EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (the "Agreement") is entered into as of
September 17, 1997, by and between LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC., a California corporation (the "Buyer"), and a wholly owned
subsidiary of LITIGATION RESOURCES OF AMERICA, INC., a Texas corporation (the
"Parent"), and XXXXX X. XXXXXXX, an individual ("Xxxxxxx"), and XXXXX X.
XXXXXXX, an individual ("SLZ", and together with Xxxxxxx, the "Sellers").
Sellers are the only shareholders of XXXXXX HOUSE, INC., a California
corporation doing business as ZISKIND, GREENE, WATANABE & XXXXX (the "Company").
This Agreement contemplates a transaction in which the Buyer will purchase
from the Sellers and the Sellers will sell to the Buyer all of the outstanding
capital stock of the Company in return for cash and the other consideration set
forth in (S) 2(B) below.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. CERTAIN DEFINITIONS.
"Accounts Payable Report" means a report as of a given time period
containing a summary of the outstanding accounts payable of the Company which
report shall reflect such accounts payable on an aged basis and shall set forth
the amounts due and owing by the Company to each of its suppliers, creditors or
employees.
"Accounts Receivable" means all amounts due and owing to the Company by
each of its customers.
"Accounts Receivable Report" means a report as of a given time period
containing a summary of the outstanding Accounts Receivable of the Company,
which report shall reflect such Accounts Receivable on an aged basis and shall
set forth the amounts due and owing to the Company by each of its customers.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Balance Sheet Report" means the balance sheet of the Company as of a given
date showing the assets, liabilities and equity of the Company prepared by the
Company in accordance
accordance with the method used to prepare the reference balance sheet provided
to the Parent on a consistent basis as with prior time periods (the "Company's
Past Practice").
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or is reasonably likely to form the
basis for any specified consequences.
"Buyer" shall mean Litigation Resources of America -- California, Inc., a
California corporation.
"Buyer Indemnified Parties" has the meaning set forth in (S) 7(B) below.
"Buyer's Accountants" shall mean the independent certified public
accounting firm of Coopers & Xxxxxxx LLP, located in Houston, Texas.
"Buyer's Disclosure Schedule" has the meaning set forth in (S) 4(B) below.
"Cash Payment" has the meaning set forth in (S) 2(B) below.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
of a corporation's employees, payroll, income or gross receipts, (ii) a
corporation's ownership or use of any of its assets, or (iii) any other aspect
of a corporation's business.
"CitiBank Debt" shall mean the Company's line of credit payable to
CitiBank, F.S.B.
"Closing" has the meaning set forth in (S) 2(C) below.
"Closing Date" has the meaning set forth in (S) 2(C) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall mean Xxxxxx House, Inc., a California corporation doing
business as Ziskind, Greene, Watanabe & Xxxxx.
"Company Financial Statements" has the meaning set forth in (S) 4(A)(e)
below.
"Company's Accountants" shall mean the independent certified public
accounting firm of H. Xxx Xxxxxxxxx or Xxxxxxxxx Accounting Corp.
"Confidential Information" means any information concerning the businesses
and affairs of the Company and its Subsidiaries that is not (a) generally known
or available to the public;
-2-
(b) after the date of this Agreement, generally known or readily available
through no violation of this Agreement; or (c) in, or hereafter becomes a part
of, the public domain through no violation of this Agreement.
"Controlled Group" means the Company, its Subsidiaries, and any trade or
business (whether or not incorporated) which together with the Company or any
Subsidiary of the Company would be deemed to be a "single employer" within the
meaning of ERISA Section 4001(b)(1) or subsections (b), (c), (m) or (o) of Code
Section 414.
"Customarily Permitted Liens" shall mean:
(a) Liens for ad valorem taxes, assessments or other governmental Charges
or levies, not yet due and payable;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other like Liens imposed by law, created in the
Ordinary Course of Business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such Liens); and
(c) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, variations and other
restrictions, Charges or encumbrances customary to the type of real property
affected and which do not impair the current use, occupancy, value or the
marketability of title of the real property subject thereto.
"Damages" has the meaning set forth in (S)7(B) below.
"EBITDA" shall mean earnings before interest, taxes, depreciation, and
amortization.
"Effective Date" shall mean 12:01 a.m. on the Closing Date.
"Effective Date Accounts Payable Report" means the Accounts Payable Report
for the Company as of the Effective Date.
"Effective Date Accounts Receivable" shall mean the entire amount of
Accounts Receivable for the Company as of the Effective Date.
"Effective Date Accounts Receivable Report" means the Accounts Receivable
Report for the Company as of the Effective Date.
"Effective Date Balance Sheet Report" means the Balance Sheet Report for
the Company as of the Effective Date.
-3-
"Employee Benefit Plan" means any (a) Employee Pension Benefit Plan, (b)
Employee Welfare Benefit Plan, or (c) personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or agreement,
deferred compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment agreement and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in clause (a) or (b) of this sentence.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2), including, but not limited to, employee pension benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1), including, but not limited to, employee welfare benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Net Worth" means the Net Worth as of the Effective Date as
determined in accordance with (S) 2(E) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Guaranteed Net Worth" means $69,735.
"Income Statement Reports" means a statement of revenues and expenses of
the Company as of a given date prepared by the Company in accordance with the
Company's Past Practice.
"IRS" means the United States Internal Revenue Service or such equivalent
successor agency of the United States with the responsibility of assessing
and/or collecting Taxes.
"Knowledge" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or other
matter which
-4-
investigation was necessary in order to make the representations and
warranties contained herein.
A person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Liens" means any mortgages, deeds of trust, liens, security interests,
pledges, claims, charges, liabilities, obligations, or other encumbrances.
"Net Worth" means the dollar amount of equity of the Company as of a given
time period as determined by the Balance Sheet Report.
"Notice of Action" has the meaning set forth in (S) 7(B) below.
"Notice of Election" has the meaning set forth in (S) 7(B) below.
"Offset" has the meaning set forth in (S) 8(B).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent" shall mean Litigation Resources of America, Inc., a Texas
corporation and the owner of all of the issued and outstanding shares of common
stock of Buyer.
"Parent Shares" has the meaning set forth in (S) 2(B) below.
"Party" shall mean, individually, the Buyer, the Parent or any Seller.
"Parties" shall mean, collectively, the Buyer, the Parent and the Sellers.
"Parent Financial Statements" has the meaning set forth in (S) 4(B)(g)
below.
"Past Due Accounts Receivable" means those accounts receivable of the
Company whose age is more than 120 days from the date of invoice as of the
Effective Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
-5-
"Permitted Encumbrances" with respect to property of a Party shall mean (i)
Security Interests expressly permitted, or consented in writing to by the other
Party; (ii) Purchase Money Liens; (iii) Customarily Permitted Liens; and (iv)
Liens of judgment creditors provided such Liens do not exceed $5,000
individually or $25,000 in the aggregate (other than Liens bonded or insured to
the reasonable satisfaction of the other Party).
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pledge Agreement" has the meaning set forth in (S) 6(A)(xi) below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"Purchase Money Liens" shall mean Liens incurred in connection with the
acquisition of any asset; provided that (i) each such Lien shall attach only to
the asset to be acquired, (ii) a description of the asset so acquired is
furnished to the other Party, and (iii) the indebtedness incurred in connection
with such acquisitions shall not individually exceed $5,000 or in the aggregate
exceed $25,000.
"Purchase Price" has the meaning described in (S) 2(B) below.
"Registration Rights Agreement" has the meaning set forth in (S) 6(A)(ix)
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any Lien other than (a) mechanic's, materialmen's
and similar Liens, (b) Liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
Purchase Money Liens and Liens securing rental payments under capital lease
arrangements, and (d) other Liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Sellers" shall have the meaning set forth in the preamble hereto.
"Sellers' Disclosure Schedule" has the meaning set forth in (S) 4(A) below.
"Senior Lender" shall mean Texas Commerce Bank, N.A.
-6-
"Shareholders' Agreement" shall have the meaning set forth in (S) 6(A)(ix).
"Subject Share" means any share of the common stock of the Company as set
forth in Section 4A(b) of the Sellers' Disclosure Schedule.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors thereof.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium
windfall profits, environmental (including taxes under Code Section 5(A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Xxxxxxx Employment Agreement" shall have the meaning set forth in (S)
6(A)(viii).
2. PURCHASE AND SALE OF SUBJECT SHARES.
A. BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree
to sell to the Buyer, all of the Subject Shares for the consideration specified
below in this (S) 2.
B. PURCHASE PRICE. The purchase price is Two Million Seven Hundred
Thousand Dollars ($2,700,000) to be paid and delivered by the Buyer to the
Sellers on the Closing Date, subject to adjustments thereto under this
Agreement, as follows (collectively, the "Purchase Price"):
(i) Delivery to the Sellers of an aggregate of 158,824 shares of
common stock of the Parent, $.01 par value per share (the "Parent Shares")
as will constitute an agreed upon aggregate value of One Million Three
Hundred Fifty Thousand and No/100 Dollars ($1,350,000.00) at a per share
value equal to the Eight and 50/100 Dollars ($8.50); and
(ii) Delivery of cash in the amount of One Million Three Hundred
Fifty Thousand ($1,350,000) payable by wire transfer or delivery of other
immediately available funds to the Sellers on the Closing Date in
accordance with wiring
-7-
instructions delivered by the Sellers to the Buyer at least three business
days prior to Closing (the "Cash Payment").
In addition, as soon as practicable after each applicable year end of the
Company, the Buyer's Accountants shall determine the amount of EBITDA, if any,
of the Company during (i) the time period beginning with the Closing Date
through December 31, 1997 (the "1997 EBITDA"), (ii) the time period beginning
January 1, 1998, through December 31, 1998 (the "1998 EBITDA"), (iii) the time
period beginning January 1, 1999, through December 31, 1999 (the "1999 EBITDA"),
and (iv) the time period beginning January 1, 2000, through December 31, 2000
(the "2000 EBITDA"). To the extent, if any, that the 1997 EBITDA exceeds the
amount of $150,000, the Sellers shall be paid an additional aggregate amount
equal to the amount of such excess multiplied by twenty percent (20%). To the
extent, if any, that the 1998 EBITDA or the 1999 EBITDA exceeds the amount of
$450,000, the Sellers shall be paid an additional aggregate amount equal to the
amount of such excess multiplied by twenty percent (20%). To the extent, if
any, that the 2000 EBITDA exceeds the amount of $450,000 the Sellers shall be
paid an additional aggregate amount equal to the amount of such excess
multiplied by twenty percent (20%), plus to the extent, if any, that the 2000
EBITDA exceeds the amount of $750,000, the Sellers shall be paid an additional
aggregate amount equal to the amount of such excess multiplied by five percent
(5%). The payments, if any, due and owing to the Sellers pursuant to the terms
of this paragraph shall be defined collectively as the "Earnout". Each year's
Earnout, if any, shall be paid to the Sellers by delivery of cash within
approximately ninety (90) days after each fiscal year end of the Company.
EBITDA will be calculated in accordance with the Company's Past Practice and not
be reduced by (i) any salary or contractual or discretionary bonus paid to any
officer, director or employee of the Parent or to any other person hired or
engaged without the consent of Xxxxxxx or (ii) any corporate management expense
or overhead allocated to, accrued or paid by the Company to the Parent or any
Affiliate of the Parent.
C. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx, Xxxxx &
Xxxxxx in Houston, Texas, unless otherwise mutually agreed, commencing on
September __, 1997 at 9:00 a.m. local time, or at such other time or place as
the Parties mutually agree (the "Closing Date").
D. DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in (S) 6(A) below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in (S) 6(B) below,
(iii) the Sellers will deliver to the Buyer stock certificates representing all
of the Subject Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) the Buyer will deliver to the Sellers the Parent
Shares (subject to the Pledge Agreement) and the Cash Payment.
-8-
E. DETERMINATION OF FINAL NET WORTH. The Effective Date Balance Sheet
Report, the Effective Date Accounts Receivable Report and the Effective Date
Accounts Payable Report (collectively, the "Effective Date Financial Reports")
shall be prepared by the Buyer and the Buyer's Accountants as promptly as
possible after the Closing, and the Buyer shall deliver the Effective Date
Reports to the Seller and the Company's Accountants as soon as possible but in
no event later than 30 days after the Closing Date. The Company's Accountants
shall review the Effective Date Financial Reports (including any corresponding
work papers of Buyer's Accountants) and report to the Buyer's Accountants in
writing within 15 days of receipt thereof of any discrepancy. If the Company's
Accountants and the Buyer's Accountants cannot resolve such discrepancy within
15 days after Buyer's Accountants receipt of such report, then they shall so
notify the Sellers and the Buyer, and the Sellers and the Buyer shall attempt to
resolve the discrepancy within 15 days of such notice. If the Sellers and the
Buyer cannot resolve the discrepancy to their mutual satisfaction, another
independent public accounting firm acceptable to the Sellers and the Buyer shall
be retained to review the Effective Date Financial Reports. The final net worth
of the Company ("Final Net Worth") shall be determined consistent with the
methods used by the Buyer's Accountants in preparing the Company's June 30, 1997
Balance Sheet Reports (e.g., the CitiBank Debt shall be deemed to remain
outstanding and commissions and taxes payable shall be accrued). Such firm's
conclusions as to the carrying values to appear on the Effective Date Financial
Reports for purposes of determining the Final Net Worth shall be conclusive.
The Sellers and the Buyer shall share equally in the expenses of retaining such
independent accounting firm. The Buyer shall pay the expenses of the Buyer's
Accountants for their review of the Effective Date Financial Reports, and the
Sellers shall pay the expenses of Company's Accountants for their review of the
Effective Date Financial Reports.
F. POST-CLOSING ADJUSTMENT OF PURCHASE PRICE. Subject to the last
sentence of this paragraph, after the Closing Date, the Purchase Price set forth
in Section 2(B) shall be adjusted as follows: (i) if the Final Net Worth of the
Company as finally determined pursuant to Section 2(E) shall be more than the
Guaranteed Net Worth, then the Cash Payment shall be increased by the amount of
such excess and (ii) if the Final Net Worth of the Company as finally determined
pursuant to Section 2(E) shall be less than the Guaranteed Net Worth, then the
Cash Payment shall be decreased by the amount of such shortfall. In the event
that the Final Net Worth is more than the Guaranteed Net Worth, the Buyer shall
within 15 days pay such amount of cash to the Sellers. In the event that the
Final Net Worth is less than the Guaranteed Net Worth, the Sellers shall within
15 days refund such amount of cash to Buyer. Notwithstanding the foregoing, any
downward adjustment proposed to be made to the Final Net Worth arising from
facts that should have been, but were not, reflected in the Company Financial
Statements shall be subject to and shall count against the Threshold Amount set
forth in Section 7B(iv) hereof.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly
and severally, represent and warrant to the Buyer and the Parent that the
statements contained in this
-9-
(S) 3(A) are correct and complete as of the date of this Agreement, except as
set forth in the schedules of exceptions attached hereto as Schedule 3A.
-----------
(A) AUTHORIZATION OF TRANSACTION. Sellers have full power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Sellers, enforceable in accordance with its terms
and conditions, except to the extent that enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or moratorium
laws or other laws or principles of equity affecting the enforcement of
creditors' rights. Sellers represent and warrant that they need not give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(B) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement by the Sellers, nor the consummation of the transactions by the
Sellers as contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
Sellers are subject or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Sellers are a party or by which they are bound or to
which any of their assets is subject.
(C) BROKERS' FEES. The Sellers have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(D) SUBJECT SHARES. Sellers hold of record and own beneficially the
number of Subject Shares set forth next to their names in (S)4A(b) of the
Sellers' Disclosure Schedule, free and clear of any Liens or restrictions
on transfer (other than any restrictions under the Securities Act and state
securities laws (other than this Agreement)). Sellers are not party to any
voting trust, proxy, or other agreement or understanding with respect to
the voting of any capital stock of the Company.
B. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT. The Buyer and
Parent, jointly and severally, represent and warrant to the Sellers that the
statements contained in this (S) 3(B) are correct and complete as of the date of
this Agreement, except as set forth in the schedule of exceptions attached
hereto as Schedule 3B.
-----------
(A) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of
California. The Buyer is qualified to do business in each jurisdiction in
which the nature of its business, the ownership of its assets or the lease
of its properties require it to be so qualified.
-10-
(B) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and the Ancillary Agreements, and to perform its
obligations hereunder and thereunder. The Board of Directors of the Buyer
has duly authorized the execution, delivery and performance of this
Agreement, the Ancillary Agreements and the other agreements and
transactions contemplated hereby and thereby. No other corporate
proceedings on the Buyer's part are necessary to authorize this Agreement,
the Ancillary Agreements or the transactions contemplated hereby. Upon
execution and delivery of this Agreement and the Ancillary Agreements by
the Parties hereto, this Agreement and the Ancillary Agreements shall
constitute legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, except to the
extent that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws or other laws or principles
of equity affecting the enforcement of creditors' rights. The Buyer
represents and warrants that it need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(C) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws.
(D) BROKERS' FEES. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could
become liable or obligated other than to The GulfStar Group, Inc.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARTIES.
A. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. Sellers
represents and warrants to the Buyer that the statements contained in this (S) 4
are correct and complete as of the date of this Agreement, except as set forth
in Sellers' disclosure schedule attached hereto as Schedule 4A ("Sellers'
-----------
Disclosure Schedule"). Nothing in the Sellers' Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Sellers' Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail.
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is
a corporation duly organized, validly existing, and in good standing under
the laws of California. The Company is not qualified to do business in any
other jurisdiction, nor
-11-
does the nature of its business require such qualification. The Company has
full corporate power and authority and all material licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. (S) 4A(a) of the
Sellers' Disclosure Schedule lists the directors and officers of the
Company. The Sellers have delivered to the Buyer correct and complete
copies of the articles of incorporation and bylaws of the Company and its
Subsidiaries, if any (as amended to date), as well as the minute book
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
certificate book, and the stock record book of the Company (all of which
are correct and complete in all material respects). The Company is not in
default under or in violation of any provision of its articles of
incorporation or bylaws.
(B) CAPITALIZATION. The entire authorized capital stock, the issued
and outstanding shares and the treasury shares of the Company are
accurately set forth in (S) 4A(b) of the Sellers' Disclosure Schedule. All
of the issued and outstanding Subject Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by
the Sellers as set forth in (S) 4A(b) of the Sellers' Disclosure Schedule.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or commitments that would require the Company to issue, sell, or otherwise
cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect
to the voting of the capital stock of the Company.
(C) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject,
(ii) violate any provision of the articles of incorporation or bylaws of
the Company, or (iii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other arrangement
to which the Company is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). The Company does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(D) SUBSIDIARIES. The Company does not have any ownership interest
in any Subsidiaries. The Company does not control, directly or indirectly,
or have any direct
-12-
or indirect equity participation in any corporation, partnership, trust, or
other business association which is not a Subsidiary.
(E) FINANCIAL STATEMENTS. The Sellers have previously furnished the
Buyer with the following financial statements (collectively the "Company
Financial Statements"): (i) a Balance Sheet Report and an Income Statement
Report for the fiscal years ended December 31, 1996, compiled by Buyer's
Accountants; and (ii) Balance Sheet Reports and Income Statement Reports
for the period ended June 30, 1997, prepared by the Buyer's Accountants,
(iii) an Accounts Receivable Report dated as of June 30, 1997, and (iv) an
Accounts Payable Report dated as of June 30, 1997. The Company Financial
Statements have been prepared in accordance with the Company's Past
Practice and: (i) are consistently reported throughout the periods covered
thereby, (ii) present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods,
(iii) are correct and complete in all material respects, and (iv) are
consistent in all material respects with the books and records of the
Company (which books and records are correct and complete in all material
respects).
(F) EVENTS SUBSEQUENT TO JUNE 30, 1997. Except as disclosed on (S)
4A(f) of the Sellers' Disclosure Schedule, since June 30, 1997, there has
not been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company taken
as a whole. Without limiting the generality of the foregoing, since that
date:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, lease,
and licenses) either involving more than $3,000 singly or $15,000 in
the aggregate or outside the Ordinary Course of Business;
(iii) the Company has not accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $3,000 singly or $15,000 in the aggregate to which the Company is
a party or by which it is bound;
(iv) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible, except for Permitted Liens;
-13-
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$3,000 singly or $15,000 in the aggregate or outside the Ordinary
Course of Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series or related capital investments, loans, and
acquisitions) either involving more than $3,000 singly or $15,000 in
the aggregate;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $3,000 singly or $15,000 in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities for a period of more than sixty
(60) days after the date of invoice;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $3,000 singly or $15,000 in the aggregate
or outside the Ordinary Course of Business;
(x) there has been no change made or authorized in the
articles of incorporation or bylaws of the Company;
(xi) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiii) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property valued,
individually or in the aggregate, in excess of (i) $10,000 for all
property which, at the time of such damage or destruction, was subject
to or covered by property, casualty or any other form of insurance,
and (ii) $3,000 for all property which, at the time of such damage or
destruction, was not subject to or covered by property, casualty or
any other form of insurance;
-14-
(xiv) the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees;
(xv) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any such existing contract or agreement;
(xvi) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvii) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xviii) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xix) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xx) there has not been any other adverse occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of or Business involving the Company or any Subsidiaries which
exceeds $3,000 individually $15,000 in the aggregate; and
(xxi) the Company has not committed to any of the foregoing.
(G) UNDISCLOSED LIABILITIES. Except as disclosed on (S) 4A(g) of the
Sellers' Disclosure Schedule, the Company does not have any Liability (and,
to the best of the Sellers' Knowledge, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability), except for (i)
Liabilities reflected in the then most current Company Financial Statements
(including any notes thereto) and (ii) Liabilities which have arisen after
June 30, 1997, in the Ordinary Course of Business (none of which results
from, arises, out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
(H) LEGAL COMPLIANCE. To the Knowledge of Sellers, the Company, and
its predecessors and Affiliates, have complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges
-00-
xxxxxxxxxx) xx xxxxxxx, xxxxx, local, and foreign governments (and all
agencies thereof), and, to the Sellers' Knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure
so to comply.
(I) TAX MATTERS. Except as disclosed on (S) 4A(i) of the Sellers'
Disclosure Schedule:
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
material respects. All Taxes shown to be due on the Tax Returns have
been paid or accrued for on the Balance Sheet. The Company is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by a Tax authority in
a jurisdiction where the Company does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, stockholder, or other third party, except
for the unlikely event that Taxes may be incurred in connection with
an independent contractor of the Company being characterized as an
employee.
(iii) There is no dispute or claim concerning any Tax Liability
of the Company either (A) claimed or raised by any Tax authority in
writing or (B) as to which the Sellers and the directors and officers
(and employees responsible for Tax matters) of the Company has
Knowledge based upon personal contact with any agent of such
authority. (S) 4A(i) of the Sellers' Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on or after December
31, 1996, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of an
audit. The Sellers have delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the
Company.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The Company has not made an election under section 341(f)
of the Code.
-16-
(J) TITLE TO ASSETS. Except as set forth on (S) 4A(j) of Sellers'
Disclosure Schedule, the Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, or shown
in the Company Financial Statements or acquired after the date thereof,
free and clear of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business since June 30, 1997, and
except for Permitted Encumbrances.
(K) REAL PROPERTY. The Company does not own any real property. (S)
4A(k) of the Sellers' Disclosure Schedule lists and describes briefly all
real property leased or subleased to the Company. The Sellers have
delivered to the Buyer correct and complete copies of the leases and
subleases listed in (S) 4A(k) of the Sellers' Disclosure Schedule (as
amended to date). Except as disclosed on (S) 4A(k) of the Sellers'
Disclosure Schedule, with respect to each lease and sublease listed in (S)
4A(k) of the Sellers' Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(iii) the Company is not in material breach or default of any
lease or sublease, and to the Sellers' Knowledge, no third party to
any such lease or sublease is in material breach or material default,
and to the Sellers' Knowledge, no event has occurred which, with
notice or lapse of time, would constitute a material breach or
material default or permit termination, modification, or acceleration
thereunder;
(iv) with respect to each sublease, to the Sellers' Knowledge,
the representations and warranties set forth in subsections (i)
through (iii) above are true and correct with respect to the
underlying lease; and
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold, except Customarily Permitted Liens.
(L) TANGIBLE ASSETS. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of its businesses as presently conducted. Each such tangible asset is
suitable for the purpose for which it is presently used.
(M) INVENTORY. The Company does not carry or maintain any inventory.
-17-
(N) CONTRACTS. (S) 4A(n) of the Sellers' Disclosure Schedule lists
the following contracts and other agreements currently in effect to which
the Company is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $15,000 per annum;
(ii) any agreement (or group of related agreements) for the
furnishing or receipt of services, the performance of which will
extend over a period of more than one year from the Closing Date or
involve consideration in excess of $15,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$15,000 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement among Sellers and their Affiliates (other
than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any written agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $15,000 or providing
severance benefits;
(ix) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(x) any agreement under which the consequences of a default or
termination would reasonably be expected to have a material adverse
effect on the business, financial condition, operations, results of
operations, or future prospects of the Company; or
-18-
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $15,000, and
which cannot be terminated without penalty by giving no more than 30
days notice.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in (S) 4A(n) of the Sellers' Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in (S) 4A(n) of the Sellers'
Disclosure Schedule. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and
effect; (B) the Company is not, nor to the Sellers' Knowledge is any other
party, in breach or default, and to the Sellers' Knowledge, no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement, and (C) the Company has not repudiated any provision of any such
agreement nor to the Sellers' Knowledge has any other party repudiated any
provision of any such agreement.
(O) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Company are properly recorded on each Accounts Receivable Report
delivered to the Buyer, reflected properly on the Company's books and
records and represent legal obligations of the parties billed therefor.
Except as set forth on (S) 4A(o) of Sellers' Disclosure Schedule, the
Sellers have no reason to believe that any of such notes or accounts are
not collectible in the Ordinary Course of Business and have received no
indication from any obligor thereunder that such obligor disputes the
amount of such note or account or does not intend to pay such amount.
(P) POWERS OF ATTORNEY. Except as disclosed on (S) 4A(p) of the
Sellers' Disclosure Schedule, there are no outstanding powers of attorney
executed on behalf of the Company.
(Q) INSURANCE. (S) 4A(q) of the Sellers' Disclosure Schedule lists
each insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety
arrangements) to which the Company is currently a party, copies of which
have been furnished to the Buyer.
(R) LITIGATION. (S) 4A(r) of the Sellers' Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party
or, to the Knowledge of the Sellers, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before
any court of quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator.
(S) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
disclosed on (S) 4A(s) of the Sellers' Disclosure Schedule, neither the
Sellers nor their Affiliates
-19-
have been involved in any business arrangement or relationship with the
Company outside of the Company's Ordinary Course of Business within the
past 12 months, and neither the Sellers nor any of their Affiliates owns
any asset, tangible or intangible, which is used in the business of the
Company.
(T) GUARANTIES. The Company is not a guarantor or otherwise liable
for any Liability or obligation (including indebtedness) of any other
Person.
(U) EMPLOYEES. To the Sellers' Knowledge, no executive, key
employee, or group of employees has any plans to terminate employment with
the Company. The Company has not committed any unfair labor practice. The
Sellers do not have any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company. (S) 4A(u) of the Sellers' Disclosure Schedule
sets forth by number and employment classification the approximate numbers
of employees employed by the Company as of the date of this Agreement, and
none of said employees are subject to union or collective bargaining
agreements with the Company.
(V) EMPLOYEE BENEFITS.
(i) (S) 4A(v) of the Sellers' Disclosure Schedule lists each
Employee Benefit Plan that the Company maintains or to which it
contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and
of Code Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company. All
premiums or other payments for all periods ending
-20-
on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan.
(D) The Company has substantially performed all obligations,
whether arising by operation of law or by contract, required to
be performed by it in connection with such Employee Benefit
Plans, and to Sellers' Knowledge, there has been no default or
violation by any other party to such Employee Benefit Plans.
(E) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which relate to each such Employee Benefit Plan.
(ii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A)
require the Company to make a larger contribution to, or pay greater
benefits under, any Employee Benefit Plan than it otherwise would or
(B) create or give rise to any additional vested rights or service
credits under any Employee Benefit Plan.
(iii) Each such Employee Benefit Plan has been terminated by the
Company in compliance with all applicable laws on or before the
Closing Date.
(W) BROKERS' FEES. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(X) DISCLOSURE. The representations and warranties contained in this
(S) 4A do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this (S) 4A not misleading.
B. REPRESENTATIONS AND WARRANTIES CONCERNING THE PARENT. The Parent and
the Buyer jointly and severally represent and warrant to the Sellers that the
statements contained in this (S) 4B are correct and complete as of the date of
this Agreement, except as set forth in the Buyer's Disclosure Schedule attached
hereto as Schedule 4B (the "Buyer's Disclosure Schedule"). Nothing in the
-----------
Buyer's Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Buyer's Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail.
-21-
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Parent is a
corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Parent is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. Each of the Parent
and its Subsidiaries has full corporate power and authority and all
material licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and to own and use the properties owned
and used by it. (S) 4B(a) of the Buyer's Disclosure Schedule lists the
directors and officers of the Parent. The Buyer has delivered to the
Sellers correct and complete copies of the charter and bylaws of the Parent
(as amended to date). The minute books (containing the records of meetings
of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record
books of the Parent are correct and complete in all material respects. The
Parent is not in default under or in violation of any provision of its
charter or bylaws.
(B) CAPITALIZATION. The entire authorized capital stock, the issued
and outstanding shares and the treasury shares of the Parent are accurately
set forth in (S) 4B(b) of the Buyer's Disclosure Schedule together with the
changes thereto contemplated by the acquisition of the Company. All of the
issued and outstanding shares of the Parent have been duly authorized, and
are validly issued, fully paid, and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Parent to issue, sell, or otherwise
cause to become outstanding any of its capital stock except those set forth
in Schedule (S) 4B(b) of the Buyer's Disclosure Schedule and those relating
to the Parent's pending acquisitions of other businesses. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Parent except as set
forth in Schedule (S) 4B(b) of the Buyer's Disclosure Schedule.
(C) COMMON STOCK. At the time of issuance thereof and delivery to
the Sellers, the Parent Shares to be delivered to the Seller pursuant to
this Agreement will constitute valid and legally issued Parent Shares,
fully paid and nonassessable, and with the exception of restrictions upon
resale contained in the Shareholders' Agreement and the Stock Pledge
Agreement, will be identical in all substantive respects (which do not
include the form of certificate upon which it is printed or the presence or
absence of a CUSIP number on any such certificate) to the Parent Shares
issued and outstanding as of the date hereof by reason of the provisions of
the Texas Business Corporation Act. Except as provided in the previous
sentence, the Parent Shares issued and delivered to the Sellers shall at
the time of such issuance and delivery be free and clear of any liens,
claims or encumbrances of any kind or character. The Parent Shares to be
issued to the Seller pursuant to this Agreement will not be registered
under the 1933 Act, except as provided in Registration Rights Agreement.
(D) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i)
-22-
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Parent is subject, (ii) violate
any provision of the charter or bylaws of the Parent, or (iii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Parent is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
The Parent does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(E) BROKERS' FEES. The Parent does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement other than
to The Gulfstar Group, Inc.
(F) DISCLOSURE. The representations and warranties contained in this
(S) 4B do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this (S) 4B not misleading.
(G) FINANCIAL STATEMENTS. The Parent previously furnished the
Sellers with the financial statements set forth in Schedule (S) 4B(g) of
the Buyer's Disclosure Schedule (collectively the "Parent Financial
Statements"). The Parent Financial Statements have been prepared in
accordance with GAAP and are consistently reported throughout the periods
covered thereby, present fairly the financial condition of the Parent and
its Subsidiaries as of such dates and the results of operations of the
Parent and its Subsidiaries for such periods, are correct and complete in
all material respects, and are consistent in all material respects with the
books and records of the Parent (which books and records are correct and
complete in all material respects).
(H) UNDISCLOSED LIABILITIES. Except as disclosed on (S) 4B(h) of the
Buyer's Disclosure Schedule, the Parent does not have any Liability (and,
to the best of the Parent's Knowledge, there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability), except for (i)
Liabilities reflected in the then most current Parent Financial Statements
(including any notes thereto) and (ii) Liabilities which have arisen after
June 30, 1997, in the Ordinary Course of Business (none of which results
from, arises, out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
(I) EVENTS SUBSEQUENT TO JUNE 30, 1997. Except as disclosed on (S)
4B(i) of the Buyer's Disclosure Schedule, since June 30, 1997, there has
not been any material
-23-
adverse change in the business, financial condition, operations, results of
operations, or future prospects of the Parent and its Subsidiaries taken as
a whole.
5. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing:
A. GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under (S) 7 below).
B. CONFIDENTIALITY. The Sellers will treat and hold as such all of the
Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement and all of the other
agreements executed in connection herewith. In the event that Sellers are
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Sellers will notify
the Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this (S)
5B. If, in the absence of a protective order or the receipt of a waiver
hereunder, Sellers are, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
Sellers may disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, that Sellers shall use their reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate; provided, however that
all of such Sellers' costs including but not limited to legal fees shall be paid
by the Buyer. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
C. ACCOUNTS RECEIVABLE. Xxxxxxx shall, during the term of his
employment by the Company, use reasonable efforts to collect the Accounts
Receivable in the Ordinary Course of Business.
6. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYER AND THE PARENT. The obligation
of the Buyer and the Parent to proceed with the Closing and consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions (any or all which may be waived in
writing by the Buyer and the Parent):
(i) the representations and warranties of the Sellers set forth in (S)
3A and (S) 4A above shall be true and correct in all material respects at
and as of the Closing Date;
-24-
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects at and as of the Closing Date;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Buyer to own the Subject Shares and to control the Company, or (D)
materially and adversely affect in any material respect the right of the
Company to own its assets and to operate its business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in (S) 6(A)(i)-(iii)
is satisfied in all respects;
(v) the Buyer shall have received from counsel to the Sellers an
opinion substantially in the form of EXHIBIT F-1 hereto and reasonably
acceptable to both the Buyer and the Sellers, addressed to the Buyer and
dated as of the Closing Date, containing such assumptions and
qualifications as may be reasonably acceptable to the Buyer's legal
counsel;
(vi) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Company other than Xxxxxxx
and those whom the Buyer shall have specified in writing prior to the
Closing;
(vii) the Buyer shall have received notification from its Senior
Lender thatsuch Senior Lender has approved consummation of the transactions
contemplated by this Agreement under its acquisition line of credit;
(viii) Xxxxxxx shall have entered into an Employment Agreement with
the Company (the "Xxxxxxx Employment Agreement") substantially in the form
of EXHIBIT A hereto;
(ix) The Sellers shall have entered into a certain First Amended and
Restated Shareholders' Agreement (the "Shareholders' Agreement")
substantially in the form of EXHIBIT B hereto, and a Registration Rights
Agreement substantially in the form of EXHIBIT C hereto, which shall grant
to Sellers certain piggyback rights with respect to the Parent Shares and
shall provide that, to the extent any greater registration rights are ever
granted to any seller of a company acquired by the Buyer, the Sellers shall
be granted the same or equivalent registration rights (the "Registration
Rights Agreement");
-25-
(x) all Employee Benefit Plans shall have been terminated by the
Sellers to the extent Buyer has implemented substitute Employee Benefit
Plans, and neither the Buyer nor the Company shall have any further
liability with respect thereto other than completion of the routine winding
up thereof ;
(xi) the Sellers shall have entered into the Stock Pledge Agreement
("Pledge Agreement") substantially in the form of EXHIBIT D hereto with the
Buyer;
(xii) the Sellers shall have delivered Investor Representation Letters
substantially in the form of EXHIBIT E hereto to the Parent; and
(xii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer;
B. CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to proceed with Closing and consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions (any or all of which may be waived in writing by Sellers):
(i) the representations and warranties of the Buyer and the Parent
set forth in (S) 3B and (S) 4B above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) the Buyer and the Parent shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
the Sellers to own the Parent Shares, or (D) affect adversely in any
material respect the right of the Buyer to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(iv) the Buyer and the Parent shall have delivered to the Seller
certificates to the effect that each of the conditions specified above in
(S) 6(B)(i)-(iii) is satisfied in all respects;
-26-
(v) the Buyer and the Parent shall have delivered to the Seller
certified resolutions of their respective Boards of Directors, authorizing
the execution, delivery and performance of this Agreement and all
documents, instruments and agreements contemplated herein to be executed by
the Buyer and Parent, respectively;
(vi) the Buyer shall have (a) obtained the full and final releases
of Xxxxxxx'x guarantee of the CitiBank Debt or (b) paid in full the
CitiBank Debt;
(vii) the Buyer shall have received from Senior Lender approval to
fund this transaction under its acquisition line;
(viii) the Buyer shall have caused the Company to enter into the
Xxxxxxx Employment Agreement;
(ix) the Sellers shall have received from counsel to the Buyer an
opinion in the form of EXHIBIT F-2 hereto and reasonably acceptable to both
the Buyer and the Sellers, addressed to the Sellers, and dated as of the
Closing Date containing such assumptions and qualifications as may be
reasonably acceptable to the Seller's legal counsel;
(x) the Buyer shall have entered into the Shareholders' Agreement
and the Registration Rights Agreement on terms and conditions reasonably
satisfactory to Sellers;
(xi) the Buyer shall have entered into the Pledge Agreement with the
Seller; and
(xii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby, and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
7. INDEMNIFICATION.
A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for two years thereafter except that the representations and warranties
contained in (S)4 A(i), and (S)4 A(j) which shall survive for three years after
the Closing.
B. INDEMNIFICATION PROVISIONS.
(I) BY THE SELLERS. The Sellers, jointly and severally, shall
indemnify, save, defend and hold harmless the Buyer, Parent and their respective
shareholders, directors, officers, partners, agents and employees (and in the
event the Buyer assigns its right, title and interest
-27-
hereunder to a corporation, which shall be permitted hereunder, such assignee)
(collectively, the "Buyer Indemnified Parties") from and against any and all
costs, lawsuits, losses, Liabilities, deficiencies, claims and expenses,
including interest, penalties, reasonable attorneys' fees and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
(collectively referred to herein as "Damages"), incurred in connection with or
arising out of or resulting from or incident to any breach (or in the event any
third party alleges facts that, if true, would mean the Sellers have breached),
of any covenant, warranty or representation made by the Sellers in or pursuant
to this Agreement or any other agreement delivered pursuant to this Agreement or
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by the Sellers or their Affiliates pursuant to the terms of this
Agreement; provided, however, that the Sellers shall not be liable for any such
Damages to the extent, if any, such Damages result from or arise out of a breach
or violation of this Agreement by any Buyer Indemnified Parties.
(II) BY THE BUYER AND THE PARENT. The Buyer and the Parent shall
indemnify, save, defend and hold harmless the Sellers from and against any and
all Damages incurred in connection with or arising out of or resulting from or
incident to any breach (or in the event any third party alleges facts that, if
true, would mean the Buyer or the Parent has breached), of any covenant,
warranty or representation made by the Buyer or the Parent in or pursuant to
this Agreement or any other agreement delivered pursuant to this Agreement
contemplated hereby or in any schedule, certificate, exhibit, or other
instrument furnished or to be furnished by the Buyer or the Parent under this
Agreement; provided, however, that the Buyer and the Parent shall not be liable
for any such Damages to the extent, if any, such Damages result from or arise
out of a breach or violation of this Agreement by the Sellers.
(III) DEFENSE OF CLAIMS. If any lawsuit or enforcement action is
filed against any Party entitled to the benefit of indemnity hereunder, written
notice thereof describing such lawsuit or enforcement action in reasonable
detail and indicating the amount (estimated, if necessary) or good faith
estimate of the reasonably foreseeable estimated amount of Damages (which
estimate shall in no way limit the amount of indemnification the indemnified
Party is entitled to receive hereunder), shall be given to the indemnifying
Party as promptly as practicable (and in any event within ten (10) days, after
the service of the citation or summons) ("Notice of Action"); provided that the
failure of any indemnified Party to give timely notice shall not affect its
rights to indemnification hereunder to the extent that the indemnified Party
demonstrates that the amount the indemnified Party is entitled to recover
exceeds the actual damages to the indemnifying Party caused by such failure to
so notify within ten (10) days; provided further that a Notice of Action must be
sent to the indemnifying Party within the applicable survival period as provided
in Section 7(a) of this Agreement. The indemnifying Party may elect to
compromise or defend any such asserted liability and to assume all obligations
contained in this (S) 7(b) to indemnify the indemnified Party by a delivery of
notice of such election ("Notice of Election") within ten (10) days after
delivery of the Notice of Action. Upon delivery of the Notice of Election, the
indemnifying Party shall be entitled to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and
-28-
defend the same, at the indemnifying Party's sole cost, risk and expense, and
such indemnified Party shall cooperate in all reasonable respects, at the
indemnifying Party's sole cost, risk and expense, with the indemnifying Party
and such attorneys in the investigation, trial, and defense of such lawsuit or
action and any appeal arising therefrom; provided, however, that the indemnified
Party may, at its own cost, risk and expense, participate in such investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom. If
the Notice of Election is delivered to the indemnified Party, the indemnified
Party shall not pay, settle or compromise such claim without the indemnifying
Party's consent, which consent shall not be unreasonably withheld. If the
indemnifying Party elects not to defend the claim of the indemnified Party or
does not deliver to the indemnified Party a Notice of Election within ten (10)
days after delivery of the Notice of Action, the indemnified Party may, but
shall not be obligated to, defend, compromise or settle (exercising reasonable
business judgment) the claim or other matter on behalf, for the account, and at
the risk, of the indemnifying Party.
(IV) LIMITATION ON INDEMNIFICATION. Notwithstanding any provision of
this Agreement, neither the Buyer nor the Sellers or any Affiliate of either
shall be required to pay an indemnified Party or any Affiliate thereof any
amount with respect to any claim for Damages under this (S) 7(B) until the
Damages which the indemnified Party and its Affiliates suffered under this
Agreement aggregate at least $25,000 (the "Threshold"), at which time and in
such event the indemnified Party or Affiliate shall be entitled to receive
payment for the entire amount of aggregate Damages to the extent they exceed
$25,000. No Party shall be liable to indemnify the other Parties in an aggregate
amount in excess of $1,350,000 including any and all amounts due and owing under
(S) 8(B) of this Agreement.
8. REMEDIES.
A. SPECIFIC PERFORMANCE. Each of the Parties hereby agrees that the
transactions contemplated by this Agreement are unique, and that each Party
shall have, in addition to any other legal or equitable remedy available to it,
the right to enforce this Agreement by decree of specific performance. If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it, he or they may be entitled at law
or equity. The rights and remedies granted herein are cumulative and not
exclusive of any other right or remedy granted herein or provided by law.
B. OFFSET. Any and all Damages incurred by the Buyer which permit the
Buyer to make an indemnification claim against the Sellers and to the extent not
otherwise prohibited by applicable law, shall be subject to mandatory offset by
the Buyer against all amounts due and owing by the Buyer to the Sellers under
this Agreement or any document, instrument, or agreement executed in connection
herewith. The foregoing shall constitute the sole remedy of Buyer against
Sellers in connection with breaches of the representations, warranties,
covenants
-29-
and obligations of the Sellers contained in this Agreement except to the extent
of any remaining unpaid claims to the extent permitted under (S) 7 of this
Agreement if there are not any Parent Shares remaining pledged to offset against
in which event Buyer may proceed against the Sellers but only for any amounts
not offset and not exceeding $1,350,000, including the amounts recovered against
the pledged Parent Shares. In the event of an offset of any Damages incurred as
a result of any such breach, the Buyer shall furnish the Sellers notice
containing detailed information about the breach, the magnitude of the Damages
that the Buyer has or reasonably expects to incur (the act of offsetting by the
Buyer shall be referred to as an "Offset"). Offsets shall first be against the
Parent Shares. For purposes hereof, the Parent Shares shall be deemed to have a
value equivalent to $8.50 per share; provided, however, that if Parent has
successfully consummated a public offering of the Parent Shares ("Public
Offering"), then the value of the Parent Shares shall be deemed to be the
average public trading price of each Parent Share over the five (5) most recent
business days falling prior to the date of delivery by the Buyer to the Sellers
of the notice of an event requiring an Offset. In order to secure the Buyer's
Offset rights against the Parent Shares, the Buyer and the Sellers shall execute
the Pledge Agreement. The Parent Shares subject to the lien created by the
Pledge Agreement shall have a restrictive legend typed on the back thereof
specifying that the Parent Shares are subject to a right of Offset as specified
in this Agreement. The Sellers acknowledge and agree that but for the right of
Offset contained in this Agreement, the Buyer would not have entered into this
Agreement or any of the transactions contemplated herein. If any legal action or
other proceeding is brought for the enforcement of this Agreement, or any
document, instrument, or agreement executed in connection herewith, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement or any document, instrument, or
agreement executed in connection herewith, the successful or prevailing Party
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding.
9. MISCELLANEOUS.
A. PUBLIC ANNOUNCEMENTS. No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement
(including the documents referred to herein) without the prior written approval
of the Parent, the Buyer and the Sellers; provided, however, that any Party may
make any public disclosure it believes in good faith upon the advise of legal
counsel it is required by applicable law (in which case the disclosing Party
will use its best efforts to advise the other Party prior to making the
disclosure).
B. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, the Buyer Indemnified
Parties and their respective successors and permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
-30-
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder (x) to one or more of
its Affiliates, and (y) to one or more financial institutions lending funds to
the Buyer for the purpose of financing the purchase of the Subject Shares
hereunder and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
E. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Sellers: Xxxxx X. & Xxxxx X. Xxxxxxx
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Copy to: Xxxxxxx X. Xxxxx
Xxxxx & Xxxxx
Suite 700, 000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
If to the Buyer: Litigation Resources of America-California, Inc.
c/o Litigation Resources of America, Inc.
650 First City Tower, 0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Phone: 713/000-0000
Fax: 713/000-0000
-31-
Copy to: Xxxx X. Xxxxx
Xxxxx, Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Phone: 713/000-0000
Fax: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
H. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
I. AMENDMENTS AND WAIVERS. No amendments of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer, the Parent and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
J. SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
K. EXPENSES. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
L. CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute
-32-
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
N. ARBITRATION. If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if said dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this (S) 9(N). Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration. There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any). If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules. Except as specifically
provided in this (S) 9(N), the arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall not render an award of punitive damages. Any arbitration
hereunder shall be held in Orange County, California. Expenses related to the
arbitration, including counsel fees, shall be borne by the Party incurring such
expenses except to the extent otherwise provided herein. The fees of the
arbitrator and of the American Arbitration Association, if any, shall be divided
equally among the Parties involved in the controversy. Judgment upon the award
rendered by the arbitrator (which may, if deemed appropriate by the arbitrator,
include equitable or mandatory relief with respect to performance of obligations
hereunder) may be entered in any court of competent jurisdiction. The
arbitrator shall award the prevailing Party in any arbitration proceeding
recovery of its attorneys' fees and other costs in connection with the
arbitration from the non-prevailing Party.
-33-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
BUYER:
-----
LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC.,
a California corporation
By: /s/ Xxxxxxx X Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx, President
PARENT
------
LITIGATION RESOURCES OF AMERICA,
INC., a Texas corporation
By: /s/ Xxxxxxx X Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx, President
SELLERS:
-------
/s/ Xxxxx X. Xxxxxxx
____________________________________
XXXXX X. XXXXXXX
/s/ Xxxxx X. Xxxxxxx
____________________________________
XXXXX X. XXXXXXX
-34-
