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EXHIBIT 10.1
EXECUTION COPY
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RECAPITALIZATION AGREEMENT
BY AND AMONG
CONVERGENT GROUP CORPORATION,
CERTAIN SHAREHOLDERS OF CONVERGENT GROUP CORPORATION,
XXXXX X. XXXXXX, AS THE SHAREHOLDERS' REPRESENTATIVE,
INSIGHT CAPITAL PARTNERS III, L.P.,
AS THE INVESTORS' REPRESENTATIVE,
AND
THE INVESTORS NAMED HEREIN
AUGUST 13, 1999
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TABLE OF CONTENTS
ARTICLE I.........................................................................................................2
RECAPITALIZATION TRANSACTIONS.....................................................................................2
1.1 CONSUMMATION OF THE EDS TRANSACTIONS AND THE MTH TRANSACTIONS..............................................2
1.2 RECAPITALIZATION...........................................................................................3
1.3 SALE AND PURCHASE OF PURCHASED SHARES......................................................................3
1.4 SALE OF THE SHARES OF NEW SERIES A PREFERRED STOCK; DELIVERY...............................................3
1.5 REDEMPTION OF REDEEMED SHARES..............................................................................3
1.6 CONSIDERATION..............................................................................................4
1.7 DELIVERY OF PURCHASED SHARES...............................................................................4
1.8 DELIVERY OF REDEEMED SHARES................................................................................4
1.9 ISSUANCE OF SHARES OF NEW COMMON STOCK.....................................................................5
1.10 TERMINATION OF EMPLOYMENT AGREEMENTS......................................................................5
1.11 CONTINGENT PAYMENTS.......................................................................................5
1.12 NO OTHER TRANSACTIONS; RELEASE............................................................................5
ARTICLE II RELATED MATTERS.......................................................................................6
2.1 HSR ACT....................................................................................................6
2.2 STAMP AND OTHER TAXES......................................................................................6
ARTICLE III CLOSING..............................................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................6
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.......................................................6
4.2 EQUITY INVESTMENTS.........................................................................................7
4.3 CAPITAL STOCK..............................................................................................7
4.4 DIRECTOR AND SHAREHOLDER APPROVALS.........................................................................8
4.5 AUTHORITY; NONCONTRAVENTION; CONSENTS......................................................................8
4.6 FINANCIAL STATEMENTS; PROJECTIONS..........................................................................9
4.7 ABSENCE OF UNDISCLOSED LIABILITIES........................................................................10
4.8 ABSENCE OF CHANGES........................................................................................10
4.9 EMPLOYMENT AGREEMENTS.....................................................................................12
4.10 TAX MATTERS..............................................................................................13
4.11 ERISA COMPLIANCE.........................................................................................17
4.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS...............................................19
4.13 REAL PROPERTY............................................................................................20
4.14 INTELLECTUAL PROPERTY....................................................................................21
4.15 AGREEMENTS, NO DEFAULTS, ETC.............................................................................22
4.16 COMPLIANCE WITH LAWS.....................................................................................23
4.17 LITIGATION, ETC..........................................................................................23
4.18 INSURANCE................................................................................................23
4.19 LABOR RELATIONS; EMPLOYEES...............................................................................24
4.20 ENVIRONMENTAL MATTERS....................................................................................25
4.21 CHANGE IN CONTROL........................................................................................25
4.22 STATE TAKEOVER STATUTES..................................................................................25
4.23 CONFLICTS OF INTEREST....................................................................................25
4.24 BROKERS..................................................................................................26
4.25 RELATED TRANSACTIONS.....................................................................................26
4.26 DISCLOSURE...............................................................................................26
4.27 ACCOUNTS AND NOTES RECEIVABLE............................................................................26
4.28 ACCOUNTS AND NOTES PAYABLE...............................................................................27
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4.29 BANK ACCOUNTS: POWER OF ATTORNEY.........................................................................27
4.30 SUPPLIERS AND VENDORS....................................................................................27
4.31 CUSTOMER RELATIONS, PROFITABILITY........................................................................27
4.32 YEAR 2000................................................................................................27
4.33 OWNERSHIP OF THE COMPANY.................................................................................28
4.34 DEFINITION OF "KNOWLEDGE."...............................................................................28
4.35 PRIOR TRANSACTIONS.......................................................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE RESPONSIBLE SHAREHOLDERS........................................29
5.1 TITLE TO SHARES...........................................................................................29
5.2 AUTHORITY.................................................................................................29
5.3 NONCONTRAVENTION..........................................................................................29
5.4 CONSENTS..................................................................................................30
5.5 BROKERS...................................................................................................30
5.6 NO CLAIMS AGAINST THE COMPANY.............................................................................30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTORS......................................................30
6.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.....................................................................30
6.2 BROKERS...................................................................................................31
6.3 INVESTMENT REPRESENTATIONS AND WARRANTIES.................................................................31
ARTICLE VII COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS CONCERNING REPRESENTATIONS AND WARRANTIES................32
7.1 INDEMNIFICATION BY RESPONSIBLE SHAREHOLDERS...............................................................32
7.2 WAIVER OF CONTRIBUTION....................................................................................32
7.3 SUFFICIENT AUTHORIZED SHARES..............................................................................33
ARTICLE VIII CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL AGREEMENTS...............................33
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY......................................................................33
8.2 NEGATIVE COVENANTS OF THE COMPANY.........................................................................33
8.3 AFFIRMATIVE COVENANTS OF THE RESPONSIBLE SHAREHOLDERS.....................................................33
8.4 REASONABLE EFFORTS........................................................................................35
8.5 REPRESENTATIONS AND WARRANTIES............................................................................35
8.6 CONSENTS..................................................................................................35
8.7 PUBLIC ANNOUNCEMENTS......................................................................................35
8.8 NEGOTIATION WITH OTHERS...................................................................................36
8.9 CERTAIN TAX MATTERS.......................................................................................36
8.10 SHAREHOLDERS' REPRESENTATIVE.............................................................................36
8.11 INVESTORS' REPRESENTATIVE................................................................................37
8.12 KEY MAN LIFE INSURANCE...................................................................................39
8.13 ADDITIONAL SMALL BUSINESS COVENANTS......................................................................39
ARTICLE IX CONDITIONS...........................................................................................40
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS....................................................................40
9.2 CONDITIONS TO OBLIGATIONS OF THE INVESTORS................................................................40
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY..................................................................43
9.4 RELEASE BY RESPONSIBLE SHAREHOLDERS.......................................................................44
ARTICLE X INDEMNIFICATION.......................................................................................45
10.1 INDEMNIFICATION GENERALLY; ETC...........................................................................45
10.2 ASSERTION OF CLAIMS......................................................................................49
10.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.................................................................49
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...............................................................50
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10.5 NO THIRD PARTY RELIANCE..................................................................................51
10.6 REMEDIES EXCLUSIVE.......................................................................................51
ARTICLE XI [INTENTIONALLY OMITTED]..............................................................................52
ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................52
12.1 EXPENSES.................................................................................................52
12.2 AMENDMENT................................................................................................52
12.3 ENTIRE AGREEMENT.........................................................................................52
12.4 SEVERABILITY.............................................................................................52
12.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.....................................................52
12.6 HEADINGS.................................................................................................53
12.7 NOTICES..................................................................................................53
12.8 COUNTERPARTS.............................................................................................54
12.9 GOVERNING LAW............................................................................................54
12.10 INCORPORATION OF EXHIBITS AND SCHEDULES.................................................................54
12.11 CONSTRUCTION............................................................................................54
12.12 NON-MERGER OF REPRESENTATIONS AND WARRANTIES............................................................55
12.13 REMEDIES; SPECIFIC PERFORMANCE..........................................................................55
12.14 JURISDICTION, ETC.......................................................................................55
12.15 WAIVER OF JURY TRIAL....................................................................................56
12.16 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES............................................56
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RECAPITALIZATION AGREEMENT (as amended,
modified or supplemented, this "Agreement"), dated as
of August 13, 1999, by and among CONVERGENT GROUP
CORPORATION, a Delaware corporation (the "Company"),
certain shareholders of the Company listed on the
signature pages hereto (the "Responsible
Shareholders"), Xxxxx X. Xxxxxx, solely in his
capacity as the Shareholders' Representative, the
Investors listed on Schedule I hereto (the
"Investors") and INSIGHT CAPITAL PARTNERS III, L.P.,
solely in its capacity as the Investors'
Representative.
RECITALS
WHEREAS, the Company is engaged in the business (the "Subject
Business") of providing technical management consulting and/or systems
integration services for automated mapping/facilities management systems and/or
geographic information systems and/or utility transmission and distribution
systems;
WHEREAS, the Board of Directors has approved this Agreement, the
Related Documents to which the Company is a party and the transactions
contemplated hereby and thereby (including the Purchase and the Redemption);
WHEREAS, subject to the terms and conditions set forth in this
Agreement, on the Closing Date the Company and the other parties hereto shall
accomplish the recapitalization of the Company (the "Recapitalization") as
follows:
(a) the Company shall enter into a twenty-five million dollar
($25,000,000) secured revolving line of credit with Fleet National Bank
("Fleet") on the terms and conditions set forth in the Loan Agreement dated as
of the date hereof among the Company, Fleet and the other parties thereto (the
"Bank Financing");
(b) the Company shall exercise its option to redeem 282,000 shares
of its Class A Common Stock and 5,725 shares of its Series A Preferred Stock
from EDS for an aggregate purchase price of $12,645,086 and 34,816 shares of its
Series B Preferred Stock from EDS for an aggregate purchase price of $14,000,000
(collectively, the "EDS Transactions"). Upon consummation of the EDS
Transactions, EDS shall not own any of the capital stock of the Company;
(c) the Company shall file the Restated Charter, which shall,
among other things, authorize the New Series A Preferred Stock;
(d) the Company shall exercise its option to redeem 2,068,000
shares of its Class A Common Stock from Xxxxxx X. Xxxxxxx ("MTH") for an
aggregate purchase price of
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$17,619,360 (the "MTH Transactions"), after which MTH shall not own any capital
stock of the Company;
(e) certain Shareholders listed on Schedule II shall exchange the
number of shares of New Common Stock set forth opposite their respective names
for the number of shares of New Series A Preferred Stock set forth opposite
their respective names;
(f) the Investors shall purchase (the "Purchase") an aggregate of
9,447,911 shares of New Series A Preferred Stock from certain Shareholders for
an aggregate purchase price of $10,250,683, as set forth on Schedule II hereto;
(g) the Investors shall subscribe for and purchase 32,530,778
shares of New Series A Preferred Stock from the Company for an aggregate
purchase price of $35,294,766, as set forth on Schedule I hereto;
(h) the Company shall redeem (the "Redemption") an aggregate of
1,389,024 shares of New Common Stock from certain Shareholders for an aggregate
purchase price of $1,512,394, as set forth on Schedule II hereto;
(i) the Company shall issue shares of New Common Stock (or options
exercisable for New Common Stock) to the Persons identified on Schedule II
hereto in the amounts set forth thereon in consideration of their continued
employment with the Company;
(j) certain Employees of the Company identified on Schedule III
hereto shall terminate their current employment agreements with the Company in
exchange for the consideration set forth opposite their respective names on
Schedule III.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby (including the Purchase and the Redemption).
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
RECAPITALIZATION TRANSACTIONS
1.1 CONSUMMATION OF THE EDS TRANSACTIONS AND THE MTH TRANSACTIONS.
(a) The Company shall exercise its option to purchase all of the
capital stock of the Company owned by EDS upon the terms and conditions set
forth in the EDS Option Agreement.
(b) The Company shall exercise its option to purchase all of the
capital stock of the Company owned by MTH upon the terms and conditions set
forth in the MTH Option Agreement.
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1.2 RECAPITALIZATION.
Immediately following the consummation of the EDS Transactions and
immediately prior to the consummation of the MTH Transactions, the Company shall
file the Restated Charter, which shall, among other things, authorize the New
Series A Preferred Stock. Upon the effectiveness of the Restated Charter, each
authorized share and outstanding share of Common Stock shall be automatically
converted into 7.83 shares of New Common Stock. Upon the effectiveness of the
Restated Charter, the Shareholders identified on Schedule II shall exchange
certain shares of New Common Stock then held by them for shares of New Series A
Preferred Stock, and upon the surrender by such Shareholders of their shares of
New Common Stock, the Company shall issue to each such Shareholder one share of
New Series A Preferred Stock for each share of New Common Stock so surrendered.
1.3 SALE AND PURCHASE OF PURCHASED SHARES.
(a) Immediately following the effectiveness of the Restated
Charter, and upon the terms and subject to the conditions set forth herein, at
the Closing the Shareholders identified on Schedule II hereto shall, severally
but not jointly, sell, transfer, convey and assign to the Investors, that number
of shares of New Series A Preferred Stock set forth opposite such Shareholder's
name on Schedule II (the "Purchased Shares").
(b) Subject to the terms and conditions hereof and of the Stock
Purchase and Redemption Agreement, each Investor shall purchase from the
Shareholders identified on Schedule II, severally but not jointly, that number
of Purchased Shares specified opposite such Investor's name on Schedule I
hereto, for an aggregate purchase price for all Investors of $10,253,135 (the
"Purchased Shares Consideration").
1.4 SALE OF THE SHARES OF NEW SERIES A PREFERRED STOCK; DELIVERY.
(a) Subject to the terms and conditions hereof, the Company shall
sell and issue to each Investor, and each Investor shall purchase from the
Company, severally but not jointly, that number of shares of New Series A
Preferred Stock specified opposite such Investor's name on Schedule I hereto,
for an aggregate purchase price for all Investors of $35,292,407 (the
"Subscription").
(b) At the Closing the Company shall deliver to each Investor the
appropriate certificate(s) representing the shares of Series A Preferred Stock
purchased by such Investor at the Closing, which shall be delivered against
payment of the purchase price therefor in the amount specified in Schedule I, by
wire transfer of same day funds.
1.5 REDEMPTION OF REDEEMED SHARES.
(a) The Company will have authorized before the Closing the
redemption of 1,389,024 shares of New Common Stock.
(b) Upon the terms and subject to the conditions set forth herein
and in the Stock Purchase and Redemption Agreement, at the Closing the
Shareholders identified on Schedule II
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hereto shall, severally but not jointly
sell, transfer, convey and assign to the Company, and the Company shall redeem
and purchase from such Shareholders (the "Redemption"), that number of shares of
New Common Stock (the "Redeemed Shares") set forth opposite such Shareholder's
name on Schedule II hereto. As payment for the Redeemed Shares, the Company
shall pay to the Shareholders by wire transfer or check the amount set forth
opposite each such Shareholder's name on Schedule II hereto ($1,512,394 in the
aggregate) (the "Redeemed Shares Consideration").
1.6 CONSIDERATION.
(a) The consideration to be paid to the Shareholders by the
Investors or the Company, as the case may be, shall be deemed to be good and
sufficient consideration for the Purchased Shares, the Redeemed Shares and the
covenants contained in Section 8.3(c) herein.
(b) At the Closing, the Shareholders and/or the Company are
delivering to the holders of Funded Indebtedness identified on Schedule 1.6
hereto (unless otherwise instructed by the Investors) an amount sufficient to
repay all such Funded Indebtedness outstanding immediately prior to the Closing,
with the result that immediately following the Closing there will be no further
monetary obligations of the Company with respect to any such Funded Indebtedness
outstanding immediately prior to the Closing. On the Closing Date, the Company
or the Shareholders shall provide the Investors with customary pay-off-letters
from all holders of such Funded Indebtedness outstanding immediately prior to
the Closing, and make arrangements satisfactory to the Investors for such
holders to provide to the Investors recordable form mortgage and lien discharges
and releases, UCC-3 and other personal property security financing statements,
canceled notes, trademark and patent relinquishments and other documents
reasonably requested by the Investors simultaneously with the Closing to
evidence the discharge and repayment of such Funded Indebtedness and the
discharge release of all Encumbrances securing such Funded Indebtedness.
1.7 DELIVERY OF PURCHASED SHARES.
At the Closing, in consideration of the Investor's delivery of the
Purchased Shares Consideration, each Shareholder shall deliver to the Investors
a certificate or certificates representing the Purchased Shares owned by such
Shareholder as set forth on Schedule II, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank, sufficient in form and
substance to convey to the Investors, good and marketable title to the Purchased
Shares free and clear of all Encumbrances.
1.8 DELIVERY OF REDEEMED SHARES.
At the Closing, in consideration of the Company's delivery of the
Redeemed Shares Consideration, each Shareholder shall deliver to the Company a
certificate or certificates representing the number of Redeemed Shares being
redeemed and purchased from each Shareholder, set forth on Schedule II, duly
endorsed in blank for transfer or accompanied by stock powers duly executed in
blank, sufficient in form and substance to convey to the Company, good and
marketable title to the Redeemed Shares free and clear of all Encumbrances.
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1.9 ISSUANCE OF SHARES OF NEW COMMON STOCK.
At the Closing, immediately following the consummation of the Purchase
and the Redemption, the Company shall issue to certain Persons, in consideration
for their continued employment with the Company, such number of shares of New
Common Stock (or options exercisable therefor), as is set forth on Schedule II
hereto (the "New Issuance").
1.10 TERMINATION OF EMPLOYMENT AGREEMENTS.
At the Closing, certain employees of the Company identified on Schedule
III hereto shall terminate their current employment agreements with the Company
in consideration for the payments set forth opposite their respective names on
Schedule III hereto.
1.11 CONTINGENT PAYMENTS.
On the thirty (30) day anniversary of the Closing Date (the "Contingent
Payment Date"), the Company shall consummate the transactions set forth on
Schedule IV hereto (the "Contingent Payments"); provided, however, that the
Company shall have no obligation to make any such Contingent Payment to any
proposed recipient except in accordance with, and subject to the terms and
conditions of, such Person's Deferred Payment Agreement (with all such Deferred
Payment Agreements attached as Exhibit E hereto). All Contingent Payments shall
be made to the recipients thereof net of all applicable federal, state,
municipal and local withholding Taxes at a level consistent with the Company's
past practices.
1.12 NO OTHER TRANSACTIONS; RELEASE.
Other than the Transactions, there shall be no other issuances of
capital stock, redemptions, repurchases or exchanges of capital stock,
cancellations of options, purchases of stock, payments of any bonuses, deferred
bonuses, payments of transaction fees or other fees, loans or option grants, in
each case effected on, after or before the Closing Date in any way related to or
in contemplation of, the Recapitalization. Each of the Responsible Shareholders
agrees and acknowledges that as a result of the Transactions, certain payments,
consideration and benefits are being provided to certain Shareholders but not
all Shareholders and that certain Shareholders are receiving different
consideration, taken as a whole, for the sale of their shares of Common Stock
than other Shareholders are receiving for the sale of their shares of Common
Stock. The Responsible Shareholders hereby release the Company, its Subsidiaries
and the Investors, their Affiliates, members, partners (including limited
partners), officers, directors, employees, independent advisors and agents from
any claims, Losses, damages or costs arising from the Transactions, including
claims, Losses, damages or costs in connection with the fact that certain
Shareholders may be, taken as a whole, receiving disparate treatment in
connection with the Transactions.
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ARTICLE II
RELATED MATTERS
2.1 HSR ACT.
Prior to the signing of the Agreement, the Company and UBS shall each
make any and all filings required under the HSR Act, each in form approved by
the other with respect to items 1 through 3 of the Notification and Report Form
required thereby. The Company shall pay its fees and expenses and the fees
(including legal fees) and expenses of UBS (including all filing fees) incurred
in connection with such filings.
2.2 STAMP AND OTHER TAXES.
The Company shall pay all stamp, filing and similar Taxes and fees
payable with respect to the transactions contemplated by this Agreement.
ARTICLE III
CLOSING
The closing of the Purchase, the Redemption and the other transactions
contemplated hereby (the "Closing") shall take place (a) at the offices of
X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, as promptly as practicable after satisfaction or waiver of the conditions
set forth in Article IX in accordance with this Agreement or (b) at such other
place, time and date as the Investors and the Company may agree in writing. The
date and time of such Closing are referred to herein as the "Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
Each of the Company and its subsidiaries (each of which is listed on
Schedule 4.1 attached hereto) (each a "Subsidiary," and together , the
"Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the Laws of the state, province or country of its jurisdiction,
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to enter into
this Agreement and the Related Documents, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where a failure to so
qualify would not have a Material Adverse Effect. The jurisdictions in which the
Company and its Subsidiaries are qualified as foreign corporations or licensed
or registered to carry on business are set forth in
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Schedule 4.1. The Company has delivered to the Investors true and complete
correct copies of its and its Subsidiaries certificates or articles of
incorporation and bylaws (or other corporate governance documents) in each case
as amended to the date hereof.
4.2 EQUITY INVESTMENTS.
Except as set forth in Schedule 4.2, the Company does not currently
have any subsidiaries, nor does it currently own any capital stock or other
interest, directly or indirectly, in any Person.
4.3 CAPITAL STOCK.
(a) Immediately prior to the filing of the Restated Charter, the
authorized capital stock of the Company consists of 2,500,000 shares of Common
Stock, 3,500,000 shares of Class A Common Stock, 1,500,000 shares of Class B
Common Stock, 5,725 shares of Series A Preferred Stock and 39,000 shares of
Series B Preferred Stock. Immediately prior to the consummation of any of the
Transactions, 1,488,905 shares of Common Stock are outstanding, 2,350,000 shares
of Class A Common Stock are outstanding, no shares of Class B Common Stock are
outstanding, 5,725 shares of Series A Preferred Stock are outstanding and 34,816
shares of Series B Preferred Stock are outstanding. All of the foregoing
outstanding shares of capital stock of the Company are owned of record by the
Shareholders in the amounts set forth in Schedule 4.3. All of such shares are
validly issued, fully paid and non-assessable and have been issued in compliance
with all applicable Laws including, without limitation, applicable securities
Laws. Except as set forth in Schedule 4.3 or on Schedule II, there are no
securities of the Company presently outstanding, and on the Closing Date there
will not be any outstanding securities of the Company, which are convertible
into, exchangeable for, or carrying the right to acquire, equity securities of
the Company, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
the Company to issue, sell, register, purchase or redeem any of its equity
securities or any ownership interest or rights therein. Except as set forth in
Schedule 4.3, there are no voting trusts or other agreements or understandings
to which the Company is bound with respect to the voting of the Company's
capital stock. There are no stock appreciation rights, phantom stock rights or
similar rights or arrangements outstanding.
(b) Upon the effectiveness of the Restated Charter, the authorized
capital stock of the Company shall consist of 125,000,000 shares of common
stock, $0.001 par value (the "New Common Stock") and 75,000,000 shares of
Preferred Stock, $0.001 par value, all of which shall be designated as Series A
Participating Convertible Preferred Stock (the "New Series A Preferred Stock").
The New Series A Preferred Stock shall have the rights, preferences, privileges
and limitations set forth in the Restated Charter. The Company has reserved, and
at all times from and after the date hereof will keep reserved, free from
preemptive rights, out of its authorized but unissued shares of New Common
Stock, solely for the purpose of effecting the conversion of all shares of New
Series A Preferred Stock, sufficient shares of New Common Stock to provide for
the conversion of all outstanding shares of New Series A Preferred Stock. All of
such shares of New Common Stock issued on such conversion will be duly
authorized and be validly issued and outstanding, fully paid and nonassessable
and free from preemptive rights.
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(c) The authorized capital stock of each Subsidiary of the Company
is as set forth on Schedule 4.3. As of the date hereof and immediately prior to
the Closing, all outstanding shares of each such Subsidiary are owned of record
by the shareholders in the amounts set forth in Schedule 4.3. All of such shares
are validly issued, fully paid and non-assessable and have been issued in
compliance with all applicable Laws including, without limitation, applicable
securities Laws. Except as set forth in Schedule 4.3, there are no securities of
any Subsidiary presently outstanding, and on the Closing Date there will not be
any outstanding securities of any Subsidiary, which are convertible into,
exchangeable for, or carrying the right to acquire, equity securities of such
Subsidiary, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
such Subsidiary to issue, sell, register, purchase or redeem any of its equity
securities or any ownership interest or rights therein. Except as set forth in
Schedule 4.3, there are no voting trusts or other agreements or understandings
to which any Subsidiary is bound with respect to the voting of its capital
stock. There are no stock appreciation rights, phantom stock rights or similar
rights or arrangements outstanding.
(d) With respect to the UK Subsidiary, the shares set out in
Schedule 4.3 constitute the whole of the issued and allotted share capital of
the UK Subsidiary and are fully paid or credited as fully paid and there are no
options over or other rights (whether exercisable now or in the future and
whether contingent or not) to acquire any shares or subscribe for shares in the
capital of the UK Subsidiary. Except as set forth in Schedule 4.3, there is no
Encumbrance on, over or affecting any of the shares in the UK Subsidiary, no
agreement to create such Encumbrance has been made and no claim has been made
that any Person is entitled to any such Encumbrance.
4.4 DIRECTOR AND SHAREHOLDER APPROVALS.
The Board of Directors of the Company has approved the Transactions,
this Agreement and the Related Documents to which the Company is a party and
determined Transactions to be fair to and in the best interests of the Company
and the Shareholders. Except as set forth on Schedule 4.4, one hundred percent
(100%) of the Company's shareholders have consented in writing to the Company's
consummation of the Transactions. Except as set forth on Schedule 4.4, no other
approval is required in order for the Company to consummate the transactions
contemplated by this Agreement or the Related Documents to which it is a party.
4.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and
the Related Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary action
on the part of the Company; and this Agreement has been, and the Related
Documents, when executed and delivered by the Company will be, duly and validly
executed and delivered by it and this Agreement is, and the Related Documents,
when executed and delivered by it will be, the valid and binding obligations of
the Company, enforceable against it in accordance with their respective terms,
except as enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights generally or
by general principles of equity.
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(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents, nor the consummation by the Company or any
Subsidiary of the transactions contemplated hereby or thereby will (i) conflict
with, or result in any violation of, or cause a default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained in or the
loss of any benefit under, or result in the creation of any Encumbrance upon any
of the properties or assets of the Company or any Subsidiary under any term,
condition or provision of (x) the Company's certificate or articles of
incorporation or bylaws or any Subsidiary's constating or governing documents or
(y) any Contract to which the Company or any Subsidiary is a party or by which
its properties or assets are bound, (ii) result in any investigatory, remedial
or reporting obligation under any Environmental Law or (iii) violate any Laws
applicable to the Company or any Subsidiary or any of their respective
properties.
(c) Each Shareholder is the lawful owner of record, of each of the
shares of Common Stock being sold. transferred, conveyed and assigned by him or
her hereunder pursuant to the Purchase and the Redemption.
(d) Except as is expressly contemplated by this Agreement, and
except for post-Closing filings required in connection with the Subscription or
the New Issuance under any applicable securities Law no consent, approval, Order
or authorization of, registration, declaration or filing with, or notification
to any Governmental Entity or any other third party is required in connection
with the execution, delivery and performance by the Company or any Subsidiary of
this Agreement or the Related Documents or the consummation by the Company or
any Subsidiary of the transactions contemplated hereby or thereby.
(e) The UK Subsidiary has not done anything which, and is not a
member or party to any agreement or arrangement which, contravenes or requires
registration or notification under any of the provisions of the United Kingdom
Fair Trading Xxx 0000, the United Kingdom Restrictive Trade Practices Acts, the
United Kingdom Resale Prices Xxx 0000, the Treaty of Rome; or the United Kingdom
Competition Act 1980 or any other anti-trust, anti-monopoly or anti-cartel
legislation or regulation in any country of the world in which or with which it
does business.
4.6 FINANCIAL STATEMENTS; PROJECTIONS.
(a) Prior to the date hereof, the Company has delivered to the
Investors true, correct and complete copies of the unaudited, consolidated
balance sheets of the Company as of June 30, 1999, (the "Latest Balance Sheet"
and such date being the "Latest Balance Sheet Date") and the related unaudited
statements of income, stockholders' equity, cash flows and supplemental data for
the six month period then ended, and true, correct and complete copies of the
audited consolidated balance sheets of the Company for the fiscal years ended
1998, 1997 and 1996 and the related statements of income, stockholders' equity,
cash flows and supplemental data for the fiscal periods then ended; and
(b) The financial statements referenced in this Section 4.6 shall
be collectively referred to in this Agreement as the "Financial Statements". The
Financial Statements (i) are in
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accordance with the Books and Records of the Company, (ii) fairly present, in
all material respects, the consolidated financial condition of the Company and
its Subsidiaries as at the respective dates indicated and the results of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the respective periods indicated and (iii) have been prepared
in accordance with the Relevant GAAP and consistently applied throughout the
periods covered thereby subject, in the case of unaudited Financial Statements,
to the omission of footnotes and to normal year end audit adjustments, which
adjustments are not expected to be material (either individually or in the
aggregate).
(c) The projected and financial data of the Company and its
Subsidiaries for the calendar year 1999, including forecasted balance sheets and
income statements and sources and uses of cash for fiscal year 1999, the budget
for calendar year 1999 and current estimates of individual project
profitability, have all been prepared in good faith, using assumptions which are
reasonable. Such projections represent the Company's best estimate of future
performance, revenues, project completion margins and costs, and the Company has
no reason to believe that such projections will not be substantially realized;
provided, however, that the Company does not represent or warrant that such
projected results will be obtained.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 4.7, to the Company's Knowledge,
neither the Company nor any Subsidiary has any Liability, except for (i)
Liabilities reflected in the Liabilities section of the Latest Balance Sheet,
(ii) Liabilities that have arisen since the date of the Latest Balance Sheet in
the ordinary course of business (none of which arise from any breach of
Contract, breach of warranty, tort, infringement, violation of Law, or any
action, suit or Proceeding (including any Liability under any Environmental and
Safety Requirement)), (iii) Liabilities to perform under executory Contracts and
(iv) Liabilities expressly set forth in the Schedules hereto. To the Company's
Knowledge, there are no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that are not adequately provided for on the
Latest Balance Sheet. Except as set forth in Schedule 4.7, neither the Company
nor any Subsidiary has, either expressly or by operation of Law, assumed or
undertaken any Liability of any other Person, including, without limitation, any
obligation for corrective or remedial action relating to Environmental and
Safety Requirements. To the Company's Knowledge, the reserves reflected on the
Latest Balance Sheet for Liabilities which were incurred but not reported are
adequate to cover such Liabilities.
4.8 ABSENCE OF CHANGES.
Since the Latest Balance Sheet Date, there has not been any Material
Adverse Change affecting the Company or any of its Subsidiaries and, to the
Company's Knowledge, no event (other than changes in general economic conditions
affecting the Subject Business) has occurred or circumstance exists which is
likely to result in such a Material Adverse Change. Without limiting the
generality of the foregoing, since the Latest Balance Sheet Date, except as set
forth in Schedule 4.8, the Company and each Subsidiary has been operated in the
ordinary course,
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consistent with past practice, and there has not been (other than as is
expressly contemplated by this Agreement):
(a) other than in the ordinary course, and consistent with past
practices, of such Person's Business, any payment, discharge or satisfaction of
any Encumbrance or Liability by the Company or any Subsidiary or any
cancellation by the Company or any Subsidiary of any debts or claims or any
amendment, termination or waiver of any rights of value to such Persons;
(b) any declaration, setting aside or payment of any dividend or
other distribution of any assets of any kind whatsoever with respect to any
shares of the capital stock of the Company or any Subsidiary, or any direct or
indirect redemption, purchase or other acquisition of any such shares of the
capital stock of the Company or any Subsidiary;
(c) any stock split, reverse stock split, combination,
reclassification or recapitalization of any capital stock of the Company or any
Subsidiary, or any issuance of any other security in respect of or in exchange
for, any shares of any capital stock of the Company or any Subsidiary;
(d) any issuance by the Company or any Subsidiary of any shares of
their capital stock or any debt security or securities, rights, options or
warrants convertible into or exercisable or exchangeable for any shares of such
capital stock or debt security;
(e) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset of the Company or any Subsidiary
other than in the ordinary course of such Person's business and consistent with
past practices;
(f) any termination or indication of an intention to terminate or
not renew, any Contract between the Company or any Subsidiary and any other
Person;
(g) any write-down or write-up of the value of any asset of the
Company or any Subsidiary, or any write-off of any accounts receivable or notes
receivable of the Company or any Subsidiary or any portion thereof;
(h) any increase in or modification of compensation payable or to
become payable to any officer, employee, consultant or agent of the Company or
any Subsidiary, other than any such increases in the ordinary course of
business, consistent with past practice, or the entering into of any employment
contract with any officer or employee;
(i) any increase in or modification or acceleration of any
benefits payable or to become payable under any bonus, pension, severance,
insurance or other benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any officer, employee, consultant or
agent of the Company or any Subsidiary;
(j) the making of any loan, advance or capital contribution to or
investment in any Person or the engagement in any transaction with any employee,
officer, director or shareholder
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of the Company or any Subsidiary, other than advances to employees in the
ordinary course of business for travel and similar business expenses;
(k) any change in the accounting methods or practices followed by
the Company or any Subsidiary or any change in depreciation or amortization
policies or rates theretofore adopted;
(l) any deterioration in the aging of the Company's or any
Subsidiary's accounts payable or acceleration in the aging of the Company's or
any Subsidiary's accounts receivable or other change in the Company's or any
Subsidiary's working capital management practices;
(m) other than in the ordinary course, and consistent with past
practices, of such Person's business, any change in the manner in which the
Company or any Subsidiary extends discounts or credit to customers or otherwise
deals with customers;
(n) any termination of employment of any officer or Designated
Employee of the Company or any Subsidiary or any expression of intention to the
Company or any Subsidiary by any officer or Designated Employee of the Company
or any Subsidiary to terminate such office or employment with such Person;
(o) except as contemplated hereby, any amendments or changes in
the Company's or any Subsidiary's articles of incorporation or bylaws or other
constating or governing documents;
(p) any labor disputes or any union organizing campaigns;
(q) to the Knowledge of the Company or any Subsidiary, the
commencement of any Proceedings by or against the Company or any Subsidiary; or
(r) any agreement, understanding, authorization or proposal,
whether in writing or otherwise, for the Company or any Subsidiary to take any
of the actions specified in items (a) through (q) above.
4.9 EMPLOYMENT AGREEMENTS.
Except as disclosed in Schedule 4.9, there exist no employment,
consulting, non-competition, severance, bonus or indemnification agreements or
understandings between the Company or the Subsidiaries and any current or former
director or officer of the Company or the Subsidiaries or any other employee or
agent. Schedule 4.9 sets forth a true, correct and complete list of all amounts
payable or that will become payable to each present or former director, officer,
consultant or employee of the Company or any Subsidiary pursuant to any
agreement or understanding set forth in Schedule 4.9 as a result of the
execution and delivery of this Agreement and the Related Documents and/or the
consummation of the transactions contemplated hereby, which schedule shall
separately identify the Person to whom such amount is or will become payable.
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4.10 TAX MATTERS.
(a) Except as set forth in Schedule 4.10: (i) the Company and (ii)
each Subsidiary:
(i)has timely paid or caused to be paid all Taxes required to
be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
(ii)has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns
required to be filed by it with the appropriate Governmental Entities
in all jurisdictions in which such Tax Returns are required to be
filed; and all Tax Returns filed on behalf of the Company and each
Subsidiary were complete and correct; and
(iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) The Company has previously delivered true, correct and
complete copies of all Federal Tax Returns filed by or on behalf of the Company
through the date hereof for the periods ending after December 31, 1994 and for
all subsequent periods.
(c) Except as set forth in Schedule 4.10:
(i) neither the Company nor any Subsidiary has been notified
by the Internal Revenue Service or any other taxing authority that any
issues have been raised (and no such issues are currently pending) by
the Internal Revenue Service or any other taxing authority in
connection with any Tax Return filed by or on behalf of the Company or
any Subsidiary; there are no pending Tax audits, and no waivers of
statutes of limitations have been given or requested with respect to
the Company or any Subsidiary; no Tax Encumbrances have been filed
against the Company or any Subsidiary except for Encumbrances for
current Taxes not yet due and payable for which adequate reserves have
been provided for in the Latest Balance Sheet; no unresolved
deficiencies or additions to Taxes have been proposed, asserted, or
assessed against the Company or any Subsidiary;
(ii) full and adequate provision has been made (A) on the
Latest Balance Sheet, and the books and records of the Company and each
Subsidiary for all Taxes not yet due and payable by the Company as if
it were a stand-alone company for all periods on or prior to the Latest
Balance Sheet Date;
(iii) neither the Company nor any Subsidiary has incurred any
Liability for Taxes from and after the Latest Balance Sheet Date other
than Taxes incurred in the ordinary course of business and consistent
with past practices;
(iv) neither the Company nor any Subsidiary has (A) made an
election (or had an election made on its behalf by another Person) to
be treated as a "consenting
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corporation" under Section 341(f) of the Code or (B) been a "personal
holding company" within the meaning of Section 542 of the Code;
(v) the Company and each Subsidiary has complied with all
applicable Laws relating to the collection or withholding of Taxes
(such as sales Taxes or withholding of Taxes from the wages of
employees);
(vi) neither the Company nor any Subsidiary has any Liability
in respect of any Tax sharing agreement with any Person, and all Tax
sharing agreements to which either the Company or any Subsidiary has
been bound have been terminated;
(vii) neither the Company nor any Subsidiary has incurred any
Liability to make or possibly make any payments either alone or in
conjunction with any other payments that:
(A) shall be non-deductible under, or would otherwise
constitute a "parachute payment" within the meaning of Section 280G of
the Code (or any corresponding provision of state, local or foreign
income Tax Law); or
(B) are or may be subject to the imposition of an excise
Tax under Section 4999 of the Code;
(viii) neither the Company nor any Subsidiary has agreed to
(nor has any other Person agreed to on its behalf) and is not required
to make any adjustments or changes either on, before or after the
Closing Date, to its accounting methods pursuant to Section 481 of the
Code, and the Internal Revenue Service has not proposed any such
adjustments or changes in the accounting methods of such Persons;
(ix) no claim has been made within the last three years by
any taxing authority in a jurisdiction in which the Company or any
Subsidiary does not file Tax Returns that the Company or any Subsidiary
is or may be subject to taxation by that jurisdiction;
(x) the consummation of the transactions hereunder will not
trigger the realization or recognition of intercompany gain or income
to the Company or any Subsidiary under the Federal consolidated return
regulations with respect to Federal, state, or local taxes; and
(xi) The Company is not currently, nor has it been at any
time during the previous five years, a "U.S. real property holding
corporation" (as defined in Section 897 of the Code).
(xii) neither the Company nor any Subsidiary owns an equity
interest in any foreign entity, including the Canadian Subsidiaries and
the UK Subsidiary, which is or has been either a foreign personal
holding company (as defined in Section 552 of the Code) or a passive
foreign investment company (as defined in Section 1297 of the Code), or
which has resulted in the inclusion of Subpart F income or an amount
determined
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under Section 956 (as defined in the Code) in the federal taxable
income of the Company or any Subsidiary.
(d) Canadian Tax Matters. There are no circumstances existing
which could result in the application of either section 78 or section 80 of the
Income Tax Act (Canada) or any equivalent provincial provision to the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
claimed or will claim any reserve under any one or more of subparagraph
40(1)(a)(iii), or paragraphs 20(1)(l), 20(1)(m) or 20(1)(n) of the Income Tax
Act (Canada) or any equivalent provincial provision, if any such amount could be
included in the income of the Company or any of the Subsidiaries for any period
ending after Closing.
(i) Each of the Company and its Subsidiaries has withheld
from each payment made to any of its present or former employees,
officers and directors, and to all Persons who are (or were at the
relevant time) non-residents of Canada for the purposes of the Income
Tax Act (Canada), all amounts required by Law and has remitted such
withheld amounts within the prescribed periods to the appropriate
Governmental Entity. Each of the Company and its Subsidiaries has
properly withheld all Canada Pension Plan contributions, unemployment
insurance premiums, employer health Tax and other Taxes payable by it
with respect to its employees and has or will have remitted such
amounts to the appropriate Governmental Entity within the time required
under the applicable legislation. Each of the Company and its
Subsidiaries has charged, collected and remitted on a timely basis all
Taxes as required by applicable legislation, including those imposed
under Part XI of the Excise Tax Act (Canada) on any sale, supply or
delivery whatsoever made by the Company or any of its Subsidiaries.
(ii) Copies of all forms T2038 or any equivalent forms are
attached as Schedule 4.10(d) and have been accepted as correct and
complete by the relevant Governmental Entity for the purpose of the
Income Tax Act (Canada) and any relevant provincial taxing statute.
Schedule 4.10(d) accurately sets out the investment tax credits (as
defined in the Income Tax Act (Canada) and any relevant provincial
taxing Law) still available to the Company or its Subsidiaries for
taxation years ending after the Closing Date or used by the Company
with respect to the last seven taxation years ending before the Closing
Date.
(iii) Each of the Canadian Subsidiaries is resident in
Canada, as defined in the Income Tax Act (Canada).
(iv) Each of the Canadian Subsidiaries is a
Canadian-controlled private corporation, as defined in the Income Tax
Act (Canada), and has been since its incorporation. Each of the
Canadian Subsidiaries is a registrant for the purposes of the goods and
services tax provided for under the Excise Tax Act (Canada).
(v) Neither the Company nor any of its Canadian Subsidiaries
has made or filed any election under section 83 or section 85 of the
Income Tax Act (Canada) or any equivalent provincial provision, other
than those elections disclosed on Schedule 4.10(d).
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All elections or designations required to be filed by the Company or
any of its Subsidiaries have been duly filed on a timely basis.
(vi) Each of the Company and its Canadian Subsidiaries has
paid all Taxes imposed under the Retail Sales Tax Act (Ontario) and
comparable legislation of any other province or territory of Canada,
and none of its tangible personal property has been transferred at any
time on a tax-exempt basis under the provisions of the Retail Sales Tax
Act (Ontario) and comparable legislation of any other province or
territory of Canada or any predecessor thereof.
(vii) Neither the Company nor any of its Canadian
Subsidiaries has ever acquired or had the use of any of the assets,
real or personal, tangible or intangible, of the Company or any of its
Subsidiaries, as the case may be, from a Person (a "Related Person")
with whom the Company or any of its Canadian Subsidiaries, as the case
may be, was not dealing at arm's length, as determined under the Income
Tax Act (Canada). Neither the Company nor any of its Canadian
Subsidiaries has ever disposed of such asset to a Related Person for
proceeds less than the fair market value of such asset.
(e) UK TAX MATTERS
Without duplication of Section 4.10(a) through (d):
(i) The UK Subsidiary has duly made all returns and given or
delivered all notices, accounts and information which should have been
made and is not involved in any Proceeding with the Inland Revenue or
other Governmental Entity concerning any matter which may affect in any
way the Liability (whether accrued, contingent or future) of it to
taxation of any nature whatsoever or other sums imposed, charged,
assessed, levied or payable under the provisions of the United Kingdom
taxation Laws and neither the Company nor the UK Subsidiary is aware of
any matter which may lead to such dispute.
(ii) The UK Subsidiary has duly paid or fully provided for
all Taxes for which it is liable and there are no circumstances in
which interest or penalties in respect of a Tax not duly paid could be
charged against it in respect of any period prior to the Closing Date.
(iii) No Liability of the UK Subsidiary for Taxes has arisen
or will arise up to the Closing Date except for corporation Taxes
payable in respect of normal trading profits earned by it or income Tax
deducted under United Kingdom Pay As You Earn regulations or National
Insurance Contributions or Value Added Tax or sickness pay for which it
is accountable to the Inland Revenue or other relevant Governmental
Entity and which has where appropriate been deducted or charged and
where due paid to the Inland Revenue or such other relevant
Governmental Entity.
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(iv) The UK Subsidiary has not entered into or been a party
to any scheme or arrangements designed partly or wholly for the purpose
of it or any other Person avoiding the payment of Taxes which are due
and payable.
(v) All documents in the possession of the UK Subsidiary or
to the production of which it is entitled and which attract stamp or
transfer duty in the United Kingdom or elsewhere have been property
stamped.
4.11 ERISA COMPLIANCE.
(a) Set forth in Schedule 4.11 is a true and complete list of all
Foreign Employee Benefit Plans, Foreign Pension Plans and Employee Plans. All
Employee Plans have been operated and administered in compliance with ERISA, the
Code and other applicable Laws.
(b) Except as set forth in Schedule 4.11:
(i) each Employee Plan, if intended to be "qualified" within
the meaning of Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified or the applicable remedial
amendment periods will not have ended before the closing date or the
applicable remedial amendment periods will not have ended before the
Closing Date, and the related trusts are exempt from tax under Section
501(a) of the Code and nothing has occurred that has or could
reasonably be expected to affect adversely such qualification or
exemption;
(ii) neither the Company nor any of its ERISA Affiliates nor
any other "disqualified person" or "party in interest" (as such terms
are defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to an Employee Plan has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that
could subject the Company or any of its ERISA Affiliates to any Tax or
penalty imposed under Section 4975 of the Code or Section 502(i), (j)
or (l) of ERISA;
(iii) all required or declared Company or Subsidiary
contributions (or premium payments) to (or in respect of) all Employee
Plans have been properly made when due, and the Company and its
Subsidiaries have deposited all amounts withheld from employees for
pension, welfare or other benefits into the appropriate trusts or
accounts;
(iv) no Proceedings (other than routine claims for benefits)
are pending or threatened in writing to the Company or any ERISA
Affiliate with respect to or involving any Employee Plan;
(v) except as may be required under Laws of general
application, none of the Employee Plans obligate the Company or any
Subsidiary to provide any employee or former employee, or their
spouses, family members or beneficiaries, any post-employment or
post-retirement health or life insurance, accident or other
"welfare-type" benefits;
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(vi) each Employee Plan which is subject to the requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
and the Health Insurance Portability and Accountability Act ("HIPAA")
has been maintained in compliance with COBRA and HIPAA, including all
notice requirements, and no tax payable on account of Section 4980B or
any other section of the Code has been or is expected to be incurred;
(vii) neither the Company nor any of its ERISA Affiliates is
or has ever maintained or been obligated to contribute to a "multiple
employer plan" (as defined in Section 413 of the Code), a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a
"defined benefit pension plan" (as defined in Section 3(35) of ERISA);
(viii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Employee
Plan;
(ix) no benefit payable or which may become payable by the
Company or its ERISA Affiliates pursuant to any Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be
deductible by reason or Section 280G of the Code;
(x) each Employee Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and
each program of benefits for which employee contributions are provided
pursuant to elections made under such Employee Plan meets the
requirements of the Code applicable thereto;
(xi) each Foreign Employee Benefit Plan and each Foreign
Pension Plan have been maintained in good standing with each applicable
Governmental Authority;
(xii) all contributions have been made with respect to all
Foreign Employee Benefit Plans and Foreign Pension Plans on a timely
basis;
(xiii) except as has been fully accrued on the Latest Balance
Sheet, neither the Company nor any ERISA Affiliate has incurred any
obligation in connection with the termination of or withdrawal from any
Foreign Employee Benefit Plan or Foreign Pension Plan;
(xiv) the present value of the accrued benefit liabilities
(whether vested or not) under each Foreign Pension Plan, determined as
of the end of the Company's most recently ended fiscal year on the
basis of actuarial assumptions provided for in such Foreign Pension
Plan, did not exceed the current value of the assets of such Foreign
Pension Plan allocable to such benefit liabilities; and
(xv) the Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments
for each Employee Plan into the appropriate trusts or accounts.
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(c) With respect to the Company and its Canadian Subsidiaries:
(i) The only benefit plans existing in respect of the
employees of the Canadian Subsidiaries are the Canadian Benefit Plans
and the Canadian Pension Plans. True, correct and complete copies of
all written Canadian Benefit Plans and related documentation have been
provided to the Investors and all Canadian Benefit Plans are accurately
described on Schedule 4.11. The Canadian Benefit Plans are duly
registered where required by, and are in good standing under, all
applicable Laws. All required employer and employee contributions and
premiums under the Canadian Benefit Plans have been made, no past
service funding liabilities exist, and there are no Proceedings pending
or threatened in writing to the Company or any Subsidiary (other than
routine claims for benefits) relating to any of the Canadian Benefit
Plans. There is no requirement to provide post-retirement profit
sharing, medical or health benefits to employees of the Company or any
of the Canadian Subsidiaries.
(ii) The only pension plans existing in respect of the
employees of the Canadian Subsidiaries are the Canadian Pension Plans.
True, correct and complete copies of all Canadian Pension Plans and
related documentation (including pension plan summaries for
participants, funding agreements, actuarial reports and investment
management agreements) have been provided to the Investors and are
accurately described in Schedule 4.11. The Canadian Pension Plans are
duly registered where required by, and are in good standing under, all
applicable Laws including the Income Tax Act (Canada), and the Pension
Benefits Act (Ontario), and there are no Proceedings pending or
threatened (other than routine claims for benefits) relating to any of
the Canadian Pension Plans. All required employer and employee
contributions and premiums under the Canadian Pension Plans have been
made, the Canadian Pension Plans are each fully funded on both a
going-concern and a wind-up basis in accordance with applicable Laws
and with the actuarial methods and assumptions used in the most recent
actuarial reports therefor, and there have been no surplus withdrawals
or contribution holidays except as permitted by Law and the terms of
the Canadian Pension Plans.
(d) The Company has provided the Investors with true and complete
copies of all documents pursuant to which each Employee Plan, Foreign Employee
Benefit Plan, Foreign Pension Plan, Canadian Benefit Plan and Canadian Pension
Plan is maintained and administered, the two most recent annual reports (Form
5500 and attachments) and financial statements therefor (if applicable), all
governmental rulings, determinations, and opinions (and pending requests
therefor), and the most recent valuation (if such valuation exists) of the
present and future obligations under each such plan that provides
post-retirement or post-employment health and life insurance, accident, or other
"welfare-type" benefits.
4.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
The Company and each Subsidiary has such rights and interests in the
Intellectual Property Rights as provided in Section 4.14 and, except as
specifically set forth in Schedule 4.13, good and marketable title to all other
assets, properties and interests in properties, real or
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personal, reflected on the Latest Balance Sheet or acquired after the Latest
Balance Sheet Date (except (i) inventory sold since the Latest Balance Sheet
Date in the ordinary course of business, and (ii) accounts receivable and notes
receivable paid in full subsequent to the Latest Balance Sheet Date), free and
clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth in Schedule 4.12 and Permitted Encumbrances. Except as
set forth on Schedule 4.12, such assets are in good operating condition and
repair (normal wear and tear excepted), are suitable for the uses for which they
are used in the Subject Business, are not subject to any condition which
materially interferes with the economic value or use thereof, and constitute all
assets, properties, interests in properties and rights necessary to permit the
Company and the Subsidiaries to carry on their business after the Closing as
generally conducted by them prior thereto. With respect to any leased assets,
such assets are in such condition as to permit surrender thereof by the Company
or Subsidiary to the lessors thereunder on the date hereof without any cost or
expense for repair or restoration as if the related leases were terminated upon
the Closing Date in the ordinary course of business.
4.13 REAL PROPERTY.
(a) No real property is owned by the Company or any Subsidiary.
(b) Schedule 4.13 contains a list and brief description of all
real property in which the Company or any Subsidiary has a leasehold interest
held under leases (the "Leased Property") including the name of the lessor and
any requirement of consent of the lessor to consummate the transactions
contemplated hereby. The Leased Property constitutes all real properties used or
occupied by the Company or the Subsidiaries.
(c) With respect to the Lease Property, except as set forth in
Schedule 4.13:
(i) with respect to the Leased Property, the Company or a
Subsidiary is the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of
the Company or Subsidiary;
(ii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord or lessor concerning
renewal terms for those leases scheduled to expire within 12 months of
the date hereof;
(iii) none of the buildings and fixtures thereon, nor their
use, operation or maintenance for the purpose of carrying on the
Subject Business, violates any restrictive covenant or any provision of
any Law or encroaches on any property owned by any other Person;
(iv) there are no outstanding work orders from or required by
any municipality, police department, fire department, sanitation,
health or safety authorities or from any other Person and there are no
matters under discussion with or by the Company or any of its
Subsidiaries relating to such work orders; and
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(v) the Company is not a party to, or under any agreement to
become a party to, any lease with respect to real property other than
the leases, copies of which have been provided to the Investors. With
respect to each lease (i) the lease (or a notice in respect of the
lease) has been properly registered in the appropriate land registry
office, (ii) all rents and additional rents which are due and payable
have been paid, (iii) no waiver, indulgence or postponement of the
lessee's obligations has been granted by the lessor, (iv) there exists
no event of default or event, occurrence, condition or act (including
the transactions contemplated hereby) which, with the giving of notice,
the lapse of time or the happening of any other event or condition,
could become a default under the lease, and (v) all of the covenants to
be performed by any party under the leases have been fully performed.
4.14 INTELLECTUAL PROPERTY.
(a) Except as set forth in Schedule 4.14, the Company and its
Subsidiaries have the unimpaired right to use, sell, license and dispose of, and
have the right to bring actions for the infringement of, all Intellectual
Property Rights necessary or required for the conduct of the Subject Business as
currently conducted and as currently proposed to be conducted and such rights to
use, sell, license, dispose of and bring actions are sufficient for such conduct
of the Subject Business.
(b) Except as set forth in Schedule 4.14, there are no royalties,
honoraria, fees or other payments payable by the Company or any Subsidiary to
any Person by reason of the ownership, use, license, sale or disposition of the
Intellectual Property Rights.
(c) Except as set forth in Schedule 4.14, no activity, service or
procedure currently conducted by the Company or any Subsidiary violates any
Contract of such Person with any third party or infringes any Intellectual
Property Right of any other party.
(d) Except as set forth in Schedule 4.14, neither the Company nor
any Subsidiary has received from any third party in the past five years any
notice, charge, claim or other assertion that the Company is infringing any
Intellectual Property Right of any third party or committed any acts of unfair
competition, and, to the Company's or its Subsidiaries' Knowledge, no such claim
is impliedly threatened.
(e) Except as set forth in Schedule 4.14, neither the Company nor
any Subsidiary has sent to any third party in the past two years or otherwise
communicated to another Person any notice, charge, claim or other assertion of
infringement by or misappropriation of any Intellectual Property Right of the
Company or any Subsidiary by such other Person or any acts of unfair competition
by such other Person, nor, to the Company's or its Subsidiaries' Knowledge, is
any such infringement, misappropriation or unfair competition occurring or
threatened.
(f) Schedule 4.14 contains a true and complete list of all
applications and filings made or taken and determinations made or issued
pursuant to Laws by the Company or any Subsidiary to perfect or protect its or
any Subsidiary's interest in the Intellectual Property Rights,
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including, without limitation, all patents, patent applications, trademarks,
trademark applications, service marks, service xxxx applications, copyrights and
copyright applications.
(g) Except as set forth on Schedule 4.14, no Person other than the
Company and its Subsidiaries has been granted any interest in a right to use all
or any portion of the Intellectual Property Rights necessary or required for the
conduct of the Subject Business.
(h) The Investors have been provided with a true and complete copy
of all Contracts listed on any Schedule hereto that comprise or are related to
the Intellectual Property Rights used in or required for the conduct of the
Subject Business.
(i) No claim has been made, and the Company is not aware of the
possibility of any claim, for compensation by an employee of the UK Subsidiary
carrying on trade in the UK under Section 40 of the United Kingdom Patents Xxx
0000 or under any comparable legislation in any part of the world.
4.15 AGREEMENTS, NO DEFAULTS, ETC.
Except as set forth in Schedule 4.15, neither the Company nor any
Subsidiary is a party to any:
(a) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other basis;
(b) Contract with any Affiliate;
(c) Contract relating to the borrowing of money (in excess of
$50,000) or to the mortgaging, pledging or otherwise placing an Encumbrance on
any asset or group of assets of the Company or any Subsidiary with an aggregate
value in excess of $50,000;
(d) Contract relating to any guarantee of any obligation for
borrowed money or otherwise;
(e) Contract with respect to the lending or investing of funds in
excess of $250,000 in the aggregate;
(f) Contract for indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or confidential
information, other than in the ordinary course of the Company's or such
Subsidiary's business on terms and conditions consistent with such Person's past
practices;
(g) Contract or group of related Contracts with the same party
(excluding purchase orders entered into in the ordinary course of business which
are to be completed within 2 months of entering into such purchase orders) for
the purchase or sale of products or services involving aggregate consideration
in excess of $1,000,000 in any given calendar year;
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(h) Contract that prohibits the Company or any Subsidiary from
freely engaging in business anywhere in the world;
(i) Contract pursuant to which the Company or any Subsidiary has
any "take or pay" or minimum purchase obligation exceeding $50,000 per year; or
(j) other Contract (i.e., not covered in clauses (a)-(i) above
without regard to the dollar thresholds set forth therein) that involves
aggregate consideration in excess of $150,000.
Except as set forth in Schedule 4.15, there are no vehicles, boats, aircraft,
apartments or other residential or recreational properties or facilities leased,
owned or operated by the Company or any Subsidiary for executive, administrative
or sales purposes or any social club memberships owned or paid for by it. Except
as set forth in Schedule 4.15, each of the Company and its Subsidiaries has
performed all the obligations required to be performed by it to date and is not
in receipt of a written notice that it is in default or alleged to be in default
in any respect under any Contract, and there exists no event, condition or
occurrence which, after notice or lapse of time, or both, would constitute such
a default by such Person of any of the foregoing. The Company has furnished to
the Investors true and complete copies of all documents listed in Schedule 4.15.
4.16 COMPLIANCE WITH LAWS.
Except as set forth on Schedule 4.16 hereto, the businesses of the
Company and the Subsidiaries have not been and are not being conducted in
violation of any applicable Law, including all Laws relating to wages, hours,
Employee Plans, equal employment opportunity, harassment, immigration, workers'
compensation, Environmental and Safety Requirements and the payment of social
security and other Taxes. Except as set forth in Schedule 4.16, no investigation
or review by any Governmental Entity with respect to the Company or any
Subsidiary is pending or threatened in writing to the Company or any Subsidiary,
nor has any Governmental Entity notified the Company or any Subsidiary of its
intention to conduct the same. Schedule 4.16 sets forth a list of all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities (the "Permits") held by the Company and each Subsidiary which are
material to the Company or its Subsidiaries, including without limitation, all
necessary state, county licenses and other Permits necessary for the conduct of
their respective businesses. Except as set forth on Schedule 4.16, the Company
and the Subsidiaries hold all Permits necessary for the lawful conduct of their
respective businesses as presently conducted and the Company and the
Subsidiaries are in compliance with the terms of the Permits. None of such
Permits shall be adversely affected as a result of the Company's execution and
delivery of, or the performance of its obligations under this Agreement, any
Related Document to which it is a party, or the consummation of the transactions
contemplated hereby or thereby. The Company has not received any written opinion
or memorandum or advice from any Person to the effect that it is exposed, to any
Liability or disadvantage which may result in a Material Adverse Effect on it or
any of its Subsidiaries.
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4.17 LITIGATION, ETC.
Except as set forth in Schedule 4.17, there are no (i) Proceedings
pending or threatened in writing to the Company or any Subsidiary against the
Company or any Subsidiary, whether at law or in equity, or before or by any
Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or
arbitrator against the Company or any Subsidiary. The Company has delivered to
the Investors all documents and correspondence relating to such matters referred
to in Schedule 4.17.
4.18 INSURANCE.
Schedule 4.18 lists and identifies each insurance policy maintained by
the Company and each Subsidiary with respect to their properties, assets and
business. Except as set forth on Schedule 4.18, the Company and the Subsidiaries
have maintained such insurance coverage at all times during the course of the
operation of the Subject Business. All of such insurance policies are in full
force and effect, and neither the Company nor its Subsidiaries is in default in
any respect with respect to its obligations under any of such insurance policies
and has not received any notification of cancellation of any of such insurance
policies and has no claim outstanding which could be expected to cause an
increase in the insurance rates thereunder. No facts or circumstances exist that
would relieve the insurer under any such policy of its obligation to satisfy in
full any claim of the Company or its Subsidiaries thereunder. Neither the
Company nor its Subsidiaries has received any notice that (i) any of such
policies has been or will be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or (ii) the premium on any of
such policies will be increased on the renewal thereof. The Company has
delivered to the Investors copies of all such insurance policies.
4.19 LABOR RELATIONS; EMPLOYEES.
(a) Except as set forth in Schedule 4.19: (i) neither the Company
nor its Subsidiaries is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other compensation for any services
performed by them to date or amounts required to be reimbursed to such
employees, (ii) there is no unfair labor practice complaint against the Company
or any Subsidiary pending before the National Labor Relations Board or any other
Governmental Entity, (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving the Company or any
Subsidiary, (iv) no labor union currently represents the employees of the
Company or any Subsidiary and no labor union has taken any action within the
last 10 years with respect to organizing the employees of the Company or any
Subsidiary, (v) no Designated Employee has informed the Company that such
employee will or may terminate his or her employment or engagement with the
Company, (vi) no trade union has applied to have the Company or any of its
Canadian Subsidiaries declared a related employer pursuant to the Labour
Relations Act (Ontario) or any similar legislation in any jurisdiction in which
the Company or any Canadian Subsidiary carries on business, (vii) all amounts
due or accrued for all salary, wages, bonuses, commissions, vacation with pay,
pension benefits or other employee benefits are reflected in the Books and
Records of the Company and its Subsidiaries.
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(b) Schedule 4.19 contains a correct and complete list of the
twenty most highly compensated employees, directors, independent contractors,
consultants and agents of the Company and its Subsidiaries, whether actively at
work or not, their salaries, wage rates, commissions and consulting fees, bonus
arrangements, positions, ages, status as full-time or part-time employees and
length of service. No employee of the Company or any of its Subsidiaries has any
agreement as to length of notice or severance payment required to terminate his
or her employment, other than such as results by Law from the employment of an
employee without an agreement as to notice or severance.
(c) Except as set forth on Schedule 4.19 and except in connection
with the Transactions, the Company's execution and delivery of, and performance
of its obligations under, this Agreement and the Related Documents to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby, will not (i) result in any payment (including, without limitation,
severance, unemployment compensation, "golden parachute", bonus or otherwise)
becoming due from the Company or any Subsidiary to any director, officer or
employee of such Person, (ii) increase any such benefits otherwise payable, or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
(d) The Company and it's ERISA Affiliates have complied in all
respects with all Laws relating to the hiring and retention of all employees,
leased employees and independent contractors relating to wages, hours, Employee
plans, Foreign Employee Benefit Plans, Foreign Pension Plans, Canadian Benefit
Plans, Canadian Pension Plans, equal opportunity, collective bargaining and the
payment of social security and other Taxes.
4.20 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 4.20, the Company and its Subsidiaries
are in compliance with all Laws relating to the protection of the environment
(the "Environmental Laws"). Except for ordinary household cleaning solvents,
office supplies and similar materials, the Company has not handled, stored or
released, or exposed any person to, any hazardous substance, as defined in 42
U.S.C.A. Section 9601 (14) or any other applicable Environmental Laws (a
"Hazardous Substance"). The Company is not and will not be liable or responsible
for clean-up costs, remedial work or damages in connection with the handling,
storage, release, or exposure by the Company of any Hazardous Substance. No
claims for clean-up costs, remedial work or damages have been made by any person
or entity in connection with the handling, storage, release, or exposure by the
Company of any Hazardous Substance.
4.21 CHANGE IN CONTROL.
Except (i) as set forth in Schedule 4.21, none of the Company nor the
Subsidiaries is a party to any Contract which terminates, gives rise to a right
of termination, requires any payment, gives rise to any Liability, accelerates
the vesting of any rights or obligations or the maturity of any indebtedness or
otherwise adversely affects the Company or any Subsidiary as a result of a
"change in control" or "potential change in control", in either case, that would
include the transactions contemplated hereby, of the Company.
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4.22 STATE TAKEOVER STATUTES.
The Board of Directors has approved this Agreement, the Related
Documents the transactions contemplated hereby and thereby (including the
Purchase and Redemption) and the Transactions and such approval is sufficient to
render inapplicable to such agreements and transactions the provisions of any
"fair price," "moratorium," "control share," "interested shareholder,"
"affiliated transaction" or other anti-takeover statute or regulation of the
State of Delaware or the State of Colorado and any applicable anti-takeover or
other restrictive provisions of the Company's articles or certificate of
incorporation, bylaws or other constituting or governing instruments.
4.23 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.23, none of the Company, any
Subsidiary or any officer, employee, agent or other Person acting on behalf of
the Company or any Subsidiary has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
Governmental Entity or other Person who was or is in a position to help or
hinder the business of the Company or any Subsidiary (or assist in connection
with any actual or proposed transaction) that (i) might subject the Company or
any Subsidiary to any damage or penalty in any Proceeding or, investigation,
(ii) if not given in the past, could have resulted in a Material Adverse Effect
on the Company or any Subsidiary, or (iii) if not continued in the future, could
result in a Material Adverse Change on the Company or any Subsidiary.
4.24 BROKERS.
Except as set forth on Schedule 4.24, none of the Company, any
Subsidiary or any of their respective officers, directors, shareholders,
employees or Affiliates have employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
4.25 RELATED TRANSACTIONS.
Except as set forth in Schedule 4.25, except for compensation to
regular employees of the Company or any Subsidiary and except for "arms length"
transactions on terms no more favorable to either party than could have been
obtained from or by an independent third party, no current or former Affiliate
of the Company, or any Subsidiary or any associate of such Person (as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended)
thereof, is now, or has been during the last five fiscal years, (i) a party to
any transaction or Contract with the Company or any Subsidiary, or (ii) the
direct or indirect owner of an interest in any Person which is a present or
potential competitor, supplier or customer of the Company or any Subsidiary
(other than non-affiliated holdings in publicly-held companies), nor does any
such Person receive income from any source other than the Company or any
Subsidiary which should properly accrue to the Company or any of its
Subsidiaries. Except as set forth on Schedule 4.25,
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neither the Company nor any of its Subsidiaries is a guarantor or otherwise
liable for any actual or potential Liability or obligation, whether direct or
indirect, of any of its Affiliates.
4.26 DISCLOSURE.
Neither this Agreement, the Related Documents nor any of the schedules,
attachments or exhibits hereto or thereto contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, taken as a whole, in light of the circumstances in
which they were made, not misleading.
4.27 ACCOUNTS AND NOTES RECEIVABLE.
Except for reserves accrued on the Latest Balance Sheet, all the
accounts receivable and notes receivable owing to the Company or the
Subsidiaries as of the date hereof constitute, and as of the Closing Date will
constitute, legal, valid and enforceable, claims arising from bona fide
transactions in the ordinary course of business, subject to bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally, and there are no asserted claims, refusals to pay
or other rights of set-off against any thereof. Schedule 4.27 sets forth a
complete and accurate aging of all accounts receivable as of date hereof from
both the due date and the invoice date.
4.28 ACCOUNTS AND NOTES PAYABLE.
All accounts payable and notes payable by the Company or its
Subsidiaries to third parties as of the date hereof arose, and as of the Closing
will have arisen, in the ordinary course of business, and there is no such
account payable or note payable delinquent in its payment other than accounts
and notes payable being disputed in good faith.
4.29 BANK ACCOUNTS: POWER OF ATTORNEY.
Schedule 4.29 sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of the Company and its Subsidiaries and all
Persons who are signatories thereunder or who have access thereto and (ii) the
names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company or
its Subsidiaries and a summary of the terms thereof (excluding ministerial
powers of attorney granted to representatives of the Company or its Subsidiaries
which are terminable at will).
4.30 SUPPLIERS AND VENDORS.
Except in the ordinary course of business, no supplier or vendor of the
Company or its Subsidiaries, nor any franchisee or licensee of the Company or
its Subsidiaries, has (i) canceled or otherwise terminated, or, threatened to
cancel or otherwise terminate, its relationship with the Company or its
Subsidiaries, (ii) decreased, limited or otherwise adversely modified, or
threatened to decrease, limit or otherwise adversely modify, the services,
supplies or materials it provides to the Company or its Subsidiaries, or (iii)
failed to honor any warranty obligations.
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4.31 CUSTOMER RELATIONS, PROFITABILITY.
The Company has no notice that any customer, agent, representative or
supplier of the Company or any Subsidiary intends to discontinue, diminish or
change its relationship with the Company.
4.32 YEAR 2000.
(a) The Company has implemented a program to achieve Year 2000
Compliance for the internal systems in use by the Company and its Subsidiaries.
Such program consists of a process by which (i) internal systems which are not
Year 2000 Compliant can be identified, (ii) the extent of the problem or
potential problem can be assessed, and (iii) the problem or potential problem
can be resolved and the systems tested while continuing regular use in
operations, or if such use is interrupted, restored to regular use in operations
on or before December 31, 1999. The program is in process and assessment will be
completed by August 15, 1999. Resolution of identified problems is on schedule
for substantial completion by November 15, 1999.
(b) The "Radline" product line marketed by the Company is itself
Year 2000 Compliant; provided, however, that in order to use the "Radline"
product line, a customer must also use Smallworld Systems' GIS software -
versions 2.21 or 3.0. Based solely upon inquiry of Smallworld Systems and
information posted on Smallworld Systems' Web page, the Company believes that
Smallworld System's GIS software - Versions 2.21 and 3.0 are Year 2000
Compliant. The "GDS" product line previously marketed by the Company's
subsidiary, Graphic Data Systems Corporation ("GDS"), is not currently Year 2000
Compliant unless the customer has purchased and installed a maintenance release
which was released by GDS in April of 1999. GDS has notified its customers of
this fact and has offered to provide the maintenance release to customers that
subscribe to GDS maintenance services. GDS has further notified its customers
that the maintenance release may not be effective to cause the GDS product to
become Year 2000 compliant depending upon the customer's specific hardware and
software operating environment configuration. Neither the Company nor its
Subsidiaries has received notice that any customer using the GDS software which
has failed to enter into a current maintenance agreement intends to make any
claim against the Company or any Subsidiary with respect to the Year 2000
non-Compliance of the GDS products.
(c) All software products other than those described in Section
4.32(b) which have been custom developed by the Company and its Subsidiaries and
licensed or sold to customers or clients of the Company or its Subsidiaries
since July 1, 1998 are Year 2000 Compliant.
(d) For purposes of this Section 4.32, "Year 2000 Compliance" and
"Year 2000 Compliant" means that the hardware and/or software under
consideration will be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such hardware and software.
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4.33 OWNERSHIP OF THE COMPANY.
Upon the consummation of the Transactions, the fully diluted equity
ownership of the Company shall be as set forth on Schedule 4.33.
4.34 DEFINITION OF "KNOWLEDGE."
As used herein "Knowledge" shall mean and include (i) the actual
knowledge of the Responsible Persons and (ii) that knowledge which the
Responsible Persons would have obtained in the management of their respective
business affairs after making due inquiry and exercising due diligence with
respect thereto; and, in connection therewith, the Knowledge (both actual and
constructive) of the Responsible Persons shall be imputed to be the Knowledge of
the Company and its Subsidiaries.
4.35 PRIOR TRANSACTIONS.
Except as is set forth on Schedule 4.35, neither the Company nor any of
its Subsidiaries has any Liability resulting from or arising out of or in
connection with the Company's consummation of the 1997 Restructuring
Transactions or the ARC Transactions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE RESPONSIBLE SHAREHOLDERS
Each of the Responsible Shareholders represents and warrants severally
(as to himself or herself and not as to any other Responsible Shareholder) to
the Investors and the Company as follows:
5.1 TITLE TO SHARES.
Such Responsible Shareholder is the lawful owner, of record and
beneficially, of the shares of Common Stock being sold, transferred, conveyed
and assigned by it, him or her hereunder pursuant to each of the Purchase and
the Redemption and has good and marketable title to such shares, free and clear
of any Encumbrances whatsoever and with no restrictions on the voting rights and
other incidents of record and beneficial ownership pertaining thereto. Except as
set forth on Schedule 4.3, there are no agreements between such Responsible
Shareholder and any other Person with respect to voting of, or any other matters
pertaining to, the capital stock of the Company.
5.2 AUTHORITY.
Such Responsible Shareholder has full and absolute legal right,
capacity, power and authority to enter into this Agreement and the Related
Documents to which such Responsible Shareholder is a party, and this Agreement
is, and the Related Documents to which such Responsible Shareholder is a party,
when executed and delivered by such Responsible
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Shareholder as contemplated hereby, will be, the valid and binding obligation of
such Responsible Shareholder, enforceable against such Responsible Shareholder
in accordance with their respective terms, except as enforceability thereof may
be limited by any applicable bankruptcy, reorganization, insolvency or other
Laws affecting creditors rights generally or by general principles of equity.
5.3 NONCONTRAVENTION.
Neither the execution, delivery and performance of this Agreement and
the Related Documents to which it, he or she is a party nor the consummation of
the transactions contemplated hereby or thereby nor compliance by such
Responsible Shareholder with any of the provisions hereof or thereof will (i)
conflict with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligations
contained in or the loss of any benefit under any term, condition or provision
of: (x) such Responsible Shareholder's organizational or constating documents
(if such Responsible Shareholder is not a natural person) or (y) any Contract to
which such Responsible Shareholder is a party, or by which such Responsible
Shareholder or any of its, his or her properties may be bound or (ii) violate
any Law applicable to such Responsible Shareholder or any of its, his or her
properties, which in the case of either clause (i) or (ii) could prevent the
consummation of the transactions contemplated by this Agreement.
5.4 CONSENTS.
Except as specified in this Agreement, no Permit, Order, authorization,
consent or approval of or by, or any notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by such Responsible Shareholder of this Agreement and the
Related Documents to which he or she is a party or the consummation by such
Responsible Shareholder of the transactions contemplated hereby or thereby.
5.5 BROKERS.
Except as set forth on Schedule 5.5, the Responsible Shareholders have
not employed any broker or finder or incurred any Liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement or the Related Documents.
5.6 NO CLAIMS AGAINST THE COMPANY.
Neither such Responsible Shareholder nor any of its Affiliates
(including the Responsible Persons) has any grounds or reason whatsoever to
bring or initiate any Proceeding against the Company or any of its Subsidiaries.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company severally (as to
itself and not as to any other Investor) as follows:
6.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and
the Related Documents and the consummation of the transactions contemplated
hereby and thereby has been duly and validly authorized by all necessary action
on the part of such Investor; and this Agreement has been, and the Related
Documents, when executed and delivered by such Investor will be, duly and
validly executed and delivered by such Investor and this Agreement is, and the
Related Documents, when executed and delivered by such Investor will be, the
valid and binding obligations of such Investor, enforceable against such
Investor in accordance with their respective terms, except as enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other Laws affecting creditors rights generally or by general principles of
equity.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents, nor the consummation by such Investor of
the transactions contemplated hereby or thereby will (i) conflict with, or
result in any violation of, or cause a default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
benefit under, or result in the creation of any Encumbrance upon any of the
properties or assets of such Investor under any term, condition or provision of
(x) such Investor's constituting or governing documents or (y) any Contract to
which such Investor is a party or by which its properties or assets are bound or
(ii) violate any Laws applicable to such Investor.
(c) No consent, approval, Order or authorization of, registration,
declaration or filing with, or notification to any Governmental Entity or any
other third party is required in connection with the execution, delivery and
performance by such Investor of this Agreement or the Related Documents or the
consummation of the transactions contemplated hereby or thereby.
6.2 BROKERS.
Except as set forth on Schedule 6.3 such Investor has not employed any
broker or finder or incurred any Liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
6.3 INVESTMENT REPRESENTATIONS AND WARRANTIES.
(a) Such Investor will acquire the shares of New Series A
Preferred Stock to be purchased by it and any shares of New Common Stock
issuable upon conversion of such shares for its own account, for investment and
not with a view to the distribution thereof, nor with any present intention of
distributing the same. Notwithstanding the foregoing, the disposition of the
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shares of New Series A Preferred Stock (and the shares of New Common Stock
issued upon conversion thereof) will at all times remain within the control of
such Investor.
(b) Such Investor understands that the shares of New Series A
Preferred Stock to be purchased by it and any shares of New Common Stock
issuable upon conversion of such shares (i) will not be registered under the
Securities Act or the securities laws of any state, by reason of their issuance
in a transaction exempt from the registration or qualification requirements of
the Securities Act or such securities laws, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein, and (ii) must
be held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration.
(c) Such Investor is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Investor) promulgated under the
Securities Act.
(d) Such Investor understands that no public market now exists for
the shares of New Series A Preferred Stock (or the shares of New Common Stock
issuable upon conversion thereof) and that no assurances whatsoever have been or
can be given regarding the existence of such a public market at any time or at
all.
(e) Based on such Investor's knowledge, experience and skill in
evaluating and investing in issues of securities derived from actual
participation in financial, investment and business matters, such Investor is
capable of evaluating the merits and risks of an investment in the shares of New
Series A Preferred Stock and the suitability of such shares as an investment for
such Investor.
(f) Such Investor has had an opportunity to discuss the business,
management and financial affairs of the Company and the terms and conditions of
an investment in the shares of New Series A Preferred Stock with, and has had
access to, the management of the Company.
(g) Such Investor is aware that no guarantees have been or can be
made respecting the future value, if any, of the shares of New Series A
Preferred Stock (or the shares of New Common Stock issuable upon conversion
thereof) or the profitability or success of the business of the Company.
ARTICLE VII
COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
CONCERNING REPRESENTATIONS AND WARRANTIES
The Investors, the Responsible Shareholders and the Company hereby
covenant, agree and acknowledge, with respect to the representations and
warranties of the Responsible Shareholders set forth in Article V of this
Agreement and the representations and warranties of the Company set forth in
Article IV of this Agreement as follows:
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7.1 INDEMNIFICATION BY RESPONSIBLE SHAREHOLDERS.
With respect to the representations and warranties of the Company set
forth in Article IV of this Agreement, the Responsible Shareholders hereby agree
to indemnify and hold harmless the Company for a breach of any such
representations and warranties all as set forth and in accordance with Article
X.
7.2 WAIVER OF CONTRIBUTION.
Each of the Responsible Shareholders and the Investors hereby waive any
rights of contribution, reimbursement, or indemnification against the Company
with respect to any of their indemnification obligations hereunder. The
Responsible Shareholders and the Investors all acknowledge and agree that
certain of such Persons may have both indemnification obligation and the
indirect rights and benefits of indemnification by holding shares of Common
Stock. Notwithstanding such dual status, it is the intent of the parties hereto
that any such Person shall not be relieved of an indemnification obligation as a
Responsible Shareholder or Investor nor deprived of any indemnification benefit
or right as a shareholder of the Company but shall be treated, as to any
indemnification obligation, as any other shareholder.
7.3 SUFFICIENT AUTHORIZED SHARES.
The Company shall at all times have a sufficient number of shares of
New Common Stock authorized for issuance to permit the conversion of the New
Series A Preferred Stock into New Common Stock.
ARTICLE VIII
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL AGREEMENTS
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY.
[Intentionally omitted.]
8.2 NEGATIVE COVENANTS OF THE COMPANY.
[Intentionally omitted.]
8.3 AFFIRMATIVE COVENANTS OF THE RESPONSIBLE SHAREHOLDERS.
Xxxxx X. Xxxxxx and, in consideration of the benefits that will inure
to their respective Affiliates pursuant to this Agreement, from and after the
Closing Date, each Responsible Person:
(a) shall not disclose or use at any time, either during his or
her employment period or thereafter, any Confidential Information of which such
Responsible Person is or becomes aware, whether or not such information is
developed by him or her, except to the extent
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that such disclosure or use is directly related to and required by such
Responsible Person's performance of duties assigned to the him or her by the
Company or any Subsidiary;
(b) agrees that all Work Product belongs to the Company or any
Subsidiary. Such Responsible Person will promptly disclose such Work Product to
the Company and perform all actions reasonably requested by the Board of
Directors of the Company (whether during or after the employment period) to
establish and confirm such ownership (including, without limitation, the
execution and delivery of assignments, consents, powers of attorney and other
instruments) and to provide reasonable assistance to the Company or any
Subsidiary in connection with the prosecution of any applications for patents,
trademarks, trade names, service marks or reissues thereof or in the prosecution
or defense of interferences relating to any Work Product;
(c) acknowledges and agrees with the Company that during the
course of such Responsible Person's employment with the Company or any
Subsidiary, such Responsible Person has had and will continue to have the
opportunity to develop relationships with existing employees, customers and
other business associates of the Company and its Subsidiaries which
relationships constitute goodwill of the Company and its Subsidiaries, and the
Company and its Subsidiaries would be irreparably damaged if such Responsible
Person were to take actions that would damage or misappropriate such goodwill
and accordingly agrees as follows:
(i) Such Responsible Person acknowledges that the Company and
its Subsidiaries currently conduct the Subject Business throughout the
world (the "Territory"). Accordingly, during the Non-Compete Period,
such Responsible Person shall not, directly or indirectly, enter into,
engage in, assist, give or lend funds to or otherwise finance, be
employed by or consult with, or have a financial or other interest in,
any Competitive Business in the Territory, whether for or by himself or
as an independent contractor, agent, stockholder, partner or joint
venturor for any other Person. As used in this Agreement, "Non-Compete
Period" means the period beginning on the Closing Date and ending on
the first anniversary of the termination of such Responsible Person's
employment with the Company for any reason. To the extent that the
covenant provided for in this Section 8.3(c)(i) may later be deemed by
a court to be too broad to be enforced with respect to its duration or
with respect to any particular activity or geographic area, the court
making such determination shall have the power to reduce the duration
or scope of this Section 8.3(c)(i), and to add or delete specific words
or phrases. This Section 8.3(c)(i) as modified shall then be enforced.
(ii) Notwithstanding Section 8(c)(i), the aggregate ownership
by a Responsible Person of no more than two percent (on a fully-diluted
basis) of the outstanding equity securities of any Person, which
securities are traded on a national or foreign securities exchange,
quoted on the NASDAQ Stock Market or other automated quotation system,
and which Person competes with the Company (or any part thereof) within
the Territory, shall not be deemed to be a violation of Section
8(c)(i). In the event that any Person in which a Responsible Person has
any financial or other interest directly or indirectly enters into a
line of business during the Non-Compete Period that competes with the
Company within the Territory, such Responsible Person shall divest all
of his or her interest (other than as permitted to be held pursuant to
the first sentence of this
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Section 8.3(c)(ii)) in such Person within 15 days after such Person
enters into such line of business that competes with the Company within
the Territory.
(iii) Such Responsible Person covenants and agrees that
during the Non-Compete Period, such Responsible Person will not,
directly or indirectly, either for himself or herself or for any other
Person (A) solicit any employee of the Company or any of its
Subsidiaries to terminate his or her employment with the Company or any
of its Subsidiaries or employ any such individual during his or her
employment with the Company or any of its Subsidiaries and for a period
of one year after such individual terminates his or her employment with
the Company or any of its Subsidiaries, (B) solicit any customer of the
Company or any of its Subsidiaries to purchase products or services of
or on behalf of such Responsible Person or such other Person that are
competitive with the products or services provided by the Company or
any of its Subsidiaries, or (c) take any action that may cause injury
to the relationships between the Company or any of its Subsidiaries or
any of their employees and any lessor, lessee, vendor, supplier,
customer, distributor, employee, consultant or other business associate
of the Company or any of its Subsidiaries as such relationship relates
to the Company's or any of its Subsidiaries' conduct of their business.
(d) Such Responsible Person understands that the foregoing
restrictions may limit his or her ability to earn a livelihood in a business
similar to the business of the Company and any of its Subsidiaries, but he or
she nevertheless believes that he or she has received and will receive
sufficient consideration and other benefits as an employee of the Company and as
otherwise provided hereunder to clearly justify such restrictions which, in any
event (given his or her education, skills and ability), he or she does not
believe would prevent him or her from otherwise earning a living.
(e) Such Responsible Person shall deliver to the Company at the
termination of his or her employment period or at any time the Company may
request all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product or the Subject Business which he or she
may then possess or have under his or her control regardless of the location or
form of such material and, if requested by the Company, will provide the Company
with written confirmation that all such materials have been delivered to the
Company.
(f) if any provision of this Section 8.3 is inconsistent with a
substantially similar provision of any Responsible Person's Employment
Agreement, the provisions of such Responsible Person's Employment Agreement
shall control.
8.4 REASONABLE EFFORTS.
The Company and the Investors shall: (i) promptly make their respective
filings and thereafter make any other submissions required under all applicable
Laws with respect to the Transactions and (ii) use their respective reasonable
efforts to promptly take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the Transactions.
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8.5 REPRESENTATIONS AND WARRANTIES.
Neither the Company, the Responsible Shareholders nor the Investors,
will take any action (without the prior written consent of the other party
hereto) that would cause any of the representations and warranties made by any
such Persons set forth in Articles IV, V and VI, as the case may be, not to be
true and correct at and as of the Closing Date.
8.6 CONSENTS.
Each party shall use its best efforts, and the other parties shall
cooperate with such efforts, to obtain any consents and approvals of, or effect
the notification of or filing with, each Person or authority, whether private or
governmental, whose consent or approval is required in order to permit the
consummation of the transactions contemplated hereby.
8.7 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (i) as otherwise required by Law
(including under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976) and
(ii) for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources, legal counsel, independent certified
public accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement, the Related Documents or the transactions contemplated hereby or
thereby, without the prior written consent of the Company, the Shareholders'
Representative or the Investors, as the case may be, which consent shall not
unreasonably be withheld or delayed.
8.8 NEGOTIATION WITH OTHERS.
[Intentionally omitted.]
8.9 CERTAIN TAX MATTERS.
[Intentionally omitted.]
8.10 SHAREHOLDERS' REPRESENTATIVE.
The Responsible Shareholders agree among themselves (without prejudice
to or affecting in any way the rights provided in this Agreement or otherwise to
the Company or any Investor) as follows:
(a) Appointment. The Responsible Shareholders, for themselves and
their personal representatives and other successors, hereby constitute and
appoint Xxxxx X. Xxxxxx, as their agent (the "Shareholders' Representative"),
with full power and authority, except as otherwise expressly provided in this
Agreement, in the name of and for and on their behalf to take all action
required or permitted under this Agreement or any of the Related Documents
(including, without limitation, the giving and receiving of all accountings,
reports, notices, waivers and consents). In the event of the death, physical or
mental incapacity or resignation of
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Xxxxx X. Xxxxxx or any successor Shareholders' Representative, the Responsible
Shareholders shall promptly appoint a substitute or substitutes and shall advise
the Investors and the Company, as the case may be, thereof. The authority
conferred under this Section 8.10(a) is an agency coupled with an interest and
all authority conferred hereby is irrevocable and not subject to termination by
the Responsible Shareholders or by the Shareholders' Representative or by
operation of Law, whether by the death or incapacity of any Responsible
Shareholder, the termination of any trust or estate or the occurrence of any
other event. If any Responsible Shareholder should die or become incapacitated,
if any trust or estate should terminate or if any other such event should occur,
any action taken by the Shareholders' Representative pursuant to this Section
8.10(a) shall be as valid as if such death or incapacity, termination or other
event had not occurred, regardless of whether or not any Person shall have
received notice of such death, incapacity, termination or other event.
(b) Reliance by Shareholders' Representative. The Shareholders'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon any statements furnished to him by any Person or any other
evidence deemed by the Shareholders' Representative to be reasonably reliable,
and the Shareholders' Representative shall be entitled to act on the advice of
counsel selected by him. The Shareholders' Representative shall be fully
justified in failing or refusing to take any action under this Agreement unless
he shall have received such advice or concurrence of the Shareholders as he
deems appropriate or he shall have been expressly indemnified to his
satisfaction by the Shareholders severally according to their respective
Shareholder Percentages against any and all Liability and expense that the
Shareholders' Representative may incur by reason of taking or continuing to take
any such action. The Shareholders' Representative shall in all cases be fully
protected in acting, or refraining from acting, under this Agreement in
accordance with a request of Shareholders whose aggregate Responsible
Shareholder Percentages equal or exceed 67%, and such request, and any action
taken or failure to act pursuant thereto, shall be binding upon all of the
Shareholders.
(c) Expenses of Shareholders' Representative. The Shareholders'
Representative shall be entitled to retain counsel and to incur such expenses
(including litigation expenses) as the Shareholders' Representative deems to be
necessary or appropriate in connection with his performance of his obligations
under this Agreement. All such fees and expenses (including reasonable
attorneys' fees) incurred by the Shareholders' Representative prior to the
Closing shall be borne by the Company, and all such fees and expenses (including
reasonable attorneys' fees) incurred by the Shareholders' Representative after
the Closing shall be borne by the Shareholders severally according to their
respective Shareholder Percentages.
(d) Indemnification. The Responsible Shareholders hereby agree
severally to indemnify the Shareholders' Representative (in his capacity as
such) ratably according to their respective Shareholder Percentages against, and
to hold the Shareholders' Representative (in his capacity as such) harmless
from, any and all Liabilities, Losses, penalties, actions, judgments, suits,
costs, expenses or disbursements of whatever kind which may at any time be
imposed upon, incurred by or asserted against the Shareholders' Representative
in such capacity in any way relating to or arising out of his action or failure
to take action pursuant to this Agreement or in connection herewith or therewith
in such capacity; provided, however, that no Shareholder shall be liable for the
payment of any portion of such Liabilities, Losses, penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or willful misconduct of the Shareholders' Representative as
determined by a final decision of a court of competent jurisdiction no longer
subject to appeal. The agreements in this paragraph shall survive the
termination of this Agreement.
(e) No Personal Liability. Except for liability to the
Shareholders resulting solely from his gross negligence or willful misconduct as
determined by a final decision of a court of competent jurisdiction no longer
subject to appeal, the Shareholders' Representative shall have no liability to
any Person as a result of his status as the Shareholders' Representative.
8.11 INVESTORS' REPRESENTATIVE.
The Investors agree (without prejudice to or affecting in any way the
rights provided in this Agreement or otherwise to the Company or any Responsible
Shareholder) as follows:
(a) Appointment. The Investors, for themselves and their
representatives and successors, hereby constitute and appoint InSight, as the
Investors' Representative, with full power and authority, except as otherwise
expressly provided in this Agreement, in the name of and for and on behalf of
the Investors, to take all action required or permitted under this Agreement and
the Related Documents (including, without limitation, the giving and receiving
of all accountings, reports, notices, waivers and consents). In the event of the
resignation of InSight or any successor Investors' Representative, the Investors
shall promptly appoint a substitute or substitutes and shall advise the
Shareholders or the Company as the case may be thereof. The authority conferred
under this Section 8.12(a) is an agency coupled with an interest and all
authority conferred hereby is irrevocable and not subject to termination by the
Investors or by operation of Law.
(b) Reliance by Investors' Representative. The Investors'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon any statements furnished to it by any Person or any other evidence
deemed by it to be reasonably reliable, and the Investors' Representative shall
be entitled to act on the advice of counsel selected by it. The Investors'
Representative shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall have received such advice or
concurrence of the Investors as it deems appropriate or it shall have been
expressly indemnified to its satisfaction by the Investors severally according
to their respective Investor Percentages against any and all Liability and
expense that the Investors' Representative may incur by reason of taking or
continuing to take any such action. The Investors' Representative shall in all
cases be fully protected in acting, or refraining from acting, under this
Agreement in accordance with a request of Investors whose aggregate Investor
Percentages equal or exceed 75%, and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all of the Investors.
(c) Expenses of Investors' Representative. The Investors'
Representative shall be entitled to retain counsel and to incur such expenses
(including litigation expenses) as it deems to be necessary or appropriate in
connection with its performance of its obligations under this Agreement. All
such fees and expenses (including reasonable attorneys' fees) incurred by it
shall be borne by the Investors severally according to their respective Investor
Percentages.
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(d) Indemnification. The Investors hereby agree severally to
indemnify the Investors' Representative (in its capacity as such) ratably
according to their respective Investor Percentages against, and to hold the
Investors' Representative (in its capacity as such) harmless from, any and all
Liabilities, Losses, penalties, actions, judgments, suits, costs, expenses or
disbursements of whatever kind which may at any time be imposed upon, incurred
by or asserted against the Investors' Representative in such capacity in any way
relating to or arising out of its action or failure to take action pursuant to
this Agreement or in connection herewith or therewith in such capacity;
provided, however, that no Investor shall be liable for the payment of any
portion of such Liabilities, Losses, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Investors' Representative as determined by a final
decision of a court of competent jurisdiction no longer subject to appeal. The
agreements in this paragraph shall survive termination of this Agreement.
(e) No Liability. Except for liability to the Investors resulting
solely from its gross negligence or willful misconduct as determined by a final
decision of a court of competent jurisdiction no longer subject to appeal, the
Investors' Representative shall have no liability to any Person as a result of
its status as the Investors' Representative.
8.12 KEY MAN LIFE INSURANCE
From and after the Closing Date, and so long as such Person is an
employee of the Company, the Company shall maintain its "key man" life insurance
policies for Xxxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxxx and Xxxxx X. Xxxxxxxx, in the
amount of $1,000,000 for each such Person, in each case, on terms reasonably
satisfactory to the Investors. Each such policy shall name the Company as sole
beneficiary.
8.13 ADDITIONAL SMALL BUSINESS COVENANTS.
(i) The proceeds from the sale by the Company of the shares
of capital stock of the Company to Imprimis and UBS pursuant to this
Agreement (the "Proceeds") shall be used by the Company solely to make
the payments specifically contemplated by this Agreement and for
working capital and general corporate purposes. The Company, its
Subsidiaries and its Affiliates shall provide to representatives of
each Investor which is an SBIC and representatives of the SBA
reasonable access to its books and records for the purpose of
confirming such use of the Proceeds or for other purposes related to
the qualifications of the financing provided hereunder or under any of
the Related Documents. If the Company breaches its representations and
warranties made in the Small Business Sideletters in any respect, then
in addition to all other remedies available to each SBIC pursuant to
this Agreement, such SBIC may elect that any shares of the Company's
capital stock be repurchased by the Company at original cost plus
accrued dividends thereon.
(ii) So long an SBIC holds any securities of the Company, the
Company, its Subsidiaries and its Affiliates will comply at all times
with the non-discrimination requirements of 13 C.F.R. Parts 112, 113
and 117.
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(iii) Within 45 days after the end of each fiscal year, and
at any other time reasonably requested by any SBIC, the Company shall
deliver to such SBIC a written assessment, in form and substance
satisfactory to such SBIC, of the economic impact of such SBIC's
investment in the Company, specifying (i) the full-time equivalent jobs
created or retained in connection with the investment, and (ii) the
impact of the investment on the Company's business, in terms of revenue
and profits, and on taxes paid by the Company, its Subsidiaries and its
Affiliates and their respective employees. Upon request, the Company
promptly (and in any event within 20 days of such request) shall
furnish to any SBIC all information (i) reasonably requested by such
SBIC in order for such SBIC to comply with the requirements of 13
C.F.R. Section 107.620 or to prepare and file Small Business
Administration Form 468 or any other SBA forms requested by the
Investors and (ii) reasonably requested or required by any Governmental
Entity asserting jurisdiction over such SBIC. Any submission of
financial information pursuant to this Section shall be under cover of
a certificate executed by the president, chief executive officer, chief
financial officer or treasurer of the Company certifying that such
information (i) relates to the Company, its Subsidiaries and its
affiliates (ii) is accurate and (iii) if applicable, has been audited
by the Company's independent auditors.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The obligation of the parties hereto to consummate the transactions
contemplated by this Agreement (including the Purchase and the Redemption) are
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part by the parties
hereto to the extent permitted by Law:
(a) Approvals. All authorizations, consents, Orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any Governmental Entity necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) Statutes. No action shall have been taken or threatened, and
no statute, rule, regulation or Order shall have been enacted, promulgated or
issued or deemed applicable to the transactions contemplated hereby or by the
Related Documents by any Governmental Entity that would (i) make the
consummation of the transactions contemplated hereby illegal or substantially
delay the consummation of any aspect of the transactions contemplated hereby,
(ii) affect the right of the Investors to exercise their rights as shareholders
of the Company, or (iii) render the Company or the Investors unable to
consummate the transactions contemplated hereby.
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9.2 CONDITIONS TO OBLIGATIONS OF THE INVESTORS.
The obligation of the Investors to consummate the transactions
contemplated by this Agreement (including the Purchase) is subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Investors:
(a) Representations and Warranties. The representations and
warranties of the Company and the Responsible Shareholders set forth in this
Agreement shall in each case be true and correct in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true and correct in all respects) as of the Closing Date, as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Investors shall have
received a certificate signed by the Chief Executive Officer of the Company
(with respect to the Company only) and from the Shareholders' Representative
(with respect to the Responsible Shareholders only) to such effect.
(b) Performance of Obligations of the Company and the Responsible
Shareholders. The Company and the Responsible Shareholders shall have performed
in all respects all obligations and covenants required to be performed by such
Persons under this Agreement and the Related Documents as of the Closing Date,
and the Investors shall have received a certificate signed by the Chief
Executive Officer of the Company (with respect to the Company only) and the
Shareholders' Representative (with respect to the Shareholders only) to such
effect.
(c) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
by the Company and the Responsible Shareholders and the consummation of the
transactions contemplated hereby and thereby, shall have been duly and validly
taken by the Company, and the Company shall have full corporate power and right
to consummate the transactions contemplated hereby on the terms provided herein.
(d) Related Documents. All parties thereto other than the
Investors shall have executed and delivered to the Company and the Investors
each of the Related Documents and such Related Documents shall, but for the
Investors' execution and delivery thereof, be in full force and effect in
accordance with their terms and conditions.
(e) Opinion of the Company's and the Responsible Shareholders'
Counsel. The Investors shall have received a legal opinion dated the Closing
Date of Holland & Xxxx LLP, counsel to the Company, and Xxxxxxxx Xxxxxxx Van
Deuren Xxxxxx & Xxxxxxxxxx, P.C. and Xxxxx, Xxxxxx & Xxxxxxxx pc counsel to the
Responsible Shareholders in form and substance reasonably satisfactory to the
Investors.
(f) Consents and Approvals. The Investors shall have received duly
executed copies of all consents and approvals, in form and substance
satisfactory to the Investors, that are (i) required of the Company or the
Responsible Shareholders for consummation of the
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transactions contemplated hereby, (ii) required in order to prevent a breach of
or a default under or a termination of any Contract set forth in Schedule 4.5.
(g) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery by the Company and the Responsible Shareholders of this Agreement
and the Related Documents and the consummation by the Company and the
Responsible Shareholders of the transactions contemplated hereby and thereby
shall have been obtained or made. In addition, the Responsible Shareholders and
the Investors shall have filed all notices and information required, if any,
under Part IX of the Competition Act (Canada) and satisfied any request for
additional information thereunder and the applicable waiting periods and any
extensions thereof shall have expired without the threat of restraint or
challenge, or the parties shall have received an Advance Ruling Certificate
("ARC") pursuant to section 102 of the Competition Act (Canada) stating that the
Director is satisfied that he would not have sufficient grounds on which to
apply for an order in respect of the transactions contemplated by the Agreement.
(h) Corporate Resolutions. The Investors shall have received
certified copies of the resolutions of the Company's board of directors
approving this Agreement, the Related Documents, all other agreements and
documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby.
(i) Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company or any Subsidiary.
(j) Officer's Certificate. The Company shall have delivered an
officer's certificate dated as of the Closing Date to the Investors certifying
(i) that attached thereto is a true and complete copy of the Company's
certificate of incorporation and all amendments thereto as in effect on such
date; (ii) that attached thereto is a true and complete copy of the Company's
bylaws as in effect on such date; (iii) as to the incumbency and genuineness of
the signature of each officer of the Company executing this Agreement, the
Related Documents or any of the other documents contemplated hereby; (iv) as to
the principal amount of the Funded Indebtedness as of the Closing Date; and (v)
that the Company is not as of the Closing Date, nor has it been at any time, a
"U.S. real property holding corporation" (as defined in Section 897 of the
Code). Each Subsidiary shall have delivered an officer's certificate dated as of
the Closing Date to the Investors certifying (i) that attached thereto is a true
and complete copy of the Subsidiary articles or certificate of incorporation and
all amendments thereto as in effect on such date; and (ii) that attached thereto
is a true and complete copy of the Subsidiary's bylaws as in effect on such date
(or, in each case, the relevant constating or governing documents).
(k) Stock Certificates. Each Shareholder shall have delivered the
stock certificates for the Purchased Shares and for the Redeemed Shares and the
related stock powers specified in Sections 1.7 and 1.8 hereof.
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(l) Charter Documents. The Shareholders or the Company shall have
delivered a long form good standing certificate as to the Company and each
Subsidiary, issued as of a recent date by the Secretary of State of each
jurisdiction where such Person is organized or qualified to do business.
(m) Directors and Officers of the Company. The new directors of
the Company shall have been elected in accordance with the terms of the
Shareholders' Agreement.
(n) Simultaneous Transactions. The EDS Transactions and the MTH
Transactions shall have been consummated.
(o) Employment Agreements. Each of the Responsible Shareholders
shall have terminated their existing Employment Agreements with the Company and
entered into new Employment Agreements (the "Employment Agreements") with the
Company upon terms and conditions satisfactory to the Investors.
(p) Credit Agreement. The Company shall have consummated the Bank
Financing.
(q) Small Business Sideletters. The Company shall have executed
and delivered the Small Business Sideletters to each of UBS and Imprimis.
(r) Option Exercises. The Investors shall have received
satisfactory evidence that all holders of the Company's outstanding options to
purchase Common Stock have validly exercised all of such options, have paid the
full exercise price therefor and are stockholders of record of the Company.
(s) Stock Purchase and Redemption Agreement. All parties thereto
other than the Investors shall have executed and delivered the Stock Purchase
and Redemption Agreement upon substantially the terms and conditions of the
draft attached as Exhibit F hereto.
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the transactions
contemplated by this Agreement (including the Redemption) is subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Company:
(a) Representations and Warranties. The representations and
warranties of the Investors set forth in Article VI shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) as of the Closing
Date, as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Company shall have
received a certificate signed by an authorized officer of the Investors'
Representative to such effect.
(b) Performance of Obligations of the Investors. Each of the
Investors shall have performed in all material respects its obligations and
covenants required to be performed by it
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under this Agreement prior to or as of the Closing Date, and the Company shall
have received a certificate signed by an authorized officer of the Investors'
Representative to such effect.
(c) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
to which an Investor is a party and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by such
Investor.
(d) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Investors and
the consummation by the Investors of the transactions contemplated hereby or
thereby shall have been obtained or made.
(e) Consents and Approvals. The Company shall have received duly
executed copies of all consents and approvals, in form and substance reasonably
satisfactory to the Company and its counsel, that are required of the Investors
or the Company for consummation of the transactions contemplated hereby.
(f) Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company or any Subsidiary.
(g) Simultaneous Transactions. The EDS Transactions and the MTH
Transactions shall have been consummated.
(h) Employment Agreements. Each of the Responsible Shareholders
shall have terminated his existing Employment Agreement with the Company and
entered into new Employment Agreements with the Company upon terms and
conditions satisfactory to the Investors.
(i) Credit Agreement. The Company shall have executed a Credit
Agreement with Fleet National Bank and certain other banks providing sufficient
financing to consummate the transactions contemplated hereby.
(j) Option Exercises. The Company shall have received satisfactory
evidence that all holders of the Company's outstanding options to purchase
Common Stock have validly exercised all of such options, have paid the full
exercise price therefor and are stockholders of record of the Company.
(k) Stock Purchase and Redemption Agreement. All parties thereto
other than the Company shall have executed and delivered the Stock Purchase and
Redemption Agreement upon substantially the terms and conditions of the draft
attached as Exhibit F hereto.
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9.4 RELEASE BY RESPONSIBLE SHAREHOLDERS
(a) Anything contained herein to the contrary notwithstanding,
upon receipt by each Responsible Shareholder of the consideration to be received
by such Responsible Shareholder pursuant to Section 1., each such Responsible
Shareholder hereby agrees, solely in his or its capacity as a stockholder of the
Company, that (without any further action on the part of such Responsible
Shareholder) the Company (for the benefit of the Company, the Investors and
their respective parents, subsidiaries, Affiliates, divisions and predecessors
and their past and present directors, officers, employees and agents, and each
of their respective successors, heirs, assigns, executors and administrators
(collectively, the "Released Persons")) shall be irrevocably released and
forever discharged of and from all manner of action and actions, cause and
causes of action, suits, rights, debts, dues, sums of money, accounts, bonds,
bills, covenants, Contracts, controversies, omissions, promises, variances,
trespasses, damages, liabilities, judgments, executions, claims and demands
whatsoever, in law or in equity which against the Released Persons such
Responsible Shareholder ever had, now has or which he or it hereafter can, shall
or may have, whether known or unknown, suspected or unsuspected, matured or
unmatured, fixed or contingent, for, upon or by reason of any matter or cause
relating to such Responsible Shareholders' interest as a shareholder in the
Company and arising at any time on or prior to the Closing, including the
consummation of the Transactions.
(b) Each Responsible Shareholder specifically represents and
warrants to the Released Persons that he or it has not assigned any such claim
set forth in paragraph (a) above, and agrees to indemnify and hold harmless the
Released Persons from and against any and all Losses arising from or in any way
related to (i) any such assignment, and (ii) any action by any third party
arising from or in any way related to the relationship among such Responsible
Shareholders and the Released Persons, which is the subject of this Section 9.4.
(c) Covenant Not to Xxx. Each Party hereto hereby covenants, that
after execution of this Agreement and the consummation of the Transactions, he,
she or it shall not commence any action, lawsuit or other Proceeding in law or
in equity, or otherwise, based upon any claim, demand, Loss, cause of action or
Liability, which is released herein. However, nothing contained herein shall
prevent any Party from commencing any action to enforce any breach of any
obligation assumed by another Party hereto under this Agreement or the Related
Documents. Should any Party, at any time after the Parties execute this
Agreement, commence any action, lawsuit or other Proceeding, in law or in equity
or otherwise, in breach of the covenant not to xxx contained in this Section 9.4
(c), such Party shall indemnify and hold harmless the other Parties to such
action, lawsuit or other Proceeding from and against any Liability, Loss, cost,
expense or judgement arising out of or occasioned by such action, including, but
not limited to, the amount or any judgement or settlement entered into in
resolution of said action and attorney's fees.
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ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION GENERALLY; ETC.
From and after the Closing Date:
(a) By the Responsible Shareholders in Favor of the Company. Each
of the Responsible Shareholders hereby agrees severally but not jointly to
indemnify and hold harmless the Company for any and all Losses it may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any representation
or warranty of such Responsible Shareholder contained in Article V of
this Agreement, any Related Document, any Schedule or Exhibit thereto
or any certificate delivered in connection therewith at or before the
Closing; and
(ii) the breach of any agreement or covenant of such
Responsible Shareholder contained in this Agreement or any Related
Document.
(b) By the Company in Favor of the Investors. The Company shall
indemnify and hold harmless the Investors for any and all Losses they may
suffer, sustain or incur as a result of:
(i) the untruth, inaccuracy or breach or any representation
or warranty of the Company contained in this Agreement, any Related
Document, any Schedule or Exhibit thereto, or any certificate delivered
in connection therewith at or before the Closing;
(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or in any Related Document to be performed
on or prior to the Closing Date; or
(iii) any Proceeding (including, any settlement thereof)
brought by any Shareholder (solely in his, her or its capacity as a
stockholder of the Company) arising from the Company's consummation of
the Transactions.
(c) By the Responsible Shareholders in Favor of the Company. Each
of the Responsible Shareholders hereby agrees, severally but not jointly, to
indemnify and hold harmless the Company for any and all Losses it may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach or any representation
or warranty of the Company contained in this Agreement, any Related
Document, any Schedule or Exhibit thereto, or any certificate delivered
in connection therewith at or before the Closing;
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(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or in any Related Document to be performed
on or prior to the Closing Date; or
(iii) any Proceeding (including any settlement thereof)
brought by any Shareholder (solely in his, her or its capacity as a
stockholder of the Company) arising from the Company's consummation of
the Transactions.
(d) By the Investors in Favor of the Company. Each of the
Investors hereby agrees severally but not jointly to indemnify and hold harmless
the Company for any and all Losses it may suffer, sustain or incur as a result
of:
(i) the untruth, inaccuracy or breach of any representation
or warranty of such Investor contained in Article VI; or
(ii) the breach of any agreement or covenant of such Investor
contained in this Agreement or in any Related Document.
(e) Indemnification for Losses. Subject to the provisions of
Section 10.1(f)(i), Losses sustained or incurred pursuant to Section 10.1(b) or
10.1(c) shall be satisfied by the Company or the Responsible Shareholders, as
set forth in this Section 10.1(e) in the following order:
(i) first, the Company shall pay to the Investors up to one
million, five hundred thousand dollars ($1,500,000) in cash; provided,
however, that if the Company is contractually prohibited (including
pursuant to the Loan Agreement with Fleet) from making such payment
(after using commercially reasonable efforts to remove or suspend such
restriction), it shall pay any amount so prohibited in the form of an
unsecured subordinated promissory note providing for a ten percent
(10%) interest rate, a maturity of not more than five years, payment of
interest in the form of additional subordinated promissory notes (with
identical terms) to the extent that the Company is contractually
prohibited (after using commercially reasonable efforts to remove or
suspend such prohibition) from paying interest in cash, and such other
reasonable and customary terms and conditions as are reasonably
acceptable to the Investors; provided further however, that the Company
shall not enter into any Contract after the date hereof that would
further impair or restrict its ability to make cash payments to the
Investors pursuant to this Section 10.1(e)(i).
(ii) second, to the extent that aggregate Losses exceed
$1,500,000, the Company shall issue up to three million dollars
($3,000,000) of New Series A Preferred Stock to the Investors, which
shares shall be valued at $1.085 per share; and
(iii) third, to the extent that aggregate Losses exceed four
million, five hundred thousand dollars ($4,500,000) the Responsible
Shareholders shall, severally but not jointly, pay to the Company up to
ten million, three hundred thousand dollars
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($10,300,000) in the aggregate, in accordance with each such
Responsible Shareholder's Proportionate Percentage set forth on
Schedule 10.1 hereto.
(f) Limits to Indemnification. Notwithstanding the foregoing
provisions of this Section 10.1:
(i) neither the Investors nor the Company shall be entitled
to be indemnified for Losses pursuant to Section 10.1(b) or Section
10.1(c), respectively (other than for breaches of Sections 4.1, 4.2,
4.3, 4.4, 4.5, 4.10, 4.11 and 4.24 of this Agreement (collectively, the
"Fundamental Representations and Warranties")) unless and until the
amount of all Losses incurred on a cumulative basis since the Closing
Date exceeds $500,000, in which case the Investors or the Company (as
the case may be) shall be indemnified for Losses exceeding $500,000
incurred since the Closing Date. The parties hereto acknowledge and
agree that any Losses that are incurred in connection with the breach
of the Fundamental Representations and Warranties shall not be applied
against or subject to either any threshold or limitation on liability
set forth in this Section 10.1(f).
(ii) the Responsible Shareholders shall have no obligation to
indemnify the Company for any Losses unless and until the aggregate
amount of all Losses sustained or incurred pursuant to Section 10.1(b)
and Section 10.1(c) exceeds $4,500,000.
(iii) no Responsible Shareholder shall be obligated to pay to
the Company more than his Proportionate Percentage (as set forth on
Schedule 10.1) for Losses payable pursuant to Section 10.1(e)(iii).
(iv) except as provided in Section 10.1(c)(iii) the
Responsible Shareholders shall have no obligation to indemnify the
Company for Losses for which a claim by an Indemnified Person was first
made after the date which is thirty (30) days after the Investors
receive the Company's 1999 audited consolidated financial statements
(which financial statements shall have been audited by a nationally
recognized "big five" accounting firm, Xxxxx Xxxxxxx LLP or any other
Person that is reasonably acceptable to the Investors). With respect to
Losses incurred pursuant to Section 10.1(c)(iii), the Responsible
Shareholders shall have no obligation to indemnify the Company for such
Losses unless an Indemnified Person shall have initiated a Proceeding
therefor on or prior to December 31, 2000.
(g) Indemnity Baskets/Limitations for the Investors. The Company
shall not have the right to be indemnified pursuant to Section 10.1(d) unless
and until the Company shall have incurred on a cumulative basis since the
Closing Date aggregate Losses otherwise entitled to indemnification hereunder in
an amount exceeding $500,000, in which event the Company shall be indemnified
for Losses exceeding $500,000 incurred since the Closing Date. The sum of all
Losses pursuant to which indemnification is payable by the Investors pursuant to
Section 10.1(d) shall not exceed the Purchased Shares Consideration. The
indemnification obligations of the Investors may, at the option of the
Investors, be satisfied by the forfeiture to the Company of the appropriate
number of shares of New Series A Preferred Stock, based upon a valuation of the
Company to be made on the date that such obligation is due, by a third party
appraisal firm
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selected by the Board of Directors (which shall not be an Affiliate of the
Company or any Responsible Shareholder).
(h) Guaranty.
(i) Xxxxx X. Xxxxxxxxxx, Xx. shall personally guaranty (the
"Xxxxxxxxxx Guaranty") the obligations of GMJM Stock Partnership, Ltd.
Such obligations of Xxxxx X. Xxxxxxxxxx, Xx. are independent of the
obligations of GMJM Stock Partnership, Ltd. set forth in Section
10.1(c), and a separate action or actions may be brought and prosecuted
against Xxxxx X. Xxxxxxxxxx, Xx. for Losses irrespective of whether any
action is brought, and prosecuted against Xxxxx X. Xxxxxxxxxx, Xx. for
Losses or whether any action is brought against GMJM Stock Partnership,
Ltd., or GMJM Stock Partnership, Ltd. is joined in any such action or
actions.
(A) The Xxxxxxxxxx Guarranty is a guaranty of payment
when due and not merely of collection.
(B) The Xxxxxxxxxx Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to GMJM
Stock Partnership, Ltd. or any bankruptcy, insolvency or similar
proceeding with respect to GMJM Stock Partnership, Ltd.; provided,
however, that the foregoing shall not be deemed to preclude Xxxxx X.
Xxxxxxxxxx, Xx. from asserting any of the defenses that would have been
available to GMJM Stock Partnership, Ltd.
(v) Xxxx X. Xxxxxxx shall personally guaranty (the "Xxxxxxx
Guaranty") the obligations of the Xxxx X. Xxxxxxx Trust. Such
obligations of Xxxx X. Xxxxxxx are independent of the obligations of
the Xxxx X. Xxxxxxx Trust set forth in Section 10.1(c), and a separate
action or actions may be brought and prosecuted against Xxxx X. Xxxxxxx
for Losses irrespective of whether any action is brought, and
prosecuted against Xxxx X. Xxxxxxx for Losses or whether any action is
brought against the Xxxx X. Xxxxxxx Trust, or the Xxxx X. Xxxxxxx Trust
is joined in any such action or actions.
(A) The Xxxxxxx Guarranty is a guaranty of payment when
due and not merely of collection.
(B) The Xxxxxxx Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to the
Xxxx X. Xxxxxxx Trust or any bankruptcy, insolvency or similar
proceeding with respect to the Xxxx X. Xxxxxxx Trust; provided,
however, that the foregoing shall not be deemed to preclude Xxxx X.
Xxxxxxx from asserting any of the defenses that would have been
available to the Xxxx X. Xxxxxxx Trust.
(vi) Xxxxx X. Xxxxxxxx shall personally guaranty (the
"Xxxxxxxx Guaranty") the obligations of LEHE Family Partners, Ltd. Such
obligations of Xxxxx X. Xxxxxxxx are independent of the obligations of
LEHE Family Partners, Ltd. set forth in Section 10.1(c), and a separate
action or actions may be brought and prosecuted against Xxxxx X.
Xxxxxxxx
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for Losses irrespective of whether any action is brought, and
prosecuted against Xxxxx X. Xxxxxxxx for Losses or whether any action
is brought against LEHE Family Partners, Ltd., or LEHE Family Partners,
Ltd. is joined in any such action or actions.
(A) The Xxxxxxxx Guarranty is a guaranty of payment when
due and not merely of collection.
(B) The Xxxxxxxx Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to LEHE
Family Partners, Ltd. or any bankruptcy, insolvency or similar
proceeding with respect to LEHE Family Partners, Ltd.; provided,
however, that the foregoing shall not be deemed to preclude Xxxxx X.
Xxxxxxxx from asserting any of the defenses that would have been
available to LEHE Family Partners, Ltd.
10.2 ASSERTION OF CLAIMS.
No claim shall be brought under Section 10.1 unless the Indemnified
Persons, or any of them, at any time prior to the applicable Survival Date, give
the Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to Section 10.3 of any Third-Party
Claim, the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal Proceedings subsequent to the Survival
Date for the enforcement of their rights under Section 10.1.
10.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.
The obligations and Liabilities of an Indemnifying Person with respect
to Losses resulting from the assertion of liability by third parties (each, a
"Third-Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third-Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such
Third-Party Claim and the amount thereof to the extent known; provided, however,
that no delay on the part of the Indemnified Person in notifying any
Indemnifying Person shall relieve the Indemnifying Person from any Liability
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is materially prejudiced by the delay. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third-Party Claim,
including, but not limited to, any summons, complaint or other pleading which
may have been served, any written demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third-Party Claim, then the Indemnifying Persons shall have
the right to assume and control the defense of any Third-Party Claim at their
own expense and by their own counsel, which counsel shall be satisfactory to the
Indemnified Persons; provided, however, that the Indemnifying Persons shall not
have the right to assume and control the defense of any Third-Party
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Claim, notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have one or more legal or equitable defenses available
to them which are different from or in addition to those available to the
Indemnifying Persons, and, in the opinion of the Indemnified Persons, counsel
for the Indemnifying Persons could not adequately represent the interests of the
Indemnified Persons because such interests could be in conflict with those of
the Indemnifying Persons, (ii) such action or Proceeding is reasonably likely to
have an effect on any other matter beyond the scope of the indemnification
obligation of the Indemnifying Persons or (iii) the Indemnifying Persons shall
not have assumed the defense of the Third-Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a
Third-Party Claim (under circumstances in which the proviso to Section 10.3(b)
is not applicable), the Indemnifying Persons shall not be responsible for any
legal or other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third-Party Claim by giving the written
acknowledgement referred to in Section 10.3(b), or are otherwise restricted from
so assuming by the proviso to Section 10.3(b), the Indemnifying Persons shall
nevertheless be entitled to participate in such defense with their own counsel
and at their own expense; and in any such case, the Indemnified Persons may
assume the defense of the Third-Party Claim, with counsel which shall be
satisfactory to the Indemnifying Persons, and shall act reasonably and in
accordance with their good faith business judgment and shall not effect any
settlement without the consent of the Indemnifying Persons, which consent shall
not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third-Party Claim, they shall not make any settlement of any claims
without obtaining in connection therewith a full release of the Indemnified
Persons, in form and substance satisfactory to the Indemnified Persons.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Subject to the further provisions of this Section 10.4, the
representations and warranties of the Company contained in this Agreement shall
survive the Closing until the first anniversary of the Closing Date; provided,
however, that (i) the representations and warranties of the Company set forth in
Section 4.20 shall survive the Closing until the seventh anniversary of the
Closing Date, (ii) the representations and warranties of the Company set forth
in Section 4.10 and Section 4.11 shall survive the closing until the expiration
of all applicable statues of limitation and (iii) the representations and
warranties of the Responsible Shareholders contained in Article V of this
Agreement, the representations and warranties of the Investors contained in
Article VI of this Agreement and the Fundamental Representations and Warranties
(other than Section 4.10 and Section 4.11) shall survive the Closing and remain
in full force and effect indefinitely without time limit. The covenants and
other agreements of the parties contained in this Agreement shall survive the
Closing until they are otherwise terminated, whether by their terms or as a
matter of applicable Law.
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10.5 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company and the Responsible Shareholders
contained in this Agreement and the Related Documents (a) are being given by the
Company and the Responsible Shareholders as an inducement to the Investors to
enter into this Agreement and the Related Documents to which the Investors are a
party (and the Company and the Responsible Shareholders acknowledge that the
Investors have expressly relied thereon) and (b) are solely for the benefit of
the Investors and the Company. Accordingly, no third party or anyone acting on
behalf of any thereof other than the Indemnified Persons, and each of them,
shall be a third party or other beneficiary of such representations and
warranties and no such third party shall have any rights of contribution
against, the Investors, the Company, any Responsible Shareholder or the Company
with respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Article X, or otherwise.
10.6 REMEDIES EXCLUSIVE.
The remedies provided for in this Article X shall be the exclusive
contractual remedies of the Indemnified Persons in connection with any
Proceedings or Loss arising under this Agreement, the Related Documents or in
connection with the transactions contemplated hereby; provided, however, that
nothing in this Section 10.6 shall be construed to limit in any way the rights
and benefits of, or the remedies available to, any party to this Agreement or
the Related Documents under or in respect of any other instrument or agreement
to which such Person may be a party or for fraud.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXPENSES.
Except as otherwise provided herein, the Company shall bear all
Transaction Related Expenses and the Responsible Shareholders shall bear all of
their out-of-pocket fees and expenses incurred by them relating to the
consummation of the Transactions.
12.2 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Investors' Representative, the Shareholders' Representative and
the Company.
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12.3 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Schedules and the Exhibits (in their
executed form) attached hereto) contain all of the agreements among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements or understandings among the parties with respect thereto
(including, but not limited to, the letter of intent dated as of June 23, 1999,
as amended, among the Investors' Representative, and the Company).
12.4 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
12.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
Except as expressly provided herein, this Agreement shall not confer
any rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, representatives, heirs and estates, as the
case may be. This Agreement shall not be assignable by the Company or any
Responsible Shareholder without the consent of the Investors' Representative.
12.6 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
12.7 NOTICES.
All notices or other communications pursuant to this Agreement shall be
in writing and shall be deemed to be sufficient if delivered personally, sent by
nationally-recognized, overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(a) if to the Company or any Responsible Shareholder, to:
Convergent Group Corporation
0000 Xxxxx Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, CEO;
with a copy to:
Holland & Xxxx, LLP
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.;
(b) if to the Shareholders' Representative:
Xxxxx X. Xxxxxx, Shareholders' Representative
c/o Convergent Group Corporation
0000 Xxxxx Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
(c) if to the Investors' Representative or any Investor:
InSight Capital Partners III, L.P.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx;
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Nissan, Esq.
All such notices and other communications shall be deemed to have been given and
received (d) in the case of personal delivery, on the date of such delivery, (e)
in the case of delivery by nationally-recognized, overnight courier or in the
case of mailing, on the delivery or refusal date as indicated in the return
receipt.
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12.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
12.9 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of New York.
12.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof. Any disclosure made in
any Schedule to this Agreement which should, based on the substance or such
disclosure, be applicable to another Schedule to this Agreement shall be deemed
to be made with respect to such other Schedule regardless of whether or not a
specific reference is made thereto; provided, that the description of such item
on a Schedule is such that the Investors can reasonably ascertain that such
disclosure relates to such other provision of this Agreement.
12.11 CONSTRUCTION.
Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
12.12 NON-MERGER OF REPRESENTATIONS AND WARRANTIES.
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties shall not merge on and shall survive
the Closing in accordance with the express terms of this Agreement,
notwithstanding the Closing or any investigation made by or on behalf of any
party, and shall continue in full force and effect. The Closing shall not
prejudice any right of one party against any other party in respect of anything
done or omitted under this Agreement or in respect of any right to damages or
other remedies.
12.13 REMEDIES; SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and
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60
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
12.14 JURISDICTION, ETC.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in the State of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any Related Document or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Nothing in this Agreement shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Agreement
in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any Related
Document in any New York State or federal court. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
12.15 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
12.16 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder. The Exhibits and Schedules attached
hereto are hereby made part of this Agreement in all respects.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first written above.
CONVERGENT GROUP CORPORATION
By: /s/ XXXXX X. XXXXXXXXXX, XX.
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx, Xx.
Title: Chief Executive Officer
SHAREHOLDERS' REPRESENTATIVE
Name: /s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx
RESPONSIBLE SHAREHOLDERS:
GMJM STOCK PARTNERSHIP, LTD.
By: /s/ XXXXX X. XXXXXXXXXX, XX.
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx, Xx.
Title: General Partner
62
XXXX X. XXXXXXX TRUST
By: /s/ Xxxxx X. Xxxxxxxxxx, Xx.
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx, Xx.
Title: Trustee
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
LEHE FAMILY PARTNERS, LTD.
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: General Partner
By: /s/ Xxxxx X. Xxxxx-Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx-Xxxxxxxx
Title: General Partner
/s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
RESPONSIBLE PERSONS:
Agreed and accepted, solely with respect
to the matters set forth in Section 8.3
and Section 10.1(h):
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
63
/s/ Xxxx X. Xxxxxxx
--------------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxxxxxxx, Xx.
INVESTORS' REPRESENTATIVE
INSIGHT CAPITAL PARTNERS III, L.P.
(Solely in respect of its obligations as
the Investors' Representative)
By: InSight Venture Associates III,
L.L.C. its General Partner
By: /s/ XXXXX XXXXXXX
----------------------------------
Name:
Title:
INVESTORS:
INSIGHT CAPITAL PARTNERS III, L.P.
By: InSight Venture Associates III,
L.L.C. its General Partner
64
By: /s/ XXXXX XXXXXXX
----------------------------------
Name:
Title:
INSIGHT CAPITAL PARTNERS III (CAYMAN),
L.P.
By: InSight Venture Associates III,
L.L.C. its General Partner
By: /s/ XXXXX XXXXXXX
----------------------------------
Name:
Title:
65
INSIGHT CAPITAL PARTNERS III
(CO-INVESTORS), L.P.
InSight Venture Associates III, L.L.C.,
its General Partner
By: /s/ XXXXX XXXXXXX
----------------------------------
Name:
Title:
UBS CAPITAL II LLC
By: /s/ XXXXXX XXXXXXXXX
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
WI SOFTWARE INVESTORS LLC
By: Wexferd Management LLC, its
investment manager
By: /s/ XXXXXX XXXXX
----------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
IMPRIMIS SB LP
By: Imprimis GP LLC, its General Partner
By: /s/ XXXXXX XXXXX
----------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President
66
GS PRIVATE EQUITY PARTNERS II, L.P.
By: GS PEP II Advisors, L.L.C., its
General Partner
By: GSAM Gen-Par, L.L.C., its Managing
Member
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS II OFFSHORE,
L.P.
By: GS PEP II Offshore Advisors, Inc.,
its General Partner
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS III, L.P.
By: GS PEP III Advisors, L.L.C., its
General Partner
By: GSAM Gen-Par, L.L.C., its Managing
Member
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS III OFFSHORE,
L.P.
By: GS PEP III Offshore Advisors, Inc.,
its General Partner
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title: Director
-------------------------------
67
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK), Inc.,
its General Partner
By: /s/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
--------------------------------
Title: Director
-------------------------------
/s/ XXXXXXX XXXXXXXX
--------------------------------------
XXXXXXX XXXXXXXX
68
ANNEX I
DEFINITIONS
The following terms used in the Recapitalization Agreement shall have
the following respective meanings:
"Affiliate" means, with respect to any Person, (i) a director, officer
or stockholder of such Person, (ii) a spouse, parent, sibling or descendant of
such Person (or spouse, parent, sibling or descendant of any director or
executive officer of such Person), or (iii) any other Person that, directly or
indirectly through one or more intermediaries, controls, or is Controlled by, or
is under common Control with, such Person.
"Agreement" has the meaning set forth in the caption.
"ARC" has the meaning set forth in Section 9.2(g).
"ARC Transactions" means the transactions described in the Mutual
Agreement and Release made and entered into as of April 14, 1997 by and among
the Company, Convergent Group Asia Pacific Pty. Ltd. and the other parties
thereto and all transactions contemplated therein and related thereto, including
the Agreement for Reorganization among the Company, ARC Systems Pty. Ltd., an
Australian corporation, and the other parties thereto.
"Bank Financing" shall have the meaning set forth in the recitals to
this Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Books and Records" means all books of account, tax records, sales and
purchase records, customer and supplier lists, computer software, formulae,
business reports, plans and projections and all other documents, files,
correspondence and other information of the Company and its Subsidiaries
(whether in written, printed, electronic or computer printout form).
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Canadian Benefit Plans" means any plan, program or arrangement
involving direct or indirect compensation by a Canadian Subsidiary on behalf of
its employees, former employees, or contractual employees in Canada or their
dependents or beneficiaries.
"Canadian Pension Plans" means any pension plan governed by the Income
Tax Act (Canada) or the Pension Benefits Act (Ontario) or comparable legislation
in any other province, or territory of Canada.
"Canadian Subsidiaries" means, collectively, all Subsidiaries of the
Company which are organised and existing under the laws of Canada or any
province or territory of Canada, and each one thereof is a "Canadian
Subsidiary."
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and liability Act.
"Class A Common Stock" means shares of the Company's Class A Common
Stock, $0.01 par value per share.
"Class B Common Stock" means shares of the Company's Class B Common
Stock, $0.01 par value per share.
"Closing Date" has the meaning set forth in Article III.
69
"Closing" has the meaning set forth in Article III.
"COBRA" has the meaning set forth in Section 4.11(b)(vi).
"Code" has the meaning set forth in Section 4.10(a).
"Common Stock" means the common stock of the Company, $0.01 par value
per share.
"Company" has the meaning set forth in the caption.
"Competition Act (Canada)" means the Competition Act (Canada), R.S.C.
1985 c.E-34, as amended from time to time.
"Competitive Business" means any Person which derives or which expects
during the two (2) years following a termination of a Responsible Shareholder's
employment with the Company for any reason to derive either (i) ten percent
(10%) or more of its revenues, or (ii) more than $10,000,000 in revenues from
providing technical management consulting and/or systems integration services
for Automated Mapping/Facilities Management Systems and/or Geographic
Information Systems and/or utility transmission and distribution systems. The
term "Competitive Business" is not intended to include mere vendors or suppliers
of the Company.
"Confidential Information" means information that is not generally
known to the public and that is used, developed or obtained by the Company or
any of its Subsidiaries in connection with the Subject Business, including, but
not limited to, (i) information, observations, procedures and data obtained by
any Shareholder while employed by the Company or any Subsidiary (including those
obtained prior to the date of this Agreement) concerning the business or affairs
of the Company or any Subsidiaries, (ii) products or services, (iii) costs and
pricing structures, (iv) analyses, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and customer lists, (xii) other
copyrightable works, (xiii) all production methods, processes, technology and
trade secrets, and (xiv) all similar and related information in whatever form.
Confidential information will not include any information that has ever been
published in a form generally available to the public prior to date any
Shareholder proposes to disclose or use such information. Confidential
information will not be deemed to have been published merely because individual
portions of the information have been published, but only if all material
features comprising such information have been published in combination.
"Contingent Payment" has the meaning set forth in Section 1.11.
"Contingent Payment Date" has the meaning set forth in Section 1.11.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, instrument,
permit, concession, franchise or license.
"Control" means, with respect to any Person, the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Xxxxxxx Guaranty" shall have the meaning set forth in Section
10.1(h)(ii).
"EDS" means Electronic Data Systems Corporation, a Delaware
corporation.
"EDS Option Agreement" means the Option Agreement dated as of May 17,
1999 by and among the Company, EDS and the other parties thereto and attached as
Exhibit A hereto.
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"EDS Transactions" has the meaning set forth in the Preamble.
"Employee Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Company or any ERISA
Affiliate of the Company has any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries.
"Encumbrances" means and includes security interests, mortgages, liens,
pledges, charges, easements, reservations, restrictions, clouds, equities,
rights of way, options, rights of first refusal and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Xxxxxxxx Guaranty" shall have the meaning set forth in Section
10.1(h)(ii).
"Environmental Laws" has the meaning set forth in Section 4.20.
"ERISA Affiliate" means, with respect to any Person, any entity that is
a member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Excise Tax Act (Canada)" means the Excise Tax Act (Canada), R.S.C.
1985, C.E-15, as amended from time to time.
"Exclusive Period" has the meaning set forth in Section 8.9.
"Financial Statements" has the meaning set forth in Section 4.6(b).
"Foreign Employee Benefit Plan" means any employee benefit plan, other
than a Canadian Benefit Plan, that is structured like an employee benefit plan
described in Section 3(3) or ERISA which is maintained outside the United States
primarily for the benefit of Persons substantially all of whom are nonresident
aliens and who are employees of the Company or any of its ERISA Affiliates and
is not covered by ERISA pursuant to Section 4(b)(4) of ERISA.
"Foreign Pension Plan" means any pension plan, other than a Canadian
Pension Plan, that is structured like an employee pension benefit plan described
in Section 3(2) of ERISA which is (i) maintained outside the United States
primarily for the benefit of Persons substantially all of whom are nonresident
aliens and who are employees of the Company, or any of its ERISA Affiliates,
(ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii)
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment.
"Fundamental Representations and Warranties" has the meaning set forth
in Section 10.1(f).
"Funded Indebtedness" means, without duplication, the aggregate amount
(including the current portions thereof) of all (i) indebtedness for money
borrowed from others and purchase money indebtedness (other than accounts
payable in the ordinary course) of the Company or any of its Subsidiaries; (ii)
indebtedness of the type described in clause (i) above guaranteed, directly or
indirectly, in any manner by the Company or any of its Subsidiaries, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the relevant debtor, or to purchase indebtedness, or to purchase and
pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling such debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss, but
excluding endorsements of checks and other instruments in the ordinary course;
(iii) indebtedness of the type described in clause (i) above secured by any
Encumbrances upon property owned by the Company or any of its Subsidiaries, even
though such Person has not in any manner become liable for the payment of such
indebtedness; (iv) interest expense accrued but unpaid, and all prepayment
premiums,
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on or relating to any of such indebtedness; (v) all obligations under leases of
the Company or its Subsidiaries which are required to be reflected as
liabilities on the balance sheet of such Person by Relevant GAAP; and (vi)
reference to existing Company bank facilities. The term Funded Indebtedness
shall specifically exclude any indebtedness incurred in connection with the
financing for the transactions contemplated hereunder.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, federal, state, provincial or local.
"Hazardous Substance" has the meaning set forth in Section 4.20.
"HIPAA" has the meaning set forth in Section 4.11(b)(vi).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Imprimis" means Imprimis SB LP, a Delaware limited partnership.
"Income Tax Act (Canada)" means the Income Tax Act (Canada), R.S.C.
1985, c.1 (5th Supplement), as amended from time to time.
"Indemnified Persons" means the Persons entitled to indemnification
under Article X.
"Indemnifying Persons" means the Person with the obligation to
indemnify an Indemnified Person under Article X.
"InSight" means InSight Capital Partners III, L.P., a Delaware limited
partnership.
"InSight Cayman" means InSight Capital Partners III (Cayman), L.P., a
company of limited liability under the law of the Cayman Islands.
"InSight Co-Investors" means InSight Capital Partners III
(Co-Investors), L.P., a Delaware limited partnership.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service xxxx applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"Investor Percentage" means, with respect to each Investor, the
percentage of all shares of New Series A Preferred Stock held by such Investor
and its Affiliates.
"Investors" has the meaning set forth in the caption.
"Investors' Representative" has the meaning set forth in Section 8.12 .
"Knowledge" has the meaning set forth in Section 4.34.
"Labour Relations Act (Ontario)" means the Labour Relations Xxx 0000
(Ontario), s.o.1995, c.1, as amended from time to time.
"Latest Balance Sheet Date" has the meaning set forth in Section
4.6(a).
"Latest Balance Sheet" has the meaning set forth in Section 4.6(a).
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"Law" means all international, European Union, national, federal, state
or local laws (both common and statute law and civil and criminal law) and all
subordinated legislation and regulatory codes of practice (including without
limitation, statutory instruments, guidance notes, circulars, directives,
decisions, rules, regulations, treaties and conventions) or Order of any
Governmental Entity.
"Leased Property" has the meaning set forth in Section 4.13(b).
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Losses" means any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes (including
interest or penalties thereon) arising from or in connection with any such
matter that is the subject of indemnification under Article X. The parties
acknowledge that in certain events a representation, warranty or covenant of the
Company or a Responsible Shareholder may be breached that may not entail an
actual "Loss" (as defined in the previous sentence) suffered by the Company.
Accordingly, for purposes of the indemnification obligations under Article X,
"Losses" suffered, sustained or incurred by the Company shall be deemed to be
those that would have been sustained by a purchaser of 100% of the shares of
Common Stock of the Company in reliance on such representations, warranties and
covenants.
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, operations, assets (including levels of
working capital and components thereof), condition (financial or otherwise),
operating results, liabilities, or employee relations of such Person or any
material casualty loss or damage to the assets of such Person, whether or not
covered by insurance.
"Material Adverse Effect" on any Person means a material adverse effect
on the business, operations, assets (including levels of working capital and
components thereof), condition (financial or otherwise), operating results,
liabilities, or employee relations of such Person.
"MTH Option Agreement" means the Option Agreement dated as of June 23,
1999 by and between the Company and Xxxxxx X. Xxxxxxx and attached as Exhibit B
hereto.
"MTH Transactions" has the meaning set forth in the Preamble.
"Xxxxxxxxxx Guaranty" shall have the meaning set forth in Section
10.1(h)(i).
"New Common Stock" means the Company's common stock, $0.001 par value,
authorized pursuant to the Restated Charter.
"New Series A Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $0.001 par value per share, having the rights,
privileges and preferences set forth in the Restated Charter.
"1997 Restructuring Transactions" means the transactions described in
the Restructuring Agreement dated as of December 31, 1997 by and among the
Company, EDS, MTH and the other parties thereto and all transactions
contemplated therein and related thereto.
"Non-Compete Period" has the meaning set forth in Section 8.3(c)(i).
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Party" means any party to this Agreement now, or by amendment.
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"Pension Benefits Act (Ontario)" means the Pension Benefits Act
(Ontario), R.S.O.1990 c.p.8, as amended from time to time.
"Permits" means all permits, licenses, authorizations, registrations,
franchises, approvals, certificates, variances and similar rights obtained, or
required to be obtained, from Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, 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).
"Potential Transaction" has the meaning set forth in Section 8.9.
"Proceedings" means actions, suits, claims, investigations or legal or
administrative or arbitration proceedings.
"Proceeds" has the meaning set forth in Section 8.13.
"Purchase" has the meaning set forth in the Preamble.
"Purchased Shares" has the meaning set forth in Section 1.3(a).
"Purchased Shares Consideration" has the meaning set forth in Section
1.3(b).
"Recapitalization" has the meaning set forth in the Preamble.
"Redeemed Shares Consideration" has the meaning set forth in Section
1.5(b).
"Redeemed Shares" has the meaning set forth in Section 1.5(b).
"Redemption" has the meaning set forth in Section 1.5(b).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date among the Company, the Investors and the other
parties thereto.
"Related Documents" means the Responsible Shareholders' Agreement, the
Employment Agreements, the Registration Rights Agreement and the Restated
Charter.
"Related Person" has the meaning set forth in Section 4.10(d)(vii).
"Relevant GAAP" means with respect to any Person, generally accepted
accounting principles consistently applied as in effect from time to time in the
jurisdiction in which such Person is organized or incorporated, as the case may
be. With respect to the Company's consolidated Financial Statements, the
Relevant GAAP shall mean generally accepted accounting principles in the United
States of America applied on a basis which is consistent with the Latest Balance
Sheet.
"Responsible Persons" means each of Xxxxx X. Xxxxxxxxxx, Xx., Xxxx X.
Xxxxxxx and Xxxxx X. Xxxxxxxx.
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"Responsible Shareholders" means the shareholders identified on the
signature pages hereto.
"Restated Charter" means the Company's Restated Certificate of
Incorporation, substantially in the form of Exhibit C.
"Retail Sales Tax Act (Ontario)" means the Retail Sales Tax Act
(Ontario), R.S.O. 1990, c.R.31, as amended from time to time.
"SBA" means the U.S. Small Business Administration.
"SBIC" means a Small Business Investment Company licensed under the
Small Business Investment Act of 1958, as amended.
"Series A Preferred Stock" means the Company's Series A Preferred
Stock, $0.01 par value per share, existing prior to the filing of the Restated
Charter.
"Series B Preferred Stock" means the Company's Series B Preferred
Stock, $0.01 par value per share, existing prior to the filing of the Restated
Charter.
"Shareholder Percentage" means with respect to any Shareholder, a
fraction; (x) the numerator of which is the total proceeds from the sale of
capital stock of the Company received by such Shareholder from the Company or
the Investors pursuant to this Agreement and the Stock Purchase and Redemption
Agreement and (y) the denominator of which is the aggregate amount of proceeds
from the sale of capital stock of the Company received by all Shareholders from
the Company or the Investors pursuant to this Agreement or the Stock Purchase
and Redemption Agreement.
"Shareholders" means all holders of the Company's outstanding capital
stock immediately prior to the consummation of the Transactions.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the Closing Date among the Company, the Investors and the other parties thereto.
"Shareholders' Representative" has the meaning set forth in the
Caption.
"Small Business Sideletters" means the sideletters and related
documents substantially in the form of Exhibit D hereto to be executed and
delivered by the Company to Imprimis and UBS at the Closing.
"Stock Purchase and Redemption Agreement" means the agreement dated of
even date among the Company, the Investors and the Shareholders named therein,
substantially in the form of Exhibit F hereto.
"Subject Business" has the meaning set forth in the preamble to this
Agreement.
"Subscription" has the meaning set forth in Section 1.4 hereof.
"Subsidiaries" has the meaning set forth in Section 4.1.
"Survival Date" means the date, if any, upon which any representation,
warranty, covenant or other agreement contained herein shall terminate in
accordance with the terms hereof.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax Affiliate" has the meaning set forth in Section 4.10(a).
I-7
75
"Tax Returns" means federal, state, provincial, local and foreign tax
returns, reports, statements, declarations of elections, notices, filings and
information return in respect of Taxes along with any schedules or attachments
thereto.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of (A) being a "transferee" (within the meaning
of Section 6901 of the Code or any other applicable Law) of another Person, (B)
being a member of an affiliated, consolidated or combined group or (c) a
contractual arrangement or otherwise.
"Termination Date" shall mean the date of the occurrence of the
termination of employment of (or by) a Shareholder for any reason.
"Territory" has the meaning set forth in Section 8.3(c)(i).
"Third-Party Claim" has the meaning set forth in Section 10.3.
"Transactions means the transactions expressly contemplated by this
Agreement, including the Purchase, the Redemption, the EDS Transactions, the MTH
Transactions, the New Issuance, the Subscription, the Bank Financing, the
Contingent Payments and any subsequent payment to any Person who is a party to
any of the foregoing.
"Transaction Related Expenses" means all fees and expenses (i) incurred
or charged by the Investors and each of their advisors, including the fees and
expenses of X'Xxxxxxxx Graev & Karabell, LLP and (ii) incurred or charged by the
Company and each of its advisors, including the fees and expenses of Holland &
Xxxx LLP and Xxxxx Xxxxxxx LLP, in each case, relating to the transactions
contemplated by this Agreement and the Related Documents (including the
financing of such transactions, the EDS Transactions and the MTH Transactions).
"Transition Period" has the meaning set forth in Section 8.1.
"UBS" means UBS Capital II LLC, a Delaware limited liability company.
"UK Subsidiary" means GDS, Ltd., a company of limited liability in
England on August 5, 1993 under the Companies Xxx 0000 as a private company,
whose registered office is at 00 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx, XX0 0XX,
Xxxxxx Xxxxxxx.
"WISI" means WI Software Investors LLC, a Delaware limited liability
company.
"Work Product" shall mean all inventions, innovations, improvements,
technical information, systems, software developments, methods, designs,
analyses, drawings, reports, service marks, trademarks, tradenames, logos and
all similar or related information (whether patentable or unpatentable) which
relates to the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by the Shareholder (whether or not
during usual business hours and whether or not alone or in conjunction with any
other Person) while employed by the Company (including those conceived,
developed or made prior to the date of this Agreement) together with all patent
application, letters patent, trademark, tradename and service xxxx application
or registrations, copyrights and reissues thereof that may be granted for or
upon any of the foregoing.
I-8
76
SCHEDULE I
--------------------------------------------------------------------------------
LIST OF INVESTORS
--------------------------------------------------------------------------------
SHARES
SHARES PURCHASED SHARES PURCHASED CONSIDERATION PAID
PURCHASED FROM CONSIDERATION FROM THE TO TOTAL SHARES TOTAL CONSIDERATION % OF TOTAL
INVESTOR SHAREHOLDERS PAID COMPANY THE COMPANY PURCHASED PAID INVESTMENT
------------------------------------------------------------------------------------------------------------------------------------
InSight 6,628,142 $ 7,191,323.00 4,764,238 $ 5,169,020.60 11,392,380 $12,360,343.11 27.1384
------------------------------------------------------------------------------------------------------------------------------------
InSight Cayman 2,819,769 $ 3,059,360.00 2,325 $ 2,516.04 2,822,094 $ 3,061,875.02 6.7226
------------------------------------------------------------------------------------------------------------------------------------
InSight Co-Investor 0 $ 0.00 1,705,632 $ 1,850,552.87 1,705,632 $ 1,850,552.87 4.0603
------------------------------------------------------------------------------------------------------------------------------------
UBS 0 $ 0.00 15,920,076 $17,272,741.00 15,920,076 $17,272,741.00 37.9241
------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners II, L.P. 0 $ 0.00 1,577,569 $ 1,711,610.00 1,577,569 $ 1,711,610.00 3.7580
------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners II Offshore
L.P. 0 $ 0.00 816,918 $ 886,329.00 816,918 $ 886,329.00 1.9461
------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners III, L.P. 0 $ 0.00 1,653,515 $ 1,794,008.00 1,653,515 $ 1,794,008.00 3.9389
------------------------------------------------------------------------------------------------------------------------------------
77
SHARES
SHARES PURCHASED SHARES PURCHASED CONSIDERATION PAID
PURCHASED FROM CONSIDERATION FROM THE TO TOTAL SHARES TOTAL CONSIDERATION % OF TOTAL
INVESTOR SHAREHOLDERS PAID COMPANY THE COMPANY PURCHASED PAID INVESTMENT
------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners III Offshore,
L.P. 0 $ 0.00 385,475 $ 418,227.00 385,475 $ 418,227.00 0.9182
------------------------------------------------------------------------------------------------------------------------------------
NBK/GS Private
Equity Partners, L.P. 0 $ 0.00 174,902 $ 189,763.00 174,902 $ 189,763.00 0.4166
------------------------------------------------------------------------------------------------------------------------------------
Imprimis 0 $ 0.00 1,843,376 $ 2,000,000.00 1,843,376 $ 2,000,000.00 4.3912
------------------------------------------------------------------------------------------------------------------------------------
WISI 0 $ 0.00 2,765,064 $ 3,000,000.00 2,765,064 $ 3,000,000.00 6.5868
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 0 $ 0.00 921,688 $ 1,000,000.00 921,688 $ 1,000,000.00 2.1956
------------------------------------------------------------------------------------------------------------------------------------
Total 9,447,911 $10,250,683.00 32,530,778 $35,294,767.51 41,978,689 $45,545,449.00 100%
------------------------------------------------------------------------------------------------------------------------------------
78
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
------------------------------------------------------------------------------------------------------------------------------------
GMJM Stock Partnership, Ltd. 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx Trust 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
------------------------------------------------------------------------------------------------------------------------------------
LEHE Family Partners, Ltd. 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
------------------------------------------------------------------------------------------------------------------------------------
EAS Trust 196,319 196,319 $ 213,000 195,750 210,922 406,672
------------------------------------------------------------------------------------------------------------------------------------
RBS Trust 196,319 196,319 $ 213,000 195,750 210,922 406,672
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 211,342 211,342 $ 229,299 210,729 0 210,729
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 779,312 779,312 $ 847,983 0 1,619,312 1,619,312
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 56,100 56,100 $ 60,867 55,938 0 55,938
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 102,974 102,974 $ 111,723 102,675 113,719 216,394
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 98,360 98,360 $ 106,717 98,075 103,395 201,470
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. XxxXxxxxxx 73,632 73,632 $ 79,888 73,418 75,819 149,237
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 48,718 48,718 $ 52,858 48,577 48,427 97,004
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Zastava 48,718 48,718 $ 52,858 48,577 48,427 97,004
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 376,383 376,383 $ 408,364 375,292 400,742 776,034
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx X. Xxxxx 19,142 19,142 $ 20,768 19,086 0 19,086
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 766 766 $ 831 763 0 763
------------------------------------------------------------------------------------------------------------------------------------
--------
(1) All new Preferred Shares received upon exchange for Common Shares
are being sold to the Investors for the Purchase Price set forth in the
adjacent column.
(2) Issuances of options instead of shares indicated by an asterisk(*).
(3) Includes the number of options indicated in the immediately preceding
column.
79
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxxx 1,963 1,963 $ 2,130 1,958 2,108 4,066
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxx 54,775 $ 59,640 54,775 54,775* 109,550
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxx 18,831 $ 20,503 18,831 18,831* 37,662
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxxx 1,901 $ 2,070 1,901 1,901* 3,803
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 5,869 $ 6,390 5,869 5,869* 11,737
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxxxx 978 $ 1,065 978 978* 1,956
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 19,562 $ 21,300 19,562 19,562* 39,125
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 1,901 $ 2,070 1,901 1,901* 3,803
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx 3,912 $ 4,260 3,912 3,912* 7,825
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxxxxx 1,588 $ 1,730 1,588 1,588* 3,177
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 9,441 $ 10,279 9,441 9,441* 18,882
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 49,521 $ 53,919 49,521 49,521* 99,041
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxx 66,512 $ 72,420 66,512 66,512* 133,025
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxx 22,008 $ 23,963 22,008 22,008* 44,016
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxx 42,302 $ 46,059 42,302 42,302* 84,604
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxxxxx 978 $ 1,065 978 978* 1,956
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 1,588 $ 1,730 1,588 1,588* 3,177
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxx 12,594 $ 13,713 12,594 12,594* 25,189
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxx 16,507 $ 17,973 16,507 16,507* 33,014
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 23,596 $ 25,692 23,596 23,596* 47,193
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 19,562 $ 21,300 19,562 19,562* 39,125
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 1,565 $ 1,704 1,565 1,565* 3,130
------------------------------------------------------------------------------------------------------------------------------------
80
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxx 2,543 $ 2,769 2,543 2,543* 5,086
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxx 978 $ 1,065 978 978* 1,956
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxx 35,212 $ 38,340 35,212 35,212* 70,425
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 39,125 $ 42,600 39,125 39,125* 78,250
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 39,371 $ 42,868 39,371 39,371* 78,743
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 32,278 $ 35,145 32,278 32,278* 64,556
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx X. Xxxxx 5,501 $ 5,990 5,501 5,501* 11,002
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 3,912 $ 4,260 3,912 3,912* 7,825
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxxxxxxx 13,083 $ 14,245 13,083 13,083* 26,167
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 9,781 $ 10,650 9,781 9,781* 19,562
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 20,419 $ 22,233 20,419 20,419* 40,839
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 11,737 $ 12,780 11,737 11,737* 23,475
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx XxXxxxxxxx 5,869 $ 6,390 5,869 5,869* 11,737
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxx 9,781 $ 10,650 9,781 9,781* 19,562
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 14,429 $ 15,711 14,429 14,429* 28,859
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 9,586 $ 10,437 9,586 9,586* 19,171
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxx 18,831 $ 20,503 18,831 18,831* 37,662
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxx 65,534 $ 71,355 65,534 65,534* 131,069
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 978 $ 1,065 978 978* 1,956
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Post 5,869 $ 6,390 5,869 5,869* 11,737
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
81
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 1,588 $ 1,730 1,588 1,588* 3,177
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 11,006 $ 11,983 11,006 11,006* 22,012
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 7,848 $ 8,546 7,848 7,848* 15,697
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxx 31,300 $ 34,080 31,300 31,300* 62,600
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxx 47,196 $ 51,388 47,196 47,196* 94,393
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxx 13,694 $ 14,910 13,694 13,694* 27,387
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. XxxXxxxxxx 145,533 $ 158,459 145,533 145,533* 291,067
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxx 50,620 $ 55,116 50,620 50,620* 101,240
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 11,370 $ 12,380 11,370 11,370* 22,739
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx 1,588 $ 1,730 1,588 1,588* 3,177
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxx 27,387 $ 29,820 27,387 27,387* 54,775
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 275,636 $ 300,117 275,636 275,636* 551,271
------------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Zastava 19,684 $ 21,432 19,684 19,684* 39,368
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxx 782 $ 852 782 782* 1,565
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxx 0 $ 0 0 0* 0
------------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 3,912 $ 4,260 3,912 3,912* 7,825
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
82
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxxxxx 1,956 $ 2,130 1,956 1,956* 3,912
------------------------------------------------------------------------------------------------------------------------------------
TOTALS 9,447,911 9,447,911 $10,253,135 1,389,024 $1,512,394 4,342,648 21,666,464 26,009,111
====================================================================================================================================
83
SCHEDULE III
Employment Agreement Terminations
Employee Consideration
Xxxxx X. Xxxxxxxxxx $813,383
Xxxx X. Xxxxxxx $813,383
Xxxxx X. Xxxxxxxx $813,383
84
SCHEDULE IV
CONTINGENT PAYMENTS
ADDITIONAL
PARTY PAYMENT DESCRIPTION
Xxxxx X. Xxxxxxxxxx $ 711,978 Deferred Compensation
------------------------------------------------------------------------------------------------------------------------
$ 492,000 Finance Fee paid in connection with the Recapitalization
------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS TO XXXXXXXXXX $1,203,978
------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx $ 711,978 Deferred Compensation
------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx $ 711,978 Deferred Compensation
------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx $ 100,000 Deferred Compensation
------------------------------------------------------------------------------------------------------------------------
$ 245,000 Finance Fee paid in connection with the Recapitalization
------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS TO HOLLAND $ 345,000
------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx $ 246,000 Finance Fee paid in connection with the Recapitalization.
------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS $3,218,934
------------------------------------------------------------------------------------------------------------------------
85
INDEX OF ATTACHMENTS
--------------------
Annex I Definitions
Schedule I Investors
Schedule II Shareholders
Schedule III Employment Agreement Terminations
Schedule IV Contingent Payments
Schedule 1.6 Certain Funded Indebtedness
Schedule 4.1 Organization
Schedule 4.2 Equity Investments
Schedule 4.3 Capital Stock
Schedule 4.4 Approvals
Schedule 4.5 Authority
Schedule 4.6 Financial Statements
Schedule 4.7 Absence of Undisclosed Liabilities
Schedule 4.8 Absence of Changes
Schedule 4.9 Employment Agreements
Schedule 4.10 Tax Matters
Schedule 4.11 ERISA Compliance
Schedule 4.12 Title to Assets
Schedule 4.13 Real Property
Schedule 4.14 Intellectual Property
Schedule 4.15 Agreements
Schedule 4.16 Compliance with Laws
86
Schedule 4.17 Litigation
Schedule 4.18 Insurance
Schedule 4.19 Labor Relations
Schedule 4.20 Environmental Matters
Schedule 4.21 Change in Control
Schedule 4.23 Conflicts of Interest
Schedule 4.24 Company Brokers
Schedule 4.25 Related Transaction
Schedule 4.27 Accounts and Notes Receivable
Schedule 4.29 Bank Accounts: Power of Attorney
Schedule 4.33 Post-Closing Ownership
Schedule 4.35 Prior Transactions
Schedule 5.5 Responsible Shareholder Brokers
Schedule 6.3 Investor Brokers
Schedule 10.1 Proportionate Percentages
Exhibit A EDS Option Agreement
Exhibit B MTH Option Agreement
Exhibit C Restated Charter
Exhibit D Small Business Sideletter
Exhibit E Deferred Payment Agreements
o Xxxxx X. Xxxxxxxxxx
o Xxxx X. Xxxxxxx
o Xxxxx X. Xxxxxxxx
o Xxxxx X. Xxxxxx
o MTH
Exhibit F Stock Purchase and Redemption Agreement
