EXHIBIT 10.22
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets (this "Agreement") is entered
into and effective as of September 25, 1997 by and among LITIGATION RESOURCES
OF AMERICA-NORTHEAST, INC., a New York corporation (the "Buyer"), LITIGATION
RESOURCES OF AMERICA, INC., a Texas corporation and the parent of Buyer (the
"Parent"), REPORTING SERVICES ASSOCIATES, INC., a Pennsylvania corporation
(the "Seller"), and Xxx Xxxxxxxxx, a resident of Florida, individually
("Xxxxxxxxx") (Xxxxxxxxx referred to sometimes as the "Stockholder"). Buyer,
Parent, Seller and the Stockholder are hereinafter sometimes referred to
collectively as the "Parties" or singularly as a "Party."
W I T N E S S E T H :
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WHEREAS, the Seller is the owner of various assets associated with the
Business (as hereinafter defined);
WHEREAS, the Buyer desires to purchase all of the Assets (as hereinafter
defined) owned by the Seller and used in the Business (such purchase of the
Assets being sometimes herein referred to as the "Acquisition"), and the Seller
desires to sell such Assets to the Buyer;
WHEREAS, in connection with the purchase and sale of the Assets, the Parties
desire to set forth in this Agreement the terms and conditions with respect to
the transfer of such Assets; and
WHEREAS, the parties understand that the Parent or its Affiliates may enter
into other agreements similar or dissimilar to this Agreement (the "Other
Agreements") for the acquisition by the Parent or such Affiliates of the assets
or stock of other entities (collectively, the "Other Acquired Businesses," and
each of those entities, individually, an "Other Acquired Business"), which Other
Agreements will be among those entities and their equity owners, the Parent and
Affiliates of the Parent;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall mean all of the
accounts receivable, notes receivable, trade receivables and intercompany
receivables relating to the Business and existing as of the Effective Date.
ACQUISITION. The term "Acquisition" shall have the meaning set forth in the
preamble hereto.
AFFILIATE. The term "Affiliate" of a person shall mean, with respect to
that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of the ability to affect the management and
policies of a person whether through the ownership of voting securities, by
contract, through the holding of a position as a director or officer of such
person, or otherwise. As used in this definition, the term "person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a joint stock company, a trust, an incorporated organization, or a
Governmental Authority.
AGREEMENT. The term "Agreement" shall the meaning set forth in the preamble
hereto.
ANCILLARY AGREEMENTS. The term "Ancillary Agreements" shall have the
meaning set forth in Section 3.2.
ASSETS. The term "Assets" shall have the meaning set forth in Section 2.1.
ASSUMED LIABILITIES. The term "Assumed Liabilities" shall have the meaning
set forth in Section 2.6.
BALANCE SHEET DATE. The term "Balance Sheet Date" shall have the meaning
ascribed to it in Section 2.6.
XXXX OF SALE. The term "Xxxx of Sale" shall have the meaning set forth in
Section 6.3(xiii).
BOOKS AND RECORDS. The term "Books and Records" shall have the meaning set
forth in Section 2.1(c).
BUSINESS. The term "Business" shall mean the court reporting and litigation
support business of the Seller as presently conducted.
BUYER. The term "Buyer" shall have the meaning set forth in the preamble
hereto.
BUYER INDEMNIFIED PARTIES. The term "Buyer Indemnified Parties" shall have
the meaning set forth in Section 7.1A.
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CAPITAL STOCK. The term "Capital Stock" shall mean, with respect to: (a)
any corporation, any share, or any depositary receipt or other certificate
representing any share, of an equity ownership interest in that corporation; and
(b) any other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity interest
in that Entity.
CASH PURCHASE PRICE. The term "Cash Purchase Price" shall have the meaning
set forth in Section 2.3(a).
CLOSING. The term "Closing" shall have the meaning set forth in
Section 6.1.
CLOSING DATE. The term "Closing Date" shall have the meaning set forth in
Section 6.1.
CLOSING MEMORANDUM. The term "Closing Memorandum" shall mean the form of
closing memorandum to be prepared by the Buyer and the Parent and approved by
the Seller (which approval will not be unreasonably withheld) for the Closing
under this Agreement in which are included the forms of officers certificates,
certificates of Stockholder, opinions of counsel and certain other documents to
be delivered at the Closing as provided herein.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
CONTRACTS. The term "Contracts" shall have the meaning as contained in
Section 2.1(b).
CUSTOMERS. The term "Customers" shall have the meaning as contained in
Section 3.25.
DAMAGES. The term "Damages" shall have the meaning set forth in
Section 7.1A.
EFFECTIVE DATE. The term "Effective Date" shall mean 12:01 a.m. on the
"Closing Date."
EMPLOYEE. The term "Employee" shall mean any employee of the Seller who, as
of the Effective Date, is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Seller's applicable policies, are eligible to return to active status,
but shall not include any independent contractor providing court reporting
services to Seller from time to time.
EMPLOYMENT AGREEMENT. The term "Employment Agreement" shall have the
meaning ascribed to it in Section 3.18.
ENTITY. The term "Entity" shall mean any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
ENVIRONMENTAL, HEALTH & SAFETY LAWS. The term "Environmental, Health &
Safety Laws" shall mean all laws (including rules and regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign
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Governmental Authorities concerning pollution or protection of the environment,
public health and safety, or employee health and safety.
EQUIPMENT. The term "Equipment" shall have the meaning as contained in
Section 2.1(a).
ERISA. The term "ERISA" shall have the meaning as contained in
Section 3.17.
EXCHANGE ACT. The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
EXCLUDED ASSETS. The term "Excluded Assets" shall have the meaning as
contained in Section 2.2.
EXPIRATION DATE. The term "Expiration Date" shall have the meaning set forth
in the introductory paragraph to Article III.
FINAL PROSPECTUS. The term "Final Prospectus" shall mean the prospectus
included in the Registration Statement at the time it becomes effective, except
that if the prospectus first furnished to the Underwriter after the Registration
Statement becomes effective for use in connection with the IPO differs from the
prospectus included in the Registration Statement at the time it becomes
effective (whether or not that prospectus so furnished is required to be filed
with the SEC pursuant to Securities Act Rule 424(b)), the prospectus so first
furnished is the "Final Prospectus."
FINANCIAL STATEMENTS. The term "Financial Statements" shall mean the
balance sheet, income statement and statement of changes of financial position
of the Seller.
GAAP. The term "GAAP" shall mean generally accepted accounting principles
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
GENERAL INTANGIBLES. The term "General Intangibles" shall have the meaning
set forth in Section 2.1(g).
XXXXXXXXX. The term "Xxxxxxxxx" shall have the meaning ascribed to it in
the preamble hereto.
XXXXXXXXX EMPLOYMENT AGREEMENT. The term "Xxxxxxxxx Employment Agreement"
shall have the meaning ascribed to it in Section 6.2(x).
GOVERNMENTAL APPROVAL. The term "Governmental Approval" shall mean at any
time any authorization, consent, approval, permit, franchise, certificate,
license, implementing order or exemption of, or registration or filing with, any
Governmental Authority, including any certification or licensing of a natural
person to engage in a profession or trade or a specific regulated activity, at
that time.
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GOVERNMENTAL AUTHORITY. The term "Governmental Authority" shall mean (a)
any national, state, county, municipal or other government, domestic or foreign,
or any agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the authority
under any applicable Governmental Requirement to assess and collect Taxes for
its own account.
GOVERNMENTAL REQUIREMENT. The term "Governmental Requirement" shall mean at
any time (a) any law, statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, writ, edict, award, authorization or other
requirement of any Governmental Authority in effect at that time, or (b) any
obligation included in any certificate, certification, franchise, permit or
license issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
GUARANTEE OF PERFORMANCE. The term "Guarantee of Performance" shall have
the meaning set forth in Section 6.3(xv).
INTELLECTUAL PROPERTY. The term "Intellectual Property" shall have the
meaning as contained in Section 2.1(e).
IPO. The term "IPO" shall mean the first time a registration statement filed
under the Securities Act with respect to a primary offering by the Parent to the
public of Parent Shares is declared effective under the Securities Act and the
shares registered by that registration statement are issued and sold by the
Parent (otherwise than pursuant to the exercise by the Underwriter of any over-
allotment option).
IPO CLOSING. The term "IPO Closing" shall mean the delivery to the
Underwriters of Parent Shares against the receipt of payment therefor pursuant
to the IPO.
IPO CLOSING DATE. The term "IPO Closing Date" shall mean the date on which
the Parent first receives payment for the Parent Shares it sells to the
Underwriter in the IPO.
IPO PRICE. The term "IPO Price" shall mean the price per share of Parent
Shares which is set forth as the "price to public" on the cover page of the
Final Prospectus.
LEASED ASSETS. The term "Leased Assets" shall have the meaning ascribed
thereto in Section 3.6.
LITIGATION. The term "Litigation" shall mean any action, case, proceeding,
claim, grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
MATERIAL. The term "Material" shall mean, as applied to any Entity or the
Business, material to the business, operations, property or assets, liabilities,
financial condition or results of operations of the Business or that Entity and
its Subsidiaries considered as a whole, as the case may be.
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MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" shall mean, with
respect to the consequences of any fact or circumstance (including the
occurrence or non-occurrence of any event) to the Business, that such fact or
circumstance has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and circumstances,
any material damages.
MINIMUM CASH AMOUNT. The term "Minimum Cash Amount" shall have the meaning
set forth in Section 6.2(iv).
NOTICE OF ACTION. The term "Notice of Action" shall have the meaning set
forth in Section 7.1C.
NOTICE OF ELECTION. The term "Notice of Election" shall have the meaning
set forth in Section 7.1C.
OFFSET. The term "Offset" shall have the meaning set forth in Section 8.2.
ORDINARY COURSE OF BUSINESS. The term "Ordinary Course of Business" shall
mean the ordinary course of Seller's Business consistent with past custom and
practice (including with respect to quantity and frequency).
OTHER ACQUIRED BUSINESSES. The term "Other Acquired Businesses" shall have
the meaning set forth in the preamble hereto.
OTHER AGREEMENTS. The term "Other Agreements" shall have the meaning set
forth in the preamble hereto.
OTHER FINANCING SOURCES. The term "Other Financing Sources" shall have the
meaning set forth in Section 6.2(iv).
PARENT. The term "Parent" shall have the meaning set forth in the preamble
hereto.
PARENT SHARES. The term "Parent Shares" shall mean any of the shares of
common stock of the Parent.
PARTY. The terms "Party" and "Parties" shall have the meanings set forth in
the preamble hereto.
PBGC. The term "PBGC" shall mean the Pension Benefits Guaranty Corporation.
PERSON. The term "Person" shall mean any natural person, Entity, estate,
trust, union or employee organization or Governmental Authority.
PRICING. The term "Pricing" shall have the meaning set forth in Section 6.1.
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PURCHASE PRICE. The term "Purchase Price" shall mean the consideration
payable to the Seller for the Assets as set forth or contemplated in
Section 2.3.
REGISTRATION RIGHTS AGREEMENT. The term "Registration Rights Agreement"
shall have the meaning set forth in Section 6.2(xi).
REGISTRATION STATEMENT. The term "Registration Statement" shall mean the
registration statement, including (a) each preliminary prospectus included
therein prior to the date on which that registration statement is declared
effective under the Securities Act (including any prospectus filed with the SEC
pursuant to Securities Act Rule 424(b)), (b) the Final Prospectus and (c) any
amendments and all supplements and exhibits thereto, filed by the Parent with
the SEC to register the Parent Shares under the Securities Act for public
offering and sale in the IPO.
RETAINED LIABILITIES. The term "Retained Liabilities" shall mean all
liabilities of the Seller other than the Assumed Liabilities.
SEC. The term "SEC" means the Securities and Exchange Commission or any
successor Governmental Authority.
SECURITIES ACT. The term "Securities Act" shall mean the Securities Act of
1933, as amended.
SELLER. The term "Seller" shall have the meaning set forth in the preamble
hereto.
SELLER INDEMNIFIED PARTIES. The term "Seller Indemnified Parties" shall
have the meaning set forth in Section 7.1B.
SELLER INDEMNITORS. The term "Seller Indemnitors" shall have the meaning
set forth in Section 7.1A.
SELLER'S NAME. The term "Seller's Name" shall have the meaning set forth in
Section 2.1(i).
SIDE LETTER. The term "Side Letter" shall have the meaning set forth in
Section 9.5.
STOCK PLEDGE AGREEMENT. The term "Stock Pledge Agreement" shall have the
meaning set forth in Section 6.3(xiv).
STOCKHOLDER. The term "Stockholder" shall have the meaning set forth in the
preamble hereto.
SUBSIDIARY. The term "Subsidiary," of any specified Person at any time,
shall mean any Entity a majority of the Capital Stock of which is at that time
owned or controlled, directly or indirectly, by the specified Person.
SUPPLEMENTAL INFORMATION. The term "Supplemental Information" shall have
the meaning set forth in Section 5.11.
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TAXES. The term "Taxes" shall mean any and all local, state or federal
taxes imposed upon the Business, the Seller or the Stockholder, including,
without limitation, tax obligations, tax claims, tax charges, tax fines or any
related tax liabilities, regardless of the source, cause or origin of such tax
liabilities, including taxes imposed as a result of the consummation of the
Acquisition.
UNDERWRITER. The term "Underwriter" shall mean collectively (a) the
investment banking firms that prospectively may enter into the Underwriting
Agreement, and (b) from and after the IPO Pricing Date, the investment banking
firms party to the Underwriting Agreement.
UNDERWRITING AGREEMENT. The term "Underwriting Agreement" shall mean the
underwriting agreement to be entered into between the Parent and the Underwriter
with respect to the IPO.
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
2.1 SALE OF ASSETS. Subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer agrees to purchase from the Seller on the Closing Date,
all assets owned by Seller and used in or derived from the Business (other than
those specifically excluded under Section 2.2 below) including the following
(such assets to be referred to herein as the "Assets"):
(a) All office equipment, furniture, artwork, service equipment,
supplies, computer hardware, data processing equipment, tools and supplies
(the "Equipment"), including the Equipment described on SCHEDULE 2.1(A);
(b) All contracts, documents, franchises, instruments, and other
written or oral agreements relating to the Business of Seller to which
Seller is a party or by which Seller or any of the Assets may be bound as
well as all rights, privileges, claims and options relating to the foregoing
(the "Contracts"), including the Contracts described on SCHEDULE 2.1(B);
(c) All customer and supplier files and databases, customer and
supplier lists, accounting and financial records, invoices, and other books
and records relating principally to the Business (the "Books and Records"),
including the Books and Records described on SCHEDULE 2.1(C);
(d) Seller's Employee files for those Employees actually hired by
Buyer;
(e) All right, title and interest of Seller, in, to and under all
service marks, trademarks, trade and assumed names, principally related to
the Business together with the right to recover for infringement thereon, if
any (the "Intellectual Property"), and other marks and/or names described on
SCHEDULE 2.1(E);
(f) All advertising materials and all other printed or written
materials related to the conduct of the Business;
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(g) All of the Seller's general intangibles, claims, rights of set
off, rights of recoupment and other proprietary intangibles, licenses and
sublicenses granted and obtained with respect thereto, and rights
thereunder, which are used in the Business, and remedies against
infringements thereof, and rights to protection of interests therein under
the laws of all jurisdictions (the "General Intangibles"), including the
General Intangibles described on SCHEDULE 2.1(G);
(h) All goodwill, going concern value and other intangible properties
related to the Business;
(i) The exclusive right to use the name "Reporting Services
Associates, Inc.", any similar name or derivative thereof, and any past or
present assumed names in connection with the Business or Seller's use of
the Assets (the "Seller's Name"); and
2.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not purchasing
any of the following excluded assets related to the Business ("Excluded
Assets"): (i) cash, cash deposits, rights to receive cash refunds, and other
cash equivalents, (ii) cash investments, (iii) Accounts Receivable, notes
receivable and trade receivables accrued on or before the IPO Closing Date, all
as more specifically described on SCHEDULE 2.2.
2.3 PURCHASE PRICE. Upon the terms and subject to the conditions
contained herein and as consideration for the sale of the Assets and the
performance by the Seller of various other matters as provided herein, the Buyer
shall pay or deliver to the Seller, on the IPO Closing Date and as soon as
practicable after the IPO Closing, the aggregate amount $9,500,000.00, payable
by delivery of the following consideration (collectively the "Purchase Price"):
(a) Subject to the provisions of Section 2.5, a cash sum in the
amount of Seven Million and No/100 Dollars ($7,000,000) (the "Cash Purchase
Price"), paid by the wire transfer of immediately available funds; and
(b) Such number of whole Parent Shares on the IPO Closing Date as,
when multiplied by 90% of the IPO Price, will most nearly approximate, but
not exceed, $2,500,000.00.
2.4 ASSUMPTION OF LIABILITIES; LEASES. Upon the terms and subject to the
conditions contained herein, the Buyer agrees that on the Closing Date, it will
not assume any liabilities of Seller (except for those liabilities related to
Seller's premise and equipment lease payments as described on Schedule 3.6,)
("Assumed Liabilities").
2.5 ALLOCATION OF PURCHASE PRICE. For all federal, state and local tax
purposes, the Purchase Price shall be allocated among the various Assets in the
manner indicated in SCHEDULE 2.7 hereto. None of the Parties shall file any tax
return or report or take any position with any Governmental Authority which is
inconsistent with the foregoing allocation, except to the extent
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mandated by a Governmental Authority in a determination binding upon one Party
provided that such Party has given written notice and reasonable opportunity to
the other Party, at its expense, to contest and appeal such determination on
behalf of both Parties and such determination has nevertheless become final.
Within ninety (90) days after the Closing Date, the Parties shall prepare for
filing with the Internal Revenue Service a Form 8594 in accordance with the
foregoing allocation.
2.6 TAXES. Seller shall be liable for the payment of all sales and use
taxes arising out of the sale and transfer or removal of the Assets, if any, and
the assumption of the Assumed Liabilities. Within one year from the Closing
Date, the Seller agrees to furnish to the Buyer certificates from the state
taxing authorities, and any related certificates that the Buyer may reasonably
request, as evidence that all sales and use tax liabilities of the Seller
accruing before the Effective Date have been fully provided for or satisfied.
The Buyer shall not be responsible for any business, occupation, withholding or
similar tax, or any taxes of any kind of the Seller, related to any period
before the Effective Date and, in the event that any taxes are found to be due
or owing by Seller within one year of the Closing Date, Seller shall pay all
such amounts and Buyer shall have the right of offset against the Parent Shares
pledged under the Stock Purchase Agreement for such amounts, if any, as provided
in Section 8.2 hereof.
2.7 TITLE TO ASSETS AND RISK OF LOSS. At the Effective Time, title to the
Assets and risk of loss or damage to the Assets by casualty (whether or not
covered by insurance) will pass to the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Stockholder jointly and severally represent and warrant that
all of the following representations and warranties in this Article III are true
at the date of this Agreement and shall be true at the time of Closing and the
IPO Closing Date, and that such representations and warranties shall survive the
IPO Closing Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that (i) the warranties and representations
set forth in Section 3.29 hereof shall survive until such time as the
limitations period has run for all tax periods ended on or prior to the IPO
Closing Date, which shall be deemed to be the Expiration Date for Section 3.29,
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 7.1 hereof has been made on a timely basis, and solely to the
extent that in connection with the IPO, the Seller or the Stockholder actually
incur liability under the Securities Act, the Exchange Act, or any other federal
or state securities laws, the representations and warranties set forth herein
shall survive until the expiration of any applicable limitations period, which
shall be deemed to be the Expiration Date for such purposes.
3.1 TITLE TO ASSETS. The Seller has good, marketable and indefeasible
title to the Assets, free and clear of restrictions or conditions to transfer or
assignment, mortgages, liens, pledges, charges, encumbrances, equities, claims,
easements, rights-of-way, covenants, conditions or restrictions, except with
respect to the Leased Assets as otherwise disclosed on SCHEDULE 2.1(A). The
Seller is in possession of all of the Leased Assets leased to it from others.
Except for the
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Excluded Assets, the Assets constitute all of the material property, whether
real, personal, mixed, tangible or intangible, that are used in the Business by
the Seller.
3.2 CONTRACTS AND AGREEMENTS. SCHEDULE 2.1(B) lists all of the material
contracts, agreements, and other written or oral arrangements relating to the
Business to which the Seller is a party, or by which the Seller or the Assets
are bound. As of the Closing Date, each of the Contracts is valid and in full
force and effect, and there has not been any default by the Seller or, to the
best of Seller's Knowledge, by any other party to any of the Contracts, or any
event that with notice or lapse of time or both, would constitute a default by
the Seller or, to the best of Seller's Knowledge, any other party to any of the
Contracts. Except as shall be disclosed in SCHEDULE 2.1(B), each Contract is
assignable to the Buyer without the consent of any other party. The Seller will
obtain and deliver at Closing all of the requisite consents relating to the
items set forth on SCHEDULE 2.1(B). Seller has not received notice that any
party to any of the Contracts intends to cancel or terminate any of the
Contracts or exercise or not exercise any options that they might have under any
of the Contracts. In the event any of the Contracts are, or are later
determined to be, non-assignable, and the other party to any such Contracts
refuses to consent to the assignment of same, then the Seller shall subcontract
to the Buyer or its designee, if the Buyer so desires, the remaining work on
such Contracts, and the Seller shall forward to the Buyer or its designee all
proceeds of such Contracts received by the Seller provided however, that Seller
shall be reimbursed for any reasonable out-of-pocket expenses incurred by it.
3.3 EQUIPMENT. All of the Equipment owned or leased by the Seller is
described on SCHEDULE 2.1(A) attached hereto. Except as disclosed on SCHEDULE
2.1(A), none of the Equipment will be, at the Effective Time, held under any
security agreement, conditional sales contract, or other title retention or
security arrangement or is located other than in the possession of the Seller
except for Equipment that is out of Seller's possession at certain job sites
and/or with certain of Seller's agents. To the best of Seller's Knowledge, the
Equipment is in good operating condition and repair, ordinary wear and tear
excepted.
3.4 LICENSES. Seller does not own any licenses or have any rights to use
any licenses in connection with the Business. Seller has not infringed, and is
not now infringing, on any license belonging to any other person, firm, or
corporation.
3.5 EMPLOYMENT CONTRACTS. Except as set forth in SCHEDULE 3.5, Seller
does not have any employment contracts and collective bargaining agreements to
which the Seller is a party or by which the Seller is bound relating to any
Employee. No Employees are represented by any labor organization, and, as of the
date hereof, no labor organization or group of Employees has made a written
demand to the Seller for recognition, or filed a petition with the National
Labor Relations Board, or announced its intention to hold an election of a
collective bargaining representative. There is no pending, or to the best
Knowledge and reasonable belief of Seller and Stockholder, threatened, labor
dispute, strike or work stoppage affecting or potentially affecting the
Business.
3.6 COMPLIANCE WITH LAWS. The Seller has complied with, and is not in
violation of, applicable federal, state or local statutes, laws, and regulations
(including, without limitation, any applicable building or other law, ordinance
or regulation) that affect, or are likely to affect, directly
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or indirectly, any of the Assets or the Business. The Seller has all permits,
licenses, and authorizations necessary to the conduct of the Business in the
manner and in the locations in which the Business is presently conducted, and
all such permits, licenses, or other authorizations are valid and in full force
and effect. To the best of Seller's Knowledge, there are not any uncured
violations of federal, state or municipal laws, ordinances, orders, regulations
or requirements affecting any portion of the Assets or the Business.
3.7 LITIGATION. Except as disclosed in SCHEDULE 3.7, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, to the best of Seller's Knowledge, threatened against
or affecting the Seller, its Affiliates, the Stockholder, the Assets, or the
Business that could result in a material adverse effect on the Business.
3.8 CONSENTS AND APPROVALS; NO BREACH OR DEFAULT. Except as set forth on
SCHEDULE 8(A), no consent, approval or authorization of, or filing or
registration with, any Person or Entity, is required to be made or obtained by
Seller in connection with the execution, delivery or performance of this
Agreement, or the consummation by Seller of the transactions contemplated
hereby. Except as set forth on SCHEDULE 3.8(B), neither the execution and
delivery of this Agreement or the Ancillary Agreements by Seller, nor the
consummation of the transactions contemplated herein by Seller, will (a) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Authority to
which Seller is, or the Assets are, subject, or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, promissory
note, conditional sales contract, partnership agreement or other arrangement to
which Seller or any of Seller's Affiliates is a party, or by which Seller is
bound, or to which the Assets are subject, or (c) conflict with or violate the
articles of incorporation, bylaws or other charter documents of Seller.
3.9 AUTHORITY. The Seller has the full right, power, legal capacity and
authority to execute, deliver and perform its obligations under this Agreement,
and all agreements ancillary to this Agreement which are part of the underlying
transaction made the basis of this Agreement and executed in connection herewith
including but not limited to the Exhibits hereto ("Ancillary Agreements"). The
sale of the Assets and the execution, delivery and performance of this Agreement
and the Ancillary Agreements by Seller have been duly authorized by the
Stockholder.
3.10 PERSONNEL. SCHEDULE 3.10(A) sets forth a complete and accurate list
of the names, addresses, hire dates, dates of birth and job descriptions of all
Employees employed by Seller in connection with the Business, current rates of
compensation including, if determined, bonuses payable to each following the
Closing.__SCHEDULE 3.10(B) is a complete and accurate list of the names,
addresses, hire dates, dates of birth and services provided by all independent
contractors used by Seller during the preceding one (1) year, stating their
rates and method of compensation.
3.11 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, this
Agreement, the Ancillary Agreements and each document, instrument and agreement
to be executed by the Seller, or the Stockholder in connection herewith, will
constitute the legal, valid, and binding obligation of the Seller, or
Stockholder, enforceable against the Seller and/or Stockholder in accordance
with its
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terms, except as limited by bankruptcy laws, insolvency laws, and other similar
laws affecting the rights of creditors generally.
3.12 FINANCIAL STATEMENTS. The Financial Statements (a) are true, complete,
and correct in all material respects, (b) fairly and accurately present the
financial position of Seller as of the periods described therein, and the
results of the operations of Seller for the periods indicated, and (c) have been
prepared consistently and in accordance with the Seller's historical customs and
practices.
3.13 EMPLOYEE BENEFITS. SCHEDULE 3.13 is a true, correct and complete list
of each "employee benefit plan,' within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which has ever been
maintained or sponsored by Seller or any of its Affiliates. Each such employee
benefit plan (and each related trust, insurance contract, or fund) is in full
force and effect, and complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws. Neither
Seller, Stockholder nor any Affiliate is in default under any of the plans,
there have been no claims of default, and there are no facts, conditions or
circumstances which if continued, or on notice, will result in a default, under
any plan. None of the plans will, by its terms or under applicable law, become
binding upon or become an obligation of the Buyer. No assets of any plan are
being transferred to Buyer or to any plan of Buyer. Seller does not contribute
to, and has never contributed to, and has never been required to contribute to,
any multiemployer plan, and Seller does not have, and has never had, any
liability (including withdrawal liability) under any multiemployer plan.
3.14 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE
3.14(A) with regard to the Business and the Assets, since the Balance Sheet
Date, there has been no:
(i) material adverse change in the condition, financial or
otherwise, of the Seller, the Assets or the Business;
(ii) waiver of any right of or claim held by the Seller;
(iii) material loss, destruction or damage to any property of the
Seller, whether or not insured;
(iv) material change in the personnel of the Seller or the terms or
conditions of their compensation or employment;
(v) acquisition or disposition of any assets (or any contract or
arrangement therefor), nor any other transaction by the Seller otherwise
than for value and in the ordinary course of business;
(vi) transaction or disbursement of funds or assets by the Seller
except in the ordinary course of business;
(vii) capital expenditure by the Seller exceeding $10,000 except in
the ordinary course of business;
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(viii) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by
the Seller;
(ix) re-valuation by the Seller of any of its Assets;
(x) amendment, modification or termination of any Contract to
which the Seller is a party, except in the ordinary course of business;
(xi) mortgage, pledge or other encumbrance of any of the Assets;
(xii) litigation or facts or circumstances that could result in
litigation that, if adversely determined, might reasonably be expected to
have a material adverse effect on Seller, Seller's financial condition,
Seller's prospects, the Business or the Assets;
(xiii) increase in salary or other compensation payable or to become
payable by the Seller to any of its officers, directors or employees, or the
declaration, payment or commitment or obligation of any kind for the payment, by
the Seller, of a bonus or other additional salary or compensation to any such
person;
(xiv) loan by the Seller to any person or entity, or guaranty by the
Seller of any loan;
(xv) other event or condition of any character that has or might
reasonably be expected to have a material adverse effect on the Business,
the Assets or the financial condition of the Seller; or
(xvi) agreement by the Seller to do any of the things described in
the preceding clauses (i) through (xv).
Except as disclosed in SCHEDULE 3.14(B), there have been no contractual
commitments by Seller to spend more than $25,000 per contractual commitment over
a continuous 12-month period.
3.15 BROKERS. Neither Seller, the Stockholder, nor any of the Seller's or
the Stockholder's Affiliates has employed any broker, agent, or finder, or
incurred any liability for any brokerage fees, agent's fees, commission or
finder's fees in connection with the transactions contemplated herein.
3.16 SALE OF ASSETS. For purposes of determining whether a sales and use
tax charge is applicable, the sale of the Assets constitutes: (i) the sale of
all of the operating assets of a business or of a separate division, branch, or
identifiable segment of a business, and (ii) a sale outside the ordinary course
of Seller's Business, and represents an isolated or occasional sale by a seller
who does not regularly engage in such business. The income and expenses of the
Business can be separately established from the Books and Records in the same
manner as previously provided to Buyer.
3.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Seller, the
Stockholder, nor any agent of the Seller, or the Stockholder, nor to Seller's
or the Stockholder's best Knowledge any
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other person acting on Seller's or the Stockholder's behalf, has, directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, government employee of the United
States or any state or foreign government, or other person who is or may be in a
position to help or hinder the Business which (1) would subject the Seller to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (2) if not given in the past, would have an adverse effect on the
Business, or (3) if not continued in the future, would have a material adverse
effect on the Business or the Assets, or which would subject the Seller to suit
or penalty in a private or governmental litigation or proceeding.
3.18 LIENS ON ASSETS. Except as set forth on SCHEDULE 3.18, all liens or
security interests of any third party as to any of the Assets have been removed
on or before the Closing Date, and the Seller has furnished evidence thereof to
Buyer.
3.19 CUSTOMERS. To the best of Seller's Knowledge, SCHEDULE 3.19 contains a
true and correct list of all customers of the Business within the last year (the
"Customers"). The Seller has no information, nor is the Seller aware of any
facts, indicating that any of the material Customers intend to cease doing
business with the Seller.
3.20 INSURANCE POLICIES. SCHEDULE 3.20 to this Agreement is a description
of all insurance policies held by the Seller concerning the Business and Assets.
The Seller maintains insurance protection on all its Assets and the Business of
such types and in such amounts as are customarily insured by similar companies
in the same industry, covering property damage and loss by fire, theft, or other
casualty.
3.21 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set forth
in SCHEDULE 3.21, neither the Seller, the Stockholder, nor any Affiliate of the
Seller or Stockholder, has any direct or indirect interest in any competitor,
supplier or customer of the Seller, or in any person from whom or to whom the
Seller leases any property, or in any other person with whom the Seller is doing
business.
3.22 ADVERSE INFORMATION. Neither Seller nor Stockholder has any actual
Knowledge of any change contemplated in any applicable laws, ordinances or
restrictions, or any judicial or administrative action, or any event, fact or
circumstance which will, or could be reasonably expected to, have a material
adverse effect on the Seller or its condition, financial or otherwise, the
Assets, or the condition, value or operation thereof.
3.23 ORGANIZATION. The Seller is a Pennsylvania corporation duly
organized, validly existing and in good standing under the laws of the State of
Pennsylvania, has all necessary powers to own the Assets and properties and to
operate the Business as now owned and operated by it, and is qualified to do
business in the State of Pennsylvania.
3.24 CONDITION. All of the Assets are in good operating condition and
repair, ordinary wear and tear excepted, and, as applicable, good working order.
To the best of the Seller's and the Stockholder's Knowledge, the buildings,
fixtures, and improvements leased by the Seller, including but not limited to
the parking areas, roofs, foundations, plumbing, electrical, air conditioning,
heating
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and ventilating systems, doors, building exteriors, landscaping, and interior
areas are in good condition, ordinary wear and tear excepted, and, as
applicable, good working order.
3.25 INTELLECTUAL PROPERTY. All of the Intellectual Property owned by the
Seller is described on SCHEDULE 2.1(E) attached hereto. The Seller is the sole
owner of all of the Intellectual Property, free and clear of any liens,
encumbrances, restrictions, or legal or equitable claims of others. The Seller
has registered all trade names, trademarks, and service marks in all
jurisdictions necessary to evidence and protect its ownership thereof, and to
permit the Seller to conduct its business in the manner in which it is currently
conducted, or otherwise has all rights or licenses necessary to use the same.
The Seller has all patents or patent applications and copyrights registered in
all jurisdictions necessary to evidence and protect the ownership thereof and to
permit the Seller to conduct its business in the manner in which it is currently
conducted, or otherwise has all rights or licenses necessary to use same.
Except as disclosed in this Agreement, all of the patents of the Seller are
valid and in full force and effect and are not subject to any taxes, maintenance
fees, or actions which have not been currently paid. None of the Intellectual
Property infringes upon any patents, trade or assumed names, trademarks, service
marks, or copyrights belonging to any other person or other entity. The Seller
is not a party to any license, agreement, or arrangement, whether as licensor,
licensee, or otherwise, with respect to any of the Intellectual Property. The
Seller does not have a license or a right to use any other patents, service
marks, trademarks, trade and assumed names, trade secrets and royalty rights and
other proprietary intangibles in connection with the Business, other than the
Intellectual Property.
3.26 POWERS OF ATTORNEY. No person or other entity holds a general or
special power of attorney from the Seller.
3.27 NO SEVERANCE PAYMENTS. Except as set forth in SCHEDULE 3.27, the
Seller will not owe a severance payment or similar obligation to any of its
Employees, officers, or directors, as a result of the transactions contemplated
by this Agreement, nor will any of such persons be entitled to an increase in
severance payments or other benefits as a result of the transactions
contemplated hereby, nor in the event of the subsequent termination of their
employment.
3.28 EMPLOYEES. Except as has occurred in the ordinary course of business,
the Seller has not, nor has it agreed to do in any unusual or extraordinary
amount or manner, any of the following acts with respect to its Employees in the
Business: (i) grant any increase in salaries payable or to become payable by it,
(ii) increase benefits, (iii) modify any collective bargaining agreement to
which it is a party or by which it may be bound, or (iv) declared any bonuses
for any of its Employees.
3.29 TAXES. Seller has filed all tax returns that Seller was required to
file, and all such tax returns were correct and complete in all respects. All
Taxes owed by Seller (whether or not shown on any tax return) have been paid.
Seller is not the beneficiary of any extension of time within which to file any
tax return, and Seller has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. Seller has withheld and paid all Taxes required to have been
withheld or paid in connection with amounts paid or owing to the Stockholder and
any Employee, independent contractor, creditor, or other third party. Neither
Seller, an Employee responsible for Tax matters, nor the Stockholder of Seller
has reason to believe
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that any authority might assess any additional Taxes for any period for which
tax returns have been filed. There is no dispute or claim concerning any Tax
liability of Seller.
3.30 HIRING OF EMPLOYEES. As of the Closing Date, Seller shall permit
Buyer to offer employment to all of the Employees. At or prior to Closing,
Seller shall have paid such Employees all compensation and benefits to which
they are entitled by reason of their previous employment with the Seller on such
date, and Buyer shall have no liability with respect thereto. Seller shall use
Seller's best efforts to assist Buyer in any reasonable manner in the hiring by
Buyer of the Employees that Buyer desires to hire. Buyer shall have the right,
but not the obligation, to offer employment to such Employees that it desires to
hire in its sole discretion. Seller shall be solely responsible and liable for
all severance pay, if any, to the extent that any of the Employees are not
offered employment with Buyer or do not accept an offer of employment. Under no
circumstances shall the Seller or any of Seller's Affiliates be permitted to
employ or offer employment to any of the Employees after the Closing Date,
without the prior written consent of Buyer.
3.31 OPERATIONS OF THE SELLER. Except as disclosed in SCHEDULE 3.31, since
the Balance Sheet Date:
(i) Seller has used its best efforts to preserve the business organization
of the Seller intact, to keep available to the Business the Employees, and to
preserve its present relationships with suppliers, Customers and others having
business relationships with it;
(ii) Seller has maintained its existing insurance as to the Business and
the Assets, and otherwise maintained and operated the Business in a good and
businesslike manner in accordance with good and prudent business practices;
(iii) Seller has not entered into any agreement or instrument which would
constitute an encumbrance of the Assets, which would bind Buyer, the Seller or
the Assets after Closing, other than in the ordinary course of business, or
which would be outside the normal scope of maintaining and operating the
Business and the Assets in the ordinary course of business;
(iv) Seller has performed all of the Seller's material obligations under
all Contracts and commitments applicable to the Seller, the Business, and the
Assets, and has maintained the Seller's Books and Records in the usual, regular
and customary manner;
(v) to the best of Seller's Knowledge, the Seller has complied with all
statutes, laws, ordinances and regulations applicable to the Seller, the Assets,
and the conduct of the Business;
(vi) Seller has not removed or disposed of, nor permitted the removal or
disposal of, any Assets unless such Assets were replaced with an item of at
least equal value that is properly suited for its intended purpose;
(vii) Seller has paid all bills and other payments due with respect to the
ownership, use, insurance, operation and maintenance of the Business and the
Assets in the usual, regular and customary manner consistent with its prior
practices, and has taken all action necessary or prudent
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to prevent liens or other claims for the same from being filed or asserted
against any part of the Assets; and
(viii) all revenues received by the Seller relating to the Business have
been deposited in the Seller's account relating to the Business.
3.32 FULL DISCLOSURE. This Agreement, the Ancillary Agreements and the
Schedules hereto, and all other documents and written information furnished by
the Seller to the Buyer pursuant hereto or in connection herewith, are true,
complete and correct, and do not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements made herein
and therein not misleading. To the best of Seller's Knowledge, there are no
facts or circumstances relating to the Assets or the Business which adversely
affect or might reasonably be expected to adversely affect the Assets, the
Business (including the prospects or operations thereof), or the ability of the
Seller to perform this Agreement or any of Seller's obligations hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Parent and Buyer jointly and severally represent and warrant that all of the
following representations and warranties in this Article IV are true at the date
of this Agreement and shall be true at the time of Closing and the IPO Closing
Date, and that such representations and warranties shall survive the IPO Closing
Date until the Expiration Date, except that solely for purposes of determining
whether a claim for indemnification under Section 7.1 hereof has been made on a
timely basis, and solely to the extent that in connection with the IPO, the
Seller actually incurs liability under the Securities Act, the Exchange Act, or
any other federal or state securities laws, the representations and warranties
set forth herein shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration Date for such
purposes.
4.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all the necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it.
4.2 AUTHORITY. Each of Buyer and Parent, as applicable, has the right,
power, legal capacity, and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution,
delivery and performance of this Agreement and any Ancillary Agreements by Buyer
and Parent, as applicable, have been duly authorized by all necessary corporate
action.
4.3 CAPITAL STOCK OF PARENT AND BUYER. The respective designations and
numbers of outstanding shares and voting rights of each class of outstanding
capital stock of the Parent and the Buyer are as follows: (i) immediately prior
to the Closing Date and the IPO Date, the authorized capital stock of Parent
will consist of 100,000,000 shares of common stock, of which the number of
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issued and outstanding shares will be set forth in the Registration Statement,
and 10,000,000 shares of preferred stock, $.01 par value, of which no shares
will be issued and outstanding, and a number of shares of restricted voting
common stock, $.01 par value, to be determined by Parent in good faith, all of
which will be issued and outstanding except as otherwise set forth in the
Registration Statement, and (ii) as of the date of this Agreement, the
authorized capital stock of Buyer consists of 10,000 shares of common stock, all
of which shares are issued and outstanding.
4.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on in the Registration Statement,
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Parent or the Buyer to issue any of their respective
authorized but unissued capital stock, and (ii) neither the Parent nor the Buyer
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. SCHEDULE 4.4 includes
complete and accurate copies of all stock option or stock purchase plans,
including a list of all outstanding options, warrants or other rights (excluding
the Other Agreements) to acquire Parent Shares.
4.5 COMMON STOCK. At the time of issuance thereof and delivery to the
Seller, the Parent Shares to be delivered to the Seller pursuant to this
Agreement will constitute valid and legally issued Parent Shares, fully paid and
nonassessable, and with the exception of restrictions upon resale (a) set forth
in Section 9.2 hereof and (b) contained in the Stock Pledge Agreement, will be
identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the Parent Shares issued and outstanding as
of the date hereof by reason of the provisions of the Texas Business Corporation
Act. Except as provided in the previous sentence, the Parent Shares issued and
delivered to the Seller shall at the time of such issuance and delivery be free
and clear of any liens, claims or encumbrances of any kind or character. The
Parent Shares to be issued to the Seller pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in the Registration Rights
Agreement.
4.6 ASSUMED LIABILITIES. Buyer shall assume the Assumed Liabilities as
defined in Section 2.6 herein.
4.7 ABSENT CERTAIN CHANGES. Since the Balance Sheet Date, there have been
no (a) material adverse changes in the business, financial condition, assets,
operations or prospects of Parent, (b) amendments, modifications or terminations
of any material contract applicable to Parent, (c) any changes in the accounting
methods or practices of Parent or (d) any litigation or facts or circumstances
that could result in litigation that, if adversely determined, might reasonably
be expected to have a material adverse effect on Parent or on its business,
financial condition or prospects.
4.8 LITIGATION. Except as disclosed in Schedule 4.8, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, to the best of the Parent's Knowledge, threatened
against or affecting the Parent or the Buyer that could result in a material
adverse effect on the Business.
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4.9 NO BREACH OR VIOLATION. As of the Effective Time and except as set
forth on Schedule 4.9, the consummation of the transactions contemplated by this
Agreement will not result in or constitute any of the following: (i) a default
or an event that, with notice or lapse of time or both, would be a default,
breach or violation, or give rise to a right of modification, termination,
cancellation or acceleration of any obligation or to a loss of a benefit under,
except for third party consents described in this Agreement or any schedule
prepared and delivered in connection herewith, of any lease, license, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of
trust, security agreement, concession, franchise, permit or other agreement,
instrument or arrangement by which the Parent or the Buyer may be affected, or
to which the Parent or the Buyer may be bound, (ii) the creation or imposition
of any lien, charge, or encumbrance on any of the assets of the Parent or the
Buyer, or (iii) a breach of any term or provision of this Agreement.
4.10 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, each of
this Agreement and the Ancillary Agreements will constitute the legal, valid,
and binding obligation of Buyer or Parent, as applicable, enforceable in
accordance with its terms, except as limited by bankruptcy laws, insolvency
laws, and other similar laws affecting the rights of creditors generally.
4.11 BROKERS. Except for The GulfStar Group, Inc. neither Buyer nor any of
its respective Affiliates, officers, directors, or employees, has employed any
broker, agent, or finder, or incurred any liability for any brokerage fees,
agent's fees, commissions or finder's fees in connection with the transactions
contemplated herein.
4.12 CONSENTS AND APPROVALS. No consent, approval or authorization of, or
filing or registration with, any Person or Entity, is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE PARTIES
Buyer and Seller covenant and agree as follows:
5.1 CONDUCT OF THE BUSINESS. Except as otherwise permitted by this
Agreement or consented to by Buyer in writing, Seller shall through the IPO
Closing Date conduct the Business in the ordinary course in substantially the
same manner as heretofore, using its best efforts to preserve intact its present
business organization, to keep available the services of its Employees, and to
preserve its relationships with Customers, suppliers and others having business
dealings with it.
5.2 CERTAIN CHANGES. Except as otherwise permitted by this Agreement or
consented to by Buyer in writing, Seller shall not: (a) subject any of the
Assets to any lien or encumbrance; (b) dispose of any of the Assets; or (c)
grant any increase in compensation or benefits to any Employee; (d) materially
modify any of the liabilities, or (e) with respect to the Business, perform any
act outside the Ordinary Course of Business except as otherwise contemplated by
this Agreement.
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5.3 NOTICE. Seller will notify Buyer immediately in writing if (i) any of
Seller's representations or warranties set forth in this Agreement are or become
untrue prior to the IPO Closing Date, (ii) Seller fails to fully perform all of
the covenants of Seller set forth in this Agreement, or (iii) there occurs any
Material adverse development in the Business or Seller's market position, sales,
profit trends, labor regulations, litigation or insurance claims or otherwise.
5.4 RECORDS. From the date of execution of this Agreement until the
Closing, Seller shall permit Buyer the right, during normal business hours, to
inspect any documents, Books and Records or other information pertaining to the
Assets.
5.5 U.C.C. SEARCHES. Within five (5) days from the date of execution
hereof, Buyer, at Buyer's sole cost and expense, shall deliver to Seller current
searches of all Uniform Commercial Code financing statements filed with the
Office of the Secretary of State of Pennsylvania and in any other state, or
county in which the Seller has an office, against Seller. Any and all liens,
pledges, mortgages, security interests and encumbrances affecting the Assets,
regardless of whether same are disclosed in such lien searches, shall be
released and discharged by Seller at or prior to Closing.
5.6 BULK SALES. It may not be practicable to comply or attempt to comply
with the procedures of the "Bulk Sales Act" or similar law in any or all of the
states in which the Assets are situated or of any other state which may be
asserted to be applicable to the transactions contemplated hereby. Accordingly,
to induce Buyer to waive any requirements for compliance with any or all of such
laws, Seller hereby agrees that except for the Assumed Liabilities, the
indemnity provisions of Article VII hereof shall apply to any Damages of Buyer
arising out of or resulting from the failure of Buyer or Seller to comply with
any such laws or any similar law which may be asserted to be applicable.
5.7 NON-COMPETITION AGREEMENT. The Seller agrees that, for the period
beginning on the Closing Date and continuing for five (5) years following the
Closing Date, neither Seller, Xxx Xxxxxxxxx, individually, nor any Affiliates,
shall, either directly or indirectly, individually or separately, for themselves
or as an owner, stockholder, joint venturer, promoter, consultant, manager,
independent contractor, agent, or in some similar capacity for any reason
whatsoever:
A. Enter into, engage in, or be connected with any business or
business operation or activity which consists in whole or in part of the
Business within the following Counties:
(list counties in Pennsylvania);
B. Call upon any customer whose account is or was serviced in whole or
in part by the Seller in relation to the Business or the Buyer with the
intent of selling or attempting to sell to any such customer any services
similar to the services provided by the Buyer; and
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C. Intentionally divert, solicit or take away any customer, supplier
or employee of the Buyer, or the patronage of any customer or supplier of
the Buyer, or otherwise interfere with or disturb the relationship existing
between the Buyer and any of its customers, suppliers, or employees,
directly or indirectly.
In the event the Buyer ceases operation of the Business other than in a
merger, consolidation, sale of assets or similar transaction, or upon the filing
of a bankruptcy or receivership proceeding against the Buyer, or upon the
appointment of a liquidator for the Buyer, the provisions of this Section 5.7
will not be applicable to the conduct of Seller subsequent thereto.
It is mutually understood and agreed that if any of the provisions relating
to the scope, time or territory in this Section 5.7 are more extensive than is
enforceable under applicable law or are broader than necessary to protect the
goodwill and legitimate business interests of the Buyer, then the Parties agree
that they will reduce the degree and extent of such provisions by whatever
minimal amount is necessary to bring such provisions within the ambit of
enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of Seller's
covenants contained in this Section 5.7 are inadequate, and they agree that the
Buyer shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of said covenants in addition to any other remedies at law
or equity that may be available to the Buyer.
5.8 TERMINATION OF EMPLOYMENT OF SELLER'S EMPLOYEES. Buyer anticipates
extending an offer of employment to substantially all of the Employees of the
Seller on substantially the same terms and conditions as the Employees currently
are employed by Seller. Notwithstanding the foregoing, nothing herein shall
imply or guarantee employment of any Employee of Seller by Buyer. If Seller's
Employees desire employment with Buyer, they will be interviewed in conjunction
with the applicants from other sources and given strong consideration for
available positions with Buyer, at the wages, hours, and conditions of
employment established by Buyer prior to hiring any Employees. Seller agrees to
use its best efforts to make available the Employees to the Buyer that Buyer
desires to hire for the purpose of operating the Business. Notwithstanding
anything to the contrary contained herein, Buyer agrees that it will offer to
employ substantially all of Seller's Employees. Nothing shall prohibit Buyer
from terminating any of Seller's Employees subsequent to their employment by
Buyer.
5.9 COOPERATION IN CONNECTION WITH THE IPO. The Seller and the Stockholder
will (a) provide the Parent and the Underwriter with all the Information
concerning Seller and the Stockholder which is reasonably requested by the
Parent and the Underwriter from time to time in connection with effecting the
IPO and (b) cooperate with the Parent and the Underwriter and their respective
representatives in the preparation and amendment of the Registration Statement
(including the Financial Statements) and in responding to the comments of the
SEC staff, if any, with respect thereto, to the extent that any of the foregoing
concern or reasonably relate to the Seller or the Stockholder. The Seller and
the Stockholder agree promptly to (a) advise the Parent if, at any time during
the period in which a prospectus relating to the IPO is required to be delivered
under the Securities Act, any information contained in the then current
Registration Statement prospectus
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concerning the Seller or the Stockholder becomes incorrect or incomplete in any
material respect and (b) provide the Parent with the information needed to
correct or complete that information.
5.10 ADDITIONAL FINANCIAL STATEMENTS. Seller shall promptly furnish to
Buyer a copy of all Financial Statements for each additional month-end period
beyond the Balance Sheet Date as soon as same is regularly prepared by Seller in
the Ordinary Course of Business. All such additional Financial Statements shall
be subject to the same representations and warranties as contained in Section
3.23 of this Agreement. The Parties acknowledge and agree that Buyer shall be
permitted to conduct at its sole cost and expense an audit of Seller for the
fiscal years ended 1994, 1995 and 1996 and 1997 (or any portion thereof) in
connection with the IPO. Buyer shall pay Seller's reasonable costs incurred in
preparing such monthly financial statements.
5.11 SUPPLEMENTAL INFORMATION. The Seller and the Stockholder agree that,
with respect to the representations and warranties of that party contained in
this Agreement, that party will have the continuing obligation through the IPO
Closing to provide the Parent promptly with such additional supplemental
Information (collectively, the "Supplemental Information"), in the form of (a)
amendments to then existing Schedules or (b) additional Schedules, as would be
necessary, in the light of the circumstances, conditions, events and states of
facts then known to the Seller or such Stockholder, to make each of those
representations and warranties true and correct as of the Closing and on the IPO
Closing Date. For purposes only of determining whether the conditions to the
obligations of the Parent and Buyer which are specified in Section 6.3 have been
satisfied, the Schedules as of the Closing and on the IPO Closing Date shall be
deemed to be the Schedules and the Investor Representation Letter as of the date
hereof as amended or supplemented by the Supplemental Information provided to
the Parent prior to the Effective Date pursuant to this Section 5.11; provided,
however, that (a) if the Supplemental Information so provided discloses the
existence of circumstances, conditions, events or states of facts which, in any
combination thereof, have had a Material Adverse Effect or, (b) based upon the
advice of the Underwriter the Parent has determined that subsequent events that
were revealed through RSA's submission of Supplemental Information pursuant to
this Section 5.11 (which shall be conclusive for purposes of this Section 5.11
and 8.3(a)(iv), but not for any purpose of Article VII), are having or will have
a Material Adverse Effect, the Parent will be entitled to terminate this
Agreement pursuant to Section 8.3(a)(iv); and provided, further, that if the
Parent is entitled to terminate this Agreement pursuant to Section 8.3(a)(iv),
but elects not to do so, it will be entitled to treat as Buyer Indemnified
Losses (which treatment will not prejudice the right of the Seller or the
Stockholder to contest Damage claims made by the Parent in respect of those
Buyer Indemnified Losses) all Damages to the Business which are attributable to
the circumstances, conditions, events and state of facts first disclosed herein
after the date hereof in the Supplemental Information. The Parent will provide
the Seller and the Stockholder with copies of the Registration Statement,
including all pre-effective amendments thereto, promptly after the filing
thereof with the SEC under the Securities Act.
5.12 INSURANCE. Seller shall assist, and shall cause its Affiliates to
assist, Buyer in transferring to Buyer any insurance applicable to the Assets or
the Leased Assets which Buyer elects to maintain in effect.
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5.13 CONFIDENTIALITY. Seller will not, and will not permit any of its
Affiliates to, disclose any information of a confidential or proprietary nature
concerning the Assets or the Business to any third parties, and in no event
shall Seller use, or allow any of its Affiliates to use, such confidential or
proprietary information for its or his own benefit or to the detriment of Buyer
or the Business. No public or private announcement shall be made of the
transactions contemplated herein, nor the terms hereof, by Seller or any of its
Affiliates, without the prior written approval of Buyer as to timing, form and
content.
ARTICLE VI
THE CLOSING
6.1 PRICING. At or prior to Pricing, the Parties shall take all actions
necessary to (a) complete the Acquisition (including the execution and delivery
of this Agreement and the Ancillary Agreements which shall be placed in escrow
under the control of the Parent for release to the Parties on the IPO Date), and
(b) effect the delivery of the Parent Shares referred to in Section 2.3 hereof,
provided however, that such actions shall not include the actual completion of
the Acquisition or the delivery of the Common Stock and funds referred to in
Section 2.3 hereof, each of which actions shall only be taken upon the IPO
Closing Date as herein provided. For purposes of this Article VI, the term
"Pricing" shall mean the date of determination by Parent and the Underwriter of
the public offering price of the Parent Shares in the IPO; the Parties
contemplate that the Pricing shall take place on the Closing Date. The escrow
agreement relating to this Agreement and the Ancillary Agreements shall provide
that in the event that there is no IPO Closing Date, and this Agreement
terminates as provided in Section 8.3(b)(ii), the Agreement and the Ancillary
Agreements shall not be delivered to the Parties. The taking of the actions
described in clauses (a) and (b) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Xxxxx, Xxxxx & Xxxxxx
Incorporated, 0 Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000. On the IPO
Closing Date, all transactions contemplated by this Agreement, including the
delivery of the Parent Shares, the wire transfer of the cash portion of the
Purchase Price which Seller is entitled to receive pursuant to Section 2.3
hereof, and the closing of the IPO shall occur and be completed. Except as
otherwise provided in Section 8.3 hereof, during the period from the Closing
Date to the IPO Closing Date, this Agreement may only be terminated by the
Parties if the Underwriting Agreement is terminated pursuant to the terms
thereof.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of the
Seller with respect to actions to be taken on the Closing Date are subject to
the satisfaction or waiver on or prior to the Closing Date of all of the
following conditions other than the conditions set forth in this Section 6.2(i)
and (viii) that cannot be satisfied prior to the IPO Closing Date. The
obligations of the Seller with respect to actions to be taken on the IPO Closing
Date are subject to the satisfaction or waiver on or prior to the IPO Closing
Date of the conditions set forth in this Section 6.2(i) and (viii). As of (a)
the Closing Date if any such conditions have not been satisfied other than the
conditions set forth in this Section 6.2(i) and (viii) that cannot be satisfied
prior to the IPO Closing Date or (b) the IPO Closing Date, if any such
conditions have not been satisfied, the Seller shall have the right to terminate
this Agreement, or in the alternative, waive any condition not so satisfied.
Any act or
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action of the Seller in consummating the Closing on the Closing Date to the
extent set forth in the first sentence of Section 6.1 shall constitute a waiver
of any conditions not so satisfied other than the conditions set forth in this
Section 6.2(i) and (viii) that cannot be satisfied prior to the IPO Closing
Date. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of Parent and Buyer contained in Article IV
hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of the Parent and the Buyer contained in
Article IV shall be true and correct in all Material respects as of the
Closing Date and the IPO Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the Parent
and the Buyer on or before the Closing Date and the IPO Closing Date shall
have been duly complied with and performed in all Material respects; and
certificates to the foregoing effect dated the Closing Date and the IPO
Closing Date, respectively, and signed by each of the Parent and the Buyer
shall have been delivered to the Seller.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of the Parent or the Buyer as a result
of which the management of the Seller deems it inadvisable to proceed with
the transactions hereunder.
(iii) OPINION OF COUNSEL. The Seller shall have received an opinion
from counsel for the Parent dated the Closing Date, in the form attached as
Exhibit G-1 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as amended
to cover the offering, issuance and sale by Parent of such number of Parent
Shares at the IPO Price (which need not be set forth in the Registration
Statement when it becomes effective under the Securities Act) as shall yield
aggregate cash proceeds to the Parent from that sale (net of Underwriter's
discount or commissions) in at least the amount (the "Minimum Cash Amount")
that is sufficient, when added to the funds, if any, available from other
sources (if any, and as set forth in the Registration Statement when it
becomes effective under the Securities Act)(the "Other Financing Sources"),
to enable the Parent to pay or otherwise deliver on the IPO Closing Date (i)
the total cash portion of the Purchase Price then to be delivered pursuant
to Article II; (ii) the total cash portion of the acquisition consideration
then to be delivered pursuant to the Other Agreements as a result of the
consummation of the acquisition transactions contemplated thereby, and (iii)
the total amount of indebtedness of the Seller, each Other Acquired Business
and the Parent which the Registration Statement discloses at the time it
becomes effective under the Securities Act will be repaid with proceeds
received by the Parent from the IPO and Other Financing Sources shall have
been declared effective by the SEC.
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein
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shall have been obtained and made and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the Acquisition.
(vi) GOOD STANDING CERTIFICATES. Parent and the Buyer each shall
have delivered to the Seller certificates, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the Texas and New York
Secretaries of State, respectively, and in each state in which the Parent
and Buyer is authorized to do business, showing that each of the Parent and
the Buyer is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for the Parent and the
Buyer, respectively, for all periods prior to the Closing have been filed
and paid.
(vii) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred with respect to the Parent or the Buyer which would constitute
a Material Adverse Effect.
(viii) CLOSING OF IPO. The closing of the sale of the Parent Shares
to the Underwriters in the IPO shall have occurred simultaneously with the
IPO Closing Date hereunder.
(ix) SECRETARY'S CERTIFICATE. The Seller shall have received a
certificate or certificates, dated the Closing Date and signed by the
secretary of each of the Parent and the Buyer, certifying the truth and
correctness of attached copies of the Parent's and the Buyer's respective
resolutions of their boards of directors and, if required, the stockholders
of the Parent and the Buyer approving the Parent's and the Buyer's entering
into this Agreement and the consummation of the transactions contemplated
hereby.
(x) XXXXXXXXX EMPLOYMENT AGREEMENT. The Buyer shall have entered
into an employment agreement with Xxxxxxxxx in the form attached as Exhibit
A ("Xxxxxxxxx Employment Agreement").
(xi) REGISTRATION RIGHTS AGREEMENT. Parent shall have entered into
the Registration Rights Agreement with the Seller in the form attached as
Exhibit B ("Registration Rights Agreement").
(xii) AUDITED FINANCIALS. Parent shall have delivered to Seller a
certified copy of the audited reports, including a signed and certified opinion
letter, prepared by Coopers & Xxxxxxx, L.L.P. for the calendar years 1995, 1996
and for the twelve months ended June 30, 1997 of the operations of Seller's
Business.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARENT AND THE BUYER. The
obligations of the Parent and the Buyer with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions other than the conditions set
forth in this Section 6.3(i) and (viii) that cannot be satisfied prior to the
IPO Closing Date. The obligations of Parent and Buyer with respect to actions
to be taken on the IPO Closing Date are subject to the satisfaction or waiver on
or prior to the IPO Closing Date of all of the following conditions. As of (a)
the Closing Date if any such conditions other than the
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conditions set forth in this Section 6.3(i) and (viii) that cannot be satisfied
prior to the IPO Closing Date have not been satisfied or (b) as of the IPO
Closing Date, if any such conditions have not been satisfied, Parent and Buyer
shall have the right to terminate this Agreement, or waive any such condition,
but no such waiver shall be deemed to affect the survival of the representations
and warranties contained in Article III hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATION. All
the representations and warranties of the Seller and the Stockholder
contained in this Agreement shall be true and correct in all Material
respects as of the Closing Date and the IPO Closing Date with the same
effect as though such representations and warranties had been made on and as
of such date; all of the terms, covenants and conditions of this Agreement
to be complied with or performed by the Seller or the Stockholder on or
before the Closing Date or the IPO Closing Date, as the case may be, shall
have been duly performed or complied with in all Material respects; and the
Seller and the Stockholder shall have delivered to the Buyer certificates
dated the Closing Date and the IPO Closing Date, respectively, and signed by
them to such effect.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of Parent as a result of which the
management of Parent deems it inadvisable to proceed with the transactions
hereunder.
(iii) OPINION OF COUNSEL. Parent shall have received an opinion
from Counsel to the Seller, dated the Closing Date, substantially in the
form attached as Exhibit G-2 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as amended
to cover the offering, issuance and sale by Parent of such number of Parent
Shares at the IPO Price as shall yield aggregate cash proceeds to the Parent
from that sale (net of Underwriter's discount or commissions) in at least
the Minimum Cash Amount shall have been declared effective by the SEC.
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties shall have been obtained; and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the Acquisition.
(vi) GOOD STANDING CERTIFICATES. Subject to Section 2.6, Seller
shall have delivered to the Buyer certificates, dated as of a date no later
than ten days prior to the Closing Date, duly issued by the Pennsylvania
Secretary of State showing that the Seller is in good standing and
authorized to do business and that all state franchise and/or income tax
returns and taxes for the Seller for all periods prior to the Closing have
been filed and paid.
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(vii) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred with respect to the Seller which would constitute a Material
Adverse Effect, and the Seller shall not have suffered any Material loss or
damages to any of its properties or assets, whether or not covered by
insurance, which change, loss or damage Materially affects or impairs the
ability of the Seller to conduct its business.
(viii) CLOSING OF IPO. The closing of the sale of the Parent Shares
to the Underwriter of the IPO shall have occurred simultaneously with the
IPO Closing Date hereunder.
(ix) CERTIFICATE. The Buyer shall have received a certificate or
certificates, dated the Closing Date and signed by the President and
Secretary of the Seller, certifying the truth and correctness of attached
copies of the Seller's articles of incorporation, bylaws and resolutions
authorizing the consummation of the transactions contemplated hereby.
(x) XXXXXXXXX EMPLOYMENT AGREEMENT. Xxxxxxxxx shall have entered
into the Xxxxxxxxx Employment Agreement.
(xi) REGISTRATION RIGHTS AGREEMENT. Seller shall have entered into
the Registration Rights Agreement.
(xii) XXXX OF SALE. Seller shall have delivered to the Buyer
instruments of assignment and transfer or bills of sale signed by the Seller
as the Buyer reasonably requests, including the Xxxx of Sale attached as
Exhibit C ("Xxxx of Sale").
(xiii) INVESTOR REPRESENTATION LETTER. Seller and each of the
Stockholders shall have delivered to the Parent at or prior to the signing
of the Registration Statement an Investor Representation Letter in the form
attached as Exhibit D, with respect to the acquisition of the Parent Shares
to be issued to Seller.
(xiv) STOCK PLEDGE AGREEMENT. Seller shall have delivered to Buyer
a Stock Pledge Agreement in the form attached as Exhibit E ("Stock Pledge
Agreement") as well as the Parent Shares issuable to the Seller at the
Closing (complete with stock powers executed in blank).
(xv) GUARANTEE. Xxxxxxxxx, individually, shall have delivered to
Buyer a Guaranty of Performance in the form of Exhibit F.
(xvi) SATISFACTION. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this
Agreement or incidental hereto and all other related legal matters shall
have been approved by counsel to the Parent.
6.4 FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. The Seller, at any time at or after the
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Closing, will execute, acknowledge and deliver any further bills of sale,
assignments and other assurances, documents and instruments of transfer,
reasonably requested by the Buyer, and will take any other action consistent
with the terms of this Agreement that may reasonably be requested by the Buyer,
for the purpose of assigning and confirming to the Buyer, all of the Assets. The
Buyer shall notify the Seller promptly, and in no event more than ten (10)
business days after the Buyer's receipt, of any tax inquiries or notifications
thereof which relate to any period prior to the Effective Date, and the Seller
shall prepare and deliver responses to such inquiries as the Seller deems
necessary or appropriate. In addition, the Seller shall make available the Books
and Records of the Business during reasonable business hours and take such other
actions as are reasonably requested by the Buyer to assist the Buyer in the
operation of the Business.
6.5 CONFIDENTIAL INFORMATION. After the Closing and except as otherwise
specifically permitted in this Agreement or reasonably required by the Parent to
conduct its business and pursue the IPO, each Party to this Agreement agrees, on
behalf of itself and ifs Affiliates, to use reasonably efforts not to divulge,
communicate, use to the detriment of any other Party to this Agreement or its
Affiliates or for the benefit of any other person or persons, any confidential
information or trade secrets of such other Party with respect to the Assets or
the Business, including personnel information, secret processes, know-how,
customer lists, formulae, or other technical data; provided, if any Party to
this Agreement or any of its Affiliates is compelled to disclose such
information to any tribunal, regulatory or governmental authority or agency or
else stand liable for contempt or suffer other censure and penalty, such Party
may so disclose such information without any liability hereunder.
6.6 ASSIGNMENT OF CONTRACTS. On or before the Effective Date, Seller
shall have delivered to Buyer all of the Contracts presently in force and shall
have effected a valid assignment of all of Seller's rights and obligations
thereunder.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
A. BY THE SELLER AND THE STOCKHOLDER. Subject to Section 7.1(E)
hereof, the Seller and the Stockholder, individually, jointly and severally,
(collectively herein "Seller Indemnitors") shall indemnify, save, defend and
hold harmless the Parent and Buyer and their respective shareholders, directors,
officers, partners, agents and employees (collectively, the "Buyer Indemnified
Parties") from and against any and all costs, lawsuits, losses, liabilities,
deficiencies, claims and expenses, including interest, penalties, attorneys'
fees and all amounts paid in investigation, defense or settlement of any of the
foregoing (collectively referred to herein as "Damages"), (i) incurred in
connection with or arising out of or resulting from or incident to any breach of
any covenant, breach of warranty as of the Effective Date, or the inaccuracy of
any representation as of the Effective Date, made by the Seller in or pursuant
to this Agreement or the Ancillary Agreements, or any other agreement
contemplated hereby or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by the Seller or the Stockholder under
this Agreement, (ii) based upon, arising out of, or otherwise in respect of any
liability or obligation of the
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Business or relating to the Assets (a) relating to any period prior to the
Effective Date, other than those Damages based upon or arising out of the
Assumed Liabilities, or (b) arising out of facts or circumstances existing prior
to the Effective Date, other than those Damages based upon or arising out of the
Assumed Liabilities; provided however, that the Seller Indemnitors shall not be
liable for any such Damages to the extent, if any, such Damages result from or
arise out of a breach or violation of this Agreement by any Buyer Indemnified
Parties, and (iii) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
Material fact relating to the Seller or the Stockholder, and provided to Parent
or its counsel by the Seller or the Stockholder, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a Material fact relating to the Seller or the
Stockholder required to be stated therein or necessary to make the statements
therein not misleading, provided however, that such indemnity shall not inure to
the benefit of Parent and Buyer to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and Seller or the Stockholder provided, in writing,
corrected information to Parent and Parent's counsel for inclusion in the Final
Prospectus, and such information was not included or properly delivered.
B. BY THE BUYER. Subject to Section 7.1(E) hereof, the Parent and
Buyer shall indemnify, save, defend and hold harmless the Seller and the
Stockholder (collectively, the "Seller Indemnified Parties") from and against
any and all Damages (i) incurred in connection with or arising out of or
resulting from or incident to any breach of any covenant, breach of warranty as
of the Effective Date, or the inaccuracy of any representation as of the
Effective Date, made by the Buyer or Parent in or pursuant to this Agreement,
the Ancillary Agreements, or any other agreement contemplated hereby or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by the Buyer under this Agreement, (ii) based upon, arising out of or otherwise
in respect of any liability or obligation of the Business or relating to the
Assets (a) relating to any period on and after the Effective Date, other than
those Damages based upon or arising out of the Retained Liabilities, or (b)
arising out of facts or circumstances existing on and after the Effective Date,
other than those Damages based upon or arising out of the Retained Liabilities;
provided, however, that the Buyer shall not be liable for any such Damages to
the extent, if any, such Damages result from or arise out of a breach or
violation of this Agreement by any Seller Indemnified Party, (iii) under the
Securities Act, the Exchange Act or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a Material fact relating to Parent, Buyer or any
Other Acquired Business contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission (or alleged omission) to state therein a Material fact relating to
Parent or Buyer or any of the Other Acquired Businesses required to be stated
therein or necessary to make the statements therein not misleading.
C. DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in
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no way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("Notice of Action"); provided that the failure of any
indemnified Party to give timely notice and an estimated amount of Damages shall
not affect its rights to indemnification hereunder to the extent that the
indemnified Party demonstrates to the indemnifying Party that the amount of
Damages the indemnified Party is entitled to recover has not increased by its
failure to so notify the indemnifying Party within ten (10) days and so long as
the indemnifying Party is not materially prejudiced by the failure to receive
such notice. The indemnifying Party may elect to compromise or defend any such
asserted liability and to assume all obligations contained in this Section 7.1
to indemnify the indemnified Party by a delivery of notice of such election
("Notice of Election") within ten (10) days after delivery of the Notice of
Action. Upon delivery of the Notice of Election, the indemnifying Party shall be
entitled to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the indemnifying Party's sole cost, risk and expense, and the
indemnified Party shall cooperate in all reasonable respects, at the
indemnifying Party's sole cost, risk and expense (except with respect to the
fees and expenses of the indemnified Party's attorney, which shall be borne by
the indemnified Party) with the indemnifying Party and such attorneys in the
investigation, trial, and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified Party may, at its own
cost, risk and expense, participate in such investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. If the Notice of
Election is delivered to the indemnified Party, the indemnified Party shall not
pay, settle or compromise such claim without the indemnifying Party's consent,
which consent shall not be unreasonably withheld. If the indemnifying Party
elects not to defend the claim of the indemnified Party or does not deliver to
the indemnified Party a Notice of Election within ten (10) days after delivery
of the Notice of Action, the indemnified Party may, but shall not be obligated
to, defend, compromise or settle (exercising reasonable business judgment) the
claim or other matter on behalf, for the account, and at the risk, of the
indemnifying Party.
D. THIRD PARTY CLAIMS. The provisions of this Section 7.1 are not
limited to matters asserted by the Parties, but cover Damages incurred in
connection with third party claims. The indemnity hereunder is in addition to
any and all rights and remedies of the Parties in connection herewith.
E. LIMITATION ON INDEMNIFICATION. Notwithstanding the other
provisions of this Section 7.1, Seller Indemnitors shall not be liable to Buyer
Indemnified Parties, and Parent and Buyer shall not be liable to Seller
Indemnified Parties, for the first $25,000 in aggregate Damages suffered by such
indemnified Parties; provided, however, that once any such indemnified Parties
have suffered Damages aggregating in excess of $25,000, the indemnifying Party
shall reimburse the indemnified Parties for the full amount of such Damages,
including the $25,000 in Damages initially excluded. In no event shall the
aggregate Damages payable by an indemnifying Party to indemnified Parties exceed
the Purchase Price.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of the Parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the
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transactions contemplated hereby and any examination on behalf of the Parties
until the Expiration Date.
ARTICLE VIII
TERMINATION AND REMEDIES
8.1 SPECIFIC PERFORMANCE; REMEDIES. Each of the Parties hereby agrees
that the transactions contemplated by this Agreement are unique, and that each
Party shall have, in addition to any other legal or equitable remedy available
to it, the right to enforce this Agreement by decree of specific performance.
If any legal action or other proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement, the successful or
prevailing Party or Parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding in addition to any
other remedies to which it, he or they may be entitled at law or equity. The
rights and remedies granted herein are cumulative and not exclusive of any other
right or remedy granted herein or provided by law.
8.2 OFFSET; REMEDIES. To the extent not otherwise prohibited by
applicable law, all amounts due and owing by the Buyer to the Seller or the
Stockholder under this Agreement, the Ancillary Agreements, or any other
document, instrument, or agreement executed in connection herewith shall be
subject to offset by the Buyer to the extent of any Damages incurred by any
breach by the Seller or the Stockholder, under this Agreement or any Ancillary
Agreement, or any document, instrument, or agreement executed in connection
herewith. In the event Buyer elects to offset any Damages incurred as a result
of any such breach, Buyer shall furnish Seller or the Stockholder, as
appropriate, notice containing detailed information about the breach, the
magnitude of the damages that Buyer has or reasonably expects to incur, and
whether the offset is against the Parent Shares pledged under the Stock Pledge
Agreement or otherwise (the act of offsetting by Buyer shall be referred to as
an "Offset"). The Seller and the Stockholder acknowledge and agree that but for
the right of Offset contained in this Agreement, the Buyer would not have
entered into this Agreement or any of the transactions contemplated herein. If
any legal action or other proceeding is brought for the enforcement of this
Agreement, any Ancillary Agreement, or any document, instrument, or agreement
executed in connection herewith, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, or any Ancillary Agreement, or any document, instrument, or agreement
executed in connection herewith, the successful or prevailing Party or Parties
shall be entitled to recover other remedies to which it or they may be entitled
at law or equity. The rights and remedies granted herein are cumulative and not
exclusive of any other right or remedy granted herein or provided by law. Buyer
shall not effect an Offset hereunder without giving Seller or a Stockholder, as
appropriate, at least ten (10) days advance written notice of its intent to do
so.
8.3 TERMINATION. Termination of This Agreement. (a) This Agreement may be
terminated at any time prior to the Closing solely:
(i) by the mutual written consent of the Parent and the Seller;
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(ii) by the Seller, on the one hand, or by the Parent, on the other
hand, if the transactions contemplated by this Agreement to take place at
the Closing shall not have been consummated by January 15, 1998, (subject to
the terms of the Side Letter) unless the failure of such transactions to be
consummated results from the willful failure of the Party seeking to
terminate this Agreement to perform or materially adhere to any agreement
required hereby to be performed or adhered to by it prior to or at the
Closing or thereafter on the IPO Closing Date;
(iii) by the Seller, on the one hand, or by the Parent, on the other
hand, if a Material breach or default shall be made by the other Party in
the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein; or
(iv) by the Parent if it is entitled to do so as provided in
Section 5.11.
(b) this Agreement may be terminated after the Closing solely:
(i) by the Parent or the Seller if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party hereto
if the IPO is not consummated within ten (10) New York City business days
after the date of the Closing.
8.4 LIABILITIES IN EVENT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.3, there shall be no liability or obligation on the part
of any Party hereto except to the extent that such liability is based on the
breach by that Party of any of its representations, warranties or covenants set
forth in this Agreement.
ARTICLE IX
COVENANTS OF BUYER AND SELLER AFTER CLOSING
9.1. PREPARATION AND FILING OF TAX RETURNS.
(i) The Seller shall file or cause to be filed all federal income
tax returns of the Seller for all taxable periods that end on or before the
IPO Closing Date, and shall permit the Parent to review all such tax returns
prior to such filings.
(ii) Parent shall file or cause to be filed all separate tax returns
of, or that include, any Other Acquired Business for all taxable periods
ending after the IPO Closing Date.
(iii) Each Party shall, and shall cause its Subsidiaries and
Affiliates to, provide to each of the other Parties hereto such cooperation
and information as any of them reasonably may request in filing any tax
return, amended tax return or claim for refund, determining a liability for
taxes or a right to refund of taxes or in conducting any audit or other
proceeding in respect of taxes. Such cooperation and information shall
include providing copies of all
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relevant portions of relevant tax returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating
to rulings or other determinations by taxing authorities and relevant
records concerning the ownership and tax basis of property, which such Party
may possess. Each Party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the preceding sentence,
each Party required to file tax returns pursuant to this Agreement shall
bear all costs of filing such tax returns.
9.2 RESTRICTIVE LEGEND. The Seller consents to the imprinting on all
certificates representing Parent Shares issued to it as part of the Purchase
Price of the following legend:
THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE SECURITIES
LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH REGISTRATION, OR (2)
DELIVERY TO THE ISSUER OF SUCH SHARES OF AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED FOR SUCH
TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF SUCH SHARES OF OTHER
EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT ANY SUCH
SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN VIOLATION OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER APPLICABLE
SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS
PROMULGATED THEREUNDER.
9.3 PLEDGE OF PARENT SHARES. Seller shall deliver all Parent Shares
acquired from the Buyer as part of the Purchase Price to Buyer to be held
pursuant to the terms of the Stock Pledge Agreement.
9.4 DELIVERY OF TAX CERTIFICATE. Within one year from the Closing Date,
Seller shall deliver such tax certificate to Buyer as required by Section 2.8 of
this Agreement.
9.5 SIDE LETTER The Side Letter, by and between Parent and Xxxxxxxxx,
dated September 15, 1997 and attached hereto as Exhibit H, is incorporated
herein and made a part of this Agreement for all purposes (the "Side Letter").
ARTICLE X
MISCELLANEOUS
10.1 FEES. Except as expressly set forth herein to the contrary, each
Party shall be responsible for all costs, fees and expenses (including attorney
and accountant fees and expenses) paid or incurred by such Party in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transaction contemplated hereby.
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10.2 MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only in writing signed by all of the Parties.
10.3 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed with receipt of
transmission confirmed during regular business hours during a business day to
the appropriate location described below, or three (3) business days after
posting thereof by United States first-class, registered or certified mail,
return receipt requested, with postage and fees prepaid and addressed as
follows:
IF TO SELLER OR Xxx Xxxxxxxxx
STOCKHOLDER: Reporting Services Associates
000 Xxxxx 00xx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
With a copy to: Xxxxxxxx X. Xxxxxxxxxx
Attorney at Law
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
IF TO BUYER
OR PARENT: Litigation Resources of America-Northeast, Inc.
Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Phone: 713/000-0000
Fax: 713/000-0000
With a copy to: Xxxx X. Xxxxx, Xx.
Xxxxx, Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: 713/000-0000
Fax: (000) 000-0000
Any addressee at any time by furnishing notice to the other addressees in the
manner described above may designate additional or different addresses for
subsequent notices or communications.
10.4 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or affect the enforceability of any other
provision of this Agreement.
10.5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the Ancillary
Agreements set forth the entire agreement among the Parties with respect to the
subject matter hereof. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.
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10.6 WAIVER. No delay in the exercise of any right under this Agreement
shall waive such rights. Any waiver, to be enforceable, must be in writing.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
10.8 ASSIGNMENT. Neither Seller, nor Parent or Buyer may assign this
Agreement or any interest therein; provided that Seller may assign its rights
hereunder to Xxx Xxxxxxxxx, individually, and Parent and Buyer may assign their
rights hereunder to an Affiliate.
10.9 HEADINGS. Headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.
10.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this
Agreement or to be delivered by the Seller, upon review and approval by the
Buyer, are and shall be hereby incorporated in and made a part of this
Agreement. All Schedules to this Agreement must be delivered no later than four
(4) days prior to Closing, in order to provide the Buyer ample time to review
and evaluate the items described therein and disclosed thereby. Although the
Schedules remain subject to the review and approval of the Buyer, no such review
or approval shall constitute a waiver by the Buyer of any breach or default
caused by the inaccuracy or incompleteness of any Schedule, the accuracy and
completeness of the Schedules being the sole responsibility of the Seller.
10.11 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parties, the Buyer
Indemnified Parties and their respective successors and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any Party to this Agreement, nor shall any provision
give any third person any right of subrogation or action over against any Party
to this Agreement.
10.12 SURVIVAL. Subject to Section 7.2, this Agreement, including but not
limited to all covenants, warranties, representations and indemnities contained
herein, shall survive the Closing, and the Xxxx of Sale and all other documents,
instruments or agreements relating to the Assets and the transactions
contemplated herein shall not be deemed merged therein.
10.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
10.14 ARBITRATION AND LIMITATION ON CLAIMS. Any controversy, dispute or
claim arising out of, in connection with, or in relation to, the interpretation,
performance or breach of this Agreement, including, without limitation, the
validity, scope and enforceability of this Section which cannot first be settled
through ordinary negotiation between the Parties shall be submitted in good
faith to mediation by and in accordance with the Commercial Mediation Rules of
the American Arbitration Association or any successor organization. In the
event that mediation of such controversy, dispute or claim cannot be settled
through the mediation proceeding, the Parties agree
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that the controversy, dispute or claim shall be submitted to binding and final
arbitration conducted in Houston, Xxxxxx County, Texas by and in accordance with
the then existing Rules for Commercial Arbitration of the American Arbitration
Association or any successor organization. Any such arbitration shall be to a
three member panel selected through the rules governing selection and
appointment of such panels of the American Arbitration Association or any
successor organization. The award rendered by the arbitrators may be confirmed,
entered and enforced as a judgment in any court of competent jurisdiction;
however, the Parties otherwise waive any rights to appeal the award except with
regard to fraud by the panel. Any such action must be brought within two years
of the date the cause of action accrues. The arbitrators shall award the Party
which substantially prevails in any arbitration proceeding recovery of that
Party's attorneys' fees, the arbitrators' fees and all costs in connection with
the arbitration from the Party who does not substantially prevail. The Parties'
remedies are limited solely to the specific remedies provided in this agreement
or in the other. The parties waive any entitlement to punitive damages,
consequential damages and lost profits and will limit any damage claim to actual
economic damages incurred. Nothing in this Section 10.14 shall restrict any
Parties' ability to seek injunctive or other equitable relief in any court of
competent jurisdiction prior to initiating mediation or arbitration. In the
event that such injunctive or equitable relief is sought by any Party, such
Party is specifically entitled to enforce the appropriate provisions of the
Agreement in obtaining such relief in any court of competent jurisdiction and,
thereafter, submit the remaining controversy, dispute or claim to arbitration in
accordance with this Section 10.14.
10.15 DRAFTING. All Parties hereto acknowledge that each Party was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
10.16 BLUE SKY LAWS.
(a) Section 203(d) and 207(m)(2) of the Pennsylvania Securities Act of
1972, as amended (the "Act") requires that each person who accepts an offer
to purchase securities exempted from registration directly from an issuer,
shall receive written notice of such person's right to withdraw his
acceptance, without incurring any liability to the seller, the underwriter
or any other person, within two business days from the date of receipt by
the issuer of such person's written binding contract of purchase.
(b) By execution of this Agreement, Seller acknowledges that (i) it
has received written notice of its rights under Sections 203 and 207 of the
Act, and (ii) that Seller's right of withdrawal shall continue until the
close of business on the second business day following the execution date of
this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement in multiple counterparts effective as of the date first written above.
BUYER:
LITIGATION RESOURCES OF
AMERICA-NORTHEAST, INC.,
a New York corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx,
Chairman and Chief Executive Officer
PARENT:
LITIGATION RESOURCES OF AMERICA, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx X. Xxxxxx,
Chairman and Chief Executive Officer
SELLER:
REPORTING SERVICES ASSOCIATES, INC.
a Pennsylvania corporation
By: /s/ Xxx Xxxxxxxxx
------------------------------------
Xxx Xxxxxxxxx, President
STOCKHOLDER
/s/ Xxx Xxxxxxxxx
----------------------------------------
Xxx Xxxxxxxxx, Individually
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Schedules
---------
2.1(a) - Equipment
2.1(b) - Contracts
2.1(c) - Books and Records
2.1(e) - Intellectual Property
2.1(g) - General Intangibles
2.2 - Excluded Assets
2.7 - Allocation of Purchase Price
3.3(a) - Consents and Approvals
3.3(b) - Breaches or Defaults
3.5 - Exceptions to Title
3.6 - Leased Assets
3.13 - Insurance Policies
3.14 - Banking
3.16(a) - Employees
3.16(b) - Independent Contractors
3.17 - Employee Benefit Plans
3.18 - Employment Agreement
3.19 - Liabilities
3.20 - Litigation
3.24 - Certain Changes or Events
3.25 - Customers
Exhibits
--------
A - Xxxxxxxxx Employment Agreement
B - Registration Rights Agreement
C - Xxxx of Sale
D - Investor Representation Letter
E - Stock Pledge Agreement
F - Guaranty
G-1 - Legal Opinion
G-2 - Legal Opinion
H - Side Letter
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated effective the ____ day of
October, 1997 (the "Effective Date"), is entered into by and between LITIGATION
RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation (hereinafter called
the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), and Xxx Xxxxxxxxx, an individual residing
in the State of Florida (the "Employee"). The Company may sometimes hereinafter
be referred to as "Employer." The Employer and Employee may sometimes
hereinafter be referred to singularly as a "Party" or collectively as the
"Parties." All capitalized terms not otherwise defined herein shall have the
same meaning as contained in that certain Agreement of Purchase and Sale of
Assets executed as of September 24, 1997 (the "Purchase Agreement"), by and
among the Company, Reporting Services Associates, Inc. a Pennsylvania
corporation ("Seller"), the Employee, individually, and Litigation Resources of
America, Inc., a Texas corporation (the "Parent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee has been and employee and the Owner of the Seller and its
business known as Reporting Services Associates, Inc. (the "RSA Business"), and
his knowledge of the affairs of the RSA Business, particularly its court
reporting business in Philadelphia, Pennsylvania, are of great value to the
Company; and
WHEREAS, pursuant to the terms of the Purchase Agreement the Company has
purchased from the Seller, and the Seller has sold to the Company, all or
substantially all of the Assets of the Seller, which required the approval of at
least a majority of the shareholders of the Seller; and
WHEREAS, part of the consideration given to the Seller and the Employee under
the Purchase Agreement included an agreement by the Company to enter into this
Agreement; and
WHEREAS, the Parties would not have entered into the Purchase Agreement
without the execution of this Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants, promises and
undertakings herein contained and other consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Parties hereby undertake and
agree as follows:
1. Employment Term. The Employer hereby employs the Employee commencing on
the Effective Date for a term of three (3) years (the "Employment Term"), unless
sooner terminated as hereinafter provided. The term of this Agreement may be
renewed or extended
-1-
for one or more successive additional one (1) year terms upon mutual agreement
of the Parties at least 90 days prior to the expiration of the initial term or
any such renewal term. Unless otherwise provided herein, Sections 12 - 26 of
this Agreement shall survive the expiration or termination of this Agreement,
for any reason whatsoever. The Employee accepts such employment and agrees to
perform the services specified herein, all upon the terms and conditions
hereinafter stated.
2. Duties. The Employee shall serve as the President of the RSA Division of
the Company and as Northeast Regional Vice President, and shall report to, and
be subject to the general direction and control of the Chief Executive Officer
and the Board of Directors of the Company (the "Board"). The Employee shall
perform such management and administrative duties, consistent with the
Employee's position, as are from time to time reasonably assigned to the
Employee by the Chief Executive Officer and the Board including developing
local, regional, and national customers for the Company and its Affiliates
(defined below). The Employee also agrees to perform, without additional
compensation, such other services for the Company, and for any parent,
subsidiary or affiliate corporations of the Company and any partnerships in
which the Company may from time to time have an interest (herein collectively
called "Affiliates"), as the Chief Executive Officer or Board shall from time to
time reasonably specify, if such services are of the nature commonly associated
with the positions of Division President and of Regional Vice President of a
company engaged in activities similar to the activities engaged in by the
Company and to perform such other activities as are consistent with the
Employee's past responsibilities as an employee of the Seller and the RSA
Business; provided, that Employee shall not be required to engage in any
business that is not reasonably related to the Business of the Company. For
purposes of this Agreement, the "Business of the Company" or, alternatively,
"Business" shall be defined as the current business of the Company, including,
but not limited to, the marketing and providing of court reporting and
litigation support services in the Philadelphia, Pennsylvania area. The term
"Company" as used in this Agreement shall be deemed to include and refer to all
such Affiliates.
3. Extent of Service. The Employee shall devote his full business time,
attention and energy to the business of the Employer, and shall not be engaged
in any other business activity during the term of this Agreement. The foregoing
shall not be construed as preventing the Employee from making passive
investments in other businesses or enterprises, if (i) such investments will not
require services on the part of the Employee which would in any material way
impair the performance of his duties under this Agreement, (ii) such other
businesses or enterprises are not engaged in any business competitive with the
business of the Company, and (iii) the Employee has complied with Sections 12
and 13 of this Agreement with respect to each such passive investment.
4. Compensation. As payment for the services to be rendered by the
Employee hereunder during the initial term, the Employee shall be entitled to
receive:
(a) a salary in the amount of One Hundred Seventy-Five Thousand and
No/100 Dollars ($175,000.00)(representing One Hundred Thousand and No/100
Dollars ($100,000.00) for services rendered as a Division President and
Seventy-Five Thousand and No/100 Dollars ($75,000.00) for services rendered as
a Regional Vice
-2-
President) per year effective as of the date hereof, which shall be payable
monthly or in accordance with the payroll policies of the Company in effect
from time to time if such policies provide for payment of salary more
frequently than monthly, until the termination of this Agreement;
(b) a monthly car allowance in the amount of Six Hundred and No/100
Dollars ($600.00), which shall be payable in accordance with the payroll
policies of the Company;
(c) a bonus consisting of two components to be calculated in
accordance with Schedule A attached hereto, payable within ninety (90) days
after the end of each fiscal year of the Company (the "Annual Bonus")
including, without limitation, the first fiscal year of the Company; provided
however, that any Annual Bonus calculated with respect to a fiscal year during
which the Employee was employed for only a part of such year shall be prorated
to account for the number of days during such year in which Employee was
employed by the Company; and
(d) a commission payment to be calculated in accordance with Schedule
B attached hereto, based upon the revenues generated from National Account (as
herein defined) sales originated by the Employee. The amount of commissions
payable will be based upon a formula ("Formula") as it exists on the date of
the origination of the National Account. A "National Account" is any account
established with an insurance or "Fortune 500" company pursuant to which two
or more of the Company's offices render services. Until notice of a change in
the Formula applicable to the Employee is given to the Employee by the
Company, the Formula applicable to the Employee shall be as set forth on
Schedule B; and
(e) In the event that the Employee identifies a business as an
acquisition candidate for the Company or any of its subsidiaries, and such
acquisition candidate has not been previously brought to the attention of the
Company, and the Company or any of its subsidiaries ultimately acquires such
business, the Employee shall be entitled to receive, at the closing of such
acquisition, a cash payment equal to 10% of the investment banking fee paid to
The Gulfstar Group, Inc. or such other investment banking firm by the Company
or its subsidiary in connection with such acquisition. In no event shall the
Company or any subsidiary be obligated to close any acquisition with regard to
any business identified by the Employee as an acquisition candidate, and no
fee shall be payable hereunder unless and until such acquisition is completed.
5. Expenses. During the term of this Agreement, the Employer shall
promptly pay or reimburse the Employee for all reasonable out-of-pocket expenses
for travel, meals, hotel accommodations and similar items incurred by him in
connection with the Business of the Company and approved by the Board or
incurred in accordance with the travel and reimbursement policies of
-3-
the Company as the same shall be in effect from time to time, upon submission by
him of an appropriate statement documenting such expenses.
6. Employee Benefits. During the term of this Agreement, the
Employee shall be entitled to participate in all employee benefit plans from
time to time made generally available to the executive employees of the Company,
including any stock option plan, retirement plan, profit-sharing plan, group
life plan, health or accident insurance or other employee benefit plans as the
same shall be maintained in effect, as determined by the Board. Until the
Company is able to procure its own insurance coverage, the Company agrees to
continue the prior insurance previously provided to the Employee by Seller. The
Employer will use commercially reasonably efforts to assist Employee in
procuring insurance coverage for any preexisting conditions.
7. Vacation. During the term of this Agreement, the Employee shall
be entitled to annual vacation time determined in accordance with the vacation
policies of the Company in effect from time to time but not less than four (4)
weeks per year, during which time his compensation shall be paid in full.
Unused vacation time shall not accrue from year to year, unless otherwise
required by law.
8. Covenants of Employee. For and in consideration of the
employment herein contemplated and the consideration paid or promised to be paid
by the Company, the Employee does hereby covenant, agree and promise that during
the term hereof and thereafter to the extent specifically provided in this
Agreement:
(a) Except as otherwise specifically permitted by this Agreement,
during the term of this Agreement, Employee will not actively engage, directly
or indirectly, in any other business other than that of Company, except at the
direction or approval of the Company.
(b) The Employee will use his best reasonable efforts to truthfully
and accurately make, maintain and preserve all records and reports that the
Company may from time to time request or require.
(c) The Employee will fully account for all money, records, goods,
wares and merchandise or other property belonging to the Company of which the
Employee has custody, and will pay over and deliver same promptly whenever and
however he may be reasonably directed to do so by the Company.
(d) The Employee will obey all rules, regulations and special
instructions of the Company applicable to him, and will be loyal and faithful
to the Company at all times.
(e) The Employee will make available to the Company any and all of the
information of which he has knowledge relating to the business of the Company,
and
-4-
will make all suggestions and recommendations which he feels will be of mutual
benefit to the Parties.
(f) The Employee agrees that upon termination of his employment
hereunder he will immediately surrender and turn over to the Company all
books, records, forms, specifications, formulae, data, processes, papers and
writings related to the Business of the Company and all other property
belonging to the Company, together with all copies of the foregoing, it being
understood and agreed that the same are the sole property of the Company.
(g) The Employee agrees that all ideas, concepts, processes,
discoveries, devices, machines, tools, materials, designs, improvements,
inventions and other things of value relating to the Business of the Company
(hereinafter collectively referred to as "intangible rights"), whether
patentable or not, which are conceived, made, invented or suggested by him
alone or in collaboration with others during the term of his employment, and
whether or not during regular working hours, shall be promptly disclosed in
writing to the Company and shall be the sole and exclusive property of the
Company. The Employee hereby assigns all of his right, title and interest in
and to all such intangible rights to the Company, and its successors or
assigns. In the event that any of such intangible rights shall be deemed by
the Company to be patentable or otherwise registerable under any federal,
state or foreign law, the Employee further agrees that, at the expense of the
Company, he will execute all documents and do all things reasonably necessary,
advisable or proper to obtain patents therefor or registration thereof, and to
vest in the Company full title thereto.
9. Mutual Covenants of the Company and the Employee. For and in
consideration of the employment herein contemplated and the compensation,
covenants, conditions and promises herein recited, the Company and the Employee
do hereby mutually agree that during the term hereof:
(a) The Employee shall not, by reason of this Agreement, have any
vested interest in, or right, title or claim to, any land, buildings,
equipment, machinery, processes, systems, products, contracts, goods, wares,
merchandise, business assets or other things of value belonging to or which
may hereafter be acquired or owned by the Company.
(b) In carrying out his duties as President of the RSA Division and
Northeast Regional Vice President of the Company, the Employee shall primarily
be responsible for making day-to-day decisions in the ordinary course of
business of the Company, subject to possible review by the Chief Executive
Officer and/or the Board. The responsibility for the Company's plans,
properties, contracts, methods, and policies shall be vested in the Board and
the Company may, in its sole and
-5-
absolute discretion, give, sell, assign, transfer or otherwise dispose of any
or all of its assets or businesses in whole or in part, to any person, firm or
corporation, whether or not such person, firm or corporation is in any manner
owned by or associated with or affiliated with the Company.
(c) The Employee acknowledges that because of the nature of the
position for which he has been employed, the Employee may be called upon to
perform such duties and render such services as are required of him hereunder
irregularly, and agrees to perform to the best of his abilities such duties as
the business may reasonably demand, and acknowledges that the number of hours
per day or per week may vary. Notwithstanding the foregoing, the Employee
shall work in a manner that is consistent with his prior customary practice on
behalf of the Seller and the RSA Business.
(d) The Company agrees that it will not terminate any employee of the
Company without giving prior notification of such termination to the Employee.
10. Termination of Employment for Cause. The Employer may terminate
the employment of the Employee if the Employer suffers or may reasonably be
expected to suffer any material adverse effect as a result of the Employee (any
such termination being a termination for "Cause"):
(a) Breaching any material provision of this Agreement and failing to
cure such breach within ten (10) days after receipt of written notice thereof;
(b) Misappropriating funds or property of the Company;
(c) Securing any personal profit not thoroughly disclosed to and
approved by the Company in connection with any transaction entered into on
behalf of the Company;
(d) Engaging in conduct, even if not in connection with the
performance of his duties hereunder, which would reasonably be expected to
result in a material adverse effect to the interest of the Company if he was
retained as an employee, such as his commission of a felony or a crime of
moral turpitude;
(e) Becoming and remaining "Disabled," as hereinafter defined (either
physically, mentally or otherwise) for a period of one hundred thirty-five
(135) days during any consecutive twelve-month time period;
(f) Failing to carry out and perform the duties assigned to the
Employee in accordance with the terms hereof and failing to cure such breach
within ten (10) days after written notice thereof; or
-6-
(g) Failing to comply with corporate policies of the Company that
are promulgated from time to time and made known to Employee and failing to
cure such breach within ten (10) days after written notice thereof.
In the event of the death of the Employee, such occurrence shall
immediately constitute a termination for Cause. Except as provided in item (e)
above, no termination for Cause shall be effective if the Employee is Disabled.
In the event the Employee is terminated for Cause because he is
Disabled, the Employee may be permitted to participate in any disability
insurance policy the Company then has in effect.
In the event of termination of his employment for Cause, the Employee
shall be entitled to receive his compensation, as determined in Section 4 of
this Agreement, due or accrued on a pro rata basis to the date of termination.
Any salary or remuneration owed as of the date of termination shall be paid less
the amount of damages, if any, caused to the Company by such breach, but no such
damages offset shall extend beyond any compensation due and owing under this
Agreement.
Notwithstanding the cure provisions provided in Sections 10(a), 10 (f)
and 10(g), the Employee shall not have the opportunity to cure any violation of
these subsections if such violation cannot reasonably be expected to be cured.
In such event, the Company shall be required to furnish the Employee notice of
the violation, but the Employee shall not be furnished an opportunity to cure.
"Disabled" shall mean the continuous inability, whether mental or
physical, of Employee to perform his normal job functions as determined by at
least two of three medical physicians selected as follows: the Employee or his
legal designee shall be entitled to appoint one physician, the Company shall be
entitled to appoint one physician, and such two appointed physicians shall
mutually appoint a third physician. Notwithstanding the foregoing, the
Employee, or his designee, and the Company may mutually agree that he is
"Disabled" within the meaning of this Agreement.
11. Termination By the Company Without Cause or By the Employee With
Good Reason. The Company may terminate the employment of Employee for any
reason other than those for Cause, in which event such termination shall be
deemed a "Termination Without Cause." In addition, the Employee shall have the
right to terminate this Agreement for any material breach of this Agreement by
the Company, which shall include but not be limited to materially changing the
duties assigned to Employee beyond those contemplated in Section 2 of this
Agreement or causing Employee to relocate his primary residence in violation of
Section 2 of this Agreement; provided that the Company shall be furnished ten
(10) days notice of such breach and an opportunity to cure (any such termination
constituting a "Termination By Employee With Good Reason"). Notwithstanding the
cure provisions provided in the preceding sentence, the Employer shall not have
the opportunity to cure any violation of this Agreement if such violation cannot
reasonably be expected to be cured
-7-
but the Employee shall still furnish notice to the Company. In the event of a
Termination Without Cause or a Termination with Good Reason by the Employee, the
Company shall continue making payments to Employee, but at a salary level equal
to the Division President portion of Employee's compensation only, as set forth
in Section 4 of this Agreement, for a period equal to the lesser of (i) one (1)
year, or (ii) the remaining term of this Agreement, which amount, in the event
of a Termination Without Cause or a Termination By Employee With Good Reason,
shall constitute the full and total amount of liquidated damages that the
Employee shall be entitled to receive from the Company and its Affiliates for
any contractual or tort claims arising out of his employment relationship with
the Company.
12. Covenant Not to Compete. The Employee recognizes that the
Company has business goodwill and other legitimate business interests which must
be protected in connection with and in addition to the Information (as defined
hereinafter), and therefore, in exchange for access to the Information, the
specialized training and instruction which the Company will provide, the
Company's agreement to employ the Employee on the terms and conditions set forth
herein, the Company's agreement to execute and consummate the Purchase
Agreement, and the promotion and advertisement by the Company of Employee's
skill, ability and value in the Company's business, subject to the provisions of
the next full paragraph of this Section 12, the Employee agrees that in the
event (i) Employee is terminated for Cause, or (ii) Employee leaves the employ
of the Company other than a Termination By Employee With Good Reason prior to
expiration of the term of the Agreement, or (iii) upon the expiration of the
term of this Agreement, then for a period of the latest date of (i) five (5)
years after the date of this Agreement, or (ii) three (3) years after the date
employment is so terminated, except in the event of Termination Without Cause or
in the event of Termination By Employee With Good Reason By Employee:
(a) Employee will not in any capacity or relationship enter into,
engage in, or be connected with any business or business operation or activity
within a fifty (50) mile radius of any office location then operated by the
Employer at the time of such termination, which consists in whole or in part
of the Business of the Company; and
(b) Employee will not call upon any customer whose account is
serviced in whole or in part by the Employer or its Affiliates at the time of
the termination of Employee's employment, with the purpose of selling or
attempting to sell to any such customer any services included within that
offered by the Employer or its Affiliates; and
(c) Employee will not intentionally divert, solicit or take away any
customer, supplier or employee of the Employer or its Affiliates, or the
patronage of any customer or supplier of the Employer or its Affiliates, or
otherwise interfere with or disturb the relationship existing between the
Employer or its Affiliates and any of their respective customers, suppliers or
employees, directly or indirectly.
-8-
The foregoing restrictive covenants shall apply to the Employee in the
event of his Termination Without Cause or in the event of Termination By
Employee With Good Reason by the Employee, but only for a period of one (1)
year.
In the event the Company ceases operation of the Business of the
Company other than in a merger, consolidation, or similar transaction, or upon
the filing of a bankruptcy or receivership proceeding against the Employer, or
upon the appointment of a liquidator for the Company, the provisions of this
Section 12 shall not be applicable to the conduct of Employee subsequent
thereto.
It is mutually understood and agreed that if any of the provisions
relating to the scope, time or territory in this Section 12 are more extensive
than is enforceable under applicable laws or are broader than necessary to
protect the good will and legitimate business interests of the Company, then the
Parties agree that they will reduce the degree and extent of such provisions by
whatever minimal amount is necessary to bring such provisions within the ambit
of enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of
Employee's covenants contained in this Section 12 are inadequate, and they agree
that the Company shall be entitled, at its election, to injunctive relief
(without the necessity of posting bond against such breach or attempted breach),
and to specific performance of such covenants in addition to any other remedies
at law or equity that may be available to the Company.
13. Business Opportunities. Except for passive investments by the
Employee in publicly traded entities, or investments in private ventures which
do not compete with, or are not in the same business as, the Company and which
come to the attention of the Employee outside of the scope of his employment,
for as long as the Employee shall be employed by the Company and thereafter with
respect to any business opportunities learned about during the time of
Employee's employment by the Company, the Employee agrees that with respect to
any future business opportunity or other new and future business proposal which
is offered to, or comes to the attention of, the Employee and which is in any
way related to, or connected with, the Business of the Company, the Company
shall have the right to take advantage of such business opportunity or other
business proposal for its own benefit. The Employee agrees to promptly deliver
notice to the Board in writing of the existence of such opportunity or proposal
and the Employee may take advantage of such opportunity only if the Employer
does not elect to exercise its right to take advantage of such opportunity.
14. Confidential Information. The Employee acknowledges that in the
course of his employment with the Company, he will receive certain trade
secrets, know-how, lists of customers, employee records and other confidential
information and knowledge concerning the Business of the Company (hereinafter
collectively referred to as "Information") which the Company desires to protect.
The Employee understands that such Information is confidential and he agrees
that he will not reveal such Information to anyone outside the Company except
(i) for information already known to the public, now or in the future, or (ii)
in connection with any legal proceeding
-9-
regarding this Agreement, the Purchase Agreement or the transactions
contemplated thereby or as otherwise required by law or judicial order. The
Employee further agrees that during the term of this Agreement and thereafter he
will not use such Information in competing with the Company. Upon termination of
his employment hereunder, the Employee shall surrender to the Company all
papers, documents, writings and other property produced by him or coming into
his possession by or through his employment hereunder and relating to the
information referred to in this Section 14, which are not general knowledge in
the industry, and the Employee agrees that all such materials will at all times
remain the property of the Company.
15. Notices. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally with a written receipt
acknowledging delivery or telefaxed with receipt confirmed, or three (3)
business days after the posting thereof by United States first class, registered
or certified mail, return receipt requested, with postage fee prepaid and
addressed as follows:
If to the Company: Litigation Resources of America-
Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telefax:(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Employee: Xxx Xxxxxxxxx
Reporting Services Associates
000 Xxxxx 00/xx/ Xxxxxx, 00/xx/ Xxxxx
Xxxxxxxxxxxx, XX 00000
Any Party may change its address for notice hereunder by providing written
notice of such change to the other Party hereto.
16. Specific Performance. The Employee acknowledges that a remedy at
law for any breach or attempted breach of Sections 12, 13 or 14 of this
Agreement will be inadequate, the Employee agrees that the Company shall be
entitled to specific performance and injunctive and other equitable relief in
case of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief.
17. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such provision or invalidity only, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
-10-
18. Assignment. This Agreement may not be assigned by the Employee.
Neither the Employee, his spouse nor their estates shall have any right to
encumber or dispose of any right to receive payments hereunder, it being
understood that such payments and the right thereto are nonassignable and
nontransferable.
19. Binding Effect. Subject to the provisions of Section 18 of this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the Employee's heirs and personal representatives, and the
successors and assigns of the Company.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas.
21. Prior Employment Agreements. Employee represents and warrants to
the Company that he has fulfilled all of the terms and conditions of all prior
employment agreements to which he may be or have been a party, and at the time
of execution of this Agreement is not a party to any other employment agreement.
22. Parol Evidence. This Agreement constitutes the sole and complete
agreement between the Parties hereto with respect to the subject matter hereof,
and no verbal or other statements, inducements or representations have been made
to or relied upon by either Party, and no modification hereof shall be effective
unless in writing signed and executed in the same manner as this Agreement,
provided, however, the amount of compensation to be paid Employee for services
to be performed for Company may be changed from time to time by the Parties
hereto by written agreement without in any other way modifying, changing or
affecting this Agreement and the performance by the Employee of any of the
duties of his employment with the Company. Written notification of any
modification of compensation paid or payable to the Employee for his services
shall be conclusively deemed to be a ratification and confirmation of this
Agreement amended by such change in compensation unless the Employee shall
object in writing with ten (10) days after such written notification from the
Company.
23. Waiver. Any waiver to be enforceable must be in writing and
executed by the Party against whom the waiver is sought to be enforced.
24. Arbitration. Any controversy, dispute or claim arising out of,
in connection with, or in relation to, the interpretation, performance or breach
of this Agreement, including, without limitation, the validity, scope and
enforceability of this Section which cannot first be settled through ordinary
negotiation between the Parties shall be submitted in good faith to mediation by
and in accordance with the Commercial Mediation Rules of the American
Arbitration Association or any successor organization. In the event that
mediation of such controversy, dispute or claim cannot be settled through the
mediation proceeding, the Parties agree that the controversy, dispute or claim
shall be submitted to binding and final arbitration conducted in Houston, Xxxxxx
County, Texas by and in accordance with the then existing Rules for Commercial
Arbitration of the American Arbitration Association or an successor
organization. Any such arbitration shall be to a three
-11-
member panel selected through the rules governing selection and appointment of
such panels of the American Arbitration Association or any successor
organization. The award rendered by the arbitrators may be confirmed, entered
and enforced as a judgment in any court of competent jurisdiction; however, the
Parties otherwise waive any rights to appeal the award except with regard to
fraud by the panel. Any such action must be brought within two years of the date
the cause of action accrues. The arbitrators shall award the Party which
substantially prevails in any arbitration proceeding recovery of that Party's
attorneys fees, the arbitrators' fees and all costs in connection with the
arbitration from the Party who does not substantially prevail. The Parties'
remedies are limited solely to the specific remedies provided in this agreement.
The Parties waive any entitlement to punitive damages, consequential damages and
lost profits and will limit any damage claim to actual economic damages
incurred. Nothing in this Section 24 shall restrict the Company's ability to
seek injunctive or other equitable relief in any court of competent jurisdiction
prior to initiating mediation or arbitration for any violation by the Employee
of Sections 12, 13, 14 or 16 of this Agreement. In the event that such
injunctive or equitable relief is sought by the Company, the Company is
specifically entitled to enforce the provisions of these Sections in obtaining
such relief in any court of competent jurisdiction and, thereafter, submit the
remaining controversy, dispute or claim to arbitration in accordance with this
Section 24.
25. Drafting. All Parties hereto acknowledge that each was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.
26. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
-12-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date and year first above written.
THE COMPANY:
LITIGATION RESOURCES OF AMERICA-
NORTHEAST, INC., a New York corporation
By: _________________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
THE EMPLOYEE:
_______________________________________
Xxx Xxxxxxxxx
Schedule A--Calculation of Annual Bonus
Schedule B--Calculation of Commissions
-13-
SCHEDULE A
----------
CALCULATION OF ANNUAL BONUS
Each year the accountants regularly employed by the Company shall
determine the amount of EBIT Profit, if any, of (i) the RSA Division and (ii)
the Northeast Region of the Company (being that region of the Company which Xxx
Xxxxxxxxx, as RVP, is responsible for managing) during each consecutive twelve
(12) month time period ending on the last day of the fiscal year of the Company
("respectively the "Annual RSA EBIT Profits" and the "Annual Northeast Region
EBIT Profits"), commencing with the first fiscal year of the Company and
continuing each year during the term of this Agreement. Beginning with the
first fiscal year of the Company, (x) to the extent that the Annual RSA EBIT
Profits for the current year exceed the Annual RSA EBIT Profits for the prior
year, the Employee shall be paid an annual bonus equal to ten percent (10%) of
the amount of such excess, if any ("Bonus Component 1"), and (y) to the extent
that the Annual Northeast Region EBIT Profits for the current year exceed the
Annual EBIT Profits for the prior year, the Employee shall be paid an annual
bonus equal to ten percent (10%) of the amount of such excess, if any ("Bonus
Component 2"); provided that for the first fiscal year of the Company (A)(i) the
Bonus Components 1 and 2, respectively shall be calculated for each full month
of operations and added together, (ii) the Bonus Components 1 and 2 respectively
for any partial month of operations shall be divided by the number of actual
days in such month and multiplied by 30 to create a full month and (iii) the sum
of (A)(i) and (A)(ii) shall be added together, that result divided by the number
of full and partial months of operations and the quotient multiplied by 12 to
create the number representing Bonus Components 1 and 2 for the first fiscal
year and (B) the Annual Northeast Region EBIT Profits for the prior year shall
be deemed to be $_________ [NET WORTH ON __________ BALANCE SHEET] and the
Annual RSA EBIT Profits for the prior year shall be deemed to be $____________.
For purposes of this calculation, EBIT Profits for each of the RSA Divisions in
the Northeast Region shall mean their gross earnings before income taxes,
interest, depreciation and amortization, but excluding the effects of any
acquisitions and after deductions for all annual bonuses to be paid to the
managers in the Northeast Region.
-14-
SCHEDULE B
----------
Commission Price Structure of
Percentage of Gross Sales National Account
3.00% Market price
2.50% Discount of 5% to 10% from market price
rate
2.00% Discount of 10% to 15% from market price
rate
1.50% Discount of 15% to 20% from market price
rate
1.00% Discount of 20% to 25% from market price
rate
0.50% Discount of 25% or more from market price
rate
In certain circumstances, more than one individual may be entitled to
receive commissions based upon sales from a National Account. In such
circumstances, the commissions described above would be shares by the Employee
and the other individuals on such a basis as is determined to be fair by the
Company's Board of Directors. All commissions payable hereunder will be paid in
cash within 45 days of the end of the fiscal year of the Company in which they
are earned.
-15-
EXHIBIT C DRAFT OF SEPTEMBER 22, 1997
XXXX OF SALE,
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this Xxxx of Sale")
is entered into effective as of September___, 1997, among REPORTING SERVICES
ASSOCIATES, INC., a Pennsylvania corporation ("Seller"), and LITIGATION
RESOURCES OF AMERICA-NORTHEAST, INC., a New York corporation ("Purchaser").
Purchaser and Seller may be hereinafter sometimes referred to collectively as
the "Parties" or individually as a "Party." All defined terms not otherwise
defined herein shall have the meanings ascribed to them in that certain
Agreement of Purchase and Sale of Assets of even date herewith (the
"Agreement"), executed among Seller, Purchaser and Litigation Resources of
America, Inc., a Texas corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser has agreed to purchase from Seller, and Seller has
agreed to grant, bargain, sell, convey, transfer, assign and deliver to
Purchaser, the Assets (but not the Excluded Assets); and
WHEREAS, as partial consideration for the sale and assignment of the
Assets, Purchaser has agreed to assume the Assumed Liabilities, on and subject
to the terms and conditions set forth in the Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the delivery to Seller of the Purchase Price,
the receipt and sufficiency of which are hereby acknowledged, Purchaser and
Seller hereby agree as follows:
1. SALE AND ASSIGNMENT. Seller has granted, bargained, sold, conveyed,
transferred, assigned and delivered, and by these presents does grant, bargain,
sell, convey, transfer, assign and deliver unto Purchaser, its successors and
assigns, the Assets. Seller warrants that Seller is the lawful owner in every
respect of all of the Assets and that the Assets are free and clear of any and
all liens, security agreements, encumbrances, claims, demands, and charges of
every kind and character whatsoever other than as previously disclosed in
writing to Purchaser. Seller hereby binds Seller and Seller's successors and
assigns to warrant and defend the title to all of the Assets unto Purchaser and
Purchaser's successors and assigns forever against every person whomsoever
lawfully claiming or to claim the Assets or any part thereof. Purchaser hereby
accepts the conveyance, transfer, assignment and delivery of the Assets.
2. ASSUMPTION. Subject to the exceptions and exclusions of Section 2.6 of
the Agreement, and otherwise on and subject to the terms and conditions of the
Agreement, Purchaser hereby assumes and agrees to pay and perform the Assumed
Liabilities.
3. FURTHER ACTIONS. Seller hereby consents and agrees to any lawful
action taken by Purchaser in connection with the enforcement of, or the legal
protection of, the Assets, and confers upon Purchaser full right of substitution
in any and all such actions. Seller further covenants and agrees to execute
such further documents and take such additional actions as may reasonably be
requested by Purchaser to vest in Purchaser any and all of the Assets and
otherwise to effectuate the intent of this Xxxx of Sale. Each of the Parties
shall perform such actions and deliver or cause to be delivered any and all such
documents, instruments and agreements as the other Party may reasonably request
for the purpose of fully and effectively carrying out this Agreement and the
transactions contemplated hereby.
4. GOVERNING LAW; JURISDICTION; VENUE; SERVICE. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas, without regard to conflicts of law principles, and the laws of the
United States applicable in Texas. Venue for any litigation between the Parties
hereto with respect to the subject matter of this Agreement shall be Xxxxxx
County, Texas. Each Party hereby irrevocably submits to personal jurisdiction
in Texas. Each Party hereby waives all objections to personal jurisdiction in
Texas and venue in Xxxxxx County for purposes of such litigation. Each Party
waives summons or citation and agrees that delivery of a duly filed complaint or
petition as provided in the notice section of this Agreement will suffice as
substitute service of summons or citation.
5. MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only by written instrument signed by all of the Parties.
6. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, and the documents,
instruments and agreements executed in connection herewith, set forth the entire
agreement and understanding between the Parties with respect to the subject
matter hereof and thereof. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns.
7. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall have the force and effect of an original, and all of which
together shall constitute one and the same agreement.
EXECUTED AND DELIVERED EFFECTIVE as of the date first written above.
2
PURCHASER:
----------
LITIGATION RESOURCES OF AMERICA-NORTHEAST, INC., a New
York corporation
By:___________________________________________________
Xxxxxxx X. Xxxxxx, President
SELLER:
-------
REPORTING SERVICES ASSOCIATES:
By:___________________________________________________
Xxx Xxxxxxxxx, President
A:\XXXX OF SALE1.WPD
3
EXHIBIT D DRAFT OF SEPTEMBER 22, 1997
---------------------------
[FORM OF SELLER'S INVESTOR REPRESENTATION LETTER]
_________ ___, 1997
Litigation Resources of America, Inc.
Litigation Resources of America -- Northeast, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx, President
Re: Investor Representations
Gentlemen:
The purpose of this letter is to evidence certain representations and
warranties to be made with respect to certain matters relating to the
acquisition by Reporting Services Associates, Inc., a Pennsylvania corporation
and/or its sole shareholder, Xxx Xxxxxxxxx, an individual rediding in the State
of Florida (the "Seller") of shares of Common Stock issued by Litigation
Resources of America, Inc., a Texas corporation (the "Company"), having a par
value of one-cent ($0.01) per share (the "Common Stock"), for and in partial
consideration of the sale of certain of the assets of the Seller to Litigation
Resources of America -- Northeast, Inc., a New York corporation ("Buyer"), upon
the terms and conditions set forth herein and in that certain Agreement of
Purchase and Sale of Assets (the "Purchase Agreement"), entered into by and
among the Seller, the sole shareholder of the Seller, the Company, and the
Buyer. The undersigned Seller or shareholder of Seller is sometimes hereinafter
referred to as the "Investor."
The Investor hereby represents and warrants to the Company, the Buyer,
and each of the Company's and the Buyer's officers, directors, shareholders,
agents, attorneys, employees and representatives as follows:
1. Investment Intent. (i) The Common Stock is being acquired solely
for the account of the Seller, for investment and not with a view to or for the
resale, distribution, subdivision or fractionalization thereof, (ii) the Seller
has no contract, understanding, undertaking, agreement or arrangement with any
person to sell, transfer or pledge to any person the Common Stock or any part
thereof, (iii) the Seller has no present plans to enter into any such contract,
undertaking, agreement or arrangement, (iv) the Seller understands the legal
consequences of the foregoing representations and warranties to mean that the
Seller must bear the economic risk of the investment in the Common Stock for an
indefinite period of time, (v) the Investor has such knowledge and experience in
financial and business matters that the Investor is capable of evaluating the
merits and
Litigations Resources of America, Inc.
Litigations Resources of America -- Northeast, Inc.
__________________ ____, 1997
Page 2
risks of acquiring the Common Stock, and (vi) the Investor acknowledges that the
acquisition of the Common Stock by the Seller involves a high degree of risk
which may result in the loss of the total amount of this investment.
2. No General Solicitation. The Common Stock has been offered to
the Seller without any form of general solicitation or advertising of any type
by or on behalf of the Company or any of its officers, directors, shareholders,
employees, agents, attorneys or representatives.
3. Access to Information. The Seller, and to the extent the
Investor is not the Seller, the Investor, has (i) for a reasonable amount of
time had an opportunity to ask questions and receive answers concerning the
terms and conditions of the issuance of the Common Stock and the proposed
business and affairs of the Company, and is satisfied with the results thereof,
(ii) has been given access, if requested, to all other documents with respect to
the Company or this transaction, as well as to such other information as the
Seller or the Investor has requested, and (iii) has relied solely on
investigations conducted by the Investor in making the decision to acquire the
Common Stock or approve the transactions set forth in the Purchase Agreement.
4. Exemption Status. The Investor understands that the Common Stock
to be sold hereunder are being issued in reliance upon the exemptions from
registration under the Securities Act of 1933, as amended. The Investor
understands that the undersigned, the Company, the Company's officers,
directors, shareholders, employees, agents, attorneys and representatives are
relying on, among other things, the representations and warranties of the
Investor set forth herein in issuing the Common Stock to the Seller.
5. Securities Compliance. The Investor understands and agrees that
(i) no sale, distribution, transfer or other disposition of the Common Stock, or
any portion thereof, can be made by the Seller unless the Common Stock has been
registered under the Securities Act of 1933, as amended, and applicable
securities laws of any other relevant jurisdiction, or exemptions from such
registration are available, as evidenced by an opinion of counsel, satisfactory
to the Company, with respect to the proposed sale, distribution, transfer or
other disposition, and (ii) an appropriate legend will be endorsed on the Common
Stock evidencing such restrictions.
6. Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act.
7. Representations of Natural Persons. If the Investor is a natural
person, the Investor has reached the age of majority in the state in which the
Investor resides, has adequate
Litigations Resources of America, Inc.
Litigations Resources of America -- Northeast, Inc.
__________________ ____, 1997
Page 3
means of providing for the Investor's current financial needs and contingencies,
is able to bear the substantial economic risks of an investment in the Common
Stock, has no need for liquidity in such investment, and is able to withstand a
complete loss of such investment.
8. Representations of Entities. If Investor is a corporation,
partnership, trust or other entity, (i) it is authorized and qualified to
purchase and hold the Common Stock, (ii) it has not been formed for the purpose
of acquiring the Common Stock, (iii) the person executing this Agreement for and
on behalf of such entity has been duly authorized by such entity to do so, (iv)
it is willing and able to bear the substantial economic risk of an investment in
the Common Stock and has no need for liquidity with respect thereto, and (v) it
is able to withstand a complete loss of its investment.
9. No Governmental Review. The Investor
acknowledges and understands that no federal or state agency has passed on the
fairness of the investment in the Common Stock, nor made any recommendation or
endorsement of the Common Stock, and that there is a significant risk of loss of
all or a portion of the Seller's investment in the Common Stock.
10. State of Residence and Domicile. The Investor
is either (i) a permanent resident of the State of Florida, or (ii) not a
resident or citizen of the United States.
The Investor acknowledges that the Company and the Company's officers,
directors, agents, attorneys and other representatives are relying on the
representations and warranties set forth herein, and would not deliver the
Common Stock to the Seller but for the execution and delivery of this letter by
the Investor.
Very truly yours,
EXHIBIT E DRAFT AS OF NOVEMBER 6, 1997
----------------------------
STOCK PLEDGE AGREEMENT
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THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is made
effective as of the ___ day of _____________, 1997, by REPORTING SERVICES
ASSOCIATES, a Pennsylvania corporation ("Pledgor"), and LITIGATION RESOURCES OF
AMERICA -- NORTHEAST, INC., a New York corporation ("Secured Party"). All
capitalized terms contained herein without definition shall have the respective
meanings given to them in that certain Agreement of Purchase and Sale of Assets
dated of even date herewith (the "Purchase Agreement") by and among the Pledgor,
Secured Party, Litigation Resources of America, Inc., a Texas corporation and
the parent company of the Secured Party (the "Parent"), and the stockholder of
the Pledgor.
W I T N E S S E T H:
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WHEREAS, Pledgor has agreed to sell substantially all of its assets to
Secured Party upon the terms and conditions contained in the Purchase Agreement;
and
WHEREAS, Pledgor has certain obligations under the Purchase Agreement,
including, but not limited to, the obligation of Pledgor to indemnify Secured
Party for any breaches of representations and warranties of Pledgor contained in
the Purchase Agreement; and
WHEREAS, pursuant to the terms of the Purchase Agreement and as partial
consideration for the purchase of the stock of the Company by the Secured Party,
the Pledgor has been issued an aggregate of ________ shares of common stock,
$.01 par value per share (the "Stock"), of Parent; and
WHEREAS, the terms of the Purchase Agreement provide for the Pledgor to
pledge the Stock, whether now owned or hereinafter acquired, to the Secured
Party to partially secure the obligations of Pledgor under the Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Pledge of Stock. Pledgor hereby pledges and grants to Secured Party a
security interest in the Stock, which shall attach immediately upon each
issuance of Stock to all shares of Stock issued to Pledgor in accordance with
the terms of the Purchase Agreement. Immediately upon receipt of any shares of
Stock, Pledgor shall be required to deliver to Secured Party the certificate or
certificates representing the Stock in order that Secured Party might perfect
its security interest therein. The Pledgor and the Secured Party hereby
acknowledge and agree that the value of the Stock ("Agreed Value") shall be
deemed to be (i) the IPO Price if shares are being surrendered hereunder in
order to effect an adjustment in the Purchase Price and (ii) if shares are being
surrendered hereunder for any other reason, the average public trading price of
each share of Stock
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over the five (5) most recent business days falling prior to the date of
delivery by the Secured Party to the Pledgor of the notice of an event requiring
an Offset, as such term is defined in the Purchase Agreement. Pledgor shall
possess all voting rights pertaining to the Stock, so long as an Event of
Offset, as hereinafter defined, has not occurred, or if an Event of Offset has
allegedly occurred but is being disputed by the parties hereto prior to
submission to arbitration in accordance with Section 10.14 of the Purchase
Agreement, and Secured Party shall have no voting rights that may be presently
or hereafter attributable to the Stock. In addition, so long as an Event of
Offset has not occurred, or if an Event of Offset has allegedly occurred but is
being disputed by the parties hereto prior to submission to arbitration in
accordance with Section 10.14 of the Purchase Agreement, then Pledgor shall have
the right to receive all dividends, if any, on the Stock, and Pledgor shall be
entitled to receive all proceeds upon liquidation of the Stock, if any, as well
as all other rights with respect to the Stock except for the right to transfer
title thereto. Notwithstanding the foregoing, if an Event of Offset has occurred
and (i) has been resolved, either by failure to timely dispute it as required by
Section 10.14 of the Purchase Agreement, by agreement or by arbitration decided
in favor of Secured Party (a "Resolved Event of Offset") or (ii) has been
submitted to arbitration in accordance with Section 10.14 of the Purchase
Agreement which arbitration is still pending or in process (a "Continuing Event
of Offset"), then Secured Party shall have the right to designate a
representative or trustee to vote those shares of Stock covered by or subject to
the Resolved Event of Offset or Continuing Event of Offset (the "Offset
Shares"), to receive all dividends and liquidation proceeds with respect to the
Offset Shares, and to receive all other rights with respect to the Offset
Shares.
2. Representations and Warranties. Pledgor hereby represents, warrants
and covenants to and with Secured Party that:
(a) Pledgor will not, without the written consent of Secured Party,
sell, contract to sell, encumber, or dispose of the Stock or any interest
therein until this Pledge Agreement and all obligations under the Purchase
Agreement have been fully satisfied.
(b) No consent of any party is necessary for the Pledgor to perform
its obligations hereunder, or if any such consent is required, such consent
has been received prior to the execution of this Pledge Agreement.
3. Event of Offset. Each delivery by Secured Party to the Pledgor of a
notice of a claim of offset shall constitute an Event of Offset ("Event of
Offset") under this Pledge Agreement.
4. Remedies.
(a) Upon the occurrence of a Resolved Event of Offset, Secured Party
may, at its option, exercise with reference to the Stock any and all of the
rights and remedies of a secured party under the Uniform Commercial Code as
adopted in the State of Texas and as otherwise granted therein or under any
other applicable law or under any other agreement executed by Pledgor,
including, without limitation, the right and power to sell, at public or
private sale(s), or otherwise dispose of or keep the Stock and any part or
parts thereof, or interest or interests therein owned by Pledgor, in any
manner authorized or permitted under
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this Pledge Agreement or under the Uniform Commercial Code, and to apply
the proceeds thereof toward payment of any costs and expenses and
attorneys' fees and legal expenses thereby incurred by Secured Party, and
toward payment of the obligations under the Purchase Agreement in such
order or manner as Secured Party may elect. Notwithstanding anything to the
contrary contained herein, the Secured Party shall only foreclose on that
portion of the Stock that is reasonably necessary in the reasonable good
faith judgment of the Secured Party in order to satisfy the amount of the
claim constituting the Resolved Event of Offset. For purposes hereof, the
Agreed Value of the Stock shall be deemed to be the value that the Secured
Party is receiving on the foreclosure of the Stock and Secured Party shall
not be entitled to foreclose on more Stock than is necessary to recover all
of its damages resulting from the Resolved Event of Offset.
(b) Secured Party is hereby granted the right, at its option, after a
Continuing Event of Offset, to transfer at any time to itself or its
nominee the securities or other property hereby pledged, or any part
thereof, and to thereafter exercise all voting rights with respect to such
Stock so transferred and to receive the proceeds, payments, monies, income
or benefits attributable or accruing thereto and to hold the same as
security for the obligations hereby secured, or at Secured Party's
election, to apply such amounts to the obligations, only if due, and in
such order as Secured Party may elect or Secured Party may, at its option,
without transferring such securities or property to its nominee, exercise
all voting rights with respect to the securities pledged hereunder and vote
all or any part of such securities at any regular or special meeting of
shareholders.
(c) Pledgor hereby agrees to cooperate fully with Secured Party in
order to permit Secured Party to sell, at foreclosure or other private
sale, Pledgor's interest in the Stock pledged hereunder as provided in this
Pledge Agreement. Specifically, Pledgor agrees to deliver to Secured Party
the certificate or certificates representing the Stock if Pledgor has
possession at that time, to fully comply with the securities laws of the
United States and of the State of Texas and to take such other action as
may be necessary to permit Secured Party to sell or otherwise transfer the
securities pledged hereunder in compliance with such laws.
5. Termination. This Pledge Agreement shall continue as security for the
payment or satisfaction of the obligations under the Purchase Agreement until
the earliest to occur of (i) termination of this Pledge Agreement by written
notice of the Secured Party to the Pledgor or (ii) the date upon which none of
the representations and warranties of Pledgor contained in the Purchase
Agreement survive and all covenants and obligations of Pledgor under said
Purchase Agreement have been fully and properly performed, or (iii) three (3)
years after the date hereof, provided that Secured Party has not given Pledgor
notice of an Event of Offset which has not been satisfied by Pledgor, or if
there is an Event of Offset, the pledge shall continue only to the extent of the
number of Shares based on the Agreed Value equal to the amount of damages
reasonably expected to be caused by the Event of Offset; provided however, upon
the expiration of one year and three years after the date of this Pledge
Agreement (each a Release Date), the following provisions shall apply: (x) if no
Event of Offset exists on such Release Date, the Secured Party shall release
one-half (1/2) of the number of Shares initially pledged hereunder from the
pledge established hereunder, and the remaining Shares shall remain pledged
under the terms and conditions of this Pledge Agreement;
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or (y) if an Event of Offset exists, the amount of Damages resulting from such
Event of Offset shall be determined, and on the first and second Release Date,
one-half and all of the remaining Shares, respectively, that have not been
Offset against shall be released from the pledge established hereby and
delivered to the Pledgor and the remaining Shares shall remain pledged under the
terms and conditions of this Pledge Agreement. . If such a Continuing Event of
Offset exists, the pledge shall continue only to the extent of the amount of
Stock (based on the Agreed Value) equal to the amount of Damages claimed in the
Offset Claim or the amount of damages reasonably expected to be caused by the
Event of Offset, as applicable.
6. Release from Pledge. Upon the termination of this Pledge Agreement,
Secured Party shall immediately release its security interest in the Stock. In
addition, Secured Party shall deliver the certificate or certificates
representing the Stock to Pledgor if Secured Party has possession of such
certificates at that time. Upon such occurrence, the security interest of
Secured Party shall automatically terminate and Secured Party shall thereafter
have no interest whatsoever in the Stock.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Pledgor: Reporting Services Associates, Inc.
000 Xxxxx 00/xx/ Xxxxxx
Xxxxxxxxxxxx, XX. 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Attn. Xxx Xxxxxxxxx
Copy to: Xxxxxxxx X. Xxxxxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX. 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
If to the
Secured Party: Litigation Resources of America-Northeast, Inc.
c/o Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: President
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Greenway Plaza, Suite 3100
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Houston, Texas 77046
Attn: Xxxx X. Xxxxx
8. Successors. This Pledge Agreement shall be binding upon, and inure to
the benefit of the parties hereto and their successors and assigns. Any
assignee whatsoever will be bound by the obligations of the assigning party
under this Pledge Agreement, and any assignment shall not diminish the liability
or obligation of the assignor under the terms of this Pledge Agreement unless
otherwise agreed.
9. Severability. In the event that any one or more of the provisions
contained in this Pledge Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Pledge Agreement or any such other
instrument.
10. Paragraph Headings. The paragraph headings used herein are
descriptive only and shall have no legal force or effect whatsoever.
11. Gender. Whenever the context so requires, the masculine shall include
the feminine and neuter, and the singular shall include the plural and
conversely.
12. Survival of Warranties. All representations, warranties, and
agreements made by the parties in this Pledge Agreement or in any certificates
delivered pursuant hereto will survive the execution date hereof.
13. Applicable Law. This Pledge Agreement shall be construed and
interpreted in accordance with the laws of the United States of America and the
State of Texas, and is intended to be performed in accordance with and as
permitted by such laws.
14. Definitions. All terms and definitions used herein shall have the
same meaning as in the Purchase Agreement unless otherwise indicated.
15. Drafting. The parties hereto acknowledge that each party was actively
involved in the negotiation and drafting of this Pledge Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Pledge Agreement shall be construed in favor or against either party hereto
because one is deemed to be the author thereof.
16. Attorneys' Fees. If any litigation is instituted to enforce or
interpret the provisions of this Pledge Agreement or the transactions described
herein, the prevailing party in such action shall be entitled to recover its
reasonable attorneys' fees from the other party hereto.
17. Arbitration. The arbitration provisions contained in Section 10.14 of
the Purchase Agreement shall govern this Pledge Agreement.
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18. Multiple Counterparts. This Pledge Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of which
shall constitute one instrument.
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