Document:

Exhibit
10.1

 

 

AGREEMENT AND PLAN
OF MERGER

 

by and among

 

P-D HOLDING CORP.,

 

EPIQ SYSTEMS,
INC.,

 

PD MERGER CORP.

 

and

 

THE SHAREHOLDERS’ REPRESENTATIVE 

IDENTIFIED HEREIN

 

 

Dated as of
January 30, 2004

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS  

  	
   

  
	
  1.1

  	
   

  	
  Definitions

  	
   

  
	
  1.2

  	
   

  	
  Other
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II THE TRANSACTIONS  

  	
   

  
	
  2.1

  	
   

  	
  The Merger

  	
   

  
	
  2.2

  	
   

  	
  Effective Time of the
  Merger

  	
   

  
	
  2.3

  	
   

  	
  Effect of
  Merger

  	
   

  
	
  2.4

  	
   

  	
  Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III THE
  SURVIVING CORPORATION  

  	
   

  
	
  3.1

  	
   

  	
  Articles of Incorporation

  	
   

  
	
  3.2

  	
   

  	
  By-Laws

  	
   

  
	
  3.3

  	
   

  	
  Directors

  	
   

  
	
  3.4

  	
   

  	
  Officers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV CONVERSION OF
  SHARES  

  	
   

  
	
  4.1

  	
   

  	
  Conversion
  of Shares

  	
   

  
	
  4.2

  	
   

  	
  Dissenters’
  Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V PAYMENT OF MERGER
  CONSIDERATION  

  	
   

  
	
  5.1

  	
   

  	
  Merger
  Consideration

  	
   

  
	
  5.2

  	
   

  	
  Initial Payment

  	
   

  
	
  5.3

  	
   

  	
  Post-Closing
  Adjustment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI CONDITIONS TO CLOSING  

  	
   

  
	
  6.1

  	
   

  	
  Conditions
  to Parent’s and Merger Sub’s Obligations

  	
   

  
	
  6.2

  	
   

  	
  Conditions to
  the Company’s Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII RESERVED  

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII
  REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY  

  	
   

  
	
  8.1

  	
   

  	
  Organization; Corporate
  Power

  	
   

  
	
  8.2

  	
   

  	
  Capital Stock and
  Related Matters

  	
   

  
	
  8.3

  	
   

  	
  Authorization;
  No Breach

  	
   

  
	
  8.4

  	
   

  	
  Subsidiaries

  	
   

  
	
  8.5

  	
   

  	
  Financial
  Statements; Accounts Receivable

  	
   

  
	
  8.6

  	
   

  	
  Absence of
  Undisclosed Liabilities

  	
   

  
	
  8.7

  	
   

  	
  No Material Adverse Effect

  	
   

  
	
  8.8

  	
   

  	
  Absence of Certain
  Developments

  	
   

  
	
  8.9

  	
   

  	
  Assets.

  	
   

  
	
  8.10

  	
   

  	
  Contracts and Commitments.

  	
   

  
	
  8.11

  	
   

  	
  Intellectual Property
  Rights.

  	
   

  
	
  8.12

  	
   

  	
  Litigation

  	
   

  
	
  8.13

  	
   

  	
  Compliance
  with Laws

  	
   

  
	
  8.14

  	
   

  	
  Environmental
  Matters

  	
   

  
	
  8.15

  	
   

  	
  Employees

  	
   

  
	
  8.16

  	
   

  	
  Employee
  Benefit Plans.

  	
   

  
	
  8.17

  	
   

  	
  Tax Matters

  	
   

  

 

i

 

	
  8.18

  	
   

  	
  Brokerage

  	
   

  
	
  8.19

  	
   

  	
  Bank Accounts

  	
   

  
	
  8.20

  	
   

  	
  Affiliate
  Transactions

  	
   

  
	
  8.21

  	
   

  	
  Customers
  and Suppliers

  	
   

  
	
  8.22

  	
   

  	
  Accuracy of
  Written Due Diligence Materials

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REPRESENTATIONS
  AND WARRANTIES OF PARENT AND MERGER SUB  

  	
   

  
	
  9.1

  	
   

  	
  Organization
  and Power

  	
   

  
	
  9.2

  	
   

  	
  Authorization

  	
   

  
	
  9.3

  	
   

  	
  No Violation

  	
   

  
	
  9.4

  	
   

  	
  Governmental
  Authorities and Consents

  	
   

  
	
  9.5

  	
   

  	
  Litigation

  	
   

  
	
  9.6

  	
   

  	
  Conduct of Business;
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X RESERVED  

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI ADDITIONAL
  AGREEMENTS  

  	
   

  
	
  11.1

  	
   

  	
  Survival

  	
   

  
	
  11.2

  	
   

  	
  Indemnification

  	
   

  
	
  11.3

  	
   

  	
  Press Release and
  Announcements

  	
   

  
	
  11.4

  	
   

  	
  Expenses

  	
   

  
	
  11.5

  	
   

  	
  Further
  Assurances

  	
   

  
	
  11.6

  	
   

  	
  Certain
  Tax Matters

  	
   

  
	
  11.7

  	
   

  	
  Appointment
  of Shareholders’ Representative

  	
   

  
	
  11.8

  	
   

  	
  Collection of
  Accounts Receivable

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII
  MISCELLANEOUS  

  	
   

  
	
  12.1

  	
   

  	
  Amendment
  and Waiver

  	
   

  
	
  12.2

  	
   

  	
  Notices

  	
   

  
	
  12.3

  	
   

  	
  Assignment

  	
   

  
	
  12.4

  	
   

  	
  Severability

  	
   

  
	
  12.5

  	
   

  	
  Interpretation

  	
   

  
	
  12.6

  	
   

  	
  Complete
  Agreement

  	
   

  
	
  12.7

  	
   

  	
  Counterparts

  	
   

  
	
  12.8

  	
   

  	
  Governing Law

  	
   

  
	
  12.9

  	
   

  	
  Schedules

  	
   

  
	
  12.10

  	
   

  	
  No Third Party
  Beneficiaries

  	
   

  
	
  12.11

  	
   

  	
  Dispute
  Resolution

  	
   

  

 

ii

 

AGREEMENT
AND PLAN OF MERGER

 

THIS  AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated as of January 30, 2004, is made by and among P-D Holding Corp., an
Oregon corporation (the “Company”), EPIQ Systems, Inc., a Missouri
corporation (“Parent”), PD Merger Corp., an Oregon corporation (“Merger
Sub”), and the Shareholders’ Representative (solely in its capacity as the
Shareholders’ Representative) identified in Section 11.7 hereof.

 

WHEREAS,
the respective boards of directors of the Company, Parent and Merger Sub have
each determined that it is in the best interests of their respective
shareholders for Merger Sub to merge with and into the Company, and,
accordingly, each has approved this Agreement and the transactions contemplated
hereby, upon the terms and subject to the conditions set forth herein;

 

WHEREAS,
consummation of the transactions contemplated hereby requires the approval of
(i) the holders of at least a majority of the issued and outstanding shares of
the Company’s common stock, no par value per share (the “Company Common
Stock”), and (ii) the holders of at least a majority of the issued and
outstanding shares of Merger Sub’s common stock, no par value per share (the “Merger
Sub Common Stock”); and

 

WHEREAS,
as an inducement to Parent and Merger Sub to enter into this Agreement and
consummate the transactions contemplated hereby, certain shareholders of the
Company collectively holding 92.37% of the shares of Company Common Stock
outstanding as of the date of this Agreement (collectively, the “Controlling
Shareholders”) have executed the Related Agreement, pursuant to which,
among other things, the Controlling Shareholders have (without limiting any
obligations the Company Shareholders may have hereunder, pursuant to law or
otherwise) expressly agreed to take certain actions and comply with certain
obligations of the Company Shareholders described herein;

 

NOW,
THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying
the same into effect, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                                 Definitions. 
For purposes of this Agreement, the following terms shall have the
meanings set forth below:

 

“Affiliate” of any
particular Person means any other Person controlling, controlled by or under
common control with such Person.

 

“Affiliated Group”
means any affiliated group as defined in Section 1504 of the Code (or any
analogous combined, consolidated or unitary group defined under state, local or
foreign income Tax law) of which the Company or any of its Subsidiaries is or
has been a member.

 

“Aggregate Base
Purchase Price” means $115,000,000.00

 

“Aggregate Deemed
Option Exercise Proceeds” means $5,585.00, which represents the aggregate
exercise proceeds that would have been payable to the Company if all Vested
Company Options outstanding immediately prior to the Closing had been exercised
as of immediately prior to the Closing.

 

 

“Aggregate Series A
Preferred Purchase Price” means $15,651,075.72, which represents the
aggregate Series A Preferred Purchase Price calculated with respect to all
shares of Series A Preferred Stock outstanding on the Closing Date and the
Series A Preferred Purchase Price with respect thereto.

 

“Applicable Rate”
means the prime rate of interest as published from time to time in The Wall
Street Journal.

 

“Audited September
2003 Financial Statements” means the Company’s consolidated financial
statements (including its consolidated balance sheet, income statement and
statement of cash flows) as of, and for the twelve-month period ending,
September 30, 2003, which financial statements have been prepared in accordance
with GAAP consistently applied throughout the periods covered thereby and the
requirements of Regulation S-X of the Securities Act of 1933, as amended.

 

“Cash on Hand”
means, as of any time of determination, the Company’s and its Subsidiaries’
actual consolidated cash (bank) balances (net of any bank overdrafts and net of
any restricted cash balances), as adjusted (to avoid duplication or for any
other appropriate reason) for any deposits in transit, any outstanding checks
and any other proper reconciling items, in each case as determined in
accordance with GAAP (it being understood that, for the avoidance of doubt,
outstanding checks shall include (and Cash on Hand shall be reduced by) the
amount of any checks written to recipients of the Tax Bonus Payment but not
otherwise delivered to the recipients thereof, or otherwise cleared, as of the
Closing).

 

“Code” means the
Internal Revenue Code of 1986, as amended, and any reference to any particular
Code section shall be interpreted to include any revision of or successor to
that section regardless of how numbered or classified.

 

“Company Disclosure
Schedules” means the disclosure schedules described in Article VIII
of this Agreement.

 

“Company Shareholders”
means the holders of the outstanding shares of capital stock of the Company
(including holders of Vested Company Options) as of the Closing.

 

“Confidentiality
Agreement” means that certain Confidentiality Agreement, made and entered
into as of August 27, 2003, by and between Parent and Poorman-Douglas
Corporation (as amended, the “Confidentiality Agreement”).

 

“Distribution Errors”
means any error or omission by the Company or any of its Subsidiaries with
respect to any distribution of client funds prior to the Closing, whether in
connection with a class action lawsuit, a bankruptcy case or otherwise.

 

“Deemed Number of
Shares Outstanding” means 13,988,344, which represents the aggregate number
of shares of Company Common Stock outstanding as of the Closing, plus the
number of shares of Company Common Stock issuable upon exercise of the Vested
Company Options outstanding as of immediately prior to the Closing.

 

“Employment Agreements”
means, collectively, the employment and non-compete agreements in the form of Exhibits
A and B attached hereto.

 

“Environmental
Requirements” means all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations and all common law, in each case concerning public health and
safety, worker health and safety, exposure to hazardous substances or
materials, pollution or protection of the environment, each as now in effect.

 

2

 

“Escrow Agent” has
the meaning given to such term in the Escrow Agreement.

 

“Escrow Agreement”
means the escrow agreement in the form of Exhibit C attached hereto.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

“Estimated Aggregate
Common Purchase Price” means $ 98,629,509.28, which represents the Final
Aggregate Common Purchase Price as estimated by the parties immediately prior
to Closing.

 

“Estimated Per Share
Common Price” means $7.05, which represents the Final Per Share Common
Price as estimated by the parties immediately prior to Closing.

 

“Executives” means
each of Jeffrey B. Baker and Edward J. Nimmo.

 

“Final Determination
Date” means the date the Closing Statement becomes final and binding on the
parties hereto in accordance with Section 5.3(a) hereof.

 

“Fundamental
Representations” means the representations and warranties set forth in Section
8.2 (Capital Stock and Related Matters); the first two sentences of Section
8.3 (Authorization; No Breach); Section 8.4 (Subsidiaries); Section
8.17(b)(ix) (Tax Matters); and Section 8.18 (Brokerage).

 

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

 

“Guaranty” means
any agreement, undertaking or arrangement by which any Person guarantees,
endorses or otherwise becomes or is contingently liable for the debt,
obligation or other liability of any other Person (other than by endorsements
of instruments in the ordinary course of collection), or guaranties of the
payment of dividends or other distributions upon the shares of any other
Person.

 

“HSR Act” means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Indebtedness”
means, with respect to any Person at any date, without duplication:  (i) all obligations of such Person for
borrowed money or in respect of loans or advances, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments or
debt securities, (iii) all obligations in respect of letters of credit and
bankers’ acceptances issued for the account of such Person, (iv) all
obligations arising from bank overdrafts, (v) all obligations arising from
deferred compensation arrangements and all obligations under severance plans or
arrangements, bonus plans or similar arrangements payable as a result of the
consummation of the transactions contemplated hereby (excluding any
unpaid portion of the “Transaction Bonuses” described in Sections 8.6 and 8.8
of the Company Disclosure Schedules, it being understood that any such unpaid
amounts shall constitute current liabilities for purposes of determining Net
Working Capital and Closing Working Capital), (vi) all obligations of such
Person secured by a Lien, (vii) all Guaranties of such Person in connection
with any of the foregoing, (viii) all capital lease obligations, (ix) all
deferred rent, (x) all indebtedness for the deferred purchase price of property
or services with respect to which a Person is liable, contingently or otherwise,
as obligor or otherwise (other than trade payables incurred in the ordinary
course of business which are not more than 30 days past due based on the due
date specified in the invoice thereof, or if no due date is specified in the
invoice or no invoice exists, then based on past custom and practice), (xi) all
other liabilities classified as non-current liabilities in accordance with GAAP
as of the date of determination of such Indebtedness (other than any deferred
Taxes), and (xii) all accrued interest, prepayment premiums or penalties
related to any of the foregoing.  For
the avoidance of doubt, Indebtedness shall not include any deferred gain
recorded in connection with the sale and leaseback of the Company’s corporate
headquarters in September 2003.

 

3

 

“Indemnity Escrow
Account” means the indemnity escrow
account established pursuant to the terms of the Escrow Agreement.

 

“Indemnity Escrow
Amount” means an amount equal to $10,000,000.00.

 

“Indemnity Escrow Release
Date” means the date that is 18 months after the Closing Date.

 

“Intellectual Property
Rights” means any and all intellectual and industrial proprietary rights of
every kind and description, including (i) patents, patent applications,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), discoveries, improvements, ideas and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (ii) trademarks, service marks, trade
dress, trade names, logos, corporate names, and rights in vanity telephone
numbers, together with all translations, adaptations, derivations, and
combinations thereof and including all registrations and applications for registration
thereof and including all of the goodwill associated therewith, (iii)
copyrights (registered or unregistered) and copyrightable works, and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) Internet domain
names (and all associated content), Internet Web sites and registrations or
applications for registration thereof,
(vi) computer software (including source code, executable code, data, databases
and documentation), (vi) trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
technical data, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), and (viii) claims or causes of
action arising out of or related to infringement or misappropriation of any of
the foregoing.

 

“Investment” as
applied to any Person means (i) any direct or indirect purchase or other
acquisition by such Person of any notes, obligations, instruments, stock,
securities or ownership interest (including limited liability company
interests, partnership interests and joint venture interests) of any other
Person and (ii) any capital contribution by such Person to any other Person.

 

“Knowledge” means,
when referring to the “Knowledge” of the Company, or any similar phrase or
qualification based on knowledge or awareness with respect to the Company, (i)
the actual knowledge of any of Jeff Baker, Edward Nimmo or Paul Meade, and (ii)
the knowledge that any such Person referenced in (i) above, as a prudent
business person, would have obtained in the conduct of his or her business.

 

“Lien” means any
mortgage, pledge, hypothecation, lien (statutory or otherwise), preference,
priority, security interest, community property interest, security agreement,
easement, covenant, restriction or other encumbrance of any kind or nature
whatsoever.

 

“Management Agreements”
means that certain Transaction and Management Services Agreement, dated as of
March 2, 2001, by and between Shawmut Capital Partners, Inc. and
Poorman-Douglas Corporation, as amended, and that certain Transaction and
Management Services Agreement, dated as of March 2, 2001, by and between
Endeavour Capital, LLC and Poorman-Douglas Corporation, as amended.

 

“Material Adverse
Effect” means any material adverse effect or development on the business,
operations, assets, liabilities, financial condition, operating results or cash
flow of the Company and its Subsidiaries taken as a whole; provided, however,
that changes in GAAP and changes in general economic conditions in the United
States shall not be considered in determining whether a Material Adverse Effect
has occurred.

 

“Net Working Capital”
means, as of any date of determination, the amount by which the Company’s and
its Subsidiaries’ total current assets (excluding Cash on Hand and any current
deferred Tax assets) on a consolidated basis as of such date exceeds the
Company’s and its Subsidiaries’ total current liabilities (including, for the
avoidance of doubt, any unpaid portion of the “Transaction Bonuses” described
in

 

4

 

Sections 8.6 and 8.8 of
the Company Disclosure Schedules, and excluding the current portion of any
Indebtedness, the current portion of any deferred gain recorded in connection
with the sale and leaseback of the Company’s corporate headquarters in
September 2003, and any current deferred Tax liabilities) on a consolidated
basis as of such date, determined in accordance with GAAP on a basis consistent
with the methodologies, practices and principles used in the preparation of the
Audited September 2003 Financial Statements (except as otherwise provided in
this definition and without regard to any purchase accounting adjustments
arising out of the transactions contemplated hereby); provided that, for
purposes of calculating Net Working Capital, the amount of any current asset or
current liability with respect to Taxes shall be determined by
(x) excluding (except as provided in clause (y) below) any item of
deduction or loss arising in connection with or as a result of the transactions
contemplated hereby (including any items arising in connection with or as a
result of payments with respect to (i) shares of Company Common Stock that have
become or will become vested upon or in connection with the consummation of the
transactions contemplated hereby, or (ii) Vested Company Options), and (y)
including (1) any item of deduction or loss arising in connection with or as a
result of the payment of the Tax Bonus Payment, and (2) items of deduction or
loss (if any) arising in connection with or as a result of the payment by the
Company of no more than $150,000 for insurance premiums with respect to an
errors and omissions insurance policy.

 

“OBCA” means the
Oregon Business Corporation Act, as amended from time to time.

 

“Per Share Escrow
Amount” means $0.836, which represents an amount equal to the quotient
determined by dividing (i) the sum of (x) the Indemnity Escrow Amount, (y) the
Purchase Price Escrow Amount, and (z) the Shareholder Representative Escrow
Amount, by (ii) the Deemed Number of Shares Outstanding.

 

“Permitted Liens”
means (i) Liens that are set forth on the Permitted Liens Schedule
attached hereto, (ii) Liens for Taxes not delinquent or the validity of which
are being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established on the Company’s financial statements
in accordance with GAAP consistently applied, and (iii) statutory landlord’s,
carrier’s, workmen’s, repairmen’s or other similar Liens arising or incurred in
the ordinary course of business.

 

“Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated association, corporation, limited liability company, entity or
governmental entity (whether foreign, federal, state, county, city or otherwise
and including any instrumentality, division, agency or department thereof).

 

“Pro Rata Share”
means, with respect to a Company Shareholder, the number of shares of Company
Common Stock held by such Company Shareholder immediately prior to the Closing,
divided by the Deemed Number of Shares Outstanding.

 

“Purchase Price Escrow
Account” means the purchase price
escrow account established pursuant to the terms of the Escrow Agreement.

 

“Purchase Price Escrow
Amount” means $1,500,000.00.

 

“Realty Leases”
means all leases, subleases, licenses, concessions and other agreements
pursuant to which the Company or any of its Subsidiaries holds any Leased
Realty, including the right to all security deposits and other amounts and
instruments deposited by or on behalf of the Company or its Subsidiaries
thereunder.

 

“Related Agreement”
means that certain Agreement Related to Merger Agreement, dated as of the date
hereof, by and among Parent, the Company and those Controlling Shareholders who
have signed the signature pages thereto.

 

5

 

“Series A Preferred
Purchase Price” means the Original Series A Issue Price (as defined in the
Company’s amended and restated articles of incorporation) of a share of Series
A Preferred Stock, plus an amount equal to all dividends thereon which
are accrued and unpaid as of the Closing.

 

“Series A Preferred
Stock” means the Company’s Series A Preferred Stock, no par value per
share.

 

“Shareholder
Representative Escrow Account” means the Shareholder Representative escrow
account established pursuant to the terms of the Escrow Agreement.

 

“Shareholder
Representative Escrow Amount” means $200,000 deposited with the Escrow
Agent pursuant to the Escrow Agreement to satisfy the expenses of the
Shareholder Representative.

 

“Software” means
the software used, relied upon, developed or created by the Company or its
Subsidiaries, or any version, improvement, modification, enhancement or
derivative thereof, and all software necessary for their respective operations,
including  all programmer and other
documentation, source code, object code and libraries, and all embodiments
thereof (whether or not in commercial use), and all Intellectual Property
Rights embodied in the foregoing.

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, limited
liability company, association, joint venture or other business entity of which
(i) if a corporation, at least 50% of the total voting power of shares of stock
entitled (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association, joint venture or other business entity, at least a
majority of the partnership, joint venture or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof.

 

“Surviving Corporation
Common Stock” means the Surviving Corporation’s Common Stock, no par value
per share.

 

“Tax” means any
(i) federal, state, local or foreign income, gross receipts, franchise,
estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; (ii) liability for the payment
of any amounts of the type described in clause (i) above arising as a result of
being (or ceasing to be) a member of any Affiliated Group (or being included
(or required to be included) in any Tax Return relating thereto); and (iii)
liability for the payment of any amounts of the type described in clause (i)
above as a result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other Person.

 

“Tax Bonus Payment”
means the collective payments made by the Company and its Subsidiaries prior to
the Closing to the persons identified on the Tax Bonus Payment Schedule attached
hereto in an aggregate amount equal to $5,550,384.11 (which collective payments
and aggregate amount reflect reductions (if any) required pursuant to waivers,
which reductions became effective upon the failure (if any) to obtain the
shareholder approval required by Section 280G of the Code).

 

“Tax Returns”
means returns, declarations, reports, claims for refund, information returns or
other documents (including any related or supporting schedules, statements or
information) filed or required to

 

6

 

be filed in connection
with the determination, assessment or collection of any Taxes of any party or
the administration of any laws, regulations or administrative requirements
relating to any Taxes.

 

“Vested Company
Options” means the outstanding options to purchase shares of Company Common
Stock, which by their terms have become vested or will become vested upon
consummation of the transactions contemplated hereby, which vested options will
be cancelled for the consideration specified in Section 5.2(c) and which
options are more fully set forth on the Company Options Schedule
attached hereto.

 

1.2                                 Other Definitions.  For purposes of this Agreement, the following terms not defined
in Section 1.1 are defined in the following Sections of this Agreement:  

 

	
  Accounting Firm

  	
   

  	
  5.3(a)

  
	
  Accounts Receivable
  Shortfall Amount

  	
   

  	
  11.8(a)

  
	
  Agreement

  	
   

  	
  Recitals

  
	
  Arbitration Service

  	
   

  	
  12.11(a)

  
	
  Articles of Merger

  	
   

  	
  2.2

  
	
  Buyer Parties

  	
   

  	
  11.2(a)

  
	
  Closing

  	
   

  	
  2.4

  
	
  Closing Accounts
  Receivable

  	
   

  	
  11.8(a)

  
	
  Closing Cash Balance

  	
   

  	
  5.1

  
	
  Closing Date

  	
   

  	
  2.4

  
	
  Closing Indebtedness

  	
   

  	
  5.1

  
	
  Closing Statement

  	
   

  	
  5.3(a)

  
	
  Closing Working Capital

  	
   

  	
  5.1

  
	
  Company

  	
   

  	
  Recitals

  
	
  Company Common Stock

  	
   

  	
  Recitals

  
	
  Company Expenses

  	
   

  	
  11.4

  
	
  Company Intellectual
  Property Rights

  	
   

  	
  8.11(a)

  
	
  Controlling
  Shareholders

  	
   

  	
  Recitals

  
	
  Deductible Amount

  	
   

  	
  11.2(a)(i)

  
	
  Disputes

  	
   

  	
  12.11(a)

  
	
  Disputing Person

  	
   

  	
  12.11(b)

  
	
  Dissenting Shares

  	
   

  	
  4.2(a)

  
	
  Effective Time

  	
   

  	
  2.2

  
	
  Final Aggregate Common
  Purchase Price

  	
   

  	
  5.1

  
	
  Final Determination

  	
   

  	
  12.11(d)

  
	
  Final Per Share Common
  Price

  	
   

  	
  5.1

  
	
  Final Receivables
  Settlement Date

  	
   

  	
  11.8(b)

  
	
  Fleet

  	
   

  	
  11.6(g)

  
	
  Fleet Purchase Agreement

  	
   

  	
  11.6(g)

  
	
  Governmental Approvals

  	
   

  	
  6.1(c)

  
	
  Indemnitee

  	
   

  	
  11.2(d)

  
	
  Indemnitor

  	
   

  	
  11.2(d)

  
	
  Initial Statement

  	
   

  	
  5.3(e)

  
	
  Last Audited Balance
  Sheet

  	
   

  	
  8.5(a)(i)

  
	
  Latest Balance Sheet

  	
   

  	
  8.5(a)(iii)

  
	
  Leased Realty

  	
   

  	
  8.9(b)

  
	
  Losses

  	
   

  	
  11.2(a)

  
	
  Material Contracts

  	
   

  	
  8.10(b)

  
	
  Material Customer

  	
   

  	
  8.21

  
	
  Material Supplier

  	
   

  	
  8.21

  
	
  Merger Sub Common Stock

  	
   

  	
  Recitals

  
	
  Merger Sub

  	
   

  	
  Recitals

  

 

7

 

	
  Merger

  	
   

  	
  2.1

  
	
  Notice of Arbitration

  	
   

  	
  12.11(b)

  
	
  Notice of Disagreement

  	
   

  	
  5.3(a)

  
	
  Other Plans

  	
   

  	
  8.16(e)

  
	
  Parent

  	
   

  	
  Recitals

  
	
  Permits

  	
   

  	
  8.13

  
	
  Plans

  	
   

  	
  8.16(g)

  
	
  Pre-Closing Tax Period

  	
   

  	
  11.6(a)

  
	
  Profit Sharing Plans

  	
   

  	
  8.16(d)

  
	
  Related Representations

  	
   

  	
  11.1(a)

  
	
  Rules

  	
   

  	
  12.11(a)

  
	
  Seller Parties

  	
   

  	
  11.2(b)

  
	
  Shareholders’
  Representative

  	
   

  	
  11.7(a)

  
	
  Straddle Period

  	
   

  	
  11.6(b)

  
	
  Subsequent Collection
  Period

  	
   

  	
  11.8(b)

  
	
  Surviving Corporation

  	
   

  	
  2.1

  
	
  Third-Party Approvals

  	
   

  	
  6.1(b)

  
	
  Welfare Plans

  	
   

  	
  8.16(b)

  

 

ARTICLE II

 

THE TRANSACTIONS

 

2.1                                 The Merger. 
On and subject to the terms and conditions set forth herein, at the
Effective Time, Merger Sub shall be merged with and into the Company (the “Merger”),
and the separate existence of Merger Sub shall thereupon cease, and the Company
shall be the surviving corporation in the Merger (the “Surviving Corporation”).

 

2.2                                 Effective Time of the Merger.  The Merger shall become effective as of the
time and date of the filing of Articles of Merger meeting the requirements of
the OBCA (the “Articles of Merger”) with the Secretary of State of the
State of Oregon in accordance with the provisions of the OBCA.  The Articles of Merger shall be filed on the
Closing Date.  The date and time when
the Merger shall become effective is referred to herein as the “Effective
Time.”  

 

2.3                                 Effect of Merger.  At the Effective Time, the Surviving Corporation shall have,
without other transfer, all of the rights and properties of the Company and
Merger Sub and shall be subject to all the debts and liabilities of the Company
and Merger Sub in the same manner as if the Surviving Corporation had itself
incurred them.  The Merger shall
otherwise have the effect described in the OBCA.

 

2.4                                 Closing.  The
closing of the transactions contemplated hereby (the “Closing”) shall
take place at the offices of Kirkland & Ellis LLP, 200 E. Randolph Drive,
Chicago, Illinois, 60601, or at such other place as may be mutually agreeable
to Merger Sub and the Company, at 10:00 a.m., local time, on the date hereof
(the “Closing Date”).  At the
Closing, the parties shall deliver the documents and other items identified in Article
VI hereof.

 

ARTICLE III

 

THE SURVIVING CORPORATION

 

3.1                                 Articles of Incorporation.  The articles of incorporation of Merger Sub,
as in effect at the Effective Time, shall be the articles of incorporation of
the Surviving Corporation immediately after the consummation of the Merger and
until duly amended in accordance with applicable law.

 

8

 

3.2                                 By-Laws.  The
by-laws of Merger Sub, as in effect at the Effective Time, shall be the by-laws
of the Surviving Corporation immediately after the consummation of the Merger.

 

3.3                                 Directors. 
The directors of Merger Sub, as in effect at the Effective Time, shall
be the initial directors of the Surviving Corporation immediately after the
consummation of the Merger.

 

3.4                                 Officers.  The
officers of Merger Sub, as in effect at the Effective Time, shall be the
initial officers of the Surviving Corporation immediately after the Effective
Time.  The officers of the Surviving
Corporation from and after immediately after the Effective Time shall be as
designated from time to time by the directors of the Surviving Corporation.

 

ARTICLE IV

 

CONVERSION OF SHARES

 

4.1                                 Conversion of Shares.  As of the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub or the Company
or the holders of any of the shares or other equity interests thereof:

 

(a)                                  Each
issued and outstanding share of Merger Sub Common Stock shall be converted into
one share of Surviving Corporation Common Stock.

 

(b)                                 Each
issued and outstanding share of Series A Preferred Stock shall be converted
into the right to receive from the Surviving Corporation an amount equal to the
Series A Preferred Purchase Price, which amount shall be payable in accordance
with Article V hereof.  All such
shares of Series A Preferred Stock, when converted as provided in this Section
4.1(b), shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate previously
evidencing such share shall thereafter represent only the right to receive the
Series A Preferred Purchase Price, multiplied by the number of shares
evidenced by such certificate.

 

(c)                                  Each
issued and outstanding share of Company Common Stock shall be converted into
the right to receive from the Surviving Corporation an amount equal to the
Final Per Share Common Price, which amount shall be payable in accordance with Article
V hereof.  All such shares of
Company Common Stock, when converted as provided in this Section 4.1(c),
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously evidencing such share
shall thereafter represent only the right to receive the Final Per Share Common
Price, multiplied by the number of shares evidenced by such certificate.

 

4.2                                 Dissenters’ Rights. 

 

(a)                                  Notwithstanding
any provision of this Agreement to the contrary, shares of Company Common Stock
outstanding immediately prior to the Effective Time which are held by Company
Shareholders who shall have neither voted in favor of the Merger or this
Agreement, nor consented thereto in writing, and who shall have demanded
properly in writing the exercise of dissenters’ rights for such outstanding
shares of Company Common Stock in accordance with the OBCA (collectively, the “Dissenting
Shares”) shall not be converted into, or represent the right to receive,
the consideration described herein. 
Such shareholders shall be entitled to receive payment of the value of
such shares of Company Common Stock held by them immediately prior to the
Effective Time in accordance with the OBCA, except that all Dissenting Shares
held by such shareholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their dissenters’ rights to such shares of Company
Common Stock shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive the
consideration specified herein, without any interest thereon, upon surrender,
in the manner provided in Section 5.2 of this Agreement, of the
certificate or certificates that formerly evidenced such shares of Company
Common Stock.

 

9

 

(b)                                 The
Company shall give Parent and Merger Sub (i) prompt notice of any demands
for the exercise of dissenters’ rights received by the Company, withdrawals of
such demands, and any other instruments served pursuant to the OBCA and
received by the Company, and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for the exercise of dissenters’ rights
under the OBCA.  The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for the exercise of dissenters’ rights or offer to settle or
settle any such demands.

 

ARTICLE V

 

PAYMENT OF MERGER
CONSIDERATION

 

5.1                                 Merger Consideration.  The “Final Per Share Common Price” shall be
the quotient determined by dividing (a) an amount equal to (i) the Aggregate
Base Purchase Price, minus (ii) the Aggregate Series A Preferred Purchase
Price, minus (iii) the aggregate amount of the Tax Bonus Payment that
has not been paid by the Company or its Subsidiaries to the recipients thereof
prior to Closing (it being understood that the amount of any checks written to
recipients of the Tax Bonus Payment but not otherwise delivered to the
recipients thereof, or otherwise cleared, as of the Closing shall be deemed
paid by the Company or its Subsidiaries to the recipients thereof prior to Closing
for purposes of this Section 5.1(a)(iii)), plus (iv) the amount of Cash on Hand
as of the Closing (the “Closing Cash Balance”), minus (v) the
aggregate amount of Indebtedness of the Company and its Subsidiaries as of the
Closing (the “Closing Indebtedness”), plus (or minus) (vi) the
amount (if any) by which Net Working Capital as of the close of business on the
Closing Date (the “Closing Working Capital”) is greater than (or less
than) $10,000,000.00, and plus (vii) the Aggregate Deemed Option
Exercise Proceeds, by (b) the Deemed Number of Shares Outstanding.  The amount calculated pursuant to clause (a)
of this Section 5.1 is referred to herein as the “Final Aggregate
Common Purchase Price.”

 

5.2                                 Initial Payment. 

 

(a)                                  At
the Closing, each holder of a share of Series A Preferred Stock shall receive
payment from the Surviving Corporation of an amount equal to the product of (x)
the Series A Preferred Purchase Price, multiplied by (y) the number of
shares of Series A Preferred Stock held by such holder as of the Closing.  Payments contemplated by this Section 5.2(a)
shall be made by the Surviving Corporation to each holder of a share of Series
A Preferred Stock on the Closing Date, by wire transfer of funds to an account
specified by each such holder to Parent at least three business days prior to
the Closing, or if no such specification is timely given or in the case of any
payment of less than $500,000, by check; provided that each such holder
has delivered to the Surviving Corporation the certificates representing such
holder’s shares of Series A Preferred Stock (duly endorsed in blank or
accompanied by duly executed stock powers with appropriate transfer stamps (if
any) affixed thereto).

 

(b)                                 At
the Closing, each holder of shares of Company Common Stock shall receive
payment from the Surviving Corporation of an amount equal to the product of (x)
the Estimated Per Share Common Price, less the Per Share Escrow Amount, multiplied
by (y) the number of shares of Company Common Stock held by such holder as
of the Closing.  Payments contemplated
by this Section 5.2(b) shall be made by the Surviving Corporation
to each holder of shares of Company Common Stock on the Closing Date, by wire
transfer of funds to an account specified by each such holder to Parent at least
three business days prior to the Closing, or if no such specification is given
or in the case of any payment of less than $500,000, by check; provided that
each such holder has delivered to the Surviving Corporation the certificates
representing such holder’s shares of Company Common Stock (duly endorsed in
blank or accompanied by duly executed stock powers with appropriate transfer
stamps (if any) affixed thereto).

 

(c)                                  Following
the Closing, each holder of a Vested Company Option shall receive payment from
the Surviving Corporation of an amount equal to (i) the Estimated Per Share
Common Price, less the Per Share Escrow Amount, multiplied by the number
of shares of Company Common Stock into which such Vested Company Options are
exercisable as of the Closing, less (ii) the aggregate exercise price of
such

 

10

 

Vested Company Options held by such holder.  Payments contemplated by this Section
5.2(c) shall be made by the Surviving Corporation to each holder of Vested
Company Options no later than the Surviving Corporation’s first ordinary
payroll date after the Closing in accordance with its ordinary and customary
payroll practices; provided that such holder has delivered to the
Surviving Corporation evidence of the cancellation of such Vested Company
Options in exchange for the consideration specified in this Section 5.2(c).

 

(d)                                 On
the Closing Date, Parent shall deliver (or cause to be delivered) the Purchase
Price Escrow Amount, the Shareholder Representative Escrow Amount and the
Indemnity Escrow Amount to the Escrow Agent for deposit into the Purchase Price
Escrow Account, the Shareholder Representative Escrow Account and the Indemnity
Escrow Account, respectively, to be established pursuant to the terms of the
Escrow Agreement.  Funds held in the
Indemnity Escrow Account shall be available on a non-exclusive basis to satisfy
amounts owing to the Buyer Parties pursuant to (but without limiting the
provisions of) Sections 5.3(d), 5.3(f), 11.2, 11.6
and 11.8 hereof and shall be distributed as provided in the Escrow
Agreement.  Funds held in the
Shareholder Representative Escrow Account shall be available to satisfy
expenses of the Shareholder Representative and shall be distributed as provided
in the Escrow Agreement.  Funds held in
the Purchase Price Escrow Account shall be distributed as provided in Section 5.3.

 

(e)                                  The
Surviving Corporation shall be entitled to deduct and withhold from any amounts
payable under this Section 5.2 all such amounts as the Surviving
Corporation may be required to deduct and withhold with respect to the making
of any such payments under the Code, the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law.

 

5.3                                 Post-Closing Adjustment.

 

(a)                                  Within
60 days following the Closing Date, the Surviving Corporation shall, in good
faith, prepare and deliver to the Shareholders’ Representative a statement (in
its final and binding form as determined below, the “Closing Statement”)
setting forth the Final Per Share Common Price and Final Aggregate Common
Purchase Price (and each component thereof). 
During the 30-day period immediately following Shareholders’
Representative’s receipt of the Closing Statement, Shareholders’ Representative
and its representatives and agents shall be permitted to review the Surviving
Corporation’s and its representatives’ working papers related to the
preparation of the Closing Statement and determination of the Final Per Share
Common Price and Final Aggregate Common Purchase Price (and each component
thereof).  The Closing Statement shall
become final and binding upon the parties 30 days following Shareholders’
Representative’s receipt thereof, unless Shareholders’ Representative shall
give written notice of its disagreement (a “Notice of Disagreement”) to
the Surviving Corporation prior to such date. 
Any Notice of Disagreement shall specify in reasonable detail the nature
and dollar amount of any disagreement so asserted and the Shareholders’
Representative’s calculation of the Final Per Share Common Price and Final
Aggregate Common Purchase Price (and each component thereof).  If a timely Notice of Disagreement is
received by the Surviving Corporation, then the Closing Statement (as revised
in accordance with clause (x) or (y) below) shall become final and binding upon
the parties on the earliest of (x) the date the parties resolve in writing any
differences they have with respect to the matters specified in the Notice of
Disagreement, or (y) the date all matters in dispute are finally resolved in
writing by the Accounting Firm.  During
the 20 days following delivery of a Notice of Disagreement, the Surviving
Corporation and Shareholders’ Representative shall seek in good faith to resolve
in writing any differences which they may have with respect to the matters
specified in the Notice of Disagreement. 
Following delivery of a Notice of Disagreement, the Surviving
Corporation and its agents and representatives shall be permitted to review
Shareholders’ Representative’s and its representatives’ working papers relating
to the Notice of Disagreement.  If, at
the end of the 20-day period referred to above, the matters in dispute have not
been resolved, then the parties shall submit to a mutually satisfactory
independent “big-four” accounting firm (the “Accounting Firm”) for
review and resolution of all matters (but only such matters) which remain in
dispute, and the Accounting Firm shall make a final determination of the Final
Per Share Common Price and Final Aggregate Common Purchase Price to the extent
such amounts are in dispute, in accordance with the guidelines and procedures
set forth in this Agreement.  If the
parties are unable to mutually agree on an Accounting Firm, the Surviving Corporation
and Shareholders’ Representative shall select a “big-four” Accounting Firm by
lot (after excluding Deloitte & Touche LLP).  The 

 

11

 

parties will cooperate with the Accounting Firm during the term of its
engagement.  The Closing Statement and
the determination of the Final Per Share Common Price and Final Aggregate
Common Purchase Price (and each component thereof) shall become final and
binding on the parties on the date the Accounting Firm delivers its final
resolution in writing to the parties (which the Accounting Firm shall be
instructed to deliver not more than 45 days following submission of such
disputed matters).  The fees and
expenses of the Accounting Firm shall be allocated by the Accounting Firm
between the Surviving Corporation and Shareholders’ Representative based on the
merits of such party’s claim with respect to such dispute.

 

(b)                                 If,
on the Final Determination Date, the Closing Statement provides that the Final
Aggregate Common Purchase Price is equal to or greater than the Estimated
Aggregate Common Purchase Price, then (i) Parent and the Shareholders’
Representative shall no later than three business days after the Final
Determination Date, take such actions as are necessary under the Escrow
Agreement to cause the Escrow Agent to release to the Company Shareholders, in
accordance with the Shareholder Distribution Schedule attached hereto,
all amounts then held in the Purchase Price Escrow Account, and (ii) Parent or
the Surviving Corporation shall pay to the Company Shareholders, in accordance
with the Shareholder Distribution Schedule attached hereto, no later
than three business days after the Final Determination Date, in immediately
available funds, an amount equal to the sum of (x) the amount (if any) by which
the Final Aggregate Common Purchase Price exceeds the Estimated Aggregate
Common Purchase Price, and (y) interest on any such excess amount computed at
the Applicable Rate in effect from time to time for the period from the Closing
Date to the date of such payment.

 

(c)                                  If,
on the Final Determination Date, the Closing Statement provides that the Final
Aggregate Common Purchase Price is less than the Estimated Aggregate Common
Purchase Price by an amount which is less than the Purchase Price Escrow
Amount, then Parent and Shareholders’ Representative shall, no later than three
business days after the Final Determination Date, take such actions as are
necessary under the Escrow Agreement to cause the Escrow Agent to release to
(i) Parent, in immediately available funds from the Purchase Price Escrow
Account, an aggregate amount equal to the sum of (x) the amount by which the
Estimated Aggregate Common Purchase Price exceeds the Final Aggregate Common
Purchase Price, and (y) all income earned in the Purchase Price Escrow Account
with respect to such excess, and (ii) the Company Shareholders, in accordance
with the Shareholder Distribution Schedule attached hereto, in
immediately available funds from the Purchase Price Escrow Account, all amounts
remaining in the Purchase Price Escrow Account after payment to Parent of the
amount described in Section 5.3(c)(i) above.

 

(d)                                 If,
on the Final Determination Date, the Final Closing Statement provides that the
Final Aggregate Common Purchase Price is less than the Estimated Aggregate
Common Purchase Price by an amount which is greater than the Purchase Price
Escrow Amount, then (i) Parent and Shareholders’ Representative shall, no later
than three business days after the Final Determination Date, take such actions
as are necessary under the Escrow Agreement to cause the Escrow Agent to
release to Parent all amounts then held in the Purchase Price Escrow Account,
and (ii) the Company Shareholders shall, in accordance with their Pro Rata
Share and within three business days after the Final Determination Date, pay to
Parent, in immediately available funds, an aggregate amount equal to the sum of
(x) the amount by which the Estimated Aggregate Common Purchase Price exceeds
the sum of (aa) Final Aggregate Common Purchase Price and (bb) the Purchase
Price Escrow Amount, and (y) interest on such excess computed at the Applicable
Rate in effect from time to time for the period from the Closing Date to the
date of such payment.  Notwithstanding
the foregoing, Parent may, but shall not be obligated to, at any time elect to
collect any amounts owing to it pursuant to clause (ii) of this Section
5.3(d) from the Indemnity Escrow Account, and if Parent so elects, Parent
and Shareholders’ Representative shall, no later than three business days after
Parent delivers notice of such election to the Shareholders’ Representative,
take such actions as are necessary under the Escrow Agreement to cause the
Escrow Agent to release to Parent from the Indemnity Escrow Account the amount
Parent elected to collect therefrom (not to exceed the amount owing to Parent
pursuant to clause (ii) of this Section 5.3(d)).

 

12

 

(e)                                  Notwithstanding
any other provision of this Section 5.3 to the contrary, if the Closing
Statement delivered to the Shareholder’s Representative by the Surviving
Corporation pursuant to the first sentence of Section 5.3(a) above (the
“Initial Statement”) provides that the Company Shareholders will be
entitled to receive funds from the Purchase Price Escrow Account in accordance
with the provisions of Sections 5.3(b) or (c) above in an
aggregate amount equal to or greater than $500,000, then Parent and
Shareholders’ Representative shall, no later than five business days after the
Surviving Corporation’s delivery of the Initial Statement, take such actions as
are necessary under the Escrow Agreement to cause the Escrow Agent to release
to the Company Shareholders, in accordance with the Shareholder Distribution
Schedule attached hereto, in immediately available funds from the Purchase
Price Escrow Account, the amount the Company Shareholders would be entitled to
receive from the Purchase Price Escrow Account determined with reference to the
Initial Statement.  Additionally, if the
Initial Statement provides that the Company Shareholders will be entitled to
receive funds from Parent or the Surviving Corporation pursuant to Section
5.3(b) above, then Parent or the Surviving Corporation shall, no later than
five business days after the Surviving Corporation’s delivery of the Initial
Statement, pay to the Company Shareholders, in accordance with the Shareholder
Distribution Schedule attached hereto, the amount the Company Shareholders
would be entitled to receive from Parent or the Surviving Corporation pursuant
to Section 5.3(b) above determined with reference to the Initial
Statement.  If any payments are made
pursuant to this Section 5.3(e), then all payments made pursuant to Sections
5.3(b) and 5.3(c) at the times specified therein shall be
appropriately adjusted to reflect the payments made pursuant to this Section
5.3(e).

 

(f)                                    Notwithstanding
any other provision of this Section 5.3 to the contrary, if a Notice of
Disagreement delivered to the Surviving Corporation by the Shareholders’
Representative pursuant to Section 5.3(a) above provides that Parent
will be entitled to receive funds from the Purchase Price Escrow Account in
accordance with the provisions of Sections 5.3(c) or (d) above in an
aggregate amount equal to or greater than $500,000, then Parent and
Shareholders’ Representative shall, no later than five business days after the
delivery of the Notice of Disagreement, take such actions as are necessary
under the Escrow Agreement to cause the Escrow Agent to release to Parent, in
immediately available funds from the Purchase Price Escrow Account, the amount
Parent would be entitled to receive from the Purchase Price Escrow Account
determined with reference to the Notice of Disagreement.  Additionally, if the Notice of Disagreement
provides that Parent will be entitled to receive funds from the Company
Shareholders pursuant to Section 5.3(d) above, then the Company
Shareholders shall, in accordance with their Pro Rata Share and within three
business days after the date of the delivery of the Notice of Disagreement, pay
to Parent, in immediately available funds, an aggregate amount equal to the
amount Parent would be entitled to receive from the Company Shareholders
pursuant to Section 5.3(d) above determined with reference to the Notice
of Disagreement.  Notwithstanding the
foregoing, Parent may, but shall not be obligated to, at any time elect to
collect any amounts owing to it pursuant to the immediately preceding sentence
from the Indemnity Escrow Account, and if Parent so elects, Parent and Shareholders’
Representative shall, no later than three business days after Parent delivers
notice of such election to the Shareholders’ Representative, take such actions
as are necessary under the Escrow Agreement to cause the Escrow Agent to
release to Parent from the Indemnity Escrow Account the amount Parent elected
to collect therefrom (not to exceed the amount owing to Parent pursuant to the
immediately preceding sentence).  If any
payments are made pursuant to this Section 5.3(f), then all payments
made pursuant to Sections 5.3(c) and 5.3(d) at the times
specified therein shall be appropriately adjusted to reflect the payments made
pursuant to this Section 5.3(f).

 

(g)                                 Any
amounts payable under this Section 5.3 shall be subject to all
applicable withholding obligations.  The
amount of Tax withholding at Closing with regard to shares of restricted
Company Common Stock that will vest for Tax purposes at Closing and the amount
of Tax withholding at the time of payment set forth in Section 5.2(c)
with regard to Vested Company Options has been determined by taking into
account the full Estimated Per Share Common Price, notwithstanding that a
portion of that Estimated Per Share Common Price will be placed in escrow.

 

13

 

ARTICLE VI

 

CONDITIONS TO CLOSING

 

6.1                                 Conditions to Parent’s and Merger
Sub’s Obligations.  The
obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions on or before the Closing Date:

 

(a)                                  Parent,
Merger Sub and the Company shall have received or otherwise obtained all third
party consents and approvals that are identified with an asterisk (*) on the
attached Restrictions Schedule (collectively, the “Third-Party
Approvals”);

 

(b)                                 Parent,
Merger Sub and the Company shall have received or obtained all governmental and
regulatory consents, approvals, licenses and authorizations that are necessary
for the consummation of the transactions contemplated hereby or for Parent and
Surviving Corporation to own the assets and operate the businesses of the
Company and its Subsidiaries following the Closing, and the waiting period
under the HSR Act shall have expired or been terminated (collectively, the “Governmental
Approvals”);

 

(c)                                  No
suit, action or other proceeding shall be pending or, to the Knowledge of the
Company, threatened before any court or governmental or regulatory official,
body or authority or any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling or charge would (i) prevent the performance of this
Agreement or the consummation of any of the transactions contemplated hereby or
declare unlawful any of the transactions contemplated hereby, (ii) cause any of
the transactions contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of the Surviving Corporation to
own the assets and operate the businesses of the Company and its Subsidiaries
following the Closing, or (iv) affect adversely the right of any of the Company
or any of its Subsidiaries to own its assets or control its businesses
following the Closing, and no such injunction, judgment, order, decree, ruling
or charge shall have been entered or be in effect;

 

(d)                                 The
Controlling Shareholders and the Company shall have entered into the Related
Agreement, and the Related Agreement shall be in full force and effect as of
the Closing and shall not have been amended or modified;

 

(e)                                  The
Shareholders’ Representative and the Escrow Agent shall have entered into the
Escrow Agreement, and the Escrow Agreement shall be in full force and effect as
of the Closing and shall not have been amended or modified;

 

(f)                                    Each
of the Executives shall have entered into their respective Employment Agreements,
and the Employment Agreements shall be in full force and effect as of the
Closing and shall not have been amended or modified;

 

(g)                                 Parent
and Merger Sub shall have received from Stoel Rives LLP, special counsel for
the Company and the Controlling Shareholders, a customary legal opinion with
respect to the matters set forth on Exhibit D attached hereto, which
shall be addressed to Parent, Merger Sub and their lender(s) and dated as of
the Closing Date;

 

(h)                                 All
agreements regarding voting, transfer or other arrangements related to the
capital stock of the Company that are in effect prior to the Closing shall have
been terminated and be of no further force and effect;

 

(i)                                     The
Company shall have obtained releases of all Liens (other than any Permitted Liens)
relating to the assets and properties of the Company and its Subsidiaries, and
the Company shall have

 

14

 

obtained and delivered to Parent and Merger Sub and
its lender(s) payoff letters with respect to all Indebtedness for borrowed
money outstanding as of the Closing;

 

(j)                                     The
Company shall have duly filed the Articles of Merger in accordance with the
OBCA;

 

(k)                                  The
number of Dissenting Shares shall not exceed 3.00% of the number of outstanding
shares of Company Common Stock;

 

(l)                                     The
Company shall have made the aggregate Tax Bonus Payment to the recipients
thereof, and the Company shall have delivered evidence thereof to Parent;

 

(m)                               None of the payments that Parent, Merger Sub,
the Surviving Corporation, the Company, the Company Shareholders or any of
their respective Affiliates has made or is obligated to make to a “disqualified
individual” (within the meaning of Section 280G(c) of the Code) with respect to
the Company and its Subsidiaries pursuant to any agreement, plan understanding
or other arrangement (including the vesting of any securities or other
property) shall constitute a “parachute
payment” within the meaning of
Section 280G(b) of the Code, and the Company shall have delivered
evidence thereof to Parent; and

 

(n)                                 At
the Closing, the Company shall have delivered to Parent and Merger Sub (i) a
certificate signed by the Company in the form of Exhibit E attached
hereto, dated the date of the Closing, stating that the conditions specified in
subsections (a) through (c) and (h) through (m) have been satisfied as of the
Closing; (ii) copies of all Third Party Approvals and Governmental Approvals;
(iii) certified copies of the resolutions duly adopted by the Company’s board
of directors authorizing the execution, delivery and performance of this
Agreement and the other agreements contemplated hereby and the consummation of
the transactions contemplated hereby and thereby; (iv) good standing (or
substantially equivalent) certificates for each of the Company and its
Subsidiaries from their respective jurisdictions of incorporation and each
jurisdiction in which each of the Company and its Subsidiaries is qualified to
do business as a foreign corporation, in each case dated as of a recent date
prior to the Closing Date; (v) evidence of the cancellation of the Vested
Company Options; (vi) evidence of the termination of the Management Agreements
and payment of all amounts due thereunder; (vii) an affidavit stating that the Company is not and has not been a United
States real property holding corporation, and (viii) such other
documents or instruments as are required to be delivered by the Company
Shareholders or the Company at the Closing pursuant to the terms hereof.

 

6.2                                 Conditions to the Company’s Obligations.  The obligations of the Company to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
of the following conditions on or before the Closing Date:

 

(a)                                  Parent,
Merger Sub and the Company shall have received or obtained all of the
Governmental Approvals;

 

(b)                                 No
suit, action or other proceeding shall be pending before any court or
governmental or regulatory official, body or authority wherein an unfavorable
injunction, judgment, order, decree or ruling would (i) prevent consummation of
the transactions contemplated by this Agreement or (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation, and no
such injunction, judgment, order, decree or ruling shall be in effect;

 

(c)                                  Parent
and the Escrow Agent shall have entered into the Escrow Agreement, and the
Escrow Agreement shall be in full force and effect as of the Closing;

 

(d)                                 Merger
Sub shall have duly filed the Articles of Merger in accordance with the OBCA;
and

 

15

 

(e)                                  At
the Closing, Parent or Merger Sub shall have delivered to the Shareholders’
Representative (i) a certificate signed by Parent and Merger Sub in the form of
Exhibit F attached hereto, dated the date of the Closing, stating that
the condition specified in subsection (a) above has been satisfied as of the
Closing, (ii) certified copies of the resolutions duly adopted by Parent’s and
Merger Sub’s board of directors authorizing the execution, delivery and performance
of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, and (iii)
such other documents or instruments as are required to be delivered by Parent
or Merger Sub at the Closing pursuant to the terms hereof.

 

ARTICLE VII

 

RESERVED

 

Article VII Intentionally
Left Blank.

 

ARTICLE VIII

 

REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY

 

As a material inducement
to Merger Sub to enter into this Agreement and consummate the transactions
contemplated hereby, except as set forth on the attached Company Disclosure
Schedules which are more specifically described below (but without limiting Section
12.9), the Company hereby represents and warrants to Parent and Merger Sub
as follows:

 

8.1                                 Organization; Corporate Power.  The Company is a corporation duly organized
and validly existing under the laws of the State of Oregon and is qualified to
do business and is in good standing in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to so qualify would not have a Material Adverse Effect.  The Company possesses all requisite
corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and to perform its obligations under this
Agreement.  The copies of the Company’s
amended and restated articles of incorporation and by-laws which have been
furnished to Merger Sub’s special counsel reflect all amendments made thereto
at any time prior to the date of this Agreement.  The attached Officers and Directors Schedule sets forth a list
all of the officers and directors of the Company and its Subsidiaries.

 

8.2                                 Capital Stock and Related Matters.  The attached Capitalization Schedule
accurately sets forth the authorized and issued outstanding capital stock of
the Company and the name of the record holders of any outstanding equity
securities of the Company.  Except as
set forth on the attached Capitalization Schedule, each Person listed on the
attached Capitalization Schedule is the record and beneficial owner of the
shares of the Company Common Stock and the Series A Preferred Stock set forth
opposite his or its name, free and clear of all Liens, voting agreements,
proxies, pledges, transfer restrictions and other arrangements of any
kind.  Except as set forth on the
attached Capitalization Schedule, the Company does not have outstanding any
shares of capital stock, or securities convertible or exchangeable or
exercisable for any shares of its capital stock or containing any profit
participation features, nor any rights or options or warrants to subscribe for
or to purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plan.  Except as set forth on the
attached Capitalization Schedule, the Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to acquire
its capital stock.  All of the
outstanding shares of the Company’s capital stock have been validly issued and
are fully paid and nonassessable.  There
are no agreements between the Company’s shareholders with respect to the voting
or transfer of the Company’s capital stock or with respect to any other aspect
of the Company’s affairs, except as set forth on the attached Capitalization
Schedule.

 

16

 

8.3                                 Authorization; No Breach.  The execution, delivery and performance of
this Agreement have been duly authorized by the Company, and no other corporate
act or proceeding on the part of the Company is necessary to authorize the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.  This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws relating to or affecting the rights and remedies or creditors
generally.  Except as set forth on the
attached Restrictions Schedule, the execution and delivery by the Company of
this Agreement and the fulfillment of and compliance with the respective terms
hereof by the Company do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default
under (whether with or without the passage of time, the giving of notice or
both), (c) result in the creation of any Lien upon the Company’s or any of its
Subsidiaries’ capital stock or assets pursuant to, (d) give any third party the
right to modify, terminate or accelerate any obligation under, (e) result in a
violation of, or (f) require any authorization, consent, approval, exemption or
other action of or by or notice or declaration to, or filing with, any third
party or any court or administrative or governmental body or agency pursuant
to, the Company’s or any of its Subsidiaries’ certificate or articles of
incorporation or bylaws or other constituent documents, or any law, statute,
rule or regulation to which the Company or any of its Subsidiaries or any of
the Company Shareholders is subject, or any agreement, instrument, license,
permit, order, judgment or decree to which the Company or any of its
Subsidiaries or any of the Company Shareholders is subject.

 

8.4                                 Subsidiaries. 
The attached Subsidiary Schedule correctly sets forth the name of each
Subsidiary of the Company, the jurisdiction of its incorporation and the
Persons owning the outstanding capital stock of such Subsidiary.  Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, possesses all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own its properties
and to carry on its businesses as now being conducted and is qualified to do
business and is in good standing in every jurisdiction in which its ownership
of property or the conduct of business requires it to qualify, except where the
failure to so qualify would not have a Material Adverse Effect.  All of the outstanding shares of capital
stock or other equity interests of each Subsidiary are duly authorized validly issued,
and (if applicable) fully paid and nonassessable, and all such shares are owned
by the Company free and clear of all Liens and are not subject to any option or
right to purchase any such shares.

 

8.5                                 Financial Statements; Accounts
Receivable.

 

(a)                                  Attached
hereto as the Financial Statements Schedule are true and correct copies of the
following financial statements:

 

(i)                                     the
audited consolidated balance sheet of the Company and its Subsidiaries as of
September 30, 2003 (the “Last Audited Balance Sheet”), and September 30,
2002, and the related consolidated statements of income, consolidated
statements of changes in stockholders’ equity and consolidated statements of
cash flows (and the accompanying notes thereto) for the fiscal years then
ended;

 

(ii)                                  the
audited consolidated balance sheet of the Company and its Subsidiaries as of
September 30, 2001, and the related consolidated statement of income,
consolidated statement of changes in stockholders’ equity and consolidated
statement of cash flows (and the accompanying notes thereto) for the period
from March 2, 2001, through September 30, 2001; and

 

(iii)                               the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
November 30, 2003 (the “Latest Balance Sheet”), and the related
consolidated statements of operations and cash flows for the two-month period
then ended.

 

17

 

Each of the foregoing
financial statements (including in all cases the notes thereto, if any) is
accurate and complete in all material respects, is consistent with the books
and records of the Company and its Subsidiaries (which, in turn, are accurate
and complete in all material respects) and fairly presents, in all material
respects, the financial condition and operating results and cash flows of the
Company and its Subsidiaries.  Each of
the foregoing financial statements (including in all cases the notes thereto,
if any) (x) has been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, subject in the case of the unaudited
financial statements to the absence of note disclosures (none of which note
disclosures would, alone or in the aggregate, if made in accordance with GAAP
be materially adverse to the financial condition, results of operations or cash
flow of the Company and its Subsidiaries taken as a whole), and (y) in the case
of the financial statements described in Section 8.5(a)(i) above, has
been prepared in accordance with the requirements of Regulation S-X of the
Securities Act of 1933, as amended.

 

(b)                                 All
accounts receivable reflected on the Latest Balance Sheet represent bona fide
sales arising in the ordinary course of business.

 

8.6                                 Absence of Undisclosed Liabilities.  Except as set forth on the attached Liabilities
Schedule, neither the Company nor any of its Subsidiaries has or will have
any obligation or liability arising out of any transaction entered into at or
prior to the date hereof, or any action or inaction at or prior to the date
hereof, or any state of facts existing at or prior to the date hereof, other
than: (a) liabilities reflected on the Last Audited Balance Sheet (including
any notes thereto), (b) liabilities and obligations which have arisen after the
date of the Last Audited Balance Sheet in the ordinary course of business
consistent with past practice (none of which is a liability resulting from
breach of contract, breach of warranty, tort, infringement, violation of law,
claim or lawsuit), (c) material obligations under contracts and commitments
described on the attached Contracts Schedule or under contracts and
commitments entered into in the ordinary course of business consistent with
past practice which are not required to be disclosed on such Schedule pursuant
to Section 8.10 below (but not liabilities for any breach of any such
contract or commitment occurring on or prior to the Closing Date), and (d)
other liabilities and obligations expressly disclosed in the other Schedules
referred to in this Article VIII.

 

8.7                                 No Material Adverse Effect.  Except as set forth on the attached Schedule
8.7, since September 30, 2003,
there has occurred no fact, event or circumstance which has had or would
reasonably be expected to have a Material Adverse Effect. 

 

8.8                                 Absence of Certain Developments.  Except as set forth on the attached Developments
Schedule or as specifically contemplated by this Agreement, since September 30, 2003, neither the
Company nor any of its Subsidiaries has:

 

(a)                                  incurred
any Indebtedness or other liabilities outside the ordinary course of business
consistent with past practice;

 

(b)                                 declared,
set aside or made any payment or distribution of cash or other property to any
of its shareholders with respect to such shareholder’s capital stock, or
purchased, redeemed or otherwise acquired any shares of its capital stock or
other equity securities;

 

(c)                                  made
or granted any bonus or any wage or salary increase to any employee or group of
employees (except as required by pre-existing contracts described on the
attached Contracts Schedule and except for any bonus or wage increases
granted to employees in the ordinary course of business consistent with past
practice);

 

(d)                                 made
any commitments for capital expenditures that aggregate in excess of $50,000;

 

(e)                                  amended
its articles of incorporation or by-laws (or similar governing documents);

 

18

 

(f)                                    entered
into any material contract other than in the ordinary course of business
consistent with past practice, entered into any other material transaction,
whether or not in the ordinary course of business or consistent with past
practice, or materially changed any business or accounting practice; or

 

(g)                                 agreed,
whether orally or in writing, to do any of the foregoing.

 

8.9                                 Assets.

 

(a)                                  Except
as set forth on the attached Assets Schedule, the Company or one of its
Subsidiaries has good and valid title to, or a valid leasehold interest in, all
properties and assets used by it, located on its premises or shown on the
Latest Balance Sheet or acquired after the date thereof, free and clear of all
Liens (other than properties and assets disposed of for fair consideration in
the ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Permitted Liens).  The
Company and each of its Subsidiaries owns or leases or has the valid and
enforceable right to use all assets, tangible or intangible, necessary for the
conduct of its business as presently conducted.

 

(b)                                 Neither
the Company nor any of its Subsidiaries owns any real property.  The Leased Real Property Schedule
attached hereto contains a complete list of all of the Realty Leases for the
real property leased, subleased, licensed or otherwise occupied by the Company
or any of its Subsidiaries (collectively, the “Leased Realty”).  The Company or one of its Subsidiaries has a
valid leasehold interest in each Leased Realty.  Except as set forth on the attached Leased Real Property
Schedule, with respect to each Realty Lease:  (i) the Realty Lease is legal, valid, binding, enforceable and in
full force and effect; (ii) neither the Company nor any of its Subsidiaries,
nor any other party to the Realty Lease is in breach or default, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a breach or default or permit termination, modification or acceleration under
the Realty Lease; (iii) there are no disputes, oral agreements or forbearance
programs in effect as to the Realty Lease; (iv) neither the Company nor any of its
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Realty Lease; (v) each of the Company and its Subsidiaries has delivered to Parent or
Merger Sub a true and complete copy of each such Realty Lease document, and in
the case of any oral Lease, a written summary of the material terms of such
Realty Lease, (vi) no security deposit or portion thereof deposited with
respect to such Realty Lease has been applied in respect of a breach or default
under such Realty Lease which has not been re-deposited in full; and (vii) none
of the Company or its Subsidiaries has subleased, licensed or otherwise granted
any Person the right to use or occupy such Leased Realty or any portion
thereof.

 

8.10                           Contracts and Commitments.  

 

(a)                                  Except
as expressly contemplated by this Agreement or as set forth on the attached Contracts
Schedule, neither the Company nor any of its Subsidiaries is a party to or
bound by any written or oral:

 

(i)                                     pension,
profit sharing, stock option, employee stock purchase or other plan or
arrangement providing for deferred or other compensation to employees, former
employees or consultants, or any other employee benefit plan or arrangement, or
any collective bargaining agreement or any other contract with any labor union,
or severance agreements, programs, policies or arrangements;

 

(ii)                                  contract
for the employment of any officer or other employee on a full-time, part-time,
consulting or other basis or contract relating to loans to officers, directors
or Affiliates or contract or arrangement with any Affiliate;

 

(iii)                               contract
under which the Company or any of its Subsidiaries has advanced or loaned any
other Person amounts in the aggregate exceeding $50,000;

 

19

 

(iv)                              agreement
or indenture relating to borrowed money or other Indebtedness or the
mortgaging, pledging or otherwise placing a Lien on any material asset or
material group of assets of the Company or any of its Subsidiaries;

 

(v)                                 Guaranty;

 

(vi)                              lease
or agreement under which the Company or any of its Subsidiaries is lessee of or
holds or operates any property, real or personal, owned by any other party,
except for any lease of real or personal property under which the aggregate
annual rental payments do not exceed $50,000;

 

(vii)                           lease
or agreement under which the Company or any of its Subsidiaries is lessor of or
permits any third party to hold or operate any property, real or personal,
owned or controlled by the Company or any of its Subsidiaries;

 

(viii)                        contract
or group of related contracts with the same party or group of affiliated
parties, the performance of which involves consideration in excess of $50,000
in the Company’s fiscal year ended September 30, 2003, or in the Company’s current
fiscal year to date, other than purchase and sales orders incurred in the
ordinary course of business;

 

(ix)                                assignment,
license, indemnification or agreement with respect to any intangible property
(including any Intellectual Property Rights) which involves consideration in
excess of $50,000 in the Company’s fiscal year ended September 30, 2003, or in
the Company’s current fiscal year to date;

 

(x)                                   agreement
with a term of more than six months which is not terminable by the Company or
any of its Subsidiaries upon less than 30 days’ notice without penalty and
which involves consideration in excess of $50,000 in the Company’s fiscal year
ended September 30, 2003, or in the Company’s current fiscal year to date;

 

(xi)                                contract
regarding voting, transfer or other arrangements related to the Company’s
capital stock or warrants, options or other rights to acquire any of the
Company’s capital stock;

 

(xii)                             contract
or agreement prohibiting it from freely engaging in any business or competing
anywhere in the world; or

 

(xiii)                          any
other agreement which involves consideration in excess of $50,000 in the
Company’s fiscal year ended September 30, 2003, or in the Company’s current
fiscal year to date.

 

(b)                                 All
of the contracts, leases, agreements and instruments set forth or required to
be set forth on the Contracts Schedule (the “Material Contracts”)
are valid, binding and enforceable against the Company and, to the Company’s
Knowledge, against all other parties thereto in accordance with their
respective terms and, to the Company’s Knowledge, shall be in full force and
effect without penalty in accordance with their terms upon consummation of the
transactions contemplated hereby. 
Except as set forth on the Contracts Schedule, (i) each of the
Company and its Subsidiaries has performed all material obligations required to
be performed by it and is not in material default under or in breach of nor in
receipt of any written claim of default or breach under any Material Contract;
(ii) no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance by
the Company or any of its Subsidiaries under any Material Contract; (iii)
neither the Company nor any of its Subsidiaries has any present expectation or
intention of not fully performing all such obligations under Material
Contracts; and (iv) the Company has no Knowledge of any breach or anticipated
breach by the other parties to any Material Contract.

 

20

 

8.11                           Intellectual Property Rights.  

 

(a)                                  The
attached Intellectual Property Schedule contains a complete and accurate
list of all (i) patented or registered Intellectual Property Rights owned or
used by the Company or any of its Subsidiaries, (ii) pending patent
applications and applications for other registrations of Intellectual Property
Rights filed by or on behalf of the Company or any of its Subsidiaries, and
(iii) material unregistered Intellectual Property Rights owned or used by the
Company or any of its Subsidiaries.  The
Intellectual Property Schedule generally describes the four material
proprietary Software platforms and lists material third-party licensed Software
used by the Company and its Subsidiaries. 
The Company or one of its Subsidiaries owns and possesses all right,
title and interest to, or has the right to use pursuant to a valid and
enforceable license, all Intellectual Property Rights and Software identified
on the Intellectual Property Schedule and all other Intellectual Property
Rights and Software necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted (collectively the “Company
Intellectual Property Rights”).  The
Company Intellectual Property Rights are not subject to any Liens, and are not
subject to any restrictions or limitations regarding use or disclosure other
than pursuant to a written license agreement set forth in the Contracts
Schedule or described generally in the Intellectual Property Schedule.

 

(b)                                 Except
as set forth on the attached Intellectual Property Schedule, (i) there
have been no written claims made against the Company or any of its Subsidiaries
asserting the invalidity, misuse or unenforceability of any of the Company
Intellectual Property Rights and, to the Company’s Knowledge, there is no valid
basis for any such claim, (ii) neither the Company nor any of its Subsidiaries
has received any notices of, and the Company has no Knowledge of, any facts
which indicate a likelihood of, any infringement or misappropriation by, or
conflict with, any third party with respect to any Intellectual Property
Rights, (iii) the conduct of the Company’s and its Subsidiaries’ businesses has
not infringed, misappropriated or conflicted with and does not infringe,
misappropriate or conflict with any Intellectual Property Rights of other
Persons, and (iv) to the Company’s Knowledge, the Company Intellectual Property
Rights have not been infringed, misappropriated or conflicted by other Persons.  The Company has no patents and no trademarks
or service marks are registered to the Company or any of its Subsidiaries.  The transactions contemplated by this
Agreement will not have a Material Adverse Effect on the Company’s or any of
its Subsidiaries’ right, title or interest in and to the Company Intellectual
Property Rights, and all Company Intellectual Property Rights shall be owned or
available for use by the Company and its Subsidiaries on substantially similar
terms and conditions immediately after the Closing.

 

(c)                                  The
Company has taken all commercially reasonable measures to maintain and protect
all of the Company Intellectual Property Rights so as not to adversely affect
the validity or enforceability thereof, and there are no registered Company
Intellectual Property Rights.

 

(d)                                 The
Company has taken commercially reasonable measures, consistent with industry
standards, to maintain the source code and related documentation and
information, and confidentiality of the processes and formulae, research and
development results and other information, know-how or trade secrets of the
Company and its Subsidiaries, the value of which to the Company and its
Subsidiaries is contingent upon maintenance of the confidentiality thereof.

 

(e)                                  All
of the computer firmware, computer hardware, and computer software (whether
general or special purpose) and other similar or related items of automated,
computerized, and/or software system(s), networks, interfaces, platforms or
application used or relied upon by the Company and its Subsidiaries is sufficient
for the conduct of the businesses of the Company and its Subsidiaries as they
are now operated.

 

(f)                                    Except
as disclosed on the Intellectual Property Schedule, the Company has
entered into valid and enforceable written confidentiality agreements with all
of its current employees and valid and enforceable written proprietary rights
and confidentiality agreements with all of its current independent contractors
who have developed, modified, improved, enhanced or had access to the Company
Intellectual

 

21

 

Property Rights, and has entered into valid and
enforceable written confidentiality agreements with all of its former employees
and valid and enforceable written proprietary rights and confidentiality agreements
with all of its former independent contractors who, since January 2001, have
developed, modified, improved, enhanced or had access to any material Company
Intellectual Property Rights, (i) assigning ownership to the Company or its
Subsidiaries of all Intellectual Property Rights created or developed by (a)
its or their employees within the scope of their employment (whether through
assignment agreements or otherwise) or related to the business or research or
development of the Company, or (b) independent contractors engaged by the
Company or its Subsidiaries within the scope of their contract; and (ii)
requiring such employees and independent contractors to maintain the
confidentiality of all Company Intellectual Property Rights.  Other than to its employees and independent
contractors, and only under the conditions described in the foregoing sentence,
the Company and its Subsidiaries have not disclosed to any third party any
source code related to any Company Intellectual Property Rights.

 

(g)                                 Except
as set forth on the Intellectual Property Schedule, no former or present
employees, officers or directors of the Company or any of its Subsidiaries,
hold any right, title or interest directly or indirectly, in whole or in part,
in or to any Company Intellectual Property Rights.

 

8.12                           Litigation. 
Except as set forth on the attached Litigation Schedule, there are no
(and, during the three years preceding the date hereof, there have not been
any) actions, suits, proceedings (including any arbitration proceedings),
orders, investigations or claims pending or, to the Company’s Knowledge,
threatened against or affecting the Company or any of its Subsidiaries (or to
the Company’s Knowledge, pending or threatened against or affecting any of the
officers, directors or key employees of the Company or any of its Subsidiaries
with respect to the business or proposed business activities of the Company or
any of its Subsidiaries), or pending or threatened by the Company or any of its
Subsidiaries against any Person, at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or
instrumentality.  Neither the Company
nor any of its Subsidiaries is subject to any judgment, order or decree of any court
or other governmental agency.

 

8.13                           Compliance with Laws.  Except as set forth on the attached
Compliance Schedule:  Each of the
Company and its Subsidiaries has, during the past five years, materially
complied and is in material compliance with all applicable laws, ordinances,
codes, rules, requirements and regulations of foreign, federal, state and local
governments and all agencies thereof relating to the operation of its business
and the maintenance and operation of its properties and assets, including all
Environmental Requirements.  No written
notices have been received by, and no claims have been filed against, the
Company or any of its Subsidiaries alleging a violation of any such laws,
ordinances, codes, rules, requirements or regulations.  Each of the Company and its Subsidiaries holds
and is in material compliance with all material permits, licenses, bonds,
approvals, certificates, registrations, accreditations and other authorizations
of all foreign, federal, state and local governmental agencies required for the
conduct of its business as currently conducted and the ownership of its
properties (collectively, “Permits”), and the attached Permits Schedule sets
forth a list of all of such material Permits. 
No notices have been received by the Company or any of its Subsidiaries
alleging the failure to hold any of the foregoing.  Except as set forth on the attached Permits Schedule, all of such
permits, licenses, bonds, approvals, accreditations, certificates,
registrations and authorizations will be available for use by the Surviving Corporation
and its Subsidiaries immediately after the Closing.

 

8.14                           Environmental Matters.  Except as set forth on the attached Environmental
Schedule:

 

(a)                                  Neither
the Company nor any of its Subsidiaries have received any written notice,
written report or written information regarding any actual or alleged violation
of Environmental Requirements or any liabilities or potential liabilities
relating to its or its predecessors’ facilities or operations arising under
Environmental Requirements.

 

22

 

(b)                                 Neither
this Agreement nor the consummation of the transactions contemplated hereby
will result in any obligations for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under
any Environmental Requirements.

 

(c)                                  To
the Company’s Knowledge, none of the following exists at any property or
facility occupied or operated by the Company or any of its Subsidiaries: (i)
underground storage tanks; (ii) asbestos-containing material in any form or
condition; (iii) materials or equipment containing polychlorinated biphenyls;
or (iv) landfills, surface impoundments or other disposal areas.

 

(d)                                 Neither
the Company nor any of its Subsidiaries, predecessors or Affiliates has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled or released any substance or owned, occupied or operated any facility
or property (and no such property or facility is contaminated by any such
substance) so as to give rise to any current or future liabilities (including
any liability for response costs, corrective action costs, personal injury,
natural resource damages, property damage or attorneys fees or any
investigative, corrective or remedial obligations) pursuant to any
Environmental Requirements.

 

(e)                                  Neither
the Company nor any of its Subsidiaries has, either expressly or by operation
of law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental
Requirements.

 

(f)                                    The
Company has furnished to Parent all environmental audits, reports and other
material environmental documents relating to the Company’s or its Subsidiaries,
Affiliates’ or predecessors’ past or current properties, facilities or
operations which are in their possession or under their reasonable control.

 

(g)                                 None
of the Company or any of its Subsidiaries, predecessors or Affiliates is
subject to any liabilities arising from, relating to, or based on the presence
or alleged presence of asbestos or asbestos-containing materials in any product
or item manufactured, sold, marketed, installed, stored, transported, handled
or distributed at any time by the Company or any of its Subsidiaries,
predecessors or Affiliates, or otherwise based on the presence or alleged
presence of asbestos or asbestos-containing materials at any property or
facility, including any liabilities arising from, relating to or based on any
personal or bodily injury or illness.

 

8.15                           Employees. 
The attached Employees Schedule sets forth the name and current
annual salary of each of the Company’s and any of its Subsidiaries’
employees.  Except as set forth on the
attached Employees Schedule, to the Company’s Knowledge, no executive or
key employee of the Company or any of its Subsidiaries or any group of
employees of the Company or any of its Subsidiaries have any plans to terminate
employment with the Company or any of its Subsidiaries.

 

8.16                           Employee Benefit Plans.  

 

(a)                                  The
Company does not contribute to or have any obligation to contribute to (or any
other liability, including current or potential withdrawal liability, with
respect to) any “multiemployer plan” (as defined in Section 3(37) of ERISA).

 

(b)                                 Except
as set forth on the attached Employee Benefits Schedule under the
heading “Welfare Plans” (the “Welfare Plans”), the Company does not
maintain or have any obligation to contribute to (or any other material
liability with respect to) any plan or arrangement, whether or not terminated,
which provides medical, health, life insurance or other welfare-type benefits
including “employee welfare benefit plans” (as defined in Section 3(1) of
ERISA).  No Welfare Plan provides
medical or life insurance benefits to current or future retired or terminated employees
(except for limited continued medical benefit coverage required to be provided
under Section 4980B of the Code or as required under applicable state law).

 

23

 

(c)                                  The
Company does not maintain, contribute to or have any liability or potential
liability under (or with respect to) any employee benefit plan which is a
“defined benefit plan” (as defined in Section 3(35) of ERISA), whether or not
terminated.

 

(d)                                 Except
as set forth on the Employee Benefits Schedule under the heading “Profit
Sharing Plans” (the “Profit Sharing Plans”), the Company does not
maintain, contribute to or have any liability or potential liability under (or
with respect to) any employee benefit plan which is a “defined contribution
plan” (as defined in Section 3(34) of ERISA), whether or not terminated.

 

(e)                                  Except
as set forth on the Employee Benefits Schedule under the heading “Other
Plans” (the “Other Plans”), the Company does not maintain, contribute to
or have any material liability or potential liability under (or with respect
to) any plan, program or arrangement providing benefits to current or former
employees, including any bonus plan, plan for deferred compensation,
retirement, severance, sick leave, employee health or other welfare benefit
plans, programs or other arrangements, whether or not terminated.

 

(f)                                    For
purposes of this Section 8.16, the term “Company” includes all entities
treated as a single employer with the Company pursuant to Section 414 of the
Code.

 

(g)                                 With
respect to the Welfare Plans, the Profit Sharing Plans and the Other Plans set
forth on the Employee Benefits Schedule (collectively, the “Plans”),
all required payments, premiums, contributions, reimbursements or accruals
required for all periods ending prior to or as of the Closing shall have been
timely made or properly accrued on the Latest Balance Sheet.  None of the Plans has any unfunded
liabilities which are not reflected on the Latest Balance Sheet.

 

(h)                                 The
Plans and all related trusts, insurance contracts and funds have been
maintained, funded and administered in compliance in all material respects with
their terms and with the applicable provisions of ERISA, the Code and other
applicable laws.  Neither the Company
nor, to the Company’s Knowledge, any trustee or administrator of any Plan, has
engaged in any transaction with respect to the Plans which would subject the
Company or any trustee or administrator of the Plans, or any party dealing with
any such Plan, nor do the transactions contemplated by this Agreement
constitute transactions which would subject any such party, to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code.  No actions, suits or claims with respect to
the assets of the Plans (other than routine claims for benefits) are pending
or, to the Company’s Knowledge, threatened which could result in or subject the
Company to any material liability, and there are no circumstances which would
give rise to or be expected to give rise to any such actions, suits or claims.

 

(i)                                     Each
of the Plans which is intended to be qualified under Section 401(a) of the Code
has received a favorable determination from the Internal Revenue Service that such
plan is qualified under Code Section 401(a), and nothing has occurred since the
date of such determination that could adversely affect the qualified status of
any such Plan.

 

8.17                           Tax Matters.

 

(a)                                  Except
as set forth on the attached Taxes Schedule, the Company and each
Subsidiary has timely filed all Tax Returns required to be filed by it, and
each such Tax Return has been prepared in material compliance with all
applicable laws and regulations.  Except
as set forth on the attached Taxes Schedule, all Taxes due and payable
by the Company and its Subsidiaries have been paid, and the Company and its
Subsidiaries have withheld and paid over to the appropriate taxing authority
all Taxes which they are required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party.

 

24

 

(b)                                 Except
as set forth on the attached Taxes Schedule: (i) neither the Company nor
any of its Subsidiaries has requested or been granted an extension of the time
for filing any Tax Return which has not yet been filed; (ii) neither the
Company nor any of its Subsidiaries has consented to extend to a date later
than the date hereof the time in which any Tax may be assessed or collected by
any taxing authority; (iii) no deficiency or proposed adjustment which has not
been settled or otherwise resolved for any amount of Tax has been proposed,
asserted or assessed by any taxing authority against the Company or any
Subsidiary; (iv) the Company and its Subsidiaries have filed all required Tax
Returns in all jurisdictions in which the Company or any Subsidiary is subject
to Tax; (v) there are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company or any of its Subsidiaries;
(vi) neither the Company nor any Subsidiary will be required to include any
item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any: (A) change in method of accounting for a taxable period ending
on or prior to the Closing Date; (B) “closing agreement” as described in Code
§7121 (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing Date; (C) intercompany
transactions occurring at or prior to the Closing or any excess loss account in
existence at Closing described in Treasury Regulations under Code §1502 (or any
corresponding or similar provision of state, local or foreign income Tax law);
(D) installment sale or open transaction disposition made on or prior to the
Closing Date; or (E) prepaid amount received on or prior to the Closing Date;
(vii) neither the Company nor any of its Subsidiaries has been a member of an Affiliated
Group other than one of which the Company was the common parent, or filed or
been included in a combined, consolidated or unitary income Tax Return, other
than one filed by the Company; (viii) neither the Company nor any of its
Subsidiaries is a party to or bound by any Tax allocation or Tax sharing
agreement; and (ix) neither any of the Company Shareholders nor the Company or
any of its Subsidiaries (or any of their employees) is a party to any
agreement, contract, plan or other arrangement that has resulted or would
result, separately or in the aggregate, in the payment of any “parachute
payments” within the meaning of Section 280G of the Code (as a result of the
consummation of the transactions contemplated hereby or otherwise).

 

(c)                                  The
unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the date of
the Last Audited Balance Sheet, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Last Audited Balance
Sheet (rather than in any notes thereto), and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and its Subsidiaries in filing
their Tax Returns.  Since the date of
the Last Audited Balance Sheet, neither the Company nor any Subsidiary has
incurred any liability for Taxes outside the ordinary course of business, other
than that created by the transactions contemplated hereby.

 

8.18                           Brokerage. 
Except as set forth on the attached Brokerage Schedule, there are no
claims for brokerage commissions, finders’ fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon any of the Company Shareholders, the
Company or any of its Subsidiaries.

 

8.19                           Bank Accounts. 
The Bank Account Schedule attached hereto lists all of the
Company’s and its Subsidiaries’ bank accounts (designating each authorized
signatory and the level of each signatory’s authorization).

 

8.20                           Affiliate Transactions.  Except as set forth on the attached Affiliated
Transactions Schedule, no officer, director, shareholder or Affiliate of
the Company or any of its Subsidiaries or, to the Company’s Knowledge, any
individual related by blood, marriage or adoption to any such individual or any
employee or any Person in which any such Person owns any beneficial interest,
is a party to any agreement, contract, commitment or transaction with the
Company or any of its Subsidiaries or has any interest in any property used by
the Company or any of its Subsidiaries.

 

8.21                           Customers and Suppliers.  The Customers and Suppliers Schedule
attached hereto sets forth (a) a list of the top ten customers of the Company
and its Subsidiaries (on a consolidated basis) by dollar

 

25

 

volume of products and services provided to such
customers (each, a “Material Customer”), and (b) a list of the top ten
suppliers of the Company and its Subsidiaries (on a consolidated basis) by
dollar volume of purchases from such suppliers (each, a “Material Supplier”),
in each case for the fiscal year ended September 30, 2003. Neither the Company
nor any of its Subsidiaries has received any written indication from any
Material Customer to the effect that such customer will materially change the
terms of its relationship with the Company or any of its Subsidiaries.  Neither the Company nor any of its
Subsidiaries has received any written indication from any Material Supplier to
the effect that such supplier will materially change the terms of its
relationship with the Company or any of its Subsidiaries.  None of the Company’s or its Subsidiaries
referral sources (including law firms) have indicated in writing to the Company
or its Subsidiaries that it is not satisfied with the Company’s and its
Subsidiaries’ legal or presentment services or relationships with the Company’s
and its Subsidiaries’ customers or that such referral sources will suggest or
otherwise counsel that their customers and clients engage the Company’s and its
Subsidiaries’ competitors rather than the Company and its Subsidiaries.

 

8.22                           Accuracy of Written Due Diligence
Materials.  Neither this Article VIII
nor the Company Disclosure Schedules, taken as a whole, contain any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary, in the context in which made, to make the
statements herein or therein not materially false or misleading.

 

ARTICLE IX

 

REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB

 

As an inducement to the
Company to enter into this Agreement and consummate the transactions
contemplated hereby, Parent and Merger Sub hereby represent and warrant to the
Company as follows:

 

9.1                                 Organization and Power.  Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Missouri.  Merger Sub is a corporation
duly organized and validly existing under the laws of the State of Oregon.  Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. 
The copies of Parent’s articles of incorporation and by-laws which have
been furnished to the Company’s special counsel reflect all amendments made
thereto at any time prior to the date of this Agreement.  The copies of Merger Sub’s articles of
incorporation and by-laws which have been furnished to the Company’s special
counsel reflect all amendments made thereto at any time prior to the date of
this Agreement. 

 

9.2                                 Authorization. 
The execution, delivery and performance of this Agreement by Parent and
its consummation of the transactions contemplated hereby have been duly and
validly authorized by Parent, and no other corporate act or proceeding on the
part of Parent is necessary to authorize the execution, delivery or performance
of this Agreement and the consummation of the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Merger Sub and its
consummation of the transactions contemplated hereby have been duly and validly
authorized by Merger Sub, and no other corporate act or proceeding on the part
of Merger Sub or its sole shareholder is necessary to authorize the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.  This
Agreement has been duly executed and delivered by each of Parent and Merger
Sub, and this Agreement constitutes a valid and binding obligation of Parent
and Merger Sub, enforceable against each in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting the rights and remedies or creditors generally.

 

9.3                                 No Violation. 
Neither Parent nor Merger Sub is subject to or obligated under its
articles of incorporation or by-laws, or any applicable law, rule or regulation
of any governmental authority, or any agreement, instrument, license or permit,
or is subject to any order, writ, injunction or decree, which would be

 

26

 

breached or violated by its execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.

 

9.4                                 Governmental Authorities and
Consents.  No permit, consent,
approval or authorization of, or declaration to or filing with, any
governmental or regulatory authority or any other Person is required in
connection with the execution, delivery or performance of this Agreement by
Parent or Merger Sub or the consummation by Parent or Merger Sub of the
transactions contemplated hereby.  

 

9.5                                 Litigation. 
There are no actions, suits, proceedings, orders or investigations
pending or, to Parent’s knowledge, threatened against or affecting Parent or
Merger Sub, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would materially and adversely
affect Parent’s or Merger Sub’s performance under this Agreement or the
consummation of the transactions contemplated hereby.

 

9.6                                 Conduct of Business; Liabilities.  Except in connection with the transactions
contemplated hereby, Merger Sub has not conducted any business, incurred any
expenses, obligations or liabilities or entered into any contracts or
agreements.

 

ARTICLE X

 

RESERVED

 

Article X
intentionally left blank.

 

ARTICLE XI

 

ADDITIONAL AGREEMENTS

 

11.1                           Survival.  The
representations and warranties in this Agreement, the Related Agreement or in
any writing delivered by any party to another party in connection with this
Agreement shall survive the Closing as follows:

 

(a)                                  the
Fundamental Representations, the representations and warranties in Section 11
of the Related Agreement (the “Related Representations”), the
representations and warranties in Section 8.1 (Organization; Corporate Power)
and Section 8.17 (Tax Matters), and the representations and
warranties in Section 9.1 (Organization and Power) and Section 9.2
(Authorization), shall terminate when the applicable statutes of limitations
with respect to the liabilities in question expire (after giving effect to any
extensions or waivers thereof), plus ninety (90) days;

 

(b)                                 the
representations and warranties in Section 8.13 (Compliance with Laws)
and Section 8.14 (Environmental Matters) shall terminate on the date
that is the three year anniversary of the Closing Date; and

 

(c)                                  all
other representations and warranties in this Agreement or in any writing
delivered by any party to another party in connection with this Agreement shall
terminate on the Indemnity Escrow Release Date;

 

provided
that any representation or warranty in respect of which indemnity may be
sought under Section 11.2 below, and the indemnity with respect thereto,
shall survive the time at which it would otherwise terminate pursuant to this Section
11.1 if written notice of the inaccuracy or breach thereof giving rise to
such right of indemnity (including a reasonable estimate of the amount of
Losses which the notifying party may suffer, sustain or become subject to, as a
result of, in connection with or by virtue of such breach, or if the notifying
party is unable to determine a reasonable estimate thereof, a statement to such
effect) shall have been given in

 

27

 

good faith to the party
against whom such indemnity may be sought prior to such time (regardless of
when the Losses in respect thereof may actually be incurred).

 

11.2                           Indemnification.

 

(a)                                  Each
Company Shareholder, severally in proportion to its Pro Rata Share and not
jointly, agrees to and shall indemnify Parent, the Surviving Corporation and
their respective Affiliates, stockholders, officers, directors, employees,
agents, successors and assigns (collectively, the “Buyer Parties”) and
save and hold each of them harmless against any loss, liability, claim, damage
or expense (including interest, penalties, reasonable attorneys’ fees and
expenses and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing) (collectively, “Losses”), which any
such Buyer Party may suffer, sustain or become subject to, as a result of, in
connection with or by virtue of: (1) any breach by the Company of any
representation or warranty made by the Company in this Agreement or in any of
the certificates or other instruments or documents furnished by the Company
pursuant to this Agreement (including the certificate contemplated by Section
6.1(n)(i) hereof); (2) any non-fulfillment or breach by the Company of any
covenant or agreement required to be performed by the Company under this
Agreement; (3) any Distribution Errors; or (4) any of the matters set forth on
the Indemnification Schedule attached hereto; provided that:

 

(i)                                     the
Company Shareholders shall not have any liability under clause (1) of this Section
11.2(a) (other than with respect to the Fundamental Representations) unless
the aggregate of all Losses relating thereto for which the Company Shareholders
would, but for this proviso, be liable exceeds on a cumulative basis an amount
equal to $850,000.00 (the “Deductible Amount”), and then the Company
Shareholders shall only be liable for all such Losses in excess of the
Deductible Amount; provided that no claim for indemnification by any Buyer
Party arising under Section 11.2(a)(1) (other than with respect
to the Fundamental Representations) shall
be asserted where the amount that would otherwise be payable by the Company
Shareholders hereunder relating to such
claim is less than $10,000;

 

(ii)                                  the
Company Shareholders’ aggregate liability under clause (1) of this Section 11.2(a)
(other than with respect to the Fundamental Representations or in connection
with any action or claim based upon fraud) shall in no event exceed
$10,000,000.00 (with it being understood, however, that notwithstanding
anything to the contrary in this Agreement, the maximum aggregate liability of
any Company Shareholder for any Losses arising under this Agreement or the
Related Agreement (including, for the avoidance of doubt, any Losses arising
with respect to any breach of any Related Representation) shall be the amount
of the aggregate proceeds actually received by such Company Shareholder in
connection herewith); and

 

(iii)                               the
Company Shareholders shall not have any liability under clause (3) of this Section
11.2(a) unless written notice of the events giving rise to such right of
indemnity (including a reasonable estimate of the amount of Losses which the
notifying party may suffer, sustain or become subject to, as a result of, in
connection with or by virtue of such breach, or if the notifying party is
unable to determine a reasonable estimate thereof, a statement to such effect)
is given in good faith to the Shareholders’ Representative prior to the
Indemnity Escrow Release Date.

 

Each Company Shareholder
(for itself and not for any other Company Shareholder) agrees to and shall
indemnify the Buyer Parties and save and hold each of them harmless against any
Losses which any such Buyer Party may suffer, sustain or become subject to, as
a result of, in connection with or by virtue of: (1) any breach by such Company
Shareholder of any Related Representation; or (2) any non-fulfillment or breach
by such Company Shareholder of any covenant or agreement required to be
performed by him or it under this Agreement or the Related Agreement.

 

(b)                                 Parent
and the Surviving Corporation agree to and shall indemnify the Company
Shareholders and their respective Affiliates, stockholders, officers,
directors, employees, agents, successors

 

28

 

and assigns (collectively, the “Seller Parties”)
and hold them harmless against any Losses which the Seller Parties may suffer,
sustain or become subject to, as a result of, in connection with or by virtue
of: (1) any breach by Parent or Merger Sub of any representation or warranty
made by Parent or Merger Sub in this Agreement or in any of the certificates or
other instruments or documents furnished by Parent or Merger Sub pursuant to
this Agreement (including the certificate contemplated by Section 6.2(f)(i)
hereof); or (2) any non-fulfillment or breach by Parent or Merger Sub of any
covenant or agreement required to be performed by Parent or Merger Sub under
this Agreement.

 

(c)                                  Any
indemnification of the Buyer Parties or the Seller Parties pursuant to this Section
11.2 shall be effected by wire transfer of immediately available funds from
one or more of the indemnifying parties to an account designated by the
applicable Buyer Party or Seller Party, as the case may be, within ten days
after the determination thereof.  Any
such indemnification payments shall include interest at the Applicable Rate
calculated on the basis of the actual number of days elapsed over 365, from the
date any such Loss is suffered or sustained to the date of payment.  Any amounts owing from any Company
Shareholder(s) pursuant to this Section 11.2 (including, for the
avoidance of doubt, any amounts owing with respect to Losses related to any
breach of any Related Representation) or Section 11.6 shall first be
made to the extent possible from the Indemnity Escrow Account (but not the
Purchase Price Escrow Account) and thereafter shall be made directly by the
Company Shareholder(s) in accordance with the terms of this Section 11.2(c).
All indemnification payments made pursuant to this Section 11.2 shall be
deemed adjustments to the purchase price.

 

(d)                                 Any
Person making a claim for indemnification under this Section 11.2 (an “Indemnitee”)
shall notify the indemnifying party (an “Indemnitor”) of the claim in
writing within fifteen (15) business days after receiving written notice of any
action, lawsuit, proceeding, investigation or other claim against it (if by a
third party), describing the claim, the amount thereof (if known and
quantifiable) and the basis thereof; provided that the failure to so notify an
Indemnitor shall not relieve the Indemnitor of its obligations hereunder except
to the extent that such failure shall have caused the damages for which the
Indemnitor is obligated to be greater than such damages would have been had the
Indemnitee given the Indemnitor prompt notice hereunder.  Any Indemnitor shall be entitled to
participate in the defense of such action, lawsuit, proceeding, investigation
or other claim giving rise to an Indemnitee’s claim for indemnification at such
Indemnitor’s expense, and at its option (subject to the limitations set forth
below) shall be entitled to assume the defense thereof by appointing counsel
reasonably acceptable to the Indemnitee to be the lead counsel in connection
with such defense; provided that, prior to the Indemnitor assuming control of
such defense it shall first verify to the Indemnitee in writing that such
Indemnitor shall be responsible (with no reservation of any rights) for all
liabilities and obligations relating to such claim for indemnification (subject
to the dollar limitations otherwise set forth in Section 11.2(a)(i) and Section
11.2(a)(ii) herein) and that it shall provide indemnification (subject to
the dollar limitations otherwise set forth in Section 11.2(a)(i) and Section
11.2(a)(ii) herein) to the Indemnitee with respect to such action, lawsuit,
proceeding, investigation or other claim giving rise to such claim for
indemnification hereunder; and provided further, that:

 

(A)                              the
Indemnitee shall be entitled to participate in the defense of such claim and to
employ counsel of its choice for such purpose; provided that the fees and
expenses of such separate counsel shall be borne by the Indemnitee (other than
any reasonable fees and expenses of such separate counsel that are incurred
prior to the date the Indemnitor effectively assumes control of such defense
which, notwithstanding the foregoing, shall be borne by the Indemnitor, and
except that the Indemnitor shall pay all of the reasonable fees and expenses of
such separate counsel if the Indemnitee has been reasonably advised by its
counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnitor and the Indemnitee);

 

(B)                                the
Indemnitor shall not be entitled to assume control of such defense and shall
pay the reasonable fees and expenses of counsel retained by the Indemnitee if
(1) the claim for indemnification relates to or arises in connection with any
criminal or quasi-criminal proceeding, action, indictment, allegation or
investigation; (2) the claim primarily seeks an injunction

 

29

 

or equitable relief
against the Indemnitee; (3) the Indemnitee has been reasonably advised by its
counsel in writing that a reasonable likelihood exists of a conflict of
interest between the Indemnitor and the Indemnitee; or (4) upon petition by the
Indemnitee, the appropriate court rules that the Indemnitor failed or is
failing to vigorously prosecute or defend such claim; and

 

(C)                                if
the Indemnitor shall control the defense of any such claim, the Indemnitor
shall obtain the prior written consent of the Indemnitee before entering into
any settlement of a claim or ceasing to defend such claim if, pursuant to or as
a result of such settlement or cessation, injunctive or other equitable relief
will be imposed against the Indemnitee or if such settlement does not expressly
and unconditionally release the Indemnitee from all liabilities and obligations
with respect to such claim, without prejudice.

 

(e)                                  The
amount of damages for which any Person may be liable under this Section 11.2
shall be the net amount of the damages suffered by the Buyer Parties or the
Seller Parties, as the case may be, after deducting (i) all insurance proceeds,
if any, actually received by the applicable Buyer Party or Seller Party, as the
case may be, less any increase in the annual premiums to such Person as a
result of such claim for insurance proceeds in the immediately succeeding year,
and (ii) any net Tax benefits actually received by the Indemnitee with
respect to Loss being indemnified.

 

(f)                                    Notwithstanding
anything to the contrary in this Agreement, for purposes of the indemnification
provisions in this Section 11.2, the determination of (i) whether any
representation or warranty has been breached, and (ii) the amount of any Losses
with respect to any such breach, shall be made without giving effect to any
“Material Adverse Effect” qualification or any materiality qualification
contained in the representations or warranties herein, except for the
representations and warranties set forth in Section 8.5 (Financial
Statements; Accounts Receivable), Section 8.7 (No Material Adverse
Effect) and Section 8.22 (Accuracy of Written Due Diligence Materials)
for which such qualifications shall be given effect.

 

(g)                                 Subject
to the terms of Section 12.11(e), except for claims of fraud, the
indemnities provided in this Section 11.2 shall be the exclusive remedy
of the parties (including the Buyer Parties and the Seller Parties) in respect
of the matters covered by this Agreement and the Related Agreement.

 

(h)                                 The
Company Shareholders and their Affiliates will have no claims or rights to
contribution or indemnity from the Surviving Corporation with respect to any
claims made by the Buyer Parties or amounts paid by any of the Company
Shareholders or their Affiliates pursuant to this Section 11.2 of the Merger
Agreement.  The Company Shareholders and
their Affiliates will have no claims or rights to contribution or indemnity
from the officers or directors of the Surviving Corporation with respect to any
amounts paid by any of them pursuant to this Section 11.2 if such claims or
rights would require the Surviving Corporation to indemnify the directors or
officers.

 

11.3                           Press Release and Announcements.  After the Closing, the Surviving Corporation
may issue any press releases, announcements to the employees, customers or
suppliers of the Company or any of its Subsidiaries or other releases of
information related to this Agreement or the transactions contemplated hereby
as it may deem appropriate without the consent of any other party hereto.

 

11.4                           Expenses. 
Except as otherwise provided herein, Parent and Merger Sub shall pay all
of their own fees, costs and expenses incurred in connection with the
negotiation of this Agreement, the performance of their obligations hereunder
and the consummation of the transactions contemplated hereby (it being
understood, however, that one-half of all filing and notification fees in
connection with the HSR Act have been paid by Parent, and one-half of all
filing and notification fees in connection with the HSR Act have been paid by
the Company).  The Company Shareholders
shall pay all of their own, and (severally in proportion to their Pro Rata
Share and not jointly) all of the Company’s and its Subsidiaries’ fees, costs
and expenses incurred in connection with the negotiation of this Agreement, the
performance of their obligations hereunder and the consummation of the
transactions contemplated hereby (collectively, “Company Expenses”).  Any Company

 

30

 

Expenses which are in fact paid by Parent or its
Subsidiaries (including the Surviving Corporation) from and after the Closing
shall, without duplication, be included in current liabilities for purposes of
the calculation of Net Working Capital.

 

11.5                           Further Assurances.  Each of the Surviving Corporation, the Company Shareholders,
Parent and Merger Sub shall, and shall cause their Affiliates to, execute and
deliver such further instruments of conveyance and transfer and take such
additional action as the Surviving Corporation may reasonably request to
effect, consummate, confirm or evidence the Merger.

 

11.6                           Certain Tax Matters.  The following provisions shall govern the
allocation of responsibility as between Parent and the Surviving Corporation,
on the one hand, and the Company Shareholders, on the other, for certain Tax
matters following the Closing:

 

(a)                                  The
Company Shareholders, severally in proportion to their Pro Rata Share and not
jointly, shall indemnify each Buyer
Party and save and hold each of them harmless against (i) all Taxes (or
the non-payment thereof) of the Company and its Subsidiaries for all Taxable
periods ending on or before the Closing Date and the portion through the end of
the Closing Date for any Taxable period that includes (but does not end on) the
Closing Date (“Pre-Closing Tax Period”), (ii) any and all Taxes of any
member of an Affiliated Group of which the Company or any of its Subsidiaries
is or was a member on or before the Closing Date, including pursuant to Treasury
Regulation §1.1502-6 or any analogous or similar state, local, or foreign law
or regulation, and (iii) any and all Taxes of any Person (other than the
Company and its Subsidiaries) imposed on the Company or any of its Subsidiaries
as a transferee or successor, by contract or pursuant to any law, rule or
regulation, which Taxes relate to an event or transaction occurring before the
Closing; provided, however, that in the case of clauses (i), (ii)
and (iii) above, the Company Shareholders shall be liable only to the extent
that such Taxes are in excess of the amount, if any, reserved for such Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the Closing Statement
and taken into account in determining the final purchase price.  Subject to the penultimate sentence of
Section 11.2(c) hereof, the Company Shareholders shall reimburse Parent for any
Taxes which are the responsibility of the Company Shareholders pursuant to this
Section 11.6(a) within ten (10) business days after payment of such
Taxes by Parent or the Surviving Corporation.

 

(b)                                 In
the case of any Taxable period that includes (but does not end on) the Closing
Date (a “Straddle Period”), the amount of any Taxes based on or measured
by income or receipts for the Pre-Closing Tax Period shall be determined based
on an interim closing of the books as of the close of business on the Closing
Date, and the amount of other Taxes for a Straddle Period which relate to the
Pre-Closing Tax Period 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 ending on the Closing Date, and the
denominator of which is the number of days in such Straddle Period.

 

(c)                                  The
Surviving Corporation shall prepare or cause to be prepared and file or caused
to be filed all Tax Returns for Pre-Closing Tax Periods for the Company and its
Subsidiaries which are filed after the Closing Date.  The Surviving Corporation shall permit Shareholders’
Representative a reasonable opportunity to review and comment on each such Tax
Return (including any amended Tax Return) prior to filing and shall make such
reasonable revisions to such Tax Returns as are reasonably requested by
Shareholders’ Representative.

 

(d)                                 The
Surviving Corporation and the Shareholders’ Representative (on behalf of the
Company Shareholders) shall cooperate with each other in connection with the
filing of any Tax Returns (including any amended Tax Return) and any audit,
litigation or other proceeding with respect to Taxes.

 

(e)                                  All
Tax-sharing agreements or similar agreements with respect to or involving the
Company and any of its Subsidiaries shall be terminated as of the Closing Date
and, after the Closing Date,

 

31

 

neither Parent, the Surviving Corporation nor any of
their Subsidiaries shall be bound thereby or have any liability thereunder.

 

(f)                                    All
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid by the Company Shareholders when due, and the Company
Shareholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, the Surviving Corporation will, and will cause its Affiliates to, join in
the execution of any such Tax Returns and other documentation.

 

(g)                                 Notwithstanding
any other provision hereof to the contrary, if (x) the Company Shareholders
provide indemnification under this Section 11.6 in accordance with the
provisions of Section 11.2(c), and (y) Fleet National Bank, a national
banking association (“Fleet”), may (in the good faith judgment of the
Shareholders’ Representative) be liable or responsible for such Tax
liability(ies) pursuant to Article IX of the Stock Purchase Agreement, dated as
of February 8, 2001, between Fleet and the Company, and joined in for limited
purposes, by Endeavour Capital Fund III, L.P., Endeavour Associates Fund III,
L.P., and Shawmut Equity Partners, L.P, as amended (the “Fleet Purchase
Agreement”), then Parent shall take all such actions as are reasonably
necessary to permit the Shareholders’ Representative to (at its option and at
the sole expense of the Company Shareholders) pursue, by, on behalf of and in
the name of the Surviving Corporation but for the benefit of the Company
Shareholders, any claim or remedy that is or may be available to the Surviving
Corporation under the 2001 Agreement.

 

(h)                                 The parties hereto agree that a Tax deduction
should arise from the accelerated vesting or disposition of capital stock of
the Company and Vested Company Options held by the Persons identified on
Schedule 11.6(h) in connection with the transactions contemplated hereby;
provided, however, that neither the Company nor the Company Shareholders are
providing any representation, warranty or indemnification (including pursuant
to Section 8.17, Section 11.2, this Section 11.6 or the
Related Agreement) with respect to the availability or timing of any such
deduction (including the failure (i) of the Company or the Surviving
Corporation to claim any such deduction at any time, or (ii) of the Company to
withhold any Taxes required to be withheld with respect to income upon vesting
or disposition at any time prior to (1) consummation of the transactions
contemplated hereby, or (2) the accelerated vesting or disposition of the
capital stock of the Company and Vested Company Options in connection with the
consummation of the transactions contemplated hereby).

 

11.7                           Appointment of Shareholders’
Representative.

 

(a)                                  Each
of the Company Shareholders and the Company (on behalf of the Company
Shareholders) hereby designates Endeavour
Capital Fund III, L.P., a Delaware limited partnership, as the exclusive
representative and agent of the Company Shareholders (“Shareholders’
Representative”) to execute any and all instruments or other documents on
behalf of the Company Shareholders, and to do any and all other acts or things
on behalf of the Company Shareholders, which Shareholders’ Representative may
deem necessary or advisable, or which may be required pursuant to this
Agreement, the Related Agreement, the Escrow Agreement or otherwise, in
connection with the consummation of the transactions contemplated hereby.  Each of the Company Shareholders and the
Company (on behalf of the Company Shareholders) hereby irrevocably appoints,
and consents to the designation of Endeavour
Capital Fund III, L.P., a Delaware limited partnership, its successor or
its designee, to act as such Company Shareholder’s exclusive attorney-in-fact
and agent, with full power of substitution, to act in the name, place and stead
of such Person with respect to the matters identified herein or arising
hereunder, including the power (i) to act for such Person with regard to
matters pertaining to indemnification referred to in this Agreement;
(ii) to execute and deliver on behalf of such Person all ancillary
agreements, certificates, statements, notices, approvals, extensions, waivers,
undertakings, amendments and other documents Shareholders’ Representative deems
appropriate in connection with responding to, compromising or settling any
claims made pursuant to this Agreement, the Escrow Agreement and the Related
Agreement; (iii) to give and receive all notices and communications to be 

 

32

 

given or received under this Agreement, the Escrow
Agreement and the Related Agreement and to receive service of process in
connection with any claims under this Agreement, the Escrow Agreement and the
Related Agreement; and (iv) to take all other actions which under this
Agreement, the Escrow Agreement and the Related Agreement may be taken by
Shareholders’ Representative and to do or refrain from doing any further act or
deed on behalf of such Person which Shareholders’ Representative deems
necessary or appropriate in its sole discretion relating to the subject matter
of this Agreement, the Escrow Agreement and the Related Agreement as fully and
completely as such Person could do if personally present.  The death or incapacity of any such Person
shall not terminate the agency and power granted hereby to Shareholders’
Representative.

 

(b)                                 Parent
shall be entitled to deal exclusively with the Shareholders’ Representative on
all Company Shareholder matters relating to this Agreement.  A decision, act, consent or instruction of
the Shareholders’ Representative constitutes a decision of all the Company
Shareholders.  Such decision, act,
consent or instruction is final, binding and conclusive upon each Company
Shareholder, and Parent may rely upon such decision of the Shareholders’
Representative.

 

(c)                                  The
Shareholders’ Representative shall act for the Company Shareholders hereunder
in the manner the Shareholders’ Representative believes to be in the best
interest of the Company Shareholders and consistent with its obligations
hereunder, but shall have no duties or obligations to the Company Shareholders
except as specifically set forth herein. 
In acting as representative of the Company Shareholders, the Shareholders’
Representative may rely upon, and shall be protected in acting or refraining
from acting upon, an opinion or advice of counsel, certificate of auditors or
other certificate, statement, instrument, opinion, report, notice, request,
consent, order, arbitrator’s award, appraisal, bond or other paper or documents
reasonably believed by the Shareholders’ Representative to be genuine and to
have been signed or presented by the proper party or parties.  The Shareholders’ Representative shall not
be personally liable to the Company Shareholders for any act done or omitted
hereunder as Shareholders’ Representative except in the event of intentional
wrongdoing for personal benefit.  The
Shareholders’ Representative may consult with counsel and any advice of such
counsel shall be full and complete authorization and protection in respect to
any action taken or suffered or omitted by it in such capacity in good faith
and in accordance with such opinion of counsel.  The Shareholders’ Representative may perform its duties as
Shareholders’ Representative either directly or by or through its agents or
attorneys, and the Shareholders’ Representative shall not be responsible to the
Company Shareholders for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.

 

(d)                                 The
Shareholders’ Representative shall be entitled to reimbursement from the
Shareholder Representative Escrow Account for its expenses incurred in
connection with its duties as Shareholders’ Representative.  The Company Shareholders (severally in
proportion to their Pro Rata Share and not jointly) shall indemnify, hold
harmless and defend the Shareholders’ Representative from and against, and
reimburse the Shareholders’ Representative with respect to, any and all Losses
reasonably incurred by the Shareholders’ Representative as a result of such
Person acting as the Shareholders’ Representative under this Agreement or in
connection with such Person’s duties hereunder, provided that the Shareholders’
Representative’s initial recourse for all such claims shall be to the
Shareholder Representative Escrow Amount for so long as any of the Shareholder
Representative Escrow Amount remains in the Shareholder Representative Escrow
Account.

 

11.8                           Collection of Accounts Receivable.  

 

(a)                                  After
the Closing and until the Final Receivables Settlement Date (as defined below),
the Surviving Corporation shall in good faith use commercially reasonable
efforts to collect the accounts receivable which are reflected in Closing
Working Capital on the Closing Statement (net of any allowance for doubtful
accounts reflected in Closing Working Capital on the Closing Statement, the “Closing
Accounts Receivable”).  Without
limiting the foregoing, the Surviving Corporation shall not be deemed to be in
good faith using commercially reasonable efforts to collect the Closing
Accounts Receivable if it shall forgive, discharge or compromise, in whole or
in part, any receivable reflected in Closing Working Capital on the

 

33

 

Closing Statement and the primary purpose for such
forgiveness, discharge or compromise, in whole or in part, was not to resolve a
bona fide customer dispute with respect to or otherwise resulting from any act
or omission by the Company or any of its Subsidiaries prior to the
Closing.  If the Surviving Corporation
has not collected an amount of receivables in an amount at least equal to the
Closing Accounts Receivable by the date that is five business days before the
Indemnity Escrow Release Date, then (without regard to whether such
non-collection constitutes a breach of a representation or warranty hereunder)
Parent and Shareholders’ Representative shall take all such actions as are
necessary under the Escrow Agreement to cause the Escrow Agent to release to
the Surviving Corporation, in immediately available funds from the Indemnity
Escrow Account on or prior to the Indemnity Escrow Release Date, an aggregate
amount equal to (the “Accounts Receivable Shortfall Amount”) the amount
by which the Closing Accounts Receivable exceeds the amount collected by the
Surviving Corporation pursuant to this Section 11.8(a) during the period
from the Closing Date through the date that is five business days before the
Indemnity Escrow Release Date.  For the
avoidance of doubt, any collection of a receivable that was a doubtful account
on the Closing Statement or had been written off prior to the Closing will be
considered an amount collected by the Surviving Corporation for the purposes of
the preceding sentence.  Notwithstanding
anything to the contrary in this Section 11.8, in the event that the Surviving
Corporation desires to forgive, discharge or compromise, in whole or in part, a
receivable reflected in Closing Working Capital on the Closing Statement and,
pursuant to the second sentence of this Section 11.8(a), such forgiveness,
discharge or compromise would not constitute the good faith use of commercially
reasonable efforts to collect the Closing Accounts Receivable, the Surviving
Corporation may nonetheless effect such forgiveness, discharge or compromise,
in whole or in part, so long as the Surviving Corporation provides the
Shareholders’ Representative with prior written notice of such forgiveness,
discharge or compromise, which notice shall contain the Surviving Corporation’s
written agreement that the amount so forgiven, discharged or compromised shall
be considered an amount collected by the Surviving Corporation for the purposes
of the third sentence of this Section 11.8(a) (or, with respect to any
forgiveness, discharge or compromise occurring during the Subsequent Collection
Period (as defined below), an amount collected by the Surviving Corporation for
the purposes of Section 11.8(b) below).

 

(b)                                 If
the Accounts Receivable Shortfall Amount is paid to the Surviving Corporation
from the Indemnity Escrow Account as contemplated by Section 11.8(a)
above, and if the Accounts Receivable Shortfall Amount paid to the Surviving
Corporation from the Indemnity Escrow Account is greater than $200,000, then
if, during the period (the “Subsequent Collection Period”) beginning on
the date that is four business days before the Indemnity Escrow Release Date
and ending on the date that is the three year anniversary of the Closing Date
(the “Final Receivables Settlement Date”), the Surviving Corporation
collects an amount of Closing Accounts Receivable in excess of $200,000, then
the Surviving Corporation, no later than the date that is ten business days
after the Final Receivables Settlement Date, shall pay to the Shareholders’
Representative (on behalf of the Company Shareholders other than the holders of
Vested Company Options in accordance with the Shareholder Distribution
Schedule attached hereto) and to the holders of Vested Company Options
(subject to applicable withholding laws and obligations), by wire transfer of
immediately available funds, an aggregate amount equal to the amount collected
by the Surviving Corporation during the Subsequent Collection Period.

 

(c)                                  Within
ten days after the last day of each calendar month, beginning with the first
full calendar month following the Closing and ending with the last full
calendar month prior to the Indemnity Escrow Release Date, the Surviving
Corporation shall provide to the Shareholders’ Representative an accurate and
complete aging report identifying all receivables that were reflected in
Closing Working Capital on the Closing Statement and that are unpaid as of the
last day of such calendar month.

 

11.9                           Payment of Tax Bonus Payment.  After the Closing (and notwithstanding the
provisions of Section 6.1(l)), the Surviving Corporation will pay (or cause to
be paid) any portion of the aggregate amount of the Tax Bonus Payment that was
not paid to the recipients thereof prior to the Closing.

 

34

 

ARTICLE XII

 

MISCELLANEOUS

 

12.1                           Amendment and Waiver.  This Agreement may be amended, and any
provision of this Agreement may be waived; provided that any such amendment or
waiver will be binding on (x) the Company Shareholders only if such amendment or
waiver is set forth in a writing executed by the Shareholders’ Representative,
and (y) Parent, Merger Sub and the Surviving Corporation only if such amendment
or waiver is set forth in a writing executed by Parent, Merger Sub or the
Surviving Corporation, as the case may be. 
No course of dealing between or among any Persons having any interest in
this Agreement will be deemed effective to modify, amend or discharge any part
of this Agreement or any rights or obligations of any Person under or by reason
of this Agreement.  No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.

 

12.2                           Notices.  All
notices, demands and other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (i) when personally delivered or sent by telecopy
(with hard copy to follow), (ii) one business day after being sent by reputable
overnight express courier (charges prepaid), or (iii) five days following
mailing by certified or registered mail, postage prepaid and return receipt
requested.  Unless another single
address is specified in writing, notices, demands and communications to (x) the
Company Shareholders shall be sent to the address indicated for the
Shareholders’ Representative (and notices, demands and communications to or
from the Shareholders’ Representative will constitute notice to or from the
Company Shareholders), and (y) Parent, the Surviving Corporation and the
Shareholders’ Representative (in its capacity as Shareholders’ Representative)
shall be sent to the addresses indicated below:

 

Notices to Parent
or the Surviving Corporation:

 

EPIQ Systems, Inc.

501 Kansas Avenue

Kansas City, KS 66105

Attn: President

Telephone:                                  (913)
621-9500

Telecopy:                                         (913)
621-7281

 

with a copy to (which
shall not constitute notice):

 

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Attn:  Richard W. Porter, P.C.

Telephone:                                    (312)
861-2000

Telecopy:                                           (312)
861-2200

 

Notices to the
Shareholders’ Representative:

 

Endeavour Capital Fund
III, L.P.

920 SW Sixth Ave.

Portland, OR 97204

Attn: Leland M. Jones

Telephone: (503) 223-2721

Telecopy: (503) 223-1384

 

35

 

with a copy to (which
shall not constitute notice):

 

Stoel Rives LLP

900 SW Fifth Ave, Suite
2600

Portland, Oregon
97204-1268

Attn: Richard C.
Josephson

Telephone: (503) 294-9537

Telecopy: (503) 220-2280

 

and

 

Shawmut
Equity Partners, L.P.

75 Federal Street, 18th
Floor

Boston, MA  02110

Attn: Daniel K. Doyle

Telephone: (617) 368-4900

Telecopy: (617) 368-4910

 

12.3                           Assignment. 
Except as set forth below, this Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other parties hereto. Notwithstanding anything
to the contrary in the immediately preceding sentence, each of Parent and the
Surviving Corporation may assign its rights and obligations hereunder, in whole
or in part, to any of its Affiliates without the consent of any of the other
parties hereto.  In addition, each of
Parent and the Surviving Corporation may assign its rights and obligations
pursuant to this Agreement in whole or in part, in connection with any
disposition or transfer of all or any portion of Parent’s, the Surviving
Corporation’s or any of their respective Subsidiaries’ or their respective
businesses in any form of transaction without the consent of any of the other
parties hereto.  Each of Parent, the
Surviving Corporation and their Subsidiaries may assign any or all of its
rights pursuant to this Agreement, including its rights to indemnification, to
any of their lenders as collateral security.

 

12.4                           Severability. 
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

12.5                           Interpretation. 
The headings and captions used in this Agreement, in any Schedule or
Exhibit hereto, in the table of contents or in any index hereto are for
convenience of reference only and do not constitute a part of this Agreement
and shall not be deemed to limit, characterize or in any way affect any
provision of this Agreement or any Schedule or Exhibit hereto, and all
provisions of this Agreement and the Schedules and Exhibits hereto shall be
enforced and construed as if no caption or heading had been used herein or
therein.  Any capitalized terms used in
any Schedule or Exhibit attached hereto and not otherwise defined therein shall
have the meanings set forth in this Agreement. 
Each defined term used in this Agreement shall have a comparable meaning
when used in its plural or singular form. 
The use of the word “including” herein shall mean “including without
limitation.”  The parties have
participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties, and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.

 

12.6                           Complete Agreement.  This Agreement (including all of the
Schedules and Exhibits attached hereto), the Related Agreement, the Escrow
Agreement and each of the Employment Agreements (including Section 7 of each of
the Employment Agreements) contain the entire agreement and understanding
between the

 

36

 

parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, whether written
or oral, relating to such subject matter in any way.

 

12.7                           Counterparts. 
This Agreement may be executed in one or more counterparts (including by
means of telecopied signature pages), all of which taken together shall
constitute one and the same instrument. 

 

12.8                           Governing Law. 
Except as provided in Section 12.11 below, all questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal law of the State of Oregon, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Oregon or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Oregon.

 

12.9                           Schedules. 
Information set forth in any schedule of the Company Disclosure Schedules
shall be deemed to have been disclosed only with respect to (a) any
representation, warranty or statement in the Agreement qualified by reference
to the schedule in question; and (b) any representation, warranty or statement
in the Agreement qualified by reference to any other schedule where the
information set forth on the face of the schedule in question is set forth with
such specificity that a reasonable person would know that such disclosure was
applicable to such other schedule.  The
fact that any matter or event is disclosed in the Company Disclosure Schedules
shall not constitute an admission that such item is required to be so
disclosed, nor shall the fact that any matter or event is disclosed in the
Company Disclosure Schedules necessarily mean that it is material, whether
considered individually or in combination with other matters or events
disclosed therein.  No information
contained in the Company Disclosure Schedules shall be deemed to be an admission
by any party to the Agreement or to any third party of any matter whatsoever,
including, without limitation, any violation of law or breach of any
agreement.  Except as otherwise limited
herein or in the Agreement, all disclosures contained in these Schedules are
made as of the date of the Agreement. 
Capitalized terms used but not otherwise defined in the Company
Disclosure Schedules shall have the meanings set forth in the Agreement.

 

12.10                     No Third Party Beneficiaries.  Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any Person other than
the parties hereto and their respective permitted successors and assigns any
rights or remedies under or by reason of this Agreement.  Notwithstanding the foregoing, certain
provisions of this Agreement are intended for the benefit of the Company
Shareholders and such provisions may only be enforced by the Shareholders’
Representative (on behalf of the Company Shareholders).

 

12.11                     Dispute Resolution.

 

(a)                                  Except
as otherwise expressly provided in this Agreement, the parties agree that the
arbitration procedure set forth below shall be the sole and exclusive method
for resolving and remedying any and all disputes, controversies or claims that
arise out of or in connection with, or relate in any manner to, the rights and
liabilities of the parties hereunder or any provision of this Agreement or the
Related Agreement or the interpretation, enforceability, performance, breach,
termination or validity hereof or thereof, including this Section 12.11
relating to the resolution of disputes (the “Disputes”) and questions
concerning arbitrability; provided that nothing in this Section 12.11
shall prohibit a party hereto from instituting litigation to enforce any Final
Determination (as defined below).  The
parties hereby acknowledge and agree that, except as otherwise provided in this
Section 12.11 or in the applicable rules for arbitration of business
disputes (the “Rules”) promulgated by the Arbitration Service of
Portland, Inc. (the “Arbitration Service”) as in effect from time to
time, the arbitration procedures and any Final Determination hereunder shall be
governed by, and shall be enforced pursuant to, the United States Arbitration
Act, 9 U.S.C. §1 et. seq.

 

(b)                                 Except
as provided elsewhere herein, in the event that any party asserts that there
exists a Dispute, such party shall deliver a written notice to each other party
involved therein specifying the nature of the asserted Dispute and requesting a
meeting to attempt to resolve the same. 
If no such resolution is reached within ten business days after the
delivery of such notice, the party delivering such notice of Dispute (the “Disputing
Person”) may thereafter commence arbitration hereunder by delivering to
each other party

 

37

 

involved therein a notice of arbitration (a “Notice
of Arbitration”).  Such Notice of
Arbitration shall specify the nature of any Dispute and any other matters
required by the Rules as in effect from time to time to be included
therein.  The Arbitrator shall permit
and facilitate such discovery as the parties shall reasonably request.  Parent and Shareholders’ Representative
shall mutually agree upon one arbitrator to resolve any Dispute pursuant to the
procedures set forth in this Section 12.11 and the Rules.  If Parent and Shareholders’ Representative
cannot mutually agree to an arbitrator within 15 days from receipt of the
notice of arbitration, the arbitrator shall be appointed by the Arbitration
Service within 15 days of being notified in writing of the Arbitration
Service’s need to make such appointment or as soon thereafter as may be
practicable.

 

(c)                                  The
fees and expenses of the Arbitration Service and the arbitrator selected
pursuant to Section 12.11(b) shall be shared equally by Parent and the
Company Shareholders (severally in proportion to their Pro Rata Share and not
jointly) and advanced by them from time to time as required; provided  that
at the conclusion of the arbitration, the arbitrator shall award reasonable
costs and expenses (including the costs of the arbitration previously advanced
and the reasonable fees and expenses of attorneys, accountants and other
experts) and interest at the Applicable Rate to the prevailing party.

 

(d)                                 The
arbitration shall be conducted in Portland, Oregon  under the Rules as in effect from time to time.  The parties shall use their reasonable best
efforts to cause the arbitrator to conduct the arbitration so that a final
result, determination, finding, judgment and/or award (the “Final
Determination”) is made or rendered as soon as practicable, but in no event
later than 90 business days after the delivery of the Notice of Arbitration nor
later than 30 days following completion of the arbitration.  Notwithstanding any Oregon law to the
contrary, the Final Determination shall be final and binding on all parties and
there shall be no appeal from or reexamination of the Final Determination,
except for fraud, perjury, evident partiality or misconduct by an arbitrator
prejudicing the rights of any party and to correct manifest clerical errors.

 

(e)                                  Notwithstanding
anything in this Agreement or the Related Agreement to the contrary, nothing in
this Section 12.11 shall be construed to impair the right of any Person
to seek injunctive or other equitable relief.

 

*   *  
*   *   *

 

38

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement and Plan of Merger on the date
first written above.

 

	
   

  	
  P-D HOLDING CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/  Jeffrey B. Baker

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey B. Baker

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer
  and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EPIQ SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/   Christopher
  E. Olofson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Christopher E. Olfson

  
	
   

  	
   

  	
  President and Chief
  Operating Officer

  
	
   

  	
   

  
	
   

  	
  P-D MERGER CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/   Christopher
  E. Olofson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Christopher E. Olofson

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  President and Chief
  Operating Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENDEAVOUR
  CAPITAL FUND III, L.P., IN ITS

  CAPACITY AS SHAREHOLDERS’

  REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
  By: ENDEAVOUR CAPITAL,
  LLC

  Its: General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/   John
  von Schlegell

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  John von Schlegell

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Member

  
									

 

39Exhibit 10.2

 

AGREEMENT RELATED TO
MERGER AGREEMENT

 

THIS AGREEMENT
RELATED TO MERGER AGREEMENT (“this Related Agreement”) is entered into
effective as of January 30, 2004 by and among EPIQ Systems, Inc., a Missouri
corporation (“Purchaser”), P-D Holding Corp., an Oregon corporation (the
“Company”), the shareholders of the Company identified on the signature pages
hereto (the “Party Shareholders”), and the Shareholders’ Representative (solely
in its capacity as the Shareholders’ Representative).  The parties to this Related Agreement are sometimes referred to
herein collectively as the “Parties” and individually as a “Party.”  The Party Shareholders other than Jeffrey B.
Baker and Edward J. Nimmo are sometimes referred to herein collectively as the
“Investor Party Shareholders” and individually as an “Investor Party
Shareholder.”

 

Concurrently
with the execution hereof, the Company, Purchaser and P-D Merger Corp., an
Oregon corporation and wholly-owned subsidiary of Purchaser (“Merger Sub”), are
entering into that certain Agreement and Plan of Merger (the “Merger
Agreement”) providing for the merger of Merger Sub with and into the Company,
with the result that the Company will be the surviving corporation (the
“Surviving Corporation”) in the merger and continue as a wholly-owned
subsidiary of Purchaser.  Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Merger Agreement.  A
copy of the Merger Agreement is attached hereto as Exhibit A.

 

The Party
Shareholders, who collectively hold 92.37% of the shares of the Company’s
common stock outstanding as of the date hereof, have agreed to execute this
Related Agreement in order to induce Purchaser and Merger Sub to enter into the
Merger Agreement.  Each Party Shareholder
is a “Company Shareholder” as such term is defined in the Merger Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing recitals and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties hereby agree as follows:

 

1.                                       Section
5.3 (Post-Closing Adjustment) of Merger Agreement.  Each Party Shareholder (for itself and not
for any other Company Shareholder) agrees to be bound by and comply with the
provisions of subsections (d) and (f) of Section 5.3 (Post-Closing Adjustment)
of the Merger Agreement as a “Company Shareholder” under such provisions to the
same extent as if such Party Shareholder had been specifically identified as a
“Company Shareholder” in the Merger Agreement and been a party thereto, subject
to the terms and conditions of such provisions (including, for the avoidance of
doubt, the terms and conditions that limit the extent of the payment
obligations of each Company Shareholder).

 

2.                                       Section
11.2 (Indemnification) of Merger Agreement.  Each Party Shareholder (for itself and not for any other Company
Shareholder) agrees to be bound by and comply with the provisions of Section
11.2 (Indemnification) of the Merger Agreement as a “Company Shareholder” under
such provisions to the same extent as if such Party Shareholder had been
specifically identified as a “Company Shareholder” in the Merger Agreement and
been a party thereto, subject to the terms and conditions of such provisions
(including, for the avoidance of doubt, the terms and conditions that limit the
extent of the indemnification obligations of each Company Shareholder).  For the avoidance of doubt and without
limiting the provisions of the Merger Agreement (including the proviso in Section
11.1 thereof), the Parties acknowledge and agree that each representation or
warranty in the Merger Agreement or this Related Agreement in respect of which
indemnification may be sought under such Section 11.2 (Indemnification), and
the indemnification with respect thereto, shall terminate at the applicable
time provided for in Section 11.1 (Survival) of the Merger Agreement.

 

3.                                       Section
11.4 (Expenses) of Merger Agreement. 
Each Party Shareholder (for itself and not for any other Company
Shareholder) agrees to be bound by and comply with the provisions of Section
11.4 (Expenses) of the Merger Agreement as a “Company Shareholder” under such
provisions to the same extent as if such Party Shareholder had been
specifically identified as a “Company Shareholder” in the Merger

 

1

 

Agreement and been a party
thereto, subject to the terms and conditions of such provisions (including, for
the avoidance of doubt, the terms and conditions that limit the extent of the
payment obligations of each Company Shareholder).

 

4.                                       Section
11.5 (Further Assurances) of Merger Agreement.  Each Party Shareholder (for itself and not for any other Company
Shareholder) agrees to be bound by and comply with the provisions of Section
11.5 (Further Assurances) of the Merger Agreement as a “Company Shareholder”
under such provisions to the same extent as if such Party Shareholder had been
specifically identified as a “Company Shareholder” in the Merger Agreement and
been a party thereto, subject to the terms and conditions of such provisions.

 

5.                                       Section
11.6 (Certain Tax Matters) of Merger Agreement.  Each Party Shareholder (for itself and not for any other Company
Shareholder) agrees to be bound by and comply with the provisions of Section
11.6 (Certain Tax Matters) of the Merger Agreement as a “Company Shareholder”
under such provisions to the same extent as if such Party Shareholder had been
specifically identified as a “Company Shareholder” in the Merger Agreement and
been a party thereto, subject to the terms and conditions of such provisions
(including, for the avoidance of doubt, the terms and conditions that limit the
extent of the indemnification obligations of each Company Shareholder).

 

6.                                       Section
11.7 (Appointment of Shareholders’ Representative) of Merger Agreement.  Each Party Shareholder (for itself and not
for any other Company Shareholder) hereby designates Endeavour Capital Fund
III, L.P., a Delaware limited partnership (i.e., the Shareholders’
Representative) as his or its exclusive representative and agent to execute any
and all instruments or other documents on behalf of the Company Shareholders,
and to do any and all other acts or things on behalf of the Company
Shareholders, which Shareholders’ Representative may deem necessary or
advisable, or which may be required pursuant to the Merger Agreement, this
Related Agreement, the Escrow Agreement or otherwise, in connection with the
consummation of the transactions contemplated by the Merger Agreement.  Each Party Shareholder (for itself and not
for any other Company Shareholder) hereby irrevocably appoints, and consents to
the designation of Endeavour Capital Fund III, L.P., a Delaware limited
partnership (i.e., the Shareholders’ Representative), its successor or its
designee, to act as such Party Shareholder’s exclusive attorney-in-fact and
agent, with full power of substitution, to act in his or its name, place and
stead with respect to the matters identified in the Merger Agreement, this
Related Agreement and the Escrow Agreement or arising hereunder or thereunder, including
the power (i) to act for him or it with regard to matters pertaining to
indemnification referred to in the Merger Agreement; (ii) to execute and
deliver on his or its behalf all ancillary agreements, certificates,
statements, notices, approvals, extensions, waivers, undertakings, amendments
and other documents the Shareholders’ Representative deems appropriate in
connection with responding to, compromising or settling any claims made
pursuant to the Merger Agreement, this Related Agreement or the Escrow
Agreement; (iii) to give and receive all notices and communications to be given
or received under the Merger Agreement, this Related Agreement or the Escrow
Agreement and to receive service of process in connection with any claims under
the Merger Agreement, this Related Agreement or the Escrow Agreement; and (iv)
to take all other actions which under the Merger Agreement, this Related
Agreement or the Escrow Agreement may be taken by Shareholders’ Representative
and to do or refrain from doing any further act or deed on his or its behalf
which the Shareholders’ Representative deems necessary or appropriate in its
sole discretion relating to the subject matter of the Merger Agreement, this
Related Agreement or the Escrow Agreement as fully and completely as he or it
could do if personally present.  The
death or incapacity of any Party Shareholder shall not terminate the agency and
power granted to Shareholders’ Representative hereunder or under the Merger
Agreement.

 

Nothing in the
foregoing paragraph shall be deemed to limit or otherwise modify the provisions
of Section 11.7 (Appointment of Shareholders’ Representative) of the Merger
Agreement (including, for the avoidance of doubt, the provisions of Section
11.7(c) thereof) or the power or authority of the Shareholders’ Representative
under the Merger Agreement, and each Party Shareholder (for itself and not for
any other Company Shareholder) agrees to be bound by and comply with the
provisions of Section 11.7 (Appointment of Shareholders’ Representative) of the
Merger Agreement as a “Company Shareholder” under such provisions to 

 

2

 

the same extent as if such
Party Shareholder had been specifically identified as a “Company Shareholder”
in the Merger Agreement and been a party thereto, subject to the terms and
conditions of such provisions.

 

7.                                       Section
12.10 (No Third Party Beneficiaries) of Merger Agreement.  Each Party Shareholder (for itself and not
for any other Company Shareholder) agrees to be bound by and comply with the
provisions of Section 12.10 (No Third Party Beneficiaries) of the Merger
Agreement as a “Company Shareholder” under such provisions to the same extent
as if such Party Shareholder had been specifically identified as a “Company Shareholder”
in the Merger Agreement and been a party thereto, subject to the terms and
conditions of such provisions.  For the
avoidance of doubt and without limiting the foregoing, each Party Shareholder
(for itself and not for any other Company Shareholder) agrees that the
provisions of the Merger Agreement which are intended for the benefit of the
Company Shareholders may only be enforced by the Shareholders’ Representative
(on behalf of the Company Shareholders).

 

8.                                       Section
12.11 (Dispute Resolution) of Merger Agreement.  Each Party Shareholder (for itself and not for any other Company
Shareholder) agrees to be bound by and comply with the provisions of Section
12.11 (Dispute Resolution) of the Merger Agreement as a “party” or “Company
Shareholder” under such provisions to the same extent as if such Party
Shareholder had been specifically identified as a “party” or “Company
Shareholder” in the Merger Agreement and been a party thereto, subject to the
terms and conditions of such provisions (including, for the avoidance of doubt,
the terms and conditions that limit the extent of the payment obligations of
each Company Shareholder under subsection (c) of Section 12.11 (Dispute
Resolution) of the Merger Agreement).  
The Parties acknowledge and agree that any Disputes (including Disputes
concerning Sections 5.3 (Post-Closing Adjustment), 11.2 (Indemnification),  11.4 (Expenses), 11.5 (Further Assurances),
11.6 (Certain Tax Matters), 11.7 (Appointment of Shareholders’ Representative),
12.10 (No Third Party Beneficiaries) and 12.11 (Dispute Resolution) of the
Merger Agreement and Disputes concerning the provisions of this Related
Agreement, including this Section 8) shall be addressed as provided for in
Section 12.11 (Dispute Resolution) of the Merger Agreement.

 

9.                                       Books
and Records with Respect to Tax Matters. 
Each Party Shareholder (for itself and not for any other Party
Shareholder and only to the extent that such Party Shareholder has in its
possession immediately after the Closing any books and records with respect to
Tax matters pertinent to the Surviving Corporation) agrees, and the Surviving
Corporation agrees, (A) to retain all books and records with respect to Tax
matters pertinent to the Surviving Corporation relating to any Taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Party Shareholders or the
Surviving Corporation, any extensions thereof) of the respective Taxable
periods, and to abide by all record retention agreements entered into with any
Taxing authority, and (B) to give the other Parties reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if any of the other Parties so requests, the Party Shareholders or the
Surviving Corporation, as the case may be, shall allow the other Party to take
possession of such books and records.

 

10.                                 Confidentiality.  Each Investor Party Shareholder (for itself
and not for any other Investor Party Shareholder) agrees not to disclose or use
at any time any Confidential Information (as defined below).  Each Investor Party Shareholder (for itself
and not for any other Investor Party Shareholder) agrees to take all
commercially reasonable steps to safeguard such Confidential Information and to
protect it against disclosure, misuse, espionage, loss and theft.  In the event any Investor Party Shareholder
is required by law to disclose any Confidential Information, such Investor
Party Shareholder (for itself and not for any other Investor Party Shareholder)
agrees that it shall promptly notify Purchaser in writing, which notification
shall include the nature of the legal requirement and the extent of the
required disclosure, and such Investor Party Shareholder (for itself and not
for any other Investor Party Shareholder) agrees that it shall cooperate with
Purchaser to preserve the confidentiality of such information consistent with
applicable law.  For purposes of this
Related Agreement, “Confidential Information” means all information of a confidential
and proprietary nature (whether or not specifically labeled or identified as
“confidential”), in any form or medium, that relates to the business, products,
services or research or development of the Company or its Subsidiaries or their
respective suppliers, distributors, customers, referral sources, independent
contractors or other business relations.

 

3

 

11.                                 Representations
and Warranties.  Each Party
Shareholder (for itself and not for any other Company Shareholder) represents
and warrants that:

 

(a)                                  it
or he is the record and beneficial owner of the shares of the Company Common
stock and the shares of the Series A Preferred Stock set forth opposite his or
its name on the Capitalization Schedule attached to the Merger Agreement, free
and clear of all Liens, voting agreements, proxies, pledges, transfer
restrictions and other arrangements of any kind;

 

(b)                                 if
such Party Shareholder is an Investor Party Shareholder, the execution,
delivery and performance of this Related Agreement have been duly authorized by
such Investor Party Shareholder, and no other corporate, partnership, limited
liability company or other similar act or proceeding, as applicable, on the
part of such Investor Party Shareholder is necessary to authorize the
execution, delivery or performance of this Related Agreement or the
consummation of the transactions contemplated hereby;

 

(c)                                  this
Related Agreement has been duly executed and delivered by such Party
Shareholder and constitutes a valid and binding obligation of such Party
Shareholder, enforceable against such Party Shareholder in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws relating to or affecting the rights and remedies or creditors
generally; and

 

(d)                                 the
execution and delivery by such Party Shareholder of this Related Agreement and
the fulfillment of, and compliance with, the respective terms hereof by such
Party Shareholder do not and will not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under
(whether with or without the passage of time, the giving of notice or both), (iii)
result in the creation of any Lien pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption
or other action of or by or notice or declaration to, or filing with, any third
party or any court or administrative or governmental body or agency pursuant
to, such Party Shareholder’s certificate of formation, operating agreement,
partnership agreement, certificate or articles of incorporation or bylaws or
other organizational or constituent documents of such Party Shareholder, as
applicable, or any law, statute, rule or regulation to which such Party
Shareholder is subject, or any agreement, instrument, license, permit, order,
judgment or decree to which such Party Shareholder is a party or by which it or
he is bound.

 

12.                                 Notices.  All notices, demands and other
communications to be given or delivered under or by reason of the provisions of
this Related Agreement shall be in writing and shall be deemed to have been
given (i) when personally delivered or sent by telecopy (with hard copy to
follow), (ii) one business day after being sent by reputable overnight express
courier (charges prepaid), or (iii) five days following mailing by certified or
registered mail, postage prepaid and return receipt requested.  Unless a Party gives to the other Parties
written notification of another address, notices, demands and other
communications shall be sent to the Party to be notified at the address
indicated for such Party on the signature pages hereto.  The Parties acknowledge and agree that the
provisions of Section 12.2 (Notices) of the Merger Agreement, and not the
foregoing provisions of this Section 12, shall apply to all notices, demands
and other communications to be given or delivered under or by reason of the
provisions of the Merger Agreement, including the provisions of Sections 5.3
(Post-Closing Adjustment), 11.2 (Indemnification), 11.4 (Expenses), 11.5
(Further Assurances), 11.6 (Certain Tax Matters), 12.10 (No Third Party
Beneficiaries) and 12.11 (Dispute Resolution) of the Merger Agreement.

 

13.                                 No
Third-Party Beneficiaries.  Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give to any Person other than the Parties and their respective permitted
successors and assigns any rights or remedies under or by reason of this
Related Agreement.  The provisions of
this Agreement which are intended for the benefit of the Party Shareholders may
only be enforced by the Shareholders’ Representative (on behalf of the Party
Shareholders).

 

4

 

14.                                 Assignment.  Except as otherwise provided in this Section
14, this Related Agreement and the rights and obligations hereunder shall not
be assignable or transferable by any Party without the prior written consent of
the other Parties.  Notwithstanding
anything to the contrary in the immediately preceding sentence, each of Purchaser
and the Surviving Corporation may assign its rights and obligations hereunder,
in whole or in part, to any of its Affiliates without the consent of any of the
other Parties.  In addition, each of
Purchaser and the Surviving Corporation may assign its rights and obligations
pursuant to this Related Agreement, in whole or in part, in connection with any
disposition or transfer of all or any portion of Parent’s, the Surviving
Corporation’s or any of their respective Subsidiaries’ or their respective
businesses in any form of transaction without the consent of any of the other
Parties.  Each of Purchaser, the
Surviving Corporation and their Subsidiaries may assign any or all of its
rights pursuant to this Related Agreement to any of their lenders as collateral
security.

 

15.                                 Severability.  Whenever possible, each provision of this
Related Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Related Agreement is
held to be prohibited by or invalid under applicable law, such provision will
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Related Agreement.

 

16.                                 Interpretation.

 

(a)                                  The
headings and captions used in this Related Agreement are for convenience of
reference only and do not constitute a part of this Related Agreement and shall
not be deemed to limit, characterize or in any way affect any provision of this
Related Agreement and all provisions of this Related Agreement shall be
enforced and construed as if no caption or heading had been used herein or
therein.  Each defined term used in this
Related Agreement shall have a comparable meaning when used in its plural or
singular form.  The use of the word
“including” herein shall mean “including without limitation.”  The Parties have participated jointly in the
negotiation and drafting of this Related Agreement.  In the event an ambiguity or question of intent or interpretation
arises, this Related Agreement shall be construed as if drafted jointly by the
Parties, and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Related Agreement.  Unless the
context otherwise requires, reference to an agreement or instrument is a
reference to that agreement or instrument as originally executed, and as
modified, amended, supplemented and restated from time to time, and to all
exhibits and/or schedules thereto.

 

(b)                                 For
the avoidance of doubt, each Party Shareholder (for itself and not for any
other Company Shareholder) agrees that such Party Shareholder is not executing
this Related Agreement in the capacity of a surety or a guarantor of any
obligation(s) of a Company Shareholder under the Merger Agreement, but rather
is executing this Related Agreement as a primary obligor of all such
obligations of such Company Shareholder under the Merger Agreement (subject to,
for the avoidance of doubt, the terms and conditions of the Merger Agreement that
limit the obligations of each Company Shareholder, including the terms and
conditions of Section 11.2 (Indemnification) of the Merger Agreement that
provide that a Company Shareholder’s indemnification obligations shall be in
proportion to such Company Shareholder’s Pro Rata Share), to the same extent as
if such Party Shareholder had been specifically identified as a “Company
Shareholder” in the Merger Agreement and been a party thereto.

 

17.                                 Governing
Law.  Except as provided in Section
12.11 (Dispute Resolution) of the Merger Agreement (which Section governs
Disputes with respect to the Related Agreement, as well as with respect to the
Merger Agreement), all questions concerning the construction, validity,
enforcement and interpretation of this Related Agreement shall be governed by
the internal law of the State of Oregon, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Oregon or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Oregon.

 

5

 

18.                                 Counterparts.  This Related Agreement may be executed in
one or more counterparts (including by means of telecopied signature pages),
all of which taken together shall constitute one and the same instrument.

 

19.                                 Complete
Agreement.  This Related Agreement,
the Merger Agreement (including all of the Schedules and Exhibits attached
thereto), the Escrow Agreement and the Employment Agreements (including Section
7  of the Employment Agreements) contain
the entire agreement and understanding between the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, whether written or oral, relating to such subject matter in any
way.

 

20.                                 Amendment
and Waiver.  This Related Agreement
may be amended, and any provision of this Related Agreement may be waived;
provided that any such amendment or waiver will be binding on (x) the Party
Shareholders only if such amendment or waiver is set forth in a writing
executed by the Shareholders’ Representative, and (y) Purchaser or the
Surviving Corporation only if such amendment or waiver is set forth in a
writing executed by Purchaser or the Surviving Corporation, as the case may
be.  No course of dealing between or
among any Persons having any interest in this Related Agreement will be deemed
effective to modify, amend or discharge any part of this Related Agreement or
any rights or obligations of any Person under or by reason of this Related
Agreement.  No waiver of any of the
provisions of this Related Agreement shall be deemed or shall constitute a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.  The Parties
acknowledge and agree that the provisions of Section 12.1 (Amendment and
Waiver) of the Merger Agreement, and not the foregoing provisions of this
Section 20, shall apply to any amendments to the Merger Agreement and any
waivers of any provisions of the Merger Agreement, including any amendments to
or waivers of the provisions of Sections 5.3 (Post-Closing Adjustment), 11.2
(Indemnification),  11.4 (Expenses),
11.5 (Further Assurances), 11.6 (Certain Tax Matters), 11.7 (Appointment of
Shareholders’ Representative), 12.10 (No Third Party Beneficiaries) and 12.11
(Dispute Resolution) of the Merger Agreement.

 

6

 

IN WITNESS
WHEREOF, the Parties have executed this Related Agreement, effective as of the
date first written above.

 

 

	
   

  	
  EPIQ
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/   Christopher
  E. Olofson

  	
   

  
	
   

  	
  Its:

  	
  President
  and Chief Operating Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  501 Kansas
  Avenue

  
	
   

  	
  Kansas City,
  KS 66105-1309

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  P-D HOLDING
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/   Jeffrey
  B. Baker

  	
   

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer and Secretary

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  10300 SW
  Allen Boulevard

  
	
   

  	
  Portland,
  OR  97005

  
						

 

7

 

	
   

  	
  ENDEAVOUR ASSOCIATES FUND III, L.P., a Delaware

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Endeavour Capital,
  LLC

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/   John
  von Schlegell

  	
   

  
	
   

  	
   

  	
  Its:

  	
        Member

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  920 SW Sixth Ave., Ste. 1400

  
	
   

  	
  Portland,
  OR  97204

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENDEAVOUR CAPITAL FUND III, L.P., a Delaware

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Endeavour
  Capital, LLC

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/   John
  von Schlegell

  	
   

  
	
   

  	
   

  	
  Its:

  	
        Member

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  920 SW Sixth Ave., Ste. 1400

  
	
   

  	
  Portland,
  OR  97204

  
	
   

  	
  Attention:
  Leland M. Jones

  
						

 

8

 

	
   

  	
  SHAWMUT EQUITY PARTNERS, L.P., a Delaware

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Shawmut
  Capital Partners, L.L.C.

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/   Daniel
  K. Doyle

  
	
   

  	
   

  	
   

  	
       Daniel
  K. Doyle, Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  75 Federal Street, 18th Floor

  
	
   

  	
  Boston,
  MA  02110

  
	
   

  	
  Attention:
  Daniel K. Doyle

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
     /s/   Jeffrey
  B. Baker

  	
   

  
	
   

  	
  Jeffrey B.
  Baker

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  402 Ashdown
  Circle

  
	
   

  	
  West Linn,
  OR 97068

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
     /s/   Edward
  J. Nimmo

  	
   

  
	
   

  	
  Edward J.
  Nimmo

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  8805 SW
  Woodside Drive

  
	
   

  	
  Portland, OR
  97225

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENDEAVOUR CAPITAL FUND III, L.P., a Delaware

  limited partnership, in its capacity as Shareholders’

  Representative

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Endeavour
  Capital, LLC

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/   John
  von Schlegell

  
	
   

  	
   

  	
  Its:

  	
       Member

  
					

 

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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}]]