EXHIBIT 10.6
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
January 17, 1997 by and between Litigation Resources of America, Inc., a Texas
corporation (the "Buyer"), and Xxxxxxx Xxxxx, an individual (the "Seller");
Seller is the sole shareholder of Xxxxx, Bury and Associates, Inc., a Florida
corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will purchase
from the Seller and the Seller will sell to the Buyer all of the outstanding
capital stock of the Company in return for cash and the other consideration set
forth in (S) 2(b) below.
The transactions as contemplated by this Agreement are part of a common
plan intended to constitute a reorganization of the Company under Internal
Revenue Code Section 351 pursuant to which (1) all of the Company Shares will be
transferred to the Buyer; and (2) all of the outstanding common stock of Looney
will be transferred to Buyer; for and in consideration of the issuance of stock
of the Buyer to the Seller, Pecks, as hereinafter defined, and the owner of
Looney, as hereinafter defined.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. CERTAIN DEFINITIONS.
"Accounts Payable Report" means a report as of a given time period
containing a summary of the outstanding accounts payable of Company which report
shall reflect such accounts payable on an aged basis and shall set forth the
amounts due and owing by Company to each of its suppliers, creditors or court
reporters.
"Accounts Receivable" means all amounts due and owing to Company by each of
its customers.
"Accounts Receivable Report" means a report as of a given time period
containing a summary of the outstanding accounts receivable of Company, which
report shall reflect such accounts receivable and shall set forth the amounts
due and owing to Company by each of its customers.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Actual Knowledge" means actual knowledge after reasonable investigation.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Balance Sheet Report" means the cash basis balance sheet of the Company as
of a given date showing the assets, liabilities and equity of the Company
prepared by the Company on a consistent basis as with prior time periods.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or is reasonably likely to form the
basis for any specified consequences.
"Buyer" shall mean Litigation Resources of America, Inc., a Texas
corporation.
"Buyer's Accountants" shall mean the independent certified public
accounting firm of Xxxxxx Xxxxxxxx & Co. of Houston, Texas.
"Buyer's Disclosure Schedule" has the meaning set forth in (S) 4B below.
"Buyer Financial Statements" has the meaning set forth in (S) 4B(d) below.
"Buyer Indemnified Parties" has the meaning set forth in (S) 8(b) below.
"Buyer Note" has the meaning set forth in (S) 2(b) below.
"Buyer Shares" has the meaning set forth in (S) 2(b) below.
"Buyer Shares Value" shall mean $6.41 per Buyer Share; provided however,
that if the Buyer has successfully consummated a public offering of its shares
of common stock, then it shall mean the average public trading price of each
Buyer Share over the five (5) most recent business days.
"Cash Purchase Price" has the meaning set forth in (S) 2(b) below.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
of a corporation's employees, payroll, income or gross receipts, (ii) any of a
corporation's ownership or use of any of its assets, or (iii) any other aspect
of a corporation's business.
"Closing" has the meaning set forth in (S) 2(c) below.
"Closing Date" has the meaning set forth in (S) 2(c) below.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall mean Xxxxx, Bury & Associates, Inc., a Florida corporation.
"Company Distribution" shall mean the distribution of all amounts contained
in the Company's City National Bank account to Seller as of the Closing Date.
"Company's Accountants" shall mean the independent certified public
accounting firm of Xxxxxx/Xxxxx & Company of Miami, Florida.
"Company Share" means any share of the common stock of the Company as set
forth in Section 4A(b) of the Seller's Disclosure Schedule.
"Confidential Information" means any information concerning the businesses
and affairs of the Company and its Subsidiaries that is not (a) generally known
or available to the public; (b) after the date of this Agreement, generally
known or readily available through no violation of this Agreement; or (c) in or
does not hereafter become a part of the public domain through no violation of
this Agreement.
"Controlled Group" means the Company, its Subsidiaries, and any trade or
business (whether or not incorporated) which together with the Company or any
Subsidiary of the Company would be deemed to be a "single employer" within the
meaning of ERISA Section 4001(b)(1) or subsections (b), (c), (m) or (o) of Code
Section 414.
"Customarily Permitted Liens" shall mean:
(a) Liens for ad valorem taxes, assessments or other governmental Charges
or levies, not yet due and payable;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other like Liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such Liens) ; and
(c) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, variations and other
restrictions, Charges or encumbrances customary to the type of real property
affected and which do not impair the current use, occupancy, value or the
marketability of title of the real property subject thereto.
"Damages" has the meaning set forth in (S) 8(b) below.
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"Effective Date' shall mean 12:01 a.m. on the Closing Date.
"Effective Date Accounts Payable Report" means the Accounts Payable Report
as of the Effective Date.
"Effective Date Accounts Receivable" shall mean the entire amount of
Accounts Receivable as of the Effective Date.
"Effective Date Accounts Receivable Report" means the Accounts Receivable
Report as of the Effective Date.
"Effective Date Balance Sheet Report" means the Balance Sheet Report as of
the close of the Effective Date.
"Employee Benefit Plan" means any (a) Employee Pension Benefit Plan, (b)
Employee Welfare Benefit Plan, or (c) personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or agreement,
deferred compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment agreement and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in clause (a) or (b) of this sentence.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2), including, but not limited to, employee pension benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1), including, but not limited to, employee welfare benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"Employment Agreement" means that certain Employment Agreement by and
between the Company and Seller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Net Worth" means the Net Worth as of the Effective Date as
determined in accordance with (S) 2(e) below.
"Financial Statements" has the meaning set forth in (S) 4A(e) below.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Guaranteed Net Worth" means $1,856,996.15 which is equal to (i) the Net
Worth as of October 31, 1996 ($295,283.89), plus (ii) the accounts receivable of
the Company as of October 14, 1996, ($2,298,381.74), plus (iii) all accumulated
depreciation as of October 31, 1996 ($143,425.08), minus (iv) the accounts
payable and other current liabilities of the Company as of October 31, 1996
($661,661.28), minus (v) cash balances at City National Bank as of October 31,
1996 ($236,758.81), minus (vi) stockholder loans borrowed by the Seller from the
Company as of October 31, 1996 (($18,325.53)), minus (vii) the gross book value
of automobiles as of October 31, 1996 ($0.00).
"Income Statement Reports" means a statement of revenues and expenses of
the Company as of a given date prepared by the Company on a cash basis and on a
consistent basis as with prior time periods.
"IRS" means the United States Internal Revenue Service or such equivalent
successor agency of the United States with the responsibility of assessing
and/or collecting Taxes.
"Investors" shall mean Pecks.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Liens" means any mortgages, deeds of trust, liens, security interests,
pledges, claims, charges, liabilities, obligations, or other encumbrances.
"Looney" shall mean Looney & Company, a Texas corporation.
"Looney Acquisition" shall mean the acquisition by the Buyer of all of the
issued and outstanding shares of common stock of Looney.
"Net Worth" means the dollar amount of equity of the Company as of a given
time period as determined by the Balance Sheet Report.
"Notice of Action" has the meaning set forth in (S) 8(b) below.
"Notice of Election" has the meaning set forth in (S) 8(b) below.
"Offset" has the meaning set forth in (S) 9(c).
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" shall mean, individually, the Buyer or the Seller.
"Parties" shall mean, collectively, the Buyer and the Seller.
"Past Due Accounts Receivable" means those accounts receivable of the
Company whose age is more than 120 days from the date of invoice as of the
Effective Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pecks" shall mean Pecks Management Partners Ltd., a New York limited
partnership.
"Permitted Encumbrances" with respect to property of a Party shall mean (i)
Security Interests expressly permitted, or consented in writing to by the other
Party; (ii) Purchase Money Liens; (iii) Customarily Permitted Liens; and (iv)
Liens of judgment creditors provided such Liens do not exceed $5,000
individually or $25,000 in the aggregate (other than Liens bonded or insured to
the reasonable satisfaction of the other Party).
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pledge Agreement" has the meaning set forth in (S) 9(c) below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Purchase Money Liens" shall mean Liens incurred in connection with the
acquisition of any asset; provided that (i) each such Lien shall attach only to
the asset to be acquired, (ii) a description of the asset so acquired is
furnished to the other Party, and (iii) the indebtedness incurred in connection
with such acquisitions shall not individually exceed $5,000 or in the aggregate
exceed $25,000.
"Purchase Price" has the meaning described in (S) 2(b) below.
"Registration Rights Agreements" has the meaning set forth in (S) 7(a)(ix)
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Securityholders Agreement" shall mean that certain Securityholders
Agreement by and between the Buyer, Pecks and the other shareholders of the
Buyer other than the Seller.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
Purchase Money Liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" shall mean Xxxxxxx Xxxxx.
"Seller's Disclosure Schedule" has the meaning set forth in (S) 4A below.
"Senior Lender" shall mean Texas Commerce Bank, N.A.
"Shareholders' Agreement" shall mean that certain Shareholders' Agreement
by and between the Buyer and all of the shareholders of the Buyer other than
Pecks.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors thereof.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium
windfall profits, environmental (including taxes under Code Section 5(A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. PURCHASE AND SALE OF COMPANY SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell to the Buyer, all of his Company Shares for the consideration specified
below in this (S) 2.
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(b) PURCHASE PRICE. The purchase price is up to $6,660,396 to be paid
and delivered by the Buyer to the Seller on the Closing Date, subject to
adjustments thereto under this Agreement, as follows (collectively, the
"Purchase Price"):
(i) Delivery to the Seller of 170,600.00 shares of common stock of the
Buyer, $.01 par value per share (the "Buyer Shares") as will constitute an
agreed upon value of $1,093,546 and at a per share value of $6.41;
(ii) Delivery to the Seller of the Buyer's 10% Subordinated Promissory
Note in the principal amount of $1,486,846 in the form attached hereto as
Exhibit A (the "Buyer Note"), which Buyer Note shall provide that it is
immediately accelerated should the Buyer consummate a public offering of shares
of its common stock;
(iii) Delivery of cash in the amount of $3,580,004 payable by wire
transfer or delivery of other immediately available funds to the Seller on the
Closing Date in accordance with wiring instructions delivered by the Seller to
the Buyer at least three business days prior to Closing (the "Cash Purchase
Price"); and
(iv) In addition, the Buyer shall deliver to the Seller, as collected in
the Ordinary Course of Business, 50% of Past Due Accounts Receivable up to a
maximum of $500,000 in payments by the Buyer to the Seller hereunder.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx, Xxxxx &
Xxxxxx in Houston, Texas, unless otherwise mutually agreed, commencing on
January 17, 1997 at 9:00 a.m. local time, or at such other time or place as the
Parties mutually agree (the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in (S) 7(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in (S) 7(b) below,
(iii) the Seller will deliver to the Buyer stock certificates representing all
of the Company Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) the Buyer will deliver to the Seller the Buyer
Shares, the Buyer Note and the Cash Purchase Price.
(e) DETERMINATION OF FINAL NET WORTH. The Effective Date Balance Sheet
Report of the Company, the Effective Date Accounts Receivable Report and the
Effective Date Accounts Payable Report shall be prepared by the Company, as
promptly as possible after the Closing. Company's Accountants shall then
compile the Effective Date Balance Sheet Report, and the Seller shall prepare
the Effective Date Accounts Receivable Report and the Effective Date Accounts
Payable Report, and deliver the Effective Date Balance Sheet Report, the
Effective Date Accounts Receivable Report and the Effective Date Accounts
Payable Report
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to the Buyer and the Buyer's Accountants within 30 days after the Closing Date.
The Buyer's Accountants shall review the Effective Date Balance Sheet Report,
the Effective Date Accounts Receivable Report and the Effective Date Accounts
Payable Report (including any corresponding work papers of Company's
Accountants) and report to the Seller's Accountants in writing within 15 days of
receipt thereof of any discrepancy. If Company's Accountants and the Buyer's
Accountants cannot resolve such discrepancy within 15 days after Company's
Accountants receipt of such report, then they shall so notify the Seller and the
Buyer, and the Seller and the Buyer shall attempt to resolve the discrepancy
within 15 days of such notice. If the Seller and the Buyer cannot resolve the
discrepancy to their mutual satisfaction, another independent public accounting
firm acceptable to the Seller and the Buyer shall be retained to review the
Effective Date Balance Sheet Report, the Effective Date Accounts Receivable
Report and the Effective Date Accounts Payable Report. Such firm's conclusions
as to the carrying values to appear on the Effective Date Balance Sheet Report,
the Effective Date Accounts Receivable Report and the Effective Date Accounts
Payable Report for purposes of determining the Final Net Worth of the Company
shall be conclusive. The Seller and the Buyer shall share equally in the
expenses of retaining such accounting firm. The Buyer shall pay the expenses of
the Buyer's Accountants for their review of the Effective Date Balance Sheet
Report, the Effective Date Accounts Receivable Report and the Effective Date
Accounts Payable Report, and the Seller shall pay the expenses of Company's
Accountants for their review of the Effective Date Balance Sheet Report, the
Effective Date Accounts Receivable Report and the Effective Date Accounts
Payable Report. The Parties acknowledge and agree that any obligations paid or
payable to Xxxxxxx Xxxxxxxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxx or Xxxx Xxxx under
their respective Bonus Agreements shall not be deducted from the determination
of the Final Net Worth.
(f) POST-CLOSING ADJUSTMENT OF PURCHASE PRICE. After the Closing Date, the
Purchase Price set forth in Section 2(b), shall be adjusted as follows: (i) if
the Final Net Worth of the Company as finally determined pursuant to Section
2(e) shall be more than the Guaranteed Net Worth, then the cash portion of the
Purchase Price shall be increased by an amount equal to 71.6% of the amount of
such excess, and the principal amount of the Buyer Note shall be increased by an
amount equal to 28.4% of the amount of such excess, and (ii) if the Final Net
Worth of the Company as finally determined pursuant to Section 2(e) shall be
less than the Guaranteed Net Worth, then the cash portion of the Purchase Price
shall be reduced by an amount equal to 71.6% of the amount of such shortfall,
and the principal amount of the Buyer Note shall be reduced by an amount equal
to 28.4% of the amount of such shortfall. In the event that any principal
payments on the Buyer Note are made by the Buyer prior to the determination of
the final principal balance as a result of the determination of the Final Net
Worth, then the amount of any such principal payments shall reduce the amount of
the principal balance of the revised Buyer Note. In addition, the Buyer Note
executed and delivered by the Buyer to the Seller at the Closing shall be
promptly returned to the Buyer marked "CANCELLED" upon the Buyer's delivery of
the revised Buyer Note to the Seller upon determination of the Final Net Worth.
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3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this (S) 3(a) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this (S) 3(a),
except as set forth in the schedules of exceptions attached hereto as Schedule
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3A.
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(i) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions, except to the extent that enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or moratorium
laws or other laws or principles of equity effecting the enforcement of
creditors' rights. The Seller represents and warrants that he need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement by the Seller, nor the consummation of the transactions by
the Seller as contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or
court to which the Seller is 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, or other arrangement to which the Seller is a party or by which
he is bound or to which any of his assets is subject.
(iii) BROKERS' FEES. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(iv) INVESTMENT. The Seller (A) understands that neither the Buyer
Note nor the Buyer Shares have been registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public
offering, (B) is acquiring the Buyer Note and the Buyer Shares solely for
his own account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received certain
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information specified on Schedule 3A concerning the Buyer and has had the
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opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Buyer Note and
the Buyer Shares, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Buyer Note and the Buyer Shares, and (F)
is an Accredited Investor.
(v) COMPANY SHARES. The Seller holds of record and owns beneficially
the number of Company Shares set forth next to his name in (S) 4A(b) of
the Seller's Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws, Taxes, Security Interests, options, warrants, purchase
rights, or other contracts or commitments that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the applicable
Company(s) (other than this Agreement)). The Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect to
the voting of any capital stock of the Company.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this (S) 3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this (S) 3(b)),
except as set forth in the schedule of exceptions attached hereto as Schedule
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3B.
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(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of Texas.
The Buyer is qualified to do business in each jurisdiction in which the
nature of its business, the ownership of its assets or the lease of its
properties require it to be so qualified.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and the Employment Agreement, and to perform its
obligations hereunder, including without limitation the issuance of the
Buyer Shares and the Buyer Note. The Board of Directors of the Buyer has
duly authorized the execution, delivery and performance of this Agreement,
the Employment Agreement and the other agreements and transactions
contemplated hereby, including, without limitation, the issuance of the
Buyer Shares and the Buyer Note, and no other corporate proceedings on the
Buyer's part are necessary to authorize this Agreement, the Employment
Agreement or the transactions contemplated hereby, including, without
limitation, the issuance of the Buyer Shares and the Buyer Note. Upon
execution and delivery of this Agreement and the Employment Agreement by
the Parties hereto, this Agreement and the Employment Agreement shall, and
upon issuance of the Buyer Note in accordance with the provisions hereof
the Buyer Note shall, constitute legal, valid and binding obligations
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of the Buyer, enforceable against the Buyer in accordance with their
respective terms, except to the extent that enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or moratorium
laws or other laws or principles of equity effecting the enforcement of
creditors' rights. The Buyer represents and warrants that it need not give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(iii) ISSUANCE OF THE BUYER STOCK. The Buyer Shares shall, upon
issuance and delivery, be duly authorized, validly issued, fully paid and
non-assessable.
(iv) NONCONTRAVENTION. The Board of Directors of the Buyer has duly
authorized the execution, delivery and performance of this Agreement, the
Employment Agreement and the other agreements and transactions contemplated
hereby, including, without limitation, the issuance of the Buyer Shares and
the Buyer Note, and no other corporate proceedings on the Buyer's part are
necessary to authorize this Agreement or the transactions contemplated
hereby, including, without limitation, the issuance of the Buyer Shares and
the Buyer Note. Upon execution and delivery of this Agreement and the
Employment Agreement by the Parties hereto this Agreement and the
Employment Agreement shall, and upon issuance of the Buyer Note in
accordance with the provisions hereof the Buyer Note shall, constitute
legal, valid and binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws or other laws or principles
of equity affecting the enforcement of creditor's rights. Neither the
execution and the delivery of this Agreement or the Employment Agreement,
nor the consummation of the transactions contemplated hereby, will violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any
provision of its charter or bylaws.
(v) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARTIES.
A. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Seller represents and warrants to the Buyer that the statements
contained in this (S) 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for
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the date of this Agreement throughout this (S) 4), except as set forth in
Seller's disclosure schedule attached hereto as Schedule 4A ("Seller's
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Disclosure Schedule"). Nothing in the Seller's Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Seller's Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of Florida. The Company is not qualified to do business in any other
jurisdiction, nor does the nature of its business require such qualification.
The Company has full corporate power and authority and all material licenses,
permits, and authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. (S) 4A(a) of the
Seller's Disclosure Schedule lists the directors and officers of the Company.
The Seller has delivered to the Buyer correct and complete copies of the
articles of incorporation and bylaws of each of the Company and its Subsidiaries
(as amended to date). The minute books (containing the records of meetings of
the stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete in all material respects. The Company is not
in default under or in violation of any provision of its articles of
incorporation or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock, the issued and
outstanding shares and the treasury shares of the Company are accurately set
forth in (S) 4A(b) of the Seller's Disclosure Schedule. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Seller as set forth in
(S) 4A(b) of the Seller's Disclosure Schedule. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that would require
the Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject, (ii) violate any
provision of the articles of incorporation or bylaws of the Company, or (iii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Company is a party or by which it is
bound or to which any of its assets is subject (or
-13-
result in the imposition of any Security Interest upon any of its assets). The
Company does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) SUBSIDIARIES. The Company does not have any ownership interest in
any Subsidiaries. The Company does not control directly or indirectly or have
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary.
(e) FINANCIAL STATEMENTS. The Seller has previously furnished the Buyer
with the following financial statements (collectively the "Financial
Statements"): (i) a Balance Sheet Report and an Income Statement Report for the
fiscal years ended September 30, 1995 and September 30, 1996 compiled by
Company's Accountants; and (ii) Balance Sheet Reports and Income Statement
Reports for the three month periods ended December 31, 1995, March 31, 1996,
June 30, 1996 and September 30, 1996 compiled by Company's Accountants and a
Balance Sheet dated October 31, 1996 prepared by the Company's Accountants,
(iii) an Accounts Receivable Report dated as of February 1, 1996 and as of
October 14, 1996, and (iv) an Accounts Payable Report dated October 31, 1996.
The Financial Statements (including the notes thereto) have been prepared on a
cash basis and are consistently reported throughout the periods covered thereby,
present fairly the financial condition of Company as of such dates and the
results of operations of Company for such periods, are correct and complete in
all material respects, and are consistent in all material respects with the
books and records of Company (which books and records are correct and complete
in all material respects).
(f) EVENTS SUBSEQUENT TO DECEMBER 31, 1995. Except as disclosed on (S)
4A(f) of the Seller's Disclosure Schedule, since December 31, 1995, there has
not been any material change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without limiting the
generality of the foregoing, since that date:
(i) the Company has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, lease, and
licenses) either involving more than $5,000 singly or $25,000 in the
aggregate or outside the Ordinary Course of Business;
(iii) the Company has not accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts,
-14-
leases, and licenses) involving more than $5,000 singly or $25,000 in the
aggregate to which any the Company is a party or by which it is bound;
(iv) the Company has not imposed any Security Interest upon any of
its assets, tangible or intangible, except for Permitted Liens;
(v) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than $5,000 singly or
$25,000 in the aggregate or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series or related capital investments, loans, and acquisitions) either
involving more than $5,000 singly or $25,000 in the aggregate;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$5,000 singly or $25,000 in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities for a period of more than sixty (60)
days after the date of invoice;
(ix) the Company has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $5,000 singly or $25,000 in the aggregate or outside
the Ordinary Course of Business;
(x) there has been no change made or authorized in the articles of
incorporation or bylaws of the Company;
(xi) the Company has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(xii) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiii) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property valued,
individually or in the aggregate, in excess of (i) $10,000 for all property
which, at the time of such damage
-15-
or destruction, was subject to or covered by property, casualty or any
other form of insurance, and (ii) $5,000 for all property which, at the
time of such damage or destruction, was not subject to or covered by
property, casualty or any other form of insurance;
(xiv) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees;
(xv) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any such existing contract or agreement;
(xvi) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvii) the Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(xviii) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xix) the Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xx) there has not been any other adverse occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company of any of its Subsidiaries which
exceeds $5,000 individually $25,000 in the aggregate; and
(xxi) the Company has not committed to any of the foregoing.
(g) UNDISCLOSED LIABILITIES. Except as disclosed on (S) 4A(g) of the
Seller's Disclosure Schedule, the Company does not have any Liability (and, to
the best of the Seller's Actual Knowledge, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability), except for
(i) Liabilities reflected in the then most current Financial Statements
(including any notes thereto) and (ii) Liabilities which have arisen after the
December 31, 1995 in the Ordinary Course of Business (none of which results
from, arises, out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
-16-
(h) LEGAL COMPLIANCE. To the Actual Knowledge of Seller, the Company, and
its predecessors and Affiliates, have complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and, to the Seller's Actual Knowledge,
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
(i) TAX MATTERS. Except as disclosed on (S) 4A(i) of the Seller's
Disclosure Schedule:
(i) The Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material
respects. All Taxes shown to be due on the Tax Returns have been paid.
The Company is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by a Tax
authority in a jurisdiction where the Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, stockholder, or other third party, except for the
unlikely event that Taxes may be incurred in connection with an independent
contractor of the Company being characterized as an employee (which matters
are addressed solely in Section 9(d) hereof).
(iii) There is no dispute or claim concerning any Tax Liability of
the Company either (A) claimed or raised by any Tax authority in writing or
(B) as to which the Seller and the directors and officers (and employees
responsible for Tax matters) of the Company has Actual Knowledge based upon
personal contact with any agent of such authority. (S) 4A(i) of the
Seller's Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company for taxable periods
ended on or after December 31, 1995, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that currently are the
subject of an audit. The Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
-17-
(v) The Company has not made an election under section 341(f) of the
Code.
(j) TITLE TO ASSETS. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, or shown in
the Financial Statements or acquired after the date thereof, free and clear of
all Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since December 31, 1995, and except for Permitted
Encumbrances.
(k) REAL PROPERTY. The Company does not own any real property. (S) 4A(k)
of the Seller's Disclosure Schedule lists and describes briefly all real
property leased or subleased to the Company. The Seller has delivered to the
Buyer correct and complete copies of the leases and subleases listed in (S)
4A(k) of the Seller's Disclosure Schedule (as amended to date). Except as
disclosed on (S) 4A(k) of the Seller's Disclosure Schedule, with respect to each
lease and sublease listed in (S) 4A(k) of the Seller's Disclosure Schedule:
(A) The lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(B) The lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
except for the leased premises covered by the New Lease;
(C) The Company is not in material breach or default of any
lease or sublease, and to the Seller's Actual Knowledge, no third
party to any such lease or sublease is in material breach or material
default, and to the Seller's Actual Knowledge, no event has occurred
which, with notice or lapse of time, would constitute a material
breach or material default or permit termination, modification, or
acceleration thereunder;
(D) with respect to each sublease, to the Sellers' Actual
Knowledge, the representations and warranties set forth in subsections
(A) through (C) above are true and correct with respect to the
underlying lease; and
(E) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold, except Customarily Permitted Liens.
(l) TANGIBLE ASSETS. The Company owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its businesses
as presently conducted. Each such tangible asset is suitable for the purpose
for which it is presently used.
-18-
(m) INVENTORY. The Company does not carry or maintain any inventory.
(n) CONTRACTS. (S) 4A(n) of the Seller's Disclosure Schedule lists the
following contracts and other agreements currently in effect to which the
Company is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the
furnishing or receipt of services, the performance of which will extend
over a period of more than one year or involve consideration in excess of
$25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement among the Seller and his Affiliates (other than
the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any written agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(ix) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(x) any agreement under which the consequences of a default or
termination would reasonably be expected to have a material adverse effect
on the business, financial condition, operations, results of operations, or
future prospects of the Company; or
-19-
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in (S) 4A(n) of the Seller's Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in (S) 4A(n) of the Seller's Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the Company is
not a party nor to the Seller's Actual Knowledge is any other party in breach or
default, and to the Seller's Actual Knowledge, no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement, and (C) the
Company has not repudiated any provision of any such agreement nor to the
Seller's Actual Knowledge has any other party repudiated any provision of any
such agreement.
(o) NOTES AND ACCOUNTS RECEIVABLE. To the Seller's Actual Knowledge, all
notes and accounts receivable of the Company are properly recorded on each
Accounts Receivable Report delivered to the Buyer, reflected properly on the
Company's books and records and are valid receivables.
(p) POWERS OF ATTORNEY. Except as disclosed on (S) 4A(p) of the Seller's
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company.
(q) INSURANCE. (S) 4A(q) of the Seller's Disclosure Schedule lists each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
the Company is currently a party, copies of which have been furnished to the
Buyer.
(r) LITIGATION. (S) 4A(r) of the Seller's Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the Actual
Knowledge of the Seller, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court of quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(s) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as disclosed
on (S) 4A(s) of the Seller's Disclosure Schedule, neither the Seller nor his
Affiliates have been involved in any business arrangement or relationship with
the Company within the past 12 months, and neither the Seller nor any of his
Affiliates owns any asset, tangible or intangible, which is used in the business
of any of the Company.
-20-
(t) GUARANTIES. The Company is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(u) EMPLOYEES. To the Seller's Actual Knowledge, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. To the Seller's Actual Knowledge, the Company has not committed any
unfair labor practice. The Seller does not have any Actual Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company. (S) 4A(u) of the Seller's
Disclosure Schedule sets forth by number and employment classification the
approximate numbers of employees employed by Company as of the date of this
Agreement, and none of said employees are subject to union or collective
bargaining agreements with the Company.
(v) EMPLOYEE BENEFITS.
(i) (S) 4A(v) of the Seller's Disclosure Schedule lists each Employee
Benefit Plan that the Company maintains or to which it contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Section 4980B have been met
with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension Benefit
Plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and
practice of the Company. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with respect to
each such Employee Benefit Plan.
(D) The Company has substantially performed all obligations,
whether arising by operation of law or by contract, required to be
performed by it in connection with such Employee Benefit Plans, and to
Seller's Actual
-21-
Knowledge, there has been no default or violation by any other party to
such Employee Benefit Plans.
(E) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which relate to each
such Employee Benefit Plan.
(ii) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (A) require the Company to
make a larger contribution to, or pay greater benefits under, any Employee
Benefit Plan than it otherwise would or (B) create or give rise to any
additional vested rights or service credits under any Employee Benefit
Plan.
(iii) Each such Employee Benefit Plan has been terminated by the
Company in compliance with all applicable laws on or before the Closing
Date.
(w) BROKERS' FEES. The Company does not have any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(x) OPERATION OF BUSINESS. To the Seller's Actual Knowledge (i) all court
reporters that are or have been hired (including independent contractors) by the
Company are qualified to perform the jobs that they are hired to perform and
they are not required by law to obtain any certification to perform their jobs,
(ii) all documents that the Company is or has been required to maintain, store
or handle in connection with conducting its business are or have been
maintained, stored or handled in the manner agreed to between the Company and
its respective clients or in material conformity with prevailing standards
regarding such matters in the Company's industry, and (iii) the Company performs
all aspects and operations of its business at or above the prevailing standards
for the Company's industry.
(y) DISCLOSURE. The representations and warranties contained in this (S)
4A do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this (S) 4A not misleading.
B. REPRESENTATIONS AND WARRANTIES CONCERNING THE BUYER AND LOONEY.
The Buyer represents and warrants to the Seller that the statements
contained in this (S) 4B are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this (S) 4B), except as set forth in the Buyer's Disclosure
Schedule attached hereto as Schedule 4B (the "Buyer's Disclosure
-----------
-22-
Schedule"). Nothing in the Buyer's Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, however,
unless the Buyer's Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Buyer is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each of the Buyer and its Subsidiaries
has full corporate power and authority and all material licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it. (S) 4B(a) of the Buyer's
Dis closure Schedule lists the directors and officers of the Buyer. The Buyer
has delivered to the Seller correct and complete copies of the charter and
bylaws of the Buyer (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Buyer are correct and complete in all material
respects. The Buyer is not in default under or in violation of any provision of
its charter or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock, the issued
and outstanding shares and the treasury shares of the Buyer are accurately set
forth in (S) 4B(b) of the Buyer's Disclosure Schedule together with the changes
thereto contemplated by the acquisition of the Company and other acquisitions
scheduled to be consummated by the Buyer contemporaneously herewith. All of the
issued and outstanding shares of the Buyer have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective parties as set forth in (S) 4B(b) of the Buyer's Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Buyer to issue, sell, or otherwise cause to
become outstanding any of its capital stock except those set forth in Schedule
(S) 4B(b) of the Buyer's Disclosure Schedule. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Buyer except as set forth in Schedule (S) 4B(b) of
the Buyer's Disclosure Schedule. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Buyer. The Buyer does not own any Subsidiaries prior to the Closing.
(c) NO OPERATIONS. The Buyer has not engaged and will not engage in
any active business operations prior to the Closing.
(d) SAME PRICE PAID BY INVESTORS FOR BUYER SHARES. The price of $6.41
per Buyer Share is the same price as that paid by the Investors.
-23-
(e) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject, (ii) violate any
provision of the charter or bylaws of the Buyer, or (iii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(f) CONTRACTS. Except as disclosed on Schedule (S) 4B(f), Buyer does
not have any contracts.
(g) OWNERSHIP AND CONTROL. Immediately after the consummation of the
transactions contemplated by this Agreement (including, but not limited to the
Closing, the closing of the Looney Acquisition and the closing of the Investor's
acquisition of stock of the Buyer), the Seller, the Investor and the former
owner of Looney, combined, shall own: (i) at least eighty percent (80%) of the
total combined voting power of all outstanding classes of stock of the Buyer
that are entitled to vote; and (ii) at least eighty percent (80%) of the total
number of shares outstanding of all other classes of stock of the Buyer.
(h) BROKERS' FEES. The Buyer does not have any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement other than to The GulfStar
Group, Inc.
(i) DISCLOSURE. The representations and warranties contained in this
(S) 4B do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements and information
contained in this (S) 4B not misleading.
5. PRE-CLOSING. The Parties agree as follows with respect to the
periods preceding the Closing.
(a) CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing Date, the Seller will use reasonable efforts to cause the Company to:
(i) conduct its business only in the Ordinary Course of Business
and refrain from changing or introducing any new method of management or
operations except in the Ordinary Course of Business and consistent with prior
practices;
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(ii) except as disclosed on Schedule 5(a), refrain from taking
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any action which is described in Section 4A(f) et seq., including without
-- ---
limiting the generality of the foregoing: (A) making any purchase, sale or
disposition of any asset or property other than in the Ordinary Course of
Business, (B) purchasing any capital asset costing more than $5,000 singly or
$25,000 in the aggregate; (C) mortgaging, pledging, subjecting to a lien or
otherwise encumbering any of such assets other than in the Ordinary Course of
Business and other than Permitted Encumbrances; (D) incurring any contingent
liability as a guarantor or otherwise with respect to the obligations of others,
and from incurring any other contingent or fixed obligations or liabilities
except those that are in the Ordinary Course of Business; (E) making any change
or incurring any obligation to make a change in its charter, bylaws or
authorized or issued capital stock; and (F) declaring, setting aside or paying
any dividend, making any other distribution in respect to its capital stock or
making any direct or indirect redemption, purchase or other acquisition of its
stock;
(iii) prevent any change with respect to its management and
supervisory personnel and banking arrangements;
(iv) keep intact its business organization, to keep available its
present officers and employees employed and to preserve the goodwill of all
suppliers, customers, distributors, independent contractors and others having
business relations with it;
(v) have in effect and maintain at all times all insurance of
the kind, in the amount and with the insurers presently in force or equivalent
insurance with any substitute insurers or insurance policies approved by the
Buyer in writing prior to such change of insurer or issuance of new insurance
policy;
(vi) permit the Buyer and its authorized representatives to have
full access during normal business hours upon reasonable prior notice to all of
its properties, assets, records, Tax Returns, contracts and documents and
furnish to the Buyer or its authorized representatives such financial and other
information with respect to its business or properties as the Buyer may
reasonably request:
(b) NO SOLICITATION OF OTHER OFFERS BY THE SELLER. Neither the
Seller nor any of his agents or representatives will, directly or indirectly,
(i) solicit, initiate discussions or engage in negotiations or any transaction
with any Person other than the Buyer relating to the possible acquisition of the
Company; or (ii) provide, or cause any other Person to provide, any information
to any Person, other than the Buyer and Looney (and their officers, directors,
employees, other agents and representatives and advisors), relating to the
possible acquisition of the Company. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
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(c) AUTHORIZATION FROM OTHERS. Prior to the Closing Date, each of the
Parties will use reasonable best efforts to obtain all authorizations, consents,
and permits of others required to permit the consummation of the transactions
contemplated hereby.
(d) BREACH OF REPRESENTATION AND WARRANTIES. Neither of the Parties
shall take any action that would result in (i) a failure to comply in any
material respect with such Party's agreements hereunder or (ii) any of the
representations and warranties of such Party being inaccurate in any material
respect; and in the event of any such breach or default by a Party, such Party
shall give detailed written notice thereof to other Party and shall use his or
its reasonable best efforts to promptly cure the same.
(e) CONSUMMATION OF AGREEMENT. Each of the Parties shall use his or
its reasonable best efforts to perform and fulfill all conditions and
obligations on his or its parts to be performed and fulfilled under this
Agreement.
(f) COOPERATION. Each Party shall cooperate with all reasonable
requests of the other Party and his or its counsel in connection with the
consummation of the transactions contemplated hereby.
(g) CONFIDENTIALITY. Each of the Parties agrees that (i) he or it,
and his or its officers, directors, agents and representatives, will treat and
hold in strict confidence, and will not use, any data and information obtained
in connection with this transaction or Agreement with respect to the business of
the other Party, except for the purpose of the internal evaluation of the
transactions contemplated by this Agreement; (ii) if the transactions
contemplated by this Agreement are not consummated, he or it will return to the
other Party all copies of such data and information, including but not limited
to worksheets, test reports, manuals, lists memoranda, and other documents
prepared by or made available to him or it in connection with this transaction;
and (iii) he or it will treat the existence of this Agreement and the
transactions contemplated hereby as strictly confidential and will not disclose
them to any Person without the prior written consent of the other Party, which
consent may be withheld for any or no reason.
(h) NO SOLICITATION OF OTHER OFFERS BY BUYER. Neither the Buyer nor
any of its officers, directors, clients, agents or representatives will,
directly or indirectly, (i) solicit, initiate discussions or engage in
negotiations or any transaction with any Person other than the Seller relating
to the possible acquisition of a company or other entity in any location within
the State of Florida that engages in the same type of business as that of the
Company except as disclosed on Schedule 5(h) or (ii) provide, or cause any other
Person to provide, any information relating to the planned acquisition of the
Company to any Person, other than the Seller, the Company (or its officers,
directors, employees, other agents and representatives) and their respective
advisors). The Buyer will notify the Seller immediately if any Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
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6. POST-CLOSING COVENANTS. The Parties agree as follows with respect
to the period following the Closing:
(a) GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under (S) 8 below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand to which the other
Party is not subject (either by virtue of the indemnification provisions
contained in (S) 8 below or otherwise) in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Company, the other Party will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnifi cation therefor under (S) 8 below). The Buyer
acknowledges and agrees that if the Seller is individually brought into any
litigation in connection with the Company, he shall be indemnified to the
maximum extent that directors and officers of corporations are permitted to be
indemnified under Florida law both for all costs of litigation as well as any
judgments or settlement amounts paid. Notwithstanding the foregoing, the Seller
shall not be entitled to indemnification to the extent of any of the following:
(i) suit against the Seller with respect to a matter for which the
Seller is required to indemnify the Buyer pursuant to this Agreement; or
(ii) to the extent that the Seller is found to have engaged in gross
negligence or willful misconduct.
(c) CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement and all of the other
agreements executed in connection herewith and except in connection with
handling all of the litigation described on (S) 4A(r) of the Seller's Disclosure
Schedule. In the event that the Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, the Seller will notify the Buyer promptly
of the request or requirement so that the Buyer may seek an
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appropriate protective order or waive compliance with the provisions of this (S)
6(c). If, in the absence of a protective order or the receipt of a waiver
hereunder, the Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the
Seller may disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, that the Seller shall use his reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate; provided, however that
all of the Seller's costs including but not limited to legal fees shall be paid
by the Buyer. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(d) ACCOUNTS RECEIVABLE. Seller shall, during the term of his
employment by the Company use reasonable efforts to collect the Accounts
Receivable in the Ordinary Course of Business. Seller represents and warrants
that all Effective Date Accounts Receivable less an allowance for doubtful
accounts not to exceed ten percent (10%) of the total balance of the Effective
Date Accounts Receivable shall be collectible in their full amounts within
thirty (30) months of the Effective Date. Buyer shall make a good faith effort
to cause the Company to collect the Effective Date Accounts Receivable. Any
payments not accompanied by a specific reference to an invoice or other payment
application received by Buyer or the Company from customers with respect to the
Business shall be first applied to the Effective Date Accounts Receivable,
otherwise such payment shall be applied as specified. If any Effective Date
Accounts Receivable, or part thereof, shall be uncollected even after thirty
(30) months after the Effective Date, and the total of such uncollected
Effective Date Accounts Receivable exceeds ten percent (10%) of the aggregate
amount of Effective Date Accounts Receivable, then Buyer's sole remedy shall be
to offset all amounts by which such uncollected Effective Date Accounts
Receivable exceed ten percent (10%) of the aggregate amount of Effective Date
Accounts Receivable equally against the Buyer Shares and the Buyer Note until
both are exhausted; provided, however, that Buyer shall have no remedy for
recovery from excess uncollected Effective Date Accounts Receivable other than
offset against the Buyer Shares and the Buyer Note as stated in this (S) 6(d).
In the event of such offset, Seller shall have the option of purchasing such
portion of the uncollected Effective Date Accounts Receivable equal to the
amount of its payment to Buyer. For purposes of offset described in this
(S)6(d), the Buyer Shares shall be valued in an amount equal to the Buyer Shares
Value.
(e) LITIGATION. The Seller shall be solely responsible for handling,
and for liability resulting from, the Xxxxxx Litigation (as identified and
defined in (S)4A(r) of the Seller's Disclosure Schedule) and shall indemnify the
Buyer from any Damages the Buyer or the Company may incur therefrom. The
foregoing indemnification obligation shall be outside of the indemnification
provisions in Section 8 of this Agreement. Buyer shall assume all liability for
all other litigation involving the Company which is disclosed in the Seller's
Disclosure Schedule. Buyer's liability for any and all litigation involving the
Company remains subject to the terms and provisions of Section 8 of this
Agreement.
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(f) THE SELLER AS DIRECTOR. Upon the Seller's written request to the
Buyer, the Seller shall be appointed to the Board of Directors of the Buyer for
a term or terms not to extend beyond the date on which the Buyer Note has been
repaid in full. Prior thereto, Seller shall, upon his written request, serve as
an advisory member of the board of directors of the Buyer until such time as the
Buyer Note has been repaid in full.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer
to proceed with the Closing and consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions (any or all which may be waived in writing, by the Buyer):
(i) the representations and warranties set forth in (S) 3(a)
and (S) 4A above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
his covenants hereunder in all material respects at and as of the
Closing Date;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own the
Company Shares and to control the Company, or (D) materially and
adversely affect in any material respect the right of the Company to own
its assets and to operate its business (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in
(S) 7(a)(i)-(iii) is satisfied in all respects;
(v) the Buyer shall have received from counsel to the Seller an
opinion in form and substance reasonably acceptable to both the Buyer
and the Seller, addressed to the Buyer, and dated as of the Closing Date
containing such assumptions and qualifications as may be reasonably
acceptable to the Buyer's legal counsel;
(vi) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company other
than the Seller and those whom the Buyer shall have specified in writing
prior to the Closing;
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(vii) the Buyer shall have obtained on terms and conditions
reasonably satisfactory to it and Seller all of the financing it needs
in order to consummate the transactions contemplated hereby;
(viii) The Seller shall have entered into an Employment Agreement
with the Company and the Buyer in the form of EXHIBIT B attached hereto
(the "Employment Agreement");
(ix) The Seller shall have entered into a certain Shareholders'
Agreement ("the Shareholders' Agreement") on terms and conditions
reasonably satisfactory to it, and a Registration Rights Agreement which
shall grant to the Seller certain piggyback rights with respect to the
Buyer Shares and shall provide that, to the extent any greater
registration rights are ever granted to any seller of a company acquired
by the Buyer, the Seller shall be granted the same or equivalent
registration rights (the "Registration Rights Agreement");
(x) all Employee Benefit Plans shall have been terminated by
the Seller to the extent Buyer has implemented substitute Employee
Benefit Plans, and neither the Buyer nor Company shall have any further
liability with respect thereto other than completion of the routine
winding up thereof;
(xi) Xxxxxxx Xxxx shall have entered into a Services Agreement,
a Bonus Agreement, an Assumption Agreement, and a Stock Option Agreement
on terms and conditions reasonably acceptable to the Buyer;
(xii) Xxxx Xxxx shall have entered into a Services Agreement, a
Bonus Agreement, an Assumption Agreement, and a Stock Option Agreement
on terms and conditions reasonably acceptable to the Buyer;
(xiii) Xxxxxxx Xxxxxxxxx shall have entered into a Services
Agreement a, Bonus Agreement, an Assumption Agreement, and a Stock
Option Agreement on terms and conditions reasonably acceptable to the
Buyer;
(xiv) Xxxxx Xxxxxx shall have entered into an Employment
Agreement, a Bonus Agreement, an Assumption Agreement and a Stock Option
Agreement on terms and conditions reasonably acceptable to the Buyer;
(xv) the Company Distribution to Xxxxx shall have occurred and
all actions to be taken by the Seller in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer;
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(xvi) the Seller shall have entered into the Pledge Agreement
and the Residual Stock Option Agreement with the Buyer;
(xvii) the Buyer, the Company, the Seller and the Senior Lender
shall have entered into a Subordination Agreement;
(xviii) the Buyer, the Company, the Seller and Pecks shall have
entered into a Subordination Agreement; and
(xix) the Buyer shall have simultaneously consummated the Looney
Acquisition.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to proceed with Closing and consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions (any or all of which may be waived in writing by Seller):
(i) the representations and warranties set forth in (S) 3(b)
and (S) 4B above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Seller to own the
Buyer Shares, or (D) affect adversely in any material respect the right
of the Buyer and Looney to own their respective assets and to operate
their respective businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in
(S) 7(b)(i)-(iii) is satisfied in all respects;
(v) the Seller shall have obtained the full and final releases
(a) of any guaranty of the Seller of the debt of the Company or any of
its Subsidiaries and (b) of any collateral pledged by the Seller
securing such debt or guarantees; provided, however, that the foregoing
releases will not require the payment of any additional consideration in
excess of the Purchase Price by the Buyer;
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(vi) the Buyer shall have obtained on terms and conditions
reasonably satisfactory to it and Seller all of the financing it needs
in order to consummate the transactions contemplated hereby;
(vii) the Company and the Buyer shall have entered into the
Employment Agreement with the Seller;
(ix) the Seller shall have received from counsel to the Buyer an
opinion in form and substance acceptable to the Seller, addressed to the
Seller, and dated as of the Closing Date containing such assumptions and
qualifications as may be reasonably acceptable to the Seller's legal
counsel;
(x) the designation of the Seller as an advisory member of the
Board of Directors of the Buyer which shall permit Seller to attend all
meetings of the Board of Directors of the Buyer and to receive copies of
all written documents with respect thereto, but shall not permit him to
vote at such meetings except that if the Buyer obtains directors' and
officers' (errors and omissions) insurance, or upon the Seller's written
request to the Buyer, the Seller shall be appointed to the Board of
Directors of the Buyer for a term or terms not to extend beyond the date
on which the Buyer Note has been repaid in full;
(xi) Xxxxxxx Xxxx shall have entered into a Services Agreement,
a Bonus Agreement, an Assumption Agreement and a Stock Option Agreement
on terms and conditions reasonably acceptable to the Seller;
(xii) Xxxx Xxxx shall have entered into a Services Agreement, a
Bonus Agreement, an Assumption Agreement and a Stock Option Agreement
on terms and conditions reasonably acceptable to the Seller;
(xiii) Xxxxxxx Abblebaum shall have entered into a Services
Agreement, a Bonus Agreement, an Assumption Agreement, and a Stock
Option Agreement on terms and conditions reasonably acceptable to the
Seller;
(xiv) Xxxxx Xxxxxx shall have entered into an Employment
Agreement, a Bonus Agreement, an Assumption Agreement and a Stock Option
Agreement on terms and conditions reasonably acceptable to the Seller;
(xv) the Company Distribution to Xxxxx shall have occurred and
all actions to be taken by the Seller in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer;
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(xvi) the Buyer shall have entered into the Securityholders'
Agreement, the Shareholders' Agreement, the Registration Rights Agreement
and a separate Registration Rights Agreement with Pecks on terms and
conditions reasonably satisfactory to Seller;
(xvii) the Looney Acquisition shall have been simultaneously
consummated;
(xviii) the Buyer shall have entered into the Pledge Agreement and
the Residual Stock Option Agreement with the Seller;
(xix) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby, and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller;
(xx) the Buyer, the Company, the Seller and the Senior Lender shall
have entered into a Subordination Agreement; and
(xxi) the Buyer, the Company, the Seller and Pecks shall have
entered into a Subordination Agreement.
8. INDEMNIFICATION.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for two years thereafter except that the representations and warranties
contained in (S) 4 A(i), and (S) 4 A(j) which shall survive for three years
after the Closing.
(b) INDEMNIFICATION PROVISIONS.
(i) BY THE SELLER. The Seller shall indemnify, save, defend and
hold harmless the Buyer and the Buyer's shareholders, directors, officers,
partners, agents and employees (and in the event the Buyer assigns its right,
title and interest hereunder to a corporation, which shall be permitted
hereunder, such assignee) (collectively, the "Buyer Indemnified Parties") from
and against any and all costs, lawsuits, losses, Liabilities, deficiencies,
claims and expenses, including interest, penalties, reasonable attorneys' fees
and all reasonable amounts paid in investigation, defense or settlement of any
of the foregoing (collectively referred to herein as "Damages"), incurred in
connection with or arising out of or resulting from or incident to any breach
(or in the event any third party alleges facts that, if true, would mean the
Seller has breached), of any covenant, warranty or representation
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made by the Seller in or pursuant to this Agreement or any other agreement
delivered pursuant to this Agreement or in any schedule, certificate, exhibit,
or other instrument furnished or to be furnished by the Seller or his Affiliates
pursuant to the terms of this Agreement; provided, however, that the Seller
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. Notwithstanding anything to the contrary contained herein,
Seller shall not have any liability or indemnification obligation arising out of
any Damages that might arise out of the failure to obtain consents from the
landlords of the various real property leases set forth in (S)4A(c) of the
Seller's Disclosure Schedule.
(ii) BY THE BUYER. The Buyer shall indemnify, save, defend and
hold harmless the Seller from and against any and all Damages incurred in
connection with or arising out of or resulting from or incident to any breach
(or in the event any third party alleges facts that, if true, would mean the
Buyer has breached), of any covenant, warranty or representation made by the
Buyer in or pursuant to this Agreement or any other agreement delivered pursuant
to this Agreement contemplated hereby or in any schedule, certificate, exhibit,
or other instrument furnished or to be furnished by the Buyer under this
Agreement; 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 the Seller.
(iii) DEFENSE OF CLAIMS. If any lawsuit or enforcement action is
filed against any Party entitled to the benefit of indemnity hereunder, written
notice thereof describing such lawsuit or enforcement action in reasonable
detail and indicating the amount (estimated, if necessary) or good faith
estimate of the reasonably foreseeable estimated amount of Damages (which
estimate shall in no way limit the amount of indemnification the indemnified
Party is entitled to receive hereunder), shall be given to the indemnifying
Party as promptly as practicable (and in any event within ten (10) days, after
the service of the citation or summons) ("Notice of Action"); provided that the
failure of any indemnified Party to give timely notice shall not affect its
rights to indemnification hereunder to the extent that the indemnified Party
demonstrates that the amount the indemnified Party is entitled to recover
exceeds the actual damages to the indemnifying Party caused by such failure to
so notify within ten (10) days; provided further that a Notice of Action must be
sent to the indemnifying Party within the applicable survival period as provided
in Section 8(a) of this Agreement. The indemnifying Party may elect to
compromise or defend any such asserted liability and to assume all obligations
contained in this (S) 8(b) to indemnify the indemnified Party by a delivery of
notice of such election ("Notice of Election") within ten (10) days after
delivery of the Notice of Action. Upon delivery of the Notice of Election, the
indemnifying Party shall be entitled to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying Party's sole
cost, risk and expense, and such indemnified Party shall cooperate in all
reasonable respects, at the indemnifying Party's sole cost, risk and expense,
with the
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indemnifying Party and such attorneys in the investigation, trial, and
defense of such lawsuit or action and any appeal arising therefrom; provided,
however, that the indemnified Party may, at its own cost, risk and expense,
participate in such investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. If the Notice of Election is delivered to the
indemnified Party, the indemnified Party shall not pay, settle or compromise
such claim without the indemnifying Party's consent, which consent shall not be
unreasonably withheld. If the indemnifying Party elects not to defend the claim
of the indemnified Party or does not deliver to the indemnified Party a Notice
of Election within ten (10) days after delivery of the Notice of Action, the
indemnified Party may, but shall not be obligated to defend, or the indemnified
Party may compromise or settle (exercising reasonable business judgment) the
claim or other matter on behalf, for the account, and at the risk, of the
indemnifying Party.
(iv) THIRD PARTY CLAIMS. The provisions of this (S) 8 are not
limited to matters asserted by the Parties, but cover costs, losses,
liabilities, damages, lawsuits, claims and expenses incurred in connection with
third party claims.
(v) LIMITATION ON INDEMNIFICATION. Notwithstanding any provision
of this Agreement except for claims by the Buyer against the Seller under (S)
6(d) of this Agreement , neither the Buyer nor the Seller or any Affiliate of
either shall be required to pay an indemnified Party or any Affiliate thereof
any amount with respect to any claim for Damages under this (S) 8(b) until the
Damages which the indemnified Party and its Affiliates suffered under this
Agreement aggregate at least $50,000 (the "Threshold"), at which time and in
such event the indemnified Party or Affiliate shall be entitled to receive
payment for the entire amount of aggregate Damages to the extent they exceed
$50,000. Neither Party shall be liable to indemnify the other Party in an amount
in excess of one-half ( 1/2) of the Purchase Price including any and all amounts
due and owing under (S) 6(d) and (S) 9(d) of this Agreement.
9. TERMINATION AND REMEDIES.
(a) TERMINATION.
(i) This Agreement may be terminated at any time prior to the
Closing: (A) by the mutual consent of the Seller and the Buyer; or (B) by the
Seller or the Buyer, at any time prior to Closing, if any of the conditions
precedent to its obligations hereunder have not been fulfilled, in any material
respect, as of the Closing Date, other than as a result of such terminating
party's breach or negligence; or (C) if any bona fide action or proceeding shall
be pending against either Party as of the Closing Date that might reasonably be
expected to result in an unfavorable judgment, decree or order that would
prevent or make unlawful the carrying out of this Agreement or if any agency of
the federal or of any state government shall have objected at or before the
Closing to this acquisition or to any other action required by or in connection
with this Agreement and such objection shall not have been removed by the
Closing Date.
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(ii) This Agreement may be terminated by the Buyer at any time
prior to the Closing if the representations or warranties of the Seller herein
shall prove to have been inaccurate in any material respect when made, provided
that, the Buyer shall give the Seller a reasonable period of time, but only if
there is any such time prior to the scheduled Closing Date, to cure any default
hereunder, by the payment of compensation (if the matter is reasonably capable
of rectification by that means) or by the rectification of the matter before the
Closing.
(iii) This Agreement may be terminated by the Seller at any time
prior to the Closing if representations or warranties of the Buyer herein shall
prove to have been inaccurate in any material respect when made, provided that,
the Seller shall give the Buyer a reasonable period of time, but only if there
is any such time prior to the scheduled Closing Date, to cure any default
hereunder, by the payment of compensation (if the matter is reasonably capable
of rectification by that means) or by the rectification of the matter before the
Closing.
(iv) Nothing in this (S) 9(a) shall be deemed to release either
Party from any liability for any breach by such Party of the terms and
provisions of this Agreement; provided, however that such Party shall not be
liable in the event the Agreement is terminated pursuant to (S) 9(a)(i), or
pursuant to (S) 9(a)(ii) or (S) 9(a)(iii) if the default is not intentional, and
reasonable and good faith efforts are made to rectify the matter but it is not
resolved.
(v) For purposes only of determining whether termination of this
Agreement is permissible pursuant to (S) 9(a)(ii) or (S) 9(a)(iii), the
representations or warranties herein shall not be deemed to be inaccurate in any
material respect, unless such failure to comply or inaccuracy might reasonably
be expected to result in Damages to the other Party of in excess of $150,000.
(b) SPECIFIC PERFORMANCE. 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.
(c) OFFSET. Any and all Damages incurred by the Buyer which permit the
Buyer to make an indemnification claim against the Seller and to the extent not
otherwise prohibited by applicable law, shall be subject to mandatory offset by
the Buyer against all amounts due
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and owing by the Buyer to the Seller under this Agreement, the Buyer Note, or
any document, instrument, or agreement executed in connection herewith. The
foregoing shall constitute the sole remedy of Buyer against Seller in connection
with breaches of the representations, warranties, covenants and obligations of
the Seller contained in this Agreement except to the extent of any remaining
unpaid claims to the extent permitted under (S) 8 of this Agreement if there is
not a Buyer Note or any Buyer Shares remaining pledged to offset against in
which event Buyer may proceed against the Seller but only for any amounts not
offset and not exceeding one-half ( 1/2) of the Purchase Price. In the event of
an offset of any Damages incurred as a result of any such breach, the Buyer
shall furnish the Seller notice containing detailed information about the
breach, the magnitude of the Damages that the Buyer has or reasonably expects to
incur (the act of offsetting by the Buyer shall be referred to as an "Offset").
All Offsets shall be one-half ( 1/2) against the Buyer Note, and one-half ( 1/2)
against the Buyer Shares. In the event there is not any principal balance
remaining due and owing on the Buyer Note, then, any additional Damages shall be
Offset against the Buyer Shares. In the event the Buyer Shares are no longer
pledged to Buyer, in order to permit Buyer to offset any of its Damages, than
the entire amount of the Offset shall be against the principal balance of the
Buyer Note. For purposes hereof, the Buyer Shares shall be deemed to have a
value equivalent to the Buyer Shares Value. In order to secure the Buyer's
Offset rights against the Buyer Shares, the Buyer and the Seller shall execute a
certain Stock Pledge Agreement in the form attached hereto as EXHIBIT C (the
"Pledge Agreement"). The Buyer Shares shall have a restrictive legend typed on
the back thereof specifying that the Buyer Shares are subject to a right of
Offset as specified in this Agreement. The Seller acknowledges and agrees that
but for the right of Offset contained in this Agreement, the Buyer would not
have entered into this Agreement or any of the transactions contemplated herein.
If any legal action or other proceeding is brought for the enforcement of this
Agreement, or any document, instrument, or agreement executed in connection
herewith, or because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement or any document,
instrument, or agreement executed in connection herewith, the successful or
prevailing Party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding.
(d) INDEPENDENT CONTRACTORS. The Parties acknowledge that the Company has
engaged numerous independent contractors to perform court reporting services,
and that there is some possibility that the IRS may attempt to assess taxes
against the Company in connection with such independent contractors being
reclassified by the IRS as employees of the Company. In the event that the IRS
assesses any such tax deficiencies against the Company covering any time period
prior to the Effective Date, Buyer and Seller shall initially cooperate on
selecting legal counsel and/or a certified public accounting firm to defend such
claim. Buyer and Seller shall each be liable for fifty percent (50%) of the cost
incurred in defending such claim. Any final, non-appealable assessments of
liability by the IRS shall be paid one hundred percent (100%) by the Seller to
the extent allocable to any time period prior to the Effective Date, and one
hundred percent (100%) by the Company to the extent it is applicable to any time
period on or after the Effective Date. All such amounts due pursuant to this
(S)9(d) are subject to (S)8 of this Agreement.
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Neither Buyer nor Seller may settle any such claims by the IRS without the
written consent of the other Party, such consent not be unreasonably withheld.
10. MISCELLANEOUS.
(a) THE SELLER AS DIRECTOR. If the Buyer obtains directors' and officers'
(errors and omissions) insurance, or upon the Seller's written request to the
Buyer, the Seller shall be appointed to the Board of Directors of the Buyer for
a term or terms not to extend beyond the date on which the Buyer Note has been
repaid in full.
(b) PUBLIC ANNOUNCEMENTS. No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement
(including the documents referred to herein) without the prior written approval
of the Buyer and the Seller; provided, however, that any Party may make any
public disclosure it believes in good faith upon the advise of legal counsel it
is required by applicable law (in which case the disclosing Party will use its
best efforts to advise the other Party prior to making the disclosure).
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder (x) to one or more of
its Affiliates, and (y) to one or more financial institutions lending funds to
the Buyer for the purpose of financing the purchase of the Company Shares
hereunder and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) 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 the Seller:
Xxxxxxx Xxxxx
c/o Klein, Bury & Associates, Inc.
00 X. Xxxxxxx Xx., Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telefax: (000) 000-0000
Copy to: Xxxxxx X. Xxxxxxx
Xxxxxxxxx Xxxxxxx
000 X. Xxx Xxxx Xxxx., Xxxxx 0000
Xxxx Xxxxxxxxxx, XX, 00000
Phone: (000) 000-0000
Telefax: (000) 000-0000
If to the Buyer:
Litigation Resources of America, Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telefax (000) 000-0000
Attn: Mr. G. Xxxx Xxxxx
President
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telefax (000) 000-0000
Attn: J. Xxxxxxxx Xxxxx
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be
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deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF TEXAS
OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
(j) AMENDMENTS AND WAIVERS. No amendments of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
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(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) ARBITRATION. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if said dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this (S) 10(o). Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this (S) 10(o), the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages. Any arbitration
hereunder shall be held in Dade County, Florida. Expenses related to the
arbitration, including counsel fees, shall be borne by the Party incurring such
expenses except to the extent otherwise provided herein. The fees of the
arbitrator and of the American Arbitration Association, if any, shall be divided
equally among the Parties involved in the controversy. Judgment upon the award
rendered by the arbitrator (which may, if deemed appropriate by the arbitrator,
include equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The arbitrator
shall award the prevailing Party in any arbitration proceeding recovery of its
attorneys' fees and other costs in connection with the arbitration from the non-
prevailing Party.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
BUYER:
LITIGATION RESOURCES OF AMERICA, INC.,
a Texas corporation
By:/s/ G. Xxxx Xxxxx
---------------------
G. Xxxx Xxxxx
President
SELLER:
/s/ Xxxxxxx Xxxxx
------------------------
Xxxxxxx Xxxxx
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SCHEDULES AND EXHIBITS
Schedule 3A - Exceptions to the Seller's Representations and Warranties
Schedule 3B - Exceptions to the Buyer's Representations and Warranties
Schedule 4A - Seller's Disclosure Schedule
Schedule 4B - Buyer's Disclosure Schedule
Schedule 5(a) - Conduct of Business
Schedule 5(h) - No Solicitation of Other Offers by the Buyer
Exhibit A - Form of Buyer Note
Exhibit B - Employment Agreement
Exhibit C - Pledge Agreement
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