EXHIBIT 2.9
PLAN AND AGREEMENT OF REORGANIZATION AND MERGER
THIS PLAN AND AGREEMENT OF REORGANIZATION AND MERGER (this "Agreement") is
dated as of August 19, 1997, by and among LITIGATION RESOURCES OF AMERICA --
CALIFORNIA, INC., a California corporation ("LRA-CA"), MEDTEXT, INC., a
California corporation ("Medtext"), SEAQUESTOR TRUST, a California private
annuity trust (the "Shareholder"), and LITIGATION RESOURCES OF AMERICA, INC., a
Texas corporation and the parent company of LRA-CA ("Parent"). LRA-CA and
Medtext are sometimes hereinafter referred to collectively as the "Constituent
Corporations" or individually as a "Constituent Corporation." LRA-CA and Parent
are sometimes hereinafter referred to collectively as the "LRA Companies" or
individually as a "LRA Company." Medtext and the LRA Companies are sometimes
hereinafter referred to collectively as the "Corporations" or individually as a
"Corporation." The Corporations and the Shareholder are sometimes referred to
collectively as the "Parties" or individually as a "Party."
W I T N E S S E T H:
WHEREAS, the Board of Directors of each Corporation deems it advisable and
in the best interests of such Corporation and of such Corporation's stockholders
that Medtext be merged with and into LRA-CA pursuant to the provisions of the
General Corporation Law of California (the "California Act") and this Agreement,
in a transaction whereby all of the currently issued and outstanding shares of
common stock, without par value, of Medtext will be canceled and converted into
the right to receive shares of common stock, $.01 par value, of the Parent,
together with cash and other consideration; and
WHEREAS, the Board of Directors of each Corporation has authorized and
approved the merger of Medtext with and into LRA-CA (the "Merger") on the terms
and conditions contained in this Agreement, and the Board of Directors of each
Constituent Corporation has submitted the Merger to the stockholders of such
Constituent Corporation for approval, as required by the California Act, and
such approval of the stockholders has been obtained in accordance with the
requirements of the California Act; and
WHEREAS, the Parties intend that the Merger will constitute a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the Parties desire to set forth certain representations,
warranties and covenants made by each of them to the others as an inducement to
the execution hereof and the consummation of the Merger;
NOW THEREFORE, in consideration of the premises and the mutual agreements,
promises and covenants herein contained, the Parties hereby agree that Medtext
shall be, at the "Effective Time" of this Agreement (as hereinafter defined in
Section 4.02), merged into LRA-CA, which shall
be the surviving corporation (such corporation in its capacity as such surviving
corporation may be hereinafter referred to as the "Surviving Corporation") and a
wholly-owned subsidiary of Parent, organized and existing under the laws of the
State of California, and the Corporations hereby adopt and agree to the
following covenants, terms and conditions relating to the Merger and the manner
of carrying the same into effect.
ARTICLE I
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DEFINITIONS
"Accounts Payable Report" means a report as of a given time period
containing a summary of the outstanding accounts payable of Medtext which report
shall reflect such accounts payable on an aged basis and shall set forth the
amounts due and owing by Medtext to each of its suppliers, creditors or court
reporters.
"Accounts Receivable" means all amounts due and owing to Medtext 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 Medtext, which
report shall reflect such accounts receivable and shall set forth the amounts
due and owing to Medtext by each of its customers.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"Additional Parent Shares Value" means $8.50 per Parent Share; provided,
that if the Parent or its Affiliates have subsequently consummated an
acquisition in which Parent Shares are issued, then the value of each Parent
Share as specified in the most recent such acquisition; and further provided
however, that if the Parent has successfully consummated a public offering of
its shares of common stock, then it shall mean the average public trading price
of each Parent Share over the five (5) most recent business days.
"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 Medtext as of a given
date showing the assets, liabilities and equity of Medtext prepared by Medtext
in accordance with GAAP on a consistent basis as with prior time periods.
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"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.
"Cash Payment" has the meaning set forth in Section 2.03(b)(iii) below.
"Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) any
of a corporation's employees, payroll, income or gross receipts, (ii) any of a
corporation's ownership or use of any of its assets, or (iii) any other aspect
of a corporation's business.
"Closing" has the meaning set forth in Section 2.04 below.
"Closing Date" has the meaning set forth in Section 2.04 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of Medtext and its Subsidiaries that is not (a) generally known or
available to the public; (b) after the date of this Agreement, generally known
or readily available through no violation of this Agreement; or (c) in or does
not hereafter become a part of the public domain through no violation of this
Agreement.
"Controlled Group" means Medtext, its Subsidiaries, and any trade or
business (whether or not incorporated) which together with Medtext or any
Subsidiary of Medtext 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
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(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 Section 11.02 below.
"Deferred Purchase Price" has the meaning set forth in Section 2.03(c).
"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 Medtext as of the Effective Date.
"Effective Date Accounts Receivable" shall mean the entire amount of
Accounts Receivable for Medtext as of the Effective Date.
"Effective Date Accounts Receivable Report" means the Accounts Receivable
Report for Medtext as of the Effective Date.
"Effective Date Balance Sheet Report" means the Balance Sheet Report for
Medtext as of the close of the Effective Date.
"Effective Time" has the meaning set forth in Section 4.02.
"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.
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"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.
"Escrow Agent" shall mean the law firm of Xxxxx, Xxxxx & Xxxxxx
Incorporated.
"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 Section 2.07 below.
"Financial Statements" has the meaning set forth in Section 7.06 below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Guaranteed Net Worth" means $191,047.00.
"Guaranty" shall mean that certain Guaranty of Performance to be executed
by Xxxxx Xxxxx guarantying the obligations of the Trust.
"Income Statement Reports" means a statement of revenues and expenses of
Medtext as of a given date prepared by Medtext on an accrual basis and on a
consistent basis as with prior time periods.
"IRS" means the United States Internal Revenue Service or such equivalent
successor agency of the United States with the responsibility of assessing
and/or collecting Taxes.
"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.
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,
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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.
"LRA Companies' Accountants" shall mean the independent certified public
accounting firm of Coopers & Xxxxxxx located in Houston, Texas.
"LRA Companies' Disclosure Schedule" has the meaning set forth in Section
8.0 below.
"LRA Financial Statements" has the meaning set forth in Section 8.08 below.
"LRA Indemnified Parties" has the meaning set forth in Section 11.2 below.
"Medtext's Accountants" shall mean the independent certified public
accounting firm of Metzleur, Xxxxxxx & Xxxxxxxx.
"Medtext Disclosure Schedule" has the meaning set forth in Section 7.0
below.
"Medtext Profits" has the meaning set forth in Section 2.03 below.
"Medtext Share" means any share of the issued and outstanding common stock
of Medtext, without par value.
"Net Worth" means the dollar amount of equity of Medtext as of a given time
period as determined by the Balance Sheet Report.
"Note" has the meaning set forth in Section 2.03(b)(ii) below.
"Notice of Action" has the meaning set forth in Section 11.02(ii) below.
"Notice of Election" has the meaning set forth in Section 11.02(ii) below.
"Offset" has the meaning set forth in Section 11.03(B) below.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent Shares" has the meaning set forth in Section 2.03(b)(i) below.
"Parent Shares Calculation" has the meaing set forth in Section 2.03(c).
"Parent Shares Value" shall mean $8.50 per Parent Share; provided however,
that if the Parent has successfully consummated a public offering of its shares
of common stock, then it shall mean the average public trading price of each
Parent Share over the five (5) most recent business days.
"Past Due Accounts Receivable" means those accounts receivable of Medtext
whose age is more than 120 days from the date of invoice as of the Effective
Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"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 $3,000
individually or $15,000 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 Section 11.03 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 $3,000 or in the aggregate
exceed $15,000.
"Purchase Price" has the meaning described in Section 2.03 below.
"Registration Rights Agreements" has the meaning set forth in Section
9.01(ix).
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"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 mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
Purchase Money Liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Senior Lender" shall mean Texas Commerce Bank, N.A.
"Shareholder" shall mean Sequester Trust, a California private annuity
trust.
"Shareholders' Agreement" shall mean that certain First Amended and
Restated Shareholders' Agreement by and between the Parent and all of the
shareholders of the Parent.
"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.
"Xxxxx" means Xxxxx Xxxxx, an individual.
"Xxxxx Employment Agreement" means that certain Employment Agreement by and
between LRA-CA and Xxxxx dated of even date herewith.
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ARTICLE II
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THE MERGER; STATUS AND CONVERSION OF SECURITIES
2.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Date, Medtext shall be merged with and into LRA-CA
in accordance with this Agreement and the separate existence of Medtext shall
thereupon cease. The Merger is intended to be a forward triangular merger and
"tax-free reorganization" pursuant to Section 368(a) of the Code. The Merger
shall have the effects specified in the California Act.
2.02 [Intentionally Omitted]
2.03 Status and Conversion of Securities. The status of the outstanding
capital stock of each of the Constituent Corporations and the manner and basis
of converting the shares of capital stock of each of the Constituent
Corporations into or for shares of capital stock of the Surviving Corporation or
into or for Parent Shares or cash (for fractional shares), as the case may be,
at the Effective Time shall be as follows:
(a) Each share of Common Stock, without par value, of LRA-CA
outstanding as of the Effective Time shall remain one fully paid and non-
assessable share of Common Stock, without par value, of the Surviving
Corporation.
(b) All of the shares of Common Stock of Medtext outstanding as of
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted at the Effective Time into
(collectively, the "Purchase Price"):
(i) a 7% Junior Subordinated Promissory Note in the principal
amount of $107,023 (the "Note") payable to the Shareholder, which Note shall
provide that it is immediately accelerated should the Parent consummate a public
offering of shares of its common stock;
(ii) cash in the amount of $428,093 payable by wire transfer or
delivery of other immediately available funds to the Shareholder on the Closing
Date in accordance with wiring instructions delivered by the Shareholder to LRA-
CA at least three business days prior to Closing (the "Cash Payment"); and
(iii) an aggregate of 60,865.764 shares of the common stock of
Parent,$.01 par value per share (the "Parent Shares") as will constitute an
agreed upon value of $517,359 and at the Parent Shares Value (the "Deferred
Purchase Price") which shall be delivered to the Escrow Agent at the Closing.
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(c) In approximately one (1) year after the Closing Date, the LRA
Companies' Accountants shall determine the amount of EBITDA, if any, of the
Medtext division of LRA-CA during the twelve (12) month time period beginning
with the first full month after the Closing Date ("Medtext Profits"). The
Medtext Profits shall then be multiplied by 6.25 with such sum minus the amount
of $560,472 being determined (the "Parent Shares Calculation"). To the extent
that the Parent Shares Calculation equals or exceeds the amount of $517,359, the
entire amount of the Parent Shares shall be deemed owned by the Shareholder and
shall be released by the Escrow Agent and pledged pursuant to the Pledge
Agreement. To the extent that the Parent Shares Calculation is less than
$517,359, the percentage by which the Parent Shares Calculation is less than
$517,359 shall be multiplied by 60,865.764 Parent Shares with the resulting
number constituting the number of Parent Shares being returned to the Parent by
the Escrow Agent, and the balance of Parent Shares being deemed to be owned by
the Shareholder and being released by the Escrow Agent and pledged pursuant to
the Pledge Agreement.
In the calculation of the Medtext Profits, such Medtext Profits will be
reduced by management salaries, but such Medtext Profits will not be reduced by
any contractual or discretionary bonus provided to management or by any
corporate management expense paid by LRA-CA to the Parent or any Affiliate.
2.04 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place simultaneously at the offices of (i)
Xxxxx, Xxxxx & Xxxxxx in Houston, Texas, and (ii) Medtext in Newport Beach,
California, unless otherwise mutually agreed, commencing on August 19, 1997, at
9:00 a.m. central daylight time, or at such other time or place as the Parties
mutually agree (the "Closing Date").
2.05 Deliveries at the Closing. At the Closing, (i) Medtext and the
Shareholder will deliver to the LRA Companies the various certificates,
instruments, and documents referred to in Section 9.01 below, (ii) the LRA
Companies will deliver to Medtext and the Shareholder the various certificates,
instruments, and documents referred to in Section 9.02 below, (iii) the
Shareholder will deliver to LRA-CA the stock certificate(s) representing all of
the Medtext Shares, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) the LRA Companies will deliver to the Escrow Agent the
Parent Shares, and deliver to the Shareholder the Note and the Cash Payment.
2.06 Exchange of Certificates and Related Matters. (a) At the Closing, the
Shareholder as the sole holder of certificates theretofore representing
outstanding Medtext Shares shall surrender the same to LRA-CA, and the
Shareholder shall upon such surrender receive in exchange therefor the Note and
the Cash Payment.
(b) After the Effective Time and until surrendered, each certificate
which theretofore represented outstanding Medtext Shares shall be deemed for all
corporate purposes, other
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than the payment of dividends and distributions, to evidence solely the right to
receive the the Note and the Cash Payment.
(c) As of the Effective Time, the stock transfer books of Medtext
will be closed and no further transfers shall be made thereon.
2.07 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 Medtext and Medtext's Accountants as promptly as possible
after the Closing, and the Shareholder shall deliver the Effective Date Reports
to LRA-CA and the LRA Companies' Accountants as soon as possible but in no event
later than 30 days after the Closing Date. The LRA Companies' Accountants shall
review the Effective Date Financial Reports (including any corresponding work
papers of Medtext's Accountants) and report to Medtext's Accountants in writing
within 15 days of receipt thereof of any discrepancy. If Medtext's Accountants
and the LRA Companies' Accountants cannot resolve such discrepancy within 15
days after Medtext's Accountants receipt of such report, then they shall so
notify the Parties, and the Parties shall attempt to resolve the discrepancy
within 15 days of such notice. If the Parties cannot resolve the discrepancy to
their mutual satisfaction, another independent public accounting firm acceptable
to all Parties shall be retained to review the Effective Date Financial Reports.
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 of
Medtext shall be conclusive. The Parties shall share equally in the expenses of
retaining such accounting firm. The LRA Companies shall pay the expenses of the
LRA Companies' Accountants for their review of the Effective Date Financial
Reports, and the Shareholder shall pay the expenses of Medtext's Accountants for
their review of the Effective Date Financial Reports.
2.08 Post-Closing Adjustment of Purchase Price. After the Closing Date,
the Purchase Price set forth in Section 2.03 shall be adjusted as follows: (i)
if the Final Net Worth of Medtext as finally determined pursuant to Section 2.07
shall be more than the Guaranteed Net Worth, then (a) the Cash Payment shall be
increased by an amount equal to eighty percent (80%) of the amount of such
excess, and (b) the principal amount of the Note shall be increased by an amount
equal to twenty percent (20%) of the amount of such excess, and (ii) if the
Final Net Worth of Medtext as finally determined pursuant to Section 2.07 shall
be less than the Guaranteed Net Worth, then (a) the Cash Payment shall be
reduced by an amount equal to eighty percent (80%) of the amount of such
shortfall, and (b) the principal amount of the Note shall be reduced by an
amount equal to twenty percent (20%) of the amount of such shortfall. In the
event that the Cash Payment should be reduced pursuant to (ii) above, the
Shareholder shall immediately refund such amount of cash to LRA-CA. In the event
that any principal payments on the Note are made by LRA-CA prior to the
determination of the final principal balance as a result of the determination of
the Final Net Worth, then the amount of any such principal payments shall reduce
the amount of the principal balance of the revised Note. In addition, the Note
executed and delivered by
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LRA-CA to the Shareholder at the Closing shall be promptly returned to LRA-CA
marked "CANCELLED" upon LRA-CA's delivery of the revised Note to the Shareholder
upon determination of the Final Net Worth.
2.09 Additional Merger Transactions. The Closing of the Merger is
contingent upon the simultaneous merger of LRA-CA with each of Rapidtext, Inc.,
a California corporation, and Xxxxx of Newport, Inc., a California corporation
doing business as Xxxxxxx Court Reporting (the "Additional Merger
Transactions"). The Merger shall not be effective unless and until the
Additional Merger Transactions have been effected.
ARTICLE III
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ARTICLES OF INCORPORATION; BY-LAWS;
DIRECTORS AND OFFICERS; VACANCIES
3.01 Articles of Incorporation. The Articles of Incorporation of LRA-CA as
in effect on the date hereof shall be and continue to be the Articles of
Incorporation of the Surviving Corporation until amended, altered or repealed in
the manner provided by law.
3.02 By-Laws. The By-Laws of LRA-CA as in effect on the date hereof shall
be and constitute the By-Laws of the Surviving Corporation until altered,
amended or repealed as provided by law.
3.03 Directors. The Directors serving on the Board of Directors of LRA-CA
on the date hereof shall continue as the Directors of the Surviving Corporation,
to hold office until their successors are elected and shall have duly qualified.
3.04 Officers. The officers of LRA-CA in office on the date hereof shall
be the officers of the Surviving Corporation, each to hold office in accordance
with the Articles of Incorporation and By-Laws of the Surviving Corporation,
until their successors are elected and shall have qualified.
3.05 Vacancies. If, as of the Effective Time, a vacancy shall exist on the
Board of Directors or in any of the offices of the Surviving Corporation for any
reason, such vacancy may be filled in the manner provided in the By-Laws of the
Surviving Corporation.
ARTICLE IV
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SHAREHOLDER APPROVALS; EFFECTIVE TIME
4.01 Shareholder Approvals. (a) The holders of all of the issued and
outstanding shares of Medtext have consented in writing to Medtext's execution,
delivery and performance of this Agreement, and have authorized, adopted and
approved the Merger of Medtext into LRA-CA.
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(b) Parent, as the sole Shareholder of LRA-CA, has consented in
writing to LRA-CA's execution, delivery and performance of this Agreement and
has authorized, adopted and approved the Merger of Medtext into LRA-CA.
(c) If the Merger is not hereafter abandoned as permitted by the
provisions of this Agreement, as soon as practicable after the satisfaction or
waiver of the conditions precedent to consummation of the Merger, appropriate
Articles of Merger setting forth the information required by the California Act
and signed and verified on behalf of the Constituent Corporations (the "Articles
of Merger") shall be delivered to and filed with the Secretary of State of
California in accordance with the California Act.
4.02 Effective Time. The filing of the Articles of Merger shall take place
as soon as practicable after the Closing or at such other time and place as the
Corporations shall agree. The Merger shall become effective on the date and at
the time specified in the Articles of Merger filed with the Secretary of State
of California (the "Effective Time").
ARTICLE V
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CERTAIN EFFECTS OF THE MERGER
5.01 Liabilities and Obligations. At the Effective Time, the separate
existence of Medtext shall cease, and Medtext shall be merged with and into LRA-
CA. All right, title and interests to all real estate and other property owned
by each of the Constituent Corporations shall be allocated to and vested in the
Surviving Corporation without reversion or impairment, without further act or
deed, and without any transfer or assignment having occurred, but subject to any
existing liens or encumbrances thereon. All liabilities and obligations of each
of the Constituent Corporations shall be allocated to the Surviving Corporation,
and the Surviving Corporation shall be the primary obligor therefor and, except
as otherwise provided by law or contract, no other party to the Merger, other
than an entity liable thereon at the Effective Time of the Merger, shall be
liable therefor. The Surviving Corporation shall be substituted in any
proceedings pending by or against either of the Constituent Corporations.
5.02. Further Assurances. From time to time, if, as and when requested
by the Surviving Corporation, or by its successors or assigns, LRA-CA and
Medtext shall execute and deliver or cause to be executed and delivered all such
deeds and other instruments, and shall take or cause to be taken all such
further or other actions, as the Surviving Corporation and its successors and
assigns may deem necessary or desirable in order to vest in and confirm to the
Surviving Corporation, all rights, title and interest to and possession of all
of the real estate and other property referred to in Section 5.01 hereof, and
otherwise to carry out the intents and purposes of this Agreement.
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES OF
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THE SHAREHOLDER
As of the execution date hereof, the Shareholder represents and warrants to
each of the LRA Companies that the statements contained in this Article VI are
correct and complete as of the date of this Agreement, except as otherwise
disclosed in that certain Shareholder Disclosure Schedule attached hereto as
Schedule 6.0. Nothing in the Shareholder Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Shareholder Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail.
6.01 Organization, Qualification, and Corporate Power. The Shareholder is
a private annuity trust duly organized, validly existing, and in good standing
under the laws of California. The Shareholder is not qualified to do business
in any other jurisdiction, nor does the nature of its business require such
qualification. The Shareholder has full 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.
Schedule 6.01 lists the trustee and all beneficiaries of the Shareholder. The
Shareholder has delivered to the LRA Companies correct and complete copies of
the trust agreement and related documentation of the Shareholder (as amended to
date). The Shareholder is not in default under or in violation of any provision
of its trust agreement or related documentation.
6.02 Authorization of Transaction. The Shareholder has full power and
authority to execute and deliver this Agreement and to perform its or her
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Shareholder, enforceable in accordance with its terms and
conditions, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, reorganization, insolvency or moratorium laws or other
laws or principles of equity effecting the enforcement of creditors' rights.
The Shareholder 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.
6.03 Noncontravention. Neither the execution and the delivery of this
Agreement by the Shareholder, nor the consummation of the transactions by the
Shareholder 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 the
Shareholder is 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
the Shareholder is a party or by which it is bound or to which any of its assets
is subject.
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6.04 Brokers' Fees. The Shareholder 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 LRA Companies could
become liable or obligated.
6.05 Investment. The Shareholder (i) understands that neither the Note nor
the Parent Shares has been registered under the Securities Act, or under any
state securities laws, and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering, (ii) is
acquiring the Note and the Parent Shares, upon the occurrence of the Earnout,
solely for its own account for investment purposes, and not with a view to the
distribution thereof, (iii) is a sophisticated investor with knowledge and
experience in business and financial matters, (iv) has received certain
information specified on Schedule 6.05 concerning the LRA Companies and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Note and the Parent Shares,
upon the occurrence of the Earnout, (v) is able to bear the economic risk and
lack of liquidity inherent in holding the Note and the Parent Shares, upon the
occurrence of the Earnout, and (vi) is an Accredited Investor.
6.06 Subject Shares. Shareholder holds of record and owns beneficially the
number of Medtext Shares set forth next to its name in Schedule 7.03, free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws, Taxes, Security Interests, options,
warrants, purchase rights, or other contracts or commitments that could require
the Shareholder to sell, transfer, or otherwise dispose of any capital stock of
Medtext (other than this Agreement)). The Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of Medtext.
6.07 Disclosure to Minority Shareholders. The Shareholder has made full
and complete disclosure of the terms and provisions of the Merger to any and all
minority shareholders of Medtext.
6.08 Guaranty by Xxxxx. Xxxxx shall enter into a certain Guaranty of
Performance dated of even date herewith (the "Guaranty"), under which Xxxxx
shall guarantee the full and punctual payment and performance by the Shareholder
of all of the obligations, duties, covenants, agreements and conditions to be
paid or performed by the Shareholder hereunder, including without limitation all
indemnification obligations of the Shareholder set forth in Article XI herein.
ARTICLE VII
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REPRESENTATIONS AND WARRANTIES OF MEDTEXT
As of the execution date hereof, Medtext represents and warrants to each of
the LRA Companies that the statements contained in this Article VII are correct
and complete as of the date of this Agreement, except as otherwise disclosed in
that certain Medtext Disclosure Schedule
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attached hereto as Schedule 7.0. Nothing in the Medtext Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Medtext Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail.
7.01 Organization, Qualification, and Corporate Power. Medtext is a
corporation duly organized, validly existing, and in good standing under the
laws of California. Medtext is not qualified to do business in any other
jurisdiction, nor does the nature of its business require such qualification.
Medtext 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. Schedule 7.01
lists the directors and officers of Medtext. The Shareholder has delivered to
the LRA Companies correct and complete copies of the articles of incorporation
and bylaws of Medtext and its Subsidiaries, if any (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 Medtext are correct and
complete in all material respects. Medtext is not in default under or in
violation of any provision of its articles of incorporation or bylaws.
7.02 Authorization of Transaction. Medtext has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of Medtext,
enforceable in accordance with its terms and conditions, except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws or other laws or principles of
equity effecting the enforcement of creditors' rights. Medtext 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.
7.03 Capitalization. The entire authorized capital stock, the issued and
outstanding shares and the treasury shares of Medtext are accurately set forth
in Schedule 7.03. All of the issued and outstanding Medtext Shares have been
duly authorized, are validly issued, fully paid, and nonassessable, and are held
of record by its shareholders as set forth in Schedule 7.03. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that would require Medtext 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 Medtext. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of Medtext.
7.04 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 Medtext is subject, (ii) violate any
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provision of the articles of incorporation or bylaws of Medtext, 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 Medtext 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). Medtext 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.
7.05 Subsidiaries. Medtext does not have any ownership interest in any
Subsidiaries. Medtext does not control, directly or indirectly, or have any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association which is not a Subsidiary.
7.06 Financial Statements. The Shareholder has previously furnished the
LRA Companies with the following financial statements (collectively the
"Financial Statements"): (i) a Balance Sheet Report and an Income Statement
Report for the fiscal years ended May 31, 1996, and May 31, 1997, compiled by
Medtext's Accountants; and (ii) Balance Sheet Reports and Income Statement
Reports for the period ended May 31, 1997, prepared by Medtext's Accountants,
(iii) an Accounts Receivable Report dated as of May 31, 1997, and (iv) an
Accounts Payable Report dated as of May 31, 1997. The Financial Statements
(including the notes thereto) have been prepared on a cash basis and are
consistently reported throughout the periods covered thereby, present fairly the
financial condition of Medtext as of such dates and the results of operations of
Medtext for such periods, are correct and complete in all material respects, and
are consistent in all material respects with the books and records of Medtext
(which books and records are correct and complete in all material respects).
7.07 Events Subsequent to May 31, 1997. Except as disclosed on Schedule
7.07, since May 31, 1997, there has not been any material change in the
business, financial condition, operations, results of operations, or future
prospects of Medtext. Without limiting the generality of the foregoing, since
that date:
(i) Medtext 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) Medtext 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) Medtext has not accelerated, terminated, modified, or canceled
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases,
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and licenses) involving more than $3,000 singly or $15,000 in the aggregate
to which Medtext is a party or by which it is bound;
(iv) Medtext has not imposed any Security Interest upon any of its
assets, tangible or intangible, except for Permitted Liens;
(v) Medtext 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) Medtext 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) Medtext 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) Medtext 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) Medtext 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 Medtext;
(xi) Medtext 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) Medtext has not have 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) Medtext 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
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for all property which, at the time of such damage or destruction, was not
subject to or covered by property, casualty or any other form of insurance;
(xiv) Medtext has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;
(xv) Medtext 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) Medtext has not granted any increase in the base compensation
of any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xvii) Medtext 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) Medtext has not made any other change in employment terms for
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xix) Medtext 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 Medtext or any Subsidiaries which exceeds
$3,000 individually $15,000 in the aggregate; and
(xxi) Medtext has not committed to any of the foregoing.
7.08 Undisclosed Liabilities. Except as disclosed on Schedule 7.08,
Medtext does not have any Liability (and, to the best of the Shareholder's
Knowledge, there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except for (i) Liabilities reflected in the then
most current Financial Statements (including any notes thereto) and (ii)
Liabilities which have arisen after May 31, 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).
7.09 Legal Compliance. To the Knowledge of Shareholder, Medtext, and its
predecessors and Affiliates, have complied with all applicable laws (including
rules, regulations,
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codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and, to the Shareholder's 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.
7.10 Tax Matters. Except as disclosed on Schedule 7.10:
(i) Medtext 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
the Balance Sheet. Medtext 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 Medtext 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 Medtext that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) Medtext 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
Medtext being characterized as an employee.
(iii) There is no dispute or claim concerning any Tax Liability of
Medtext either (A) claimed or raised by any Tax authority in writing or (B)
as to which the Shareholder and the directors and officers (and employees
responsible for Tax matters) of Medtext has Knowledge based upon personal
contact with any agent of such authority. Schedule 7.10 lists all federal,
state, local, and foreign income Tax Returns filed with respect to Medtext
for taxable periods ended on or after March 31, 1997, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of an audit. The Shareholder has delivered to
the LRA Companies correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Medtext.
(iv) Medtext 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) Medtext has not made an election under section 341(f) of the
Code.
(vi) Medtext has made adequate provision for reserves or accruals
for taxes not yet due and payable relating to operations of the Company
prior to the Effective Time.
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7.11 Title to Assets. Medtext has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it, or shown in the
Financial Statements or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the Ordinary
Course of Business since May 31, 1997, and except for Permitted Encumbrances.
7.12 Real Property. Medtext does not own any real property. Schedule 7.12
lists and describes briefly all real property leased or subleased to Medtext.
The Shareholder has delivered to the LRA Companies correct and complete copies
of the leases and subleases listed in Schedule 7.12 (as amended to date). Except
as disclosed on Schedule 7.12, with respect to each lease and sublease listed in
Schedule 7.12:
(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) Medtext is not in material breach or default of any lease or
sublease, and to the Shareholder's Knowledge, no third party to any such
lease or sublease is in material breach or material default, and to the
Shareholder's 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 Shareholder's 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) Medtext has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold, except Customarily Permitted Liens.
7.13 Tangible Assets. Medtext owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is suitable for the purpose for
which it is presently used.
7.14 Inventory. Medtext does not carry or maintain any inventory.
7.15 Contracts. Schedule 7.15 lists the following contracts and other
agreements currently in effect to which any Company is a party:
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(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 the Shareholder and its Affiliates (other
than Medtext);
(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 Medtext; or
(xi) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $15,000.
The Shareholder has delivered to the LRA Companies a correct and complete copy
of each written agreement listed in Schedule 7.15 (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 7.15. With respect
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to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) Medtext is not a party nor to the
Shareholder's Knowledge is any other party in breach or default, and to the
Shareholder's 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) Medtext has not repudiated any
provision of any such agreement nor to the Shareholder's Knowledge has any other
party repudiated any provision of any such agreement.
7.16 Notes and Accounts Receivable. All notes and accounts receivable of
Medtext are properly recorded on each Accounts Receivable Report delivered to
the LRA Companies, reflected properly on Medtext's books and records and are
valid receivables.
7.17 Powers of Attorney. Except as disclosed on Schedule 7.17, there
are no outstanding powers of attorney executed on behalf of Medtext.
7.18 Insurance. Schedule 7.18 lists each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Medtext is currently a
party, copies of which have been furnished to the LRA Companies.
7.19 Litigation. Schedule 7.19 sets forth each instance in which Medtext
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, to the Knowledge of the Shareholder, 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.
7.20 Certain Business Relationships with Medtext. Except as disclosed on
Schedule 7.20, neither the Shareholder nor its Affiliates have been involved in
any business arrangement or relationship with Medtext within the past 12 months,
and neither the Shareholder nor any of its Affiliates owns any asset, tangible
or intangible, which is used in the business of Medtext.
7.21 Guaranties. Medtext is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
7.22 Employees. To the Shareholder's Knowledge, no executive, key
employee, or group of employees has any plans to terminate employment with
Medtext. Medtext has not committed any unfair labor practice. The Shareholder
does 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
Medtext. Schedule 7.22 sets forth by number and employment classification the
approximate numbers of employees employed by Medtext as of the date of this
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Agreement, and none of said employees are subject to union or collective
bargaining agreements with Medtext.
7.23 Employee Benefits.
(i) Schedule 7.23 lists each Employee Benefit Plan that Medtext
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 Medtext. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan.
(D) Medtext 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
Shareholder's Knowledge, there has been no default or violation by any
other party to such Employee Benefit Plans.
(E) The Shareholder has delivered to the LRA Companies 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
Medtext to make a larger
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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 Medtext
in compliance with all applicable laws on or before the Closing Date.
7.24 Brokers' Fees. Except for T.R. Capital, Medtext 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.
7.25 Operation of Business. To the Shareholder's Knowledge (i) all court
reporters that are or have been hired (including independent contractors) by
Medtext are qualified to perform the jobs that they are hired to perform and
they are not required by law to obtain any certification to perform their jobs,
(ii) all documents that Medtext is or has been required to maintain, store or
handle in connection with conducting its business are or have been maintained,
stored or handled in the manner agreed to between Medtext and its clients or in
material conformity with prevailing standards regarding such matters in
Medtext's industry, and (iii) Medtext performs all aspects and operations of its
business at or above the prevailing standards for Medtext's industry.
7.26 Disclosure. The representations and warranties contained in this
Section 7.26 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 Section 7.26 not misleading.
ARTICLE VIII
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REPRESENTATIONS AND WARRANTIES OF LRA COMPANIES
The LRA Companies represent and warrant that the statements contained in
this Article VIII are correct and complete as of the date of this Agreement,
except as otherwise disclosed in that certain LRA Companies Disclosure Schedule
attached hereto as Schedule 8.0. Nothing in the LRA Companies Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the LRA Companies Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail.
8.01 Organization, Qualification, and Corporate Power. Each of the LRA
Companies is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
LRA Companies 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 LRA Companies and their respective 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.
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Schedule 8.01 lists the directors and officers of each of the LRA Companies.
Each of the LRA Companies has delivered to the Shareholder correct and complete
copies of the charter and bylaws of each of the LRA Companies (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 each of the LRA Companies are
correct and complete in all material respects. Neither of the LRA Companies are
in default under or in violation of any provision of its respective charter or
bylaws.
8.02 Capitalization. The entire authorized capital stock, the issued and
outstanding shares and the treasury shares of each of the LRA Companies are
accurately set forth in Schedule 8.02 together with the changes thereto
contemplated by the acquisition of Medtext. All of the issued and outstanding
shares of each of the LRA Companies have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the respective
parties as set forth in Schedule 8.02. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require either of
the LRA Companies to issue, sell, or otherwise cause to become outstanding any
of its capital stock except those set forth in Schedule 8.02. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to either of the LRA Companies
except as set forth in Schedule 8.02. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of either of the LRA Companies.
8.03 Authority. The execution and delivery of this Agreement by each of
the LRA Companies has been duly authorized by each of the LRA Companies' Board
of Directors which constitutes all of the necessary corporate action required in
order for the LRA Companies to consummate the transactions hereunder. The LRA
Companies have the right, power, legal capacity and authority to enter into, and
perform their respective obligations under, this Agreement, and no approvals or
consents of any persons are necessary in connection herewith.
8.04 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 either of the LRA Companies is subject,
(ii) violate any provision of the charter or bylaws of either of the LRA
Companies, 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
either of the LRA Companies 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). Neither of the LRA Companies needs 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.
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8.05 Brokers' Fees. Neither of the LRA Companies has 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.
8.06 Financial Statements. The LRA Companies have previously furnished to
Medtext and the Shareholder true and complete copies of the documents and
financial statements dated as of May 31, 1997 (the foregoing financial
statements being referred to as the "LRA Financial Statements"). The LRA
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated, and
fairly present, in all material respects, the financial position of the LRA
Companies as of the respective dates of the balance sheets included in the LRA
Financial Statements and the results of operations for the respective periods
indicated.
8.07 Consents. No consent, authorization, approval, permit or license
of, or filing with, any governmental or public body or authority, or any lender,
or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of either of the LRA Companies.
8.08 Issuance of the Parent Shares. The Parent Shares have been reserved
for issuance and upon issuance and delivery in connection with the Earnout,
shall be duly authorized, validly issued, and non-assessable.
8.09 Litigation. Neither of the LRA Companies is subject to any pending
litigation, or to the best of its knowledge, threatened litigation.
8.10 Material Adverse Changes. There have been no material adverse changes
with respect to the business of the LRA Companies since May 31, 1997.
8.11 Undisclosed Liabilities. Except as disclosed on Schedule 8.11 none of
the LRA Companies have any Liability (and, to the best of the LRA Companies'
Knowledge, there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except for (i) Liabilities reflected in the then
most current Financial Statements (including any notes thereto) and (ii)
Liabilities which have arisen after May 31, 1997 in the Ordinary Course of
Business (none of which results form, 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).
8.12 Disclosure. The representations and warranties contained in this
Article VIII 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 Article VIII not misleading.
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ARTICLE IX
----------
CONDITIONS TO THE MERGER
9.01 Conditions to Obligation of the LRA Companies. The obligation of the
LRA Companies to proceed with the Closing and consummate the transactions to be
performed by each of them in connection with the Closing is subject to
satisfaction of the following conditions (any or all which may be waived in
writing, by the LRA Companies):
(i) the representations and warranties set forth in Articles VI and
VII above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Medtext and the Shareholder 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 LRA-CA to merge Medtext with and into itself, or (D) materially and
adversely affect in any material respect the right of Medtext to own its
assets and to operate its business (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(iv) Medtext and the Shareholder shall have delivered to the LRA
Companies a certificate to the effect that each of the conditions specified
above in 9.01(i)-(iii) is satisfied in all respects;
(v) the LRA Companies shall have received from counsel to Medtext
and the Shareholder an opinion in form and substance reasonably acceptable
to all Parties, addressed to the LRA Companies, and dated as of the Closing
Date containing such assumptions and qualifications as may be reasonably
acceptable to the LRA Companies' legal counsel;
(vi) the LRA Companies shall have received the resignations,
effective as of the Closing, of each director and officer of Medtext other
than those whom the LRA Companies shall have specified in writing prior to
the Closing;
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(vii) the LRA Companies shall have received notification from its
Senior Lender that such Senior Lender has approved consummation of the
transactions contemplated by this Agreement under its acquisition line of
credit;
(viii) Xxxxx shall have entered into the Xxxxx Employment Agreement;
(ix) Xxxxx shall have entered into the Guaranty;
(x) The Shareholder shall have each entered into a certain First
Amended and Restated Shareholders' Agreement (the "Shareholders'
Agreement") on terms and conditions reasonably satisfactory to it, and a
Registration Rights Agreement which shall grant to the Shareholder 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 LRA-CA, the Shareholder shall be granted
the same or equivalent registration rights (the "Registration Rights
Agreement");
(xi) all Employee Benefit Plans shall have been terminated by
Medtext and the Shareholder and, tot he extent that they are eligible,
employees will participate int he LRA-CA Employee Benefit Plans to the
extent LRA-CA has implemented substitute Employee Benefit Plans, and
neither the LRA Companies nor Medtext shall have any further liability with
respect thereto other than completion of the routine winding up thereof;
(xii) all actions to be taken by the Medtext and/or the Shareholder
in connec tion 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 LRA Companies;
(xiii) the Shareholder shall have entered into the Escrow Agreement;
(xiv) the Shareholder shall have entered into the Pledge Agreement;
(xv) the LRA Companies, the Shareholder and the Senior Lender shall
have entered into a Subordination Agreement; and
(xvi) the Shareholder and Xxxxx shall have executed a Release in form
and substance acceptable to the LRA Companies.
9.02 Conditions to Obligation of Medtext and the Shareholder. The
obligation of Medtext and the Shareholder to proceed with Closing and consummate
the transactions to be
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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
Medtext and/or the Shareholder):
(i) the representations and warranties set forth in Articles VIII
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the LRA Companies shall have performed and complied with all of
their respective 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 Shareholder to own the Parent Shares, or (D) affect adversely in any
material respect the right of LRA-CA 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 LRA Companies shall have delivered to Medtext and the
Shareholder a certificate to the effect that each of the conditions
specified above in Section 9.02(i)-(iii) is satisfied in all respects;
(v) Medtext and the Shareholder shall have obtained the full and
final releases (a) of any guaranty of the Shareholder of the debt of
Medtext or any of its Subsidiaries and (b) of any collateral pledged by the
Shareholder securing such debt or guarantees; provided, however, that the
foregoing releases will not require the payment of any additional
consideration in excess of the Purchase Price by LRA-CA;
(vi) the LRA Companies shall have received from Senior Lender
approval to fund this transaction under its acquisition line;
(vii) LRA-CA shall have entered into the Xxxxx Employment Agreement;
(viii) LRA-CA shall have entered into the Xxxxxxx Employment
Agreement;
(ix) Medtext and the Shareholder shall have received from counsel to
the LRA Companies an opinion in form and substance acceptable to Medtext
and the Shareholder, addressed to Medtext and the Shareholder, and dated as
of the Closing Date containing such assumptions and qualifications as may
be reasonably acceptable to the Medtext's and the Shareholder's legal
counsel;
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(x) all actions to be taken by Medtext and/or the Shareholder 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 LRA Companies;
(xi) the LRA Companies shall have entered into the Shareholder's
Agreement, and the Registration Rights Agreement on terms and conditions
reasonably satisfactory to Shareholder;
(xii) LRA-CA and Escrow Agent shall have entered into the Escrow
Agreement;
(xiii) Parent and LRA-CA shall have entered into the Pledge
Agreement;
(xiv) all actions to be taken by the LRA Companies 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 Medtext and the Shareholder; and
(xv) the LRA Companies, the Shareholder and the Senior Lender shall
have entered into a Subordination Agreement.
ARTICLE X
---------
POST CLOSING COVENANTS
10.01 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
Article XI below).
10.02 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand to which the other
Party is not subject (either by virtue of the indemnification provisions
contained in Article XI below or otherwise) in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any Party, the other Parties will cooperate with him or it and his or
its counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless
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the contesting or defending Party is entitled to indemnification therefor under
Article XI below). The LRA Companies acknowledge and agree that if Shareholder
or any director or officer of Medtext is individually brought into any
litigation in connection with Medtext, it, he or she shall be indemnified to the
maximum extent that directors and officers of corporations are permitted to be
indemnified under California law both for all costs of litigation as well as any
judgments or settlement amounts paid. Notwithstanding the foregoing, the
Shareholder shall not be entitled to indemnification to the extent of any of the
following:
(i) suit against Shareholder or any director or officer with
respect to a matter for which such Shareholder, director or officer is
required to indemnify the LRA Companies pursuant to this Agreement; or
(ii) to the extent that Shareholder or any director or officer is
found to have engaged in gross negligence or willful misconduct.
10.03 Confidentiality. The Shareholder will treat and hold as such all
of the Confidential Information and refrain from using any of the Confidential
Information except in connection with this Agreement and all of the other
agreements executed in connection herewith and except in connection with
handling all of the litigation described on Schedule 7.19. In the event that
Shareholder 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, the Shareholder will notify the LRA Companies promptly of the
request or requirement so that the LRA Companies may seek an appropriate
protective order or waive compliance with the provisions of this Section 10.03.
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Shareholder is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the
Shareholder may disclose the Confidential Information to the tribunal; PROVIDED,
HOWEVER, that Shareholder shall use its reasonable best efforts to obtain, at
the reasonable request of the LRA Companies, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the LRA Companies shall designate;
provided, however that all of the Shareholder's costs including but not limited
to legal fees shall be paid by the LRA Companies. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
10.04 Accounts Receivable. Xxxxx shall use commercially reasonable
efforts to collect the Accounts Receivable in the Ordinary Course of Business.
Shareholder represents and warrants that all Effective Date Accounts Receivable
shall be collectible in their full amounts less a reserve for doubtful accounts
of ten percent (10%) of the total principal amount of Effective Date Accounts
Receivable outstanding within twelve (12) months of the Effective Date. LRA-CA
shall make a good faith effort to collect the Effective Date Accounts
Receivable.
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ARTICLE XI
----------
INDEMNIFICATION; REMEDIES
11.01 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
Section 7.10, and Section 7.11 which shall survive for three years after the
Closing.
11.02 Indemnification Provisions.
(i) By the Shareholder. Shareholder shall indemnify, save,
defend and hold harmless each of the LRA Companies and their respective
shareholders, directors, officers, partners, agents and employees (and in the
event either of the LRA Companies assigns its right, title and interest
hereunder to a corporation, which shall be permitted hereunder, such assignee)
(collectively, the "LRA 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 Shareholder has
breached), of any covenant, warranty or representation made by Shareholder 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 Shareholder or its Affiliates pursuant to
the terms of this Agreement; provided, however, that the Shareholder 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 LRA Indemnified
Parties.
(ii) By the LRA Companies. The LRA Companies shall indemnify,
save, defend and hold harmless the Shareholder 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 either of the LRA Companies have breached), of any covenant,
warranty or representation made by either of the LRA Companies 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 either of the LRA Companies under
this Agreement; provided, however, that the LRA Companies 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 Shareholder.
(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
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no way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("Notice of Action"); provided that the failure of any
indemnified Party to give timely notice 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
10.1 of this Agreement. The indemnifying Party may elect to compromise or defend
any such asserted liability and to assume all obligations contained in this
Section 11.02 to indemnify the indemnified Party by a delivery of notice of such
election ("Notice of Election") within ten (10) days after delivery of the
Notice of Action. Upon delivery of the Notice of Election, the indemnifying
Party shall be entitled to take control of the defense and investigation of such
lawsuit or action and to employ and engage attorneys of its own choice to handle
and defend the same, at the indemnifying Party's sole cost, risk and expense,
and such indemnified Party shall cooperate in all reasonable respects, at the
indemnifying Party's sole cost, risk and expense, with the indemnifying Party
and such attorneys in the investigation, trial, and defense of such lawsuit or
action and any appeal arising therefrom; provided, however, that the indemnified
Party may, at its own cost, risk and expense, participate in such investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom. If
the Notice of Election is delivered to the indemnified Party, the indemnified
Party shall not pay, settle or compromise such claim without the indemnifying
Party's consent, which consent shall not be unreasonably withheld. If the
indemnifying Party elects not to defend the claim of the indemnified Party or
does not deliver to the indemnified Party a Notice of Election within ten (10)
days after delivery of the Notice of Action, the indemnified Party may, but
shall not be obligated to defend, or the indemnified Party may compromise or
settle (exercising reasonable business judgment) the claim or other matter on
behalf, for the account, and at the risk, of the indemnifying Party.
(iv) Third Party Claims. The provisions of this Section 11.02 are
not limited to matters asserted by the Parties, but cover costs, losses,
liabilities, damages, lawsuits, claims and expenses incurred in connection with
third party claims.
(v) Limitation on Indemnification. Notwithstanding any provision
of this Agreement except for claims by the LRA Companies against the Shareholder
under Section 10.04 of this Agreement, neither the LRA Companies nor the
Shareholder 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 Section 11.02 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.
Neither Party shall be liable to indemnify the other Party in an amount in
excess of the Purchase Price excluding any and all amounts due and owing under
Section 10.04 of this Agreement.
11.03 Remedies.
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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 LRA Companies which
permit the LRA Companies to make an indemnification claim against the
Shareholder and to the extent not otherwise prohibited by applicable law, shall
be subject to mandatory offset by the LRA Companies against all amounts due and
owing by the LRA Companies to the Shareholder under this Agreement, the Note,
or any document, instrument, or agreement executed in connection herewith;
provided, however, that no offsets shall be permitted against the base salary
due and owing to the Shareholder under Xxxxx Employment Agreement. The
foregoing shall constitute the sole remedy of the LRA Companies against the
Shareholder in connection with breaches of the representations, warranties,
covenants and obligations of the Shareholder contained in this Agreement except
to the extent of any remaining unpaid claims to the extent permitted under
Article X of this Agreement if there is not a Note or any Parent Shares pledged
or remaining pledged to offset against in which event the LRA Companies may
proceed against the Shareholder but only for any amounts not offset and not
exceeding the Purchase Price. In the event of an offset of any Damages incurred
as a result of any such breach, the LRA Companies shall furnish the Shareholder
notice containing detailed information about the breach, the magnitude of the
Damages that the LRA Companies has or reasonably expects to incur (the act of
offsetting by the LRA Companies shall be referred to as an "Offset"). All
Offsets shall be one-half ( 1/2) against the Note, and one-half ( 1/2) against
the Parent Shares if Seller has any Parent Shares that are pledged. In the
event there is not any principal balance remaining due and owing on the Note,
then, any additional Damages shall be Offset against the Parent Shares. In the
event the Parent Shares are no longer pledged to the LRA Companies, in order to
permit the LRA Companies to offset any of their Damages, than the entire amount
of the Offset shall be against the principal balance of the Note. For purposes
hereof, the Parent Shares shall be deemed to have a value equivalent to the
Parent Shares Value. In order to secure the LRA Companies' Offset rights
against the Parent Shares, the LRA Companies and the Shareholder shall execute
that certain Stock Pledge Agreement dated of even date herewith (the "Pledge
Agreement"). The Parent Shares 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 Shareholder acknowledges and agrees that
but for the right of Offset contained in this Agreement, the LRA Companies 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
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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.
ARTICLE XII
-----------
GENERAL
12.01 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 all of the Parties; 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).
12.02 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
12.03 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.
12.04 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 Parties; provided, however, that the LRA Companies 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 LRA Companies for the purpose of financing the merger hereunder and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the LRA Companies nonetheless shall remain responsible
for the performance of all of their respective obligations hereunder).
12.05 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.
12.06 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.
12.07 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
-36-
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 Shareholder: Seaquestor Trust
00 Xxxxxx Xxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxxx, Trustee
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Copy to: Mr. Xxxxxx Xxxxxxxx
Xxxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telefax: (000) 000-0000
If to LRA-CA: Litigation Resources of America-California, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Telefax (000) 000-0000
Attn: Xx. Xxxxxxx X. Xxxxxx,
Chief Executive Officer
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telefax (000) 000-0000
Attn: J. Xxxxxxxx Xxxxx
If to Parent: Litigation Resources of America, Inc.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Telefax (000) 000-0000
Attn: Xx. Xxxxxxx X. Xxxxxx,
Chief Executive Officer
Copy to: Xxxxx Xxxxx & Xxxxxx Incorporated
Nine Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
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Telefax (000) 000-0000
Attn: J. Xxxxxxxx Xxxxx
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be 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.
12.08 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 TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
12.09 Amendments and Waivers. No amendments of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. 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.
12.10 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.
12.11 Expenses. Each of the Parties will bear his, her or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
12.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the
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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.
12.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
12.14 Arbitration and Limitation on Claims. Any controversy, dispute
or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without
limitation, the validity, scope and enforceability of this Agreement which
cannot first be settled through ordinary negotiation between the Parties shall
be submitted in good faith to mediation by and in accordance with the Commercial
Mediation Rules of the American Arbitration Association or any successor
organization. In the event that mediation of such controversy, dispute or claim
cannot be settled through the mediation proceeding, the Parties agree that the
controversy, dispute or claim shall be submitted to binding and final
arbitration conducted in Los Angeles, California by and in accordance with the
then existing Rules for Commercial Arbitration of the American Arbitration
Association or any successor organization. Any such arbitration shall be to a
three member panel selected through the rules governing selection and
appointment of such panels of the American Arbitration Association or any
successor organization. The award rendered by the arbitrators may be confirmed,
entered and enforced as a judgment in any court of competent jurisdiction;
however, the Parties otherwise waive any rights to appeal the award except with
regard to fraud by the panel. Any such action must be brought within two years
of the date the cause of action accrues. The arbitrators shall award the Party
which substantially prevails in any arbitration proceeding recovery of that
Party's attorneys' fees, the arbitrators' fees and all costs in connection with
the arbitration from the Party who does not substantially prevail. The Parties'
remedies are limited solely to the specific remedies provided in this Agreement
or in the other. The parties waive any entitlement to punitive damages,
consequential damages and lost profits and will limit any damage claim to actual
economic damages incurred. Nothing in this Section 12.14 shall restrict any
Parties' ability to seek injunctive or other equitable relief in any court of
competent jurisdiction prior to initiating mediation or arbitration. In the
event that such injunctive or equitable relief is sought by any Party, such
Party is specifically entitled to enforce the appropriate provisions of the
Agreement in obtaining such relief in any court of competent jurisdiction and,
thereafter, submit the remaining controversy, dispute or claim to arbitration in
accordance with this Section 12.14.
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
date first above written.
ATTEST: LITIGATION RESOURCES OF AMERICA-
CALIFORNIA, INC., a California corporation
By: /s/ X. Xxxx Kahve By: /s/ Xxxx Xxxxxxxx
------------------------------ --------------------------------------
X. Xxxx Kahve, Asst. Secretary Xxxx Xxxxxxxx, Chief Financial Officer
and Vice President
LITIGATION RESOURCES OF AMERICA,
INC., a Texas corporation
By: /s/ X. Xxxx Kahve By: /s/ Xxxx Xxxxxxxx
------------------------------ --------------------------------------
X. Xxxx Kahve, Asst. Secretary Xxxx Xxxxxxxx, Chief Financial Officer
and Vice President
MEDTEXT, INC.,
a California corporation
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxx Xxxxx
---------------------------------- --------------------------------------
Xxxxx Xxxxxxx, Secretary Xxxxx Xxxxx, President
SEAQUESTOR TRUST,
a California private annuity trust
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxxxx X. Xxxxx, Sole Trustee
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LIST OF SCHEDULES
6.0 Shareholder Disclosure Letter
6.01 Trustee and Beneficiaries of Shareholder
6.05 Information re: LRA Companies
7.0 Medtext Disclosure Letter
7.01 Directors and Officers of Medtext
7.03 Capitalization and Shareholder Listing for Medtext
7.07 Certain Changes or Events
7.08 Liabilities
7.10 Tax Matters
7.12 Real Property Leases
7.15 Medtext Contracts
7.17 Powers of Attorney
7.18 Insurance
7.19 Litigation
7.20 Business Relationships with Medtext
7.22 Employees
7.23 Employee Benefit Plans
8.0 LRA Companies Disclosure Letter
8.01 Directors and Officers of LRA Companies
8.02 Capitalization and Shareholders Listing for LRA Companies
8.11 Undisclosed Liabilities
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