Asset Purchase Agreement Dated 11/19/04 - HHI


Exhibit 10.14

EXECUTION
COPY




ASSET
PURCHASE AGREEMENT dated as of November 19, 2004 among HHI, L.L.C., a Maryland
limited liability company (“Seller”), the
members of Seller listed on the signature pages hereto (each a “Member” and
collectively the “Members”), the
affiliated parties of the Members listed on the signature pages hereto (the
“Member
Affiliates” and,
together with the Members, the “Member
Parties”),
Ventiv Health, Inc., a Delaware corporation (“Parent”); and
IIH Acquisition LLC, a Delaware limited liability company (“Purchaser”).

 

W I T N E
S S E T H:

 

WHEREAS,
Purchaser wishes to purchase from Seller, and Seller wishes to sell, assign and
transfer to Purchaser, substantially all of the assets of Seller, for the
purchase price and upon the terms and subject to the conditions hereinafter set
forth;

 

WHEREAS,
in order to induce Seller to enter into this Agreement, Parent is executing a
guaranty (the “Parent
Guaranty”) of
Purchaser’s obligations hereunder in the form of Exhibit
A
simultaneously with the execution of this Agreement; 

 

WHEREAS,
in order to induce Purchaser and Parent to enter into this Agreement, certain
key employees of Seller (the “Key
Employees”) are
entering into employment agreements with Purchaser in the form of Exhibits 1 and
2 (each, an “Employment
Agreement”)
simultaneously with the execution of this Agreement;

 

WHEREAS,
the Members constitute all of the members of Seller;

 

WHEREAS,
the Member Parties will receive substantial economic benefits from the
consummation of the transactions contemplated hereby and are therefore joining
in the indemnification and other provisions of this Agreement; and

 

WHEREAS,
certain terms used in this Agreement are defined in Section 11.1;

 

NOW,
THEREFORE, in consideration of the mutual covenants, representations and
warranties made herein and other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:

 

ARTICLE
I  

 PURCHASE AND SALE OF THE ASSETS


 

Section
1.1  Assets. Subject
to and upon the terms and conditions set forth in this Agreement, at the closing
of the transactions contemplated hereby (the “Closing”),
Seller shall sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser shall purchase and acquire from Seller, all right, title and interest
of Seller in and to all properties, assets and rights of every nature, kind and
description, tangible and intangible (including goodwill), whether accrued,
contingent or otherwise, that relate to or are used or held for use in the
Business (collectively, the “Assets”),
including without limitation the following Assets:

 

(a)  all cash
and cash equivalents of Seller as of the Closing Date;

 

(b)  all
computer hardware, furniture, furnishings, vehicles, equipment, machinery and
other tangible personal property;

 

(c)  subject
to Section 1.3, all rights under the Contracts listed on Schedule I (the
“Included
Contracts”);

 

(d)  all
payment rights and other intangible assets (including goodwill) with respect to
customer relationships that are not embodied in complete written Contracts (it
being understood that an expired Contract shall not be deemed to be a complete
written Contract for purposes of this Section 1.1(d));

 

(e)  all
rights in Intellectual Property now in existence or under development, including
all licenses and rights to use or practice such Intellectual Property, and all
goodwill represented thereby and pertaining thereto; 

 

(f)  all
credits, prepaid expenses, deferred charges, advance payments, security deposits
and prepaid items (other than as provided in Section 1.2(c));

 

(g)  all notes
and accounts receivable (in all cases, whether or not billed) and the benefit of
any security therefor;

 

(h)  except
for the Book and Records of Seller identified in Section 1.1(h) of the Seller
Disclosure Schedule as being subject to a statutory prohibition against transfer
identified therein (the “Excluded
Employee Records”), all
Books and Records;

 

(i)  to the
extent their transfer is permitted by applicable Law, all Governmental
Approvals, including all applications therefor; and

 

(j)  all
causes of action, lawsuits, claims and demands of any nature available to or
being pursued by Seller with respect to the Assets or the Assumed
Liabilities.

 

At the
Closing, the Assets shall be transferred or otherwise conveyed to Purchaser free
and clear of all Liens excepting only Permitted Exceptions. [***]

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















 

Section
1.2  Excluded
Assets.
Notwithstanding Section 1.1, Seller shall retain Seller’s right, title and
interest in and to the following assets (collectively, the “Excluded
Assets”):

 

(a)  except as
otherwise provided in Sections 9.5 and 10.2, insurance policies and causes of
action, lawsuits, claims, demands, rights of recovery and set-off under or with
respect to, and the proceeds of, insurance policies;

 

(b)  causes of
action, lawsuits, claims, demands, and rights of recovery and set-off with
respect to any Excluded Assets or Excluded Liability; 

 

(c)  prepaid
Taxes and any claims for any refund, rebate or abatement with respect to Taxes
for any period or portion thereof through the Closing Date; 

 

(d)  Contracts
other than Included Contracts; 

 

(e)  any and
all income tax returns and related workpapers used to prepare the same for
periods ending on or prior to the date (the “Closing
Date”) of the
Closing; 

 

(f)  all
Employee Benefit Plans, and Pension Plans, except those listed in Section 9.2(b)
of the Seller Disclosure Schedule;

 

(g)  all
indebtedness owing from officers of Seller or from stockholders of Seller (the
“Affiliate
Receivables”);


 

(h)  the
Excluded Employee Records; 

 

(i)  all
rights of Seller under this Agreement and the other Transaction
Documents;

 

(j)  the
automobile owned by Seller and identified in Section 1.2(j) of the Seller
Disclosure Schedule;

 

(k)  the
paintings and artwork located at Seller’s place of business and listed in
Section 1.2(k) of the Seller Disclosure Schedule; and

 

(l)  the
computers listed in Section 1.2(l) of the Seller Disclosure Schedule that are
owned by Seller and located at the homes or the Members and Member Parties
listed in Section 1.2(l) of the Seller Disclosure Schedule. 

 

Section
1.3  Required
Consents.
Notwithstanding anything to the contrary in this Agreement, this Agreement shall
not constitute an agreement to assign or transfer any Asset or interest therein
as to which (i) an assignment or transfer thereof or an attempt to make such an
assignment or transfer without a Consent (a “Required
Consent”) would
constitute a breach or violation thereof or of applicable Law, or would
adversely affect the rights or obligations thereunder to be assigned or
transferred to or for the account of Purchaser and (ii) all such Required
Consents shall not have been obtained with respect to such Asset or interest
therein prior to the Closing. Any transfer or assignment to Purchaser by Seller
of any such Asset or interest therein (a “Delayed
Asset”), and
any assumption by an Acquiring Entity of any corresponding Assumed Liability (a
“Delayed
Liability”), shall
be made subject to all such Required Consents in respect of such Delayed Asset
being obtained. If there are any Delayed Assets, Seller shall use its reasonable
best efforts to obtain all Required Consents in respect thereof as promptly as
practicable following the Closing, and shall obtain such Required Consents
without any further cost to Purchaser or any of its Affiliates. Until all
Required Consents with respect to each Delayed Asset have been obtained, (a)
Seller shall hold the Delayed Asset on behalf of Purchaser, (b) Seller shall
cooperate with Purchaser for no additional consideration in any lawful
arrangement (including subleasing or subcontracting, or performance thereunder
by Seller as Purchaser’s agent) to provide Purchaser with all of the benefits of
or under any such Delayed Asset, (c) to the extent of any benefits received by
or for the account of Purchaser under clause (b) above, Purchaser shall assume
and perform any corresponding Delayed Liabilities and (d) Seller shall otherwise
enforce and perform for the account of Purchaser and as directed by Purchaser
any other rights of Seller arising from such Delayed Asset. At such time and on
each occasion after the Closing Date as all Required Consents with respect to a
Delayed Asset have been obtained, such Delayed Asset shall automatically be
transferred and assigned by Seller to Purchaser for no additional consideration,
and all corresponding Delayed Liabilities shall be simultaneously assumed by
Purchaser, without the need for any further act on the part of any party. [***]


 

ARTICLE
II  

 




 

PURCHASE
PRICE AND CLOSING

 

Section
2.1  Purchase
Price; Allocation.
(a) The
consideration for the Assets (the “Purchase
Price”) shall
be, in the aggregate, (i) $[***] in cash, payable by electronic funds transfer
at the Closing, subject to adjustment as provided in Section 2.5 based on the
Closing Working Capital Statement, (ii) $[***] the “Initial
Cash Purchase Price”), (iii)
a number of unregistered shares of the common stock, par value $0.001 per share,
of Parent (“Parent
Common Stock”), [***]
equal to the quotient of (x) $[***] divided by (y) the Fair Market Value of one
share of Parent Common Stock as of the date of this Agreement (the “Initial
Shares”), (iv)
the assumption by Purchaser at the Closing of the Assumed Liabilities, (v) all
amounts payable or distributable to Seller pursuant to Section 2.6 below and
(vi) any amount payable to Seller pursuant to Section 2.1(d). On the Closing
Date, Purchaser shall deliver to the transfer agent for the Parent Common Stock
irrevocable instructions to (1) issue the Initial Shares [***] in the name of
Seller and (2) [***]. Neither Purchaser nor Parent shall have any responsibility
for the 

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.allocation
among Seller and the Members of any consideration to which Seller is entitled
hereunder, including the allocation of any of the Initial Shares among the
Members upon distribution thereof by Seller under Section 2.1(b)
below.






















 

(b)  [***] shall be
held in escrow until [***] pursuant
to an escrow agreement dated as of the Closing Date among Purchaser, Seller, on
behalf of Seller, and Bank of New York, as escrow agent (the “Escrow
Agreement”), in
substantially the form annexed hereto as Exhibit
B. Any
time following [***] release
from escrow in accordance with the Escrow Agreement, subject to Section 2.8
below, [***].


 

(c)  The
Purchase Price shall be allocated by Purchaser among the Assets in the manner
required by Section 1060 of the Code and regulations thereunder. Purchaser shall
deliver to Seller a copy of such allocation within seventy five (75) days after
the Closing. The portion of the Purchase Price, if any, allocated to one or more
covenants set forth in a Transaction Document shall not be offered by any party
hereto as evidence, or otherwise taken into account, in connection with a
determination of the damages arising from a breach of any such covenant.
Purchaser and Seller shall file on a timely basis with the IRS substantially
identical initial and supplemental IRS Forms 8594 consistent with such
allocation and which gives effect to any adjustment of the Purchase Price
determined in accordance with Section 2.5 hereof or any amounts payable or
distributable to Seller pursuant to Section 2.6 below.

 

(d)  If any
portion of the consideration described in [***], Purchaser shall [***] (subject
to reasonable extension in the event the amount of such payment has not been
determined) [***]. Each party shall cooperate in good faith to [***]


 

Section
2.2  Closing
Date. Subject
to the satisfaction of the conditions set forth in Sections 6.1 and 6.2 (or the
waiver thereof by the party entitled to waive that condition), the Closing shall
take place at a location in New York City to be designated by Purchaser at 10:00
a.m. on the date hereof. The date on which the Closing occurs is referred to
herein as the “Closing
Date”. At the
Closing, the parties shall make the deliveries provided for in Section 2.1 and
Article VII hereof. The Closing shall become effective as of 11:59 P.M. EST on
the Closing Date. If the Closing shall not take place prior to the close of
business on January 15, 2005, then this Agreement shall terminate and shall be
of no further force or effect and the parties shall have no further obligations
to one another hereunder, provided that no such termination shall relieve a
breaching party from liability resulting from any breach by that party of this
Agreement.

 

Section
2.3  Assumption
of Liabilities . Subject
to the terms and conditions set forth herein, at the Closing, Purchaser shall
assume and agree to pay and discharge when due solely the following liabilities
and obligations of Seller (collectively, the “Assumed
Liabilities”):

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.





















 

 

(a)  liabilities
and obligations of Seller under Included Contracts included in the Assets that,
by the terms of such Included Contracts, arise after the Closing, relate to
periods following the Closing and are to be observed, paid, discharged, or
performed as the case may be, at any time after the Closing;

 

(b)  liabilities
and obligations of Seller set forth on the Final Closing Working Capital
Statement, other than liabilities and obligations arising outside the ordinary
course of business after September 30, 2004 (the “Balance
Sheet Date”), as
determined based upon, among other things, the pro forma balance sheet of Seller
included in Section 2.3 of the Seller Disclosure Schedule (the “Pro
Forma Balance Sheet”);
and

 

(c)  liabilities
and obligations expressly assumed by Purchaser pursuant to Article IX,
including, to the extent provided in Article IX, liabilities and obligations
with respect to (i) Seller’s matching obligation as to its 401(k) plan and (ii)
Seller’s bonus plan, vacation and sick leave benefits. 

 

Section
2.4  Excluded
Liabilities.
Purchaser shall not be responsible for any Liabilities, obligations or
commitments of Seller that are not specifically set forth in Section 2.3
(collectively, the “Excluded
Liabilities”). In
addition, notwithstanding anything to the contrary in this Agreement (including
Section 2.3), Purchaser shall not be responsible for any of the following (each
which shall also constitute Excluded Liabilities):

 

(a)  any
Liability, obligation or commitment (other than accounts payable arising in the
ordinary course of business and reflected on the Final Closing Working Capital
Statement) that, in accordance with GAAP, was required to have been shown as a
liability on the Pro Forma Balance Sheet and was not so shown; 

 

(b)  any
Liability relating to any cause of action or judicial or administrative action,
suit, proceeding or investigation, (i) pending or threatened on or prior to the
Closing Date, or (ii) relating to Excluded Assets or Excluded
Liabilities;

 

(c)  any
Liability relating to any failure or alleged failure to comply with, or any
violation or alleged violation of, (i) any Law, Order or Governmental
Approval applicable to the Business or the Assets, including without limitation
any Tax Law or any Law relating to employment practices, or (ii) any
Contract, in each case which failure or violation occurred or was alleged to
have occurred on or prior to the Closing Date;

 

(d)  any
Liability, termination fee, obligation or commitment relating to or arising out
of (i) the employment by Seller of any of its employees or the engagement by
Seller of any of its independent contractors (or any employee of an independent
contractor), (ii) except as expressly assumed by Purchaser or any of their
Affiliates pursuant to Article IX, any Employee Benefit Plan or Pension Plan,
including any sponsorship, administration or contribution obligation of any
Person under any Employee Benefit Plan or Pension Plan or the termination prior
to any such assumption of any Employee Benefit Plan or Pension Plan or
(iii) the termination of employment or engagement of any employee or
independent contractor of Seller while they are employed or engaged by
Seller;

 

(e)  any
Liability relating to any infringement or alleged infringement of the rights of
any other Person arising out of the use of any Intellectual Property in
connection with the Business on or prior to the Closing Date, including without
limitation any Liability, termination fee, obligation or commitment relating to
or arising out of the Master License Agreement for Institute Software dated
August 18, 1997 between Seller and SAS Institute Inc., as amended and
supplemented (the “SAS
License”);

 

(f)  any
Liability relating to the creation by Seller or an employee or independent
contractor of Seller on or prior to the Closing Date of any Intellectual
Property in connection with the performance of services for a customer of
Seller, or any failure of Seller or any such employee or independent contractor
to assign the rights therein to such customer; 

 

(g)  any
Liability for any Taxes attributable to Seller, the Assets or the Business with
respect to any taxable period (or portion thereof) ending on or prior to the
Closing Date;

 

(h)  any
Liability relating to any Excluded Asset; 

 

(i)  any
Liability imposed by any Environmental Law and incurred in connection with (i)
conditions existing or events occurring on or prior to the Closing Date on
Seller Property (as defined below), (ii) any real property, business
entities or assets, whether domestic or foreign, formerly owned, leased,
occupied or operated by or in connection with the Business or (iii) the
transportation or disposal of any Hazardous Materials to or at any offsite
facility or location by or in connection with the Business occurring prior to
the Closing Date; or

 

(j)  any
Liability in respect of a claim of ownership of Seller, including any claim to a
portion of the Purchase Price paid for the Assets hereunder, by any present or
former member of Seller (including without limitation Gerald Dal Pan and Cliff
Y.K. Meng).

 

For
purposes of Section 2.4(g), in the case of any taxable period that begins before
and ends after the Closing Date (a “Straddle Period”), the amount of any Tax for
the portion of such taxable period ending on the Closing Date shall be deemed to
be the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period through the
Closing Date and the denominator of which is the number of days in such Straddle
Period. 

 

Section
2.5  Working
Capital Adjustment. The
Purchase Price shall be subject to adjustment after the Closing Date as
follows:

 

(a) Within
60 days after the Closing Date, Purchaser shall prepare and deliver to Seller a
statement (the “Closing
Working Capital Statement”)
setting forth total cash and cash equivalents as of the Closing Date
(“Closing
Cash Amount”) and
calculating the Working Capital (as defined below) of the Business as of the
Closing Date (the “Closing
Working Capital Amount”). For
purposes of this Agreement, “Working
Capital” shall
mean the current assets of the Business as of the Closing Date (including
accounts receivable (net of allowance for doubtful accounts), work in process,
prepaid assets and other current assets, but excluding cash and cash equivalents
other than deposits) less the sum of (a) the current liabilities of the Business
as of the Closing Date (including accounts payable and accrued expenses
(including all accrued and unused vacation benefits, all deferred revenues and
[***] unpaid sales tax) and all other current liabilities) and (b) all other
Assumed Liabilities, but excluding the Excluded Assets and the Excluded
Liabilities, and shall be calculated on an accrual basis in accordance with
GAAP. Purchaser shall provide Seller and a single accounting firm for Seller
reasonable access to all (i) work papers and written procedures used to prepare
the Closing Working Capital Statement and (ii) Books and Records and personnel
to the extent reasonably necessary to enable Seller and such accounting firm to
conduct a sufficient review of the Closing Working Capital Statement and verify
the calculation of the Closing Cash Amount and the Closing Working Capital
Amount. If Seller disputes the Closing Cash Amount or the Closing Working
Capital Amount as shown on the Closing Working Capital Statement prepared by
Purchaser, Seller shall deliver to Purchaser within 30 days after receipt of the
Closing Working Capital Statement a statement (the “Dispute
Notice”)
setting forth Seller’s calculation of the Closing Cash Amount or the Closing
Working Capital Amount, as the case may be, and describing in reasonable detail
the basis for the dispute. The parties shall use reasonable efforts to resolve
such differences regarding the determination of the Closing Cash Amount or the
Closing Working Capital Amount, as the case may be, within a period of 30 days
after Seller has given the Dispute Notice. If the parties resolve such
differences, the Closing Cash Amount agreed to by the parties shall be deemed to
be the “Final
Closing Cash Amount”, the
Closing Working Capital Amount agreed to by the parties shall be deemed to be
the “Final
Closing Working Capital Amount” and the
Closing Working Capital Statement agreed to by the Parties shall be deemed to be
the “Final
Closing Working Capital Statement.”

 

(b)  If
Purchaser and Seller do not reach a final resolution on the Closing Cash Amount
or the Closing Working Capital Amount within 30 days after Seller has given the
Dispute Notice, the Neutral Accountant shall resolve such differences, pursuant
to an engagement agreement among Purchaser, Seller and the Neutral Accountant
(which Purchaser and Seller agree to execute promptly), in the manner provided
below. Purchaser and Seller shall each be entitled to make a 

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















 

presentation
to the Neutral Accountant, pursuant to procedures to be agreed to among
Purchaser, Seller and the Neutral Accountant (or, if they cannot agree on such
procedures, pursuant to procedures determined by the Neutral Accountant),
regarding such party’s calculation of the Closing Cash Amount and/or the Closing
Working Capital Amount, as applicable; and the Neutral Accountant shall be
required to resolve the differences between Purchaser and Seller and determine
the Closing Cash Amount or the Closing Working Capital Amount, as the case may
be, within 20 days after the engagement of the Neutral Accountant. The Closing
Cash Amount determined by the Neutral Accountant shall be deemed to be the Final
Closing Cash Amount, the Closing Working Capital Amount determined by the
Neutral Accountant shall be deemed to be the Final Closing Working Capital
Amount and the Closing Working Capital Statement, as adjusted to reflect such
determination, shall be deemed to be the Final Closing Working Capital
Statement. Such determination by the Neutral Accountant shall be conclusive and
binding upon the parties, absent fraud or manifest error. In the event either
Purchaser or Seller believes the determination of the Neutral Accountant
reflects a manifest error, Purchaser or Seller, as the case may be, shall be
entitled to specify the error to the Neutral Accountant in writing, in
reasonable detail (with a copy to the other) within five business days of the
date of delivery to the parties of the Neutral Accountant’s determination, and
any correction made by the Neutral Accountant (which the Neutral Accountant
shall be requested to make within ten business days after such date of delivery)
shall supersede the Neutral Accountant’s initial determination. Nothing in this
Section 2.5(b) shall be construed to authorize or permit the Neutral Accountant
to:

 

(i)  determine
any questions or matters whatsoever under or in connection with this Agreement
except for the resolution of differences between Purchaser and Seller regarding
the determination of the Closing Cash Amount and/or the Closing Working Capital
Amount; or

 

(ii)  resolve
any such differences by making an adjustment to the Closing Working Capital
Statement that is outside of the range(s) defined by amounts as finally proposed
by Purchaser and Seller.

 

Purchaser
and Seller shall each pay one half of the fees and expenses of the Neutral
Accountant; provided that if the Neutral Accountant determines that Purchaser or
Seller has adopted a position or positions with respect to the Closing Working
Capital Statement that is or are frivolous or clearly without merit, the Neutral
Accountant (i) may, in its discretion, assign a greater portion of any such fees
and expenses to such party and (ii) shall provide to the parties a written
explanation of its reasons for making such a determination.




(c)  (i) If
the Final Closing Cash Amount is less than $[***], then
Seller shall pay to Purchaser an amount equal to the difference between
$[***] and the


 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















 

Final
Closing Cash Amount. If the Final Closing Cash Amount is more than $[***], then
Purchaser shall pay to Seller an amount equal to the difference between the
Final Closing Cash Amount and $[***]. Any
payment pursuant to this Section 2.5 shall be made in cash by wire transfer of
immediately available funds into an account designated by Seller or Purchaser,
as the case may be, within five business days after the date on which the Final
Closing Cash Amount is determined. 

 

(ii) If
the Final Closing Working Capital Amount is less than $[***], then
Seller shall pay to Purchaser an amount equal to the difference between
$[***], and the
Final Closing Working Capital Amount. If the Final Closing Working Capital
Amount is more than $[***], then
Purchaser shall pay to Seller an amount equal to the difference between the
Final Closing Working Capital Amount and $[***]. Any
payment pursuant to this Section 2.5 shall be made in cash by wire transfer of
immediately available funds into an account designated by Seller or Purchaser,
as the case may be, within five business days after the date on which the Final
Closing Working Capital Amount is determined.

 

(iii) To
the extent any amount required to be paid pursuant to this Section 2.5(c) is not
satisfied by the time it is required to be satisfied in accordance with the
preceding paragraphs (i) and (ii), interest shall accrue on such amount at a
rate (the “Applicable
Rate”) one
percent per annum in excess of the rate announced by Citibank, N.A. in New York
City as its “prime” or “base” lending rate from time to time.

 

(d)  For
purposes of this Section 2.5, “accounts receivable” means (i) with respect to
contractual arrangements pursuant to which Seller is entitled to payment based
solely on the number of person-hours worked, the number of person-hours worked
through the Closing Date multiplied by the contractually agreed hourly rate for
the employees of Seller performing the work (taking into account the effect of
any billing cap) and (ii) with respect to contractual arrangements pursuant to
which Seller is entitled to payment based upon deliverable milestones, amounts
payable to Seller in respect of conforming deliverables completed on or prior to
the Closing Date, in each case whether billed or unbilled and net of any
customer advances included in cash and cash equivalents. 

 

Section
2.6  Earnout.
(a) Seller
shall be entitled to additional consideration from Purchaser (any such
additional consideration due with respect to any Applicable EBIT Period (as
defined below), an “Earnout
Amount”)
determined as set forth on Schedule II. 




Purchaser’s
obligation with respect to the payment of any Earnout Amount may be satisfied by
the issuance to Seller of unregistered shares of Parent Common Stock to the
extent set forth on Schedule II. Shares of Parent Common Stock issued in


 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















 

satisfaction
of any portion of an Earnout Amount are referred to as “Earnout
Shares” and,
together with the Initial Shares, as the “Shares”. [***]
In no event will any Shares be issued hereunder if the issuance of such Shares
would cause the total number of Shares issued pursuant to this Agreement to
exceed 19.9% of the number of shares of Parent Common Stock outstanding on the
Closing Date. Any Earnout Amount that would otherwise be satisfied by the
issuance of Earnout Shares in excess of such amount, and any other portion of an
Earnout Amount that is not satisfied through the issuance of Earnout Shares,
will be paid in cash by wire transfer of immediately available funds in
accordance with written instructions delivered to Purchaser by Seller. Seller
acknowledges and agrees that neither Purchaser nor any other Person makes any
guarantee or representation to Seller that any Earnout Amount will be realized.
Any Earnout Amount that is paid in cash or Earnout Shares to Seller or its
designees shall be treated as a component of the Purchase Price.

 

(b)  Seller
shall at its expense deliver to Purchaser within 65 days after the end of each
Applicable EBIT Period its calculation of EBIT for such period (an “Initial
EBIT Amount”) and
the Earnout Amount, if any, payable under Section 2.6(a) in respect
thereof. Seller shall provide Purchaser and Purchaser’s accounting firm with
reasonable access to all books and records and working papers to the extent
reasonably necessary to enable Purchaser and such accounting firm to verify such
calculations after the delivery thereof. Such calculations shall be binding on
the parties unless Purchaser, within 30 days after the delivery of the
calculations by Seller to Purchaser, notifies Seller in writing that it objects
to any item or computation in connection with the calculations and specify in
reasonable detail the basis for such objection. (For the avoidance of doubt,
Purchaser shall be required to notify Seller of any objection with respect to
the calculation of EBIT or the Earnout Amount for calendar year 2005 within such
period even if Seller’s right to receive the Earnout Amount in accordance with
Schedule II cannot be determined until financial results for calendar year 2006
are available.) If Seller and Purchaser are unable to agree upon the
calculations within 20 days after any notice of objection has been given by
Purchaser to Seller, then at the election of either Purchaser or Seller, the
dispute shall be submitted to the Neutral Accountant for a final determination
in accordance with the procedures set forth in Section 2.5(b), which
determination shall be final and binding upon the parties, absent fraud or
manifest error. In the event either Purchaser or Seller believes the
determination of the Neutral Accountant reflects a manifest error, Purchaser or
Seller, as the case may be, shall be entitled to specify the error to the
Neutral Accountant in writing, in reasonable detail (with a copy to the other)
within five business days of the date of delivery to the parties of the Neutral
Accountant’s determination, and any correction made by the Neutral Accountant
within ten business days after such date of delivery shall supersede the Neutral
Accountant’s initial determination. Seller and Purchaser shall each bear
one-half of the fees, costs and expenses of the Neutral Accountant in the event
such an election is made. For purposes of this Agreement, with respect to any
Applicable EBIT Period, (i) 

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















 

the
“Final
EBIT Amount” for
such period shall mean the Initial EBIT Amount for such period, or such other
amount as shall have been agreed to by Purchaser and Seller following a timely
notice of objection as contemplated under this Section 2.6 (b), or such
other amount as determined by the Neutral Accountant and (ii) the “Final
Earnout Amount Determination Date” for
such period shall mean: (x) the date that is 31 days after the delivery of
Purchaser’s calculation of the Initial EBIT Amount for such period to Seller,
(y) such earlier date on which Seller delivers an irrevocable notice to
Purchaser in writing that it agrees with Purchaser’s calculation of such Initial
EBIT Amount, or (z) if Seller timely objects to such Initial EBIT Amount, such
date on which the Final EBIT Amount in respect thereof is otherwise determined.


 

(c)  Purchaser
shall deliver any Earnout Amount to or as directed by Seller within five
business days after such Earnout Amount has been determined to have been earned,
and the amount thereof has been determined, in accordance with this Section 2.6
and Schedule II, provided that (x) the portion of an Earnout Amount that is
satisfied by the issuance of shares of Parent Common Stock shall be deemed to
have been delivered at the time irrevocable instructions are given by Parent to
its transfer agent to issue shares of Parent Common Stock to Seller and (y)
Parent shall not be required to give such instructions until the third business
day after Seller has notified Purchaser in writing of the address to which such
shares of Parent Common Stock are to be delivered. To the extent any Earnout
Amount or portion thereof is not satisfied by the time it is required to be
satisfied in accordance with the preceding sentence, interest shall accrue on
such amount at the Applicable Rate. For the avoidance of doubt, no interest
shall accrue on any disputed portion of an Earnout Amount prior to the Final
Earnout Amount Determination Date.

 

(d)  From the
Closing Date until December 31, 2006 (the “Earnout
Period”), the
Business shall be conducted in good faith as a going concern and in accordance
with applicable Law (including without limitation Laws relating to the
collection of sales tax). During such period (and, to the extent determined by
Parent, thereafter), (x) Purchaser shall be controlled by a Board of Directors,
elected or appointed, directly or indirectly, by Parent, of the sole member of
Purchaser or by such other managing or supervisory body as is provided for in
the organizational documents of Purchaser (the “Board”) and
(y) the operation of the Business shall be subject to the control of the Board,
and ultimate authority for all decisions affecting the Business shall rest with
the Board. [***] Subject
to the preceding sentence and to the last paragraph of this Section 2.6(d),
during the Earnout Period:

 

(i) [***];
and

 

(ii) [***].

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















During
the Earnout Period, Purchaser will be provided with working capital resources
necessary to operate the Business in the ordinary course of business consistent
with Seller’s recent historical practice. 

 

[***]


 

(e)  During
the Earnout Period, [***] for the
duration of the Earnout Period.

 

(f)  In the
event of a merger, consolidation or other transaction (a “Conversion
Transaction”) as a
result of which substantially all of the outstanding shares of Parent Common
Stock are converted into the right to receive, in whole or in part, equity
securities, if such equity securities are traded on the New York Stock Exchange,
the American Stock Exchange, The Nasdaq Stock Market or another securities
exchange or interdealer quotation system reasonably acceptable to Seller
(“Listed
Equity Securities”), (i)
any issued Shares, including shares held pursuant to the Escrow Agreement, shall
be eligible to participate in any Conversation Transaction on the same basis as
other outstanding shares of Parent Common Stock and (ii) any portion of an
Earnout Amount that would otherwise be permitted to be satisfied through the
issuance of Parent Common Stock shall thereafter be permitted to be satisfied
through the issuance of such Listed Equity Securities. For such purpose, such
Listed Equity Securities shall be valued at their aggregate Fair Market Value as
of the applicable Value Date. In the event that, in any Conversion Transaction,
substantially all of the outstanding shares of Parent Common Stock are converted
into the right to receive equity securities that are not Listed Equity
Securities (or are converted into the right to receive a combination of such
equity securities and cash), then, until such equity securities constitute
Listed Equity Securities, any Earnout Amount that thereafter becomes due shall
be required to be satisfied entirely in cash. In the event of a merger,
consolidation or other transaction as a result of which substantially all of the
outstanding shares of Parent Common Stock are converted into the right to
receive only cash, any Earnout Amount that thereafter becomes due shall be
required to be satisfied entirely in cash, provided that if the surviving or
transferee entity in such transaction (or an Affiliate thereof) has a class of
Listed Equity Securities, any portion of an Earnout Amount that would otherwise
be permitted to be satisfied through the issuance of Parent Common Stock shall
thereafter be permitted to be satisfied through the issuance of such Listed
Equity Securities, valued at their aggregate Fair Market Value as of the
applicable Value Date. 

 

Section
2.7  Lock-Up
Agreement. During
the applicable Restricted Period, neither Seller nor any Member shall sell,
pledge, hedge or otherwise dispose of any economic interest in such Shares
except pursuant to and in accordance with the terms of a Conversion Transaction,
in which event the restrictions contained in this Section 2.7 shall apply to any
Listed Equity Securities issued in exchange for Shares. “Restricted


 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















Period” means
(i) with respect to the Initial Shares, the period ending on the first
anniversary of the Closing Date and (ii) with respect to any Earnout Shares, the
period ending on the first anniversary of the Value Date with respect to such
Earnout Shares. 

 

Section
2.8  Transferability;
Legending of Shares. (a)
Seller and each Member acknowledges that the Shares are being acquired pursuant
to an exemption from registration under the Securities Act of 1933, as amended
(the “Securities
Act”) and
that the Shares may be transferred only pursuant to an effective registration
statement or an exemption from registration under the Securities Act. Seller and
each Member represents that it is familiar with Rule 144 under the Securities
Act. Neither Seller nor any Member shall be permitted to transfer any Shares in
the absence of an effective registration statement unless Seller or such Member
has furnished Parent with an opinion of counsel, reasonably satisfactory to
Parent, that such disposition does not require registration of such Shares under
the Securities Act. It is agreed that Parent will not require opinions of
counsel for transfers made pursuant to Rule 144 if Parent is provided with any
certificates or other evidence of compliance with Rule 144 reasonably required
by it in connection with such transfer (including without limitation a copy of
the relevant Form 144).

 

(b) It is
understood that the certificates evidencing the Shares may bear a legend to the
following effect:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTES OF SUCH ACT.

 

The
certificates evidencing the Shares may also bear any legends required by
applicable blue sky laws.




Section
2.9  Receivables
Guaranty. In the
event that any account receivable shown on the Final Working Capital Statement
has not been collected in full by the nine-month anniversary of the Closing,
Seller agrees, within five business days of notice from Purchaser to Seller
given at any time thereafter, to purchase such account receivable from Purchaser
at its face amount less any reserve applied against the receivable on the Final
Working Capital Statement. All accounts receivable purchased by Seller (each, a
“Seller
Receivable”) shall
continue to be collected by Purchaser in the ordinary course and consistent with
procedures employed in Seller’s recent historical practice. In the event
Purchaser receives funds, not designated as being in payment of a specific
account receivable, from a customer that is an account debtor with respect to
both Seller Receivables and accounts receivable that continue to be owned by
Purchaser, such funds shall be allocated to the oldest balance (excluding any
balance that is in dispute with the account debtor). Subject to compliance with
the preceding sentence, Purchaser shall have no liability to Seller for the
collection of any Seller Receivable. 

 

    

 

ARTICLE
III  

 




 

REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE MEMBERS

 

Seller
and the Member Parties represent and warrant to Purchaser that, except as set
forth in the Seller Disclosure Schedule attached hereto, the following
statements are correct and complete as of the date hereof. The Seller Disclosure
Schedule makes explicit reference to the particular representation or warranty
as to which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply, provided
that the disclosures in the Seller Disclosure Schedule that are set forth
expressly therein with particularity will apply to all representations and
warranties. The disclosure of the existence of a contract on the Seller
Disclosure Schedule shall not, without more, constitute the disclosure of any
particular provisions of such contract or the actual or potential consequences
thereof.

 

The
following representations and warranties are made (i) jointly and severally by
Seller and the Member Parties other than Mark Schactman (“Schactman”) and
(ii) severally by Schactman in accordance with Section 10.1. 

 

Section
3.1  Organization
and Good Standing. Seller
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Maryland and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business. Seller is duly qualified or authorized to do business as a foreign
limited liability company and is in good standing under the laws of each
jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized would not have a Seller Material
Adverse Effect. Section 3.1 of the Seller Disclosure Schedule sets forth a true,
correct and complete list of each jurisdiction in which Seller is qualified or
authorized to do business as a foreign limited liability company.

 

Section
3.2  Authorization
and Enforceability. Seller
has all requisite power and authority to execute and deliver this Agreement and
each other agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by Seller in connection with the consummation of the
transactions contemplated by this Agreement (this Agreement, together with all
other agreements, documents, instruments and certificates executed by Seller or
any Member Party pursuant hereto or in connection herewith (including without
limitation the Employment Agreements) being referred to herein, collectively, as
the “Transaction
Documents”), and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of each of the Transaction Documents to which
it is a party have been duly authorized by all necessary corporate action on the
part of Seller. This Agreement, the Employment Agreements and the other
Transaction Documents have been duly and validly executed and delivered by
Seller or the Member Party party thereto and constitute legal, valid and binding
obligations of Seller or such Member Party, enforceable against Seller or such
Member Party in accordance with their respective terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). 

 

Section
3.3  Ownership;
Subsidiaries. Section
3.3 of the Seller Disclosure Schedule sets forth (i) the record and beneficial
ownership of all outstanding interests in Seller and (ii) a true and complete
list of all partnerships, joint venture arrangements or other Persons in which
Seller owns a direct or indirect equity interest, together with the jurisdiction
of organization thereof and each record and beneficial owner of equity interests
in such partnership, joint venture or other Person.

 

Section
3.4  Seller’s
Records.

 

(a)  Seller
has delivered to Purchaser true, correct and complete copies of Seller’s
certificate of formation or other charter document (certified by the Secretary
of State or other appropriate official of the applicable jurisdiction of
organization) and operating agreement (certified by the secretary, assistant
secretary or other appropriate officer) of Seller.

 

(b)  The
membership records of Seller previously made available to Purchaser are true,
correct and complete. 

 

(c)  The
books, records and accounts of Seller accurately and fairly present in all
material respects the financial condition, results of operations, members’
equity and cash flows of Seller on a cash basis. Seller has not engaged in any
material transaction with respect to its business, maintained any bank account
for its business or used any of its funds, except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books, records and accounts of Seller. Seller is not aware that any fraud,
whether or not material, has occurred that involves or involved management or
other employees who have a significant role in Seller’s system of internal
accounting control.

 

Section
3.5  Conflicts;
Consents of Third Parties.

 

None of
the execution and delivery by Seller of this Agreement and the other Transaction
Documents to which it is a party, the consummation of the transactions
contemplated hereby or thereby, or compliance by Seller with any of the
provisions hereof or thereof will (i) conflict with, or result in the breach of,
any provision of Seller’s certificate of formation or operating agreement
or comparable organizational documents (collectively, “Organizational
Documents”) of
Seller; (ii) conflict with, violate, result in the breach or termination
of, or constitute a default under any Contract to which Seller is a party or by
which Seller or its properties or assets is bound, or require a consent or
waiver by any Person in order to avoid any such conflict, violation, breach,
termination or default; (iii) violate any Law or any Order by which Seller is
bound; or (iv) result in the creation of any Lien upon the properties or
assets of Seller. No governmental franchise, easement, permit, right,
application, filing, registration, license or other authorization (each a
“Permit”),
Order, waiver, declaration or filing with, or notification to any Person,
including without limitation any Governmental Body, is required on the part of
Seller in connection with the execution, delivery and performance of this
Agreement or the other Transaction Documents to which it is a party, or the
compliance by Seller with any of the provisions hereof or thereof.

 

Section
3.6  Financial
Statements.
Included in Section 3.6 of the Seller Disclosure Schedule are the
internally prepared cash basis balance sheets of Seller as at December 31, 2002
and 2003 and September 30, 2004 and the related statements of income of Seller
for the years then ended (such statements, including the related notes and
schedules thereto, are referred to herein as the “Financial
Statements”). The
Financial Statements have been prepared from the books and records of Seller and
fairly present in all material respects the financial position and results of
operations of Seller on a cash basis as at the dates and for the periods
reflected thereon. The financial forecasts for Seller for the fiscal years 2005
and 2006 included in Section 3.6 of the Seller Disclosure Schedule were prepared
based upon reasonable assumptions and reflect management’s good faith best
estimate of the projected operating performance of Seller for such period.
Purchaser acknowledges and agrees that (i) Seller and the Member Parties make no
guarantee or representation that the results estimated in such financial
forecasts will be realized, (ii) the factors upon which the assumptions and
estimate were based may change from the date hereof and (iii) the results
estimated in such financial forecasts may differ materially from actual
results.

 

Section
3.7  No
Undisclosed Liabilities. Seller
has no indebtedness or any other material obligation or Liability of any kind,
including any Liability as guarantor, surety or otherwise, which is not either
fully reflected in, reserved against or otherwise described in the Pro Forma
Balance Sheet or the notes thereto or incurred in the ordinary course of
business consistent with past practice since the Balance Sheet
Date.

 

Section
3.8  Absence
of Certain Developments. Since
the Balance Sheet Date (and, with respect to clauses (a), (e), (f) and (p), the
date that is 12 months prior to the Balance Sheet Date):

 

(a)  there has
not been any Seller Material Adverse Change nor has there occurred any event
which is reasonably likely to result in a Seller Material Adverse
Change;

 

(b)  there has
not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property and assets of Seller having a replacement cost of
more than $5,000 for any single loss or $10,000 for all such
losses;

 

(c)  Seller
has not made any change in the rate of compensation, commission, bonus or other
direct or indirect remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus, incentive, retention or other
compensation, retirement, welfare, fringe or severance benefit or vacation pay,
to or in respect of any director, officer, employee, distributor or agent of
Seller, other than increases in the ordinary course of business consistent with
past practice in the base salaries of employees of Seller other than officers or
senior managers;

 

(d)  Seller
has not entered into any employment, deferred compensation, severance or similar
agreement (nor amended any such agreement);

 

(e)  there has
not been any change by Seller in accounting or Tax reporting principles, methods
or policies;

 

(f)  Seller
has not conducted its business other than in the ordinary course consistent with
past practice;

 

(g)  Seller
has not entered into (1) any Material Contract that is not an Included Contract
or (2) any other material transaction;

 

(h)  Seller
has not hired employees or engaged independent contractors to provide services
for clients of Seller other than in the ordinary course of business consistent
with, and at a level consistent with, past practice;

 

(i)  Seller
has not materially breached any Included Contract or materially amended any
Included Contract;

 

(j)  Seller
has not failed to promptly pay and discharge current Liabilities except where
disputed in good faith in an appropriate manner;

 

(k)  Seller
has not made any loans, advances or capital contributions to, or investments in,
any Person or paid any fees or expenses to any Affiliate of Seller other than
intercompany transactions in the ordinary course of business consistent with
past practice;

 

(l)  Seller
has not mortgaged, pledged or subjected to any Lien any of its assets, or
acquired any assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of any assets of Seller except for assets acquired or sold,
assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary
course of business consistent with past practice;

 

(m)  Seller
has not discharged or satisfied any Lien, or paid any obligation or Liability,
except in the ordinary course of business consistent with past practice and
which, in the aggregate, are not material to Seller;

 

(n)  Seller
has not canceled or compromised any debt or claim or amended, canceled,
terminated, relinquished, waived or released any Contract or right except in the
ordinary course of business consistent with past practice and which, in the
aggregate, are not material to the Company;

 

(o)  Seller
has not made or committed to make any capital expenditures or capital additions
or improvements in excess of $5,000 individually or $10,000 in the aggregate,
except as set forth in the Seller Disclosure Schedule, or otherwise in the
ordinary course of business consistent with past practices;

 

(p)  Seller
has not entered into any prepaid services transactions with any of its customers
or otherwise accelerated revenue recognition or the sales of its services for
periods prior to any Closing hereunder; 

 

(q)  Seller
has not amended any of its Organizational Documents;

 

(r)  Seller
has not issued any membership interests or any security exercisable or
exchangeable for or convertible into membership interests of Seller;
and

 

(s)  Seller
has not entered into any agreements to do or perform in the future any actions
referred to in this Section 3.8 which have not been consummated as of the date
hereof.

 

Section
3.9  Taxes.

 

Seller
has duly and timely filed all Tax Returns with respect to Taxes required to be
filed on or before the Closing Date. All such Tax Returns are true, complete and
correct in all material respects. All Taxes owed by Seller (whether or not shown
on any Tax Return) or for which Seller is responsible have been duly and timely
paid. Seller has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
Seller is not currently the beneficiary of any extension of time within which to
file any Tax Return. Seller has withheld all required amounts in respect of
Taxes from its employees, agents, contractors and nonresidents and, to the
extent required, has remitted such amounts to the proper agencies. Seller is not
a “foreign person” within the meaning of Section 1445(b)(2) of the Code. Seller
(a) has not been a member of an affiliated group filing a consolidated income
Tax Return and (b) does not have any liability for the Taxes of any person under
Treasury Regulations section 1.1502-6(a) (or any analogous or similar provision
of any state, local or foreign Law), as a transferee or successor, by contract,
or otherwise. Seller is, and since the date of its formation has been, treated
as a partnership for federal, state and local income tax purposes and neither
Seller nor any of its owners, nor any taxing authority has taken any position
inconsistent with such treatment, including, without limitation, filing an
election to be treated as an association taxable as a corporation under Treasury
Regulation Section 301.7701-3(c). There are
no liens for taxes (other than Taxes not yet due and payable) on any of the
Assets. No deficiency or proposed adjustment for any amount of Tax has been
proposed, asserted or assessed by any taxing authority against Seller that has
not been paid, settled or otherwise resolved. There is no action, suit, claim,
examination, investigation, proceeding or audit now pending, proposed or, to the
Knowledge of Seller, threatened against Seller with respect to Taxes. None of
the Assumed Liabilities is an obligation to make a payment that is not
deductible under Code section 280G. No claim has ever been made by any taxing
authority in a jurisdiction where Seller did not file Tax Returns that Seller
may be subject to taxation by that jurisdiction. Seller will not be required
under applicable Law to report on any return for a period commencing on or after
the Closing Date income realized prior to the Closing Date. 

 

Section
3.10  Real
Property.

 

(a)  Seller
does not own in fee any real property or interest in real property. Section 3.10
of the Seller Disclosure Schedule sets forth a complete list of all real
property and interests in real property leased by Seller (individually, a
“Real
Property Lease” and the
real properties specified in such leases being referred to herein individually
as a “Seller
Property” and
collectively as the “Company
Properties”) as
lessee. The Seller Property constitutes all interests in real property currently
used or currently held for use in connection with the Business or which are
necessary for the continued operation of the Business as the Business is
currently conducted and proposed to be conducted. Seller has a valid and
enforceable leasehold interest under each of the Real Property Leases, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Seller has not
received any written notice of any default or event that with notice or lapse of
time, or both, would constitute a default under any of the Real Property Leases
and Seller and, to Seller’s Knowledge, each other party thereto is in compliance
in all material respects with all obligations of such party thereunder. All of
the Seller Property, buildings, fixtures and improvements thereon owned or
leased by Seller are in good operating condition and repair (subject to normal
wear and tear). Seller has delivered or otherwise made available to Purchaser
true, correct and complete copies of the Real Property Leases, together with all
amendments, modifications or supplements, if any, thereto.

 

(b)  Seller
has all material certificates of occupancy and Permits of any Governmental Body
necessary or useful for the current use and operation of each Seller Property,
and Seller has fully complied with all material conditions of the Permits
applicable to it. No default or violation, or event that with the lapse of time
or giving of notice or both would become a default or violation, has occurred in
the due observance of any Permit.

 

(c)  To the
Knowledge of Seller, there does not exist any actual or threatened or
contemplated condemnation or eminent domain proceeding that affects Seller
Property or any part thereof, and Seller has not received any notice, oral or
written, of the intention of any Governmental Body or other Person to take or
use all or any part thereof.

 

Section
3.11  Tangible
Personal Property; Title; Sufficiency of Assets.

 

(a)  Section
3.11 of the Seller Disclosure Schedule lists all leases of personal property
(“Personal
Property Leases”)
involving annual payments in excess of $5,000 relating to personal property used
in the Business or to which Seller is a party or by which the properties of
Seller are bound. Seller has delivered or otherwise made available to Purchaser
true, correct and complete copies of the Personal Property Leases, together with
all amendments, modifications or supplements thereto.

 

(b)  Seller
has a valid leasehold interest under each of the Personal Property Leases under
which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no default under any Personal Property Lease by Seller or,
to the Knowledge of Seller, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder, and Seller and, to the Knowledge of Seller,
each other party thereto is in compliance in all material respects with all
obligations of Seller or such other party, as the case may be, thereunder.


 

(c)  Seller
has good and marketable title to the Assets used in the Business as of the date
hereof (which include, without limitation, all of the items of tangible personal
property reflected in the Pro Forma Balance Sheet), free and clear of any and
all Liens other than the Permitted Exceptions. All tangible personal property
included in the Assets, and all of the items of tangible personal property used
by Seller under the Personal Property Leases, are in good condition and in a
state of good maintenance and repair (ordinary wear and tear excepted) and are
in all material respects suitable for the purposes used. The Assets include all
assets, rights and interests reasonably required for the continued conduct of
the Business by Purchaser as now being conducted and proposed to be conducted.


 

Section
3.12  Intellectual
Property.

 

(a)  Seller
owns, free and clear from all Liens (other than Permitted Exceptions) or
otherwise possesses legally enforceable rights to use all of the Intellectual
Property reasonably necessary to conduct the Business as currently conducted and
proposed to be conducted. The Intellectual Property owned by Seller
(“Owned
Intellectual Property”) and
the Intellectual Property licensed to Seller comprise all of the Intellectual
Property that is reasonably necessary to conduct the Business as currently
conducted and proposed to be conducted.

 

(b)  Section
3.12(b)(i) of the Seller Disclosure Schedule sets forth a true, complete and
correct list of all Owned Intellectual Property for which a registration or
application has been filed with a Governmental Body, including patents,
trademarks, service marks and copyrights, issued by or registered with, or for
which any application for issuance or registration thereof has been filed with,
any Governmental Body. Section 3.12(b)(ii) of the Seller Disclosure Schedule
sets forth a complete and correct list of all trademarks, service marks and
other trade designations that are Owned Intellectual Property and not otherwise
identified in Section 3.12(b)(i) of the Seller Disclosure Schedule. Section
3.12(b)(iii) of the Seller Disclosure Schedule also sets forth a complete and
correct list of all material written or oral licenses and arrangements (other
than ordinary course licenses of commercially available software),
(i) pursuant to which the use by any Person of Intellectual Property is
permitted by Seller, and (ii) pursuant to which the use by Seller of
Intellectual Property is permitted by any Person (collectively, the
“Intellectual
Property Licenses”). The
Intellectual Property Licenses are in full force and effect. 

 

(c)  Nothing
will interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of the Business as presently conducted or reasonably
expected to be conducted. 

 

(d)  To the
Knowledge of Seller, no Intellectual Property that is Owned Intellectual
Property or subject to any Intellectual Property License is being infringed by
third parties. There is no claim or demand of any Person pertaining to, or any
proceeding which is pending or, to the Knowledge of Seller, threatened, that
challenges the rights of Seller in respect of any Owned Intellectual Property,
or claims that any default exists under any Intellectual Property
License.

 

(e)  Seller
has no Liability relating to (i) the creation by Seller or an employee or
independent contractor of Seller of Intellectual Property in connection with the
performance of services for a customer of Seller or (ii) any failure of Seller
or any such employee or independent contractor to assign rights therein to such
customer. 

 

Section
3.13  Material
Contracts. Section
3.13 of the Seller Disclosure Schedule sets forth all of the following Contracts
to which Seller is a party or by which it is bound (collectively, the
“Material
Contracts”) and
categorizes such Contracts by the types described below: (i) Contracts with any
current officer, director, employee or member of Seller, or any Affiliate of
Seller or any such Person; (ii) Contracts with any employee or labor union or
association representing any employee; (iii)  Contracts for the sale of any
Assets other than in the ordinary course of business; (iv) joint venture or
partnership agreements; (v) Contracts containing covenants not to compete in any
line of business or with any person in any geographical area or covenants of any
other person not to compete with Seller in any line of business or in any
geographical area, or otherwise concerning confidentiality or non-competition
(other than ordinary course customer contracts that would otherwise be included
solely because they contain confidentiality provisions); (vi) Contracts entered
into within the last five years relating to the acquisition of any operating
business or the capital stock or equity interests of any other Person; (vii)
Contracts relating to the borrowing of money from or by Seller or the extension
of any credit by Seller to any customer, employee or other Person; (xiii) all
customer Contracts and (ix) any other Contracts, other than Real Property Leases
and customer contracts, with respect to which the amount to be paid or received
thereunder in the future could reasonably be expected to exceed $5,000 in any
calendar year or $15,000 in the aggregate. There have been made available to
Purchaser true, correct and complete copies of all of the Material Contracts.
All of the Material Contracts are in full force and effect. Neither Seller not,
to the Knowledge of Seller, any other party to any Material Contract in default
thereunder or has otherwise failed to comply in all material respects with its
obligations thereunder. No Material Contract has been modified or amended except
as described in Section 3.13 of the Seller Disclosure Schedule. Seller has not
received any notice or communication from any party to a Material Contract or
other material customer or supplier (whether or not a party to a Material
Contract) relating to such party’s intent to modify, terminate or fail to renew
the arrangements and relationships set forth therein. From and after each
Closing, Seller will continue to enjoy all of the benefits of each of the
Material Contracts without the necessity of any consent, authorization or
agreement from or with any Person. There are no outstanding powers of attorney
executed on behalf of Seller. The consummation of the transactions contemplated
hereby will not affect any of the Material Contracts in a manner that could
reasonably be expected to have a Seller Material Adverse Effect.

 

Section
3.14  Employee
Benefits.

 

(a)  Section
3.14 of the Seller Disclosure Schedule sets forth a complete and correct list of
(i) all “employee benefit plans,” as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and
any other pension plans or employee benefit arrangements, programs or payroll
practices (including without limitation severance pay, vacation pay, company
awards, salary continuation for disability, sick leave, retirement, deferred
compensation, bonus or other incentive compensation, stock purchase arrangements
or policies, hospitalization, medical insurance, life insurance and scholarship
programs) that is currently in effect or was maintained, sponsored or
contributed to by Seller within the last six years to which Seller contributes
or is obligated to contribute thereunder with respect to employees of Seller, or
that has been approved before the date hereof but is not yet effective
(“Employee
Benefit Plans”) and
(ii) all “employee pension plans,” as defined in Section 3(2) of ERISA,
maintained by Seller or any trade or business (whether or not incorporated)
which are under control, or which are treated as a single employer, Seller under
Section 414(b), (c), (m) or (o) of the (“ERISA
Affiliate”) or to
which Seller or any ERISA Affiliate contributed or is obligated to contribute
thereunder (“Pension
Plans”) within
the last six years. Section 3.14 of the Seller Disclosure Schedule identifies,
in separate categories, Employee Benefit Plans or Pension Plans that are
(i) subject to Section 4063 and 4064 of ERISA (“Multiple
Employer Plans”), (ii)
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) (“Multiemployer
Plans”) or
(iii) “benefit plans”, within the meaning of Section 5000(b)(1) of the Code
providing continuing benefits after the termination of employment (other than as
required by Section 4980B of the Code or Part 6 of Title I of ERISA and at the
former employee’s or his beneficiary’s sole expense).

 

(b)  Neither
Seller nor any ERISA Affiliate maintains, sponsors, or contributes, or has,
within the past six years, maintained, sponsored or had any obligation to
contribute to, for the benefit of current or former employees a defined benefit
plan subject to Title IV of ERISA, (ii) any Multiemployer Plan or (iii) any
Multiple Employer Plan.

 

(c)  Each of
the Employee Benefit Plans and Pension Plans intended to qualify under Section
401 of the Code (“Qualified
Plans”) so
qualifies and has received a determination letter from the IRS to such effect
and the trusts maintained thereto are exempt from federal income taxation under
Section 501 of the Code and nothing has occurred or is expected to occur with
respect to the operation of any such plan which caused or would cause the loss
of such qualification or exemption or the imposition of any liability, penalty
or tax under ERISA or the Code.

 

(d)  All
contributions and premiums required by Law or by the terms of any Employee
Benefit Plan or Pension Plan or any agreement relating thereto have been timely
made (without regard to any waivers granted with respect thereto) to any funds
or trusts established thereunder or in connection therewith, and no accumulated
funding deficiencies exist in any of such plans.

 

(e)  There has
been no violation of or failure to comply with ERISA or the Code with respect to
the filing of applicable returns, reports, documents and notices regarding any
of the Employee Benefit Plans or Pension Plans with the DOL, the IRS, the PBGC
or any other Governmental Body or the furnishing of such notices or documents to
the participants or beneficiaries of the Employee Benefit Plans or Pension
Plans.

 

(f)  True,
correct and complete copies of the following documents, with respect to
each of the Employee Benefit Plans and Pension Plans, have been delivered to
Purchaser: (A) any plans and related trust documents (all amendments thereto),
investment management agreements, administrative service contracts, group
annuity contracts, insurance contracts, collective bargaining agreements and
employee handbooks, (B) the most recent Forms 5500 for the past three years and
schedules thereto, (C) the most recent financial statements and actuarial
valuations for the past three years, (D) the most recent IRS determination
letter, (E) the most recent summary plan descriptions (including letters or
other documents updating such descriptions) and (F) written descriptions of all
non-written agreements relating to the Employee Benefit Plans and Pension
Plans.

 

(g)  There are
no pending Legal Proceedings which have been asserted or instituted or, to the
Knowledge of Seller, threatened against any of the Employee Benefit Plans or
Pension Plans, the assets of any such plans or of any related trust or Seller,
the plan administrator or any fiduciary of the Employee Benefit Plans or Pension
Plans with respect to the operation of such plans (other than routine,
uncontested benefit claims), and there are no facts or circumstances which could
form the basis for any such Legal Proceeding. No Employee Benefit Plan or
Pension Plan is under audit or investigation by the IRS, DOL, or any other
Government Body and no such completed audit, if any, has resulted in the
imposition of Tax, interest, or penalty.

 

(h)  Each of
the Employee Benefit Plans and Pension Plans complies with and has been
maintained, in all material respects, in accordance with its terms and all
provisions of applicable Law, including ERISA and the Code, and all material
reporting and disclosure requirements have been satisfied on a timely
basis.

 

(i)  Seller
and any ERISA Affiliate which maintains a “group health plan” within the meaning
of Section 5000(b)(1) of the Code and each plan sponsor or administrator has
complied with the COBRA reporting, disclosure, notice, election, and other
benefit continuation and coverage requirements of Section 4980B of the Code or
Part 6 of Title I of ERISA and the applicable regulations thereunder and any
comparable state laws, and has not incurred any direct or indirect liability,
and is not subject to any loss, assessment or excise tax, penalty, loss of
federal income tax deduction or other sanction arising on account of or in
respect of any direct or indirect failure at any time to comply with any such
federal or state benefit continuation coverage requirements.

 

(j)  Neither
Seller nor a “party in interest” or “disqualified person” with respect to the
Employee Benefit Plans or Pension Plans has engaged in a “prohibited
transaction” within the meaning of Section 4975 of the Code or Section 406 of
ERISA which has subjected or could subject Seller, any ERISA Affiliates,
Purchaser, Parent or any trustee, administrator or other fiduciary to a tax
penalty on prohibited transaction or any other liabilities with respect
thereto.

 

(k)  Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee; (ii) increase any benefits otherwise payable under any Employee
Benefit Plan or Pension Plan; or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.

 

(l)  No
membership interest or other security issued by Seller forms or has formed a
material part of the assets of any Employee Benefit Plan or Pension
Plan.

 

(m)  The
consummation of the transactions contemplated by this Agreement will not give
rise to any liability for termination of any agreements related to any Employee
Benefit Plan or Pension Plan.

 

(n)  No
amounts payable under any Employee Benefit Plan and Pension Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.

 

(o)  Each
Employee Benefit Plan or Pension Plan that purports to provide benefits which
qualify for tax-favored treatment under Sections 79, 105, 106, 117, 120, 125,
127, 129, and 132 of the Code satisfies the requirements of said
Section(s).

 

(p)  Each
Employee Benefit Plan that purports to defer income complies with Section 409A
of the Code.

 

(q)  Each
Employee Benefit Plan, or Pension Plan, its related trust and insurance
agreement may be unilaterally amended or terminated on no more than 90 days
notice.

 

Section
3.15  Labor.

 

(a)  Seller is
not a party to any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements which pertain to employees of
Seller.

 

(b)  No
employees of Seller are represented by any labor organization. No labor
organization or group of employees of Seller has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Knowledge of Seller,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity involving Seller
pending or, to the Knowledge of Seller, threatened by any labor organization or
group of employees of Seller.

 

(c)  There are
no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other labor disputes pending or, to the Knowledge of
Seller, threatened against or involving Seller. There are no unfair labor
practice charges, grievances or complaints pending or, to the Knowledge of
Seller, threatened by or on behalf of any employee or group of employees of
Seller.

 

(d)  There are
no complaints, charges or claims against Seller pending or, to the Knowledge of
Seller, threatened which could be brought or filed, with any public or
Governmental Body based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by Seller, of any
individual.

 

(e)  Seller is
in compliance in all material respects with all Laws and Orders relating to the
employment of labor, including all such Laws and orders relating to wages,
hours, the Worker Adjustment and Retraining Notification Act and any similar
state, local or foreign “plant closing” Law (“WARN”),
collective bargaining, discrimination, civil rights, safety and health, worker’s
compensation, payment of overtime wages and the collection and payment of
withholding and/or social security taxes and any similar tax.

 

(f)  There has
been no “mass layoff” or “plant closing” as defined by WARN with respect to
Seller within the six (6) months prior to making this
representation.

 

(g)  To the
Knowledge of Seller, no executive, key employee, or group of employees currently
has any plans to terminate employment with Seller independently of or as a
result of this Agreement.

 

Section
3.16  Litigation. There
is not, and during the past five years there has not been, any suit, action,
proceeding, investigation, claim or order pending or, to the Knowledge of
Seller, threatened by or against Seller, or to the Knowledge of Seller, pending
or threatened, against any of the officers, directors, employees or independent
contractors (or employees of independent contractors) of Seller with respect to
their business activities on behalf of Seller, or to which Seller or any such
officer, director, employee, independent contractor or employee of an
independent contractor, with respect thereto, is otherwise a party, before any
court, or before any governmental department, commission, board, agency, or
instrumentality; nor to the Knowledge of Seller is there any reasonable basis
for any such action, proceeding, or investigation. Seller is not subject to any
Order of any Governmental Body.

 

Section
3.17  Compliance
with Laws; Permits. Seller
is in compliance with all Laws applicable to it or to the conduct of the
businesses or operations of Seller. Seller has all Permits from Governmental
Bodies which are required for Seller or Seller to operate its
businesses.

 

Section
3.18  Environmental
Matters.


 

(a)  To the
best of Seller’s and the Member Parties’ Knowledge, the operations of Seller are
in compliance with all applicable Environmental Laws and all Permits issued
pursuant to Environmental Laws or otherwise (“Environmental
Permits”);

 

(b)  To the
best of Seller’s and the Member Parties’ Knowledge, Seller has obtained and
currently maintains all Environmental Permits required under all applicable
Environmental Laws necessary to operate its business;

 

(c)  Seller is
not the subject of any outstanding written Order or Contract with any
Governmental Body or other Person respecting (i) Environmental Laws,
(ii) Remedial Action or (iii) any Release or threatened Release of a
Hazardous Material;

 

(d)  Seller
has not received any written communication alleging either that Seller may be in
violation of any Environmental Law or Environmental Permit or that Seller may
have any liability under any Environmental Law;

 

(e)  Seller
has not incurred, assumed or undertaken any current contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site) and there are no facts,
circumstances or conditions relating to, arising out of or attributable to
Seller that could give rise to liability under Environmental Laws;

 

(f)  there are
no judicial or administrative proceedings pending or, to the Knowledge of
Seller, threatened against Seller that allege a violation of, or seek to impose
liability pursuant to, Environmental Laws or Environmental Permits and, to
Seller’s Knowledge, there are no investigations of the business, operations, or
currently or previously owned, operated or leased property of Seller pending or
threatened which could result in Seller incurring any liability pursuant to any
Environmental Law;

 

(g)  there is
not located at any of the properties of Seller any (i) underground storage
tanks, (ii) asbestos-containing material or (iii) equipment containing
polychlorinated biphenyls; and

 

(h)  Seller
has provided to Purchaser all environmentally related audits, studies, reports,
analyses, and results of investigations that have been performed with respect to
the currently or previously owned, leased or operated properties of
Seller.

 

Section
3.19  Insurance. Section
3.19 of the Seller Disclosure Schedule sets forth a complete and accurate list
of all policies of insurance of any kind or nature covering Seller or Seller or
any of Seller’s or Seller’s employees, properties or assets. All such policies
are in full force and effect, and Seller is not in default of any provision
thereof. Section 3.19 of the Seller Disclosure Schedule describes all
self-insurance arrangements affecting Seller.

 

Section
3.20  Receivables;
Payables.

 

(a)  All
accounts receivable of Seller have arisen from bona fide transactions in the
ordinary course of business consistent with past practice. All accounts
receivable of Seller reflected on the Pro Forma Balance Sheet are good and
believed to be collectible at the aggregate recorded amounts thereof and subject
to no setoffs (including without limitation reductions in respect of customer
advances or deposits) or counterclaims. All accounts receivable arising after
the Balance Sheet Date are believed to be good and collectible at the aggregate
recorded amounts thereof and subject to no setoffs (including without limitation
reductions in respect of customer advances or deposits) or
counterclaims.

 

(b)  All
accounts payable of Seller reflected on the Pro Forma Balance Sheet or arising
after the Balance Sheet Date are the result of bona fide transactions in the
ordinary course of business and have been paid or are not yet due and payable,
except for accounts payable that are being disputed in good faith in an
appropriate manner.

 

Section
3.21  Related
Party Transactions. Except
as described in Section 3.21 of the Seller Disclosure Schedule, (i) Seller (A)
has not loaned or borrowed any amounts from or (B) has outstanding any
indebtedness or other similar obligations to or owing from any Affiliate of
Seller. Neither Seller nor any Affiliate of Seller nor any officer or employee
of any of them (i) owns any direct or indirect interest of any kind in, or
controls or is a director, officer, employee or partner of, or consultant to, or
lender to or borrower from or has the right to participate in the profits of,
any Person which is (A) a competitor, supplier, customer, landlord, tenant,
creditor or debtor of Seller, (B) engaged in a business related to the business
of Seller, or (C) a participant in any transaction to which Seller is a party or
(ii) is a party to any Contract with Seller. Seller does not have any Contract
or understanding with any officer, director or manager of Seller, or any
Affiliate of any such Person, with respect to the subject matter of this
Agreement, the consideration payable hereunder or any other material matter.


 

Section
3.22  Relationships
with Customers.
(a) The
relationships of Seller with its existing customers is sound and there is no
reasonable basis to believe that any of the material customers of Seller will
materially and adversely change the manner in which they currently conduct
business with Seller, either as a result of the transactions contemplated by
this Agreement or otherwise.

 

(b)  The names
and addresses of all customers of Seller during fiscal years 2003 and 2004 and
all customers Known as of the Closing Date who will be customers during fiscal
2005 are listed in Section 3.22(b) of the Seller Disclosure Schedule. All
contracts and agreements with such customers that are in existence as of the
date hereof are valid, effective and enforceable. No such customer has an
account balance that is in excess of 60 days past due.

 

(c)  Seller
does not have Knowledge of any written or oral communication, fact, event or
action which exists or has occurred within 120 days prior to the date of this
Agreement which would indicate that any of the following shall terminate or
materially reduce its business with Seller:

 

(i)  any
current customer of Seller which accounted for over three percent (3)% of total
net sales of Seller for its most recently completed fiscal year; or

 

(ii)  any
current supplier to Seller of items essential to the conduct of the business,
which items cannot be replaced at comparable cost and the loss of which could
reasonably be expected to have an adverse effect on Seller.

 

No such
termination or material reduction has occurred since the Balance Sheet
Date.

 

Section
3.23  No
Misrepresentation. No
representation or warranty of Seller contained in this Agreement or in any
Schedule hereto or in any certificate or other instrument furnished by Seller to
Purchaser pursuant to the terms hereof, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.

 

Section
3.24  Financial
Advisors. Seller
has no Liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement,
other than any fees to be paid to The Geneva Companies, which will be paid
exclusively by Seller.

 

Section
3.25  Private
Placement. Seller
is an “accredited investor” within the meaning of Rule 501 under the Securities
Act and Seller was not organized for the specific purpose of acquiring the
Shares. Seller and each Member has sufficient knowledge and experience in
investing in companies similar to Parent in terms of Parent's market
capitalization and other relevant factors so as to be able to evaluate the risks
and merits of its investment in Parent and it is able financially to bear the
risks thereof. Seller and each Member has had an opportunity to discuss the
terms of the offering and sale of the Shares and Parent's business, management
and financial affairs with Parent's management and to obtain any additional
information regarding the foregoing which Parent possesses or can acquire
without unreasonable effort or expense. The Shares are being acquired for the
Seller’s (and, to the extent the Shares are transferred by Seller to any Member,
such Member’s) own accounts and not with a view to, or the intention of, any
distribution in violation of the Securities Act or any applicable state
securities laws. Seller and each Member understands that (i) the
Shares have not been registered under the Securities Act by reason of the
issuance of the Shares in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505
or 506 promulgated under the Securities Act, (ii) the
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration,
(iii) the
Shares will bear a legend to such effect and (iv) Parent
will issue stop transfer instructions to its transfer agent to such effect.


 

ARTICLE
IV  

 




 

REPRESENTATIONS
AND WARRANTIES OF PURCHASER

 

Purchaser
represents and warrants to Seller that, except as set forth in the Purchaser
Disclosure Schedule attached hereto, the following statements are correct and
complete as of the date hereof. The Purchaser Disclosure Schedule makes explicit
reference to the particular representation or warranty as to which exception is
taken, which in each case shall constitute the sole representation and warranty
as to which such exception shall apply, provided that the disclosures in the
Purchaser Disclosure Schedule that are set forth expressly therein with
particularity will apply to all representations and warranties.

 

Section
4.1  Organization. (a)
Purchaser is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. Purchaser is duly
qualified or authorized to do business as a foreign limited liability company
and is in good standing under the laws of each jurisdiction in which it owns or
leases real property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified or authorized would
not have a material adverse effect on the business or assets of
Purchaser.

 

(b) Purchaser
is an indirect wholly-owned subsidiary of Parent. All of the issued ownership
interests in Purchaser have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly or indirectly by Parent.
Purchaser has conducted no material operations.

 

Section
4.2  Authorization
of Transaction. The
execution, delivery and performance of the Transaction Documents to which
Purchaser is a party have been duly authorized by all necessary action by or on
behalf of Purchaser. Purchaser has full power and authority to execute and
deliver this Agreement and each other Transaction Document to which it is a
party, and to perform its obligations hereunder and thereunder. This Agreement
and each Transaction Document to which Purchaser is or will be a party has been
or will be duly and validly executed and delivered and constitutes the valid and
legally binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). Purchaser is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any Governmental Body in
order to consummate the transactions contemplated by this Agreement and each
such Transaction Document.

 

Section
4.3  Noncontravention. Neither
the execution and the delivery by Purchaser of this Agreement and the other
Transaction Documents to which it is a party, nor the consummation of the
transactions contemplated hereby and thereby on the part of Purchaser, will
(i) violate any Law or any Order by which Purchaser is bound or any
provision of its organizational documents or (ii) result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any Contract to which Purchaser is a party or by which Purchaser is bound
or to which any of its assets is subject. No Order, Permit or waiver, or
declaration or filing with any Governmental Body is required on the part of
Purchaser in connection with the execution, delivery and performance of this
Agreement or the other Transaction Documents to which it is a party, or the
compliance by Purchaser with any of the provisions hereof or
thereof.

 

Section
4.4  Brokers’
Fees.
Purchaser has no Liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement for which Seller shall have any Liability. 

 

ARTICLE
V  

 




 

REPRESENTATIONS
AND WARRANTIES OF PARENT

 

Parent
represents and warrants to Seller that, except as set forth in the Parent
Disclosure Schedule attached hereto, the following statements are correct and
complete as of the date hereof. The Parent Disclosure Schedule makes explicit
reference to the particular representation or warranty as to which exception is
taken, which in each case shall constitute the sole representation and warranty
as to which such exception shall apply, provided that the disclosures in the
Parent Disclosure Schedule that are set forth expressly therein with
particularity will apply to all representations and warranties.

 

Section
5.1  Organization. Parent
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Parent is duly qualified or authorized to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified or authorized would not have a material adverse
effect on the business or assets of Parent.

 

Section
5.2  Authorization
of Transaction. The
execution, delivery and performance of the Transaction Documents to which Parent
is a party have been duly authorized by all necessary action by Parent. Parent
has full power and authority to execute and deliver this Agreement and each
other Transaction Document to which it is a party, and to perform its
obligations hereunder and thereunder. This Agreement and each Transaction
Document to which Parent is a party has been or will be duly and validly
executed and delivered and constitutes the valid and legally binding obligation
of Parent, enforceable against Parent in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Parent is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Body in order to
consummate the transactions contemplated by this Agreement and each other
Transaction Document.

 

Section
5.3  Noncontravention. Neither
the execution and the delivery by Parent of this Agreement and each other
Transaction Document to which it is or will be a party, nor the consummation of
the transactions contemplated hereby and thereby on the part of Parent, will
(i) violate any Law or any Order by which Parent is bound or any provision
of its organizational documents or (ii) result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
Contract to which Parent is a party or by which Parent is bound or to which any
of its assets is subject. No Order, Permit or waiver, or declaration or filing
with any Governmental Body is required on the part of Parent in connection with
the execution, delivery and performance of this Agreement or the other
Transaction Documents to which it is a party, or the compliance by Parent with
any of the provisions hereof or thereof.

 

Section
5.4  Status
of the Shares. The
Shares have been duly authorized and, when issued upon in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable
shares of Parent Common Stock and will
be free and clear of all Liens created by or through Parent. The issuance and
delivery of the Shares is not subject to any preemptive right of shareholders of
Parent that has not been waived or to any right of first refusal or other right
in favor of any person that has not been waived. 

 

Section
5.5  SEC
Documents. Since
November 18, 2003, Parent has filed all required reports, schedules, forms,
statements and other documents with the SEC (such documents, together with all
exhibits and schedules thereto and documents incorporated by reference therein,
collectively referred to herein as the “Parent
SEC Documents”). As of
their respective dates, the Parent SEC Documents complied (or will comply, in
the case of Parent SEC Documents filed during the Closing Period) in all
material respects with the requirements of the Securities Act, or the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”), as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the Parent SEC Documents, and none of the Parent SEC Documents
contained (or will contain, in the case of Parent SEC Documents filed during the
Closing Period) any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Parent included in the Parent SEC
Documents, as of their respective dates, complied (or will comply, in the case
of Parent SEC Documents filed during the Closing Period) in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared (or will be prepared,
in the case of Parent SEC Documents filed during the Closing Period) in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10 Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
(or will fairly present, in the case of Parent SEC Documents filed during the
Closing Period) the financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year end audit adjustments and other adjustments described therein).
No Parent Material Adverse Change has occurred subsequent to November 9, 2004
and prior to the date of this Agreement that has not been either reflected in a
Parent SEC Document filed with the SEC prior to the date of this Agreement or
disclosed to Seller in writing, and no executive officer of Parent has actual
knowledge of any event or circumstance not reflected in a Parent SEC Document
that is reasonably likely to result in a Parent Material Adverse Change.





Section
5.6  Litigation. There
is no suit, action, proceeding, investigation, claim or order pending or, to the
Knowledge of Parent, threatened by or against Parent or any of its subsidiaries
which, if determined adversely to Parent or such subsidiary, as the case may be,
would have a material adverse effect on the business or assets of
Parent.



 

Section
5.7  Authorized
Capital Stock. The
Parent Common Stock is the sole authorized class of capital stock of Parent.


 

Section
5.8  Brokers’
Fees. Parent
has no Liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement
for which Seller shall have any Liability.

 

ARTICLE
VI  

 




 

CONDITIONS
TO CLOSING

 

Section
6.1  Conditions
Precedent to Obligations of Purchaser at the Closing. The
obligation of Parent and Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment, on or prior to the Closing
Date, of each of the following conditions (any or all of which may be waived by
Parent and Purchaser in whole or in part to the extent permitted by applicable
Law):

 

(a)  all
representations and warranties of Seller and the Member Parties contained herein
shall be true and correct on and as of the Closing Date, except to the extent
expressly made as of an earlier date;

 

(b)  Seller
and each Member Party shall have performed and complied in all material respects
with all obligations and covenants required by this Agreement to be performed or
complied with by Seller or such Member Party on or prior to the Closing
Date;

 

(c)  there
shall not have been or occurred any Seller Material Adverse Change since the
Balance Sheet Date;

 

(d)  no Legal
Proceedings shall have been instituted or threatened or claim or demand made
against Seller, any Member Party, Parent or Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated hereby;

 

(e)  there
shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby;

 

(f)  Purchaser
shall have received letters in form and substance satisfactory to it from all
holders of indebtedness of Seller that would be reflected on Seller’s
consolidated balance sheet as of the Closing Date or disclosed in the footnotes
thereto (other than any such indebtedness that is an Assumed Liability) or that
is secured by any of the Assets confirming the full payment and satisfaction of
such indebtedness (by way of application of a portion of the Purchase Price for
such purpose or otherwise), and all related Liens shall have been released and
appropriate UCC termination statements filed with respect thereto; 

 

(g)  Purchaser
shall have received confirmation that any Affiliate Receivables have been have
been fully repaid as of the time of the Closing (by way of application of a
portion of the Purchase Price for such purpose or otherwise); and

 

(h)  Purchaser
shall have entered into written Employment Agreements with each of the Key
Employees, in form and substance agreeable to the parties.

 

Section
6.2  Conditions
Precedent to Obligations of Seller at the Closing. The
obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions (any or all of which may be waived by Seller,
on behalf of the Seller, in whole or in part to the extent permitted by
applicable Law):

 

(a)  all
representations and warranties of Purchaser and Parent contained herein shall be
true and correct on and as of the Closing Date;

 

(b)  Purchaser
and Parent shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by Purchaser or Parent, as applicable, on or prior to the Closing Date;


 

(c)  there
shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby; 

 

(d)  any
waiting period under the HSR Act applicable to the transactions contemplated by
this Agreement shall have expired or been terminated; and

 

(e)  Purchaser
shall have entered into written Employment Agreements with each of Earl Webb
Henry, Eugenia Henry and Mark Schactman, in form and substance agreeable to the
parties.

 

ARTICLE
VII  

 




 

DOCUMENTS
TO BE DELIVERED

 

Section
7.1  Deliveries
by Seller to Purchaser and Parent at the Closing. At the
Closing, Seller shall deliver, or shall cause to be delivered, to Purchaser and
Parent the following:

 

(a)  A duly
executed bill of sale, assignments and assumption agreement in the form of
Exhibit
C

 

(b)  An
Employment Agreement duly executed by each Key Employee;

 

(c)  a duly
executed assignment of lease and estoppel certificate, dated the Closing Date,
with respect to each Real Property Lease in form and substance satisfactory to
Purchaser and its counsel;

 

(d)  Seller
shall have delivered all consents and waivers that are (A) required for the
assumption of any contract related to an Employee Benefit Plan or Pension Plan
that will be assumed by Purchaser or Parent pursuant to Section 10.2, (B)
required for the assumption by or reissuance to Purchaser of any existing
insurance policy of Seller that Purchaser determines must be maintained in order
to avoid a gap in coverage with respect to the Business immediately following
the Closing or (C) listed on Schedule II, each in form and substance
satisfactory to Purchaser (collectively, the “Closing
Consents”);

 

(e)  certificates
of title to all motor vehicles included in the Assets (if any), duly endorsed
for transfer to Purchaser as of the Closing Date;

 

(f)  certificates
(dated the Closing Date and in form and substance reasonably satisfactory to
Purchaser) executed by Seller certifying as to the fulfillment of the conditions
specified in Sections 6.1(a), 6.1(b), 6.1(c), 6.1(d), 6.1(e) and 6.1(g)
hereof;

 

(g)  the
Escrow Agreement, duly executed by Seller;

 

(h)  an
opinion of Offit, Kurman, Yumkas & Denick, counsel for Seller, dated the
Closing Date, substantially in the form attached hereto as Exhibit
D;

 

(i)  a receipt
for the cash portion of the purchase price paid at the Closing and, if then
issued, for the Initial Shares;

 

(j)  a
certificate of the secretary of Seller certifying to (A) Seller’s attached
Organizational Documents, (B) the adoption of resolutions of the Members and (C)
the incumbency of the officers signing the Transaction Documents on behalf of
Seller (together with their specimen signatures);

 

(k)  a written
consent, executed by each Member, to the execution by the Seller of the
Transaction Documents to which Seller is a party and the consummation of the
transactions contemplated thereby;

 

(l)  a
certificate of good standing with respect to Seller issued by the Secretary of
State of the State of Maryland and for each state in which Seller is qualified
to do business as a foreign limited liabilit8y company dated as soon as
practicable prior to the Closing Date; 

 

(m)  a copy of
IRS Form W-9 duly and properly executed by Seller; and

 

(n)  a
certificate of non-foreign person status in the form prescribed by United States
Treasury Regulation § 1.1445-2(b)(2)(iii) with respect to Seller in form
and substance acceptable to Purchaser; 

 

(o)  a fully
executed amendment to the SAS License (the “SAS
Amendment”)
assigning the same to Purchaser, in the form previously agreed; and

 

(p)  such
other documents, instruments or certificates as shall be reasonably requested by
Purchaser or Parent or their counsel.

 

Section
7.2  Deliveries
by Purchaser to Seller. At the
Closing, Purchaser shall deliver to Seller, on behalf of Seller, the
following:

 

(a)  An
Employment Agreement with each of Earl Webb Henry, Eugenia Henry and Mark
Schactman duly executed by Purchaser;

 

(b)  the cash
portion of the purchase price payable at the Closing; 

 

(c)  irrevocable
instructions to the transfer agent for the Parent Common Stock to issue the
Initial Shares in accordance with Section 2.1 and the Escrow Agreement;


 

(d)  the
Escrow Agreement, duly executed by Purchaser and the Escrow Agent; 

 

(e)  an
opinion of the Law Office of Kenneth G. Alberstadt, counsel for Parent and
Purchaser, dated the Closing Date, substantially in the form attached hereto as
Exhibit
E;

 

(f)  a duly
executed bill of sale, assignment and assumption agreement in the form of
Exhibit
B;

 

(g)  an
assignment of lease, dated the Closing Date, with respect to each Real Property
Lease in form and substance reasonably satisfactory to Seller and its counsel
duly executed by Purchaser; 

 

(h)  a
certificate dated the Closing Date and in form and substance reasonably
satisfactory to Seller executed by an authorized officer of Purchaser certifying
as to the fulfillment of the conditions specified in Sections 6.2(a), 6.2(b),
6.2(d) and 6.2(e) hereof;

 

(i)  a
certificate dated the Closing Date and in form and substance reasonably
satisfactory to Seller executed by an authorized officer of Parent certifying as
to the fulfillment of the conditions specified in Sections 6.2(a), 6.2(b) and
6.2(d) (with respect to Parent) and 6.2(e) hereof; 

 

(j)  a
certificate of the secretary of Purchaser certifying to (A) Purchaser’s attached
Organizational Documents, (B) the adoption of attached resolutions of the Board
of Directors of Purchaser approving the execution by Purchaser of the
Transaction Documents to which Purchaser is a party and the consummation of the
transactions contemplated thereby and (C) the incumbency of the officers signing
the Transaction Documents on behalf of Seller (together with their specimen
signatures);

 

(k)  a
certificate of the secretary of Parent certifying to (A) the adoption of
attached resolutions of the Board of Directors of Parent approving the execution
by Parent of the Transaction Documents to which Parent is a party and the
consummation of the transactions contemplated thereby and (B) the incumbency of
the officers signing the Transaction Documents on behalf of Seller (together
with their specimen signatures);

 

(l)  certificates
of good standing with respect to Parent and Purchaser issued by the Secretary of
State of its jurisdiction of incorporation; 

 

(m)  an
executed copy of the SAS Amendment; and

 

(n)  such
other documents, instruments or certificates as shall be reasonably requested by
Seller or its counsel.

 

Section
7.3 SAS
Amendment. At the
Closing, each of Purchaser and Seller shall pay 50% of the cost of the initial
DSP fee of $125,000 under the SAS Amendment.

 

ARTICLE
VIII  

 

POST-CLOSING
COVENANTS

 

The
parties agree as follows with respect to the period following the
Closing:

 

Section
8.1  General. In the
event that at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request.


 

Section
8.2  Litigation
Support. In the
event and for so long as any party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstances, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving Seller, each of the
other parties will cooperate reasonably with such party and such party’s counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor hereunder).

 

Section
8.3  Confidentiality. From
and after the date hereof (unless this Agreement is terminated in accordance
with its terms), Seller and the Member Parties will, and will cause their
Affiliates to, hold in strict confidence, and will not, and will cause their
Affiliates not to, disclose to any third party or use for any purpose, any and
all information with respect to Seller, the Business, the Transaction Documents
or the transactions contemplated thereby. Notwithstanding the foregoing, Seller
and the Member Parties may, and may permit their Affiliates to, disclose such
information (i) if compelled to disclose the same by judicial or administrative
process or by other requirements of Law (but subject to the following provisions
of this Section), (ii) if the same hereafter is in the public domain through no
fault of Seller or any Member Party or (iii) if the same is later acquired by
Seller or a Member Party from another source that is not under an obligation to
another Person to keep such information confidential. If Seller or any Member
Party or any of their respective Affiliates is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any such information, Seller or such Member Party, as the case may be,
shall provide Purchaser with prompt written notice of any such request or
requirement so that Purchaser may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section. If, in the
absence of a protective order or other remedy or the receipt of a waiver by
Purchaser, Seller or such Member Party or such Affiliate, as the case may be,
nonetheless, based on the written advice of outside counsel, is required to
disclose such information to any tribunal or in accordance with applicable Law,
Seller or such Member Party or such Affiliate, without liability hereunder, may
disclose that portion of such information which such counsel advises Seller or
such Member Party or such Affiliate it is legally required to disclose. Seller
and the Member Parties acknowledge and agree that money damages would not be an
adequate remedy for any breach of their agreements contained in this
Section 8.3 and that in addition to any other remedies available to
Purchaser, Purchaser shall be entitled to the remedies of injunction, specific
performance and other equitable relief for any threatened or actual breach of
this Section 8.3. 

 

Section
8.4  Non-Competition. As a
material inducement to Parent and Purchaser to enter into this Agreement, each
of Seller and each Member Party agrees as follows:

 

(a)  During
the Non-Competition Period, neither Seller nor any Member Party will, and each
will cause its Affiliates not to, engage or participate, directly or indirectly,
as principal, agent, executive, director, proprietor, joint venturer, trustee,
employee, employer, consultant, stockholder, partner or in any other capacity
whatsoever, in the conduct or management of, or own any stock or any other
equity investment in or debt of, (1) any business that is competitive with any
business conducted or proposed to be conducted by Seller as of the Closing Date,
including any business involving the provision of contract research services
(including, among other things, data entry, data management, statistical
analysis and medical writing) but excluding passive investments of up to 2% of
the common stock of any publicly traded company or (2) any Person that is a
customer or client of the Company at any time during the Non-Competition Period
or that has been a customer or client of Seller at any time during the two years
prior to the date of this Agreement.

 

(b)  During
the Non-Competition Period, neither Seller nor any Member Party will, and each
will cause its Affiliates not to, for its or such Affiliate’s own benefit or for
the benefit of any Person other than Purchaser, (i) solicit, or assist any
person or entity to solicit, any officer, director, executive or employee of
Purchaser (or, prior to the Closing Date, Seller) to leave his or her
employment, (ii) hire or cause to be hired any person who is then, or who will
have been at any point in time during the Non-Competition Period, an officer, a
director, an executive or an employee of Purchaser (or, prior to the Closing
Date, Seller), or (iii) engage any Person who is then, or who will have been at
any point in time during the Non-Competition Period, an officer, director,
executive or employee of Purchaser (or, prior to the Closing Date, Seller) as a
partner, contractor, sub-contractor or consultant.

 

(c)  During
the Non-Competition Period, Seller and each Member Party will not, and each will
cause its Affiliates not to, (i) solicit, or assist any person or entity other
than Purchaser to solicit, any Person that is a client or customer of Purchaser
(or, prior to the Closing Date, Seller), or has been a client or customer of
Purchaser (or, prior to the Closing Date, Seller) during the prior twelve (12)
months, to provide any services competitive with those provided by Purchaser
(or, prior to the Closing Date, Seller) or (ii) interfere with any of the
business relationships of Purchaser.

 

(d)  Seller
and each Member Party acknowledges that (i) the markets served by Seller are
national and international in scope and are not dependent on the geographic
location of the executive personnel or the businesses by which they are
employed; and (ii) the above covenants are manifestly reasonable on their face,
and the parties expressly agree that such restrictions have been designed to be
reasonable and no greater than is required for the protection of Purchaser and
are a significant element of the consideration hereunder.

 

(e)  If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 8.4 is invalid or unenforceable, the parties agree
that the court making the determination of invalidity or unforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable that
comes closest to expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.

 

(f)  [***].

 

Section
8.5  Corporate
Existence; Insurance. (a)
Seller hereby agrees that it will (and the Member Parties agree that they will
cause Seller to) (i) not commence any dissolution of its corporate existence,
liquidation or winding up, or commence a voluntary proceeding under Title 11 of
the United States Code, until at least one year from the Closing Date and (ii)
timely object to the commencement of any involuntary proceeding filed under
Title 11 of the United States Code or to any action seeking the appointment of a
receiver or trustee in respect of it or its assets if such petition, proceeding
or action is commenced prior to the first anniversary of the Closing Date.


 

(b)
Purchaser’s insurance coverage and the carriers providing such coverage shall be
determined by Parent. At Parent’s option, Seller shall obtain the consent of its
current insurance carriers to the assignment or reissuance of its current
insurance coverage to Purchaser on the Closing Date. Seller will not cancel any
of its insurance policies that are not transferred to Purchaser pursuant to the
preceding sentence or Article IX (the “Retained
Policies”) or
permit any such policy to lapse until the earlier of 60 days following the
closing and notice from Purchaser that such maintenance is no longer necessary.
To the extent Purchaser elects to assume the Retained Policies of Seller, Seller
will take such actions as are reasonably requested by Purchaser to effect the
transfer of Seller’s Retained Policies to Purchaser. All premium expense with
respect to such period under such policies shall be borne by Purchaser but will
be taken into account in calculating EBIT to the extent consistent with the
definition thereof in Section 11.1. To the extent Purchaser elects during such
period to assume a Retained Policy, Seller will take such actions as are
reasonably requested by Purchaser to effect the transfer of such Retained Policy
to Purchaser.

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















          Section 8.6 Mail;
Payments. From
and after the Closing, Seller agrees to refer to Purchaser all customer,
supplier, employee or other inquiries or correspondence relating to the Assets
or the conduct of the Business after the Closing Date. Seller further agrees to
promptly remit to Purchaser all payments and invoices received after the Closing
Date that relate to the Assets, the Assumed Liabilities or the conduct of the
Business after the Closing Date and Purchaser agrees to promptly remit to Seller
all payments and invoices received after the Closing Date that relate to the
Excluded Assets or the Excluded Liabilities or (other than with respect to the
Assets or the Assumed Liabilities) the conduct of the Business prior to the
Closing Date.

 

Section
8.7 Names
and Logos. From
and after the Closing, neither Seller nor any Member will use any names or logos
incorporating “HHI”. The covenants contained in the preceding sentence shall
survive the expiration of the Non-Competition Period. Within five business days
following the Closing, Seller shall in cooperation with Purchaser amend its
certificate of formation to change its name to a name not incorporating “HHI”.
Seller shall file any consents or other documents required by the Maryland
Department of Assessments and Taxation to permit Purchaser to change its name to
“HHI, L.L.C.” and shall cooperate with Purchaser to ensure that such name is
made available to Purchaser upon Purchaser’s submission of appropriate documents
amending Purchaser’s registration as a foreign limited liability company in the
State of Maryland. 

 

Section
8.8 Certain
Financial Information. From
and after the Closing Date, to the extent requested by Parent, Seller shall and
shall cause its Affiliates to deliver to Parent the financial information,
management representation letters and other documents and information with
respect to Seller required by Parent to prepare and file the financial
statements required to be filed by Parent pursuant to the Exchange Act and will
use commercially reasonable efforts to cause its independent accountants to
deliver to Parent such reports and consents as may be required in connection
therewith, all reasonably in advance of the time such filings are required to be
made. Parent shall reimburse Seller for the reasonable third party accounting
costs in preparing and delivering such information to the extent such expenses
were not incurred by Seller prior to the Closing. 

 

Section
8.9 Retention
of and Access to Records. (a)
Purchaser will provide Seller with access to the Books and Records included in
the Assets, upon reasonable written notice from Seller, during ordinary business
hours and in such a manner as does not interfere with the business operations of
Purchaser or any of its Affiliates, for purposes reasonably related to any
actual or threatened Legal Proceedings relating to Seller’s operation of the
Business or to any Tax audit or proceedings in which Seller or Member Party is
involved. Purchaser’s undertaking in this Section 8.9 shall survive for six
years following the Closing or such longer period during which Purchaser
maintain such Books and Records in the course of its business, provided that
Purchaser may at its option offer to deliver to Seller at any time any such
Books and Records and if Seller shall decline to take possession of such Books
and Records, Purchaser shall thereafter be free to dispose of the same.
Purchaser may require that any Person who will obtain access to Books and
Records pursuant to this Section 8.9 execute a confidentiality undertaking
reasonably satisfactory to Purchaser.

 

(b) To
the extent permitted by applicable Law, Seller will provide Purchaser with
access to the Books and Records included in the Excluded Assets, upon reasonable
written notice from Purchaser, during ordinary business hours and in such a
manner as does not interfere with the business operations of Seller or any of
its Affiliates, for purposes reasonably related to any actual or threatened
Legal Proceedings relating to Purchaser’s operation of the Business or to any
Tax audit or proceedings in which any Purchaser or any of its Affiliates is
involved. Seller’s undertaking in this Section 8.9 shall survive for six years
following the Closing or such longer period during which Seller maintain such
Books and Records in the course of its business, provided that Seller may at its
option offer to deliver to Purchaser at any time any such Books and Records and
if Purchaser shall decline to take possession of such Books and Records, Seller
shall thereafter be free to dispose of the same. Seller may require that any
Person who will obtain access to Books and Records pursuant to this Section 8.9
execute a confidentiality undertaking reasonably satisfactory to
Seller.

 

 

 

ARTICLE
IX  

 




 

EMPLOYEES
AND EMPLOYEE BENEFIT PLANS

 

The
parties agree as follows with respect to the period following the
Closing:

 

Section
9.1  General.
Purchaser shall offer employment, effective as of the Closing Date, to all
employees who are employed by Seller as of the Closing Date and identified in
Section 9.1 of the Seller Disclosure Schedule. Those employees who accept such
offers of employment and become employees of Purchaser shall be referred to
herein as the “Transferred
Employees”.
Neither Purchaser nor any Affiliate of Purchaser (including Parent) shall have
any liability with respect to any employee of Seller or any Employee Benefit
Plan or any claim thereof or related thereto except with respect to Transferred
Employees and then only to the extent expressly provided under Section 9.2.
Purchaser and Seller agree to use the standard procedures set forth in Revenue
Procedure 2004-53 with respect to wage reporting. Seller shall be
(i) responsible for the payment of all wages and other remuneration due to
its employees through the Closing Date and (ii) except as otherwise provided in
Section 9.2, liable for any claims made by its employees and their beneficiaries
under any Employee Benefit Plans or Pension Plans. 

 

Section
9.2  Seller
Benefit Plans.


 

(a)  Except as
explicitly set forth in this Section 9.2, neither Purchaser nor any Affiliate of
Purchaser (including Parent) shall assume any obligations under or liabilities
with respect to any of the Employee Benefit Plans or Pension Plans. Effective as
of the Closing Date, except as otherwise specifically provided in this
Agreement, all Transferred Employees will become fully vested in their account,
cease any participation in, and any benefit accrual under, each of the Employee
Benefit Plans or Pension Plans that is not assumed as set forth in Section
9.2(b), except as otherwise required by applicable Law or the terms of such
plans.

 

(b)  (i)
Purchaser shall or shall cause one or more of its Affiliates to assume
sponsorship of Seller’s Employee Benefit Plans and Pension Plan as in effect at
Closing and listed in Section 9.2(b) of the Seller Disclosure Schedule (the
“Assumed
Plans”).
Effective as of the Closing, Seller shall terminate its participation as
sponsor, plan administrator and adopting employer of the Assumed Plans and
Purchaser shall assume sponsorship of the Assumed Plans. At the Closing, Seller
and Purchaser shall execute and deliver, or cause to be executed and delivered
to Seller and Purchaser, agreements for assumption of the Assumed Plans.
Notwithstanding the foregoing, Seller and Purchaser acknowledge that the Group
Long-Term Disability Insurance Policy and Group Life Insurance Policy between
Jefferson Pilot Financial and HHI, LLC dated August 1, 2004 (Policy #
000010061565) (the “Jefferson
Policy”) shall
be assumed by Purchaser following the Closing subject to receipt of an
appropriate document consent to the assignment and assumption of such policy
within a reasonable period of time following the Closing.

 

(ii)
Purchaser shall assume Seller’s obligation to contribute matching funds to
Seller’s 401(k) plan for calendar year 2004, provided that (i) Purchaser shall
not be required to make aggregate matching contributions to Seller’s 401(k) in
excess of the amounts set forth (on an employee-by-employee basis) in Section
9.2(b) of the Seller Disclosure Schedule and (ii) an appropriate accrual for
such contributions shall be reflected on the Final Closing Working Capital
Statement. 

 

(c)  To the
extent that service is relevant for purposes of computing the amount of any
vacation, sick days, severance and similar benefits under any employee benefit
plan, program or arrangement established or maintained by Purchaser under which
the Transferred Employees benefit, such plan, program or arrangement shall
credit each such Transferred Employee for service earned by that Transferred
Employee on and prior to the Closing Date with Seller in addition to service
earned with Purchaser after the Closing Date but shall not, at any time, exceed
twelve months for one year of service. Purchaser shall not be obligated to cover
any Transferred Employee under any Employee Benefit Plan of Purchaser at the
same time such Transferred Employee is covered under a corresponding plan
assumed pursuant to Section 9.2(b).

 

(d)  Purchaser
shall recognize all accrued but unused vacation of each Transferred Employee as
of the Closing Date, provided that in no event shall Purchaser be required to
recognize accrued vacation benefits with respect to any Transferred Employee in
excess of the amount (or having a value in excess of the amount) set forth with
respect to such Transferred Employee in Section 9.2(d) of the Seller Disclosure
Schedule.

 

(e)  Purchaser
shall recognize and adopt Seller’s bonus plan for calendar year 2004 with
respect to the Transferred Employees, provided that (i) Purchaser shall not be
required to make aggregate bonus payments to the Transferred Employees in excess
of the amounts set forth (on an employee-by-employee basis) in Section 9.2(e) of
the Seller Disclosure Schedule and (ii) an appropriate accrual for such bonus
obligations shall be reflected on the Final Closing Working Capital Statement.


 

(f)  Seller
shall include all employee records other than the Excluded Employee Records in
the Books and Records transferred to Purchaser at the Closing. Seller shall
maintain the Excluded Employee Records for the time required by applicable Law.
To the extent permissible under applicable Law, Seller shall permit Purchaser to
inspect from time to time any Excluded Employee Records.

 

(g)  Effective
as of the Closing and through December 31, 2005, Purchaser shall maintain for
the benefit of the Transferred Employees that are employed by Purchaser during
such period a package of employee benefits that is reasonably comparable in the
aggregate to the employee benefit programs that are listed on the Seller
Disclosure Schedule and that Seller maintained for the benefit of those
employees immediately prior to the Closing. Purchaser’s obligation under this
Section 9.2(g) shall not be deemed to have been breached by virtue of the
inability of Seller to assign the Jefferson Policy as of the Closing Date.


 

Section
9.3  No
Limitations. Nothing
in this Article IX or elsewhere in this Agreement or any other Transaction
Document (other than any Employment Agreement) shall limit or restrict in any
way Purchaser’s right to modify the terms and conditions of any Transferred
Employee or any other employee of Purchaser (including without limitation
Purchaser’s right to modify or discontinue any Employee Benefit Plan assumed by
it pursuant to Section 9.2, subject to applicable Law and the terms of such
Employee Benefit Plan) or change the nature of any at-will employment
relationship between Purchaser and any Transferred Employee or any other
employee of Purchaser.

 

ARTICLE
X  

 




 

INDEMNIFICATION

 

Section
10.1  Indemnity
Obligations of Seller. Seller
and the Member Parties (collectively, “Seller
Indemnitors”)
covenant and agree to defend, indemnify and hold harmless Purchaser and its
Affiliates (including Parent) and the respective its officers, directors,
employees, agents, advisers and representatives of the foregoing (collectively,
the “Purchaser
Indemnitees”), from
and against, and to pay or reimburse Purchaser Indemnitees for, any and all
claims, liabilities, obligations, losses, fines, costs, proceedings or damages
(whether absolute, accrued, conditional or otherwise and whether or not
resulting from third party claims), including all reasonable fees and
disbursements of counsel incurred in the investigation or defense of any of the
same or in asserting any of their respective rights hereunder (collectively,
“Losses”),
resulting from or arising out of:

 

(i) any
misrepresentation or breach of any warranty of Seller or Member Party contained
in the Transaction Documents; provided that in determining whether any such
misrepresentation or breach occurred, any dollar amount thresholds, materiality
qualifiers and Seller Material Adverse Effect qualifier contained in any
representation or warranty herein shall be disregarded;

 

(ii) any
failure of Seller or any Member Party to perform any covenant or agreement made
or contained in the Transaction Documents or fulfill any obligation in respect
thereof; or

 

(iii) any and
all Excluded Liabilities.

 

The
obligations of Seller and the Member Parties other than Schactman under this
Section 10.1 are joint and several with respect to 100% (subject to the
limitations contained in the succeeding paragraph) of any Loss. The obligations
of Schactman under this Section 10.1 are several and shall in no event exceed
10% (subject to the limitations contained in the succeeding paragraph) of any
Loss. 

 

Seller
Indemnitors shall not be required to indemnify Purchaser Indemnitees with
respect to any claim for indemnification (other than a claim for indemnification
based on a breach of the representations and warranties contained in Sections
3.11(c), 3.24 or, subject to the next succeeding paragraph, 3.9) resulting from
or arising out of matters described in clause (i) above pursuant to this
Section 10.1 (and not resulting from or arising out of matters described in
clause (ii) or (iii) above) unless and until the aggregate amount of all
such claims against all Seller Indemnitors, exclusive of Sales Tax Claims (as
hereinafter defined), exceeds $50,000 (the “Seller
Threshold Amount”), in
which case Seller Indemnitors shall be required to indemnify Purchaser
Indemnitees for the amount of such claims in excess of the Seller Threshold
Amount. Claims thereafter may be asserted regardless of amount.

 

Seller
Indemnitors’ indemnity obligation with respect to sales Tax pursuant to clause
(iii) above shall apply to the sales Tax matters disclosed in Section 3.9 of the
Seller Disclosure Schedule. However, Seller Indemnitors shall not be required to
indemnify Purchaser Indemnitees with respect to any claim for indemnification in
respect of a failure of Seller to pay sales Tax (excluding any Taxes payable to
the State of Maryland or any subdivision thereof) or to file a return with
respect thereto (including without limitation any claim for a breach of the
representations and warranties contained in Section 3.9 with respect to any such
failure) (“Sales Tax Claims”) unless and until the aggregate amount of all Sales
Tax Claims against all Seller Indemnitors exceeds $50,000, in which case Seller
Indemnitors shall be required to indemnify Purchaser Indemnitees for the amount
of Sales Tax Claims in excess of $50,000. Sales Tax Claims thereafter may be
asserted regardless of amount. Seller shall take all actions reasonably
requested by Purchaser to resolve Seller’s potential liability for sales Tax for
periods prior to the Closing, including by making voluntary disclosures to Tax
authorities in jurisdictions where such taxes may reasonably be determined to be
due. 

 

Indemnitors’
maximum liability to Purchaser Indemnitees under clause (i) above (and not
resulting from or arising out of matters described in clause (ii) or (iii)
above) shall not exceed the Effective Purchase Price. “Effective
Purchase Price” means,
as of the time any liability pursuant to this Section X is determined and
required to be satisfied, the sum of (i) $5,750,000 (constituting the sum of the
Initial Cash Purchase Price and the aggregate Fair Market Value as of the
Closing Date of the Initial Shares), as such amount shall have been adjusted
pursuant to Section 2.5, (ii) the value of the Assumed Liabilities as of the
Closing Date, (iii) the amount of cash theretofore paid pursuant to Section 2.6,
(iv) the aggregate Fair Market Value as of the applicable Value Date of any
Earnout Shares theretofore issued pursuant to Section 2.6 and (v) any amount
paid to Seller pursuant to Section 2.1(d). 

 

Section
10.2  Indemnity
Obligations of Purchaser and Parent.
Purchaser and Parent (collectively, “Purchaser
Indemnitors”)
jointly and severally covenant and agree to defend, indemnify and hold harmless
Seller and its Affiliates, their respective officers, directors, employees,
agents, advisers and representatives and the Member Parties (collectively, the
“Seller
Indemnitees”), from
and against any and all Losses resulting from or arising out of:

 

(i) any
misrepresentation or breach of warranty of any Purchaser Indemnitor contained in
the Transaction Documents; provided that in determining whether any such
misrepresentation or breach occurred, any dollar amount thresholds, materiality
qualifiers and Parent Material Adverse Effect qualifier contained in any
representation or warranty herein shall be disregarded;

 

(ii) any
failure of any Purchaser Indemnitor to perform any covenant or agreement made or
contained in the Transaction Documents or fulfill any other obligation in
respect thereof; 

 


	(iii)  	
      the
      Assumed Liabilities; or




 

(iv)  the
post-Closing operation of the Business.

 

Purchaser
shall not be required to indemnify Seller Indemnitees with respect to any claim
for indemnification resulting from or arising out of matters described in
clause (i) above pursuant to this Section 10.2 (and not resulting from or
arising out of matters described in clause (ii) or (iii) above) unless and
until the aggregate amount of all claims against Purchaser exceeds $50,000 (the
“Purchaser
Threshold Amount”), in
which case Purchaser shall be required to indemnify Seller Indemnitees for the
full amount of such claims in excess of the Purchaser Threshold Amount. Claims
thereafter may be asserted regardless of amount. Purchaser’s maximum liability
to Seller Indemnitees under clause (i) above (and not resulting from or arising
out of matters described in clause (ii) or (iii) above) shall not exceed
the Effective Purchase Price.

 

Section
10.3  Indemnification
Procedures. (a)
Third
Party Claims. In the
case of any claim asserted by a third party against a party entitled to
indemnification under this Agreement (the “Indemnified
Party”),
notice shall be given by the Indemnified Party to the party required to provide
indemnification (the “Indemnifying
Party”) as
soon as practicable after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and the Indemnified Party shall
permit the Indemnifying Party (at the expense of such Indemnifying Party) to
assume the defense of any third party claim or any litigation with a third party
resulting therefrom; provided,
however, that
(a) the counsel for the Indemnifying Party who shall conduct the defense of
such claim or litigation shall be subject to the approval of the Indemnified
Party (which approval shall not be unreasonably withheld or delayed),
(b) the Indemnified Party may participate in such defense at such
Indemnified Party’s expense (which shall not be subject to reimbursement
hereunder except as provided below), and (c) the failure by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its indemnification obligation under this Agreement except and only to the
extent that such Indemnifying Party is actually and materially damaged as a
result of such failure to give notice. Except with the prior written consent of
the Indemnified Party, no Indemnifying Party, in the defense of any such claim
or litigation, shall consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such Indemnified Party of a general
release from any and all liability with respect to such claim or litigation. If
the Indemnified Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnifying Party might be expected to
affect adversely the ability of the Indemnified Party to conduct its business,
or that the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party; provided,
however, that if
the Indemnified Party does so take over and assume control, the Indemnified
Party shall not settle such claim or litigation without the prior written
consent of the Indemnifying Party, such consent not to be unreasonably withheld
or delayed. If the Indemnifying Party does not accept the defense of any matter
as above provided within thirty (30) days after receipt of the notice from the
Indemnified Party described above, the Indemnified Party shall have the full
right to defend against any such claim or demand at the sole cost of the
Indemnifying Party and shall be entitled to settle or agree to pay in full such
claim or demand. In any event, the Indemnifying Party and the Indemnified Party
shall reasonably cooperate in the defense of any claim or litigation subject to
this Article X and the records of each shall be reasonably available to the
other with respect to such defense.

 

(b)
Non-Third
Party Claims. With
respect to any claim for indemnification hereunder which does not involve a
third party claim, the Indemnified Party will give the Indemnifying Party
written notice of such claim. The Indemnifying Party may acknowledge and agree
by notice to the Indemnified Party in writing to satisfy such claim within
twenty (20) days of receipt of notice of such claim from the Indemnified Party.
If the Indemnifying Party shall dispute such claim, the Indemnifying Party shall
provide written notice of such dispute to the Indemnified Party within such
20-day period, setting forth in reasonable detail the basis of such dispute.
Upon receipt of notice of any such dispute, the Indemnified Party and the
Indemnifying Party shall use reasonable efforts to resolve such dispute within
thirty (30) days of the date such notice of dispute is received. If the
Indemnifying Party shall fail to provide written notice to the Indemnified Party
within twenty (20) days of receipt of notice from the Indemnified Party that the
Indemnifying Party either acknowledges and agrees to pay such claim or disputes
such claim, the Indemnifying Party shall be deemed to have acknowledged and
agreed to pay such claim in full and to have waived any right to dispute such
claim. Once (a) the Indemnifying Party has acknowledged and agreed to pay any
claim pursuant to this Section 10.3, (b) any dispute under this Section 10.3 has
been resolved in favor of indemnification by mutual agreement of the
Indemnifying Party and the Indemnified Party, or (c) any dispute under this
Section 10.3 has been finally resolved in favor of indemnification by order of a
court of competent jurisdiction or other tribunal (including an arbitrator
contemplated by this agreement) having jurisdiction over such dispute, then the
Indemnifying Party shall pay the amount of such claim to the Indemnified Party
within twenty (20) days of the date of acknowledgement by the Indemnifying Party
or final resolution in favor of indemnification, as the case may be, to such
account and in such manner as is designated in writing by the Indemnified
Party.

 

(c) A
proportion of any indemnifiable Loss suffered by a Purchaser Indemnitee equal to
(x) the aggregate Fair Market Value of the Shares issued under this Agreement
prior to the time any liability pursuant to this Section XI is determined and
required to be satisfied (determined with respect to the Initial Shares as of
the Closing Date and with respect to any Earnout Shares as of their Value Date)
divided by (y) the Effective Purchase Price as of the time such liability is
determined and required to be satisfied shall be satisfied by the delivery to
Parent for cancellation of shares of Parent Common Stock having an aggregate
Assigned Value equal to such portion of such Loss. “Assigned Value” means, with
respect to each outstanding Share, as of the time any liability pursuant to this
Section XI is determined and required to be satisfied, (A) the sum of the
aggregate Fair Market Value of the Initial Shares as of the date of this
Agreement and the aggregate Fair Market Value of any Earnout Shares issued prior
to such time as of their respective Value Dates divided by (B) the total number
of Shares issued prior to such time pursuant to this Agreement.

 

Section
10.4  Expiration
of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
Closing until [***];
provided,
however, that
(i) (i) the representations and warranties stated in Sections 5.1, 5.4 and
5.7 shall survive the Closing until [***], (ii) the representations and
warranties stated in Sections 3.9, 3.14 and 3.18 shall survive the Closing
for the period ending on the date that is 30 days after the expiration of the
applicable statute of limitations period and (iii) the representations and
warranties stated in Sections 3.11(c) and 3.24 shall survive
indefinitely.

 

Section
10.5  Exclusive
Remedy. Absent
fraud or criminal activity and except as provided under Sections 8.3 and
8.4, the indemnifications provided for in this Article X shall be the sole
and exclusive post-Closing remedies available to either party against the other
party for any claims under or based upon this Agreement. Seller acknowledges
that the representations and warranties contained in the Transaction Documents
shall not be deemed waived or otherwise affected by any investigation by or on
behalf of Purchaser or Parent.

 

Section
10.6  Set
Off. If
Seller, or any of them, or any Member Party shall have any Liability to
Purchaser or any other Purchaser Indemnitee (pursuant to this Article X or
otherwise), Purchaser and Parent shall be entitled, in addition to any other
right or remedy they may have, to exercise rights of set-off against any
payments or securities payable or deliverable to Seller in connection with the
Transaction Documents or otherwise, including without limitation pursuant to
Section 2.6 of this Agreement [***]. 

 

Section
10.7  Treatment
of Indemnification Payments. All
indemnification payments made under this Agreement shall be treated by the
parties as an adjustment to the Purchase Price. 

 

Section
10.8  No
Punitive Damages. NO
PARTY SHALL BE LIABLE UNDER THIS ARTICLE XI OR OTHERWISE IN RESPECT OF THIS
AGREEMENT, OTHER THAN SECTIONS 8.3 AND 8.4 HEREOF, FOR EXEMPLARY OR PUNITIVE
DAMAGES EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS 

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















OR INCURS
SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY IN CONNECTION WITH A THIRD PARTY
CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE RECOVERABLE.

 

 

 

ARTICLE
XI  

 




 

MISCELLANEOUS

 

Section
11.1  Certain
Definitions.

 

For
purposes of this Agreement, the following terms shall have the meanings
specified in this Section 11.1:

 

“Affiliate” means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by or under common control with such Person, and in the case of any
natural Person shall include all relatives and family members of such Person.
For purposes of this definition, a Person shall be deemed to control another
Person if such first Person directly or indirectly owns or holds five percent
(5%) or more of the ownership interests in such other Person.

 

“Books
and Records” means
all books and records of Seller, including manuals, price lists, mailing lists,
lists of customers, sales and promotional materials, purchasing materials,
documents evidencing intangible rights or obligations, personnel records,
accounting records and litigation files (regardless of the media in which
stored), in each case relating to or used in the Business, excluding only
Seller’s corporate seal, corporate minute book and stock record
books.

 

“Business” means
the business of Seller as conducted or proposed to be conducted on the date
hereof and as of the Closing Date.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

“Contract” means
any contract, agreement, indenture, note, bond, loan, mortgage, license,
instrument, lease, commitment or other arrangement or agreement.

 

“EBIT” means,
for any Applicable EBIT Period, income before interest income or expense and
before provision for income taxes for such period, in each case determined based
on the income statement of Purchaser for such period prepared in accordance with
GAAP (taking into account all applicable reserves); provided,
however, that
EBIT shall in any event exclude (i) all gains or losses in connection with sales
or dispositions of assets and investments not in the ordinary course of
business, (ii) all earnings resulting from downward adjustments (and, to the
extent imposed by Parent through its control of Purchaser, all decreases in
earnings resulting from upward adjustments) to compensation, bonuses, or to any
other expenses, which adjustments are not in the ordinary course of business (it
being understood that, for purposes of determining whether any such adjustments
are in the ordinary course of business, the determination of certain of the
Member Parties to forego bonuses during 2004 shall be ignored), [***]. For
purposes of determining EBIT, the effect of the following items shall be
excluded:

 

[***]

 

(D) other
allocations, if any, agreed to by Seller and Purchaser;

 

(ii) out-of-pocket
expenses incurred in connection with the acquisition of the Business and the
Assets or the interpretation and enforcement of the Transaction
Documents;

 

(iii) any
amount which has been paid by or to Purchaser to satisfy an indemnification
obligation;

 

(iv) [***];

 

(v) [***];

 

(vi) [***];

 

(vii) [***];
and

 


	(viii)  	
      [***]
      




 

"EBIT"
shall include, subject to the foregoing (or comparable) adjustments, the income
before interest expense and before provision for taxes realized by Parent or any
subsidiary of Parent from the provision by Parent or such subsidiary to a
pharmaceutical company of statistical analysis or computer programming services
related to outsourced clinical data management, such services typically defined
by benchmark milestones for billing purposes, similar to the services provided
by Seller as of this date of this Agreement, but excluding any services provided
by employees that are subject to the day-to-day supervision of personnel of such
pharmaceutical companies, including temporary employees, permanent employees,
co-employees or other employees. Any income realized from the hiring by any
pharmaceutical company of any temporary or permanent employees to perform such
services shall not be included in Purchaser's income before interest expense and
provision for taxes for purposes of determining EBIT under this
Agreement.

 

“Environmental
Law” means
any foreign, federal, state or local statute, regulation, ordinance, or rule of
common law as now or hereafter in effect in any way or 

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.




















any other
legally binding requirement relating to the environment, natural resources or
protection of human health and safety including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§ 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the
Clean Water Act (33 U.S.C. § 1251 et seq.), the
Clean Air Act (42 U.S.C. § 7401 et seq.) the
Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136
et seq.), and
the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and
the regulations promulgated pursuant thereto.

 

“Fair
Market Value” means,
as to the Parent Common Stock, (i) the average closing bid price of the Parent
Common Stock on quoted on NASDAQ over a period of 20 consecutive trading days
the latest of which shall be the trading day immediately preceding the date as
of which "Fair Market Value" is being determined.

 

“GAAP” means
United States generally accepted accounting principles as in effect from time to
time.

 

“Governmental
Approval” means
any Consent of, with or to any Governmental Body.

 

“Governmental
Body” means
any government or governmental or regulatory authority or body thereof, or
political subdivision thereof, whether federal, state, local or foreign, or any
agency, instrumentality or authority thereof, or any court or arbitrator (public
or private).

 

“Hazardous
Material” means
any substance, material or waste which is regulated by the United States, the
foreign jurisdictions in which Seller conducts business, or any state, local or
foreign governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
“hazardous waste,” “hazardous substance,” “hazardous material,” “restricted
hazardous waste,” “industrial waste,” “solid waste,” “contaminant,” “pollutant,”
“toxic waste” or “toxic substance” under any provision of Environmental
Law.

 

“Intellectual
Property” means
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).

 

“IRS” means
the United States Internal Revenue Service.

 

“Knowledge” or
words of similar effect means, (a) with respect to Seller, the actual subjective
knowledge of each Member Party and each member of senior management of Seller
and (b) with respect to Parent or any Purchaser, the actual subjective knowledge
of each member of senior management of Parent, and in either case, matters that
an individual in the position of such Member Party or member of senior
management, as the case may be, in light of the relevant circumstances,
reasonably would be expected to know upon due inquiry.

 

“Law” means
any federal, state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement.

 

“Legal
Proceeding” means
any judicial, administrative or arbitral actions, suits, proceedings (public or
private), claims or governmental proceedings.

 

“Liability” means
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.

 

“Lien” means
any lien, pledge, mortgage, deed of trust, security interest, claim, lease,
charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.

 

“Parent
Material Adverse Change” or
“Parent
Material Adverse Effect” means
any change effect that is materially adverse to (i)  the business,
properties, results of operations, prospects or condition (financial or
otherwise) of Parent, (ii) the ability of Parent or Purchaser to perform
its obligations under this Agreement or (iii) the ability of Purchaser to
conduct the Business after the Closing Date as the Business is being conducted
as of the date hereof, provided that a change or effect relating to the economy
or financial markets in general shall not constitute a Parent Material Adverse
Effect.

 

“Seller
Material Adverse Change” or
“Seller
Material Adverse Effect” means
any change effect that is materially adverse to (i)  the business,
properties, results of operations, prospects or condition (financial or
otherwise) of Seller, (ii) the ability of Seller to perform its obligations
under this Agreement or (iii) the ability of Purchaser to conduct the
Business after the Closing Date as the Business is being conducted as of the
date hereof, provided that a change or effect relating to the economy or
financial markets in general shall not constitute a Seller Material Adverse
Effect.

 

“Neutral
Accountant” means
(i) Ernst & Young, or if Ernst & Young is not independent in the
reasonable determination of Purchaser or Seller, then (ii) an independent
auditing firm of nationally or regionally recognized standing selected by the
mutual agreement of Purchaser and Seller within 15 days of the date on which the
Neutral Accountant is proposed to begin serving or, if Purchaser and Seller are
unable to agree within such period, an independent auditing firm of nationally
or regionally recognized standing selected jointly by two other such firms, one
of which shall be specified by Purchaser and one of which shall be specified by
Seller, within 15 days after the expiration of such period. 

 

“Non-Competition
Period” means
[***]. 

 

“Order” means
any order, injunction, judgment, decree, ruling, writ, assessment or arbitration
award.

 

“Permitted
Exceptions” means
(i) statutory liens for current taxes, assessments or other governmental charges
not yet delinquent or the amount or validity of which is being contested in good
faith by appropriate proceedings, provided an appropriate reserve is established
therefor; (ii) mechanics’, carriers’, workers’, repairers’ and similar Liens
arising or incurred in the ordinary course of business that are not material to
the business, operations and financial condition of the property so encumbered
or Seller; (iii) zoning, entitlement and other land use and environmental
regulations by any Governmental Body, provided that such regulations have not
been violated; and (iv) such other imperfections in title, charges, easements,
restrictions and encumbrances which do not materially detract from the value of
or materially interfere with the present use of the Assets subject thereto or
affected thereby.

 

“Person” means
any individual, corporation, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Body or
other entity.

 

“Release” means
any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, migration or leaching into the indoor or outdoor
environment, or into or out of any property.

 

[***]
Confidential treatment requested. Omitted portions have been filed separately
with the Securities and Exchange Commission.























“Remedial
Action” means
all actions to (x) clean up, remove, treat or in any other way address any
Hazardous Material; (y) prevent the Release of any Hazardous Material so it does
not endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (z) perform pre-remedial studies and investigations or
post-remedial monitoring and care.

 

“Subsidiary” means,
as to any Person, any other Person of which a 50% or more of the outstanding
voting securities or other equity interests are owned, directly or indirectly,
by such Person.

 

“Tax” or
“Taxes” shall
mean means any federal, state, provincial, local or foreign income, alternative
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits, windfall profits, gross receipts, value
added, sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of the Code or
any analogous or similar provision of any state, local or foreign law or
regulation), real property, personal property, ad valorem, intangibles, rent,
occupancy, license, occupational, employment, unemployment insurance, social
security, disability, workers’ compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or assessment
or deficiencies thereof, and including any interest, penalties or additions to
tax attributable to the foregoing.

 

“Tax
Return” means
any return, report, declaration, form, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.

 

Section
11.2  Publicity . No
party shall issue any press release or make any other public announcement
relating to the subject matter of this Agreement without the prior written
consent of Parent.

 

Section
11.3  Payment
of Sales, Use or Similar Taxes; Transfer Taxes. Sellers
and Purchasers shall each be responsible for and pay in a timely manner 50% of
all sales, use, value added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar Taxes and
fees (“Transfer
Taxes”),
arising out of or in connection with or attributable to the transactions
effected pursuant to the Transaction Documents, provided that Purchaser shall be
responsible for any Transfer Taxes in respect of Assets other than fixtures,
furniture and equipment. Each party hereto shall prepare and timely file all Tax
Returns required to be filed in respect of Transfer Taxes that are the primary
responsibility of such party under applicable Law; provided,
however, that
such party’s preparation of any such Tax Returns shall be subject to the other
party’s approval, which approval shall not be unreasonably withheld or
delayed.

 

Section
11.4  Expenses. Except
as otherwise provided in this Agreement, each party shall bear all costs and
expenses incurred by such party in connection with the negotiation and execution
of this Agreement and each other Transaction Document, whether or not the
transactions contemplated hereby and thereby are consummated.

 

Section
11.5  Specific
Performance. Seller
acknowledges and agrees that the breach of this Agreement would cause
irreparable damage to Purchaser and that Purchaser will not have an adequate
remedy at law. Therefore, the obligations of Seller under this Agreement,
including, without limitation, Seller’s obligation to sell the Assets to
Purchaser, shall be enforceable by a decree of specific performance issued by
any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith (without the requirement of the
posting of a bond or other surety). Such remedies shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which any party
may have under this Agreement or otherwise.

 

Section
11.6  Submission
to Jurisdiction; Consent to Service of Process. The
parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of
any federal or state court located Wilmington, Delaware over any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby and each party hereby irrevocably agrees that all claims in respect of
such dispute or any suit, action proceeding related thereto may be heard and
determined in such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable Law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum for the maintenance of such dispute. Each
of the parties hereto agrees that a judgment in any such dispute may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law.

 

Section
11.7  Entire
Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by Purchaser, in the case of an amendment,
supplement, modification or waiver sought to be enforced against Purchaser or
Parent, or Seller, in the case of an amendment, supplement, modification or
waiver sought to be enforced against Seller. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.

 

Section
11.8  Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to conflicts of law principles
thereof.

 

Section
11.9  Table
of Contents and Headings. The
table of contents and section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.

 

Section
11.10  Notices. All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally or mailed by certified mail,
return receipt requested, to the parties (and shall also be transmitted by
facsimile to the Persons receiving copies thereof) at the following addresses
(or to such other address as a party may have specified by notice given to the
other party pursuant to this provision):

 

If to
Seller, to:

 

HHI,
L.L.C.

224
Schilling Center, Suite 160

Hunt
Valley, Maryland 21031

Attn:
Eugenia Henry

Telecopier:
410-785-3865

 

With a
copy to:

 

Offit,
Kurman, Yumkas & Denick

8 Park
Center Court

Owings
Mill, Maryland 21117

Attn: Ted
Offit, Esq.

Telecopier:
443-738-1535

 

If to a
Member Party, to such Member Party in care of:

 

HHI,
L.L.C.

224
Schilling Center, Suite 160

Hunt
Valley, Maryland 21031

Attn:
Eugenia Henry

Telecopier:
410-785-3865

 

With a
copy to:

 

Offit,
Kurman, Yumkas & Denick

8 Park
Center Court

Owings
Mill, Maryland 21117

Attn: Ted
Offit, Esq.

Telecopier:
443-738-1535

 

If to
Parent, to:

 

Ventiv
Health Inc.

200
Cottontail Lane

Vantage
Court North

Somerset,
New Jersey 08873

Attention:
Chief Executive Officer




With a
copy to:

 

Kenneth
G. Alberstadt, Esq.

Law
Office of Kenneth G. Alberstadt

111
Broadway, 18th
Floor

New York,
New York 10006

Telecopier:
(212) 404-7567

 

If to
Purchaser, to:

 

IIH
Acquisition LLC

in care
of Ventiv Health Inc.

200
Cottontail Lane

Vantage
Court North

Somerset,
New Jersey 08873

Attention:
Chief Executive Officer




With a
copy to:

Kenneth
G. Alberstadt, Esq.

Law
Office of Kenneth G. Alberstadt

111
Broadway, 18th
Floor

New York,
New York 10006

Telecopier:
(212) 404-7567




Any such
notice or communication shall be deemed to have been received (i) when
delivered, if personally delivered or transmitted by electronic mail, with
receipt acknowledgment by the recipient by return electronic mail, (ii) when
sent, if sent by facsimile on a business day during normal business hours (or,
if not sent on a business day during normal business hours, on the next business
day after the date sent by facsimile), (iii) on the next business day after
dispatch, if sent by nationally recognized, overnight courier guaranteeing next
business day delivery, and (iv) on the 5th business
day following the date on which the piece of mail containing such communication
is posted, if sent by mail.




Section
11.11  Bulk
Sales.
Purchaser and Seller hereby waive compliance by the other with the provisions of
the bulk sales laws of any jurisdiction, to the extent applicable to the
transactions contemplated by this Agreement. Seller shall indemnify and hold
harmless Purchaser and the other Purchaser Indemnitees from and against any and
all Losses resulting from or arising out of any noncompliance or alleged
noncompliance by Purchaser or Seller with such bulk sales laws.

 

Section
11.12  Severability. If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.

 

Section
11.13  Assignment
of Works. The
Stockholder agrees that all Work Product belongs in all instances to the
Company. To the extent any Member Party has any right, title or interest of any
kind or nature whatsoever in any Work Product, such Member Party hereby assigns
all such right, title and interest, effective upon the Closing, to (or as
otherwise directed by) Purchaser. For purposes hereof, “Work
Product” means
all inventions, innovations, improvements, technical information, systems,
software developments, methods, designs, analyses, drawings, reports, service
marks, trademarks, trade names, logos and all similar or related information
(whether patentable or unpatentable) which relates to any business conducted or
proposed to be conducted by the Company as of the date hereof.

 

Section
11.14  Binding
Effect; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Except as provided in Article
IX, nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not a party to this Agreement.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by any party hereto (by operation of law or otherwise) without the prior
written consent of the other parties hereto and any attempted assignment without
the required consents shall be void, provided that no such consent shall be
required for any such assignment (i) of Parent’s rights and obligations
hereunder (a) in connection with a sale or other transfer (whether directly or
indirectly, including by merger or consolidation) of substantially all of the
assets of Parent and its consolidated subsidiaries, so long as the surviving or
transferee entity in such transaction undertakes to comply with Parent’s
obligations under this Agreement or (b) to an Affiliate of Parent, provided that
Parent remains liable therefor, (ii) of Purchaser’s rights and obligations
hereunder in connection with a sale or other transfer (whether directly or
indirectly, including by merger or consolidation) of the Business, provided that
the Parent Guaranty remains in effect, or (iii) of Parent’s and Purchasers’
rights hereunder as security for the obligations of Parent or any Affiliate of
Parent under a credit agreement entered into with a bank or other financial
institution, including without limitation that certain Loan and Security
Agreement dated as of March 29, 2002 among Wells Fargo Foothill, Inc., as
lender, and Parent and Ventiv Health US Sales LLC, as borrowers, as the same may
be amended from time to time.

 

Section
11.15  Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.

 

Section
11.16  Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.

 

* *
*

 







HHI,
L.L.C.







By /s/
Eugenia Henry    

Name:
Eugenia Henry

Title:
President




VENTIV
HEALTH, INC.







By /s/
John Emery     

Name:
John Emery

Title:
Chief Financial Officer and Secretary




IIH
ACQUISITION LLC







By /s/
John Emery     

Name:
John Emery

Title:
Vice President




MEMBERS:







/s/
Eugenia Henry    

Eugenia
Bair Henry







EARL WEBB
HENRY LIVING TRUST







By /s/
Earl Henry     

Earl Webb
Henry, trustee







By /s/
Eugenia Henry    

Eugenia
Bair Henry, trustee







/s/
Mark Schachtman    

Mark
Schactman










2























MEMBER
AFFILIATES:







/s/
Earl Henry     

Earl Webb
Henry




EUGENIA
BAIR HENRY LIVING         TRUST







By /s/
Earl Henry     

Earl Webb
Henry, trustee







By /s/
Eugenia Henry    

Eugenia
Bair Henry, trustee