify the party which provided
the same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
Section 10. Miscellaneous
29
10.01. Expenses. Except as set forth on Schedule 10.01, Xxxxx and
Sellers shall each pay their own expenses incident to this Agreement and the
transactions contemplated hereby, including all fees of its counsel or
accountants, whether or not such transactions shall be consummated; provided,
however, that Xxxxx shall reimburse Sellers for one-half of their reasonable
legal fees (not heretofore paid by Sellers or CSI) in connection with the
preparation, execution and closing of this Agreement.
10.02. No Finders. Each party to this Agreement will indemnify and
hold harmless the other parties against and in respect of any claims for
brokerage or other commissions relative to this Agreement or the transactions
contemplated hereby, based in any way on agreements, arrangements, or
understandings claimed to have been made by such party with any third party.
Sellers and CSI each represents and warrants that it has not dealt with and does
not know of any person, firm or corporation asserting a brokerage, finder's or
similar claim in connection with the making or negotiation of this Agreement or
the transactions contemplated hereby. Xxxxx and Xxxxx Holdings each represents
and warrants that it has not dealt with and does not know of any person, firm or
corporation asserting a brokerage, finder's or similar claim in connection with
the making or negotiation of this Agreement or the transactions contemplated
hereby other than as may have been set forth in writing delivered by it to CSI.
Xxxxx shall be responsible for satisfying any such claim.
10.03. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement, at any time prior to the Closing Date, may be
terminated: (a) by the mutual written consent of Sellers, CSI, Xxxxx and Xxxxx
Holdings; (b) by Xxxxx and Xxxxx Holdings if any of the conditions set forth in
Sub-Sections 7.01 or 7.02 shall not have been fulfilled or waived by the Closing
Date; (c) by Xxxxx and Xxxxx Holdings if any default under or breach of any
agreement or condition of Sellers or CSI shall have occurred and shall not have
been cured or waived by the Closing Date; (d) by Sellers and CSI if any or the
conditions set forth in Sub-Sections 7.01 or 7.03 shall not have been fulfilled
by the Closing Date; or (e) by Sellers and CSI if any default under or breach of
any agreement or condition of Xxxxx or Xxxxx Holdings shall have occurred and
shall not have been cured or waived by the Closing Date. Any termination shall
be without liability on the part of any party other than a termination under
clause (c) or (e) of this Sub-Section 10.03.
10.04. Defense of Indemnified Claims.
(a) In the event that any claim shall be asserted by any third party
against Xxxxx, Xxxxx Holdings, Elligent, any of Patra's Indemnified Parties, or
CSI which could involve the operation of the indemnity provision of this
Agreement, Sellers shall be notified of such claim forthwith and shall be given
a reasonable opportunity to defend or participate in the original defense
against such claim at their own expense; provided that Sellers proceed in good
faith, expeditiously and diligently. In connection therewith, the party which
may seek indemnity shall cooperate fully to make available to Sellers all
pertinent information under its control relating thereto. There shall be no
obligation to indemnify pursuant to Sub-Section 8.01 with respect to any such
claim for which indemnity is sought thereunder while a defense against said
claim is being made by litigation or arbitration until the resolution of said
claim by a final judgment, decision or settlement.
30
(b) In the event that any claim shall be asserted by any third party
against Sellers or any of Sellers' Indemnified Parties which could involve the
operation of the indemnity provision of this Agreement, Xxxxx and Xxxxx Holdings
shall be notified of such claim forthwith and shall be given a reasonable
opportunity to defend or participate in the original defense against such claim
at their own expense; provided that they proceed in good faith, expeditiously
and diligently. In connection therewith, the party which may seek indemnity
shall cooperate fully to make available to Xxxxx and Xxxxx Holdings all
pertinent information under its control relating thereto. There shall be no
obligation to indemnify pursuant to Sub-Section 8.02 with respect to any such
claim for which indemnity is sought thereunder while a defense against said
claim is being made by litigation or arbitration until the resolution of said
claim by a final judgment, decision or settlement.
10.05. Records. Sellers and Xxxxx each agree that after the Closing
Date Sellers will transfer to Xxxxx any and all books or records relating to CSI
or its properties or business.
10.06. Assignments. This Agreement and the rights and obligations of
the parties hereto shall not be assigned by any party to any third party, except
with the written consent of the others; provided, however, that Xxxxx and Xxxxx
Holdings may assign and/or delegate their respective rights and obligations
hereunder to any other person, partnership or corporation controlling,
controlled by or under common control with Xxxxx or Xxxxx Holdings, as the case
may be, if such assignee shall assume and agree to be bound by the obligations
of Xxxxx and Xxxxx Holdings hereunder; provided further, that no such assignment
will relieve Xxxxx or Xxxxx Holdings of any of its obligations hereunder.
Nothing in this Agreement, unless otherwise expressly provided, is intended to
confer upon any person, other than parties hereto and their successors and
assigns, any rights or remedies under or by reason of this Agreement.
10.07. Notices. Any notice, demand, request or other communication
which by any provision of this Agreement is required or permitted to be given to
or served on any party hereto shall be given in writing (setting forth in
reasonable detail the purpose of such notice, demand, request or communication
and identifying the provision of this Agreement pursuant to which such notice,
demand, request or communication is given), and shall be deemed to be effective
for all purposes when (i) delivered personally, (ii) sent by facsimile
transmission, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth below for such party:
(a) If to Xxxxx: Xxxxx Capital Ltd.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxxx
31
with a copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Xxxxx Holdings: Xxxxx Holdings, LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxxx
with a copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(c) If to CSI: Conversion Services International, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxx Xxxxxx
(d) If to Sellers: Mr. Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
Xx. Xxxxx Xxxxxxx
00 Xxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
with a copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Sub-Section 10.07. Any such notice
shall be deemed to be delivered, given, and received (x) as of the date so
delivered, if delivered personally, (y) as of the date on which the
32
same was deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and sent as aforesaid, or (z) if transmitted by
facsimile at the opening of business in the office of the addressee on the
business day next following the transmission thereof. In this Sub-Section 10.07,
"business day" means any day except Saturday, Sunday or a statutory holiday in
the State of New York or the State of New Jersey.
10.08. Entire Agreement, etc. This instrument contains the entire
agreement between the parties hereto with respect to the transactions
contemplated herein and supersedes all prior oral or written agreements and
understandings, including the Preliminary Agreement. No amendment or
modification of this Agreement will be effective unless reduced to writing and
signed by all the parties hereto. The Schedules and Exhibits attached hereto
shall constitute part of this Agreement. This Agreement shall be construed in
accordance with the laws of the State of New York applicable to agreements to be
performed wholly within said State. This Agreement may be executed in two or
more counterparts by the several parties hereto, but all of which will together
constitute one and the same instrument. In the event any provision of this
Agreement shall be deemed to be invalid or void under any applicable law, the
remaining provisions hereof shall not be affected thereby and shall continue in
full force and effect.
10.09. Successors in Interest. This Agreement shall be binding upon
and shall inure to the benefit of the respective successors and permitted
assigns of the parties hereto.
10.10. Captions. The captions in this Agreement are used for
convenience only and are not intended in any way to affect the interpretation or
construction of this Agreement.
10.11. Substitution of Elligent. In the event that the Xxxxx-Elligent
Merger is not consummated within ninety (90) days of the date of the execution
of this Agreement, Xxxxx and Xxxxx Holdings shall have an additional thirty (30)
days in which to substitute another public company for Elligent under the terms
and conditions of this Agreement.
33
IN WITNESS WHEREOF, the parties hereto have each duly executed this
Agreement as of the date and year first above written.
XXXXX CAPITAL LTD.
By: /S/XXXXXXX XXXXXXXX /S/ XXXXX XXXXXX
------------------------------ -----------------------------
Xxxxxxx Xxxxxxxx XXXXX XXXXXX, individually
President
/S/ XXXXX XXXXXXX
-----------------------------
XXXXX XXXXXXX, individually
XXXXX HOLDINGS, LLC
By: /S/ XXXXXXX XXXXXXXX
------------------------------
Xxxxxxx Xxxxxxxx
Manager
CONVERSION SERVICES INTERNATIONAL, INC.
By: /S/ XXXXX XXXXXX /S/ XXXXX XXXXXXX
------------------------------ -----------------------------
Xxxxx Xxxxxx Xxxxx Xxxxxxx
President Senior Vice President
00
XXXXX XX XXX XXXX )
) SS
COUNTY OF NEW YORK )
On this 19th day of September, 1998 before me, a Notary Public, in and
for the above county, personally appeared Xxxxxxx Xxxxxxxx, President of Xxxxx
Capital Ltd., known to me personally to be such, and duly acknowledged the above
instrument to be the act and deed of said corporation and that he signed his
name thereto in his capacity as President by order of the Board of Directors of
said corporation.
/S/ XXXXXXX X. STAIRS
-----------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this 19th day of September, 1998 before me, a Notary Public, in and
for the above county, personally appeared Xxxxxxx Xxxxxxxx, Manager of Xxxxx
Holdings LLC, known to me personally to be such, and duly acknowledged the above
instrument to be the act and deed of said limited liability company and that he
signed his name thereto in his capacity as Manager by order of the sole Manager
of said limited liability company.
/S/ XXXXXXX X. STAIRS
-----------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this 19th day of September, 1998 before me, a Notary Public, in and
for the above county, personally appeared Messrs. Xxxxx Xxxxxx and Xxxxx
Xxxxxxx, respectively President and Executive Vice President of Conversion
Services International, Inc., known to me personally to be such, and duly
acknowledged the above instrument to be the act and deed of said corporation and
that they signed their names thereto in their capacity as President and
Executive Vice President by order of the Board of Directors of said corporation.
/S/ XXXXXXX X. STAIRS
-----------------------------
NOTARY PUBLIC
35
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this 19th day of September, 1998 before me, a Notary Public, in and
for the above county, personally appeared Xxxxx Xxxxxx and acknowledged that he
is the individual who executed the foregoing instrument and that such execution
was his voluntary act and deed.
/S/ XXXXXXX X. STAIRS
-----------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this 19th day of September, 1998 before me, a Notary Public, in and
for the above county, personally appeared Xxxxx Xxxxxxx and acknowledged that he
is the individual who executed the foregoing instrument and that such execution
was his voluntary act and deed.
/S/ XXXXXXX X. STAIRS
-----------------------------
NOTARY PUBLIC
36
Index to Exhibits and Schedules
1. EXHIBIT 1.01 - Form of Certificate of Merger
2. EXHIBIT 1.04(b)-1 - Form of Secured Installment Promissory Note
(Mr.Xxxxx Xxxxxx)
3. EXHIBIT 1.04(b)-2 - Form of Secured Installment Promissory Note
(Xx. Xxxxx Xxxxxxx)
4. EXHIBIT 3.01(a)-1 - Certificate of Restoration and Revival of
Certificate
of Incorporation of CSI
5. EXHIBIT 3.01(a)-2 - Application for Authority of CSI (New York)
6. EXHIBIT 3.01(a)-3 - Certificate of Incorporation of CSI
7. EXHIBIT 3.01(a)-4 - By-Laws of CSI
8. EXHIBIT 3.01(b)-1 - Certificate of Incorporation of Doorways
9. EXHIBIT 3.01(b)-2 - By-Laws of Doorways
10. EXHIBIT 3.01(e) - Conflicts (Contracts)
11. EXHIBIT 3.01(i) - Compliance with Laws
12. EXHIBIT 3.01(j)-1 - CSI Financial Statements as at December 31,
1995, 1996 and 1997
13. EXHIBIT 3.01(j)-2 - CSI and Doorways Interim Financials as at
June 30, 1998
14. EXHIBIT 3.01(j)-3 - Xxxxx Xxxxxxxx Adjustments
15. EXHIBIT 3.01(j)-4 - Excluded Assets (Xxxxxxxxx.xxx)
16. EXHIBIT 3.01(k) - Other Liabilities
17. EXHIBIT 3.01(l) - Returns and Complaints
18. EXHIBIT 3.01(m) - Litigation
19. EXHIBIT 3.01(n) - CSI Tax Matters
20. EXHIBIT 3.01(n)(i)-1 - CSI Tax Returns for 1995, 1996 and 1997
21. EXHIBIT 3.01(n)(i)-2 - Doorways Tax Returns for 1995, 1996 and 1997
22. EXHIBIT 3.01(p)(ii) - CSI Dividends, Distributions
23. EXHIBIT 3.01(p)(vii) - Forgiven or Cancelled Debt
24. EXHIBIT 3.01(q)-1 - Key Employees and Consultants
25. EXHIBIT 3.01(q)-2 - Employee and Consultant Contracts - CSI and
Doorways (Compensation in excess of
$100,000 p.a.)
26. EXHIBIT 3.01(s)-1 - CSI Officers and Directors
27. EXHIBIT 3.01(s)-2 - Doorways Officers and Directors
28. EXHIBIT 3.01(t)-1 - CSI Bank Accounts
29 EXHIBIT 3.01(t)-2 - Doorway Bank Accounts
30. EXHIBIT 3.01(u) - Contracts (CSI and Doorways)
31. EXHIBIT 3.01(w) - Related Party Transactions
32. EXHIBIT 3.01(x) - Insurance
33. EXHIBIT 3.01(y) - CSI Trademark/Intellectual Property
34. EXHIBIT 4.01(a)-1 - Xxxxx Capital Ltd. Certificate of Incorporation
35. EXHIBIT 4.01(a)-2 - Patral Capital Ltd. By-Laws
36. EXHIBIT 4.03(a) - Xxxxx Holdings LLC Certificate of Formation
37
37. EXHIBIT 6.01 - Loan Guarantees
38. EXHIBIT 6.02(b)-1 - Form of Registration Rights Agreement
(Mr. Xxxxx Xxxxxx)
39. EXHIBIT 6.02(b)-2 - Form of Registration Rights Agreement
(Xx. Xxxxx Xxxxxxx)
40. EXHIBIT 7.02(i)-1 - Form of Employment Agreement (Mr. Xxxxx Xxxxxx)
41. EXHIBIT 7.02(i)-2 - Form of Employment Agreement (Xx. Xxxxx Xxxxxxx)
42. SCHEDULE 7.02(j) - Officers Retained
43. SCHEDULE 7.03(i) - Form of Opinion of Elligent's Counsel
44. SCHEDULE 7.03(j) - Form of Pledge Agreement
45. SCHEDULE 10.01 - Expenses
38
EXHIBIT 1.01
CERTIFICATE OF MERGER
OF
CONVERSION SERVICES INTERNATIONAL, INC.
INTO
XXXXX CAPITAL LTD.
The undersigned corporation organized and existing under and by virtue of the
General Corporation Law of Delaware, DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
NAME STATE OF INCORPORATION
---- ----------------------
Conversion Services International, Inc. Delaware
Xxxxx Capital Ltd. Delaware
SECOND: That a Plan and Agreement of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
251 of the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger is
Xxxxx Capital Ltd.
39
FOURTH: That the Certificate of Incorporation of Xxxxx Capital Ltd., a
Delaware corporation which will survive the merger, shall be the Certificate of
Incorporation of the surviving corporation.
FIFTH: That the executed Plan and Agreement of Merger is on file at
the principal place of business of the surviving corporation, the address of
which is 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx, XX 00000.
SIXTH: That a copy of the Plan and Agreement of Merger will be
furnished by the surviving corporation, on request and without cost, to any
stockholder of any constituent corporation.
Executed this 17th day of September, 1998.
XXXXX CAPITAL LTD.
By:
-------------------------------
Name: Xxxxxxx X. Stairs
Title: Secretary
40
SECRETARY'S CERTIFICATE
The undersigned, Xxxxx Xxxxxxx, Secretary of CONVERSION SERVICES INTERNATIONAL,
INC., a corporation organized and existing under the laws of the State of
Delaware ("CSI") and one of the merging corporations mentioned in the Plan and
Agreement of Merger to which this Certificate is attached ("Merger Agreement"),
certifies that the Merger Agreement has been approved and adopted by written
consent of the holders of all the outstanding stock of CSI in accordance with
Section 228 of the General Corporation Law of the State of Delaware on August
26, 1998.
WITNESS my hand on this 17th day of September, 1998.
----------------------------------
XXXXX XXXXXXX, Secretary
41
SECRETARY'S CERTIFICATE
The undersigned, Xxxxxxx X. Stairs, Secretary of XXXXX CAPITAL LTD., a
corporation organized and existing under the laws of the State of Delaware
("Xxxxx") and one of the merging corporations mentioned in the Plan and
Agreement of Merger to which this Certificate is attached ("Merger Agreement"),
certifies that the Merger Agreement has been approved and adopted by written
consent of the holders of all the outstanding stock of Xxxxx in accordance with
Section 228 of the General Corporation Law of the State of Delaware on August
26, 1998.
WITNESS my hand on this 17th day of September, 1998.
----------------------------------
XXXXXXX X. STAIRS, Secretary
42
EXHIBIT 1.04(b)-1
SECURED INSTALLMENT PROMISSORY NOTE
US$5,666,667 [**DATE**]
FOR VALUE RECEIVED, ELLIGENT CONSULTING GROUP, INC., a Nevada
corporation having its registered office at ___________________________________
(hereinafter referred to as "Elligent") and XXXXX CAPITAL LTD., a Delaware
corporation having its registered office at Corporation Trust Center, 0000
Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle, Delaware (hereinafter
referred to as "Xxxxx"; Elligent and Xxxxx are hereinafter jointly referred to
as "Makers") hereby jointly and severally promise to pay to XXXXX XXXXXX, an
individual residing at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000
(hereinafter referred to as "Xxxxxx") or to his assignee, the principal sum of
FIVE MILLION SIX HUNDRED AND SIXTY-SIX THOUSAND SIX HUNDRED AND SIXTY-SEVEN
DOLLARS (US$5,666,667) in installments as set forth on Schedule "A" attached
hereto and made a part hereof, together with interest at the rate of eight
percent (8%) per annum, payable monthly in arrears, on the unpaid principal
balance of each of the Interest Bearing Installments (as defined on Schedule
"A") from time to time outstanding from the date hereof until the respective
Interest Bearing Installment is fully paid.
This Note is the Secured Installment Promissory Note referred to in
and issued under that certain Pledge Agreement dated as of August 1, 1998
between Xxxxxx, Elligent and Xxxxx Xxxxxxx (the "Pledge Agreement"), and this
Note and the holder hereof are entitled to all of the benefits provided for in
the Pledge Agreement or referred to therein. This Note is the Secured
Installment Promissory Note attached as Exhibit 1.04(b)-1 to the Plan and
Agreement of Merger made as of August 1, 1998 by and among Xxxxx, Xxxxx Holdings
LLC, Conversion Services International, Inc., Xxxxxx and Xxxxx Xxxxxxx (the
"Merger Agreement").
This Note is subject to a right of setoff pursuant to Section 8.03 of
the Merger Agreement. Xxxxxx has the right to accelerate this Note as provided
in Section 8 of the Pledge Agreement. An event of default for purposes of this
Note shall be the same as an Event of Default under Section 8 of the Pledge
Agreement.
Makers, and each of them, hereby waive protest, presentment for
payment, demand for payment, notice of nonpayment, notice of dishonor, protest
of dishonor, and consent to and waive notice of any extension, renewal or
modification of this Note or any installment of principal or interest granted by
Xxxxxx.
1
No delay or omission on the part of Xxxxxx in exercising any remedy,
right or option hereunder shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any one occasion shall not be construed as a
waiver or bar to any such remedy, right or option on a future occasion.
All payments under this Note shall be payable in lawful money of the
United States of America which shall be legal tender for public and private
debts at the time of payment.
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York.
ELLIGENT CONSULTING GROUP, INC.
By: _________________________________
Name:
Title:
XXXXX CAPITAL LTD.
By: _________________________________
Name:
Title:
2
SCHEDULE "A"
Interest Bearing
Principal Amount Payment Date Installment
---------------- ------------ ----------------
$666,667.00 45 Business Days (as defined in the Yes
Merger Agreement) after the Closing
Date (as defined in the Merger
Agreement)
$1,000,000.00* January 21, 1999 Yes
$2,500,000.00 May 1, 1999 No
$1,500,000.00 August 1, 1999 No
----------------------
* The payment of $1,000,000.00 due on January 21, 1999 may, at the option of
Maker, be made by the delivery of Conversion Stock (as defined in the
Merger Agreement) to Xxxxxx in accordance with Sub-Section 1.04(b) and
Sub-Section 1.05(a) of the Merger Agreement.
Elligent: _______
Xxxxx: _______
Xxxxxx: _______
3
EXHIBIT 1.04(b)-2
SECURED INSTALLMENT PROMISSORY NOTE
US$2,833,333.00 [*DATE**]
FOR VALUE RECEIVED, ELLIGENT CONSULTING GROUP, INC., a Nevada
corporation having its registered office at ____________________________________
(hereinafter referred to as "Elligent") and XXXXX CAPITAL LTD., a Delaware
corporation having its registered office at Corporation Trust Center, 0000
Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle, Delaware (hereinafter
referred to as "Xxxxx"; Elligent and Xxxxx are hereinafter jointly referred to
as "Makers") hereby jointly and severally promise to pay to XXXXX XXXXXXX, an
individual residing at 00 Xxxx Xxxxx, Xxxx Xxxxxx, Xxx Xxxxxx 00000 (hereinafter
referred to as "Peipert") or to his assignee, the principal sum of TWO MILLION
EIGHT HUNDRED AND THIRTY-THREE THOUSAND THREE HUNDRED AND THIRTY-THREE DOLLARS
(US$2,833,333) in installments as set forth on Schedule "A" attached hereto and
made a part hereof, together with interest at the rate of eight percent (8%) per
annum, payable monthly in arrears, on the unpaid principal balance of each of
the Interest Bearing Installments (as defined on Schedule "A") from time to time
outstanding from the date hereof until the respective Interest Bearing
Installment is fully paid.
This Note is the Secured Installment Promissory Note referred to in
and issued under that certain Pledge Agreement dated as of August 1, 1998
between Peipert, Elligent and Xxxxx Xxxxxx (the "Pledge Agreement"), and this
Note and the holder hereof are entitled to all of the benefits provided for in
the Pledge Agreement or referred to therein. This Note is the Secured
Installment Promissory Note attached as Exhibit 1.04(b)-2 to the Plan and
Agreement of Merger made as of August 1, 1998 by and among Xxxxx, Xxxxx Holdings
LLC, Conversion Services International, Inc., Peipert and Xxxxx Xxxxxx (the
"Merger Agreement").
This Note is subject to a right of setoff pursuant to Section 8.03 of
the Merger Agreement. Peipert has the right to accelerate this Note as provided
in Section 8 of the Pledge Agreement. An event of default for purposes of this
Note shall be the same as an Event of Default under Section 8 of the Pledge
Agreement.
Makers, and each of them, hereby waive protest, presentment for
payment, demand for payment, notice of nonpayment, notice of dishonor, protest
of dishonor, and consent to and waive notice of any extension, renewal or
modification of this Note or any installment of principal or interest granted by
Peipert.
No delay or omission on the part of Peipert in exercising any remedy,
right or option hereunder shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any
1
one occasion shall not be construed as a waiver or bar to any such remedy, right
or option on a future occasion.
All payments under this Note shall be payable in lawful money of the
United States of America which shall be legal tender for public and private
debts at the time of payment.
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York.
ELLIGENT CONSULTING GROUP, INC.
By: _________________________________
Name:
Title:
XXXXX CAPITAL LTD.
By: _________________________________
Name:
Title:
2
SCHEDULE "A"
Interest Bearing
Principal Amount Payment Date Installment
---------------- ------------ ----------------
$333,333.34 45 Business Days (as defined in the Yes
Merger Agreement) after the Closing
Date (as defined in the Merger
Agreement)
$500,000.00* January 21, 1999 Yes
$1,250,000.00 May 1, 1999 No
$749,999.66 August 1, 1999 No
----------------------
* The payment of $1,000,000.00 due on January 21, 1999 may, at the option of
Maker, be made by the delivery of Conversion Stock (as defined in the
Merger Agreement) to Peipert in accordance with Sub-Section 1.04(b) and
Sub-Section 1.05(a) of the Merger Agreement.
Elligent: _______
Xxxxx: _______
Peipert: _______
3
EXHIBIT 3.01(a)-1
Certificate of Restoration and Revival Certificate of Incorporation of CSI
[OMITTED]
EXHIBIT 3.01(a)-2
Application for Authority of CSI (New York)
[OMITTED]
EXHIBIT 3.01(a)-3
Certificate of Incorporation of CSI
[OMITTED]
EXHIBIT 3.01(a)-4
By-Laws of CSI
[OMITTED]
EXHIBIT 3.01(b)-1
Certificate of Incorporation of Doorways
[OMITTED]
EXHIBIT 3.01(b)-2
By-Laws of Doorways
[OMITTED]
SCHEDULE 3.01(e)
Conflicts (Contracts)
The following agreements require consents:
1. Real property lease - 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx, XX
Term - 5 years
Dated - November 6, 1997
2. Real property lease - 1st floor, 000 Xxxx Xx. Xxxxxxxx Xxxxxx,
Xxxxxxxxxx, XX
Term - ends September 30, 1998
3. Summit Bank Master Advance Note and Security Credit Agreement - dated
November 28, 1997 in the amount of $1,500,000.00.
SCHEDULE 3.01(i)
Compliance with Laws
1. An issue has been raised by the State of New Jersey, Department of Labor
regarding CSI's classification of certain employees as independent
contractors as opposed to employees.
2. See also Schedule 3.01(l) and (m).
EXHIBIT 3.01 (j)-1
CSI Financial Statements as at
December 31, 1995, 1996 and 1997
[OMITTED]
EXHIBIT 3.01 (j)-2
CSI and Doorways Interim Financials as at June 30, 1998
[OMITTED]
EXHIBIT 3.01 (j)-3
Xxxxx Xxxxxxxx Adjustment
[OMITTED]
SCHEDULE 3.01(j)-4
Excluded Assets
1. Xxxxxxxxx.xxx
SCHEDULE 3.01(k)
Other Liabilities
1. See Schedules 3.01(l) and (m).
SCHEDULE 3.01(l)
Returns and Complaints
1. In the ordinary course of business, CSI receives letters and telephone
calls complaining about services provided.
2. See also Schedules 3.01(k) and (m).
The foregoing disclosures, taken together, will not constitute a material
adverse effect on CSI's business or prospects.
SCHEDULE 3.01 (m)
LITIGATION- Actual and threatened
1. Congedo v. Conversion Services, Inc., Superior Court of New Jersey,
Bergen County, Docket No. BER-L-2308-96. This is a contract dispute in
which Plaintiff claims approximately $15,000 in damages. Trial call is
currently scheduled for September 22, 1998.
2. State of New Jersey, Department of Labor - inquiry regarding CSI's
classification of certain employees as independent contractors as opposed
to employees.
3. The Matlen Silver Group - litigation alleging amounts due resulting from
hiring of Xxxxxx Xxxxxxxx - regarding nonsolicitation (June 1993). This
matter has been marked settled by the court and settlement papers are to
be exchanged. This was a non-cash settlement.
4. Consultant Services Institute - attorney correspondence exchanged
regarding CSI assumed name (November 1993). No action was filed.
5. CSI v. GTN Technologies - failure to pay for services rendered by CSI.
CSI's counsel has drafted a complaint for non-payment of services
rendered which has not yet been filed.
6. Attorney correspondence alleging breach of an employment agreement by CSI
regarding Xxxxx Xxxxx Xxxxxxx (no litigation filed and no longer employed
at CSI).
7. Xxx Xxxxxx - Independent consultant alleging amounts due (no action
filed).
8. CSI x. Xxxxxx Group - failure to pay for services rendered by CSI. CSI's
counsel has drafted a complaint for non-payment of services rendered
which has not yet been filed.
9. CSI attorney letter threatening litigation regarding Xxxxx Xxxxx'x
obligation not to compete. CSI has decided not to pursue litigation.
SCHEDULE 3.01(n)
CSI Tax Matters
[OMITTED]
SCHEDULE 3.01(n)(i)-1
CSI Tax Returns for 1995, 1996 and 1997
[OMITTED]
SCHEDULE 3.01(n)(i)-2
Doorways, Inc. Tax Returns
(1195, 1996 and 1997)
[OMITTED]
SCHEDULE 3.01(p)(ii)
CSI Dividends, Distributions
1. See Schedule 3.01(p)(vii).
SCHEDULE 3.01(p)(vii)
FORGIVEN or CANCELLED DEBT
1. Loans from CSI to shareholders have been reduced by one hundred thousand
($100,000.00) dollars (post June 30, 1998).
SCHEDULE 3.01(q)-1
Key Employees and Consultants
[OMITTED]
SCHEDULE 3.01(q)-2
Employee and Consultant Contracts
CSI and Doorways
(Compensation in excess of $100,000 p.a.)
[OMITTED]
SCHEDULE 3.01 (s)-1
CSI Officers and Directors
Directors - Xxxxx Xxxxxx and Xxxxx Xxxxxxx
Officers - President - Xxxxx Xxxxxx
Senior Vice President - Xxxxx Xxxxxxx
Secretary - Xxxxx Xxxxxxx
SCHEDULE 3.01(s)-2
Doorways Officers and Directors
Director - Xxxxx Xxxxxx
Officers - President - Xxxxx Xxxxxx
Secretary - Xxxxx Xxxxxx
SCHEDULE 3.01(t)-1
CSI Bank Accounts
[OMITTED]
SCHEDULE 3.01(t)-2
Doorways Bank Accounts
[OMITTED]
SCHEDULE 3.01(u)
Contracts
This Schedule should be read in its entirety - there are many contracts which
fit into more than one category.
3.01(u)(i)
Summit Bank Master Advance Note and Security Credit Agreement - dated November
28, 1997 in the amount of $1,500,000.00 (including CSI correspondence).
November 1997 Standby Letter of Credit in the amount of $167,344.00
3.01(u)(ii)
CSI Employee Agreements
CSI Contract Employee Agreements
CSI Independent Contractor Agreements
Professional Services Agreement (sample)
3.01(u)(iii)
none
3.01(u)(iv)
401K Profit Sharing Plan Documents (Red Bank Pension Services, Inc.)
CSI Long term disability plan booklet - UNUM Life Ins. Co.
CSI Group Insurance Book - Xxxx Xxxxxx Life Ins. Co.
Aetna Retirement Services Package
American National Fire Insurance Company - Commercial Property, Commercial
General Liability, Commercial Crime, Commercial Inland Marine, Commercial
Boiler and Machinery, Commercial Auto, and Commercial Umbrella
American National Fire Insurance Company - Workers Compensation, Employers
Liability
American Alliance Insurance Company - Umbrella Policy
CSI Shareholders Agreement
Jaguar Credit Corp. - automobile lease
State Farm Indemnity Co. - Auto Insurance - Xxxxx Xxxxxx
First Trenton Indemnity Co. - Auto Insurance - Xxxxx Piepert
3.01(u)(v)
none
3.01 (u)(vi)
none
3.01(u)(vii)
Jaguar Cars; Doorways, Inc. Software Development and License Agreement with CSI;
Xxxxx & XxXxxxxx Group Associates; Lifespan; Xxxxxx Xxxxxxx; Sterling Testing
Systems; ACS- East; ADP; Arco; Xxxxxx & S. Bleichroeder; Cendant; Corporate
Express; Xxxx & Xxxxxx Insurance; Cytec Industries, Inc.; Ernst & Young; Xxxxxxx
Xxxxx & Co.; GTN Technologies, LLC; ISP Management Co., Inc.; Xxxxxx & Noble;
Xxxx Atlantic; H) Xxxxxxx; Lenox, Inc. Lifespan Info. Services; Lucent Tech.;
Xxxxxxx Xxxxx; Xxxxxx Xxxxxxx; Merck & Co.; Metlife; Navieras NPR Inc.; Party
City; Pfizer; Prudential; Securities Industry Automation Corp.; Xxxxx Xxxxxx;
Sony Electronics, Inc.; Xxxxx Fund Management; Xxxxxxx Computer Systems, Inc.;
Summit Bancorp.; Volvo; NYLCare Health Care Plans of New Jersey, Inc.
3.01(u)(viii)
-See 3.01 (y)
3.01(u)(ix)
none
3.01(u)(x)
none
3.01(u)(xi)
none
3.01(u)(xii)
none
Additional Contracts
Real Property Lease - 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx, XX
Real Property Lease (and amendments) - 1st floor, 000 Xxxx Xx. Xxxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx
Equipment Leases - Bankvest Capital Corp
Lease Agreement with IKON for copier, dated March 30, 1998.
Matlen Silver Group, Inc. Agreement
Imperial Capital Equipment Contract
nView Equipment Contract
Ikon Equipment Leases
Matthijssen, Inc. Office Equipment Maintenance Agreement
Presentation Products Equipment Lease
GE Capital Equipment Lease Agreement Sample Confidentiality Agreement
SCHEDULE 3.01(w)
Related Party Transactions
1. Doorways, Inc. will be contributed prior to closing.
Schedule 3.01(x)
Insurance
1. American Alliance Insurance Co. - General Corporate Policy.
2. American national Fire Insurance Co. - Workers Compensation and Employers
Liability Insurance.
3. American National Fire Insurance Co. - Commercial Property, Commercial
General Liability, Commercial Crime, Commercial Inland Marine, Commercial
Boiler and Machinery, Commercial Auto, and Commercial Umbrella.
4. State Farm Indemnity Co. - Auto Insurance - Xxxxx Xxxxxx.
5. First Trenton Indemnity Co. - Auto Insurance - Xxxxx Xxxxxxx.
Schedule 3.01(y)
CSI Trademark/Intellectual Property
Doorways, Inc. and Conversion Services International, Inc. are the corporate
names. CSI -Tracker or Tracker is a customer service, help desk software
product. Wang 2 IBM is a software conversion tool used to convert Wang files to
AS 100 files - it is no longer used. CSI/400 is a COBOL conversion software
product and it is no longer in existence. Doorways is a dynamic menu manager
software product that is no longer in existence. The only formal copyright filed
was for Wang 2 IBM.
Exhibit 4.01(a)-1
Xxxxx Capital Ltd.
Certificate of Incorporation
[OMITTED]
Exhibit 4.01(a)-2
Xxxxx Capital Ltd. By-Laws
[OMITTED]
Exhibit 4.03(a)
Xxxxx Holdings LLC
Certificate of Formation
[OMITTED]
Schedule 6.01
Loan Guarantees
Xxxxx Xxxxxx and Xxxxx Xxxxxxx are to be removed as guarantors from
the Summit Bank Line of Credit dated September 13, 1993, as extended on August
31.
EXHIBIT 6.02(b)-1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
the ____ day of ______________, 1998 (the "Effective Date"), by and between
ELLIGENT CONSULTING GROUP, INC., a Nevada corporation (the "Company"), and XXXXX
XXXXXX, an individual residing at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000 (the "Shareholder"),
WITNESSETH:
WHEREAS, Xxxxx Capital Ltd. ("Xxxxx"), Xxxxx Holdings LLC, Conversion
Services International, Inc., Xxxxx Xxxxxxx, and the Shareholder have entered
into a Plan and Agreement of Merger dated as of August 1, 1998 ("Merger
Agreement") pursuant to which Shareholder has received newly issued unregistered
shares of the Company's common stock (the "Company Shares"); and
WHEREAS, the Company is willing to grant certain registration rights to the
Shareholder with respect to the Company Shares; and
WHEREAS, the Company wishes to execute this Agreement and to grant to the
Shareholder the rights contained herein;
NOW THEREFORE, the parties hereto agree as follows:
Section l. Registration Rights.
1.01. Definitions. As used in this Agreement:
(a) The terms "Register", "Registered," and "Registration" refer to a
registration effected by preparing and filing a registration statement in
accordance with the Securities Act of 1933, as amended (the "Securities Act"),
and the subsequent declaration or ordering of the effectiveness of such
registration statement.
(b) The term "Registrable Securities" means:
(i) the Company Shares issued to the Shareholder pursuant to the
Merger Agreement; and
(ii) any other shares of common stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of, the Company Shares designated in Section
1.01(b)(i), excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his or
her rights and duties under this Agreement are not assigned;
provided, however, that the Company's common stock or other
securities shall only be treated as Registrable Securities
if and so long as they have not been (A) sold to or through
a broker or dealer or underwriter in a public distribution
or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section
4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale.
(c) The term "Holder" means any holder of outstanding Registrable
Securities who, subject to the limitations set forth in Section 1.09, acquired
such Registrable Securities in a transaction or series of transactions not
involving any registered public offering.
(d) The term "Business Day" means any day except Saturday, Sunday or a
statutory holiday in the State of New York or the State of Nevada.
1.02. Piggyback Registration.
(a) During the period beginning ______ (__) months following the Effective
Date and ending twenty-four (24) months following the Effective Date (the
"Piggyback Period"), the Company will notify the Holders in writing at least
thirty (30) days prior to filing its first registration statement under the
Securities Act during the Piggyback Period for purposes of effecting a public
offering of the Company's common stock whether or not for its own account
(excluding any registration statement on Form S-8 or Form S-4 or any successor
forms) and will afford the Holder(s) an opportunity to include in such
registration statement all or any part of the Registrable Securities not
previously sold by the Holder(s), subject to underwriter's cutbacks, if any,
pursuant to Section 1.02(b) below. If a Holder desires to include in any such
registration statement all or any part of such Registrable Securities, such
Holder will, within twenty (20) days after receipt of the foregoing notice from
the Company, so notify the Company in writing. The Holder's notice will
inform the Company of the number of shares the Holder wishes to include in such
registration statement. Notwithstanding anything in this Section 1.02 to the
contrary, if at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to all Holders and
thereupon shall be relieved of its obligations to register any Registrable
Securities in connection with such abandoned registration without prejudice to
the rights of Holders under this Section 1.02.
(b) If a registration statement for which the Company gives notice under
this Section 1.02 is for an underwritten offering, the Company will so advise
the Holders. In such event, a Holder's right to include Registrable Securities
in a registration pursuant to this Section 1.02 will be conditioned upon such
Holder's participation in such underwriting and the inclusion of the Registrable
Securities in the underwriting to the extent provided herein. In order to
participate in the underwriting, a Holder must enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting and satisfy all the terms, conditions and obligations contained
therein. Notwithstanding any other provision of this Agreement, if the managing
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, then the managing underwriter may
exclude shares (including any or all of the Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting will be allocated first, to the shares
to be sold by the Company and any shares proposed to be sold thereunder by a
Holder on a pro rata basis based upon the number of shares proposed to be sold
by the Company and a Holder, respectively, and, second, to any shares proposed
to be sold thereunder by any holders of registration rights granted by the
Company (other than to a Holder) on a pro rata basis based upon the number of
shares of each such Holder entitled to such registration. If a Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing underwriter,
delivered at least ten (10) Business Days prior to the effective date of the
registration statement. Any shares excluded or withdrawn from such underwriting
will be excluded and withdrawn from the registration and such Holder shall no
longer have any rights to include its Registrable Securities in such
registration.
(c) Notwithstanding anything in this Section 1.02 to the contrary, a Holder
shall not have the right to include its Registrable Securities in any
distribution or registration of securities by the Company which is a result of a
merger, consolidation, acquisition, exchange offer, recapitalization,
reorganization, dividend reinvestment plan, stock option plan or other employee
benefit plan or any similar transaction having the same effect.
(d) All expenses incurred in connection with a registration effected
pursuant to this Section 1.02, including (without limitation) all registration,
filing, qualification, printer and accounting fees shall be borne by the
Company. The Company shall not be required to pay any underwriters' or brokers'
fees, discounts or commissions relating to the Registrable Securities, or the
fees or expenses of separate counsel to the selling Holders, unless the
Company's counsel is unable or unwilling to represent the selling Holders.
1.03. Obligations of the Company. When required under Section 1.02 to
effect the registration of any Registrable Securities, the Company shall, as
soon as reasonably practicable:
(a) Prepare and file with the Securities and Exchange Commission ("SEC") a
registration statement on any appropriate form under the Securities Act with
respect to such Registrable Securities and use its reasonable efforts to cause
such registration statement to become effective, and keep such registration
statement effective for the period in which shares are sold by the Company
thereunder.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of Registrable Securities
pursuant to the terms and subject to the conditions of this Agreement.
(c) Furnish to the Holders such numbers of copies of a prospectus in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Notify each Holder of Registrable Securities covered by a registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, whereupon each
Holder shall cease utilizing such prospectus and the Company agrees, as soon
thereafter as reasonably practicable, to supplement the prospectus so as to meet
the requirements of the Securities Act, and to notify the Holders of such
action.
(e) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(f) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Agreement, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Agreement, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities.
1.05 Obligation of the Holders.
(a) Each Holder agrees that, upon receipt of a notice from the Company of
any suspension or stop-order relating to a registration statement covering the
Registrable Securities, such Holder will forthwith forego or delay the
disposition of any Registrable Securities covered by such registration statement
or prospectus until such Holder's receipt of the copies of the supplemented or
amended prospectus, or until it is advised in writing by the Company that the
use of the applicable prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in such
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of any prospectus covering such Registrable
Securities.
(b) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder's Registrable Securities pursuant to the
Securities Act.
1.06. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder against any losses, claims, damages, or liabilities (joint
or several) to which any of the foregoing persons may become subject, under the
Securities Act, the Securities Exchange Act of 1934, as amended (the"1934 Act"),
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any state securities law; and the Company will
pay, as incurred, any reasonable legal or other expenses incurred by any person
intended to be indemnified pursuant to this Section 1.06(a), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
1.06(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs (i) in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by a Holder or (ii) as a
result of any use or delivery by a Holder of a prospectus other than the most
current prospectus made available to such Holder by the Company.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the 1934 Act, any other Holder
selling securities in such registration statement, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs (i) in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration or (ii) as a
result of any use or delivery by such Holder of a prospectus other than the most
current prospectus made available to such Holder by the Company; and each such
Holder will pay, as incurred, any reasonable legal or other expenses incurred by
any person intended to be indemnified pursuant to this Section 1.06(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.06(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld. The liability of a selling Holder under this paragraph (b) and under
paragraph (d) below shall be limited to an amount equal to the net proceeds to
such selling Holder from the sale of such Holder's Registrable Securities
hereunder.
(c) Promptly after receipt by an indemnified party under this Section 1.06
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.06, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel of the indemnifying party's choosing.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.06, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.06.
(d) If the indemnification provided in this Section 1.06 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this Section 1.06
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.07. Reports under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the 1934 Act;
(c) upon the request of any Holder, furnish to such Holder, so long as the
Holder owns any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration.
1.08. Certain Additional Agreements of the Holder(s).
(a) Prior to and so long as the Registration Statement shall remain
effective, each Holder shall:
(i) not engage in any stabilization activity in connection with the
Company's common stock;
(ii) not bid for or purchase any of the Company's common stock or any
rights to acquire any of the Company's common stock, or attempt
to induce any person to purchase any of the Company's common
stock other than as permitted under the 1934 Act; or
(iii) effect all sales of Registrable Securities in broker's
transactions through broker-dealers acting as agents, in
transactions directly with market makers or in privately
negotiated transactions where no broker or other third party
(other than the purchaser) is involved.
(b) Without limiting any other provision of this Agreement, no Holder shall
engage in any short-sales of the Company's common stock prior to the
effectiveness of the registration statement pursuant to which the Holder is
offered the opportunity to sell its Registrable Securities hereunder, except to
the extent that any such short-sale is fully covered by freely tradable shares
of the Company's common stock.
1.09. Assignment of Registration Rights. The registration rights granted
pursuant to this Section 1 are not assignable other than in connection with a
transfer of such Registrable Securities to any spouse, son or daughter of the
Shareholder, or to trustees of a trust the beneficiaries of which include the
Shareholder and any spouse, son or daughter of the Shareholder, provided that
all such transferees agree in writing to appoint a single representative as
their attorney-in-fact for the purpose of receiving any notices and exercising
their rights under this Section 1, and provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such Registrable Securities by the transferee is restricted under
the Securities Act. Any attempted assignment of registration rights in
contravention of this Section 1.09 shall be null and void. The Shareholder
shall, within a reasonable time after such transfer, furnish the Company with
written notice of the name and address of such transferee and the securities
with respect to which such registration rights are being assigned.
1.10. Termination of Registration Rights. Subject to Section 1.06 the
registration rights granted under this Section 1 shall terminate upon the
earlier of (i) two (2) years following the Effective Date, (ii) all of the
Holder's Registrable Securities have been registered pursuant to this Agreement,
or (iii) with respect to any Holder, at such time as such Holder may sell all of
such Holder's Registrable Securities in any single three (3) month period
pursuant to Rule 144 (or such successor rule as may be adopted).
Section 2. Miscellaneous.
2.01. Assignment. Subject to the provisions of Section 1.09 hereof, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
2.02. Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
2.03. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, without regard to the conflict of laws
provisions thereof.
2.04. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.05. Notices. Any notice, demand, request or other communication which by
any provision of this Agreement is required or permitted to be given to or
served on any party hereto shall be given in writing (setting forth in
reasonable detail the purpose of such notice, demand, request or communication
and identifying the provision of this Agreement pursuant to which such notice,
demand, request or communication is given), and shall be deemed to be effective
for all purposes when (i) delivered personally, (ii) sent by facsimile
transmission, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth below for such party:
(a) If to Company: Elligent Consulting Group, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxxxxx
with copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Shareholder: Mr. Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telefax No.:
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Subsection 2.05. Any such notice shall
be deemed to be delivered, given, and received (x) as of the date so delivered,
if delivered personally, (y) as of the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid, or (z) if transmitted by facsimile at the opening of
business in the office of the addressee on the business day next following the
transmission thereof. In this paragraph, "business day" means any day except
Saturday, Sunday or a statutory holiday in the State of New York or the State of
New Jersey.
2.06. Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety,
to the extent necessary, shall be severed from this Agreement, and the balance
of this Agreement shall be enforceable in accordance with its terms.
2.07. Amendment and Waiver. Any provision of this Agreement may be amended
with the written consent of the Company and the Holders of at least a majority
of the outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. Each Holder
acknowledges that by the operation of this Section 2.07, the Holders of a
majority of the outstanding Registrable Securities, acting in conjunction with
the Company, will have the right and power to diminish or eliminate all rights
pursuant to this Agreement.
2.08. Rights of Holders. Each Holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
2.09. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing.
2.10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
ELLIGENT CONSULTING GROUP, INC.
By:
------------------------------------ ------------------------------
Name: XXXXX XXXXXX
Title:
EXHIBIT 6.02(b)-2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
the ____ day of ______________, 1998 (the "Effective Date"), by and between
ELLIGENT CONSULTING GROUP, INC., a Nevada corporation (the "Company"), and XXXXX
XXXXXXX, an individual residing at 00 Xxxx Xxxxx, Xxxx Xxxxxx, Xxx Xxxxxx 00000
(the "Shareholder"),
WITNESSETH:
WHEREAS, Xxxxx Capital Ltd. ("Xxxxx"), Xxxxx Holdings LLC, Conversion
Services International, Inc., Xxxxx Xxxxxx, and the Shareholder have entered
into a Plan and Agreement of Merger dated as of August 1, 1998 ("Merger
Agreement") pursuant to which Shareholder has received newly issued unregistered
shares of the Company's common stock (the "Company Shares"); and
WHEREAS, the Company is willing to grant certain registration rights to the
Shareholder with respect to the Company Shares; and
WHEREAS, the Company wishes to execute this Agreement and to grant to the
Shareholder the rights contained herein;
NOW THEREFORE, the parties hereto agree as follows:
Section l. Registration Rights.
1.01. Definitions. As used in this Agreement:
(a) The terms "Register", "Registered," and "Registration" refer to a
registration effected by preparing and filing a registration statement in
accordance with the Securities Act of 1933, as amended (the "Securities Act"),
and the subsequent declaration or ordering of the effectiveness of such
registration statement.
(b) The term "Registrable Securities" means:
(i) the Company Shares issued to the Shareholder pursuant to the
Merger Agreement; and
(ii) any other shares of common stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right
or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in
replacement of, the Company Shares designated in Section
1.01(b)(i), excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his or her
rights and duties under this Agreement are not assigned;
provided, however, that the Company's common stock or other
securities shall only be treated as Registrable Securities if
and so long as they have not been (A) sold to or through a
broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so
that all transfer restrictions, and restrictive legends with
respect thereto, if any, are removed upon the consummation of
such sale.
(c) The term "Holder" means any holder of outstanding Registrable
Securities who, subject to the limitations set forth in Section 1.09, acquired
such Registrable Securities in a transaction or series of transactions not
involving any registered public offering.
(d) The term "Business Day" means any day except Saturday, Sunday or a
statutory holiday in the State of New York or the State of Nevada.
1.02. Piggyback Registration.
(a) During the period beginning _____(__) months following the Effective
Date and ending twenty-four (24) months following the Effective Date (the
"Piggyback Period"), the Company will notify the Holders in writing at least
thirty (30) days prior to filing its first registration statement under the
Securities Act during the Piggyback Period for purposes of effecting a public
offering of the Company's common stock whether or not for its own account
(excluding any registration statement on Form S-8 or Form S-4 or any successor
forms) and will afford the Holder(s) an opportunity to include in such
registration statement all or any part of the Registrable Securities not
previously sold by the Holder(s), subject to underwriter's cutbacks, if any,
pursuant to Section 1.02(b) below. If a Holder desires to include in any such
registration statement all or any part of such Registrable Securities, such
Holder will, within twenty (20) days after receipt of the
foregoing notice from the Company, so notify the Company in writing. The
Holder's notice will inform the Company of the number of shares the Holder
wishes to include in such registration statement. Notwithstanding anything in
this Section 1.02 to the contrary, if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to all Holders and
thereupon shall be relieved of its obligations to register any Registrable
Securities in connection with such abandoned registration without prejudice to
the rights of Holders under this Section 1.02.
(b) If a registration statement for which the Company gives notice under
this Section 1.02 is for an underwritten offering, the Company will so advise
the Holders. In such event, a Holder's right to include Registrable Securities
in a registration pursuant to this Section 1.02 will be conditioned upon such
Holder's participation in such underwriting and the inclusion of the Registrable
Securities in the underwriting to the extent provided herein. In order to
participate in the underwriting, a Holder must enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting and satisfy all the terms, conditions and obligations contained
therein. Notwithstanding any other provision of this Agreement, if the managing
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, then the managing underwriter may
exclude shares (including any or all of the Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting will be allocated first, to the shares
to be sold by the Company and any shares proposed to be sold thereunder by a
Holder on a pro rata basis based upon the number of shares proposed to be sold
by the Company and a Holder, respectively, and, second, to any shares proposed
to be sold thereunder by any holders of registration rights granted by the
Company (other than to a Holder) on a pro rata basis based upon the number of
shares of each such Holder entitled to such registration. If a Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing underwriter,
delivered at least ten (10) Business Days prior to the effective date of the
registration statement. Any shares excluded or withdrawn from such underwriting
will be excluded and withdrawn from the registration and such Holder shall no
longer have any rights to include its Registrable Securities in such
registration.
(c) Notwithstanding anything in this Section 1.02 to the contrary, a Holder
shall not have the right to include its Registrable Securities in any
distribution or registration of securities by the Company which is a result of a
merger, consolidation, acquisition, exchange offer, recapitalization,
reorganization, dividend reinvestment plan, stock option plan or other employee
benefit plan or any similar transaction having the same effect.
(d) All expenses incurred in connection with a registration effected
pursuant to this Section 1.02, including (without limitation) all registration,
filing, qualification, printer and accounting fees shall be borne by the
Company. The Company shall not be required to pay any underwriters' or brokers'
fees, discounts or commissions relating to the Registrable Securities, or the
fees or expenses of separate counsel to the selling Holders, unless the
Company's counsel is unable or unwilling to represent the selling Holders.
1.03. Obligations of the Company. When required under Section 1.02 to
effect the registration of any Registrable Securities, the Company shall, as
soon as reasonably practicable:
(a) Prepare and file with the Securities and Exchange Commission ("SEC") a
registration statement on any appropriate form under the Securities Act with
respect to such Registrable Securities and use its reasonable efforts to cause
such registration statement to become effective, and keep such registration
statement effective for the period in which shares are sold by the Company
thereunder.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of Registrable Securities
pursuant to the terms and subject to the conditions of this Agreement.
(c) Furnish to the Holders such numbers of copies of a prospectus in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Notify each Holder of Registrable Securities covered by a registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, whereupon each
Holder shall cease utilizing such prospectus and the Company agrees, as soon
thereafter as reasonably practicable, to supplement the prospectus so as to meet
the requirements of the Securities Act, and to notify the Holders of such
action.
(e) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(f) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Agreement, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Agreement, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities.
1.05 Obligation of the Holders.
(a) Each Holder agrees that, upon receipt of a notice from the Company of
any suspension or stop-order relating to a registration statement covering the
Registrable Securities, such Holder will forthwith forego or delay the
disposition of any Registrable Securities covered by such registration statement
or prospectus until such Holder's receipt of the copies of the supplemented or
amended prospectus, or until it is advised in writing by the Company that the
use of the applicable prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in such
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of any prospectus covering such Registrable
Securities.
(b) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder's Registrable Securities pursuant to the
Securities Act.
1.06. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder against any losses, claims, damages, or liabilities (joint
or several) to which any of the foregoing persons may become subject, under the
Securities Act, the Securities Exchange Act of 1934, as amended (the"1934 Act"),
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any state securities law; and the Company will
pay, as incurred, any reasonable legal or other expenses incurred by any person
intended to be indemnified pursuant to this Section 1.06(a), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
1.06(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs (i) in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by a Holder or (ii) as a
result of any use or delivery by a Holder
of a prospectus other than the most current prospectus made available to such
Holder by the Company.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the 1934 Act, any other Holder
selling securities in such registration statement, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs (i) in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration or (ii) as a
result of any use or delivery by such Holder of a prospectus other than the most
current prospectus made available to such Holder by the Company; and each such
Holder will pay, as incurred, any reasonable legal or other expenses incurred by
any person intended to be indemnified pursuant to this Section 1.06(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.06(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld. The liability of a selling Holder under this paragraph (b) and under
paragraph (d) below shall be limited to an amount equal to the net proceeds to
such selling Holder from the sale of such Holder's Registrable Securities
hereunder.
(c) Promptly after receipt by an indemnified party under this Section 1.06
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.06, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel of the indemnifying party's choosing.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.06, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.06.
(d) If the indemnification provided in this Section 1.06 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this Section 1.06
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.07. Reports under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the 1934 Act;
(c) upon the request of any Holder, furnish to such Holder, so long as the
Holder owns any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration.
1.08. Certain Additional Agreements of the Holder(s).
(a) Prior to and so long as the Registration Statement shall remain
effective, each Holder shall:
(i) not engage in any stabilization activity in connection with the
Company's common stock;
(ii) not bid for or purchase any of the Company's common stock or any
rights to acquire any of the Company's common stock, or attempt
to induce any person to purchase any of the Company's common
stock other than as permitted under the 1934 Act; or
(iii) effect all sales of Registrable Securities in broker's
transactions through broker-dealers acting as agents, in
transactions directly with market makers
or in privately negotiated transactions where no broker or other
third party (other than the purchaser) is involved.
(b) Without limiting any other provision of this Agreement, no Holder shall
engage in any short-sales of the Company's common stock prior to the
effectiveness of the registration statement pursuant to which the Holder is
offered the opportunity to sell its Registrable Securities hereunder, except to
the extent that any such short-sale is fully covered by freely tradable shares
of the Company's common stock.
1.09. Assignment of Registration Rights. The registration rights granted
pursuant to this Section 1 are not assignable other than in connection with a
transfer of such Registrable Securities to any spouse, son or daughter of the
Shareholder, or to trustees of a trust the beneficiaries of which include the
Shareholder and any spouse, son or daughter of the Shareholder, provided that
all such transferees agree in writing to appoint a single representative as
their attorney-in-fact for the purpose of receiving any notices and exercising
their rights under this Section 1, and provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such Registrable Securities by the transferee is restricted under
the Securities Act. Any attempted assignment of registration rights in
contravention of this Section 1.09 shall be null and void. The Shareholder
shall, within a reasonable time after such transfer, furnish the Company with
written notice of the name and address of such transferee and the securities
with respect to which such registration rights are being assigned.
1.10. Termination of Registration Rights. Subject to Section 1.06 the
registration rights granted under this Section 1 shall terminate upon the
earlier of (i) two (2) years following the Effective Date, (ii) all of the
Holder's Registrable Securities have been registered pursuant to this Agreement,
or (iii) with respect to any Holder, at such time as such Holder may sell all of
such Holder's Registrable Securities in any single three (3) month period
pursuant to Rule 144 (or such successor rule as may be adopted).
Section 2. Miscellaneous.
2.01. Assignment. Subject to the provisions of Section 1.09 hereof, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
2.02. Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
2.03. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, without regard to the conflict of laws
provisions thereof.
2.04. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.05. Notices. Any notice, demand, request or other communication which by
any provision of this Agreement is required or permitted to be given to or
served on any party hereto shall be given in writing (setting forth in
reasonable detail the purpose of such notice, demand, request or communication
and identifying the provision of this Agreement pursuant to which such notice,
demand, request or communication is given), and shall be deemed to be effective
for all purposes when (i) delivered personally, (ii) sent by facsimile
transmission, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth below for such party:
(a) If to Company: Elligent Consulting Group, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxxxxx
with copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Shareholder: Xx. Xxxxx Xxxxxxx
00 Xxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Subsection 2.05. Any such notice shall
be deemed to be delivered, given, and received (x) as of the date so delivered,
if delivered personally, (y) as of the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid, or (z) if transmitted by facsimile at the opening of
business in the office of the addressee on the business day next following the
transmission thereof. In this
paragraph, "business day" means any day except Saturday, Sunday or a statutory
holiday in the State of New York or the State of New Jersey.
2.06. Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
2.07. Amendment and Waiver. Any provision of this Agreement may be amended
with the written consent of the Company and the Holders of at least a majority
of the outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. Each Holder
acknowledges that by the operation of this Section 2.07, the Holders of a
majority of the outstanding Registrable Securities, acting in conjunction with
the Company, will have the right and power to diminish or eliminate all rights
pursuant to this Agreement.
2.08. Rights of Holders. Each Holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
2.09. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing.
2.10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
ELLIGENT CONSULTING GROUP, INC.
By:
----------------------------------- ------------------------
Name: XXXXX XXXXXXX
Title:
EXHIBIT 7.02(i)-1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the ___day of August
1998, by and between XXXXX CAPITAL LTD., a Delaware corporation having its
registered office at Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle, Delaware (the "Corporation") and XXXXX XXXXXX,
an individual residing at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Xx.
Xxxxxx"),
W I T N E S S E T H:
WHEREAS, the Corporation desires to engage Xx. Xxxxxx as its President; and,
WHEREAS, Xx. Xxxxxx desires to serve in such capacity;
NOW THEREFORE, the parties hereto agree as hereinafter set forth:
Section 1. Employment. The Corporation hereby employs and appoints Xx. Xxxxxx,
and Xx. Xxxxxx hereby accepts such employment and appointment with the
Corporation, as President of the Corporation, effective as of the Effective Date
(as hereinafter defined).
Section 2. Term of this Agreement. The term of this Agreement shall begin as of
August 1, 1998 (the "Effective Date") and shall terminate three (3) years from
the Effective Date, unless earlier terminated as provided in Section 7 hereof
(the "Term"). The Term will automatically be renewed for succeeding twelve (12)
month periods, unless, not less that sixty (60) days prior to the end of the
initial Term or any renewal Term, one of the parties gives the other party
written notice that it elects not to renew this Agreement whereupon this
Agreement will terminate at the end of the initial Term or renewal Term during
which the notice is given.
Section 3. Duties. Xx. Xxxxxx shall be the President of the Corporation and
shall comply with such reasonable instructions as the Corporation's Board of
Directors and/or the President of the Corporation's parent company may issue to
him from time to time during the Term. Xx. Xxxxxx shall diligently and
conscientiously devote his full and exclusive time and attention and best
efforts
to the performance of his duties hereunder. Xx. Xxxxxx shall have those
powers and perform those duties generally associated with his position as well
as those responsibilities as the Board of Directors may reasonably request of
him from time to time, which responsibilities shall be consistent with those of
a senior executive officer. His duties shall include the following:
(i) general management of the Corporation; and
(ii) serving on the Management Committee of the Corporation's parent
company.
Xx. Xxxxxx shall be directly responsible to the President of the Corporation's
parent company. Xx. Xxxxxx shall, from time to time, hold such other senior
offices and/or directorships in the Corporation to which he may, with his
permission, be elected or appointed by the shareholders or Board of Directors of
the Corporation.
Section 4. Salary. The Corporation agrees to pay Xx. Xxxxxx a salary (the
"Salary") of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) per year during
the Term of this Agreement. The Salary shall be compensation for all positions
held by Xx. Xxxxxx at the Corporation or at any affiliate of the Corporation.
The Salary will be reviewed annually by the Board of Directors of the
Corporation, taking into consideration the performance of Xx. Xxxxxx and the
compensation arrangements accorded to executives of similar skill and stature of
the Corporation's parent company. The Salary shall be paid monthly, or at such
other intervals as the parties may agree.
Section 5. Expenses. Xx. Xxxxxx shall be entitled to reimbursement by the
Corporation, upon submission to the Corporation in accordance with its operating
procedures of appropriate vouchers or other receipts, for business expenses
(including travel and entertainment and other out-of-pocket expenses) reasonably
incurred by him in the performance of his duties hereunder.
Section 6. Benefits.
6.01. General. Xx. Xxxxxx shall be entitled to participate, and receive
benefits from, any pension, profit sharing, insurance, medical, vacation, stock
purchase, stock option, and other employee benefit plan of the Corporation which
may be in effect at any time during the Term and which shall be generally
available to senior executives of the Corporation or of the Corporation's parent
company, or which may be granted to him by the Board of Directors of the
Corporation. Such benefits shall include the benefits which Xx. Xxxxxx was
receiving as of July 31, 1998 from Conversion Services International, Inc.
6.02. Medical Insurance. Xx. Xxxxxx shall be entitled to participate in the
medical insurance policy presently in effect for employees of the Corporation in
accordance with its terms. The inability of Xx. Xxxxxx and his immediate family
to qualify for participation in the Corporation's present medical insurance
policy shall not be deemed a breach of this Agreement.
Section 7. Termination for Cause. The Corporation may terminate Xx.
Xxxxxx'x employment hereunder for "Cause" (as hereinafter defined) at any time
by giving notice in writing to Xx. Xxxxxx. Such notice shall be effective upon
the giving thereof. Upon termination for
Cause, payment of all compensation to Xx. Xxxxxx shall cease. For purposes of
this Agreement "Cause" shall mean (i) the continued failure by Xx. Xxxxxx
substantially to perform his duties under this Agreement (other than any such
failure resulting from Xx. Xxxxxx'x incapacity due to physical or mental illness
as provided in Section 8 of this Agreement) after a written demand for
substantial performance is given to Xx. Xxxxxx at the direction of the Board of
Directors of the Corporation which specifically identifies the manner in which
it is believed that Xx. Xxxxxx has not substantially performed his duties
hereunder, and giving Xx. Xxxxxx fifteen (15) days in which to correct such
failure to perform, (ii) the willful engaging by Xx. Xxxxxx in misconduct
materially or demonstrably injurious to the Corporation or any subsidiary or
affiliate of the Corporation, or (iii) breach of fiduciary duty, fraud,
misappropriation, embezzlement, arrest for a felony, habitual drunkenness, or
use of any illegal substances by Xx. Xxxxxx.
Section 8. Death or Disability.
8.01. Death. Upon the death of Xx. Xxxxxx during the Term, this Agreement
shall terminate on such date of death and the Salary payable to Xx. Xxxxxx shall
cease to be paid thereafter.
8.02. Disability. If during the Term Xx. Xxxxxx fails because of illness or
other physical or mental incapacity to perform the services required to be
performed by him hereunder for the consecutive period of more than sixty (60)
days, or for shorter periods aggregating more than ninety (90) days in any
consecutive twelve-month period, then the Board of Directors of the Corporation,
in its discretion, may at any time thereafter terminate this Agreement by giving
not less than ten (10) days written notice thereof to Xx. Xxxxxx during which
period Xx. Xxxxxx shall have the right to present to the Board of Directors
evidence that he is able properly to perform his duties under this Agreement. In
the event that the Board of Directors in its discretion, exercised in good
faith, nevertheless continues to believe that Xx. Xxxxxx is unable so to
perform, this Agreement shall terminate upon the date set forth in such notice.
No such notice may be given if prior to the date thereof, Xx. Xxxxxx'x illness
or physical or mental incapacity shall have terminated and he shall be
physically and mentally able to perform the services required hereunder and
shall have taken up and be performing such duties.
8.03. Rights Not Affected. The termination of this Agreement by reason of
death or disability pursuant to this Section 8 shall not affect the right of Xx.
Xxxxxx or his estate, as the case may be, to receive any payments hereunder to
which Xx. Xxxxxx would be otherwise entitled.
Section 9. Non-Competition; Confidentiality; Non-Solicitation.
9.01. Non-Competition. Xx. Xxxxxx agrees that (i) during his employment by
the Corporation, and for a period of twelve (12) months thereafter, neither he
nor any firm or corporation in which he may be interested as a partner, trustee,
director, officer, employee, shareholder, option holder, lender of money or a
guarantor, shall at any time during such period be engaged directly or
indirectly in any "business competitive to that of the Corporation" (as
hereinafter defined); provided, however, that the foregoing agreement of
non-competition shall not be deemed breached by ownership by Xx. Xxxxxx (as a
result of open market purchase) of one percent (1%) or less of any
class of capital stock of a corporation which is regularly traded on a national
securities exchange or with the NASDAQ System. The term "business competitive to
that of the Corporation" as used herein shall mean a business involved in the
technology consulting business.
9.02. Confidentiality. Xx. Xxxxxx acknowledges and agrees that his duties
under this Agreement will involve the use and creation of customer lists,
prospect lists, know-how, future plans, and other trade secrets of the
Corporation and of the Corporation's parent company and affiliates which are
valuable, proprietary, confidential and not in the public domain (the
"Proprietary Information"). Accordingly, Xx. Xxxxxx agrees that during the
period of his employment by the Corporation, and for three (3) years following
the cessation of such employment, except as may be required by applicable law or
legal process, Xx. Xxxxxx shall not, without the prior written consent of the
Board of Directors of the Corporation or a person authorized thereby, disclose,
divulge, permit access to or communicate, directly or indirectly, any
Proprietary Information to any person, other than an employee of the Corporation
or one of its affiliates or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by Xx. Xxxxxx of his duties as
an executive of the Corporation.
9.03. Non-Solicitation. Xx. Xxxxxx agrees that during his employment by the
Corporation, and for a period of twelve (12) months thereafter, he will not,
directly or indirectly, induce or attempt to induce any employee of the
Corporation, or of any of its affiliates, to terminate his or her employment
therewith.
9.04. Severability. The parties intend that the covenants contained in
Sub-Sections 9.01, 9.02 and 9.03 hereof shall be deemed to be a series of
separate covenants, one for each county of each state where the party which is
intended to be protected by such covenant does business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants deemed
included in such action, then such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced in
such proceeding.
9.05. Injunctive Relief. Xx. Xxxxxx acknowledges and agrees that by reason
of the irreparable harm that would be sustained by the Corporation or its
affiliates in the event of a breach by Xx. Xxxxxx of the covenants contained in
this Section 9, for which there would be no adequate remedy at law, the
Corporation and such affiliates shall be entitled to enforcement of the
covenants contained in this Section 9 by injunction or decree of specific
performance by a court of competent jurisdiction, in addition to any other
rights or remedies that the Corporation may have under this Agreement or
otherwise, without the necessity of providing a bond or other undertaking in
connection therewith.
9.06. Breach of Agreement. In the event that there is a final
non-appealable judgment by a court of competent jurisdiction that the
Corporation or Elligent Consulting Group, Inc. ("Elligent") is in default under
either of the two Installment Promissory Notes (as defined in the Plan and
Agreement of Merger dated as of August 1, 1998 among Xx. Xxxxxx, Xxxxx Xxxxxxx,
Conversion Services International, Inc., the Corporation and Xxxxx Holdings
LLC), then thereafter the provisions of Sub-Sections 9.01, 9.02 and 9.03 hereof
shall be of no further force and effect except that (i) Sub-
Section 9.02 shall continue to apply with respect to the confidentiality of the
Proprietary Information of the Corporation's parent company and affiliates and
(ii) Sub-Section 9.03 shall continue to apply with respect to the
non-solicitation of the employees of the Corporation's parent company and
affiliates, and Xx. Xxxxxx shall enter into an agreement with Elligent,
reasonably satisfactory to counsel for Elligent, incorporating such provisions.
Section 10. Notices. Any notice, demand, request or other communication which by
any provision of this Agreement is required or permitted to be given to or
served on any party hereto shall be given in writing (setting forth in
reasonable detail the purpose of such notice, demand, request or communication
and identifying the provision of this Agreement pursuant to which such notice,
demand, request or communication is given), and shall be deemed to be effective
for all purposes when (i) delivered personally, (ii) sent by facsimile
transmission, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth below for such party:
(a) If to Corporation: Xxxxx Capital Ltd.
c/x Xxxxx Holdings LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telefax No.: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxxxxx
with copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Xxxxxx: Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telefax No.: _____________
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Section 10. Any such notice shall be
deemed to be delivered, given, and received (x) as of the date so delivered, if
delivered personally, (y) as of the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid, or (z) if transmitted by facsimile at the opening of
business in the office of the addressee on the business day next following the
transmission thereof. In this paragraph, "business day" means any day except
Saturday, Sunday or a statutory holiday in the State of New York or the State of
New Jersey.
Section 11. Assignability. This Agreement shall not be assignable by either
party hereto without the prior written consent of the other party hereto.
Section 12. Waiver of Breach. Waiver by either party to this Agreement of a
breach of any condition or covenant of this Agreement by the other party to this
Agreement shall not be construed as a waiver of any subsequent breach.
Section 13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs, beneficiaries, legal representatives, and permitted
assigns of Xx. Xxxxxx and the successors and permitted assigns of the
Corporation.
Section 14. Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
Section 15. Governing Law. This Agreement and the validity, construction and
enforcement of, and the remedies under, this Agreement shall be governed in
accordance with the internal laws of the State of New York.
Section 16. No Third Party Beneficiaries. No party other than Xx. Xxxxxx and the
Corporation shall have any rights hereunder, may rely hereon or shall be
construed in any way to be a third party beneficiary hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXX CAPITAL LTD.
By:
---------------------------------- ----------------------
Authorized Representative XXXXX XXXXXX
EXHIBIT 7.02(i)-2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the __ day of August
1998, by and between XXXXX CAPITAL LTD., a Delaware corporation having its
registered office at Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle, Delaware (the "Corporation") and XXXXX
XXXXXXX, an individual residing at 00 Xxxx Xxxxx, Xxxx Xxxxxx, Xxx Xxxxxx 00000
("Xx. Xxxxxxx"),
W I T N E S S E T H:
WHEREAS, the Corporation desires to engage Xx. Xxxxxxx as its Senior
Vice President; and,
WHEREAS, Xx. Xxxxxxx desires to serve in such
capacity;
NOW THEREFORE, the parties hereto agree as hereinafter set forth:
Section 1. Employment. The Corporation hereby employs and appoints Xx. Xxxxxxx,
and Xx. Xxxxxxx hereby accepts such employment and appointment with the
Corporation, as Senior Vice President of the Corporation, effective as of the
Effective Date (as hereinafter defined).
Section 2. Term of this Agreement. The term of this Agreement shall begin as of
August 1, 1998 (the "Effective Date") and shall terminate three (3) years from
the Effective Date, unless earlier terminated as provided in Section 7 hereof
(the "Term"). The Term will automatically be renewed for succeeding twelve (12)
month periods, unless, not less that sixty (60) days prior to the end of the
initial Term or any renewal Term, one of the parties gives the other party
written notice that it elects not to renew this Agreement whereupon this
Agreement will terminate at the end of the initial Term or renewal Term during
which the notice is given.
Section 3. Duties. Xx. Xxxxxxx shall be the Senior Vice President of the
Corporation and shall comply with such reasonable instructions as the
Corporation's Board of Directors and/or the President of the Corporation's
parent company may issue to him from time to time during the Term. Xx. Xxxxxxx
shall diligently and conscientiously devote his full and exclusive time and
attention and
best efforts to the performance of his duties hereunder. Xx. Xxxxxxx shall have
those powers and perform those duties generally associated with his position as
well as those responsibilities as the President of the Corporation may
reasonably request of him from time to time, which responsibilities shall be
consistent with those of a senior executive officer. His duties shall include
serving on the Management Committee of the Corporation's parent company.
Xx. Xxxxxxx shall be directly responsible to the Corporation's President. Xx.
Xxxxxxx shall, from time to time, hold such other senior offices and/or
directorships in the Corporation to which he may, with his permission, be
elected or appointed by the shareholders or Board of Directors of the
Corporation.
Section 4. Salary. The Corporation agrees to pay Xx. Xxxxxxx a salary (the
"Salary") of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) per year during
the Term of this Agreement. The Salary shall be compensation for all positions
held by Xx. Xxxxxxx at the Corporation or at any affiliate of the Corporation.
The Salary will be reviewed annually by the Board of Directors of the
Corporation, taking into consideration the performance of Xx. Xxxxxxx and the
compensation arrangements accorded to executives of similar skill and stature of
the Corporation's parent company. The Salary shall be paid monthly, or at such
other intervals as the parties may agree.
Section 5. Expenses. Xx. Xxxxxxx shall be entitled to reimbursement by the
Corporation, upon submission to the Corporation in accordance with its operating
procedures of appropriate vouchers or other receipts, for business expenses
(including travel and entertainment and other out-of-pocket expenses) reasonably
incurred by him in the performance of his duties hereunder.
Section 6. Benefits.
6.01. General. Xx. Xxxxxxx shall be entitled to participate, and receive
benefits from, any pension, profit sharing, insurance, medical, vacation, stock
purchase, stock option, and other employee benefit plan of the Corporation which
may be in effect at any time during the Term and which shall be generally
available to senior executives of the Corporation or of the Corporation's parent
company, or which may be granted to him by the Board of Directors of the
Corporation. Such benefits shall include the benefits which Xx. Xxxxxxx was
receiving as of July 31, 1998 from Conversion Services International, Inc.
6.02. Medical Insurance. Xx. Xxxxxxx shall be entitled to participate in
the medical insurance policy presently in effect for employees of the
Corporation in accordance with its terms. The inability of Xx. Xxxxxxx and his
immediate family to qualify for participation in the Corporation's present
medical insurance policy shall not be deemed a breach of this Agreement.
Section 7. Termination for Cause. The Corporation may terminate Xx. Xxxxxxx'x
employment hereunder for "Cause" (as hereinafter defined) at any time by giving
notice in writing to Xx. Xxxxxxx. Such notice shall be effective upon the giving
thereof. Upon termination for Cause, payment of all compensation to Xx. Xxxxxxx
shall cease. For purposes of this Agreement "Cause" shall mean (i) the continued
failure by Xx. Xxxxxxx substantially to perform his duties under this Agreement
(other than any such failure resulting from Xx. Xxxxxxx'x incapacity due to
physical or mental illness as provided
in Section 8 of this Agreement) after a written demand for substantial
performance is given to Xx. Xxxxxxx at the direction of the Board of Directors
of the Corporation which specifically identifies the manner in which it is
believed that Xx. Xxxxxxx has not substantially performed his duties hereunder,
and giving Xx. Xxxxxxx fifteen (15) days in which to correct such failure to
perform, (ii) the willful engaging by Xx. Xxxxxxx in misconduct materially or
demonstrably injurious to the Corporation or any subsidiary or affiliate of the
Corporation, or (iii) breach of fiduciary duty, fraud, misappropriation,
embezzlement, arrest for a felony, habitual drunkenness, or use of any illegal
substances by Xx. Xxxxxxx.
Section 8. Death or Disability.
8.01. Death. Upon the death of Xx. Xxxxxxx during the Term, this Agreement
shall terminate on such date of death and the Salary payable to Xx. Xxxxxxx
shall cease to be paid thereafter.
8.02. Disability. If during the Term Xx. Xxxxxxx fails because of illness
or other physical or mental incapacity to perform the services required to be
performed by him hereunder for the consecutive period of more than sixty (60)
days, or for shorter periods aggregating more than ninety (90) days in any
consecutive twelve-month period, then the Board of Directors of the Corporation,
in its discretion, may at any time thereafter terminate this Agreement by giving
not less than ten (10) days written notice thereof to Xx. Xxxxxxx during which
period Xx. Xxxxxxx shall have the right to present to the Board of Directors
evidence that he is able properly to perform his duties under this Agreement. In
the event that the Board of Directors in its discretion, exercised in good
faith, nevertheless continues to believe that Xx. Xxxxxxx is unable so to
perform, this Agreement shall terminate upon the date set forth in such notice.
No such notice may be given if prior to the date thereof, Xx. Xxxxxxx'x illness
or physical or mental incapacity shall have terminated and he shall be
physically and mentally able to perform the services required hereunder and
shall have taken up and be performing such duties.
8.03. Rights Not Affected. The termination of this Agreement by reason of
death or disability pursuant to this Section 8 shall not affect the right of Xx.
Xxxxxxx or his estate, as the case may be, to receive any payments hereunder to
which Xx. Xxxxxxx would be otherwise entitled.
Section 9. Non-Competition; Confidentiality; Non-Solicitation.
9.01. Non-Competition. Xx. Xxxxxxx agrees that (i) during his employment by
the Corporation, and for a period of twelve (12) months thereafter, neither he
nor any firm or corporation in which he may be interested as a partner, trustee,
director, officer, employee, shareholder, option holder, lender of money or a
guarantor, shall at any time during such period be engaged directly or
indirectly in any "business competitive to that of the Corporation" (as
hereinafter defined); provided, however, that the foregoing agreement of
non-competition shall not be deemed breached by ownership by Xx. Xxxxxxx (as a
result of open market purchase) of one percent (1%) or less of any class of
capital stock of a corporation which is regularly traded on a national
securities exchange or with the NASDAQ System. The term "business competitive to
that of the Corporation" as used herein shall mean a business involved in the
technology consulting business.
9.02. Confidentiality. Xx. Xxxxxxx acknowledges and agrees that his duties
under this Agreement will involve the use and creation of customer lists,
prospect lists, know-how, future plans, and other trade secrets of the
Corporation and of the Corporation's parent company and affiliates which are
valuable, proprietary, confidential and not in the public domain (the
"Proprietary Information"). Accordingly, Xx. Xxxxxxx agrees that during the
period of his employment by the Corporation, and for three (3) years following
the cessation of such employment, except as may be required by applicable law or
legal process, Xx. Xxxxxxx shall not, without the prior written consent of the
Board of Directors of the Corporation or a person authorized thereby, disclose,
divulge, permit access to or communicate, directly or indirectly, any
Proprietary Information to any person, other than an employee of the Corporation
or one of its affiliates or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by Xx. Xxxxxxx of his duties
as an executive of the Corporation.
9.03. Non-Solicitation. Xx. Xxxxxxx agrees that during his employment by
the Corporation, and for a period of twelve (12) months thereafter, he will not,
directly or indirectly, induce or attempt to induce any employee of the
Corporation, or of any of its affiliates, to terminate his or her employment
therewith.
9.04. Severability. The parties intend that the covenants contained in
Sub-Sections 9.01, 9.02 and 9.03 hereof shall be deemed to be a series of
separate covenants, one for each county of each state where the party which is
intended to be protected by such covenant does business. If in any judicial
proceeding a court shall refuse to enforce all of the separate covenants deemed
included in such action, then such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced in
such proceeding.
9.05. Injunctive Relief. Xx. Xxxxxxx acknowledges and agrees that by reason
of the irreparable harm that would be sustained by the Corporation or its
affiliates in the event of a breach by Xx. Xxxxxxx of the covenants contained in
this Section 9, for which there would be no adequate remedy at law, the
Corporation and such affiliates shall be entitled to enforcement of the
covenants contained in this Section 9 by injunction or decree of specific
performance by a court of competent jurisdiction, in addition to any other
rights or remedies that the Corporation may have under this Agreement or
otherwise, without the necessity of providing a bond or other undertaking in
connection therewith.
9.06. Breach of Agreement. In the event that there is a final
non-appealable judgment by a court of competent jurisdiction that the
Corporation or Elligent Consulting Group, Inc. ("Elligent") is in default under
either of the two Installment Promissory Notes (as defined in the Plan and
Agreement of Merger dated as of August 1, 1998 among Xx. Xxxxxxx, Xxxxx Xxxxxx,
Conversion Services International, Inc., the Corporation and Xxxxx Holdings
LLC), then thereafter the provisions of Sub-Sections 9.01, 9.02 and 9.03 hereof
shall be of no further force and effect except that (i) Sub-Section 9.02 shall
continue to apply with respect to the confidentiality of the Proprietary
Information of the Corporation's parent company and affiliates and (ii)
Sub-Section 9.03 shall continue to apply with respect to the non-solicitation of
the employees of the Corporation's parent company and
affiliates, and Xx. Xxxxxxx shall enter into an agreement with Elligent,
reasonably satisfactory to counsel for Elligent, incorporating such provisions.
Section 10. Notices. Any notice, demand, request or other communication which by
any provision of this Agreement is required or permitted to be given to or
served on any party hereto shall be given in writing (setting forth in
reasonable detail the purpose of such notice, demand, request or communication
and identifying the provision of this Agreement pursuant to which such notice,
demand, request or communication is given), and shall be deemed to be effective
for all purposes when (i) delivered personally, (ii) sent by facsimile
transmission, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid, to the address set forth below for such party:
(a) If to Corporation: Xxxxx Capital Ltd.
c/x Xxxxx Holdings LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telefax No.: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxxxxx
with copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Peipert: Xxxxx Xxxxxxx
00 Xxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Section 10. Any such notice shall be
deemed to be delivered, given, and received (x) as of the date so delivered, if
delivered personally, (y) as of the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid, or (z) if transmitted by facsimile at the opening of
business in the office of the addressee on the business day next following the
transmission thereof. In this paragraph, "business
day" means any day except Saturday, Sunday or a statutory holiday in the State
of New York or the State of New Jersey.
Section 11. Assignability. This Agreement shall not be assignable by either
party hereto without the prior written consent of the other party hereto.
Section 12. Waiver of Breach. Waiver by either party to this Agreement of a
breach of any condition or covenant of this Agreement by the other party to this
Agreement shall not be construed as a waiver of any subsequent breach.
Section 13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs, beneficiaries, legal representatives, and permitted
assigns of Xx. Xxxxxxx and the successors and permitted assigns of the
Corporation.
Section 14. Counterparts. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
Section 15. Governing Law. This Agreement and the validity, construction and
enforcement of, and the remedies under, this Agreement shall be governed in
accordance with the internal laws of the State of New York.
Section 16. No Third Party Beneficiaries. No party other than Xx. Xxxxxxx and
the Corporation shall have any rights hereunder, may rely hereon or shall be
construed in any way to be a third party beneficiary hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXX CAPITAL LTD.
By:
--------------------------------- --------------------------
Authorized Representative XXXXX XXXXXXX
Schedule 7.02(j)
Officers Retained
Xxxxx Xxxxxx - President and Director
Xxxxx Xxxxxxx - Senior Vice President
SCHEDULE 7.03(i)
FORM OF OPINION OF ELLIGENT'S COUNSEL
[OMITTED]
EXHIBIT 7.03(j)
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") made as of _____________, 1998 by and
among ELLIGENT CONSULTING GROUP, INC., a Nevada corporation having an office at
__________________________________ (the "Pledgor"), XXXXX XXXXXX, an individual
residing at 00 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Xxxxxx"), and
XXXXX XXXXXXX, an individual residing at 00 Xxxx Xxxxx, Xxxx Xxxxxx, Xxx Xxxxxx
00000 ( "Peipert"; Xxxxxx and Xxxxxxx are hereinafter jointly referred as the
"Pledgees" and individually as a "Pledgee"),
WITNESSETH:
WHEREAS, Xxxxx Capital Ltd. ("Xxxxx"), Xxxxx Holdings LLC ("Xxxxx
Holdings"), Conversion Services International, Inc. ("CSI"), and Pledgees have
entered into a Plan and Agreement of Merger dated as of August 1, 1998 (the
"Merger Agreement") pursuant to which each Pledgee is entitled to receive a
Secured Installment Promissory Note of Pledgor and Xxxxx;
WHEREAS, pursuant to the Merger Agreement Pledgor shall pledge certain
stock with the Pledgees as security for the repayment of the Xxxxxx Indebtedness
(as hereinafter defined) and the Peipert Indebtedness (as hereinafter defined),
and in connection therewith to enter into this Agreement;
NOW THEREFORE, for valuable consideration, including but not limited to,
the extension, renewal or advance of funds to Pledgor by Pledgees, receipt of
which is hereby acknowledged, the parties hereto agree as hereinafter set forth:
Section 1. Definitions.
(a) "Pledged Stock" shall mean the shares described in Schedule 1 hereto,
together with all certificates, options, rights, or other distributions issued
as an addition to, in substitution or in exchange for, or on account of, any
such shares, and all proceeds of all of the foregoing, now or hereafter owned or
acquired by the Pledgor.
(b) "Xxxxxx Indebtedness" shall mean all principal, interest and other
amounts owed by Pledgor and Xxxxx to Xxxxxx pursuant to that certain Secured
Installment Promissory Note dated September 19, 1998, a copy of which is
attached hereto as Exhibit "A" (the "Xxxxxx Note"), as well as all amounts owed
by Pledgor to Xxxxxx pursuant to this Agreement.
(c) "Peipert Indebtedness" shall mean all principal, interest and other
amounts owed by Pledgor and Xxxxx to Xxxxxxx pursuant to that certain Secured
Installment Promissory Note dated September 19, 1998, a copy of which is
attached hereto as Exhibit "B" (the "Peipert Note"), as well as all amounts owed
by Pledgor to Peipert pursuant to this Agreement.
(d) "Indebtedness" shall mean the Xxxxxx Indebtedness and the Peipert
Indebtedness.
Section 2. Pledge.
(a) As security for the prompt satisfaction of the Indebtedness, the
Pledgor hereby pledges to the Pledgees the Pledged Stock and grants the Pledgees
a first priority lien thereon and security interest therein.
(b) Upon the occurrence of an Event of Default (as hereinafter defined) the
Pledgees may, without demand of performance or other demand, advertisement, or
notice of any kind to or upon the Pledgor or any other person (all of which are
hereby expressly waived by the Pledgor) forthwith realize upon the Pledged Stock
or any part thereof, and may forthwith (i) retain the Pledged Stock for their
own account or (ii) sell or otherwise dispose of and deliver the Pledged Stock
or any part thereof or interest therein, or agree to do so, in one or more
parcels at public or private sale or sales, at such prices and on such terms as
they may deem best, for cash or on credit, or for future delivery without
assumption of any credit risk, with the right to the Pledgees or any purchaser
to purchase upon any such sale the whole or any part of the Pledged Stock free
of any right or equity of redemption in the Pledgor, which right or equity is
hereby expressly waived and released.
(c) As a condition to the Pledgees' taking any action pursuant to clause
(b) of this Section 2 or Section 8 hereof, the parties to the Merger Agreement
shall have first fully complied with Sub-Section 8.05 of the Merger Agreement.
Section 3. Representations of Pledgor.
The Pledgor represents and warrants that:
(a) It has, and has fully exercised, all requisite corporate power and
authority to enter into this Agreement, to pledge the Pledged Stock for the
purposes described in Section 2 (a), and to carry out the transactions
contemplated by this Agreement;
(b) It is the legal and beneficial owner of all of the Pledged Stock which
evidences all of the issued and outstanding capital stock of Xxxxx;
(c) All of the shares of the Pledged Stock are owned by the Pledgor free
and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance, or
security interest in such shares or the proceeds thereof except such as are
granted hereunder;
(d) The execution and delivery of this Agreement, and the performance of
its terms, will not violate or constitute a default under any agreement,
indenture, or other instrument, license, judgment, decree, order, law, statute,
ordinance, or other governmental rule or regulation applicable to the Pledgor or
any of its property; and
(e) Upon delivery of the Pledged Stock to the Pledgees or their agent, this
Agreement shall create a valid first priority lien upon, and perfected security
interest in, the Pledged Stock and the proceeds thereof, subject to no prior
security interest, lien, charge, encumbrance, or agreement purporting to grant
to any third party a security interest in the property or assets of the Pledgor
which would include the Pledged Stock.
Section 4. Covenants of Pledgor.
(a) The Pledgor hereby covenants that, until all of the Indebtedness has
been paid in full, it will not:
(i) sell, convey, or otherwise dispose of any of the Pledged Stock
or any interest therein or create, incur, or permit to exist any
pledge, mortgage, hypothecation, lien, charge, encumbrance, or
security interest in, or with respect to, any of the Pledged
Stock or the proceeds thereof except such as are granted hereby;
or
(ii) consent to, or approve of, the issuance of any additional shares
of any class of capital stock by Xxxxx; or any securities
convertible voluntarily by the holder thereof or automatically
upon the occurrence or nonoccurrence of any event or condition
into, or exchangeable for, any such shares; or any
warrants, options, rights, or other commitments entitling any
person to purchase or otherwise acquire any such shares; or
(iii) create, incur, assume or suffer to exist any liens or
encumbrances on any of the assets of Xxxxx, or permit Xxxxx to
do so, except for (A) liens with respect to any financing of
Xxxxx or Pledgor obtained from a bank, insurance company or
institutional investor the proceeds of which are intended to
facilitate the execution of Pledgor's business plan, and (B)
other liens and encumbrances (other than such liens and
encumbrances as exist as of the date of this Agreement) which
individually or in the aggregate would not materially impair
Patra's ability to conduct its business substantially as
currently conducted; or
(iv) sell, lease, transfer or otherwise dispose of any of the
properties, assets (whether tangible or intangible) or rights of
Xxxxx, or permit Xxxxx to do so, except in the ordinary course
of business without the express written consent of Pledgees; or
(v) recapitalize, reorganize, consolidate, acquire the assets of
another business or merge Xxxxx with any other entity without
the express written consent of Pledgees which consent will not
be unreasonably withheld; or
(vi) guarantee, endorse or otherwise in any way become directly or
contingently liable for or in connection with the obligations of
any person or entity other than Xxxxx without the express
written consent of Pledgees; or
(vii) consent to, or approve of, any amendment to the Certificate of
Incorporation or By-Laws of Xxxxx if such amendment would result
in a breach or violation of any of Pledgor's agreements or
covenants under this Agreement.
(b) The Pledgor warrants and will, at its own expense, defend the Pledgees'
right, title, special property, and security interest in and to the Pledged
Stock against the claims of any person.
Section 5. Delivery of Notices.
The Pledgor shall promptly deliver to the Pledgees all written notices and
will promptly give the Pledgees written notice of any other notices received by
Pledgor with respect to the Pledged Stock.
Section 6. Further Action.
The Pledgor shall at any time, and from time to time, upon the written request
of Pledgees, execute and deliver such further documents and do such further acts
and things as the Pledgees may reasonably request to effect the purposes of this
Agreement, including, without limitation, delivering to the Pledgees upon the
occurrence of an Event of Default irrevocable proxies with respect to the
Pledged Stock in form satisfactory to the Pledgees. Until receipt thereof, this
Agreement shall
constitute the Pledgor's proxy to the Pledgees or their nominee to vote all
shares of the Pledged Stock then registered in the Pledgor's name at any and all
such times as Pledgees have the right to vote such shares pursuant to this
Agreement subsequent to the occurrence of an Event of Default. Such power of
attorney granted hereby is coupled with an interest and is irrevocable.
Section 7. Termination of Pledge.
Upon the satisfaction in full of all of the Indebtedness and the satisfaction of
all additional costs and expenses of the Pledgees as provided herein, this
Agreement shall terminate, and the Pledgees shall deliver to the Pledgor, at the
Pledgor's expense, such of the Pledged Stock as shall not have been sold or
otherwise disposed of pursuant to this Agreement.
Section 8. Default.
Upon the occurrence of any of the following events ("Events of Default"):
(a) Pledgor shall fail to pay (i) all or any part of the principal of the
Xxxxxx Indebtedness or the Peipert Indebtedness when due in accordance with the
terms thereof, or (ii) any interest on the Xxxxxx Indebtedness or the Peipert
Indebtedness, and in both instances such default shall continue unremedied for a
period of ten (10) Business Days; provided, however, that Pledgor shall have the
right to withhold any payment of principal or interest in accordance with
Sub-Section 8.03 of the Merger Agreement; or
(b) Pledgor shall default in the observance or performance of any other
provision contained in this Agreement or in the Xxxxxx Note or the Peipert Note,
and such default shall continue unremedied for a period of thirty (30) Business
Days after Pledgor has received a written notice of such default from the
appropriate Pledgee; or
(c) If the Pledgor files or consents to the filing of any petition in
bankruptcy or for other relief under any bankruptcy law or law for the relief of
debtors, or is adjudicated insolvent, which adjudication is not shown or
dismissed within thirty (30) Business Days after the date thereof, or makes an
assignment to its creditors, or a receiver or a similar person is appointed with
respect to the Pledgor's assets, which appointment is not stayed within thirty
(30) Business Days after the date thereof;
then, and in any such event, either Pledgee by written notice to
Pledgor may declare the full amount of the Xxxxxx Indebtedness or the
Peipert Indebtedness then outstanding, with accrued interest thereon
and all other amounts owing under this Agreement, to be immediately
due and payable; provided, however, that if Xxxxx or Pledgor is in
default with respect to the Xxxxxx Indebtedness and the Peipert
Indebtedness, then such Pledgee shall not be entitled to make such
declaration unless and until the other Pledgee has declared the Xxxxxx
Indebtedness or the Peipert Indebtedness, as the case may be, to be
due and payable.
Section 9. Governing Law.
This Agreement and all transactions pursuant thereto shall be governed by and
construed in accordance with the internal laws of the State of New York.
Section 10. Notices.
Any notice, demand, request or other communication which by any provision of
this Agreement is required or permitted to be given to or served on any party
hereto shall be given in writing (setting forth in reasonable detail the purpose
of such notice, demand, request or communication and identifying the provision
of this Agreement pursuant to which such notice, demand, request or
communication is given), and shall be deemed to be effective for all purposes
when (i) delivered personally, (ii) sent by facsimile transmission, or (iii)
sent by registered or certified mail, return receipt requested, postage prepaid,
to the address set forth below for such party:
(a) If to Pledgor: Elligent Consulting Group, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxxxxx
with copy to: Stairs Xxxxxxxxxx Xxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Stairs, Esq.
(b) If to Xxxxxx: Mr. Xxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telefax No.:
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
(c) If to Peipert: Xx. Xxxxx Xxxxxxx
00 Xxxx Xxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Telefax No.: (000) 000-0000
with copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other addresses as may be from time to time furnished in writing by
any party hereto in accordance with this Section 10. Any such notice shall be
deemed to be delivered, given, and received (x) as of the date so delivered, if
delivered personally, (y) as of the date on which the same was deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and sent as aforesaid, or (z) if transmitted by facsimile at the opening of
business in the office of the addressee on the Business Day next following the
transmission thereof. In this Agreement, "Business Day" means any day except
Saturday, Sunday or a statutory holiday in the State of New York or the State of
New Jersey.
Section 11. Miscellaneous.
(a) Beyond the exercise of reasonable care to assure the safe custody of
the Pledged Stock while held hereunder, the Pledgees shall have no duty or
liability to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it or tendering surrender
of it to the Pledgor.
(b) The rights and remedies provided herein and in all other agreements,
instruments, and documents relating to the Indebtedness are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law,
including, without limitation, the rights and remedies of a secured party under
the Uniform Commercial Code.
(c) This Agreement, all Exhibits and Schedules attached hereto, and all
agreements and instruments to be delivered by the parties hereto constitute the
entire agreement among the parties hereto pertaining to the subject matter
hereof and thereof and supersede all negotiations, preliminary agreements and
all prior or contemporaneous discussions and understandings of the parties
hereto in connection with the subject matter hereof, whether oral or written,
and except as aforesaid, are intended as a complete and exclusive statement of
the terms of the agreement among the parties.
(d) Except as otherwise provided in this Agreement, every covenant, term,
and provision of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective legal representatives, successors,
transferees, heirs and permitted assigns.
(e) Neither this Agreement nor any part hereof may be amended, waived,
changed or in any way modified except in a writing executed by the parties
hereto with the same formality as this Agreement.
(f) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party hereto.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(g) Section and other headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define, or
limit the scope, extent, or intent of this Agreement or any provision hereof,
and shall not affect in any way the meaning or interpretation of this Agreement.
(h) Where the context and circumstances so require, the use of the singular
form of a word shall be deemed to include the plural form thereof (and vice
versa) and the masculine gender shall be deemed to include the feminine and
neuter genders thereof (and vice versa).
(i) Every covenant, term, and provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or against
any party.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the day and year first above written.
ELLIGENT CONSULTING GROUP, INC.
By:
---------------------------------- -------------------------
Name: XXXXX XXXXXX
Title:
-------------------------
XXXXX XXXXXXX
SCHEDULE 1
Issuer Certificate No. No. of Shares
------ --------------- -------------
Xxxxx Capital Ltd. One (1) 1,000 shares
Pledgor:____
Pledgee:____
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this ___day of August, 1998 before me, a Notary Public, in and for the
above county, personally appeared ______________ and acknowledged that he is the
authorized representative of Elligent Consulting Group, Inc. the corporation
described in and which executed the above instrument; that he signed his name
thereto in his capacity as President by order of the Board of Directors of said
corporation; and that the corporation is organized, existing and in good
standing under the laws of the jurisdiction of its incorporation.
---------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this ___day of August, 1998 before me, a Notary Public, in and for the
above county, personally appeared Xxxxx Xxxxxx and acknowledged that he is the
individual who executed the above and foregoing Pledge Agreement and that such
execution was his voluntary act and deed.
---------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On this ___day of August, 1998 before me, a Notary Public, in and for
the above county, personally appeared Xxxxx Xxxxxxx and acknowledged that he is
the individual who executed the above and foregoing Pledge Agreement and that
such execution was his voluntary act and deed.
--------------------------------
NOTARY PUBLIC
Schedule 10.01
Expenses
[OMITTED]
