SALE AGREEMENT
Agreement, dated as of May 25, 1995, between RCG International,
Inc., a Delaware corporation with its principal place of business at 000 Xxxx
00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (herein called "RCG"), and Xxxxxx Xxxxxx
Consulting, Inc., a Delaware corporation with its principal place of business at
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000-0000 (herein called
"Consulting").
WHEREAS, RCG desires to sell to Consulting and Consulting desires to
purchase from RCG all of the outstanding Common Stock of RCG/Hagler, Bailly,
Inc. (the "Company") in exchange for (a) $9,318,720 in cash (by wire transfer of
immediately available funds) or certified or bank check, payable to RCG on the
Closing Date, (b) a senior note due June 29, 1995 in the principal amount of
$431,280 to be issued by Consulting to RCG on the Closing Date, and (c) a 9.5%
subordinated note in the principal amount of $4,650,000 to be issued by
Consulting to RCG on the Closing Date; and
WHEREAS, the terms of the notes to be issued hereunder, various
further banking and financial arrangements and other contractual provisions for
the conduct of business by Consulting are more fully set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Definitions.
(a) "Common Stock", as used herein, shall mean 13,651 shares of Class A
Common Stock of the Company, $.10 par value.
(b) "Bridge Note", as used herein, shall mean a senior note due June 29, 1995
in the principal amount of $431,280 issued by Consulting to RCG, the form
of which note is attached hereto and made a part hereof as Exhibit A.
(c) "Closing Date", as used herein, shall mean May 25, 1995.
(d) "Consulting Note", as used herein, shall mean a 9.5% subordinated note in
the principal amount of $4,650,000 issued by Consulting to RCG, the form
of which note is attached hereto and made a part hereof as Exhibit B.
(e) "Key Employees", as used herein, shall mean Xxxxx-Xxxxxx Xxxxxx, Xxxxxxx
X. Xxxxxx, Xxxx Xxxxxxxxx, Xxxxxx Xxxxxxx, Xxxx-Xxxxx Xxxxxxx, Xxxxxx
Xxxxx, Xxxxxx X. Xxxx, Xxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxx.
(f) "Tax Note", as used herein shall have the meaning assigned to it in
Section 8(g)(iii).
2. Transfer of Stock.
Subject to the terms and conditions herein set forth:
(a) RCG shall, on the Closing Date, sell and deliver to Consulting the Common
Stock, free and clear of all liens, claims, charges and encumbrances
whatsoever, and Consulting shall so acquire the same.
(b) RCG shall make such sale and delivery of the Common Stock by delivering
to Consulting certificates evidencing the Common Stock duly endorsed in
blank or accompanied by appropriate of instruments of transfer
satisfactory in form and substance to Consulting. Consulting shall pay all
documentary, stamp and transfer taxes required, if any, in respect of the
transfer of the Common Stock unless such taxes are paid by the Company.
(c) In exchange for the Common Stock on the Closing Date, Consulting shall
deliver to RCG (i) $9,318,720 in cash (by wire transfer of immediately
available funds to an account designated by RCG) or certified or bank
check in same day funds made payable to the order of RCG; (ii) the Bridge
Note duly executed by Consulting and (iii) the Consulting Note duly
executed by Consulting.
(d) On and as of the Closing Date, the Company, on one hand, and RCG and its
affiliates (other than the Company), on the other, shall settle in cash
all intercompany receivables and payables (including, without limitation,
payment by the Company of $1,500,000 in intercompany advances and payment
by the Company of federal income tax accruals in an amount equal to
$347,801 in respect of taxes on the earnings of the Company from January
1, 1995 through April 30, 1995 and certain other taxes, plus 35% of the
product of $6,000 and the number of days elapsed from and including May 1,
1995 and through and including the Actual Closing Date (the "Estimated Tax
Payment")). Immediately prior to the Closing, RCG shall contribute to the
equity of the Company $2,500,000 of intercompany receivables owed to it by
the Company.
3. Closing.
The Closing of this Agreement shall take place in at the offices of RCG's
parent, Reliance Group Holdings, Inc., Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx,
00000, at 11:00 A.M., New York City time, on the Closing Date.
4. Representations and Warranties of RCG.
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RCG represents and warrants to Consulting as of the Closing Date as follows:
(a) Title to the Common Stock. RCG is the legal and beneficial owner of the
Common Stock, free and clear of all pledges, liens, claims, options,
charges, security interests and encumbrances. Other than pursuant to this
Agreement, RCG has not created any transfer restriction, trust,
irrevocable proxy, voting arrangement, commitment, understanding or
agreement relating to the transfer of any of the Common Stock. The Common
Stock constitutes all the outstanding shares of Class A Common Stock of
the Company and since July 1, 1984 (the "Original Acquisition Date"), the
Company has not issued any shares of any other class of capital stock.
(b) Financial Statements. Based solely on information provided to RCG by the
Company and without any independent investigation thereof, RCG believes
the balance sheet of the Company as at December 31, 1994 fairly presents
the assets and liabilities of the Company as a going concern as at such
date.
(c) No Conflicts. The execution and delivery of this Agreement by RCG does
not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with or result in the
creation of any lien, claim, encumbrance, security interest, option,
charge or restriction of any kind upon any of the Common Stock under, or
require any consent, authorization or approval under (i) any provision of
the certificate of incorporation or by-laws of RCG or (ii) any material
judgment, order or decree applicable to RCG.
(d) Insurance Company Regulations. To the knowledge of RCG, after due
inquiry, the fact that its parent, Reliance Insurance Company, is an
insurance company, will have no effect on the consummation of the sale of
the Common Stock pursuant to this Agreement.
(e) Incorporation; Authority. RCG is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. All
corporate acts and other proceedings required to be taken by RCG to
authorize the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and properly taken.
(f) Due Execution. This Agreement has been duly executed and delivered by RCG
and constitutes a valid and binding obligation of RCG, enforceable against
RCG in accordance with its terms except (i) that such enforceability may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
laws, decisions or equitable principles now or hereafter in effect
relating to or affecting the enforcement of creditors' rights or debtors'
obligations generally, and (ii) that the remedy of specific performance
and injunctive and other forms of equitable relief may be
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subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(g) As-is. Except as specifically set forth in Section 4 of this Agreement,
RCG makes no representation or warranty regarding the Company or its
business or balance sheet, and the assets of the Company being acquired by
Consulting as a result of its purchase of the Common Stock are being
acquired "as-is". Except as set forth in this Agreement, RCG will not be
responsible for any liabilities or obligations of the Company, known or
unknown, absolute or contingent arising before or after the Closing Date.
(h) Litigation. Except as set forth on Schedule 4(h), there are no lawsuits
or claims pending against RCG as of the date of this Agreement and
relating to the Company with respect to which RCG has knowledge and which
would have a material adverse affect on RCG's ability to consummate the
transactions contemplated hereby.
(i) Related Party Transactions. Except as set forth on Schedule 4(i) hereto,
there are no written agreements, contracts or other agreements, known to
RCG and not known by any Key Employee, which are material to the Company
and pursuant to which (i) RCG pays money, guarantees any obligation, or
provides goods, services or property to the Company or (ii) the Company
pays money, guarantees any obligation, or provides goods, services or
property to RCG.
5. Representations and Warranties of Consulting.
Consulting represents and warrants to RCG as of the Closing Date as follows:
(a) Incorporation and Authority. Consulting is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. All corporate acts and other proceedings required to be
taken by Consulting to authorize the execution, delivery and performance
of this Agreement, the Bridge Note, the Consulting Note and the Tax Note
and the consummation of the transactions contemplated hereby and thereby
have been duly and properly taken.
(b) Due Execution. This Agreement has been duly executed and delivered by
Consulting and constitutes, and the Bridge Note, Consulting Note and the
Tax Note, when executed and delivered by Consulting, will each constitute
a valid and binding obligation of Consulting, enforceable against
Consulting in accordance with its terms, except (i) that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other laws, decisions or equitable principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights or debtors' obligations generally, and (ii) that the remedy of
specific performance and
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injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) No Conflicts. The execution and delivery of this Agreement by Consulting
does not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or,
except under the terms of the Credit Agreement and Security Documents
(each as defined in the Consulting Note) and the Bridge Note, result in
the creation of any lien, claim, encumbrance, security interest, option,
charge or restriction of any kind upon any of the properties or assets of
Consulting under any provision of (i) the certificate of incorporation or
bylaws of Consulting, (ii) any contract, agreement, instrument or other
document to which Consulting is a party or by which any of its properties
or assets are bound, or (iii) any material judgment, order or decree or
any material statute, law, ordinance, rule or regulation applicable to
Consulting or its assets.
(d) Actions and Proceedings. There are no (i) outstanding judgments, orders,
writs, injunctions or decrees of any court, governmental agency or
arbitration tribunal against Consulting or, to the knowledge of
Consulting, the Company which would have a material adverse effect on the
ability of Consulting to consummate the transactions contemplated hereby
or (ii) actions, suits, claims or legal, administrative or arbitration
proceedings or investigations pending or, to the knowledge of Consulting,
threatened against Consulting or, to the knowledge of Consulting, the
Company, which have or could have a materially adverse effect on the
ability of Consulting to consummate the transactions contemplated hereby,
including without limitation, the ability of Consulting to meet its
obligations under the Bridge Note, the Consulting Note or the Tax Note.
(e) Disclosure. As of the date hereof, Consulting has furnished RCG with the
financial statements and other reports listed in Schedule 5(e) attached
hereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial position and results of operations of the
persons to which they purport to relate as of the dates and for the
periods indicated, with the exception of year-end adjustments and
footnotes. Between the end of the most recent fiscal period shown in such
financial statements and the date hereof, except as set forth m Schedule
5(e) hereto, there has not been any material adverse change in the
business, operations, properties or financial position of Consulting (or
of the persons to which such financial statements purport to relate).
Neither this Agreement nor any financial statements, reports or other
documents or
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certificates furnished to RCG by Consulting in connection with the
transactions contemplated hereby contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements herein or therein contained not misleading. Neither the loans
made to the Company pursuant to the Subordinated Note, the Bridge Note or
the senior bank facility or all such loans in the aggregate will render
the Company unable to pay its debts as they become due; Consulting is not
contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of its property; and Consulting has no knowledge of any person
contemplating the filing of any such petition against it.
(f) Securities Laws. Consulting is acquiring the Common Stock to be purchased
pursuant to this Agreement for its own account and with no present
intention of distribution or reselling the Common Stock being purchased by
it in any transaction which would be in violation of the securities laws
of the United States of America or any state thereof. The capital stock of
Xxxxxx Bailly, Inc., the parent of Consulting ("Xxxxxx"), has been issued
in compliance with all applicable federal and state securities laws.
(g) Compliance with Lease Terms. The Company is in material compliance with
each covenant, agreement and condition contained in the Lease (as defined
in Section 6(f) below) other than its monetary obligations thereunder.
With respect to monetary obligations under the Lease, the Company is in
complete compliance therewith. Neither the Company nor Consulting knows of
any event or condition that could give rise to a default under the Lease.
6. Covenants.
(a) Consulting shall obtain all required governmental consents (including any
necessary filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act),
permissions, assignments of contracts, security clearances, and any other
agreements required by it or the Company to acquire and own the Common
Stock, except, in the case of the Company, such consents as may be
required to be obtained by the Company or filings made by the Company
solely by virtue of the Company's affiliation with RCG or Reliance
Insurance Company (the "Consents").
(b) RCG shall be responsible for any obligation or liability of the Company,
absolute or contingent, arising with respect to the period prior to the
Closing Date but after the Original Acquisition Date and
(A)known to RCG but not known to the Company or any Key Employee on or before
the Closing Date; or
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(B)not known to any of RCG, the Company or any Key Employee on or before the
Closing Date;
and which, in the case of clause (B), arises principally from the failure
by RCG or any person (other than an officer, director or employee of the
Company) acting for, at the direction of, or for the benefit of RCG or its
affiliates (other than the Company or its subsidiaries) to perform
properly any obligation described on Schedule 6(b) hereof.
(c) Consulting shall be responsible for any obligation or liability of the
Company, absolute or contingent, arising before, on or after the Closing
Date and
(A)known to the Company (even if also known to RCG) (on or prior to the Closing
Date, with respect to those liabilities arising with respect to the period on or
prior to the Closing Date) or;
(B)not known to either RCG or the Company (on or prior to the Closing Date, with
respect to those liabilities arising with respect to the period on or prior to
the Closing Date) and which, in the case of this clause (B), arises from any
cause other than the failure by RCG or any person (other than an officer,
director or employee of the Company) acting for, at the direction of, or for the
benefit of RCG or its affiliates (other than the Company or its subsidiaries) to
perform any obligation described on Schedule 6(b) hereof.
(d) Consulting agrees that, immediately after the Closing Date, it will, and
will cause the Company to delete all references to "RCG" or Reliance Group
Holdings, Inc., from its name and from any letters, documents, or
instruments relating to the Company or Consulting.
(e) RCG or its affiliates will provide payroll services to the Company, at a
cost, for the periods and on terms and conditions set forth on Exhibit D.
(f) (i) Consulting agrees that it will endeavor to obtain for RCG a release
(in form and substance satisfactory to RCG) (the "RCG Release") of all of
RCG's obligations under all guarantees relating to the lease dated as of
October 25, 1991 between the Company and Xxxxxx Boulevard Venture
(together with its successors and assigns, the "Landlord"), as amended by
the First and Second Amendments thereto dated as of February__, 1993 and
December 12, 1994, respectively (the "Lease). On the Closing Date,
Consulting agrees to establish a reserve fund (the "Fund") at Chemical
Bank, which shall have on deposit therein (A) at all times at least
$180,000, prior to such date as the Revolving Commitment (as defined in
the Credit Agreement) is raised to $4,500,000 and the cash collateral is
released pursuant to Section 6.12(c) of the Credit Agreement (the "Initial
Deposit End Date"), (B) at all times at least $350,000 from the Initial
Deposit End Date through December 31, 1997, (C) at all
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times at least $450,000 from January 1, 1998 through December 31, 1998
(provided that the Initial Deposit End Date has occurred), and (D) at all
times at least $550,000 after December 31, 1998 (provided that the Initial
Deposit End Date has occurred); provided that the Fund may be discontinued
and closed-out by Consulting on such date as the RCG Release is
effectuated or during any period in which there is in full force and
effect a surety bond from an insurance company, in an amount and
containing such terms as are reasonably satisfactory to RCG (a "Surety
Bond"). Any money in the Fund shall be immediately disbursed to RCG at
such time as any monetary obligations under the Lease are due and unpaid
(after giving effect to applicable grace periods in the Lease). In the
event that the RCG Release is not effectuated by June 30, 1996, Consulting
shall endeavor to obtain and keep in full force and effect, until such RCG
Release is obtained, a Surety Bond; provided that the obligation to obtain
and keep in full force and effect a Surety Bond shall be solely in the
good faith business discretion of Consulting. RCG agrees to pay the first
$50,000 in premium payments for the Surety Bond for each of any two full
twelve-month periods ending prior to June 30, 1998 covered thereby (which
premiums shall be paid by RCG to the insurance company issuing the Surety
Bond). Any amount in excess of $50,000 for each of such two twelve-month
periods and all amounts thereafter with respect to the Surety Bond, if
obtained, shall be the responsibility of Consulting.
(ii) Notwithstanding anything contained in this Section 6(f) to the
contrary, in the event that the RCG Release is obtained prior to
June 30, 1998 and a condition thereto is the payment of money to the
Landlord, RCG agrees to pay to the Landlord an amount equal to the
lesser of (i) the excess of $100,000 ($50,000 after June 30, 1996)
over the amount previously paid or payable by RCG in respect of a
Surety Bond and (ii) the amount of the required payment to the
Landlord.
(iii) Consulting shall deliver to RCG, no later than 10 days after
the end of each fiscal quarter, a statement showing the amount on
deposit in the Fund (or, a statement from its chief financial
officer that no Fund is required pursuant to this paragraph (f)
because a Surety Bond is in full force and effect) and a certificate
from its chief financial officer to the effect that all of the
monetary obligations of Consulting under the Lease for the three
months included in such quarter were timely paid and that no other
default exists under the Lease.
(g) On or before June 29, 1995, Consulting shall provide to RCG a balance
sheet as at the Closing Date and an income statement for the period
beginning on May 1, 1995 and ending on the Closing Date, each of which
shall be certified by the chief financial officer of Consulting and must
be satisfactory in scope and form to RCG and be prepared on a basis
consistent with past practices. Consulting agrees to pay to RCG an amount
equal to the excess, if any, of the product of 35% times the earnings of
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the Company reflected on such income statement (the "Actual Tax Payment")
over the Estimated Tax Payment. RCG agrees to pay to Consulting the
amount, if any, by which the Estimated Tax Payment exceeds the Actual Tax
Payment. Any payments to be made by RCG or Consulting under this
subparagraph (g) shall be made in immediately available funds no later
than July 5, 1995.
(h) RCG agrees that each of the Key Employees who is also an officer or
director of RCG shall be entitled, in their capacities as such, to such
indemnification as is provided to officers and directors of RCG pursuant
to Article VIII of RCG's Bylaws, as in effect on the date hereof.
7. Indemnification.
(a) Indemnification by RCG.
RCG shall indemnify Consulting, its affiliates and each of their
respective officers, directors, employees and agents against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation, warranty or covenant of RCG contained in this Agreement or
(ii) any matter for which RCG is responsible as provided in Section 6(b)
above.
(b) Indemnification by Consulting.
Consulting shall and shall cause the Company to, indemnify RCG, its
affiliates and each of their respective officers, directors, employees and
agents against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered
or incurred by any such indemnified party to the extent arising from (i)
any breach of any representation, warranty or covenant of Consulting
contained in this Agreement or (ii) any claim made by any landlord or
employee of the Company against RCG or any of its affiliates (other than
the Company and its subsidiaries) in respect of any of the items listed on
Exhibit C hereto or (iii) any matter for which Consulting is responsible
as provided in Section 6(c) above.
(c) Procedures Relating to Indemnification.
(i) Notice. In order for a party to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or
involving a claim or demand made by any person, firm, governmental
authority or corporation against the indemnified party (a "Third
Party Claim"), such indemnified party
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must notify the indemnifying party in writing, and in reasonable
detail, of the Third Party Claim as promptly as reasonably possible
after receipt by such indemnified party of written notice of the
Third Party Claim. Thereafter, if the indemnifying has assumed the
defense of such Third Party Claim, the indemnified party shall
deliver to the indemnifying party, within three business days after
the indemnified party's receipt thereof, copies of all notices and
documents (including court papers) received by the indemnified party
relating to the Third Party Claim. Notwithstanding anything
contained in this subparagraph (c) to the contrary, the failure to
deliver any notices or documents required to be delivered pursuant
to this subparagraph (c) shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall
have been actually prejudiced as a result of such failure.
(ii) Defense. If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate
in the defense thereof and, if it so chooses, to assume the
defense thereof with counsel selected by the indemnifying
party and reasonably satisfactory to the indemnified party.
Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party will not be
liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection
with the defense thereof. If the indemnifying party assumes
such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying
party shall control such defense. The indemnifying party shall
be liable for the fees and expenses of counsel employed by the
indemnified party for any period during which the indemnifying
party has not assumed the defense thereof; provided, however,
that if the indemnified party's counsel determines that the
indemnified party has or may have defenses to the Third Party
Claim apart from or conflicting with the defenses of the
indemnifying party, then the indemnified party shall be
entitled to retain its own separate counsel and the
indemnifying party shall be liable for legal expenses incurred
by the indemnified party in the defense of such Third Party
Claim. If the indemnifying party chooses to defend any Third
Party Claim, all the parties thereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall include
the retention and (upon the indemnifying party's request)
access to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. Whether or not the indemnifying party
shall have assumed the defense of a Third Party Claim,
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the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge such Third
Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably
withheld). If the indemnifying party shall have assumed
the defense of a Third Party Claim, the indemnifying party
shall not settle such Third Party Claim without the
indemnified party's prior written consent (which consent
shall not be unreasonably withheld).
Notwithstanding the foregoing, if there is a reasonable
probability that the indemnifying party will not be able to
satisfy its indemnification obligations under this Section 7,
the indemnified party will have the right to defend and, after
reasonable consultation with the indemnifying party, to
compromise or settle the Third Party Claim.
(d) In no event shall Consulting have any right to set-off against the
Bridge Note or the Consulting Note any amount due from RCG to
Consulting under this Section 7, but RCG shall be entitled to credit,
dollar for dollar, the Consulting Note for any amount due from RCG
under this Section 7.
8. Tax Matters.
(a) Tax Definitions.
(i) Adjustment means, with respect to Taxes, a change in the
amount or character of any item of income, gain, loss,
deduction or credit of the Company, including but not limited
to changes thereto attributable to:
(w) amendment of returns;
(x) deficiencies asserted by any taxing authority; or
(y) claims for refund
irrespective of whether such change arises out of a voluntary act,
or any audit, examination, proceeding or litigation resulting from
any of the foregoing events.
(ii) Affiliated Group means the affiliated group of corporations
(within the meaning of Section 1504(a) of the Code) of which
Reliance Group Holdings, Inc. is the common parent, and of
which the Company is and has been (since acquired by any
member thereof) a member.
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(iii) Affiliation Year means each taxable year or period applicable
to the Company ending on or before the Closing Date during
which the Company was a member of the Affiliated Group.
(iv) City of Philadelphia BPT Return means the City of Philadelphia
Business Privilege Tax Regular Return filed by RCG on behalf
of the Company.
(v) Consolidated Return(s) means the consolidated United States
Federal income return(s) of the Affiliated Group.
(vi) Code means the Internal Revenue Code of 1986, as amended, or
any successor thereto.
(vii) Incremental Federal Income Tax means the product of (x) the
amount by which (A) the federal taxable income of the Company
for the period January 1, 1995 through the Closing Date
reflecting the Code Section 338(h)(10) Election provided for
in paragraph (g) below exceeds (B) the sum of (i) the federal
taxable income RCG would have realized on the gain on the sale
of the Common Stock if the Code Section 338(h)(10) Election
had not been made and (ii) the federal taxable income of the
Company for the period January 1, 1995 through the Closing
Date without reflecting the Code Section 338(h)(10) Election
and (y) 35%.
(viii) IRS means the Internal Revenue Service.
(ix) Post-Affiliation Year means any taxable year or period of the
Company beginning after the Closing Date.
(x) Regulations means the U.S. Treasury Department Income Tax
Regulations in effect under the Code, as amended from time to
time.
(xi) Tax or Taxes means all taxes, charges, fees, levies, duties or
other assessments whether federal, state, local or foreign,
based upon or measured by income, capital or gain and all
other taxes including, without limitation, recapture, gross
receipts, profits, sales, use, occupancy, value added, ad
valorem, customs, transfer, franchise, withholding, social
security, unemployment, disability, payroll, employment,
excise, or real or personal property taxes and alternative or
add-on minimum or environmental taxes together with any
interest, fines, penalties and additions to such tax as may be
imposed with respect thereto.
(b) Tax Returns and Payments.
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(i) 1994 Federal Return. Based upon the information previously
provided to it by Consulting or the Company, RCG or its parent
entity shall prepare the pro forma federal income tax return
of the Company for the taxable period ended on December 31,
1994, and shall include the taxable income or loss reflected
in such pro forma return in the Consolidated Return.
(ii) 1995 Short Year Federal Return. Based upon the information
provided to it by Consulting or the Company pursuant to this
subparagraph (ii), RCG or its parent entity shall prepare the
pro forma federal income tax return of the Company for the
short taxable period ending on the Closing Date, and shall
include the taxable income or loss reflected in such pro forma
return in the Consolidated Return. Based upon the information
so provided, such return shall be true and complete in all
material respects and shall be prepared in accordance with
Section 1.1502-76(b)(4) of the Regulations. If a Code Section
338(h)(10) Election is made pursuant to paragraph (g) below,
such 1995 pro forma federal income tax return will be prepared
based on the allocation of the payment referred to in Section
2(c) among the assets of the Company pursuant to subparagraph
(g)(ii) below. No later than July 15, 1995, Consulting or the
Company shall prepare and deliver to RCG or its parent entity,
a domestic tax package including such information and prepared
in a manner and in such form consistent with those delivered
to RCG by the Company in prior years.
(iii) 0000 Xxxxx xxx Xxxx xx Xxxxxxxxxxxx BPT Returns. Based upon
the information previously provided to it by Consulting or the
Company, RCG or its parent entity shall prepare all state
income tax returns of the Company that are required to be
filed for the taxable period ended December 31, 1994 and shall
also prepare the City of Philadelphia BPT Return for such
period. Consulting shall provide RCG a Power of Attorney
solely for the purposes of obtaining such extension of time as
may be needed for such returns. RCG shall provide Consulting
with such returns in proper form for filing no later than 30
days before such returns are due. Such returns shall be signed
and timely filed by or caused to be timely filed by
Consulting.
(iv) 1995 Short Year State and City of Philadelphia BPT Tax
Returns. RCG or its parent entity shall prepare all state
income tax returns of the Company that are required to be
filed for the short taxable period ended on the Closing Date
and shall also prepare the City of Philadelphia BPT Tax Return
for such period, if required. Consulting shall provide RCG a
Power of Attorney solely for the purposes of obtaining such
extension of time as may be needed for such returns. RCG shall
provide Consulting with such return in proper form
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for filing no later than 30 days before such returns are due.
RCG shall consult with Consulting with respect to the
modifications to federal taxable income made by RCG or its
parent entity in such state income tax returns. Such returns
shall be signed and timely filed by or caused to be timely
filed by Consulting.
(v) Post Closing Returns. Consulting shall prepare, sign and file
all tax returns, for any type of Tax, which returns are
required to be filed for all periods ending after the Closing
Date, including state income tax returns which include the
period January 1, 1995 through the Closing Date ("straddle
returns"). Consulting shall also prepare, sign and file all
local tax returns (whether for periods ending before or after
the Closing Date).
(vi) Tax Liability of Consulting and the Company. As between the
parties, Consulting and the Company shall have the sole
liability to timely pay to the relevant taxing authority all
Taxes which arise from:
(x) any tax period which ends after the Closing Date; and
(y) any tax returns which Consulting is required to file
under subparagraphs (b)(iii), (iv) or (v).
(c) Adjustments.
(i) Adjustments to Post-Affiliation Year Returns. If with respect
to Consolidated Returns:
(x) there is an Adjustment to any item reported on a return
filed with respect to the Company for a Post-Affiliation
Year that results in an increase in Taxes payable by
Consulting or the Company; and
(y) such Adjustment results in a corresponding Adjustment to
items reported on a return filed with respect to RCG or
any affiliate of RCG (including the Company) for an
Affiliation Year; and
(z) the Taxes payable by or on behalf of RCG (or such
affiliate) with respect to the Company for such period
are reduced by such Adjustment (the "RCG Decrease"),
then RCG shall pay to Consulting or the Company, an
amount equal to such increase in Taxes of Consulting or
the Company. The amount payable by RCG under this
paragraph shall be limited to the RCG Decrease, plus
interest calculated as under Code Section 6621, or
comparable interest from
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state and local authorities, with respect to such RCG
Decrease. Payment under this paragraph shall be made no
later than five business days after the RCG Decrease is
refunded to RCG or such affiliate or is otherwise
actually realized.
(ii) Adjustments to Affiliation Year Returns. If, with respect to
Consolidated Returns:
(x) there is an Adjustment to any item reported on a return
filed with respect to RCG or any affiliate of RCG
(including the Company) for an Affiliation Year that
results in an increase in the Taxes payable by RCG or an
affiliate of RCG; and
(y) such Adjustment results in a corresponding Adjustment to
items reported on a tax return filed with respect to
Consulting or any affiliate of Consulting (including the
Company) for a Post-Affiliation Year; and
(z) the Taxes payable by or on behalf of Consulting (or such
affiliate) with respect to such Post-Affiliation period
are reduced by such Adjustment (the "Consulting
Decrease"), then Consulting shall pay to RCG an amount
equal to such increase in Taxes of RCG or such
affiliate. The amount payable by Consulting under this
paragraph shall be limited to the Consulting Decrease,
plus interest calculated as under pursuant to Code
Section 6621, or comparable interest from state or local
authorities, with respect to such Consulting Decrease.
Payment under this paragraph shall be made no later than
five business days after the Consulting Decrease is
refunded to Consulting or such affiliate, or is
otherwise actually realized.
(iii) Other Changes in Taxable Income. If with respect to a
Consolidated Return for an Affiliation Year:
(x) the Company's taxable income is determined (by
Consulting or RCG with the agreement of the other that
the change is appropriate, or by the IRS) to be greater
than its taxable income as originally reported on such
Consolidated Return (other than as a result of an
Adjustment described in subparagraph (c)(i) or (c)(ii)
above), the Company shall pay to RCG an amount equal to
the product of the increase in taxable income times the
maximum federal Tax rate for the applicable year (plus
penalties and interest);
-15-
(y) the Company's taxable income is determined (by
Consulting or RCG with the agreement of the other that
the change is appropriate, or by the IRS) to be less
than its taxable income as originally reported on such
Consolidated Return (other than as a result of an
Adjustment described in subparagraph (c)(i) or (c)(ii)
above, RCG shall pay to Consulting an amount equal to
the product of the reduction in taxable income and the
maximum federal Tax rate for the applicable year (plus
interest);
(z) Payment pursuant to this subparagraph (iii) shall be
made no later than five (5) business days after RCG
receives or otherwise actually realizes a refund of or
is assessed the additional tax.
(iv) Notice of Adjustments by RCG. RCG shall promptly notify
Consulting of any IRS notice or revenue agent's report or
equivalent state or local tax authority notice received by RCG
which could result in an Adjustment giving rise to a liability
of Consulting or the Company under this Agreement. However,
the failure to give such notice shall not relieve Consulting
or the Company from any liability that it may have hereunder,
except to the extent that such failure results in increased
liability to Consulting or the Company arising out of its
obligations to pay RCG as provided in this Section 8. RCG
shall keep Consulting informed of developments regarding such
notice or report and shall consult with the Company or
Consulting concerning the appropriate actions or positions to
be taken in such proceedings to the extent such developments:
(x) relate to any liability of Consulting or the Company to
RCG under this Agreement, or
(y) could affect the liability of Consulting or the Company
for Taxes in a Post-Affiliation Year.
(v) Notice of Adjustments by Consulting and the Company.
Consulting shall promptly notify RCG of any IRS notice or
revenue agent's report or equivalent state or local tax
authority notice received by Consulting or the Company which
could result in an Adjustment giving rise to a liability of
RCG under this Agreement. However, the failure to give such
notice shall not relieve RCG from any liability that it may
have hereunder, except to the extent that such failure results
in increased liability to RCG arising out of its obligations
to pay Consulting. Consulting shall keep RCG informed of
developments regarding such report or notice to the extent
such developments relate to any liability of RCG to Consulting
or the Company under this Agreement.
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(d) Indemnification. RCG agrees to pay and shall indemnify and hold
harmless the Company and Consulting from and against all Taxes, and
RCG shall be entitled to receive and retain all refunds of Taxes, in
each case, only to the extent attributable to the operations or
assets of any member of the Affiliated Group other than the Company
and its subsidiaries.
(e) Cooperation; Furnishing of Information. The parties agree to provide
each other with such cooperation and information as may be
reasonably requested in connection with:
(i) the preparation or filing of any Tax return, report, amended
return or claim for refund with respect to Taxes;
(ii) the conduct of any audit; or
(iii) making any other computation or determination required
hereunder.
(f) Record Retention. RCG and the Company shall retain all relevant tax
returns, schedules and workpapers, and all related material records
or other documents until the expiration of the statute of
limitations (including extensions) of the taxable years to which
such returns and other documents relate, but in any event for a
period of not less than seven (7) years, provided, however, that RCG
is not required to retain any documents which have been furnished to
the Company or Consulting.
(g) Code Section 338(h)(10) Election.
(i) Subject to subparagraph (g)(iii) below, Consulting agrees to,
and RCG agrees to have its parent entity, join in a Code
Section 338(h)(10) Election with respect to the acquisition by
Consulting of the Common Stock. RCG agrees to execute Form
8023-A (or any replacement form), to comply with all the
requirements of Code Section 338(h)(10) and Regulations
promulgated thereunder, and to take any other action
reasonably requested by Consulting in order to make and
effectuate this election. Other than as set forth in this
paragraph (g), all Taxes arising as a result of the Code
Section 338(h)(10) Election are the responsibility of the
Company or Consulting.
(ii) Notwithstanding the provisions of subparagraph (g)(i) above,
in the event of a failure to make a Code Section 338(h)(10)
Election, other than a failure resulting from a breach by RCG
or its parent entity of the provisions of this paragraph (g),
RCG shall have no liability for any such Taxes resulting from
any other election made by Consulting pursuant to Code Section
338. RCG and Consulting agree to use their best efforts to
agree on an allocation of the purchase price among the assets
of the Company as of the Closing that is
-17-
acceptable to both parties. In the event that such agreement
has not been reached by June 29, 1995, Consulting shall obtain
and deliver to RCG an appraisal of such assets performed by an
appraiser selected and paid by Consulting. Such appraisal
shall be obtained by Consulting and delivered to RCG by August
15, 1995 and shall be used by Consulting and RCG in allocating
and reporting the fair market values of the assets of the
Company for purposes of Code Section 338. Prior to June 29,
1995, Consulting shall prepare and deliver to RCG a schedule
showing state apportionments of payroll, property and sales
for the period January 1, 1995 through the Closing Date in a
form consistent with those schedules delivered to RCG by the
Company in prior years.
(iii) Notwithstanding anything contained in this subparagraph
(g)(iii) to the contrary, RCG's parent entity shall have no
obligation to join in, and Consulting shall not file a Code
Section 338(h)(10) Election unless (A) Consulting has paid to
each appropriate state taxing authority, at such time as the
extension for such state return is filed pursuant to
subparagraph (b)(iv) of this Section 8, an amount equal to the
state Taxes to be paid as a result of the Code Section
338(h)(10) Election, based on the allocations agreed to by RCG
and Consulting pursuant to subparagraph (g)(ii) above, (B)
prior to such filing, Consulting has executed and delivered to
RCG (i) a promissory note (pari passu with the Credit
Agreement) in a principal amount equal to the Incremental
Federal Income Taxes and on such terms as are contained in,
and in the form attached hereto as Exhibit E (the "Tax Note"),
(ii) a guaranty of the Tax Note by Xxxxxx (pari passu with the
guaranty by Xxxxxx granted to the Bank under the Credit
Agreement) in the form attached hereto as Exhibit E-1 and
(iii) evidence that the Bank (as defined in the Credit
Agreement) has consented to the Tax Note and the Xxxxxx
guaranty thereof, and (C) the Bridge Note has been repaid in
full.
9. Termination.
The agreement of RCG to sell and of Consulting to purchase the Common Stock
shall terminate on the close of business on May 26, 1995 (unless extended by
written agreement among the parties) if the Closing shall not have occurred
prior to said time and date. Unless terminated in writing by mutual agreement
among the parties, the parties shall have such rights and remedies, each against
the other, as shall exist at law or in equity.
10. Expenses.
All expenses incident to the sale and purchase of the Common Stock incurred by
RCG shall be borne by RCG, and those by the Company (other than any allocation
by RCG of its personnel costs to the
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Company for work on this transaction) and/or Consulting (including the formation
of Consulting and the costs of obtaining the necessary financing) shall be borne
by Consulting.
11. Survival of Warranties.
All representations, warranties, covenants and agreements herein contained shall
survive the Closing hereunder.
12. Broker.
RCG and Consulting each represent and warrant to the other that all negotiations
relative to this Agreement and to the transactions contemplated hereby have been
carried on by each directly with the other without the intervention of any
brokers or finders and that no broker or finder is entitled to a fee in
connection with the sale of the Common Stock. RCG and Consulting each agree to
indemnify and hold the other harmless from and against any and all loss, cost,
damage, claim, and expense which the other may sustain or which may be asserted
against the other by reason of any claim for compensation by any person, firm or
corporation, introduced by or arising from any relationship with the
indemnifying party in connection with the transactions contemplated by this
Agreement.
13. Notices.
Any notice sent hereunder shall be in writing, sent by certified mail, return
receipt requested, facsimile transmission between the hours of 9:00 A.M. and
5:30 P.M., New York City time, or delivered in person, addressed as follows, or
to such other address as either party may notify the other in accordance with
the provisions hereof:
(a) to RCG, at Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000 Attention:
Xxxxxx X. Xxxxxxxx, fax number (000) 000-0000.
(b) to Consulting, at the address on page 1 hereof, Attention:
Xxxxx-Xxxxxx Xxxxxx, fax number (000) 000-0000.
14. Knowledge.
For purposes of this Agreement, information shall not be deemed within the
"knowledge of", "known to" or "known by" (a) the Company, if the only persons at
the Company who know such information are Xxxxxx X. Xxxxx and/or Xxxxxxxxx X.
Xxxxxxxxx (and the references in the first parenthetical phrases in Sections
6(b) and 6(c)(B) to any officer, director or employee of the Company shall
exclude Messrs. Xxxxx and Xxxxxxxxx) or (b) RCG, if the only persons at RCG who
know such information are persons (other than Messrs. Xxxxx and Xxxxxxxxx) who
are also officers, directors or employees of the Company.
-19-
15. Entire Agreement, Governing Law, Counterparts, Assignment.
(a) This Agreement (including the Schedules and Exhibits annexed hereto)
constitutes the entire Agreement between the parties hereto and
there are no terms other than those contained herein. No variation
hereof shall be deemed valid unless in writing and signed by the
parties hereto.
(b) This Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflicts of law,
including but not limited to matters of construction, validity and
performance.
(c) This Agreement may be executed in one or more counterparts each of
which shall be an original, but all of which shall be deemed to be
one and the same instrument. Each counterpart may be delivered by
facsimile transmission, which transmission shall be deemed delivery
of an originally executed document.
(d) This Agreement shall not be assignable by either party hereto except
as herein specifically provided. Consulting shall be permitted to
assign its rights hereunder to any corporation controlled by Xxxxxx,
provided that notwithstanding any such assignment Consulting shall
remain liable to perform all obligations required to be preformed
hereunder and such assignee shall specifically agree to be similarly
bound. Nothing in this Agreement is intended to confer upon any
person, other than the parties hereto, and their successors and
assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
RCG INTERNATIONAL, INC. XXXXXX XXXXXX CONSULTING, INC.
By: /s/ Xxxxxx X. X'Xxxxx By: /s/ Xxxxxx X. Xxxxx
--------------------- ---------------------------------
NAME: Xxxxxx X. X'Xxxxx NAME: Xxxxxx X. Xxxxx
TITLE: Vice President TITLE: Chief Financial Officer
-20-
EXHIBITS
A. Bridge Note
B. Consulting Note
C. List of Guaranties
D. Payroll Services
E. Tax Note
F. Tax Note Guaranty
-21-
EXHIBIT A
XXXXXX BAILLY CONSULTING, INC.
Senior Note due June 29, 1995
$431,280 New York, New York
May 25, 1995
FOR VALUE RECEIVED, Xxxxxx Xxxxxx Consulting, Inc., ("Consulting"), a Delaware
corporation, promises to pay on June 29, 1995, RCG International, Inc.
("Holder") or order, the principal sum of FOUR HUNDRED THIRTY-ONE THOUSAND TWO
HUNDRED EIGHTY DOLLARS ($431,280), with interest thereon payable from June 5,
1995 until paid at a rate of 10% per annum. All interest shall be computed for
the actual number of days elapsed on the basis of a year consisting of 360 days.
All indebtedness outstanding following maturity shall bear interest at the rate
of 13% per annum. Payments of principal and interest shall be made in lawful
money of the United States of America at the principal office of Holder at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 0000 8 or at such other address as Holder
may have from time to time furnished Consulting in writing. Consulting shall
have the right to prepay this Note in whole or in part at any time.
Following the failure of Consulting to make payment hereunder, Holder may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, or by other appropriate proceedings, and Consulting shall pay and
reimburse Holder for all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Holder in connection with
its exercise of any of its rights and remedies hereunder or under the Assignment
of Subscription Agreements referred to below. Consulting hereby waives
presentment, demand, notice of protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note. Neither the exercise of, nor the failure to exercise, any right
hereunder or under the Assignment of Subscription Agreements referred to below,
shall waive the right to exercise any such right thereafter.
This Note has been delivered in New York, New York, and shall be governed by and
construed in accordance with the laws of the State of New York. Wherever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note.
This Note is entitled to the benefits of the Assignment of Subscription
Agreement Rights dated as of May 25, 1995 between Consulting and Holder.
-1-
IN WITNESS WHEREOF, Consulting has executed this Note as of the day and year
first above written.
XXXXXX BAILLY CONSULTING, INC.
By:________________________________
Name:
Title:
-2-
EXHIBIT B
This instrument is subject to an lntercreditor and Subordination Agreement
dated as of May 25, 1995, as the same may be amended from time to time,
among Xxxxxx Xxxxxx Consulting, Inc., RCG International, Inc. and State
Street Bank and Trust Company, which, among other things, subordinates the
maker's obligations to the payee to the maker's obligations to the holder
of Senior indebtedness as defined in said Agreement.
XXXXXX BAILLY CONSULTING, INC.
9.5% SUBORDINATED NOTE DUE MAY 15, 2001
$4,650,000 New York, New York
May 25, 1995
FOR VALUE RECEIVED, Xxxxxx Xxxxxx Consulting, Inc. (the "Company"), a
Delaware corporation, promises to pay on May 15, 2001, RCG International, Inc.
("Holder") or order, the principal amount of FOUR MILLION SIX HUNDRED FIFTY
THOUSAND DOLLARS ($4,650,000), or, if less, the aggregate unpaid principal
amount then outstanding under this Note. The Company promises to pay interest
(computed on a 360-day year, 30-day month basis) on the unpaid balance of such
principal amount from May 25, 1995, payable in semi-annual installments on each
May 15, and November 15, after the date of this Note, at the rate of 9.5% per
annum until such principal amount shall become due and payable (whether at
stated maturity or by prepayment or declaration or otherwise), and to pay
interest on any overdue principal and (to the extent permitted by applicable
law) on any overdue interest at the rate of 12.5% per annum until paid. Payments
of principal and interest shall be made in lawful money of the United States of
America at the principal office of Holder at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 or at such other address as Holder may have from time to time
furnished the Company in writing.
1.Prepayment of Notes. The Company may, at its option, upon notice as provided
in the succeeding sentence, prepay at any time all or from time to time any part
of the Note, at the principal amount so prepaid, together with interest thereon
accrued to date of such prepayment. The Company will give written notice of each
prepayment to the Holder not less than five (5) days prior to the date fixed for
such prepayment, specifying (a) the date of prepayment, (b) the aggregate
principal amount to be prepaid on such date and (c) the aggregate amount of
accrued interest payable on such prepayment.
2.Taxes. All payments by the Company of principal of, and interest on, this Note
and all other amounts payable hereunder shall be made free and clear of and
without deduction for any present or future income, excise, stamp or franchise
taxes and other taxes, duties, fees, withholdings or other charges of any nature
whatsoever imposed by any taxing authority.
3.Accounting; Financial Statements and Other Information. The Company will
maintain and cause each of its Subsidiaries to maintain a uniform system of
accounting established and
-1-
administered in accordance with generally accepted accounting principles
("GAAP"). The Company will deliver to Holder:
(a) as soon as practicable after the end of each of the
first three quarterly fiscal periods of each fiscal year
of Xxxxxx, and in any event within 45 days thereafter,
consolidating and consolidated balance sheets of Xxxxxx
and its Subsidiaries as at the end of such period and
consolidating and consolidated statements of income and
of cash flows of the Company and its Subsidiaries for
such period and (in the case of the second and third
quarterly periods) for the portion of the current fiscal
year to the end of such period, all in reasonable detail
and certified by the principal financial officer of the
Company as being complete and as fairly presenting, in
accordance with GAAP, the financial position of Xxxxxx
and its Subsidiaries and results of their operations for
the period then ended, subject only to changes resulting
from year-end audit adjustments;
(b) as soon as practicable after the end of each fiscal year
of Xxxxxx, and in any event within 90 days thereafter,
consolidating and consolidated balance sheets of Xxxxxx
and its Subsidiaries as at the end of such year and
consolidating and consolidated statements of income and
of cash flows of Xxxxxx and its Subsidiaries for such
year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable
detail and, in the case of such consolidated statements,
accompanied by the report and opinion thereon of
independent public accountants of recognized national
standing selected by Xxxxxx and reasonably acceptable to
Holder, which opinion shall be prepared in accordance
with generally accepted auditing standards and shall be
based upon an examination by such accountants of the
accounts of Xxxxxx and all of its Subsidiaries;
(c) together with each delivery of financial statements
referred to in subdivisions (a) and (b) above, an
Officer's Certificate of the Company (i) stating that
each of the signers has reviewed the relevant terms of
this Note and has made, or caused to be made under his
supervision, an adequate review of the transactions and
condition of Xxxxxx and its Subsidiaries during the
fiscal period covered by such financial statements, (ii)
stating that such review has not disclosed the existence
during such period nor does such signer have knowledge
of the existence, as at the date of such certificate, of
any Default, or, if any Default existed or exists,
specifying the nature and period of existence thereof
and the action the Company has taken or is taking or
proposes to take with respect thereto, and (iii) setting
forth and demonstrating in reasonable detail
-2-
compliance during and at the end of such period with the
financial and restricted payment covenants contained in
this Note;
(d) together with each delivery of financial statements
referred to in subdivision (b) above, a certificate by
the independent public accountants reporting on such
financial statements (provided that such accountants
shall not be required to go beyond normal auditing
procedures to make such statement) (i) briefly setting
forth the scope of their examination (which shall have
been made in accordance with generally accepted auditing
standards) and stating that in their judgment such
examination is sufficient to enable them to render such
certificate, (ii) stating whether or not their
examination has disclosed the existence of any Default
and, if so, specifying the nature and period of
existence thereof, and (iii) covering the matters
referred to in clause (iii) of subdivision (c) above
with respect to the fiscal year covered by such
financial statements;
(e) promptly upon receipt thereof, copies of all reports, if
any, submitted to the Company by independent accountants
in connection with each annual or interim audit of the
books of the Company or any of its Subsidiaries made by
such accountants;
(f) prompt written notice of (i) any litigation involving a
claim of more than $200,000 against the Company or any
of its Subsidiaries, or (ii) any matter which, in the
opinion of the Company, might have a materially adverse
effect on the operations, business condition (financial
or otherwise), affairs or prospects of the Company or
any of its Subsidiaries (a "Material Adverse Effect");
(g) forthwith upon any officer of the Company obtaining
knowledge of any Default or any Event of Default, a
certificate of such officer specifying the nature and
period of existence thereof and what action the Company
has taken, is taking or proposes to take with respect
thereto;
(h) concurrently with the transmittal thereof, copies of all
information provided under Section 5.1 of the Credit
Agreement; and
(i) as soon as practicable, all such other information and
data with respect to the business, affairs or condition
of the Company or any of its Subsidiaries as from time
to time may reasonably be requested by Holder.
4.Inspection. The Company will permit any authorized representative designated
by Holder to visit and inspect, at the Company's expense (provided that not more
than two such inspections
-3-
shall be paid for in any year unless there has occurred a Default), any of the
properties of the Company or any of its Subsidiaries, including its and their
books (and to make copies thereof or extracts therefrom), and to discuss its and
their affairs, finances and accounts with its and their officers, all at such
reasonable times and as often as may reasonably be requested by Holder.
5.Maintenance of Corporate Existence, etc. The Company will preserve its
corporate existence, franchises, privileges and right to do business, and those
of each of its Subsidiaries.
6.Payment of Impositions, etc. The Company will and will cause each Subsidiary
to promptly pay or cause to be paid all Impositions before the same become
delinquent, except where contested in good faith, by proper proceedings pursuant
to which collection from the Company of such Imposition is suspended, if
adequate reserves therefor have been established on the books of the Company or
such Subsidiary, as the case may be, in accordance with and to the extent
required by GAAP, and where non-payment will not have, individually or in the
aggregate, a Material Adverse Effect.
7.Compliance with Legal and Insurance Requirements, etc. The Company at its
expense will, and will cause each of its Subsidiaries to, promptly (a) comply
with all Legal Requirements and Insurance Requirements and (b) procure, maintain
and comply with all permits, licenses and other authorizations material to the
proper operation of their respective properties and businesses.
0.Xxxxxxxxx of Properties and Business. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to the properties and business of the Company and its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or a similar business and
similarly situated, in such amounts and by such methods as shall be deemed
adequate by the Board of Directors of the Company and acceptable to Holder. All
insurance shall provide that no cancellation, reduction in amount or change in
coverage shall be effective until thirty (30) days after receipt by Holder of
written notice thereof.
0.Xxxxxxxxx on Life of Principal Officer. So long as Xxxxx-Xxxxxx Xxxxxx shall
be an officer of the Company, the Company will maintain (with Chubb LifeAmerica
Insurance Company or other insurers satisfactory to Holder) life insurance on
his life with the Company named as beneficiary, in the amount of $2,000,000.
10.Conduct of Business. The Company will carry on its business and will cause
the business of its Subsidiaries to be carried on in an efficient manner and
will not engage or permit any of its Subsidiaries to engage in any business
other than businesses engaged in by the Company on the date of this Note, and in
activities substantially similar or related thereto.
11.Employment Agreement. The Company will not (a) materially amend, modify,
waive any provision of, or consent to any action under, such of the terms and
conditions of the Employment Agreement as relate to compensation, duties,
non-competition and non-interference or (b) terminate the Employment Agreement
without the prior written consent of Holder.
-4-
12.Mortgages, Liens, etc. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any mortgage, lien, charge or encumbrance on or security interest in or
pledge of or conditional sale or other title retention agreement with respect to
any property or asset now owned or hereafter acquired by the Company or such
Subsidiary, or any Indebtedness or liability of the Company or any of its
Subsidiaries, provided that the foregoing restrictions shall not prohibit:
(a) liens for Impositions the payment of which is not at the
time required by Section 6;
(b) liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation,
unemployment insurance and other types of social
security, or to secure the performance of bids, tenders,
statutory obligations, surety and appeal bonds, payment
and performance bonds, completion bonds, return-of-
money bonds and other similar obligations (not incurred
in connection with the borrowing of money or the
obtaining of advances or credit);
(c) liens on assets of the Company and/or its Subsidiaries
created under the Credit Agreement or the Security
Documents referred to therein;
(d) in the case of the issued and outstanding capital stock
of any Subsidiary owned by the Company, the pledge
thereof pursuant to the Credit Agreement; and
(e) in the case of any equipment or other similar personal
property acquired by the Company or any Subsidiary and
having an unpaid purchase price of no more than $500,000
($700,000, if and to the extent of the Contingent
Obligation under the HBRS Transaction), individually or
in the aggregate, liens (such term to include security
interests and conditional sale and other title retention
agreements) created to finance the acquisition of such
personal property, provided that each such lien shall at
all times be confined solely to the items of personal
property so acquired and shall at no time confer on the
holder of such lien any right in respect of any other
property of the Company or any Subsidiary.
13. Investments.
(a) Except as provided in paragraphs (b) and (c) below, the Company
will not, and will not permit any Subsidiary to, directly or indirectly make or
own any Investment, except that the Company or any Subsidiary may make and own
Investments consisting of (i) marketable direct obligations of the United States
of America, (ii) certificates of deposit or other obligations of banks organized
and existing under the laws of the United States of America and having capital
-5-
and surplus and undivided profits of at least $500,000,000, and (iii) commercial
paper issued by a corporation organized under the laws of any state of the
United States or of the District of Columbia and rated at least A-1 by S&P or
P-1 by Xxxxx'x, provided that all such investments shall mature within a period
of nine (9) months from the date when made and, provided further that the
Company may make aggregate Investments in the Common Stock of direct
Wholly-Owned Subsidiaries of the Company not to exceed $100,000.
(b) The Company shall be permitted to make and own Investments in HB
Capital, Inc. so long as the aggregate amount of such investments shall not
exceed $600,000 and HB Capital, Inc. shall have unconditionally guaranteed the
payment of this Note pursuant to a guaranty agreement satisfactory in form and
substance to Holder (such guaranty shall be permitted to terminate if there is
no Default and the Company no longer makes or owns any investment in HB Capital,
Inc.).
(c) The Company shall be permitted to make and own Investments in
the form of loans or advances to officers or employees of the Company made in
the ordinary course of business and consistent with past practice so long as the
aggregate outstanding amount of all such investments does not exceed $200,000.
The Company shall also be permitted to make advances in the ordinary course of
business and consistent with past practices to officers and employees for travel
and similar reimbursable business expenses to be incurred by such officer or
employee.
14. Indebtedness and Contingent Obligations, etc. The Company will
not, and will not permit any Subsidiary to, directly or indirectly create or
suffer to exist any Indebtedness; provided that nothing contained in this
Section 14 shall prohibit the Company from incurring the Indebtedness created by
this Note, the Bridge Note (as defined and issued pursuant to the Purchase
Agreement), the Virginia Lease (as defined below) or the Credit Agreement or
Indebtedness incurred in connection with the purchase of personal property or
equipment in an aggregate outstanding amount not to exceed $500,000, which
Indebtedness is non-recourse except as to such property or equipment or the
Contingent Obligation of the Company in an aggregate amount not to exceed
$200,000 arising from the purchase of assets from HBRS, Inc. pursuant to an
asset purchase agreement, executed effective as of April 1, 1995 (the "HBRS"
Transaction"). The Company will not amend, modify, waive any provision of,
consent to any action under, or extend the Company's lease (the "Virginia
Lease") on its Arlington, Virginia headquarters without the prior written
consent of Holder.
15. Restricted Payments. The Company will not directly or indirectly
declare, order, pay or make or set apart any sum or property for any Restricted
Payment, except for (a) the declaration and payment on or before May 31, 1995,
of a dividend in-kind consisting of the capital stock of HB Capital, Inc., the
value of which does not exceed $100 and (b) payments in any fiscal year of the
Company in an aggregate amount necessary to enable Xxxxxx to make its then
required payments under the Stockholders Agreement, provided that such payments
do not exceed amounts allowed to be paid under Section 8 of the Stockholders
Agreement and at the time of payment thereof and after giving effect thereto, no
Default shall exist.
-6-
16. Transactions with Affiliates. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, enter into any transaction
with any Affiliate except for: (a) transactions (other than transactions
constituting Investments in HB Capital, Inc. or loans or advances permitted by
Section 13(c) above) in the ordinary course of business on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time from Persons who are not Affiliates and (b)
salaries and other employee compensation, provided that if the Company fails to
pay when due any amounts owed under this Note, the Credit Agreement or the
Virginia Lease, then, so long as such failure to pay continues, salaries and
other compensation of officers and d i rectors of the Company or any Subsidiary
shall not increase in the aggregate without the written consent of Holder;
provided that increases required pursuant to the Employment Agreement shall be
permitted but shall be included in determining amounts available hereunder.
17. Disposal of Indebtedness of Securities or Subsidiaries, etc. The
Company will not
(a) directly or indirectly sell, assign, pledge or otherwise
transfer any Indebtedness or claim against or any stock
or other securities of (or options to acquire stock or
other securities of) any Subsidiary except as required
by the Credit Agreement; or
(b) permit any Subsidiary directly or indirectly to own or
hold any Indebtedness of or claim against the Company or
any other Subsidiary, or any stock or other securities
of (or options to acquire stock or other securities) of
any other Subsidiary; or
(c) permit any Subsidiary directly or indirectly to issue or
sell any shares of its stock or any other securities
except to the Company.
18. Sale, Consolidation, Merger, etc. The Company will not, and will
not permit any Subsidiary to (other than as contemplated by the Purchase
Agreement), directly or indirectly,
(a) sell, lease or otherwise dispose of all or substantially
all of its properties or assets; or
(b) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge
into it, except that a Subsidiary may be consolidated
with or merged into the Company or a Wholly-Owned
Subsidiary, if the Company or such Wholly-Owned
Subsidiary, as the case may be, shall be the surviving
corporation; or
(c) sell, lease or otherwise dispose of any of its
properties or assets otherwise than in the ordinary
course of business.
-7-
19. Financial Covenants. The Company shall comply with the financial
covenants contained in Section 7 of the Credit Agreement, notwithstanding
termination of the Credit Agreement, provided that in the event that any
provision of Section 7 of the Credit Agreement is waived (or amended in a manner
which has the effect of being a waiver, i.e., such amendment is not modifying
future compliance with the Credit Agreement) and the Company has certified to
Holder that no consideration has been offered or given by the Company or Xxxxxx
to the person consenting to such waiver or amendment in order to obtain such
waiver or amendment and has requested Holder to consent in writing to such
waiver (or such amendment) under this Section 19, then Holder will not
unreasonably withhold its consent to such request.
20. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such mutilation, upon surrender of such Note
to the Company for cancellation, and in the case of loss, an agreement of
indemnity by Holder, the Company at its expense will execute and deliver, in
lieu thereof, a new Note of like tenor, dated the date to which interest on such
lost, stolen, destroyed or mutilated Note has been paid.
21. Events of Default; Declaration of Note Due. If one or more of
the following events ("Events of Default") shall occur:
(a) if any principal of this Note shall not be paid when due,
whether at stated maturity or by prepayment or otherwise; or
(b) if any interest on this Note shall not be paid for more
than 5 days after such interest shall have become due; or
(c) if the Company shall fail to perform or comply with any
term of Sections 11 to 19, inclusive, of this Note for a period of
15 days; or
(d) if, without the written consent of Holder, which consent
shall not be unreasonably withheld, the Company shall (i) amend, or
receive under the Credit Agreement any waiver or modification of,
the amortization schedule contained in the Credit Agreement, or (ii)
fail to make such amortization payments when due (or within 90 days
of the date provided for in the Credit Agreement, provided that
acceptance of such late payment by State Street Bank and Trust
Company shall not be deemed a waiver under clause (i) above); or
(e) if the Company shall fail to perform or comply with (i)
any term of this Note required to be performed or complied with by
it (other than those referred to above in this Section 21) or (ii)
any covenant contained in the Purchase Agreement and such failure
shall continue for more than 15 days after written notice thereof
shall have been given to the Company by Holder; or
-8-
(f) if any representation or warranty of the Company contained
in this Note or made in the Purchase Agreement shall prove to have
been incorrect in any material respect as of the date on which made;
or
(g) if, other than as provided in clause (d) above, (i) the
Company or any Subsidiary shall default (as principal or guarantor
or other surety) in the payment of any principal of or premium, if
any, or interest on the Indebtedness evidenced by the Credit
Agreement or any other Indebtedness; or the Company or any
Subsidiary shall default with respect to any term of any evidence of
any such Indebtedness or of any mortgage, indenture or other
agreement relating thereto, and (ii) such default shall continue for
more than the period of grace, if any, provided with respect thereto
and, except with respect to payment, shall not have been effectively
waived; or
(h) if Xxxxxx, the Company or any Subsidiary shall make an
assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts as they become due, or shall not
generally be paying its debts as they become due, or shall file a
petition in bankruptcy, or shall be adjudicated a bankrupt or
insolvent, or shall file a petition or answer seeking for itself, or
consenting to, or acquiescing in, any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or
shall file an answer admitting or not contesting the material
allegations of a petition filed against it in any such proceeding,
or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Xxxxxx, the Company or such
Subsidiary or any material part of its properties; or
(i) if, within 30 days after the commencement of any
proceeding against the Company or any Subsidiary seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed, or
if, within 30 days after the appointment without the consent or
acquiescence of Xxxxxx, the Company or any Subsidiary, of any
trustee, receiver or liquidator of Xxxxxx, the Company or such
Subsidiary or of any substantial part of its properties, such
appointment shall not have been vacated; or
(j) if Xxxxxx, the Company or their respective directors or
stockholders shall take any action looking to the dissolution or
liquidation of Xxxxxx or the Company; or
(k) if a final judgment which, with other then outstanding
final judgments against the Company and its Subsidiaries, exceeds an
aggregate of $200,000 shall be rendered against the Company or any
Subsidiary, and if, within 15 days after the entry thereof, such
judgment shall not have been discharged or execution thereof stayed
pending appeal or if, within 15 days after the expiration of any
such stay, such judgment shall not have been discharged; or
-9-
(l) a Change in Control shall have occurred; or
(m) Xx. Xxxxx-Xxxxxx Xxxxxx shall fail to own 75% of the
number of shares of Common Stock of Xxxxxx owned by him on the date
of this Note (without giving effect to any stock split or other
corporate event pursuant to which such number is increased or
decreased) or shall cease to be the chief executive officer of the
Company (other than by death or disability, so long as a successor
acceptable to Holder shall serve in his stead); or
(n) if Xxxxxx shall fail to perform any of its obligations
under the Lease Guaranty;
then, and in any such event, Holder may at any time at its option, by written
notice to the Company, declare this Note to be due and payable, whereupon the
same shall forthwith become due and payable, together with interest accrued
hereon, without presentment, demand, protest or notice, all of which are hereby
waived; provided that upon the occurrence of any of the events described in
clause (h), (i) or (j) of this Section 21, this Note shall automatically be and
become due and payable, together with interest accrued hereon, without
presentment, demand, protest or notice, all of which are hereby waived.
22. Remedies on Default, etc. In case any one or more Events of
Default shall have occurred and shall be continuing, the Holder may proceed to
protect and enforce its rights by a suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any agreement
contained in this Note, or for an injunction against a violation of any of the
terms hereof, or in aid of the exercise of any right, power or remedy granted
thereby or by law, equity, statute or otherwise. In the case of a Default in the
payment of any principal of or interest on the Note, the Company will pay to the
Holder such further amount as shall be sufficient to cover the cost and expense
of collection, including, without limitation, reasonable attorneys' fees. No
course of dealing and no delay on the part of the Holder in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
the Holder's rights, powers or remedies. No right, power or remedy conferred
hereby shall be exclusive of any other right, power or remedy referred to herein
or now or hereafter available at law, in equity, by statute or otherwise.
23. Subordination. The indebtedness evidenced by this Note is
subordinate and junior in right of payment to the extent set forth in the
Intercreditor and Subordination Agreement referred to in the legend at the top
hereof.
24. Definitions. As used herein the following terms have the
following respective meanings:
Affiliate: (a) Messrs. Bailly and Xxxxxx (b) any Person owning or
controlling 5% or more of any class of stock or similar interests of Xxxxxx or
any Subsidiary, (c) any spouse of any such Person, (d) any relative (within the
third degree) of any such Person or spouse, (e) any corporation, association,
partnership or other business entity in which any such Person or spouse or
relative has a substantial interest (including in the case of a partnership, any
general partnership
-10-
interest), direct or indirect, and (f) any corporation, association, partnership
or other business entity, other than a Subsidiary, 5% or more of any class of
stock or similar interests, or in the case of a partnership, the general
partnership interest, of which is owned or controlled by Xxxxxx or any
Subsidiary.
Change in Control: (a) after an initial public offering of stock of
Xxxxxx, any person (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
the Management Group, is or becomes "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all shares that any such person has the right to
acquire whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 25% or more of the common stock of Xxxxxx
on a fully diluted basis; or
(b) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of Xxxxxx or the
Company (together with any new or replacement directors whose election by such
Board or whose nomination for election by the shareholders of Xxxxxx or the
Company was approved by a vote of two-thirds of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of Xxxxxx or
the Company then in office.
Common Stock: stock of any class or classes (however designated) the
holders of which are ordinarily entitled to vote for the election of a majority
of the directors (or persons performing similar functions) of the corporation,
association or other entity in question.
Contingent Obligation: means, relative to any Person, any agreement,
undertaking or arrangement by which such Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the Indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any Person's obligation under any Contingent
Obligation shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum principal amount, if larger) of the
Indebtedness, obligation of other liability guaranteed thereby.
Credit Agreement: means the Credit Agreement, dated May 17, 1995,
between Consulting and State Street Bank and Trust Company, as in effect on the
Closing Date (as such term is defined in the Purchase Agreement) except that,
solely for purposes of Section 17(a) above, it shall mean as amended from time
to time.
Default: any condition or event which constitutes or which, after
notice or lapse of time or both, would constitute an Event of Default and which
has not been fully cured or duly waived.
-11-
Employment Agreement: means the agreement, dated as of May 25, 1995,
between the Company and Xxxxx-Xxxxxx Xxxxxx as in effect on the Closing Date (as
such term is defined in the Purchase Agreement), except the term "Employment
Agreement" shall also include any amendments thereafter made in accordance with
Section 11 hereof.
Event of Default: the meaning specified in Section 21 of this Note.
GAAP: the meaning specified in Section 3 of this Note.
Xxxxxx: Xxxxxx Xxxxxx, Inc. and any successor thereto.
Impositions: all taxes, fees, duties, withholdings, assessments
(including, without limitation, all assessments for public improvements or
benefits), levies, and other charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed on or in respect of or be a lien upon the
Company or any of its Subsidiaries or any of its or their respective properties,
assets, income or profits.
Indebtedness: as applied to any Person, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services, (b) all obligations of such Person for the payment of money evidenced
by notes, bonds, debentures or similar instruments, (c) all obligations,
contingent or otherwise, relative to the face amount of all letters of credit,
whether or not drawn, and banker's acceptances issued for the account of such
Person, (d) all indebtedness secured by any mortgage, pledge, security interest,
lien or conditional sale or other title retention agreement existing on any
property or asset owned or acquired by such Person subject thereto, whether or
not such indebtedness shall have been assumed and whether or not the remedies of
the Persons entitled to payment of such indebtedness are limited upon default to
repossession of such property, and (e) all Contingent Obligations of such
Person. The term "Indebtedness" shall not include leases which under generally
accepted accounting principles are not required to be capitalized, but shall
include the Virginia Lease.
Insurance Requirements: all terms of each insurance policy and
requirements of the issuers of all such policies applicable to or affecting the
Company or any Subsidiary or any properties of the Company or any Subsidiary, or
any business conducted by the Company or any Subsidiary.
Investment: any direct or indirect purchase or other acquisition of
stock or other securities of any Person, any direct or indirect loan, advance or
capital contribution to any Person, and any direct or indirect purchase or other
acquisition of any property or asset other than those acquired by such Person in
the ordinary course of its business.
Legal Requirements: all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments, departments,
commissions, boards, courts, authorities, agencies, officials and officers,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time
-12-
hereafter may be applicable to the Company or any Subsidiary or any properties
of the Company or any Subsidiary.
Lease Guaranty: the Lease Guaranty, dated as of May 25, 1995, by
Xxxxxx for the benefit of Holder, as such Lease Guaranty may from time to time
be amended or modified.
Management Group: Messrs. Bailly, Yokell, Armstrong, Ciliano,
Poirier, Rouse, Rowe, Steinbergh and Xxxxxxxxx.
Material Adverse Effect: the meaning specified in Section 3(f).
Officer's Certificate: as applied to any Person, a certificate
executed on behalf of such Person by its President or one of its Vice Presidents
or its Controller.
Person: a corporation, an association, a partnership, an
organization, a business, an individual or a government or political subdivision
thereof or any governmental agency.
Purchase Agreement: the sale agreement, dated as of May 25, 1995,
between RCG International, Inc. and the Company.
Restricted Payment: (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of the Company now
or hereafter outstanding, or (b) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of the
Company now or hereafter outstanding (or any warrants, rights or options to
purchase any such stock) or (c) any payment by the Company on behalf of Xxxxxx,
or any payment to Xxxxxx or any member of the Management Group for services
rendered to the Company or any Subsidiary other than, in the case of members of
the Management Group, payment permitted under Section 16 (b) above.
Stockholder Agreement: the Stockholders Agreement, dated as of May
15, 1995, among Xxxxxx and its Stockholders as in effect on the Closing Date (as
such term is defined in the Purchase Agreement).
Subsidiary: any corporation, association or other business entity a
majority (by number of votes) of the voting stock or Common Stock of which is at
the time owned or controlled, directly or indirectly, by the Company.
Wholly-Owned Subsidiary: any Subsidiary all of the outstanding
shares of each class of stock of which are at the time owned directly by the
Company.
25. Indemnification. The Company hereby indemnifies, exonerates and
holds the Holder and its officers, directors and employees (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including
-13-
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them (except as a.
result of such person's gross negligence or willful misconduct as determined by
a final, unappealable decision of a court of competent jurisdiction) as a result
of, or arising out of, or relating to
(a) the transaction contemplated by the Purchase
Agreement,
(b) the entering into and performance of this Note by
the Holder, or
(c) enforcement of the Holder's rights or remedies
under this Note or the collection of any amounts
payable hereunder.
26. Notices, etc. All notices and other communications hereunder
shall be in writing and shall be delivered faxed or mailed by first class mail,
postage prepaid, addressed If to the Holder, at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 Attention: President, fax number (000) 000-0000 with a copy to
Reliance Group Holdings, Inc., Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxxxxx, fax number (000) 000-0000, and if the Company at
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxxxxxx, Xxxxxxxx 00000-0000 or to such other
address as Holder or the Company may notify the other in accordance with the
provisions hereof.
27. Amendment. No amendment or waiver of any provision of this Note,
nor consent to any departure by the Company herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Company and the
Holder, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
28. Miscellaneous. This Note shall be binding upon the Company and
its successors and assigns and shall inure to the benefit of and be enforceable
by the Holder. This Note shall be construed and enforced in accordance with and
governed by the laws of the State of New York (without giving effects to the
conflicts of law principles thereof). The headings in this Note are for purposes
of reference only and shall not limit or define the meaning hereof.
XXXXXX XXXXXX CONSULTING, INC.
By: ______________________________
Title:
-14-
EXHIBIT C
All Welfare Benefit Plans of the Company
Profit-Sharing Plan of the Company
401 (K) Plan of the Company
Virginia Lease
Automobile Insurance
General Liability Insurance
Workers Compensation
-15-
EXHIBIT D
Payroll Services
Services Provided
Preparation of input based on Consulting submissions, reconciliation of
the output, mailing quarterly payroll, tax processing and annual payroll
tax processing.
Term
RCG will provide to Consulting the services described above for the
fifteen pay periods remaining in 1995
Cost
The cost to Consulting for the payroll services to be provided by RCG to
Consulting hereunder shall be $18,000 plus the actual costs for ADP,
postage and other expenses incurred by RCG.
D-1
EXHIBIT E
XXXXXX XXXXXX CONSULTING, INC.
Floating Rate Senior Note
$[ ] New York, New York
January 1, 1996
FOR VALUE RECEIVED, Xxxxxx Bailly Consulting, Inc., ("Consulting"), a Delaware
corporation, promises to pay on December 31, 1996, RCG International, Inc.
("Holder") or order, the principal sum of [to be determined pursuant to Section
8(g)(iii) of the Sale Agreement dated as of May 25, 1995, between Consulting and
Holder] ($____________) or, if less than such amount, the aggregate unpaid
principal amount outstanding under this Note on such date. Interest shall be
payable on the principal amount outstanding from time to time, from the date
hereof until paid at a rate of Prime + 2% per annum on the last business day of
each month during the term hereof and on the final day when the principal amount
hereof becomes due or is paid. Principal payments shall be made in equal monthly
installments on the last business day of each month. All interest shall be
computed for the actual number of days elapsed on the basis of a year consisting
of 360 days. All indebtedness outstanding following maturity shall bear interest
at the rate of Prime + 5% per annum. Payments of principal and interest shall be
made in lawful money of the United States of America at the principal office of
Holder at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other
address as Holder may have from time to time furnished Consulting in writing.
Consulting shall have the right to prepay this Note in whole or in part at any
time.
For purposes hereof, "Prime" shall mean, at any time, the rate per annum then
announced by Chemical Bank, New York, New York as its reference rate.
Following the failure of Consulting to make payment hereunder, Holder may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, or by other appropriate proceedings, and Consulting shall pay and
reimburse Holder for all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Holder in connection with
its exercise of any of its rights and remedies hereunder. Consulting hereby
waives presentment, demand, notice of protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note. Neither the exercise of, nor the failure to exercise, any right
hereunder shall waive the right to exercise any such right thereafter.
This Note has been delivered in New York, New York, and shall be governed by and
construed in accordance with the laws of the State of New York. Wherever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note.
D-2
IN WITNESS WHEREOF, Consulting has executed this Note as of the day and year
first above written.
XXXXXX, XXXXXX CONSULTING, INC.
By:________________________________
Name:
Title:
D-3
EXHIBIT E-1
GUARANTY
The undersigned (the "Guarantor"), for value received hereby, irrevocably and
unconditionally guarantees to the holder of this Note the due and punctual
payment of the principal of and interest on this Note, when the same shall
become due and payable. Such guaranty is an absolute, unconditional, present and
continuing guaranty of payment and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from Xxxxxx Bailly
Consulting, Inc. or upon any other condition or contingency.
The Guarantor hereby waives acceptance of this guaranty. The Guarantor further
waives any presentment, demand, protest or notice (including, without
limitation, all notices required by statute, rule of law or otherwise to
preserve rights against the Guarantor hereunder) of any kind.
The Guarantor hereby agrees that its obligations hereunder shall not be subject
to any counterclaims, set-off, deduction or defense based upon any claim that
the Guarantor may have against the holder of this Note (except the defense that
the Note has been previously repaid in full in cash by Consulting).
This guaranty shall be binding upon the successors, assigns, heirs and
representatives of the Guarantor and shall be governed by and construed and
enforced in accordance with the laws of New York, and no defense given or
allowed by the laws of any other state or country shall be interposed in any
action thereon unless such defense is also given or allowed by the laws of New
York.
Dated: January 1, 1996
XXXXXX XXXXXX, INC.
By:______________________________
Name:
Title:
E-1
SCHEDULE 4(h)1
Litigation
1. RCG/Hagler, Bailly, Inc. vs. Xxxxxxxx Energy Company and Xxxxxx
Xxxxxxxx/Xxxxxxxx Energy Company vs. RCG/ Hagler, Bailly, Inc. & Xxxxxxx
Xxxxxx
2. Xxxxx-Xxxx vs. RCG/Hagler, Bailly, Inc.
3. Xxxxxxx Xxxxxxx v. RCG/Hagler, Bailly, Inc.
4. Xxxxxx Xxxx-state EEOC action.
-------------
1 Inclusion of litigation on the Schedule 4(h) is not an admission that it
is material.
SCHEDULE 4(i)1
Related Party Transactions
1. Virginia Lease
2. Accounting, Legal, Financial Reporting, Payroll and Tax Advice or Services
--------------
1 Inclusion of litigation on the Schedule 4(h) is not an admission that it
is material.
SCHEDULE 5(e)
Disclosure
See attached materials marked Schedule 5(e)-1.
SCHEDULE (e)-l
FINANCIAL STATEMENTS AND FINANCIAL REPORTS
BALANCE SHEETS AND INCOME STATEMENTS PAST THREE CALENDAR YEARS AND FOUR MONTHS
ENDED APRIL 30, 1995
FORECASTS (DIFFERING SCENARIOS) THROUGH THE YEAR (CALENDAR) 2001
SCHEDULES OF INVESTOR CONTRIBUTIONS, SOURCES OF EQUITY AND INITIAL SHARES
BACKLOGS, BY MONTH, FROM AUGUST, 1994 THROUGH MARCH 31, 1995
PIPELINE ANALYSES (INCLUDING BIDS/PROPOSALS), AS OF MARCH, 1995 AND APRIL, 1995
SUMMARY OF CONTRACT COSTS AND REVENUE (CSR) REPORTS DETAILED GENERAL LEDGERS,
CUMULATIVE, FOR PAST 3 CALENDAR YEARS AND FOR THE FOUR MONTHS ENDED APRIL 30,
1995
SUB-LEDGER SUMMARY OF FIXED ASSETS AND RESERVES
SCHEDULES OF ACCOUNTS RECEIVABLE, PERIODIC, OVER THE PAST THREE YEARS AND
SEMI-MONTHLY FROM DECEMBER 31, 1994
ANALYSIS OF TRENDS IN A/R AND BORROWING BASE COMPUTATIONS (PRO FORMA)
FINANCIAL TRENDS, HIGHLIGHTS AND OTHER STATISTICAL DATA FOR THE PAST TEN YEARS
HISTORICAL PURCHASE, ACQUISITION DATA AND ROI CALCULATIONS
ALL WORKPAPERS, AND ANALYSIS FOR THE PAST THREE CALENDAR YEARS AND THE THREE
MONTHS ENDED MARCH 31, 1995, AS A PART OF THE NORMAL RECORDS AND WORKPAPERS
MAINTAINED BY THE COMPANY
CASH FLOW FORECASTS BY MONTH THROUGH 2001
HBRS ACQUISITION DOCUMENTS INCLUDING FINANCIALS AND LISTED ASSUMED ASSETS AND
LIABILITIES
SCHEDULE 5(e)
Material Adverse Change
See attached materials marked Schedule 5(e)-2.
SCHEDULE 5(e)-2
--------------------------------------------------------------------------------
RCG/Hagler, Bailly, Inc.
--------------------------------------------------------------------------------
0000 Xxxxxx Xxxxxxxxx Xxxxx 000 Xxxxx-Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000 Chairman of the Board
(000) 000-0000
Telex: 000-000-0000; Fax: 000-000-0000
May 11, 1995
VIA TELECOPY
Xx. Xxxxx X. Xxxxxxx
Vice President
State Street Bank and Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Xx. Xxxxxx X. Xxxxxxxx
Senior Vice President
and Chief Financial Officer
Reliance Group Holdings, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xxxxx and Xxxxxx:
In the spirit of the covenants that are likely to be included in the final
Credit Agreement and Subordinated Note we have been negotiating with you, the
purpose of this letter is to inform you of some recent developments concerning
the U.S. Agency for International Development (USAID) which could adversely
affect Xxxxxx Bailly's financial performance in the coming months. As you know,
USAID is the single largest client of the firm. Over the first four months of
this year, it accounted for approximately 62% of our gross revenues, 44% of our
net revenues and 40% of our gross profits.
First, on May 9, we received a copy of a memorandum for USAID (dated April 24,
1995) informing us to start clearing all major expenses with our cognizant
contracting officer. A copy of this memorandum is enclosed. Second, last night,
the House Budget Committee voted to abolish USAID, fold USAID's functions into
the State Department and substantially cut the U.S. foreign assistance budget.
Specifically, the House proposed a 25% cut in assistance to Russia which has
been a major source of revenue for us.
Xx. Xxxxx X. Xxxxxxx
Xx. Xxxxxx X. Freilberg
May 11, 1995
Page 2
Needless to say we are following these developments very closely to ensure they
do not materially affect the overall financial performance of the company.
Despite these uncertainties, management is still committed to the repurchase of
the firm from RCG International. If you have any questions or need additional
information please call me.
Sincerely yours,
/s/ Xxxxx-Xxxxxx Xxxxxx
-----------------------
Xxxxx-Xxxxxx Xxxxxx
Chairman
Enclosure
cc: Prospective Stockholders of Xxxxxx Bailly
Pepper, Xxxxxxxx & Xxxxxxx (Xxxxxxxx/Xxxxxx)
Reliance Group Holdings (Benchimol)
U.S. AGENCY FOR
INTERNATIONAL
DEVELOPMENT
MEMORANDUM FOR ALL USAID CONTRACTORS, GRANTEES AND RECIPIENTS
FROM: Xxxxxxx X. Xxxxxxx, Procurement Executive
SUBJECT: Possible USAID Budget Reductions
As you may be aware, there are currently very serious discussions underway in
the U.S. Congress regarding possible rescissions of the approved Fiscal Year
1995 U.S. Agency for International Development (USAID) budget. Concurrently, the
Congress is also discussing very significant reductions in the proposed Fiscal
Year 1996 budget request for USAID.
As a result of the aforementioned deliberations, we must take precautions
regarding upcoming incurrence of expenses under all USAID procurement and
assistance instruments currently in effect. Cuts of the magnitude being
discussed could cause significant changes or, in some cases, outright
termination of procurement and "assistance" instruments.
Therefore, effective this date, you are hereby notified to contact your
cognizant Contracting, Grant or Agreement Officer of record before any major
expenses are incurred, until further advised. Examples would include major
subcontractors, major equipment procurements, mobilization of long-term overseas
personnel, etc.
Further information may be obtained from our cognizant official in the USAID
Office of Procurement.
SCHEDULE 6(b)
RCG Obligations
Each of the following shall constitute an obligation of RCG only to the extent
that the information supplied to RCG by the Company for inclusion therein was
true, complete and correct and responsive to the requests for information made
by RCG or its affiliates (other than the Company or its subsidiaries).
1. All filings made with the Securities and Exchange Commission by RCG or its
affiliates (other than the Company or its subsidiaries) pursuant to the
Securities Exchange Act of 1934, as amended or the Securities Act of 1933,
as amended.
2. All reports prepared by RCG and filed with the Census Bureau.
3. All federal and state tax returns that included or by statute were
required to include the Company prepared by RCG or its affiliates (other
than the Company or its subsidiaries), subject to Section 8 of the
Agreement.
4. All EEO reports prepared by RCG or its affiliates (other than the Company
or its subsidiaries).
