<PAGE>
As filed with the Securities and Exchange Commission on April 7, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
Under
the Securities Act of 1933
--------------
CENTERPOINT ADVISORS, INC.
(Exact name of registrant as specified in its charter)
--------------
Delaware 8700 36-4272852
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification No.)
of incorporation or Classification Code No.)
organization)
225 West Washington Street, 16th Floor, Chicago, Illinois 60606; (312) 578-
9600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
ROBERT C. BASTEN
President and Chief Executive Officer
225 West Washington Street, 16th Floor
Chicago, Illinois 60606
(312) 578-9600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
HOWARD S. LANZNAR, ESQ. MICHAEL A. CAMPBELL, ESQ.
MARGUERITE M. ELIAS, ESQ. Mayer Brown & Platt
Katten Muchin & Zavis 190 South LaSalle Street
525 West Monroe Street, Suite 1600 Chicago, Illinois 60603
Chicago, Illinois 60661 (312) 782-0600
(312) 902-5200
--------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
maximum Amount of
Title of each class of aggregate registration
securities to be registered offering price fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock.................................................... $150,000,000(1) $41,700.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933, as amended.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+CenterPoint may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated April 7, 1999
PROSPECTUS
Shares
CenterPoint Advisors, Inc.
[LOGO]
Common Stock
-----------
This is CenterPoint's initial public offering of common stock. The
underwriters will offer shares in the United States and Canada. This is a
firm commitment underwriting.
CenterPoint expects the public offering price to be between $ and
$ per share. Currently, no public market exists for the shares. After
pricing of the offering, CenterPoint expects that the common stock will trade
on The New York Stock Exchange under the symbol " ".
Investing in the common stock involves risks which are described in the
"Risk Factors" section beginning on page 9 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- ------
<S> <C> <C>
Public offering price................................... $ $
Underwriting discount................................... $ $
Proceeds, before expenses, to CenterPoint............... $ $
</TABLE>
The underwriters may also purchase up to an additional shares at the
public offering price, less the underwriting discount, within 30 days from the
date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
CenterPoint expects that the shares of common stock will be ready for
delivery in New York, New York on or about , 1999.
-----------
Merrill Lynch & Co.
Lehman Brothers
Thomas Weisel Partners LLC
CIBC World Markets
-----------
The date of this prospectus is , 1999
<PAGE>
[U.S. map with the locations of the CenterPoint Companies]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 9
Forward Looking Statements............................................... 19
The Company.............................................................. 20
Use of Proceeds.......................................................... 24
Dividend Policy.......................................................... 24
Capitalization........................................................... 25
Dilution................................................................. 26
Selected Financial Data.................................................. 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 29
Industry Overview........................................................ 50
Business................................................................. 53
Management............................................................... 65
Certain Transactions..................................................... 73
Principal Stockholders................................................... 78
Description of Capital Stock............................................. 79
Shares Eligible for Future Sale.......................................... 80
Underwriting............................................................. 82
Certain Legal Matters.................................................... 85
Experts.................................................................. 85
Where You May Find Additional Information................................ 86
Financial Statements..................................................... F-1
</TABLE>
----------------
CenterPoint's principal executive offices are located at 225 West
Washington Street, 16th Floor, Chicago, Illinois 60606, and its phone number is
(312) 578-9600.
You should rely only on the information contained in this prospectus.
CenterPoint has not, and the underwriters have not, authorized any other person
to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. CenterPoint
is not, and the underwriters are not, making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus is accurate as of the date on
the front cover of this prospectus only. CenterPoint's business, financial
condition, results of operations and prospects may have changed since that
date.
3
<PAGE>
PROSPECTUS SUMMARY
At the same time as, and as a condition to, the closing of the offering,
CenterPoint will acquire, in eleven separate transactions (the "Mergers"),
eleven companies that collectively provide professional, business and financial
services and products. These eleven companies are referred to as the
"CenterPoint Companies." Unless the context indicates otherwise, all references
to "CenterPoint" in this prospectus mean CenterPoint Advisors, Inc. and the
CenterPoint Companies after the Mergers. For more information about the
CenterPoint Companies and the Mergers, see "The Company" and "Certain
Transactions."
This summary highlights selected information from this prospectus and may
not contain all of the information that may be important to you. You should
read the entire prospectus carefully, including the financial data and related
notes, before you decide whether to invest in CenterPoint. Unless stated
otherwise, all financial information and share and per share data in this
prospectus (1) have been adjusted to give effect to the Mergers, (2) give
effect to the approximate -for-1 stock split that will occur prior to the
offering and (3) assume that the underwriters' over-allotment option is not
exercised.
The Company
CenterPoint is a leading provider of diversified professional, business
and financial services and products to a broad spectrum of middle-market
clients. CenterPoint offers a full range of consulting, accounting, tax and
related professional services, as well as complementary business and financial
services and products, including insurance brokerage and employee benefits
design and administration. These services and products are provided by more
than 2100 employees who serve clients located throughout the United States.
CenterPoint principally focuses on middle-market clients that are privately
held companies, governmental and not-for-profit entities and affluent
individuals and families.
CenterPoint was created to provide comprehensive and effective solutions
to the increasingly complex needs of middle-market clients through an
integrated network of expert advisors. CenterPoint has assembled a group of
founding companies with distinct expert capabilities, reputations for quality,
effective leadership and strong "trusted advisor" relationships with clients.
The CenterPoint Companies are well-established in their markets, having been in
business an average of 27 years. On a combined historical basis, revenues of
the CenterPoint Companies increased from $144.8 million in fiscal 1996 to
$201.0 million in fiscal 1998, representing a compound annual growth rate of
17.8%.
Industry Overview
The professional and business and financial services market is growing
and changing as clients increasingly look to outside service providers to meet
their complex and diverse needs. CenterPoint believes that client demands and
other market forces are redefining the lines that once separated the delivery
of traditional accounting services from other professional, business and
financial services. According to the U.S. Department of Commerce, the
accounting profession is facing greater demand for value-added consulting
services. This expansion of services has fueled significant growth in
CenterPoint's industry.
CenterPoint believes that the Big Five accounting firms have focused
primarily on developing diversified business, financial and consulting services
in response to the needs of their largest corporate clients. However,
CenterPoint believes that the needs of middle-market clients are also
increasingly complex, creating opportunities for large regional accounting
firms to expand their service and product offerings. According to Accounting
Today, revenues of the top 100 accounting firms other than the Big Five totaled
$4.9 billion in 1998. When comparing 1998 and 1997, consulting revenues for
such firms were the most significant contributor to the growth that this
segment of the industry experienced, outpacing growth in revenues for tax
services and for accounting and auditing services. CenterPoint believes that
clients are increasingly demanding diverse professional services,
4
<PAGE>
including consulting, as well as other business and financial services and
products, and that these demands are creating a new and rapidly emerging
diversified industry where trusted advisors provide clients with a variety of
services and products.
CenterPoint's Strategy
CenterPoint's goal is to provide middle-market clients with personalized,
local service backed by the depth, resources and expert capabilities of a
diversified, national firm. Key elements of CenterPoint's client-focused
business strategy include:
. Developing and delivering diverse, high quality services and
products.
. Creating national practices that extend CenterPoint's existing
industry, service and product expertise.
. Expanding CenterPoint's strong local presence in key geographic
markets.
. Employing an integrated management and systems infrastructure.
. Utilizing a unique compensation structure designed to provide
CenterPoint with a baseline level of earnings before corporate
expenses.
In addition, CenterPoint will implement a growth strategy that focuses on
expanding its services and products in order to better service existing clients
and attract new clients. Critical components of CenterPoint's growth strategy
include:
. Leveraging existing "trusted advisor" relationships by using
CenterPoint's professional services firms as the principal focal
points for delivering its diverse services and products.
. Encouraging continued cooperation among the CenterPoint Companies
by instituting incentives for client and knowledge sharing.
. Pursuing targeted acquisitions and alliances to build and enhance
CenterPoint's national practices, increase its presence and
capacity in key markets and add new professional, business and
financial services and products.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by
CenterPoint..................... shares
Common stock to be outstanding
after the offering.............. shares(1)
Use of proceeds.................. CenterPoint expects that the net proceeds
from the offering (after deducting the
underwriting discount and estimated
offering expenses) will be approximately
$ million (assuming an initial public
offering price of $ per share).
CenterPoint intends to use these net
proceeds to pay the cash portion of the
purchase price for the CenterPoint
Companies (other than certain contingent
payments), to repay certain indebtedness of
the CenterPoint Companies, to reimburse
certain employee and other costs incurred
prior to the offering and for general
corporate purposes, including future
acquisitions.
Proposed New York Stock Exchange
symbol..........................
Risk Factors..................... See "Risk Factors" for a discussion of
certain factors you should carefully
consider before deciding whether to invest
in CenterPoint.
</TABLE>
- --------
(1) Does not include (a) shares of common stock issuable
upon the exercise of options which are expected to be granted to
CenterPoint's management and other employees upon closing of the offering,
(b) 100,000 shares of common stock issuable upon the exercise of warrants
issued to certain investors in CenterPoint and (c) shares
reserved for issuance under CenterPoint's incentive compensation and stock
purchase plans. See "Management--Employee Incentive Compensation Plan" and
"--Employee Stock Purchase Plan" and "Certain Transactions--Organization of
CenterPoint."
6
<PAGE>
Summary Unaudited Pro Forma Combined Financial Data
(in thousands, except share and per share data)
CenterPoint will acquire the CenterPoint Companies simultaneously with
the closing of the offering. For financial statement presentation purposes,
CenterPoint has been identified as the "accounting acquiror." The following
summary unaudited pro forma combined financial data present certain data for
CenterPoint, as adjusted for: (1) the completion of the Mergers; (2) certain
pro forma adjustments to the historical financial statements; and (3) the
completion of, and the application of the estimated net proceeds from, the
offering, at an assumed initial public offering price of $ per share. You
should read this data together with the unaudited pro forma combined financial
statements and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Pro Forma Combined
Year Ended
December 31, 1998
------------------
<S> <C>
Statement of Operations Data (1):
Revenues:
Professional services................................... $152,351
Business and financial services......................... 53,128
--------
Total revenues........................................ 205,479
Expenses:
Professional services compensation and related costs
(2).................................................... 95,283
Business and financial services compensation and related
costs (2).............................................. 35,358
Other operating expenses (3)............................ 39,188
Depreciation and amortization (4)....................... 10,783
--------
Income from operations.................................... 24,867
Other income, net (5)..................................... 1,495
--------
Income before income taxes................................ 26,362
Provision for income taxes (6)............................ 12,887
--------
Net income................................................ $ 13,475
========
Net income per share, basic and diluted...................
========
Shares used in computing net income per share (7).........
========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Combined As
Adjusted
December 31,
1998
------------
<S> <C>
Balance Sheet Data (8):
Working capital.................................................. $ 18,729
Total assets..................................................... 305,340
Total long-term debt, net of current portion..................... --
Stockholders' equity............................................. 264,810
</TABLE>
- --------
(1) The pro forma combined statement of operations data assume that the Mergers
and the offering were completed on January 1, 1998. These data do not
necessarily indicate the results CenterPoint would have achieved had the
offering and Mergers actually occurred on that date and should not be
viewed as representative of future operating results.
7
<PAGE>
(2) The pro forma combined statement of operations data include an aggregate of
approximately $22.1 million in pro forma reductions in compensation and
benefits to certain owners and employees of the CenterPoint Companies.
These individuals have agreed to these reductions in employment and
incentive compensation agreements which will take effect upon completion of
the offering (the "Compensation Differential").
(3) Reflects the reduction in other operating expenses of $281,000 related to
signing bonuses and a non-recurring stock compensation charge for
management of CenterPoint, net of prospective compensation to management of
CenterPoint as agreed to in employment agreements.
(4) Includes the amortization of $234.2 million of goodwill to be recorded as a
result of the Mergers over a 40-year period and computed on the basis
described in the notes to the unaudited pro forma combined financial
statements.
(5) Reflects a reduction of net interest expense of $2.2 million associated
with long-term debt to be repaid from the proceeds of the offering or
retained by the owners of the CenterPoint Companies.
(6) Assumes all income is subject to a corporate income tax rate of 40% and
assumes all goodwill is non-deductible.
(7) Includes (a) 12,569,367 shares to be issued to the owners and employees of
the CenterPoint Companies in the Mergers; (b) 3,681,309 shares held by
initial investors and management of CenterPoint; and (c) of the
shares of common stock sold in the offering, net of underwriting
discounts, necessary to pay the cash portion of the Merger consideration,
to repay certain indebtedness of the CenterPoint Companies and to pay
estimated expenses of the offering.
(8) The pro forma combined balance sheet data (a) assume that the Mergers were
completed on December 31, 1998, and (b) are adjusted to reflect the sale of
the shares of common stock offered by, and the application of
the estimated net proceeds from, the offering, at an assumed initial public
offering price of $ per share, after which time a total of
shares will be outstanding. The balance sheet data are not necessarily
indicative of the financial position that would have been achieved had
these events actually occurred on that date and should not be viewed as
representative of CenterPoint's future financial position. See "Use of
Proceeds."
8
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding whether to purchase CenterPoint common
stock.
CenterPoint has no operating history
CenterPoint was formed in November 1998 to acquire the CenterPoint
Companies and integrate and operate their existing businesses (other than
certain attest services which will not be provided by CenterPoint as described
under "--Regulation of the accounting profession could have a material adverse
effect on CenterPoint's business"). Until the closing of the offering,
CenterPoint will conduct no operations and generate no revenues. The pro forma
financial results presented in this prospectus do not necessarily indicate
actual results which might have occurred if the operations and management teams
of the CenterPoint Companies had been combined during the periods presented. In
addition, these pro forma results are not representative of future results that
will be reported on a consolidated basis. CenterPoint cannot guarantee that its
operating results will equal or exceed the combined historical operating
results of the CenterPoint Companies prior to the offering. Unless the
financial benefits resulting from the combination of the CenterPoint Companies
exceed the incremental corporate overhead, CenterPoint's results as a combined
company will fall short of the combined historical operating results of the
CenterPoint Companies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Failure to integrate successfully the CenterPoint Companies could materially
and adversely affect CenterPoint
CenterPoint's success will depend, in part, on its ability to integrate
successfully the operations of the CenterPoint Companies. Each CenterPoint
Company has operated, and until the Mergers will operate, independently. In
addition, a number of the CenterPoint Companies offer different services,
utilize different internal accounting policies and procedures, employ different
technologies and computer operating systems and target different geographic
markets and client segments. At the time of the offering, CenterPoint will not
have a fully integrated financial reporting system. CenterPoint intends to
develop programs and processes that will promote cooperation and the sharing of
opportunities and resources among the CenterPoint Companies, and also intends
to centralize certain functions to achieve cost savings. This integration will
require significant management resources, and may distract certain members of
management of the CenterPoint Companies from normal operations. CenterPoint
cannot guarantee that its recently assembled corporate management team will
effectively oversee the combined entity and implement its business, acquisition
or growth strategies. Failure to accomplish the integration quickly and
effectively and uncertainty in the marketplace or customer concern regarding
the impact of the Mergers could have a material adverse effect on CenterPoint's
business, financial condition or results of operations.
CenterPoint's success depends on attracting and retaining qualified personnel
CenterPoint's success and future growth depends on its ability to attract
and retain qualified employees throughout its business. In particular,
competition for qualified accounting professionals, both experienced
professionals and recent college graduates, is intense. Many states have
enacted laws that increase the college credits required for licensing.
CenterPoint believes that these laws may further reduce an already limited
supply of accounting professionals and lead to increased compensation levels.
CenterPoint competes for its employees with many other companies, some of which
have greater financial and other resources. In the future, CenterPoint may have
difficulty recruiting and retaining sufficient numbers of qualified personnel,
which could result in a material decline in revenues. In addition, increased
compensation levels could materially and adversely affect CenterPoint's
financial condition or results of operations.
Regulation of the accounting profession could have a material adverse effect on
CenterPoint's business
Each state has adopted accountancy laws providing for the licensure of
certified public accountants ("CPAs") and granting to licensed CPAs and
accounting firms that are wholly-owned by CPAs the exclusive
9
<PAGE>
right to undertake certain activities, including issuing reports on financial
statements. In addition, each state has adopted laws, regulations and codes of
ethics which place restrictions upon the activities of licensed CPAs. In recent
years, alternative business structures have been developed in an effort to
permit licensed CPAs and firms to provide a variety of services while complying
with these state regulatory regimes. In addition, certain states are currently
reviewing their laws and regulations pertaining to the accounting profession
and are considering the adoption of certain provisions of the Uniform
Accountancy Act (the "UAA") as proposed in 1997 by the American Institute of
Certified Public Accountants (the "AICPA") and the National Association of
State Boards of Accountancy (the "NASBA"). As proposed, the UAA's definition of
the services that can only be provided by licensed CPAs is more narrow than
that of many current state statutes. In addition, the UAA, as proposed, would
permit partial ownership of licensed accounting firms by non-CPA employees. See
"Business--Regulation--Accounting Profession." However, currently there is a
lack of uniformity among the state regulatory regimes.
Current laws, regulations and ethical codes related to the practice of
accountancy pose the following principal risks to CenterPoint:
Restrictions on CenterPoint's Operations. The accountancy laws grant
licensed CPAs and accounting firms that are wholly-owned by CPAs the exclusive
right to practice accountancy. Accordingly, CenterPoint will not render any
services that may not be performed by persons and firms not licensed to
practice accountancy. Such services are defined by most states to include
reports on historical and prospective financial statements, including audits,
compilations and reviews; certain other reports intended to be relied upon by
third parties; advice and opinions regarding accounting principles and auditing
standards; and other attest services, e.g., reports on compliance with laws and
contractual obligations and the adequacy of internal accounting controls. Some
states define regulated services more broadly. For purposes of this prospectus,
the term "attest services" will be used to describe the services that can be
provided only by a licensed CPA or firm under laws and regulations of the
applicable states. Following the Mergers, attest services will continue to be
performed by the CPAs who currently own the CenterPoint Companies. Such CPAs
will provide the attest services through separate firms (the "Attest Firms")
which will be licensed to practice accountancy and in which CenterPoint will
have no ownership interest. Pursuant to services agreements, CenterPoint will
provide, for a fee, professional and other personnel, equipment, office space
and business and administration services necessary for the operation of the
Attest Firms. The services agreements are non-exclusive, and one or more Attest
Firms could choose to contract with entities other than CenterPoint for some or
all of these services. Failure by one or more Attest Firms to use CenterPoint's
services could have a material adverse effect on CenterPoint's revenue
production capabilities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Introduction--Services Agreements" and
"Certain Transactions--The Mergers--Ancillary Agreements with Professional
Services Firms and their Affiliates--Services Agreements." CenterPoint believes
that this separate practice structure makes a successful challenge to its
operations unlikely under existing regulatory regimes in the states in which it
currently has material operations and that this arrangement would comply with
the currently proposed provisions of the UAA, if adopted. However, only four
states (New York, Texas, Ohio and Kansas) have published interpretations that
specifically address alternative practice structures. Each of these four states
has issued a ruling recognizing a separate practice format similar to
CenterPoint's as being in compliance with its laws. Each of these rulings
contains conditions to their findings that such format complies with the
applicable state's laws, including conditions related to the maintenance of the
separate attest entity's economic independence, management autonomy and
separate public identity. Some of these conditions vary among the states. In
light of the absence of express authority in most states, there can be no
assurance that CenterPoint's operations will not be successfully challenged as
constituting the illegal practice of accountancy in one or more states in which
CenterPoint operates. Under each of the services agreements, CenterPoint and
the Attest Firm have agreed that if any provision of the agreement is found to
be in violation of applicable laws or regulations, CenterPoint and the Attest
Firm will amend the agreement as necessary to preserve the underlying economic
and financial arrangements without substantial economic detriment to either
party. If the agreement cannot be so amended, it will terminate. These
contractual provisions could limit CenterPoint's flexibility to modify its
operations in response to regulatory issues. A successful challenge to
CenterPoint's
10
<PAGE>
separate practice structure could result in, among other things, a reduction in
the operations of or services provided by CenterPoint or the divestiture by
CenterPoint of certain assets, and a corresponding reduction in its revenues,
or termination of or modifications to one or more of the services agreements in
a manner adverse to CenterPoint's economic interests, any of which consequences
could have a material adverse effect on CenterPoint's business, results of
operations or financial condition.
Restrictions on CPAs Employed By CenterPoint. CPAs who will be employed
by CenterPoint are subject to regulation by State Boards of Accountancy not
only with respect to attest services, but also with respect to other activities
which they may undertake as employees of CenterPoint. Should state regulators
deem such activities to be in violation of the laws, regulations or codes under
which the CPAs practice, they could lose their right to practice accountancy
and thereby lose their ability to provide attest services to the clients which
the Attest Firms share with CenterPoint. This could adversely affect both the
revenues that CenterPoint would otherwise receive under the services agreements
described above and CenterPoint's ability to render non-attest services to
these clients. Although CenterPoint believes that its separate practice
structure is not likely to result in a successful challenge to the activities
of its CPA employees in the states in which CenterPoint currently has material
operations, there can be no assurance that disciplinary action will not be
instituted by one or more states against CPAs in CenterPoint's employ, and such
actions could have a material adverse effect on CenterPoint's business, results
of operations or financial condition.
Limitations on the Use of the "CPA" Designation. Many state accountancy
laws not only prohibit unlicensed persons from rendering attest services, but
also prohibit such persons from holding themselves out as CPAs. Although this
prohibition is interpreted differently from state to state, numerous states in
which CenterPoint operates currently prohibit CPAs not working for a licensed
CPA firm from holding themselves out as CPAs (i.e., they cannot proclaim
expertise in accounting principles or auditing standards or use their "CPA"
designation on letters, business cards, promotional literature, etc.) while
providing non-attest services. Although regulations of this type imposed by the
state of Florida were declared unconstitutional on First Amendment grounds in
1997 by the U.S. Court of Appeals for the Eleventh Circuit, such ruling is not
binding in other jurisdictions which could seek to impose similar restrictions.
In addition, such ruling does not preclude other regulatory restrictions on
persons holding themselves out as CPAs. Therefore, in numerous states the CPAs
employed by CenterPoint will not be able to hold themselves out as CPAs while
performing non-attest services on behalf of CenterPoint.
Restrictions Imposed by Independence Requirements and Conflict of
Interest Rules. In order to maintain the objectivity and integrity of reports
issued by CPAs and to encourage the public's reliance upon those reports, the
accounting profession and accounting regulators have adopted "independence
standards" which prohibit (a) CPAs, (b) employees of accounting firms and (c)
members of the immediate families of such CPAs and employees from (x) having
certain ownership and other financial relationships with clients for which the
CPA or accounting firm performs attest services and (y) participating in the
management, operations or accounting functions of such clients. Independence
can also be impaired as a result of litigation or other disputes with the
client, common investments with the client or indemnity agreements relating to
attest services. Under recent interpretations, as applied to CenterPoint's
proposed operations, these standards extend to CenterPoint's executives, board
members and controlling stockholders as well as CPA employees who own the
Attest Firms. In addition to the independence standards, CPAs who provide
litigation consulting services on behalf of CenterPoint or an Attest Firm will
be subject to rules designed to avoid conflicts of interest, e.g., simultaneous
representation of, or other relationships with, adverse parties. Although
CenterPoint does not believe that the restrictions imposed by independence
standards or the conflict of interest rules will have a material adverse effect
upon its business, there can be no assurance that CenterPoint or the Attest
Firms will not be forced to discontinue their services on behalf of some
existing clients of the CenterPoint Companies or to forego providing services
to potential future clients as a result of these restrictions.
Limitations on the Use of Incentive Fees. The accountancy laws of most
states currently include prohibitions against CPAs paying or receiving referral
fees with respect to their clients or using fee
11
<PAGE>
arrangements that are contingent upon the outcome of their engagements or the
results imparted to their clients. Although these restrictions could be relaxed
with the passage of the UAA, as currently proposed, current state laws place
significant restrictions upon the use of incentive fee arrangements that
CenterPoint could otherwise employ in its operations. CenterPoint will not make
any such payments to those of its employees who are CPAs if those payments
would be prohibited under applicable law.
Incompatible Occupations. Many state accountancy laws and regulations
contain prohibitions against CPAs engaging in "incompatible" occupations.
Although few states have provided guidance as to what activities are
encompassed by this prohibition, there can be no assurance that one or more
state regulators may not invoke it to preclude CenterPoint's employees from
engaging in one or more types of services which CenterPoint will be offering to
its clients, which preclusion could have a material adverse effect on
CenterPoint's business, financial condition or results of operations.
Potential Adverse Impact. Existing state laws and regulations are subject
to evolving interpretations and enforcement policies and practices. CenterPoint
cannot ensure that (1) a review by state judicial or regulatory authorities
would not result in a determination that CenterPoint, its CPA employees or the
Attest Firms have violated one or more provisions of state law, regulations or
codes of ethics, (2) the laws, regulations or codes of ethics of any state, or
other elements of the regulatory environment, will not change so as to
materially restrict CenterPoint's operations or (3) the UAA will be adopted, in
its currently proposed form or any form, by state legislatures. Accordingly,
CenterPoint's ability to continue to operate in, or expand its operations in or
to, certain states may depend on its flexibility to modify its operational
structure in response to changes in laws, regulations, codes of ethics or their
interpretation or enforcement. As discussed above, such flexibility may be
constrained, in certain circumstances, by provisions of the services agreements
between CenterPoint and the Attest Firms. Limitations on CenterPoint's ability
to use the separate practice structure in order to comply with applicable law
could have a material adverse effect on its relationship with the Attest Firms,
their clients and/or CenterPoint's business, financial condition or results of
operations.
CenterPoint's growth and business strategies may not be successful
A key element of CenterPoint's strategy is to generate internal growth by
capitalizing on existing client relationships to provide a variety of
additional services and products to those clients. Future internal growth will
depend upon many factors, including (1) the recruitment, motivation and
retention of qualified management and other professional personnel; (2) the
effective initiation, development and expansion of client relationships; and
(3) the maintenance and expansion of high quality services and products. Future
growth will also require the successful cross-servicing of clients and cross-
selling of services and products among CenterPoint's business units.
CenterPoint cannot assure that its strategies will generate internal growth or
that it will be able to generate cash flow adequate for its operations and
sufficient to support growth. CenterPoint also intends to operate its business
units through an integrated management structure, with local management
retaining responsibility for the profitability and growth of their respective
businesses. If proper controls are not implemented, this strategy could result
in inconsistent operating and financial practices at the various business units
and CenterPoint's financial condition or results of operations could be
materially and adversely affected. See "Business--Business Strategy" and "--
Internal Growth Strategy."
CenterPoint's acquisition strategy may not be successful
CenterPoint intends to pursue acquisitions that will add to or complement
its existing businesses. Acquisitions involve numerous risks that could
materially and adversely impact CenterPoint's growth prospects. For example:
. CenterPoint will be competing with other firms, many of which have
greater financial and other resources, to acquire attractive
companies. CenterPoint believes this competition will increase,
making it more difficult to acquire suitable companies on
acceptable terms.
12
<PAGE>
. CenterPoint currently intends to finance future acquisitions by
using common stock for some or all of the purchase price. This
could dilute the ownership interests of CenterPoint's
stockholders. CenterPoint may also incur additional debt and
amortization expense related to goodwill and other intangible
assets purchased in future acquisitions. This additional debt and
amortization expense may materially and adversely affect
CenterPoint's financial condition or results of operations.
. CenterPoint may be unable to integrate acquired businesses
successfully and realize anticipated economic, operational and
other benefits in a timely manner, particularly if it acquires a
business in a market in which it has limited or no expertise, or
with a corporate culture different from its own. If CenterPoint is
unable to integrate acquired businesses successfully, it may incur
substantial costs and delays or other operational, technical or
financial problems.
. The integration of acquisitions may disrupt CenterPoint's ongoing
business, distract management and other resources, and make it
difficult to maintain CenterPoint's standards, controls and
procedures.
Some or all of these risks could have a material adverse effect on
CenterPoint's business, financial condition or results of operations. In
addition, CenterPoint cannot ensure that the acquired businesses will achieve
anticipated revenues, earnings or cash flow. See "Business--Acquisitions and
Alliances."
CenterPoint may not be able to obtain adequate financing to implement its
strategies
Successful implementation of CenterPoint's strategies will require
continued access to capital. If CenterPoint does not have sufficient cash
resources, its growth could be limited unless it is able to obtain capital
through additional financings. CenterPoint currently intends to finance future
acquisitions by using common stock for some or all of the purchase price. If
the common stock does not maintain sufficient value, or potential acquisition
candidates do not accept common stock as consideration for the sale of their
businesses, CenterPoint may be required to use more of its cash resources or
obtain other financing. CenterPoint cannot ensure that equity or debt
financings will be available as required for acquisitions or other needs. Even
if financing is available, it may not be on terms that are favorable to
CenterPoint or sufficient for its needs. If CenterPoint is unable to obtain
sufficient financing, it may be unable to fully implement its acquisition or
other business or growth strategies.
Regulation of the insurance industry may adversely affect CenterPoint's
insurance brokerage business
CenterPoint is required to be licensed in each state in which it provides
insurance brokerage services. The insurance department of each such state
exercises jurisdiction over insurance agents and their activities, establishes
licensing standards, regulates activities such as the collection of premiums,
the maintenance of funds in custodial accounts and the form and content of
sales literature, and generally acts to protect consumers from
misrepresentation and other unfair conduct. State insurance departments have
broad discretionary powers to interpret and apply state insurance laws and
regulations and in some cases have unwritten or unpublished policies or
interpretations of laws and regulations which could affect the business and
results of operations of an agent.
State insurance departments and the National Association of Insurance
Commissioners continually re-examine existing laws and regulations. CenterPoint
cannot predict the future impact of potential state and federal regulations on
its insurance operations, and there can be no assurance that those changes in
insurance-related laws and regulations, or their interpretation or enforcement,
will not have a material adverse effect on CenterPoint's business, financial
condition or results of operations. See "Business--Regulation--Insurance
Business."
13
<PAGE>
Regulation of employee welfare plans may impact CenterPoint
CenterPoint is subject to regulation at the federal and state levels in
connection with its employee benefit plan design and administration services.
The federal Employee Retirement Income Security Act of 1974 ("ERISA") regulates
many aspects of employee health care benefit plans, including the duties and
responsibilities of persons who provide services or sell products to such
plans. These service providers, salespeople and consultants may be held to the
standard of a fiduciary with respect to their activities. In addition, states
regulate many aspects of employee benefit plans, principally through the
regulation of insurance products, including stop-loss insurance products sold
to self-insured plans. States also directly regulate third party administrators
by requiring licensing and compliance with state regulations in each state in
which they do business. In addition, federal and state regulations are
susceptible to statutory and regulatory changes which could reduce or eliminate
the need for CenterPoint's services with respect to employee benefit plans. See
"Business--Regulation--Employee Welfare Plans."
CenterPoint's insurance services revenues depend on premiums set by other
companies
A portion of CenterPoint's business consists of insurance agency and
brokerage activities which derive revenues from commissions paid by insurance
companies. These commissions are a percentage of premiums charged, which
premiums are determined by insurers, not CenterPoint. Historically, property
and casualty premiums have been cyclical in nature and have varied widely based
on market conditions. Since the mid-1980s, general premium levels have been
depressed as a result of the expanded underwriting capacity of insurance
companies and increased competition. In addition, as traditional risk-bearing
insurance companies continue to outsource the production of premium revenue to
non-affiliated agents such as CenterPoint, these insurance companies may seek
to further reduce their expenses by reducing the commission rates payable to
such insurance agents. CenterPoint cannot predict the timing or extent of
future changes in commission rates or premiums and, therefore, cannot predict
the effect, if any, that such changes would have on its operations.
CenterPoint's services are subject to claims for errors and malpractice
Some of the services that CenterPoint offers, including accounting,
valuation and financial planning, involve a risk of professional malpractice
and other similar claims. Tax services and administrative services for employee
benefits insurance plans are subject to various risks relating to errors and
omissions in processing and filing plan forms and tax returns in accordance
with the plans and government regulations. CenterPoint processes data received
from employees and employers and may be subject to liability for any late or
misfiled plan forms or tax returns. In addition, failure to properly file plan
forms or tax returns could have a material adverse effect on CenterPoint's
reputation or materially and adversely affect its relationships with existing
clients and its ability to gain new clients.
CenterPoint maintains professional liability and errors and omissions
insurance coverage that it believes is adequate both as to risks and amounts.
However, CenterPoint cannot ensure that actual future claims will not exceed
the coverage amounts. If CenterPoint experiences a large claim or claims, the
rates for such insurance may increase. CenterPoint's ability to incorporate
such increases into fees paid by clients could be constrained by contractual
arrangements with clients or competitive factors. As a result, such increases
could have a material adverse effect on its business, financial condition or
results of operations. In addition, a determination adverse to CenterPoint in
connection with one or more significant claims, whether or not insured, could
adversely affect CenterPoint's reputation and client relationships.
CenterPoint may expand its insurance business to include risk-bearing
activities
CenterPoint may in the future expand its insurance business to include
risk-bearing activities. While it is likely that CenterPoint would focus on
underwriting products in which it has particular expertise through its
brokerage business, as a risk-bearing entity CenterPoint would be subject to
significant additional risks that it does not currently encounter in its
brokerage business. CenterPoint cannot guarantee that it will be able to
14
<PAGE>
manage any underwriting risk its assumes. Failure by CenterPoint to manage
successfully such risk could have a material adverse effect on its business,
financial condition or results of operations.
CenterPoint's client contracts do not ensure revenues
CenterPoint enters into agreements with most of its clients. While these
contracts typically define fee arrangements, the scope of services and
termination provisions, they generally do not obligate the client to use
CenterPoint's services and do not, therefore, ensure revenues. While
CenterPoint believes that its relationships with its current clients are good,
it cannot guarantee that such clients will renew their existing agreements or
engage CenterPoint pursuant thereto or otherwise.
CenterPoint operates in competitive markets
The markets in which CenterPoint competes are fragmented and competitive.
CenterPoint competes with larger providers, in-house operations of clients,
local and regional firms, and independent consultants. CenterPoint has also
experienced, and expects to continue to experience, competition from new
entrants into the markets in which it competes. Increased competition could
result in pricing pressures, loss of market share and clients, any of which
could have a material adverse effect on its business, financial condition or
results of operations. Many of CenterPoint's competitors have significantly
greater financial, technical, marketing and other resources. New competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. CenterPoint cannot ensure that it will be able to compete successfully
against current and future competitors, or that the competitive pressures it
faces will not have a material adverse effect on its business, financial
condition or results of operations. See "Business--Competition."
CenterPoint's success is dependent on management personnel
CenterPoint's success depends largely on the efforts of its senior
management team including Robert C. Basten, president and chief executive
officer, Thomas W. Corbett, president and chief operating officer of the
business and financial services group, DeAnn L. Brunts, chief financial
officer, Rondol E. Eagle, chief integration officer and Dennis W. Bikun, chief
accounting officer. In addition, CenterPoint's success will depend
significantly on the senior management of the CenterPoint Companies as a result
of their experience in managing these companies and their strong relationships
with their clients. The loss of the services of one or more of these persons
could materially and adversely affect CenterPoint's business or prospects, and
there can be no assurance that such individuals will continue in their present
capacities for any particular period of time. See "Management."
CenterPoint's quarterly operating results will fluctuate due to seasonality and
other factors
CenterPoint expects its revenues, expenses and operating results to vary
materially from quarter to quarter. CenterPoint anticipates higher revenues and
operating income in the first quarter of its fiscal year because of the
seasonal demand for accounting and tax services. In addition to this
seasonality, quarterly results may vary as a result of many factors, including
(1) client engagements commenced and completed during a quarter, (2) the timing
and structure of acquisitions and their related costs and (3) the addition or
loss of material clients. Since a significant portion of CenterPoint's revenues
is generated on a project-by-project basis, the timing of material projects
could result in quarterly fluctuations. Unexpected variations in quarterly
results could also materially and adversely affect the price of CenterPoint
common stock, which in turn could limit CenterPoint's ability to pursue
acquisitions.
CenterPoint's success depends on its ability to keep pace with rapid
technological change
The technology CenterPoint utilizes in providing its services and
products is rapidly changing. CenterPoint's continued success will depend on
its ability to keep pace with technological developments in order to increase
margins and enhance its services and products. CenterPoint may not succeed in
the foregoing, and such failure could have a material adverse effect on
CenterPoint's business, financial condition or results of operations.
15
<PAGE>
Failure to be year 2000 compliant could materially and adversely affect
CenterPoint
Each CenterPoint Company is reviewing its internal information management
and other systems in order to identify and modify any products, services or
systems that are not year 2000 compliant. Computer programs that have time-
sensitive hardware and software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, bill and collect fees,
or engage in similar normal business activities.
Each CenterPoint Company has undertaken, and substantially completed, an
assessment of the potential overall impact of year 2000 risks on its business,
financial condition and results of operations. Based on CenterPoint's ongoing
survey of the assessment made by each CenterPoint Company, CenterPoint
estimates that the total cost of year 2000 compliance activities will be
approximately $400,000 to $500,000, of which approximately $330,000 had been
incurred as of December 31, 1998. However, CenterPoint cannot guarantee that
(1) actual compliance costs will fall within the range of this estimate, (2)
any business acquired in the future will not require substantial year 2000
compliance expenditures or (3) precautions that the CenterPoint Companies have
taken to protect their businesses from or minimize the impact of the year 2000
issue will be adequate. Any damage to CenterPoint's information processing
system, failure of telecommunications lines or breach of the security of its
computer systems could result in an interruption of its operations or other
loss which may not be covered by insurance. These events could have a material
adverse effect on CenterPoint's business, financial condition or results of
operations.
Each of the CenterPoint Companies has also undertaken an assessment of
the year 2000 readiness of its significant customers, business partners and
vendors to determine the extent to which its interface systems are vulnerable
to the failure of these third parties to remediate their own year 2000 issues.
To date, CenterPoint is not aware of any significant customers, business
partners or vendors with year 2000 issues that would materially affect
CenterPoint or a CenterPoint Company. However, CenterPoint cannot guarantee
that the systems of other companies, on which CenterPoint's operations rely,
will be timely converted or that failure to timely convert would not have a
material adverse effect on CenterPoint's business, financial condition or
results of operations.
Several of the CenterPoint Companies have information technology
consulting practices that have periodically been asked by clients to provide
certain year 2000 consulting services. Although CenterPoint believes, based on
the services it has provided to date, that it has limited exposure to claims
that may be asserted by clients whose systems might be compromised as a result
of a year 2000 related malfunction, there can be no assurance that material
claims will not be made.
Amortization of a material amount of intangible assets will reduce net income
Approximately $234.2 million, or 76.7%, of CenterPoint's pro forma as
adjusted total assets as of December 31, 1998 represents goodwill recorded in
connection with the Mergers. Goodwill is an intangible asset that represents
the difference between the aggregate purchase price for the assets acquired and
the amount of such purchase price allocated to such assets for purposes of
CenterPoint's pro forma balance sheet. CenterPoint will amortize the goodwill
from the Mergers over 40 years with the amount amortized in a particular period
constituting an expense that reduces net income for that period. The amount
amortized, however, will not give rise to a deduction for tax purposes. In
addition, CenterPoint will be required to amortize the goodwill, if any, from
any future acquisitions. Under accounting rules, CenterPoint is required to
periodically evaluate if goodwill has been impaired by reviewing the cash flows
for acquired companies and comparing such amounts with the carrying value of
the associated goodwill. If goodwill is impaired, CenterPoint would be required
to write down goodwill and incur a related charge to income. A reduction in net
income resulting from the write down could have a material adverse impact upon
the market price of the common stock.
16
<PAGE>
Industry billing and collection experience may affect CenterPoint's liquidity
In general, professional services firms experience higher average
accounts receivable days outstanding than businesses in many other industries.
This may affect CenterPoint's liquidity. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Introduction--Pro
Forma Combined Liquidity and Capital Resources."
Immediate and substantial dilution of book value of shares
Purchasers of shares of common stock in the offering will experience
immediate dilution in the net tangible book value of their shares of
approximately $ per share. If CenterPoint issues additional shares of
common stock in the future for acquisitions or other purposes, purchasers of
common stock in the offering may suffer further dilution. See "Dilution."
Current stockholders will be able to exercise substantial control
After the offering, CenterPoint's management, its initial investors and
the owners and employees of the CenterPoint Companies will own approximately
% of the outstanding shares of common stock, or % if the
underwriters' over-allotment option is exercised in full. As a result, if these
persons act together, they will have the ability to exercise substantial
control over CenterPoint's affairs and to elect a sufficient number of
directors to control the board of directors. Pursuant to a stockholders'
agreement, these persons have agreed, through the fifth annual meeting
following the offering, to take all actions necessary as stockholders,
directors or officers of CenterPoint, including voting all shares of common
stock held by them, to cause the directors serving at the time of the offering
or their designated successors to be nominated and elected throughout such
period. The ownership position of these stockholders and the terms of the
stockholders' agreement may have the effect of delaying, deterring or
preventing a change in control of CenterPoint or a change in the composition of
the board of directors. See "Certain Transactions," "Principal Stockholders,"
and "Description of Capital Stock--Stockholders' Agreement."
Shares eligible for future sale by CenterPoint's current stockholders may
adversely affect the stock price
Sales, or the availability for sale of, substantial amounts of the common
stock in the public market after the offering could adversely affect prevailing
market prices of the common stock and the ability of CenterPoint to raise
equity capital, or finance acquisitions using equity capital, in the future.
The shares of common stock being sold in the offering will be freely
tradeable unless acquired by CenterPoint's affiliates as that term is defined
under the rules and regulations of the Securities Act of 1933. Affiliates'
shares will be subject to the resale limitations contained in Rule 144 under
the Securities Act.
Other than the shares sold in the offering, the shares of common stock
outstanding after the offering will be held by (1) the owners and employees of
the CenterPoint Companies who will receive a total of 12,569,367 shares in
connection with the Mergers, (2) CenterPoint's initial investors who
collectively own 2,760,982 shares and (3) CenterPoint's corporate management
who collectively own 920,327 shares (which include 608,363 shares acquired by
Robert C. Basten as an initial investor). The shares issued to the owners and
employees of the CenterPoint Companies in the Mergers will be registered on a
registration statement on Form S-4 and will be freely tradeable under federal
securities laws unless acquired by CenterPoint's affiliates; however, under the
Merger Agreements, the holders of all such shares have agreed not to sell,
transfer or otherwise dispose of any of these shares for a period of 18 months
following the offering. Effective 18 months after the offering, 20% of each
stockholder's shares will be released from such restrictions, and an additional
20% of the original number of restricted shares will be released on the
expiration of each succeeding six-month period.
Shares acquired in the Mergers by stockholders who are CenterPoint
employees are subject to additional restrictions. If such a stockholder's
employment with a CenterPoint Company is terminated within 30 months of the
offering, other than by reason of death, disability, retirement or
circumstances approved by management of the CenterPoint Company and by
CenterPoint's chief executive officer, restricted shares then held by such
stockholder will remain restricted until the fifth anniversary of the offering
(the "Extended Lockup"). The Extended Lockup will not apply (1) to the former
owners of IDA if their employment is
17
<PAGE>
terminated without cause as defined in their employment agreements and (2) to
former owners of Driver and Reppond entering into employment agreements with
CenterPoint, if their employment is terminated without cause or within 60 days
of a constructive termination, in each case as defined in the employment
agreements. The owners and employees of the CenterPoint Companies have certain
piggyback registration rights, beginning on the second anniversary of the
offering, with respect to shares that have been released from the restrictions.
The shares owned by CenterPoint's initial investors and corporate
management have not been registered under the Securities Act and, therefore,
may not be sold unless registered under the Securities Act or sold pursuant to
an exemption from registration, such as the exemption provided by Rule 144. In
addition, under a stockholders' agreement to be entered into at the closing of
the offering, these stockholders will be subject to contractual restrictions on
transfer substantially identical to those agreed to by the owners and employees
of the CenterPoint Companies as described above. Under the terms of employment
agreements between CenterPoint and members of corporate management, restricted
shares held by management will be subject to the Extended Lockup if the
employee voluntarily terminates his or her employment within 30 months of the
offering, other than (1) for good reason (as defined in the employment
agreement) or (2) under circumstances approved by CenterPoint's board of
directors with respect to the chief executive officer, or approved by the chief
executive officer with respect to other members of corporate management.
In addition to the above restrictions, CenterPoint and its stockholders,
except investors who purchase in the offering, have agreed, with certain
exceptions, not to offer, pledge, sell, contract to sell or otherwise dispose
of any shares of common stock, or any securities convertible into or
exchangeable for common stock, for a period of 180 days after the date of this
prospectus without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated. See "Shares Eligible for Future Sale" and "Underwriting."
CenterPoint's common stock has never been publicly traded; CenterPoint's stock
price is likely to be highly volatile
There has been no public market for CenterPoint's common stock.
CenterPoint plans to apply to list the common stock for trading on The New York
Stock Exchange. CenterPoint does not know whether investor interest will lead
to the development of a trading market or, if a trading market develops, how
liquid that market will be. CenterPoint will determine the initial offering
price for the shares through negotiations with the underwriters. You may not be
able to sell your shares at or above the initial offering price. See
"Underwriting." The price at which CenterPoint's shares will trade will depend
upon a number of factors, including (1) CenterPoint's historical and
anticipated operating results; (2) announcements by CenterPoint or its
competitors; (3) changes in financial estimates by securities analysts
regarding CenterPoint, its industry, its competitors or its clients; (4)
conditions and trends in the industries in which CenterPoint or its competitors
compete and (5) general market and economic conditions, some of which factors
are beyond CenterPoint's control. In addition, the stock market has from time
to time experienced extreme price and volume fluctuations. These broad market
fluctuations may adversely affect the market price of the shares.
Anti-takeover provisions and CenterPoint's right to issue preferred stock could
make an acquisition of CenterPoint difficult
CenterPoint's certificate of incorporation and Delaware law contain
provisions that may delay, deter or inhibit a future acquisition of CenterPoint
if the board of directors does not approve of such acquisition. This could
occur even if CenterPoint's stockholders are offered an attractive value for
their shares or if a substantial number or even a majority of the stockholders
believe the takeover is in their best interest. These provisions are intended
to encourage any person interested in acquiring CenterPoint to negotiate with
and obtain the approval of CenterPoint's board of directors. These provisions
include restrictions on calling special meetings and the prohibition of
stockholder action by written consent. In addition, CenterPoint's certificate
of incorporation permits the board of directors to issue shares of preferred
stock with voting, conversion and other rights as it determines, without any
further vote or action by the stockholders. By using preferred stock,
CenterPoint could (1) discourage a proxy contest, (2) make the acquisition of a
substantial block of common stock more difficult or (3) limit the price
investors may be willing to pay in the future for shares of common stock. These
provisions also could discourage bids for your shares of common stock at a
premium and could have a material adverse effect on the market price of your
shares. See "Management--Board of Directors" and "Description of Capital
Stock."
18
<PAGE>
FORWARD LOOKING STATEMENTS
This prospectus includes forward-looking statements. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "intend," "believe," "estimate" and "continue" or similar words.
You should read statements that contain these words carefully because they: (1)
discuss CenterPoint's future expectations; (2) contain projections of
CenterPoint's future results of operations or financial condition; or (3) state
other "forward-looking" information. These forward-looking statements are
subject to risks, uncertainties and assumptions. The "Risk Factors" set forth
above, as well as other cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause CenterPoint's actual
results to differ materially from the expectations described in these forward-
looking statements. CenterPoint is not undertaking any obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
19
<PAGE>
THE COMPANY
CenterPoint is a leading provider of diversified professional, business
and financial services and products to a broad spectrum of middle-market
clients. CenterPoint's goal is to provide clients with personalized, local
service backed by the depth, resources and expert capabilities of a
diversified, national firm. CenterPoint has assembled a group of founding
companies with distinct expert capabilities, reputations for quality, effective
leadership and strong "trusted advisor" relationships with clients. The
CenterPoint Companies are well-established in their markets, having been in
business an average of 27 years. Five of the eight CenterPoint Companies that
are professional services firms were named in Accounting Today's 1999 Top 100
Accounting Firms (the "Top 100") which ranks the largest accounting firms in
the United States in terms of total revenues for their respective 1998 fiscal
years. Based on the pro forma combined revenues of these eight firms for the
fiscal year ended December 31, 1998, CenterPoint would have been ranked No. 13
in the Top 100 had the CenterPoint Companies been combined throughout such
period.
Each of the CenterPoint Companies represents an integral component of
CenterPoint's business and growth strategies and was selected to fill a
specific role in the development of CenterPoint's professional, business and
financial services platforms. The CenterPoint Companies, each of which is
prominent in its market, have collectively achieved substantial growth in
recent years. On a combined historical basis, revenues increased from $144.8
million in fiscal 1996 to $201.0 million in fiscal 1998, representing a
compound annual growth rate of 17.8%.
A brief description of each CenterPoint Company, its principal areas of
expertise and its anticipated contribution to the execution of CenterPoint's
strategy is set forth below. Except as noted below, the following table
represents revenues for the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
CenterPoint Company Headquarters 1998 Revenues
------------------- --------------- -------------
(In millions)
<S> <C> <C>
Professional Services
Reznick Fedder & Silverman................. Bethesda, MD $47.9(a)
Mann Frankfort Stein & Lipp................ Houston, TX $21.6
Follmer, Rudzewicz & Company............... Detroit, MI $19.4(b)
Berry, Dunn, McNeil & Parker............... Portland, ME $17.9(c)
Urbach Kahn & Werlin....................... Albany, NY $17.1(d)
Grace & Company............................ St. Louis, MO $ 9.7
Holthouse Carlin & Van Trigt............... Los Angeles, CA $ 9.5
Simione, Scillia, Larrow & Dowling......... New Haven, CT $ 6.2
Business and Financial Services
Robert F. Driver Co........................ San Diego, CA $32.9(e)
Insurance Design Administrators............ Oakland, NJ $10.9
Reppond.................................... Bellevue, WA $ 7.9
</TABLE>
- --------
(a) For the fiscal year ended September 30, 1998.
(b) For the fiscal year ended May 31, 1998.
(c) For the fiscal year ended June 30, 1998.
(d) For the fiscal year ended October 31, 1998.
(e) For the fiscal year ended July 31, 1998.
20
<PAGE>
Professional Services
Reznick Fedder & Silverman
Reznick Fedder & Silverman, P.C. ("Reznick"), founded in 1977, provides
business, accounting and tax advisory services that include tax consulting,
real estate consulting, business consulting and due diligence. Reznick is
ranked No. 22 in the Top 100 and is the largest non-Big Five firm headquartered
in the Mid-Atlantic region. Reznick is known nationally for its expertise in
the real estate industry and also has substantial experience serving closely
held commercial businesses and clients in the health care and construction
industries. Reznick maintains offices in Bethesda, Maryland; Baltimore,
Maryland; Boston, Massachusetts; Charlotte, North Carolina; and Atlanta,
Georgia. In addition to providing CenterPoint with multiple distribution points
in the Mid-Atlantic region, Reznick will provide the foundation for
CenterPoint's anticipated national practice in real estate consulting services
and participate significantly in CenterPoint's anticipated national practice in
health care consulting services.
Mann Frankfort Stein & Lipp
Mann Frankfort Stein & Lipp, P.C. ("Mann Frankfort"), founded in 1971,
provides accounting, tax, financial reporting, consulting and litigation
consulting services primarily to closely held clients in a wide range of
industries. Mann Frankfort, located in Houston, Texas, is Houston's largest
accounting firm other than the Big Five based on the number of professionals,
and was ranked No. 44 in the Top 100. Mann Frankfort provides a regional
distribution point in Texas and will be the lead member of CenterPoint's
anticipated national practice in litigation consulting services.
Follmer, Rudzewicz & Company
Follmer, Rudzewicz & Company, P.C. ("Follmer"), the predecessor of which
was founded in 1968, provides a broad range of accounting, tax and business
consulting services to closely held companies with an emphasis on manufacturing
companies. Follmer is headquartered in Southfield, Michigan and also maintains
an office in Sterling Heights, Michigan. After the Big Five, Follmer is the
second largest firm in the Detroit metropolitan area based on the number of
professionals, and was ranked No. 46 in the Top 100. Follmer will provide
CenterPoint with a regional distribution point in the upper Midwest and a
platform for CenterPoint's anticipated national practice focused on the
manufacturing industry.
Berry, Dunn, McNeil & Parker
Berry, Dunn, McNeil & Parker, Chartered ("Berry Dunn"), founded in 1974,
provides a wide range of accounting, tax and business consulting services to a
variety of business clients in both the private and public sectors. Berry Dunn
is one of the largest accounting firms in the Northeast in terms of number of
professionals, and was ranked No. 53 in the Top 100. Berry Dunn has significant
expertise serving clients in the health care, financial institutions,
telecommunications, real estate and construction industries. The firm also
provides information technology consulting services to clients in a variety of
industries. Berry Dunn maintains offices in Portland, Maine; Bangor, Maine;
Manchester, New Hampshire; and Lebanon, New Hampshire. In addition to providing
CenterPoint with a regional distribution point in New England, Berry Dunn will
participate significantly in developing CenterPoint's anticipated national
practice in health care consulting services.
Urbach Kahn & Werlin
Urbach Kahn & Werlin PC ("Urbach"), the predecessor of which was founded
in 1963, provides a broad range of accounting and business consulting services
to a variety of clients in both the private and public sectors. Urbach has
significant practices in the not-for-profit and state and federal government
arenas. Urbach maintains offices in Albany, New York; New York, New York;
Washington, D.C.; Los Angeles, California;
21
<PAGE>
Glens Falls, New York; and Poughkeepsie, New York. Urbach, ranked No. 48 in the
Top 100, will provide regional distribution points in the Northeast and Mid-
Atlantic regions and play a significant role in CenterPoint's anticipated
national practice in litigation consulting services. In addition, through
Urbach's international affiliate, Urbach Hacker Young International Limited,
CenterPoint will be able to help clients achieve their business and financial
objectives in the international marketplace.
Grace & Company
Grace & Company, P.C. ("Grace"), founded in 1983, provides a full range
of accounting, tax and consulting services to clients in a spectrum of
industries including manufacturing, construction and real estate. Grace is
headquartered in St. Louis, Missouri and, after the Big Five, is the second
largest accounting firm in St. Louis in terms of number of professionals. Grace
will provide CenterPoint with a lower-Midwest regional distribution point.
Holthouse Carlin & Van Trigt
Holthouse Carlin & Van Trigt LLP ("Holthouse"), founded in 1991, provides
accounting services, tax services and litigation consulting services. Holthouse
is headquartered in Los Angeles, California and maintains offices in Long Beach
and Westlake Village, California. Holthouse will provide CenterPoint with a
regional distribution point on the West Coast and participate significantly in
CenterPoint's anticipated national practice in litigation consulting services.
Simione, Scillia, Larrow & Dowling
Simione, Scillia, Larrow & Dowling LLC ("Simione"), the predecessor of
which was founded in 1974, provides accounting and tax services and management
consulting services. Simione has significant expertise in providing services to
construction companies and serves as an advisor to many of New England's major
road builders and contractors. Simione maintains offices in New Haven and
Hartford, Connecticut and will serve as a regional distribution point in its
markets.
Business and Financial Services
Robert F. Driver Co.
Robert F. Driver Co., Inc. ("Driver"), founded in 1925, is a multi-line
insurance brokerage company that provides property and casualty insurance
services, workers compensation coverage, employee benefits products, surety
coverage and various financial services to a broad range of domestic and
international clients. Driver maintains offices in San Diego, Newport Beach,
Escondido, Sacramento, Fresno, San Francisco, San Rafael and Ontario,
California. Driver manages in excess of $500 million in premiums and was ranked
by the San Diego Business Journal as San Diego's largest independent insurance
brokerage firm in 1998 based on premium volume. In terms of brokerage revenues,
Driver was ranked No. 33 nationally in 1998 by Business Insurance. Driver will
provide CenterPoint with a platform for its anticipated national practice in
insurance and benefits brokerage and consulting services.
Insurance Design Administrators
Self Funded Benefits, Inc., which does business under the trade name
Insurance Design Administrators ("IDA"), was founded in 1979. IDA is an
independent healthcare management company that designs healthcare programs and
provides claims administration services in both the private and public sectors.
IDA has made significant investments in technology to develop a scalable
infrastructure capable of handling a large volume of business. IDA is
headquartered in Oakland, New Jersey. In addition to designing healthcare
programs, IDA also manages healthcare claims of its clients. Based on the
annual volume of claims handled,
22
<PAGE>
IDA was ranked by Employee Benefit News in July 1998 as the 11th largest third
party administrator in the United States. IDA will provide the platform for
CenterPoint's anticipated national practice in third party administration and
self insurance services.
Reppond
The Reppond Company, Inc., Reppond Administrators, LLC, and VeraSource
Excess Risk Ltd. (collectively, "Reppond"), founded in 1981, provide group
benefits insurance and consulting services to privately-held companies. Reppond
is headquartered in Bellevue, Washington and maintains offices in Yakima,
Washington and Brooklyn Park, Minnesota. Reppond enhances CenterPoint's
anticipated national practice in insurance and benefits brokerage and
consulting services.
The Mergers
Simultaneously with the closing of the offering, the CenterPoint
Companies will be merged with separate wholly-owned subsidiaries of
CenterPoint. For more information concerning the Mergers, see "Certain
Transactions." Prior to the closing of the Mergers, each of the CenterPoint
Companies that is a professional services firm will cease to provide attest
services. Such services will thereafter be provided by an Attest Firm formed by
the CPAs who formerly owned the CenterPoint Company. See "Business--
Regulation--Accounting Profession."
23
<PAGE>
USE OF PROCEEDS
The net proceeds to CenterPoint from the sale of the shares of
common stock offered by this prospectus, assuming an initial public offering
price of $ per share and after deducting the underwriting discount and
estimated offering expenses, are estimated to be approximately $ million
(approximately $ million if the Underwriters' over-allotment option is
exercised in full). Estimated offering expenses include amounts advanced by BGL
Capital Partners L.L.C. ("BGL Capital") (an initial investor in CenterPoint) on
behalf of CenterPoint in payment of certain legal, accounting and other fees.
Of the net proceeds, (1) approximately $83.9 million will be used to pay the
cash portion of the purchase price for the CenterPoint Companies (other than
certain contingent payments as described in "Certain Transactions--The
Mergers"), (2) approximately $ million will be used to repay certain
indebtedness assumed by CenterPoint in the Mergers, (3) approximately $
will be used to reimburse BGL Capital and other initial investors for employee
and other costs incurred on behalf of CenterPoint prior to the offering, (4)
$ million will be used to fund the redemption by Driver of its outstanding
preferred stock, and (5) $ will be paid in settlement of a consulting
agreement entered into by Driver. The indebtedness to be repaid bears interest
at effective rates up to % with a weighted average interest rate of %,
and would otherwise mature on various dates through . The remaining
$ million of net proceeds ($ million if the underwriters' over-
allotment option is exercised in full) will be used for working capital and
general corporate purposes, including future acquisitions. Pending such uses,
CenterPoint will invest the net proceeds in short term, interest bearing, U.S.
government securities.
CenterPoint is seeking to obtain a bank credit facility in an amount up
to $100 million. CenterPoint has not obtained any commitments, and there is no
assurance that CenterPoint will be able to obtain this facility, or other
financing it may need, on acceptable terms.
DIVIDEND POLICY
CenterPoint intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes, and does not
anticipate paying any cash dividends on its common stock in the foreseeable
future. Any payment of future dividends will be at the discretion of the board
of directors and will depend upon, among other things, CenterPoint's earnings,
financial condition, capital requirements, level of indebtedness, any
contractual restrictions on the payment of dividends and other factors the
board of directors believes to be relevant. In addition, in the event
CenterPoint obtains one or more lines of credit, such facility may include
restrictions on its ability to pay dividends without the consent of the lender.
24
<PAGE>
CAPITALIZATION
The following table shows the current maturities of the short-term and
long-term debt and capitalization of CenterPoint at December 31, 1998: (1) on a
pro forma combined basis to give effect to the Mergers; and (2) as further
adjusted to give effect to the offering (assuming an initial public offering
price of $ per share and after deducting the underwriting discount and
estimated offering expenses) and the application of the estimated net proceeds.
You should read this information together with CenterPoint's unaudited pro
forma combined financial statements and the accompanying notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
---------------------
Pro
Forma Pro Forma
Combined As Adjusted
-------- -----------
(In thousands)
<S> <C> <C>
Short-term debt, including current maturities of
long-term debt..................................... $ 10,346 $
======== ========
Long-term debt, less current maturities............. $ 20,629 $
Redeemable preferred stock.......................... 4,000
Stockholders' equity:
Preferred Stock, par value $.01 per share,
10,000,000 shares authorized; none issued and
outstanding...................................... --
Common stock, par value $.01 per share, 50,000,000
shares authorized; 16,250,676 shares issued and
outstanding, pro forma combined; shares
issued and outstanding, pro forma as
adjusted(1)...................................... 163
Additional paid-in-capital.......................... 132,578
Retained earnings................................... (1,961)
-------- --------
Total stockholders' equity...................... 130,780
-------- --------
Total capitalization............................ $165,755 $
======== ========
</TABLE>
- --------
(1) Does not include (a) shares of common stock issuable
upon the exercise of options which are expected to be granted to
CenterPoint's management and other employees upon closing of the offering,
(b) 100,000 shares of common stock issuable upon the exercise of warrants
issued to certain investors in CenterPoint and (c) shares
reserved for issuance under CenterPoint's incentive compensation and stock
purchase plans. See "Management--Employee Incentive Compensation Plan" and
"--Employee Stock Purchase Plan" and "Certain Transactions--Organization of
CenterPoint."
25
<PAGE>
DILUTION
The pro forma net tangible book value of CenterPoint as of December 31,
1998 was approximately $ , or $ per share of common stock, after
giving effect to the Mergers. The pro forma net tangible book value per share
represents CenterPoint's pro forma net tangible assets less total liabilities
divided by the number of shares of common stock to be outstanding after giving
effect to the Mergers. After giving effect to the sale of the
shares of common stock offered by this prospectus, assuming an initial public
offering price of $ per share and after deducting the estimated
underwriting discount and offering expenses, and the application of such
estimated net proceeds from the offering, CenterPoint's pro forma net tangible
book value at December 31, 1998 would have been approximately $ , or
$ per share. This represents an immediate increase in pro forma net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors purchasing the shares
in the offering. The following table illustrates this pro forma dilution:
<TABLE>
<S> <C> <C>
Assumed offering price per share....................... $
Pro forma net tangible book value per share before
the offering........................................
Increase in pro forma net tangible book value per
share attributable to new investors.................
--------
Pro forma net tangible book value per share after the
offering..............................................
--------
Dilution per share to new investors....................
========
</TABLE>
The following table illustrates, on a pro forma basis to give effect to
the Mergers as of December 31, 1998, the number of shares of common stock
purchased from CenterPoint, the total consideration paid and the average price
per share paid by existing stockholders, after giving effect to the Mergers,
and the new investors purchasing shares of common stock in the offering:
<TABLE>
<CAPTION>
Shares Total Average
Purchased Consideration(1) Price
--------------- ---------------------- Per
Number Percent Amount Interest Share
------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders..
New investors.......... (2) (2)
------- ------- -------- --------
Total..............
======= ======= ======== ========
</TABLE>
- --------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of CenterPoint and the CenterPoint Companies before
the offering, adjusted to reflect the cash consideration payable to the
owners of the CenterPoint Companies in the Mergers (other than certain
contingent payments as described in "Certain Transactions--The Mergers").
(2) At an assumed initial public offering price of $ per share.
26
<PAGE>
SELECTED FINANCIAL DATA
(in thousands, except share and per share data)
CenterPoint will acquire the CenterPoint Companies simultaneously with
the completion of the offering. For financial statement presentation purposes,
CenterPoint has been identified as the "accounting acquiror."
The table below presents unaudited pro forma combined financial data for
CenterPoint giving effect to the completion of the Mergers and certain pro
forma adjustments to the historical financial statements. These data also
reflect the closing of, and the application of the estimated net proceeds from,
the offering, at an assumed initial public offering price of $ per share.
The summary pro forma combined financial data do not necessarily indicate the
operating results or financial position that would have been achieved had the
events described been completed during the periods presented. You should not
view the results as representative of the future operating results or financial
position of CenterPoint. See the unaudited pro forma combined financial
statements and related notes and the historical financial statements of the
CenterPoint Companies and related notes included elsewhere in this prospectus.
Selected financial data related to the historical balance sheet and statement
of operations for CenterPoint have been omitted as they are immaterial and do
not provide meaningful information.
<TABLE>
<CAPTION>
Pro Forma
Combined
Year Ended
December 31, 1998
-----------------
<S> <C>
Statement of Operations Data (1):
Revenues:
Professional services...................................... $152,351
Business and financial services............................ 53,128
--------
Total revenues........................................... 205,479
Expenses:
Professional services compensation and related costs (2)... 95,283
Business and financial services compensation and related
costs (2)................................................. 35,358
Other operating expenses (3)............................... 39,188
Depreciation and amortization (4).......................... 10,783
--------
Income from operations....................................... 24,867
Other income, net (5)........................................ 1,495
--------
Income before income taxes................................... 26,362
Provision for income taxes (6)............................... 12,887
--------
Net income................................................... $ 13,475
========
Net income per share.........................................
========
Shares used in computing net income per share (7)............
========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------------
Pro Forma As
Combined (8) Adjusted (9)
------------ ------------
<S> <C> <C>
Balance Sheet Data:
Working (deficit) capital........................... $(90,672) $ 18,729
Total assets........................................ 290,027 305,340
Total long-term debt, net of current portion........ 20,629 --
Stockholders' equity................................ 130,780 264,810
</TABLE>
27
<PAGE>
- --------
(1) The pro forma combined statement of operations data assume that the Mergers
and this offering were completed on January 1, 1998. These data do not
necessarily indicate the results CenterPoint would have achieved had the
offering and Mergers actually occurred on that date and should not be
viewed as representative of future operating results.
(2) The pro forma combined statement of operations data include an aggregate of
approximately $22.1 million in pro forma reductions in compensation and
benefits to certain owners and employees of the CenterPoint Companies.
These individuals have agreed to these reductions in employment and
incentive compensation agreements which will take effect upon completion of
the offering (the "Compensation Differential").
(3) Reflects the reduction in other operating expenses of $281,000 related to
signing bonuses and a non-recurring stock compensation charge for
management of CenterPoint, net of prospective compensation to management of
CenterPoint as agreed to in the employment agreements.
(4) Includes the amortization of $234.2 million of goodwill to be recorded as a
result of the Mergers over a 40-year period and computed on the basis
described in the notes to the unaudited pro forma combined financial
statements.
(5) Reflects a reduction of net interest expense of $2.2 million associated
with long-term debt to be repaid from the proceeds of the offering or
retained by the owners of the CenterPoint Companies.
(6) Assumes all income is subject to a corporate income tax rate of 40% and
assumes all goodwill is non-deductible.
(7) Includes (a) 12,569,367 shares to be issued to the owners and employees of
the CenterPoint Companies in the Mergers; (b) 3,681,309 shares held by
initial investors and management of CenterPoint; and (c) of the
shares of common stock sold in the offering, net of underwriting
discounts, necessary to pay the cash portion of the Merger consideration,
to repay certain indebtedness of the CenterPoint Companies and to pay
estimated expenses of the offering.
(8) The pro forma combined balance sheet data assume that the Mergers were
completed on December 31, 1998 and are not necessarily indicative of the
financial position that would have been achieved had these events actually
occurred on that date and should not be viewed as representative of
CenterPoint's future financial position. See "Use of Proceeds."
(9) Adjusted to reflect the sale of shares of common stock offered by,
and the application of the estimated net proceeds from, the offering, at an
assumed initial public price of $ per share, after which time a total of
shares will be outstanding. See "Use of Proceeds."
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with "Selected Financial
Data," the pro forma combined financial statements and related notes and the
historical financial statements of the CenterPoint Companies and related notes
appearing elsewhere in this prospectus.
Introduction
General
CenterPoint was created to become a leading provider of diversified
professional, business and financial services and products to a broad spectrum
of middle-market clients. CenterPoint has conducted no operations and generated
no revenues to date and has entered into agreements to acquire the eleven
CenterPoint Companies simultaneously with the closing of the offering.
CenterPoint's revenues are derived primarily from professional services and
business and financial services and products. CenterPoint's pro forma combined
revenues for the year ended December 31, 1998 totaled $205.5 million, of which
approximately 74% was derived from professional services and approximately 26%
from business and financial services and products.
Overview--Professional Services--Historical Results of Operations
CenterPoint's professional services firms provide a full range of
consulting, accounting, tax and related professional services to middle-market
clients. The following table presents the combined historical revenues of
CenterPoint's professional services firms for the periods shown:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1997 Fiscal 1998
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C>
$105,716 $124,824 $149,280
</TABLE>
Professional services revenues are primarily affected by the number of
billable hours and the realized rates per hour. Professional services expenses
consist of member compensation and related costs, employee compensation and
related costs and other operating expenses. Member compensation and related
costs include all compensation and compensation-related expenses for senior
professionals who share in each firm's profits. Employee compensation and
related costs include all compensation and compensation-related expenses for
non-member professionals and administrative staff. Other operating expenses
consist of occupancy, information technology systems maintenance, practice
development, training, recruiting, office supplies and other such costs.
Member compensation is primarily affected by the overall profitability of
the firm which is affected by billable hours, realized rates per hour, employee
compensation and related costs and other operating expenses. Employee
compensation and related costs are primarily affected by the demand for
qualified professionals within the professional services industry, a firm's
leverage ratio and engagement efficiencies. Other operating expenses are
primarily affected by the number and experience level of professional and
administrative staff, prevailing rates of compensation, the amount and cost of
leased office space, the firm's investments in information technology, the
frequency of training and the extent to which a firm promotes its practice or
develops new product lines.
Overview--Business and Financial Services--Historical Results of Operations
CenterPoint's business and financial services firms provide insurance
brokerage, employee benefits design and administration and related business and
financial services and products to middle-market clients.
29
<PAGE>
The following table presents the combined historical revenues of CenterPoint's
business and financial services firms for the periods shown:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1996 1997 1998
------- ------- -------
(Dollars in thousands)
<S> <C> <C>
$39,108 $44,889 $51,711
</TABLE>
Insurance brokerage commissions and related revenues are primarily
affected by prevailing insurance premium levels, brokerage commission rates,
the number of policies sold or renewed and the number of clients served.
Revenues from employee benefits design and administration are primarily
affected by the number of insured lives administered, the management fee per
life and the prevailing rates for other services provided. Business and
financial services expenses consist of producer compensation, employee
compensation and related costs and other operating expenses. Producer
compensation represents compensation paid to insurance brokerage producers.
Employee compensation and related costs include all compensation and
compensation-related expenses for management personnel and administrative
staff. Other operating expenses consist of occupancy, information technology
systems maintenance, promotional, training, office supplies and other such
costs.
Insurance brokerage producer compensation depends primarily upon the
number of policies sold or renewed as such compensation is typically calculated
as a percentage of commission revenues. Employee compensation and related costs
are primarily affected by the size of the firm's staff, demand for qualified
personnel in the industry and the firm's administrative efficiency. Other
operating expenses are primarily affected by the size of the firm, the amount
and cost of leased office space, the frequency of training and the extent to
which a firm advertises or develops new lines of business.
Overview--CenterPoint--Unaudited Pro Forma Combined Results of Operations
The following table sets forth the unaudited pro forma combined operating
results of CenterPoint for the year ended December 31, 1998. For a discussion
of the pro forma adjustments, see the unaudited pro forma combined financial
statements and the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year ended
December 31, 1998
-----------------------
(Dollars in thousands)
<S> <C> <C>
Revenues:
Professional services............................ $ 152,351 74.1%
Business and financial services.................. 53,128 25.9
------------ ---------
205,479 100.0
Expenses:
Compensation and related costs................... 130,641 63.6
Other operating expenses......................... 39,188 19.1
Depreciation and amortization.................... 10,783 5.2
------------ ---------
Income from operations............................. $ 24,867 12.1%
============ =========
</TABLE>
CenterPoint's expenses consist of payroll and related costs of
professional and administrative personnel, occupancy costs, practice
development expenses, other operating expenses and depreciation and
amortization expenses. Payroll and related costs include base and incentive
compensation, related payroll taxes, group insurance and other employee benefit
costs. Occupancy costs include rent related to office space, parking and repair
and maintenance expenses. Practice development expenses include promotional
expenses such as marketing and advertising and the cost of developing new
clients. Other operating expenses include all other operating costs such as bad
debt expense, travel, computer-operating expenses and other such costs.
30
<PAGE>
Depreciation and amortization expense relates primarily to the depreciation of
computer hardware and software and office furnishings and equipment as well as
the amortization of goodwill associated with the Mergers.
CenterPoint has created a unique compensation structure for its
professional services firms. Senior professionals' compensation is subject to
contractual agreements regarding the amount and timing of payments made
thereunder. These incentive compensation agreements provide for the retention
by CenterPoint of a specified fixed dollar amount ("CenterPoint Base Earnings")
of each firm's annual operating earnings before any compensation is paid to the
firm's senior professionals. Such compensation structure is designed to provide
CenterPoint with a baseline level of earnings before corporate expenses.
Operating earnings in excess of a threshold amount will be subject to a split,
with 40% of any such earnings retained by CenterPoint and 60% allocated to the
senior professionals. For more information concerning the compensation
agreements, including the definitions of certain terms, see "Business--Employee
Incentives--Professional Services." See also the unaudited pro forma combined
financial statements and related notes included in this prospectus.
On a pro forma combined basis for the year ended December 31, 1998,
Operating Earnings (as defined below), CenterPoint Base Earnings and senior
professionals' compensation would have been as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Operating Earnings (1).................... $56,710
CenterPoint Base Earnings................. $29,871
-------
Senior professionals' compensation........ $26,839
Senior professionals' compensation as a
percentage of Operating Earnings......... 47.3%
</TABLE>
- --------
(1) As shown in this table, "Operating Earnings" means the combined operating
income of the professional services firms plus related depreciation,
amortization and senior professionals' compensation.
CenterPoint expects to realize certain savings following the Mergers as a
result of (a) the integration of services, products and offices, (b) operating
efficiencies and purchasing economies of scale in areas such as systems
components and development, telecommunications and other operating expenses and
(c) the consolidation of insurance, employee benefits and other administrative
expenses. CenterPoint has not and cannot quantify these savings until
completion of the Mergers and the integration of the CenterPoint Companies.
CenterPoint also expects to incur additional costs associated with public
ownership, corporate management and administration and the initial creation of
its technology infrastructure. However, these costs, except for prospective
compensation payable pursuant to employment agreements with management, cannot
be quantified accurately at this time. Accordingly, except for such prospective
compensation, neither the expected savings nor the expected costs have been
included in the unaudited pro forma combined financial statements of
CenterPoint. These various future costs and possible future cost savings may
make useful comparisons of future operating results with historical operating
results difficult.
Centerpoint's professional services firms recognize revenues as the
related services are provided and bill clients based upon actual hours incurred
on client projects at expected net realizable rates per hour, plus any out-of-
pocket expenses. The cumulative impact of any subsequent revision in the
estimated realizable value of unbilled fees for a particular client project is
reflected in the period in which the change becomes known. Any anticipated
losses expected to be incurred in connection with the completion of a project
are recognized when known taking into account any fixed price agreements that
may be in process. Outstanding fees receivable are evaluated each period to
assess the adequacy of the allowance for doubtful accounts.
31
<PAGE>
CenterPoint's insurance brokerage businesses principally recognize
commission income on the later of the effective date of the policy or the
billing date. Commissions on premiums billed and collected directly by the
insurance company are principally recognized as income when received by
CenterPoint. Contingent commissions are recorded when received. Service fee
income is recognized as earned, which is ordinarily over the period in which
the services are provided. CenterPoint's third party administration business
recognizes revenues as the related services are provided. CenterPoint bills
administration fees for administering its customers' self-insured health plans.
Administration fees are based on a fixed amount per eligible life per month and
CenterPoint receives reinsurance commissions from the various reinsurance
carriers utilized. The reinsurance commissions are determined by the terms of
the reinsurance carrier agreements. Outstanding fees receivable are evaluated
each period to assess the adequacy of the allowance for doubtful accounts.
Seasonality
Certain of CenterPoint's professional services firms regularly experience
higher revenues in the first and second calendar quarters due to a number of
factors, including the seasonality of accounting, tax processing, tax planning
and related professional services. CenterPoint believes that quarter-to-quarter
comparisons of results of operations are not necessarily meaningful or
indicative of the results that CenterPoint may achieve for any subsequent
quarter or fiscal year.
On a prospective basis, CenterPoint's baseline earnings from its
professional services firms will be recognized as earned on a basis consistent
with the seasonality of the underlying Subsidiary Operating Earnings.
CenterPoint's earnings from professional services firms in excess of baseline
earnings will also be recognized as earned on a seasonal basis.
Pro Forma Combined Liquidity and Capital Resources
The CenterPoint Companies' principal sources of liquidity have
historically been cash flows from operating activities. After the completion of
the Mergers and the offering, CenterPoint will have approximately $18.7 million
of working capital. It is expected that certain short-term and long-term debt
of the CenterPoint Companies, totaling approximately $28.6 million as of
December 31, 1998, will be repaid from the net proceeds of the offering.
CenterPoint is seeking to obtain a revolving credit facility of up to
$100 million. Although such revolving credit facility is expected to be
available upon the completion of the offering, CenterPoint has not obtained any
commitment nor can there be any assurance that CenterPoint will be able to
obtain such revolving credit facility or other financing it may need on terms
it deems acceptable. It is expected that such facility, if obtained, will
require CenterPoint to comply with various loan covenants, including: (a)
maintenance of certain financial ratios, including minimum tangible net worth;
(b) restrictions on additional indebtedness; and (c) restrictions on liens,
guarantees, advances and dividends. Such facility is intended to be used for
acquisitions, capital expenditures, working capital and other general corporate
purposes. Obtaining a credit facility in an amount not less than $75 million is
a condition to closing of the Mergers.
The CenterPoint Companies' capital expenditures were $5.2 million for the
year ended December 31, 1998, primarily for purchases of equipment. CenterPoint
believes that cash flow from operations, borrowings under the proposed
revolving credit facility and the unallocated net proceeds of the offering, if
any, will be sufficient to fund CenterPoint's expected working capital needs,
debt service requirements and planned capital expenditures for at least the
next 12 months.
CenterPoint will incur certain contingent payment obligations in
connection with the Mergers. See "Certain Transactions--The Mergers."
32
<PAGE>
CenterPoint intends to pursue selected acquisition opportunities. The
timing or success of any acquisition efforts is unpredictable. Accordingly,
CenterPoint is unable to estimate its expected capital commitments. Funding for
future acquisitions will likely come from a combination of the unallocated net
proceeds of the offering, internally generated cash flow from operations,
borrowings under the anticipated revolving credit facility or other debt
financings and the issuance of additional equity. See "Risk Factors--
CenterPoint may not be able to obtain adequate financing to implement its
strategies."
SAB 97
SEC Staff Accounting Bulletin No. 97 ("SAB 97") requires the application
of purchase accounting when three or more substantive operating entities
combine in a single business combination effected by the issuance of stock just
prior to or simultaneously with an initial public offering and the combination
does not meet the pooling-of-interest criteria of Accounting Principles Board
Opinion No. 16. CenterPoint has been identified as the accounting acquiror in
accordance with the provisions of SAB 97, which states that the recipient of
the largest portion of voting rights in the combined corporation is presumed to
be the accounting acquiror for financial statement presentation purposes.
Accordingly, the excess purchase price over the fair value of the net assets
acquired from the CenterPoint Companies of approximately $234.2 million will be
amortized over a period of 40 years as a non-cash charge to CenterPoint's
income statement. This amortization will be approximately $5.9 million per
year.
Amortization of Intangible Assets
The $234.2 million of goodwill resulting from the Mergers represents
approximately 76.7% of CenterPoint's pro forma total assets as of December 31,
1998. CenterPoint plans to evaluate continually whether events or circumstances
have occurred that indicate that the remaining useful life of goodwill may
warrant revision. Additionally, in accordance with the provisions of Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
CenterPoint will evaluate any potential goodwill impairments by reviewing the
future cash flows of respective acquired entities' operations and comparing
these amounts with the carrying value of the associated goodwill.
Recently Issued Accounting Standards
Segment Reporting. In June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of An Enterprise and Related Information." SFAS No.
131 establishes standards for reporting information about operating segments in
annual financial statements and in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. In general, such
information must be reported externally in the same manner used for internal
management purposes. SFAS No. 131 is effective for financial statements issued
for periods beginning after December 15, 1997. In the initial year of adoption,
comparative information for earlier years must be restated. Since SFAS No. 131
only requires disclosure of certain information, its adoption will not affect
CenterPoint's financial position or results of operations.
Accounting for Derivative Instruments and Hedging Activities. In June
1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities, supersedes and amends a number of existing
standards. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999, but earlier adoption is permitted. Upon initial application, all
derivatives are required to be recognized in the statement of financial
position as either assets or liabilities and measured at fair value.
Recognition of changes in fair value depends on whether
33
<PAGE>
the derivative is designated and qualifies as a hedge, and the type of hedging
relationship that exists. CenterPoint does not currently hold any derivative
instruments or participate in any hedging activities.
Professional Services
Each CenterPoint professional services firm has operated as an
independent, privately-owned entity throughout the periods presented. The
results of operations of these firms reflect varying historical levels of
owners compensation which were determined at the discretion of the owners. The
owners of each of these firms have agreed to certain reductions in their
compensation and related benefits that will take effect upon the closing of the
Mergers. See the unaudited pro forma combined financial statements and notes
thereto for additional information.
For a description of CenterPoint's professional services firms, see "The
Company."
Results of Operations--Reznick
The following table sets forth certain selected financial data for
Reznick on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended September 30, December 31,
------------------------------------------------ -----------------------------
1996 1997 1998 1997 1998
-------------- -------------- -------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $31,483 100.0% $35,103 100.0% $47,877 100.0% $9,338 100.0% $9,848 100.0%
Expenses:
Member compensation and
related costs......... 7,784 24.7 8,170 23.3 13,516 28.2 1,360 14.6 769 7.8
Employee compensation
and related costs..... 17,477 55.5 19,617 55.9 25,792 53.9 5,829 62.4 6,937 70.4
Other operating
expenses.............. 6,231 19.8 7,530 21.4 8,502 17.8 2,172 23.2 2,221 22.6
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Operating loss.......... $ (9) (0.0)% $ (214) (0.6)% $ (67) (0.1)% $ (23) (0.2)% $ (79) (0.8)%
======= ===== ======= ===== ======= ===== ====== ===== ====== =====
</TABLE>
Results for the Three Months Ended December 31, 1998 Compared to the Three
Months Ended December 31, 1997--Reznick
Revenues. Professional services revenues increased $510,000, or 5.5%,
from $9.3 million in the three months ended December 31, 1997 to $9.8 million
in the three months ended December 31, 1998, primarily due to an expansion of
the firm's core real estate and health care practices.
Member Compensation and Related Costs. Member compensation and related
costs decreased $591,000, or 43.5%, from $1.4 million in the three months ended
December 31, 1997 to $769,000 in the three months ended December 31, 1998,
primarily due to a reduction in operating income available for member
compensation. As a percentage of revenues, these expenses decreased from 14.6%
in the three months ended December 31, 1997 to 7.8% in the three months ended
December 31, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $1.1 million, or 19.0%, from $5.8 million in the three
months ended December 31, 1997 to $6.9 million in the three months ended
December 31, 1998, primarily due to an increase in the number of professional
employees and annual performance-based compensation increases. As a percentage
of revenues, these expenses increased from 62.4% in the three months ended
December 31, 1997 to 70.4% in the three months ended December 31, 1998.
34
<PAGE>
Other Operating Expenses. Other operating expenses remained constant at
$2.2 million in the three months ended December 31, 1997 and 1998. As a
percentage of revenues, these expenses decreased from 23.2% in the three months
ended December 31, 1997 to 22.6% in the three months ended December 31, 1998.
Results for the Year Ended September 30, 1998 Compared to the Year Ended
September 30, 1997--Reznick
Revenues. Professional services revenues increased $12.8 million, or
36.4%, from $35.1 million in the year ended September 30, 1997 to $47.9 million
in the year ended September 30, 1998, primarily due to (a) an expansion of the
firm's practice as a result of a merger with a Baltimore-based accounting firm
(the "Reznick Merger") and (b) an expansion of the firm's core real estate
practice and growth in other practice areas such as due diligence, bankruptcy
and litigation consulting services.
Member Compensation and Related Costs. Member compensation and related
costs increased $5.3 million, or 65.4%, from $8.2 million in the year ended
September 30, 1997 to $13.5 million in the year ended September 30, 1998,
primarily due to an increase in operating income available for member
compensation and the admission of three members during 1998. As a percentage of
revenues, these expenses increased from 23.3% in the year ended September 30,
1997 to 28.2% in the year ended September 30, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $6.2 million, or 31.5%, from $19.6 million in the year
ended September 30, 1997 to $25.8 million in the year ended September 30, 1998,
primarily due to the addition of approximately 50 professional employees and
approximately 25 administrative support personnel as a result of the Reznick
Merger. As a percentage of revenues, these expenses decreased from 55.9% in the
year ended September 30, 1997 to 53.9% in the year ended September 30, 1998.
Other Operating Expenses. Other operating expenses increased $972,000, or
12.9%, from $7.5 million in the year ended September 30, 1997 to $8.5 million
in the year ended September 30, 1998, primarily due to an increase in rent
expense resulting from the leasing of additional office space, an increase in
recruiting fees and an increase in office operating expenses. As a percentage
of revenues, these expenses decreased from 21.4% in the year ended September
30, 1997 to 17.8% in the year ended September 30, 1998.
Results for the Year Ended September 30, 1997 Compared to the Year Ended
September 30, 1996--Reznick
Revenues. Professional services revenues increased $3.6 million, or
11.5%, from $31.5 million in the year ended September 30, 1996 to $35.1 million
in the year ended September 30, 1997, primarily due to expansion of the firm's
real estate, construction, not-for-profit and closely held business support
services.
Member Compensation and Related Costs. Member compensation and related
costs increased $386,000, or 5.0%, from $7.8 million in the year ended
September 30, 1996 to $8.2 million in the year ended September 30, 1997,
primarily due to an increase in operating income available for member's
compensation. As a percentage of revenues, these expenses decreased from 24.7%
in the year ended September 30, 1996 to 23.3% in the year ended September 30,
1997.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $2.1 million, or 12.2%, from $17.5 million in the year
ended September 30, 1996 to $19.6 million in the year ended September 30, 1997,
primarily due to an increase in the number of employees required as a result of
the expansion in the firm's practice. As a percentage of revenues, these
expenses increased from 55.5% in the year ended September 30, 1996 to 55.9% in
the year ended September 30, 1997.
Other Operating Expenses. Other operating expenses increased $1.3
million, or 20.8%, from $6.2 million in the year ended September 30, 1996 to
$7.5 million in the year ended September 30, 1997, primarily due to an increase
in occupancy, practice development and office operating expenses. As a
percentage of
35
<PAGE>
revenues, these expenses increased from 19.8% in the year ended September 30,
1996 to 21.6% in the year ended September 30, 1997.
Liquidity and Capital Resources--Reznick
Reznick used net cash from operating activities of approximately $7.2
million and $5.0 million in the three months ended December 31, 1998 and 1997,
respectively. Net cash generated in operating activities was approximately $3.7
million, $1.7 million and $1.4 million in the years ended September 30, 1998,
1997 and 1996, respectively. For the three months ended December 31, 1998 and
1997, net cash used in investing activities was approximately $201,000 and
$779,000, principally for property and equipment purchases. Net cash used in
investing activities was approximately $1.5 million, $1.3 million and $684,000
in the years ended September 30, 1998, 1997 and 1996, respectively, used
primarily for the purchases of property and equipment. In the three months
ended December 31, 1998 and 1997, net cash provided by financing activities was
approximately $2.6 million and $2.7 million, respectively, principally from
proceeds of short-term borrowings and long-term debt. Reznick used net cash of
approximately $402,000 in financing activities in the year ended September 30,
1998, primarily representing payments of debt. Net cash provided by financing
activities in the year ended September 30, 1997 totaled $509,000, generated by
net proceeds from the issuance of long-term debt. In the year ended September
30, 1996, cash used in financing activities totaled $162,000 and was used
primarily for net payments of long-term debt. At December 31, 1998, Reznick had
working capital of $3.8 million.
Results of Operations--Mann Frankfort
The following table sets forth certain selected financial data for Mann
Frankfort on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1997 1998
------------ ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues..................... $9,921 100.0% $17,475 100.0% $21,631 100.0%
Expenses:
Member compensation and
related costs............. 4,412 44.4 6,636 38.0 8,921 41.2
Employee compensation and
related costs............. 3,608 36.4 6,405 36.7 8,829 40.8
Other operating expenses... 1,763 17.8 2,996 17.1 3,347 15.5
------ ----- ------- ----- ------- -----
Income from operations....... $ 138 1.4% $ 1,438 8.2% $ 534 2.5%
====== ===== ======= ===== ======= =====
</TABLE>
Results for the Year Ended December 31, 1998 Compared to the Year Ended
December 31, 1997--Mann Frankfort
Revenues. Revenues increased $4.2 million, or 23.8%, from $17.5 million
in the year ended December 31, 1997 to $21.6 million in the year ended December
31, 1998, primarily due to increases in billing rates and billable hours and
the addition of new clients.
Member Compensation and Related Costs. Member compensation and related
costs increased $2.3 million, or 34.4%, from $6.6 million in the year ended
December 31, 1997 to $8.9 million in the year ended December 31, 1998,
primarily due to an increase in the operating income of the firm over the
comparable periods while the number of shareholders increased only slightly
from 15 to 16 from 1997 to 1998. As a
36
<PAGE>
percentage of revenues, these expenses increased from 38.0% in the year ended
December 31, 1997 to 41.2% in the year ended December 31, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $2.4 million, or 37.8%, from $6.4 million in the year
ended December 31, 1997 to $8.8 million in the year ended December 31, 1998,
primarily due to the addition of professional and administrative staff and
performance-related compensation increases. As a percentage of revenues, these
expenses increased from 36.7% in the year ended December 31, 1997 to 40.8% in
the year ended December 31, 1998.
Other Operating Expenses. Other operating expenses increased $351,000, or
11.7%, from $3.0 million in the year ended December 31, 1997 to $3.3 million in
the year ended December 31, 1998, primarily due to (a) higher occupancy costs
resulting from an expansion of the firm's office and (b) additional
depreciation expenses resulting from investments in computer hardware and
software and leasehold improvements. As a percentage of revenues, these
expenses decreased from 17.1% in the year ended December 31, 1997 to 15.5% in
the year ended December 31, 1998.
Results for the Year Ended December 31, 1997 Compared to the Year Ended
December 31, 1996--Mann Frankfort
Revenues. Revenues increased $7.6 million, or 76.1%, from $9.9 million in
the year ended December 31, 1996 to $17.5 in the year ended December 31, 1997,
due in part to a January 1997 merger (the "Mann Frankfort Merger") with a
Houston based accounting firm which added incremental 1997 revenues of $3.4
million. Also contributing to the revenue growth were increases in billing
rates and billable hours as well as the addition of new clients during 1997.
Member Compensation and Related Costs. Member compensation and related
costs increased $2.2 million, or 50.4%, from $4.4 million in the year ended
December 31, 1996 to $6.6 million in the year ended December 31, 1997,
primarily due to an increase in the number of shareholders resulting from the
Mann Frankfort Merger and their related compensation and a corresponding
increase in the firm's operating income over the period. As a percentage of
revenues, however, these expenses decreased from 44.4% in the year ended
December 31, 1996 to 38.0% in the year ended December 31, 1997.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $2.8 million, or 77.5%, from $3.6 million in the year
ended December 31, 1996 to $6.4 million in the year ended December 31, 1997,
primarily due to an increase in professional and administrative staff because
of the Mann Frankfort Merger and performance-based compensation increases. As a
percentage of revenues, these expenses increased from 36.4% in the year ended
December 31, 1996 to 36.7% in the year ended December 31, 1997.
Other Operating Expenses. Other operating expenses increased $1.2
million, or 69.9%, from $1.8 million in the year ended December 31, 1996 to
$3.0 million in the year ended December 31, 1997, primarily due to an increase
in operating costs because of the Mann Frankfort Merger and merger-related
transaction costs. As a percentage of revenues, these expenses decreased from
17.8% in the year ended December 31, 1996 to 17.1% in the year ended December
31, 1997.
Liquidity and Capital Resources--Mann Frankfort
Mann Frankfort generated net cash flow from operating activities of
approximately $454,000 in the year ended December 31, 1998. Net cash used in
operating activities was approximately $196,000 and $103,000 in the years ended
December 31, 1997 and 1996, respectively. Net cash used in investing activities
was approximately $534,000, $714,000 and $77,000 in the years ended December
31, 1998, 1997 and 1996, respectively, primarily for the purchases of property
and equipment. Net cash provided by financing activities for the years ended
December 31, 1998 and 1997 was approximately $398,000 and $1.1 million,
respectively,
37
<PAGE>
principally from the issuance of debt in the year ended December 31, 1998 and
from the issuances of debt and stock in the year ended December 31, 1997. Net
cash used in financing activities was approximately $132,000 for the year ended
December 31, 1996, principally due to payments of debt. At December 31, 1998,
Mann Frankfort had net working capital of $2.6 million.
Results of Operations--Follmer
The following table sets forth certain selected financial data for
Follmer on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended May 31, November 30,
------------------------------------------- ---------------------------
1996 1997 1998 1997 1998
------------ ------------- ------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $15,528 100% $17,954 100% $19,417 100% $7,790 100% $8,937 100%
Expenses:
Member compensation and
related costs......... 4,833 31.1 6,646 37.0 7,339 37.8 2,488 31.9 3,154 35.3
Employee compensation
and related costs..... 6,649 42.8 7,567 42.1 8,225 42.4 3,444 44.3 3,843 43.0
Other operating
expenses.............. 3,781 24.4 4,042 22.6 3,891 20.0 1,959 25.2 2,318 25.9
------- ---- ------- ---- ------- ---- ------ ---- ------ ----
Income (loss) from
operations............. $ 265 1.7% $ (301) (1.7)% $ (38) (0.2)% $ (101) (1.2)% $ (378) (4.2)%
======= ==== ======= ==== ======= ==== ====== ==== ====== ====
</TABLE>
Results for the Six Months Ended November 30, 1998 Compared to the Six Months
Ended November 30, 1997--Follmer
Revenues. Revenues increased $1.1 million, or 14.7%, from $7.8 million in
the six months ended November 30, 1997 to $8.9 million in the six months ended
November 30, 1998, primarily due to an expansion of the firm's computer
information service, organizational development and training ("ODT") and ISO
service lines. Follmer was also able to increase its realization rates as
demand for its services increased.
Member Compensation and Related Costs. Member compensation and related
costs increased $666,000, or 26.8%, from $2.5 million in the six months ended
November 30, 1997 to $3.2 million in the six months ended November 30, 1998. As
a percentage of revenues, these expenses increased from 31.9% in the six months
ended November 30, 1997 to 35.3% in the six months ended November 30, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $399,000, or 11.6%, from $3.4 million in the six months
ended November 30, 1997 to $3.8 million in the six months ended November 30,
1998, primarily due to an increase in base compensation levels of the
professional staff in an effort to be more competitive with the Big Five in the
Detroit metropolitan area. As a percentage of revenues, these expenses
decreased from 44.3% in the six months ended November 30, 1997 to 43.0% in the
six months ended November 30, 1998.
Other Operating Expenses. Other operating expenses increased $359,000, or
18.3%, from $2.0 million in the six months ended November 30, 1997 to $2.3
million in the six months ended November 30, 1998, primarily due to an increase
in occupancy costs and consulting fees related to the outsourcing of personnel
used to staff the firm's ODT services product. As a percentage of revenues,
these expenses increased from 25.2% in the six months ended November 30, 1997
to 25.9% in the six months ended November 30, 1998.
Results for the Year Ended May 31, 1998 Compared to the Year Ended May 31,
1997--Follmer
Revenues. Revenues increased $1.5 million, or 8.2%, from $18.0 million in
the year ended May 31, 1997 to $19.4 million in the year ended May 31, 1998,
primarily due to (a) an increase in realized billing rates,
38
<PAGE>
(b) a modest number of new clients and (c) the growth in the firm's valuation
services, ODT and ISO service lines.
Member Compensation and Related Costs. Member compensation and related
costs increased $693,000, or 10.4%, from $6.6 million in the year ended May 31,
1997 to $7.3 million in the year ended May 31, 1998. This increase was due to
the growth in the firm's net operating income available for member
compensation. As a percentage of revenues, these expenses increased from 37.0%
in the year ended May 31, 1997 to 37.8% in the year ended May 31, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $658,000, or 8.7%, from $7.6 million in the year ended
May 31, 1997 to $8.2 million in the year ended May 31, 1998, primarily due to
an increase in base compensation levels of the professional staff in an effort
to be more competitive with the Big Five in the Detroit metropolitan area. As a
percentage of revenues, these expenses increased from 42.1% in the year ended
May 31, 1997 to 42.4% in the year ended May 31, 1998.
Other Operating Expenses. Other operating expenses decreased $151,000, or
3.7%, from $4.0 million in the year ended May 31, 1997 to $3.9 million in the
year ended May 31, 1998, primarily due to a reduction in bad debts and practice
development expenses. As a percentage of revenues, these expenses decreased
from 22.6% in the year ended May 31, 1997 to 20.0% in the year ended May 31,
1998.
Results for the Year Ended May 31, 1997 Compared to the Year Ended May 31,
1996--Follmer
Revenues. Revenues increased $2.4 million, or 15.6%, from $15.5 million
in the year ended May 31, 1996 to $18.0 million in the year ended May 31, 1997.
This increase was due to (a) an increase in realized billing rates, (b) a
modest number of new clients and (c) the growth in the firm's valuation
services, ODT and ISO service lines.
Member Compensation and Related Costs. Member compensation and related
costs increased $1.6 million, or 33.4%, from $4.8 million in the year ended May
31, 1996 to $6.6 million in the year ended May 31, 1997. This increase was due
to the addition of one new partner and an increase in net operating income upon
which member compensation is determined. As a percentage of revenues, these
expenses increased from 31.1% in the year ended May 31, 1996 to 37.0% in the
year ended May 31, 1997.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $918,000, or 13.8%, from $6.6 million in the year ended
May 31, 1996 to $7.6 million in the year ended May 31, 1997, primarily due to
the addition of 20 professional staff members and annual performance-based
compensation increases. As a percentage of revenues, these expenses decreased
from 42.8% in the year ended May 31, 1996 to 42.1% in the year ended May 31,
1997.
Other Operating Expenses. Other operating expenses increased $261,000, or
6.9%, from $3.8 million in the year ended May 31, 1996 to $4.0 million in the
year ended May 31, 1997, primarily due to increases in training, occupancy,
advertising, promotional and depreciation expenses. As a percentage of
revenues, these expenses decreased from 24.4% in the year ended May 31, 1996 to
22.6% in the year ended May 31, 1997.
Liquidity and Capital Resources--Follmer
Follmer generated net cash flow from operating activities of
approximately $1.3 million and $2.4 million in the six months ended November
30, 1998 and 1997, respectively. Net cash flow from operating activities was
approximately $1.4 million, $226,000 and $286,000 in the years ended May 31,
1998, 1997 and 1996, respectively. In the six months ended November 30, 1998
and 1997, cash used in investing activities was $589,000 and $457,000,
respectively, primarily for purchases of property and equipment. Net cash used
in investing activities was approximately $927,000, $1.2 million and $958,000
in the years ended May 31, 1998,
39
<PAGE>
1997 and 1996, respectively, primarily for purchases of property and equipment.
Net cash used in financing activities for each of the six months ended November
30, 1998 and 1997 was approximately $1.4 million, consisting principally of net
repayments to shareholders and payment of debt. In the year ended May 31, 1998,
cash provided by financing activities totaled $37,000 and was generated
primarily from advances from shareholders and the issuance of stock net of
proceeds and payments of debt. Net cash provided by financing activities in the
year ended May 31, 1997 totaled $1.2 million and was provided by net advances
from shareholders and payments of debt. In the year ended May 31, 1996, cash
used in financing activities totaled $59,000 and was used primarily for net
repayments to shareholders and payments of long-term debt net of proceeds from
the issuance of long-term debt and stock. At November 30, 1998, Follmer had a
working capital deficit of $507,000.
Results of Operations--Berry Dunn
The following table sets forth certain selected financial data for Berry
Dunn on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
------------------------------------------- --------------------------
1996 1997 1998 1997 1998
------------- ------------- ------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $14,844 100.0% $16,812 100.0% $17,916 100.0% $7,229 100.0% $7,975 100.0%
Expenses:
Member compensation and
related costs......... 5,024 33.8 6,214 37.0 7,113 39.7 1,961 27.1 2,023 25.4
Employee compensation
and related costs..... 6,037 40.7 6,441 38.3 6,318 35.3 3,063 42.4 3,292 41.3
Other operating
expenses.............. 3,727 25.1 4,113 24.4 4,405 24.6 2,177 30.1 2,525 31.6
------- ----- ------- ----- ------- ----- ------ ----- ------ -----
Income from operations.. $ 56 0.4% $ 44 0.3% $ 80 0.4% $ 28 0.4% $ 135 1.7%
======= ===== ======= ===== ======= ===== ====== ===== ====== =====
</TABLE>
Results for the Six Months Ended December 31, 1998 Compared to the Six Months
Ended December 31, 1997--Berry Dunn
Revenues. Revenues increased $746,000 or 10.3%, from $7.2 million in the
six months ended December 31, 1997 to $8.0 million in the six months ended
December 31, 1998, primarily due to a net increase in billings to clients for
recurring services as well as special projects.
Member Compensation and Related Costs. Member compensation and related
costs remained relatively constant at $2.0 million in the six months ended
December 31, 1997 and 1998. As a percentage of revenues, these expenses
decreased from 27.1% in the six months ended December 31, 1997 to 25.4% in the
six months ended December 31, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $229,000, or 7.5%, from $3.1 million in the six months
ended December 31, 1997 to $3.3 million in the six months ended December 31,
1998, primarily due to salary increases. As a percentage of revenues, these
expenses decreased from 42.4% in the six months ended December 31, 1997 to
41.3% in the six months ended December 31, 1998.
Other Operating Expenses. Other operating expenses increased $348,000, or
16.0%, from $2.2 million in the six months ended December 31, 1997 to $2.5
million in the six months ended December 31, 1998, primarily due to increased
business development costs, depreciation on computers, interoffice phone
charges and occupancy costs and expenditures for new tax software. As a
percentage of revenues, these expenses
40
<PAGE>
increased from 30.1% in the six months ended December 31, 1997 to 31.6% in the
six months ended December 31, 1998.
Results for the Year Ended June 30, 1998 Compared to the Year Ended June 30,
1997--Berry Dunn
Revenues. Revenues increased $1.1 million, or 6.6%, from $16.8 million in
the year ended June 30, 1997 to $17.9 million in the year ended June 30, 1998,
primarily due to an increase in the hourly billing rates for information
technology and other consulting projects.
Member Compensation and Related Costs. Member compensation and related
costs increased $899,000, or 14.5%, from $6.2 million in the year ended June
30, 1997 to $7.1 million in the year ended June 30, 1998, primarily due to
increased profits. As a percentage of revenues, these expenses increased from
37.0% in the year ended June 30, 1997 to 39.7% in the year ended June 30, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs decreased $123,000, or 1.9%, from $6.4 million in the year ended
June 30, 1997 to $6.3 million in the year ended June 30, 1998, primarily due to
reduction in administrative staff offset in part by salary increases. As a
percentage of revenues, these expenses decreased from 38.3% in the year ended
June 30, 1997 to 35.3% in the year ended June 31, 1998.
Other Operating Expenses. Other operating expenses increased $292,000, or
7.1%, from $4.1 million in the year ended June 30, 1997 to $4.4 million in the
year ended June 30, 1998, primarily due to an increase in depreciation of
personal computers. As a percentage of revenues, these expenses increased from
24.4% in the year ended June 30, 1997 to 24.6% in the year ended June 30, 1998.
Results for the Year Ended June 30, 1997 Compared to the Year Ended June 30,
1996--Berry Dunn
Revenues. Revenues increased $2.0 million or 13.3%, from $14.8 million in
the year ended June 30, 1998 to $16.8 million in the year ended June 30, 1997,
primarily due to a net increase in billings to clients for recurring services
as well as special projects.
Member Compensation and Related Costs. Member compensation and related
costs increased $1.2 million, or 23.7%, from $5.0 million in the year ended
June 30, 1996 to $6.2 million in the year ended June 30, 1997, primarily due to
increased profits and the admission of new principals. As a percentage of
revenues, these expenses increased from 33.8% in the year ended June 30, 1996
to 37.0% in the year ended June 30, 1997.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $404,000, or 6.7%, from $6.0 million in the year ended
June 30, 1996 to $6.4 million in the year ended June 30, 1997, primarily due to
salary increases. As a percentage of revenues, these expenses decreased from
40.7% in the year ended June 30, 1996 to 38.3% in the year ended June 30, 1997.
Other Operating Expenses. Other operating expenses increased $386,000, or
10.4%, from $3.7 million in the year ended June 30, 1996 to $4.1 million in the
year ended June 30, 1997, primarily due to increases in health insurance,
occupancy, software, insurance and telephone expenses. As a percentage of
revenues, these expenses decreased from 25.1% in the year ended June 30, 1996
to 24.4% in the year ended June 30, 1997.
Liquidity and Capital Resources--Berry Dunn
Berry Dunn used net cash in operating activities of approximately
$497,000 and $444,000 in the six months ended December 31, 1998 and 1997,
respectively. Berry Dunn generated net cash flow from operating activities of
approximately $1.6 million, $1.1 million and $29,000 in the years ended June
30, 1998, 1997 and
41
<PAGE>
1996, respectively. Net cash used in investing activities was approximately
$1.1 million and $734,000 in the six months ended December 31, 1998 and 1997,
respectively, used primarily for the purchases of property and equipment and
business acquisitions. Net cash used in investing activities was approximately
$1.1 million in each of the years ended June 30, 1998 and 1997 and $1.3 million
in the year ended June 30, 1996. Net cash used in financing activities was
approximately $380,000 for the six months ended December 31, 1998, principally
due to payments of debt net of capital contributed by principals and repayments
from related parties. Net cash provided by financing activities was
approximately $111,000 in the six months ended December 31, 1997, representing
repayments from related parties, proceeds from the issuance of debt and capital
contributed by principals. In the years ended June 30, 1998, 1997 and 1996, net
cash provided by financing activities was approximately $337,000, $1.1 million
and $501,000, respectively, principally from repayments from related parties,
proceeds from debt and capital contributed by principals. At December 31, 1998,
Berry Dunn had a net working capital deficit of $2.2 million.
Results of Operations--Urbach
The following table sets forth certain selected financial data for Urbach
on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended October 31, January 31,
---------------------------- --------------------------
1997 1998 1998 1999
------------- ------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $16,012 100.0% $17,085 100.0% $3,678 100.0% $4,346 100.0%
Expenses:
Shareholders
compensation and
related costs......... 4,798 30.0 4,853 28.4 752 20.5 1,221 28.1
Employee compensation
and related costs..... 6,590 41.1 7,147 41.8 1,674 45.5 1,817 41.8
Other operating
expenses.............. 4,317 27.0 4,860 28.5 1,207 32.8 1,137 26.2
------- ----- ------- ----- ------ ----- ------ -----
Income from operations.. $ 307 1.9% $ 225 1.3% $ 45 1.2% $ 171 3.9%
======= ===== ======= ===== ====== ===== ====== =====
</TABLE>
Results for the Three Months Ended January 1, 1999 Compared to the Three Months
Ended January 31, 1998--Urbach
Revenues. Revenues increased $668,000, or 18.16%, from $3.7 million for
the three months ended January 31, 1998 to $4.3 million for the three months
ended January 31, 1999, as a result of revenues derived from an increase in net
realizable billing rates and new client engagements.
Shareholder compensation and related costs. Shareholder compensation and
related costs increased $469,000, or 62.7%, from $752,000 for the three months
ended January 31, 1998 to $1.2 million for the three months ended January 31,
1999, primarily due to an increase in the net operating income available for
shareholder compensation. As a percentage of revenues, these expenses increased
from 20.5% in 1998 to 28.1% in 1999.
Employee compensation and related costs. Employee compensation and
related costs increased $143,000, or 8.5%, from $1.7 million in the three
months ended January 31, 1998 to $1.8 million in the three months ended January
31, 1999, primarily due to an increase in professional and administrative staff
resulting from the Urbach Acquisition as well as performance-based compensation
increases. As a percentage of revenues, these expenses decreased from 45.5% in
the three months ended January 31, 1998 to 41.8% in the three months ended
January 31, 1999.
42
<PAGE>
Other operating expenses. Other operating expenses decreased $70,000, or
5.8%, from $1.2 million in the three months ended January 31, 1998 to $1.1
million in the three months ended January 31, 1999. The decrease was
attributable to a reduction of operating costs as the firm began to realize
certain economies of scale. As a percentage of revenues, these expenses
decreased from 32.8% in the three months ended January 31, 1998 to 26.2% in the
three months ended January 31, 1999.
Results for the Year Ended October 31, 1998 Compared to the Year Ended October
31, 1997--Urbach
Revenues. Revenues increased $1.1 million, or 6.7%, from $16.0 million
for the year ended October 31, 1997 to $17.1 million for the year ended October
31, 1998, primarily due to the Urbach Acquisition which added incremental 1998
revenues of $850,000. Also contributing to the revenue growth was a 10%
increase in billing rates during 1998.
Shareholder compensation and related costs. Shareholder compensation and
related costs remained relatively constant at $4.8 and $4.9 million in the
years ended October 31, 1997 and 1998, respectively. As a percentage of
revenues, these expenses decreased from 30.0% in the year ended October 31,
1997 to 28.4% in the year ended October 31, 1998.
Employee compensation and related costs. Employee compensation and
related costs increased $557,000, or 8.5%, from $6.6 million in the year ended
October 31, 1997 to $7.1 million in the year ended October 31, 1998, primarily
due to an increase in professional and administrative staff resulting from the
Urbach Acquisition as well as performance-based compensation increases. As a
percentage of revenues, these expenses increased slightly from 41.1% in the
year ended October 31, 1997 to 41.8% in the year ended October 31, 1998.
Other operating expenses. Other operating expenses increased $543,000, or
12.6%, from $4.3 million in the year ended October 31, 1997 to $4.9 million in
the year ended October 31, 1998, due in part to increased occupancy costs
resulting from the additional office space acquired as part of the Urbach
Acquisition. As a percentage of revenues, these expenses increased from 27.0%
in the year ended October 31, 1997 to 28.5% in the year ended October 31, 1998.
Liquidity and Capital Resources--Urbach
Urbach generated cash from operating activities of approximately $776,000
and $67,000 in the three months ended January 31, 1999 and 1998, respectively.
Net cash from operating activities was approximately $157,000 and $9,000 in the
years ended October 31, 1998 and 1997, respectively. Net cash used in investing
activities was approximately $619,000 and $201,000 in the three months ended
January 31, 1999 and 1998, respectively, principally from the purchase of
equipment and advances to shareholders. Net cash used in investing activities
was approximately $349,000 and $178,000 in the years ended October 31, 1998 and
1997, respectively, primarily used for purchases of equipment and advances to
shareholders in the year ended October 31, 1998. Net cash used in financing
activities in the three months ended January 31, 1999 was approximately
$321,000, consisting principally of payments on debt. In the three months ended
January 31, 1998, cash provided by financing activities was approximately
$260,000, principally from proceeds from the issuance of debt. Cash provided by
financing activities was approximately $363,000 and $181,000 in the years ended
October 31, 1998 and 1997, respectively. This was generated by borrowings, net
of repayments, and the issuance and payments of subscriptions, net of
retirements, of common stock. At January 31, 1999, Urbach had working capital
of approximately $4.1 million.
43
<PAGE>
Results of Operations--Holthouse
The following table sets forth certain selected financial data for
Holthouse on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998
------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues...................................... $7,720 100.0% $9,446 100.0%
Expenses:
Employee compensation and related costs..... 2,617 33.9 3,089 32.7
Other operating expenses.................... 1,448 18.8 1,578 16.7
------ ----- ------ -----
Income from operations........................ $3,655 47.3% $4,779 50.6%
====== ===== ====== =====
Partners' withdrawals......................... $3,531 45.7% $4,237 44.9%
====== ===== ====== =====
</TABLE>
Results for the Year Ended December 31, 1998 Compared to the Year Ended
December 31, 1997--Holthouse
Revenues. Revenues increased $1.7 million, or 22.4%, from $7.7 million
for the year ended December 31, 1997 to $9.4 million for the year ended
December 31, 1998, primarily due to an increase in billable hours and an
increase in hourly billing rates. The increase in billable hours resulted from
the expansion of services provided to the firm's clients supported by an
increase in professional staff.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $472,000, or 18.0%, from $2.6 million in the year ended
December 31, 1997 to $3.1 million in the year ended December 31, 1998,
primarily due to the addition of professional and administrative staff and
annual performance-based compensation increases. As a percentage of revenues,
these expenses decreased from 33.9% in the year ended December 31, 1997 to
32.7% in the year ended December 31, 1998.
Other Operating Expenses. Other operating expenses increased $130,000, or
9.0%, from $1.4 million in the year ended December 31, 1997 to $1.6 million in
the year ended December 31, 1998, primarily due to higher occupancy costs
resulting from an expansion of the firm's office. As a percentage of revenues,
these expenses decreased from 18.8% in the year ended December 31, 1997 to
16.7% in the year ended December 31, 1998.
Liquidity and Capital Resources--Holthouse
Holthouse generated net cash from operating activities of approximately
$4.5 million in the year ended December 31, 1998 and approximately $3.7 million
in the year ended December 31, 1997. Net cash used in investing activities was
approximately $142,000 and $115,000 in the years ended December 31, 1998 and
1997, respectively, primarily used for purchases of property and equipment.
Cash used in financing activities was approximately $4.2 million and $3.5
million in the years ended December 31, 1998 and 1997, primarily due to
payments of partner capital. At December 31, 1998, Holthouse had working
capital of approximately $3.1 million.
Business and Financial Services
For a description of CenterPoint's business and financial services firms,
see "The Company."
44
<PAGE>
Results of Operations--Driver
The following table sets forth certain selected financial data for Driver
on a historical basis and as a percentage of revenues for the periods
indicated:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended July 31, January 31,
------------------------------------------- -----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions and fees.... $26,939 100.0% $28,170 100.0% $32,886 100.0% $13,474 100.0% $14,891 100.0%
Expenses:
Producer compensation.. 13,074 48.5 12,965 46.0 15,422 46.9 6,553 48.6 6,626 44.5
Employee compensation
and related costs..... 7,261 27.0 7,433 26.4 8,475 25.8 4,011 29.8 5,511 37.0
Other operating
expenses.............. 6,214 23.1 6,548 23.3 6,631 20.1 2,661 19.8 3,754 25.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income (loss) from
operations............. $ 390 1.4% $ 1,224 4.3% $ 2,358 7.2% $ 249 1.8% $(1,000) (6.7)%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Results for the Six Months Ended January 31, 1999 Compared to the Six Months
Ended January 31, 1998-- Driver
Commissions and Fees. Revenues increased $1.4 million, or 10.5%, from
$13.5 million in the six months ended January 31, 1998 to $14.9 million in the
six months ended January 31, 1999, primarily due to revenues derived from two
insurance brokerage firms acquired in 1998.
Producer Compensation. Producer compensation remained constant at $6.6
million in the six months ended January 31, 1998 and 1999. As a percentage of
revenues, these expenses decreased from 48.6% in the six months ended January
31, 1998 to 44.5% in the six months ended January 31, 1999.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $1.5 million, or 37.4%, from $4.0 million in the six
months ended January 31, 1998 to $5.5 million in the six months ended January
31, 1999, primarily due to an increase in the number of employees and annual
performance-based compensation increases. As a percentage of revenues, these
expenses increased from 29.8% in the six months ended January 31, 1998 to 37.0%
in the six months ended January 31, 1999.
Other Operating Expenses. Other operating expenses increased $1.1
million, or 41.1%, from $2.7 million in the six months ended January 31, 1998
to $3.8 million in the six months ended January 31, 1999, primarily due to an
increase in depreciation and amortization resulting from the restatement of
Driver's assets and liabilities at fair value and recognition of goodwill,
which is being amortized over 40 years. The restatement of the assets and
liabilities and recognition of goodwill resulted from a May 1998 management
buyout of the predecessor company. Also contributing to the increase in
operating expenses were professional fees incurred in 1998 pursuing a non-
compete agreement infringement suit against a former employee. As a percentage
of revenues, these expenses increased from 19.8% in the six months ended
January 31, 1998 to 25.2% in the six months ended January 31, 1999.
Results for the Year Ended July 31, 1998 Compared to the Year Ended July 31,
1997--Driver
Commissions and Fees. Commissions and fees increased $4.7 million, or
16.7%, from $28.2 million in the year ended July 31, 1997 to $32.9 million in
the year ended July 31, 1998. $2.6 million of the increase was due to the
addition of ten producers and the acquisition of two insurance brokerage firms
in 1998 which resulted in an increase in the volume of sales transactions. The
balance of the increase was due to an increase in the number of policies
written.
45
<PAGE>
Producer Compensation. Producer compensation increased $2.5 million, or
19.0%, from $13.0 million in the year ended July 31, 1997 to $15.4 million in
the year ended July 31, 1998, primarily due to the addition of ten producers in
1998 and the related compensation expense. As a percentage of revenues, these
expenses increased from 46.0% in the year ended July 31, 1997 to 46.9% in the
year ended July 31, 1998.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $1.0 million, or 14.0%, from $7.4 million in the year
ended July 31, 1997 to $8.5 million in the year ended July 31, 1998. This
increase was due to an increase in the number of employees in response to
continued revenue growth as well as annual performance-based compensation
increases. As a percentage of revenues, these expenses decreased from 26.4% in
the year ended July 31, 1997 to 25.8% in the year ended July 31, 1998.
Other Operating Expenses. Other operating expenses increased $83,000, or
1.3%, from $6.5 million in the year ended July 31, 1997 to $6.6 million in the
year ended July 31, 1998. This increase was primarily due to an increase in
depreciation and amortization resulting from the restatement of Driver's assets
and liabilities at fair value and the recognition of goodwill and the value of
customer lists, which are being amortized over 40 years. The restatement of the
assets and liabilities and the recognition of the goodwill and customer lists
were recorded following a management buyout of the company in May 1998. Also
contributing to the increase in operating expenses were professional fees
incurred in 1998 while pursuing a non-compete agreement infringement suit
against a former employee. As a percentage of revenues, these expenses
decreased from 23.3% in the year ended July 31, 1997 to 20.1% in the year ended
July 31, 1998.
Results for the Year Ended July 31, 1997 Compared to the Year Ended July 31,
1996--Driver
Commissions and Fees. Commissions and fees increased $1.2 million, or
4.6%, from $26.9 million in the year ended July 31, 1996 to $28.2 million in
the year ended July 31, 1997, primarily due to an expansion of Driver's public
entity and specialty refuse lines of business and an increase in the number of
producers.
Producer Compensation. Producer compensation decreased $109,000 or 0.8%,
from $13.1 million in the year ended July 31, 1996 to $13.0 million in the year
ended July 31, 1997, primarily due to a reduction in producer compensation
rates. As a percentage of revenues, these expenses decreased from 48.5% in the
year ended July 31, 1996 to 46.0% in the year ended July 31, 1997.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $172,000 or 2.4%, from $7.3 million in the year ended
July 31, 1996 to $7.4 million in the year ended July 31, 1997, primarily due to
annual performance-based compensation increases. As a percentage of revenues,
these expenses decreased from 27.0% in the year ended July 31, 1996 to 26.4% in
the year ended July 31, 1997.
Other Operating Expenses. Other operating expenses increased $334,000, or
5.4%, from $6.2 million in the year ended July 31, 1996 to $6.5 million in the
year ended July 31, 1997, primarily due to increases in depreciation,
consulting fees and legal expenses. As a percentage of revenues, these expenses
increased from 23.1% in the year ended July 31, 1996 to 23.3% in the year ended
July 31, 1997.
Liquidity and Capital Resources--Driver
Driver generated net cash from operating activities of approximately
$498,000 and $1.1 million in the six months ended January 31, 1999 and 1998,
respectively. Net cash flow from operating activities was approximately $2.5
million, $426,000 and $515,000 in the years ended July 31, 1998, 1997 and 1996,
respectively. Net cash used in investing activities was approximately $3.5
million in the six months ended January 31, 1999, primarily for the purchases
of property and equipment and acquisitions. In the six months ended January 31,
1998, cash used in investing activities was approximately $208,000 and was used
primarily for the purchase of property and equipment. Net cash used in
investing activities was approximately $530,000 in the year ended July 31, 1998
(excluding the purchase of the predecessor company) and $491,000 and
46
<PAGE>
$327,000 in the years ended July 31, 1997 and 1996, and was used primarily for
the purchases of property and equipment. Net cash provided by financing
activities was approximately $3.6 million in the six months ended January 31,
1999, consisting primarily of payments received on stockholder notes and
proceeds from issuance of debt. Net cash used in financing activities in the
six months ended January 31, 1998 was approximately $113,000 and was primarily
due to the repurchase of common stock. In the year ended July 31, 1998, cash
generated by financing activities totaled $16.6 million and was used primarily
to finance the acquisition of the predecessor company. Net cash used in
financing activities in the year ended July 31, 1997 and 1996 totaled $64,000
and $546,000, respectively. At January 31, 1999, Driver had working capital of
$2.3 million.
Results of Operations--IDA
The following table sets forth certain selected financial data for IDA on
a historical basis and as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998
------------ -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues..................................... $9,756 100.0% $10,933 100.0
Expenses:
Employee compensation and related costs.... 6,047 62.0 6,361 58.2
Other operating expenses................... 2,668 27.3 3,050 27.9
------ ----- ------- -----
Income from operations....................... $1,041 10.7% $ 1,522 13.9%
====== ===== ======= =====
</TABLE>
Results for the Year Ended December 31, 1998 Compared to the Year Ended
December 31, 1997--IDA
Revenues. Revenues increased $1.2 million, or 12.1%, from $9.8 million
for the year ended December 31, 1997 to $10.9 million for the year ended
December 31, 1998, primarily as a result of the addition of a major customer in
January 1998 for which IDA provides benefits administration for an approximate
enrollment of 2,300 lives. In addition IDA experienced an increase in COBRA and
PPO administration fees.
Employee Compensation and Related Costs. Employee compensation and
related costs increased $314,000, or 5.2%, from $6.0 million in the year ended
December 31, 1997 to $6.4 million in the year ended December 31, 1998, as a
result of annual performance-based compensation increases, additional staffing
and an increase in overtime compensation. As a percentage of revenues, these
expenses decreased from 62.0% in the year ended December 31, 1997 to 58.2% in
the year ended December 31, 1998.
Other Operating Expenses. Other operating expenses increased $382,000, or
14.3%, from $2.7 million in the year ended December 31, 1997 to $3.1 million in
the year ended December 31, 1998. As a percentage of revenues, these expenses
increased slightly from 27.3% in the year ended December 31, 1997 to 27.9% in
the year ended December 31, 1998.
Liquidity and Capital Resources--IDA
IDA generated net cash from operating activities of approximately $1.8
million and $996,000 in the years ended December 31, 1998 and 1997,
respectively. Net cash used in investing activities was approximately $105,000
and $451,000 in the years ended December 31, 1998 and 1997, respectively, used
for purchases of property and equipment. Cash used in financing activities was
approximately $1.1 million and $730,000 in the years ended December 31, 1998
and 1997, respectively. This was due to payments of dividends of $850,000 and
$980,000 in 1998 and 1997, respectively, as well as payments of debt of
$202,000 in 1998 and net proceeds from the issuance of debt of $350,000 in
1997. At December 31, 1998, IDA had working capital of approximately $1.3
million.
47
<PAGE>
Inflation
Substantially all of CenterPoint's client services agreements and
insurance policies allow, at the time of renewal, for adjustments in the fees
payable thereunder and thus may enable CenterPoint to seek increases in the
amounts charged. Such increases have historically allowed the CenterPoint
Companies to respond to increases in their costs, the most significant
component of which is compensation expense. The substantial majority of these
agreements and policies are for one year or less and the remaining agreements
and policies are for terms of up to two years. The short-term nature of these
agreements and contracts generally reduce the risk to CenterPoint of the
adverse affect of inflation.
Year 2000 Compliance
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have time-sensitive hardware and software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, bill and
collect fees, or engage in similar normal business activities.
Each CenterPoint Company has undertaken, and substantially completed, an
assessment of the potential overall impact of such year 2000 risks on its
business, financial condition and results of operations. CenterPoint believes
that it has satisfactorily assessed its internal risks with respect to its
information technology ("IT") systems and is in the process of identifying its
non-IT systems to assess their year 2000 readiness. Critical IT systems
include, but are not limited to: time and billing, accounts receivable and cash
collections, accounts payable and general ledger, human resources and payroll,
cash management, fixed assets and all IT hardware (such as desktop/laptop
computers and data networking equipment). Critical non-IT systems include
telephone systems, fax machines, copy machines and building security systems.
To date, CenterPoint has not identified any material year 2000 problems with IT
or non-IT systems. Based on an ongoing survey of such year 2000 risks,
CenterPoint currently estimates that the total cost of its year 2000 compliance
and remediation activities will be approximately $400,000 to $500,000, of which
approximately $330,000 had been incurred as of December 31, 1998. However,
CenterPoint cannot guarantee that actual compliance costs will fall within the
range of this estimate, that any future acquisition of a business will not
require substantial year 2000 compliance expenditures or that precautions that
CenterPoint has taken to protect its business from or minimize the impact of
year 2000 issues will be adequate. Any damage to CenterPoint's information
processing system, failure of telecommunications lines or breach of the
security of its computer systems could result in an interruption of operations
or other loss which may not be covered by insurance. Any such event could have
a material adverse effect on CenterPoint's business, financial condition or
results of operations.
Each of the CenterPoint Companies has also undertaken an assessment of
the year 2000 readiness of its significant customers, business partners and
vendors to determine the extent to which CenterPoint's interface systems are
vulnerable to the failure of those third parties to remediate their own year
2000 issues. To date, CenterPoint is not aware of any significant customers,
business partners or vendors with a year 2000 issue that would materially
affect CenterPoint or a CenterPoint Company. However, CenterPoint cannot
guarantee that the systems of other companies, on which CenterPoint's
operations rely, will be timely converted or that failure to timely convert
would not have a material adverse effect on CenterPoint's business, financial
condition or results of operations.
48
<PAGE>
CenterPoint believes that each CenterPoint Company has a program in place
to resolve the year 2000 issue in a timely manner. In addition, CenterPoint has
commenced its contingency planning for critical operational areas that might be
affected by the year 2000 issue if compliance by CenterPoint is delayed. Aside
from catastrophic failure of banks, utilities or governmental agencies,
CenterPoint believes that it could continue its normal business operations.
Unless such catastrophic failure occurs, CenterPoint does not believe that the
year 2000 issue will materially affect its results of operations, liquidity or
capital resources.
Several of the CenterPoint Companies have information technology
consulting practices that have periodically been asked by clients to provide
certain year 2000 consulting services. Although CenterPoint believes, based on
the services it has provided to date, that it has limited exposure to claims
that may be asserted by clients whose systems might be compromised as a result
of a year 2000 related malfunction, there can be no assurance that material
claims will not be made.
49
<PAGE>
INDUSTRY OVERVIEW
The Competitive Environment
According to the U.S. Department of Commerce, firms providing traditional
accounting services--accounting, auditing and bookkeeping--generated
approximately $59.3 billion in revenues in 1997. Such revenues were projected
to grow to $65.8 billion for 1998, with further growth in these revenues
expected at an annual rate of 9% to 10% from 1999 through 2002, assuming
moderate U.S. economic growth.
According to a report published by the AICPA in 1996, the distribution of
AICPA members employed by accounting firms was as shown below.
<TABLE>
<CAPTION>
Total
Number of AICPA Average
Number of Members in Number of AICPA
Firm Size* Firms Firms Members per Firm
------------------------------ --------- --------------- ----------------
<S> <C> <C> <C>
The Big Five
Big Five.................... 5 20,928 4,185
Regional Firms
Next six largest firms...... 6 3,516 586
Firms with more than 100
members.................... 16 2,237 139
Firms with 50 to 99
members.................... 50 3,265 65
Firms with 25 to 49
members.................... 215 6,948 32
Local Firms
Firms with 10 to 24
members.................... 1,218 17,003 13
Firms with 5 to 9 members... 2,937 18,767 6
Tax and Bookkeeping Firms
Firms with 2 to 4 members... 11,586 29,547 2
1 member.................... 30,406 30,406 1
------ -------
46,439 132,617
====== =======
</TABLE>
--------
*The italicized headings reflect CenterPoint's categorizations.
Based on the pro forma combined revenues of CenterPoint's eight
professional services firms for the fiscal year ended December 31, 1998,
CenterPoint would have been ranked No. 13 in the Top 100 had the CenterPoint
Companies been combined throughout such period.
CenterPoint categorizes the competitive environment in the following
manner:
. The Big Five. This segment consists of Arthur Andersen, Deloitte &
Touche, Ernst & Young, KPMG and PricewaterhouseCoopers. These
multinational firms provide diversified professional, business and
financial services and products primarily to publicly-held
corporations and large private companies, focusing mainly on
Fortune 1000 companies.
. Regional Firms. These firms provide services primarily to
privately-held, middle-market clients. Firms in this segment
continue to expand service and product offerings beyond
traditional accounting.
. Local Firms. This segment is comprised of firms whose clients are
primarily small, local businesses. Many of these firms have also
begun to offer non-traditional services and products, typically on
a niche basis.
. Tax and Bookkeeping Firms. These businesses generally provide
basic bookkeeping, tax return preparation and traditional
accounting services to small businesses and individuals.
50
<PAGE>
This segment is extremely fragmented, consisting of approximately
42,000 firms and/or sole practitioners. This category also
includes storefront operations of franchisors.
CenterPoint believes that its primary competitors in the accounting
industry are the regional firms, although it also competes for certain clients
and in certain markets with the Big Five, other national firms and larger
local firms. Although a trend toward consolidation among accounting firms is
emerging, the regional and local segments are still highly fragmented, with no
single firm accounting for more than 1% of the industry's total revenues.
CenterPoint believes that the fragmented nature of these segments presents
opportunities for future acquisitions.
Industry Opportunities
CenterPoint believes that certain industry trends have created a
significant opportunity for a company that provides high quality, diversified
professional, business and financial services and products to middle-market
clients. CenterPoint intends to capitalize on this opportunity by utilizing
its professional services firms as focal points for delivering its high
quality services and products. Industry trends include the following:
Client-Driven Expansion of Services Provided by Trusted Advisors
CenterPoint believes that market forces are redefining the lines that
once separated the delivery of traditional accounting services from other
professional, business and financial services and products. Management
believes that this has occurred primarily as a consequence of the willingness
of clients to use outside service providers to meet their increasingly complex
needs.
According to U.S. Department of Commerce analysts, the accounting
profession is facing greater demand for value-added consulting services.
Revenues of the Top 100 increased 24% to $31.6 billion in 1998 from $25.5
billion in 1997. Consulting services represented the biggest factor in this
growth, outpacing growth in revenues from tax services and from accounting and
auditing services. Clients whose engagements have traditionally been limited
to accounting and tax services are increasingly looking to their accounting
professionals to provide--or refer them to--additional services such as
management consulting, insurance brokerage, employee benefits design and
administration and information technology consulting. CenterPoint believes
that clients are increasingly seeking a single provider of multiple outsourced
services and that accounting professionals are uniquely situated to respond to
these demands because of their position as trusted advisors.
CenterPoint believes that it is well positioned to capitalize on this
expansion of clients' demands as it offers a network of trusted advisors as
well as expertise in business and financial services and products, including
insurance brokerage and employee benefits design and administration services.
These industries are also experiencing consolidation and other changes,
including the convergence of insurance brokerage services with the
distribution of other business and financial services and products.
CenterPoint believes that these trends present additional opportunities for
future acquisitions.
Increasingly Complex Needs of Middle-Market Clients
CenterPoint believes that the Big Five are increasingly focused on the
needs of their largest, publicly-held corporate clients. According to a 1998
survey by Public Accounting Report, of the approximately 14,000 publicly-held
clients served by the top 100 accounting firms in that survey, approximately
90% were being served by the Big Five. The Big Five have developed globally
diversified business, financial and consulting services in response to the
complex needs of these large clients. CenterPoint believes that the needs of
middle-market clients are increasingly complex, creating opportunities for
large, regional accounting firms to expand their service and product offerings
beyond traditional accounting. Revenues of the Top 100 other than the Big
51
<PAGE>
Five grew to $4.9 billion in 1998, an increase of 23% from 1997. Consulting
revenues were the most significant contributor to this growth.
Changing Regulatory Environment
As demand for non-traditional services from accounting firms has
increased, state regulations are evolving to keep pace with this new industry
dynamic. Accordingly, as more states allow CPAs to diversify into new business
lines, there is increasing opportunity for and competitive pressure on
accounting firms to enter into these businesses. CenterPoint believes that many
local and regional accounting firms do not have access to capital, possess the
expertise necessary or offer the diversified services required to compete
effectively in this evolving market environment. See "Business--Regulation--
Accounting Profession."
52
<PAGE>
BUSINESS
Introduction
CenterPoint is a leading provider of diversified professional, business
and financial services and products to a broad spectrum of middle-market
clients. CenterPoint offers a full range of consulting, accounting, tax and
related professional services, as well as complementary business and financial
services and products, including insurance brokerage and employee benefits
design and administration. These services and products are provided by more
than 2100 employees who serve clients located throughout the United States.
CenterPoint principally focuses on middle-market clients that are privately-
held companies, governmental and not-for-profit entities and affluent
individuals and families.
CenterPoint was created to provide comprehensive and effective solutions
to the increasingly complex needs of middle-market clients through an
integrated network of expert advisors. CenterPoint has assembled a group of
founding companies with distinct expert capabilities, reputations for quality,
effective leadership and strong "trusted advisor" relationships with clients.
The CenterPoint Companies are well-established in their markets, having been in
business an average of 27 years. On a combined historical basis, revenues of
the CenterPoint Companies increased from approximately $144.8 million in fiscal
1996 to approximately $201.0 million in fiscal 1998, representing a compound
annual growth rate of 17.8%.
Business Strategy
CenterPoint's goal is to provide middle-market clients with personalized,
local service backed by the depth, resources and expert capabilities of a
diversified, national firm. Key elements of CenterPoint's client-focused
business strategy include:
. Develop and Deliver Diverse, High Quality Services and Products.
CenterPoint currently offers a broad range of high quality
professional, business and financial services and products. In
order to continue providing clients with the most effective
solutions, CenterPoint intends to (1) enhance its current service
and product offerings by capitalizing on its existing expertise
and (2) develop new services and products through innovation and
selected acquisitions and alliances.
. Create National Practices by Leveraging Existing Expertise.
Several of the CenterPoint Companies have developed strong
national or regional reputations with respect to a particular
industry, service or product. For example, CenterPoint has
significant advisory expertise in the real estate, manufacturing,
health care and construction industries and in specialized
services including litigation consulting services and information
technology consulting services. CenterPoint also has expertise in
insurance brokerage and employee benefits administration services.
CenterPoint intends to utilize its national practices as:
. Clearinghouses of knowledge that provide industry, service or
product expertise to all CenterPoint business units.
. Resources for the development of "best practices" that will be
used for training, continuing education and practice
development throughout CenterPoint.
. Platforms for identifying, integrating and managing future
acquisitions. See "--Acquisitions and Alliances."
. Expand Presence in Key Geographic Markets. Capitalizing on the
strong reputations of the CenterPoint Companies, CenterPoint
intends to build upon its local presence through targeted
acquisitions. At the same time, CenterPoint intends to take
advantage of its geographic diversity in order to promote the
CenterPoint brand nationally by adopting a marketing strategy that
highlights CenterPoint's expanded functional capabilities and
market presence.
53
<PAGE>
. Employ an Integrated Management and Systems Infrastructure.
CenterPoint recognizes the importance of integrating and
coordinating its various business units and systems and has hired
a chief integration officer to spearhead this process.
CenterPoint's executive management team will work closely with the
CenterPoint Companies to ensure the proper implementation and
integration of CenterPoint's business and growth strategies.
Internal Growth Strategy
Key elements of CenterPoint's growth strategy include:
. Leveraging Its Trusted Advisor Relationships. CenterPoint believes
that its trusted advisor relationships present an opportunity to
provide additional services and products to clients. CenterPoint
intends to leverage these relationships by utilizing its
professional services firms as the principal focal points for
delivering CenterPoint's diversified services and products. By
capitalizing on its client relationships as well as its reputation
for quality, each CenterPoint Company can help navigate its
clients to the expertise, services and products that provide the
best solutions to their business and personal needs.
. Instituting Incentives for Client and Knowledge Sharing.
CenterPoint intends to implement incentives to motivate the
sharing of client relationships and expertise throughout
CenterPoint. In addition, CenterPoint utilizes stock ownership to
ensure that the objectives of its various operating businesses are
aligned with those of CenterPoint.
. Capturing Benefits of Scale. CenterPoint believes that it can
achieve certain benefits as a result of its size. Its combined
client base, number of professionals and numerous industry and
product specialties provide significant opportunities to create
national practices. CenterPoint's broad geographic coverage will
enable it to serve clients as they expand into new markets. In
addition, CenterPoint believes that it can reduce costs through
greater purchasing power in key expense areas and by eliminating
or consolidating certain duplicative administrative functions.
Acquisitions and Alliances
CenterPoint believes that the emergence of a diversified professional,
business and financial services industry will create significant acquisition
opportunities. CenterPoint believes that many regional and local firms are
facing pressure to join larger enterprises that provide the resources and
breadth of service and product offerings necessary to fulfill client needs and
to compete successfully in this evolving market. As a result, CenterPoint
expects that numerous firms will explore alternatives to independent ownership.
CenterPoint intends generally to focus on acquisition targets that have a
strong financial history, offer effective management and entrepreneurial
leadership and have strong client relationships. In particular, CenterPoint
intends to further its strategy by targeting acquisition and alliance
candidates that:
. provide a professional services practice with a national or
regional reputation;
. expand CenterPoint's offerings and expertise to build and enhance
national practices;
. function as a distribution point by providing a local presence in
new geographic markets; or
. expand the presence of CenterPoint's existing platforms in their
geographic markets.
CenterPoint believes that the opportunity to be acquired by CenterPoint
will be attractive to many local and regional firms. CenterPoint will offer
owners of such firms the benefits of its business strategy, including:
. the opportunity to better serve their clients' needs;
. significant opportunities to enhance current and future
profitability;
54
<PAGE>
. access to new technology and operational processes; and
. enhanced financial resources and visibility as a public company.
As a result of discussions with many companies during its formation
process, CenterPoint has developed a significant list of potential acquisition
candidates. In addition, each CenterPoint Company has memberships in industry
associations and relationships with other firms that will be used to further
expand the list of potential acquisition candidates. These candidates currently
include accounting firms, information technology consulting firms, financial
service firms, business consulting firms, insurance brokerage firms, third
party administrators and professional staffing firms.
As consideration for future acquisitions, CenterPoint intends to use
various combinations of cash, debt and common stock. Other than in connection
with the Mergers, CenterPoint is not currently a party to any agreements
regarding any acquisitions.
In addition to acquisitions, CenterPoint will actively pursue alliances
with other providers who offer quality services and products that are not
directly offered by CenterPoint. For example:
. CenterPoint is the only U.S. member of Urbach Hacker Young
International Limited, an international strategic alliance of 42
international firms from 36 countries. Through this alliance,
CenterPoint can assist clients in achieving their business and
financial objectives in the international marketplace.
. CenterPoint has an alliance with Omnitech Corporate Solutions,
Inc., an information technology consulting firm located in the
Northeast. Through this non-exclusive arrangement, Omnitech has
been identified as one of CenterPoint's preferred providers of
network services, internet design and implementation, software
development, sales force automation and other information
technology services to CenterPoint's clients.
Services and Products Offered by CenterPoint
Professional Services
Consulting Services. CenterPoint offers a broad array of business
consulting and other advisory services. The number and variety of these
services reflect the breadth of the expertise of CenterPoint's professionals as
well as the diversity of its clients. Such services include management
consulting, profit improvement consulting, international business advisory
services, succession and estate planning, business valuations, personal
financial planning and mergers and acquisitions consulting. Many of these
services are designed for and offered to clients in particular industries.
Accounting Services. Accounting services provided by CenterPoint include
budgets, business plan preparation and related cash flow projections, internal
control and operational review, insolvency services, receivables and cash flow
management and due diligence review and controllership activities. These
services are often tailored and packaged to serve clients' particular needs.
Under non-exclusive services agreements, CenterPoint provides professional
personnel to perform field work and other accounting services for the Attest
Firms. See "Certain Transactions--The Mergers--Ancillary Agreements with
Professional Services Firms and their Affiliates-- Services Agreements."
Tax Services. CenterPoint provides clients with a complete range of tax
services. Specifically, CenterPoint assists its clients in planning their
overall business structures and operations to minimize federal, state, local
and foreign taxes. Tax services also include tax return preparation, tax
compliance services and business, individual and estate planning services. A
significant portion of the tax services provided by CenterPoint are
nondiscretionary, compliance driven services.
55
<PAGE>
Specialized Services. CenterPoint has developed significant practices in
certain specialized services offered to clients across industry lines.
CenterPoint intends to build national practices based on these specialized
services, which currently include the following:
. Litigation Consulting Services. CenterPoint has a strong practice
in providing litigation consulting services, which include
analyzing and providing expert opinions and testimony on complex
financial disputes.
. Information Technology Consulting Services. Several of
CenterPoint's professional services firms have developed
information technology consulting practices that advise clients
with respect to strategic systems planning, application systems
selection and contract negotiation, network design and
installation, software implementation project management and
systems security reviews.
Industry Expertise. CenterPoint has considerable expertise with respect
to certain industries, enabling it to tailor its consulting, accounting and tax
services to industry-specific business, regulatory or competitive environments.
CenterPoint intends to build national practices based on these areas of
expertise, which include:
. Real Estate. CenterPoint has a nationally recognized practice
serving the unique needs of the real estate industry. Its real
estate services include structuring of real estate investments,
financings and transactions, investment analysis, tax consulting,
due diligence, and complex real estate syndication and operational
real estate projections.
. Manufacturing. CenterPoint has developed expertise in advising its
manufacturing clients with respect to implementing inventory
management systems, advanced activity-based cost and pricing
systems, and quality management systems required for industry
recognized certifications such as ISO and QS 9000 registration.
. Health Care. CenterPoint has developed a significant practice in
the health care industry. The services provided include physician
practice valuation, compliance and consulting services to
hospitals and nursing homes, billing code and rate audits,
medicare and medicaid reporting and auditing, medical records
management and patient billing systems.
. Construction. CenterPoint has developed a significant client base
among, and as a result, special industry expertise with respect
to, contractors and their related industries. Services offered to
these clients include estimating and job cost management systems,
contract auditing, bonding capacity analysis, capital equipment
financing options and other special projects.
Business and Financial Services
Insurance Brokerage Services. CenterPoint offers its clients access to a
wide array of insurance products, including property and casualty insurance,
workers compensation coverage, surety bonds and health and life insurance
programs. With industry-wide carrier access, CenterPoint brokers property and
casualty insurance to companies with diverse insurance requirements, ranging
from comprehensive business packages for small, local businesses to large
portfolios for international corporations. CenterPoint offers programs for a
wide variety of specialty risk groups. CenterPoint also provides brokerage,
benefits administration and other services with respect to life and health
insurance products for its clients' employee benefits programs. In addition,
CenterPoint has established relations with most major bonding companies,
enabling it to provide its clients a wide variety of surety bond products.
CenterPoint also provides related financial services ranging from sales and
support of 401(k) products, comprehensive risk management planning to analysis
for retirement plans, executive benefits, and financial and estate planning for
business owners and executives.
CenterPoint's insurance services businesses do not currently engage in
risk-bearing activities. CenterPoint may in the future enter this segment of
the industry, through acquisition or otherwise, by
56
<PAGE>
underwriting certain products in which CenterPoint has particular expertise
through its brokerage activities. CenterPoint has no current plans to engage in
risk-bearing activities. Expansion into this area would involve certain risks.
See "Risk Factors--CenterPoint may expand its insurance business to include
risk-bearing activities."
Employee Benefits Design and Administration. CenterPoint offers
comprehensive employee benefits design and third party administration services.
Such services include consulting with clients to design self-funded employee
benefits plans. Self-funded plans allow an employer to structure a traditional
indemnity plan or to take advantage of preferred provider or managed care
options. Once the plan is designed, CenterPoint procures quotes for insurance
from stop loss carriers. Once the insurance is placed, CenterPoint provides
administration services for the client's plan, which include claims processing
and analysis of plan performance. CenterPoint provides administration services
for a wide variety of plans, including medical, dental, group life, group
disability, COBRA and Section 125 plans. Clients in this area range from small
businesses to large corporate accounts, as well as units of state and local
governments. Revenues from these services primarily consist of per employee
fees for administrative services and commissions from stop loss carriers.
CenterPoint believes that the systems, programming and data processing
infrastructure in place for these services has the capacity to handle
significantly greater number of plans and covered employees without significant
incremental investment.
Employee Incentives
The performance of CenterPoint's employees is critically important to its
success. Senior employees, many of whom were the owners or principals of the
CenterPoint Companies before the Mergers, must continue to generate and
maintain business as they have historically. In addition, because of their
prominence and client relationships, it is anticipated that they will play an
important role in generating cross-selling opportunities and attracting
acquisition candidates.
The principal objectives of the compensation structure include:
. Motivating employees to increase CenterPoint's overall
profitability through new business, cross-selling and the
integration of services, products and offices.
. Creating incentives that motivate each business unit to increase
its profitability.
. Retaining and motivating top performing employees and attracting
additional employees and acquisition candidates by providing
competitive compensation.
Professional Services
CenterPoint's senior professionals are taking significant cuts in cash
compensation--in some cases more than 50%--in order to join CenterPoint.
However, CenterPoint believes that these individuals will continue to be highly
motivated to perform through (1) significant equity in CenterPoint as a result
of the Mergers, (2) the opportunity to gain additional equity through the
issuance of stock options and (3) the opportunity to increase their cash
compensation by sharing in the growth of their firm's earnings as discussed
below. Professionals who are on the "partner track" will be eligible to acquire
stock in CenterPoint via options and upon "making partner" will have the
ability to share in potential increases in their firm's earnings. See
"Management--Employee Incentive Compensation Plan." The current compensation of
such employees will not be directly affected by the Mergers.
Compensation Structure. The senior professionals of each CenterPoint
professional services firm will enter into firm-specific incentive compensation
agreements with CenterPoint. The incentive compensation agreements provide that
a significant portion of the Subsidiary Operating Earnings of each professional
services firm will be allocated to such firm to compensate its senior
professionals (the "participants").
57
<PAGE>
On an annual basis, CenterPoint will retain a specified fixed dollar
amount of earnings before any compensation is paid to a firm's participants.
The amount retained by CenterPoint is referred to as "CenterPoint Base
Earnings." The amount of CenterPoint Base Earnings has been negotiated with
each professional services firm and varies from firm to firm. Agreed-upon
CenterPoint Base Earnings range from % to % of the adjusted earnings of the
respective professional services firms in the four calendar quarters ending
March 31, 1999 ("Initial Operating Earnings"). The amount allocated to each
professional services firm for compensation of participants is referred to as
"Subsidiary Base Compensation." Subsidiary Base Compensation equals Initial
Operating Earnings less CenterPoint Base Earnings.
In addition to Subsidiary Base Compensation, each professional services
firm has agreed to a 40%/60% split of any amount by which Subsidiary Operating
Earnings exceed Initial Operating Earnings, with 40% to be retained by
CenterPoint and 60% to be allocated to participants (the "Bonus"). For purposes
of the incentive compensation agreements, "Subsidiary Operating Earnings"
generally means a firm's earnings before taxes, interest expense not related to
capital leases, certain depreciation expense, amortization of Merger
transaction costs, extraordinary items, allocations of corporate overhead,
expenses incurred in connection with acquisitions completed prior to the
Mergers and the base salary, bonus and indirect costs of any participant.
Indirect costs are all costs paid by the professional services firm with
respect to a participant's employment, such as social security and medicare
taxes, medical, life and disability insurance, costs associated with employee
benefit plans and fringe and personal benefits. CenterPoint believes that this
Bonus provides participants with a powerful, direct incentive to continue the
growth of their Subsidiary Operating Earnings. If Subsidiary Operating Earnings
for any year are less than Initial Operating Earnings, Subsidiary Base
Compensation will be reduced by the amount of the shortfall.
This compensation structure is designed to provide CenterPoint with a
baseline level of earnings, before corporate expenses, equal to the CenterPoint
Base Earnings. Participants can only enjoy increased compensation if they
improve their firm's profitability, which in turn will result in additional
profits, before corporate expenses, for CenterPoint.
Administration. Each professional services firm will administer the
incentive compensation agreement for its participants including the allocation
among the participants of Subsidiary Base Compensation and Bonus, subject to
review and oversight by CenterPoint's management. In addition, for corporate
cash flow management reasons, participants will only be paid a portion of their
compensation throughout the year--in an amount equal to a specified percentage
(85% in 1999 and 2000 and 75% thereafter) of their total compensation in the
prior year. The balance of the Subsidiary Base Compensation plus Bonus, if any,
will be paid on or about April 1 of the next fiscal year. If the amount paid to
a firm's participants during the year exceeds the Subsidiary Base Compensation
and Bonus, if any, to be paid for such year, CenterPoint will reduce future
compensation to recover the deficiency.
A single incentive compensation agreement may be amended with the
agreement of CenterPoint, the professional services firm and a specified
percentage of such firm's participants which may vary among the firms.
"Blanket" amendments to all of the incentive compensation agreements will
require, for three years following the offering, the approval of CenterPoint
and representatives of all of the original professional services firms.
Thereafter, any such amendments will require the approval of CenterPoint and
representatives of 75% of the original professional services firms.
The incentive compensation agreements have been designed to accommodate
and support CenterPoint's growth and acquisition strategies. They provide
mechanisms for adding new participants by allowing the firms to continue to
"make partners" of their successful professionals. The incentive compensation
agreements can also be modified to accommodate the acquisitions of additional
professional services practices, as well as individual lateral hires. With the
approval of CenterPoint, a promoted professional, the former owners of an
acquired firm or a lateral hire may be added as participants, and the
58
<PAGE>
incentive compensation agreements will appropriately adjust the definitions of
Subsidiary Base Compensation and other relevant terms to appropriately reflect
their promotion/addition to the firm's revenues and expenses.
Other Incentives. The incentive compensation agreements contain
additional provisions that are designed to foster CenterPoint's profit growth
objectives. For example, CenterPoint intends to establish incentives for cross-
selling and cross-servicing of clients and integration of services among all of
CenterPoint's operating units. These incentives will generally be included in
the Subsidiary Operating Earnings and flow through the compensation mechanisms
established under the incentive compensation agreements. Moreover,
participants' benefits and perquisites are included in the determination of the
Subsidiary Operating Earnings, subjecting these expenses to the self-
disciplining features of the incentive compensation agreement structure.
Business and Financial Services
At the closing of the Mergers, CenterPoint will enter into employment
agreements with key employees in its business and financial services group.
Generally, such agreements will provide for competitive base salaries and
performance bonuses based upon such factors as (1) the financial performance of
CenterPoint and the particular business unit, (2) the achievement of certain
operating objectives and (3) the achievement of personal performance goals.
These key employees are receiving CenterPoint common stock in the Mergers. They
and other key employees may also be targeted with CenterPoint stock options.
CenterPoint also intends to create incentive programs to motivate its business
and financial services group employees to build platforms and pursue and
integrate acquisitions.
Technology and Infrastructure
Each of the CenterPoint Companies maintains its information systems on a
local area or wide area network architecture that supports both local and
remote processing. The software portfolio used by the professional services
firms includes leading programs for electronic workpapers, tax preparation,
time reporting and billing and financial control and management reporting, as
well as CD-based software for tax and accounting research. In its insurance
brokerage business, CenterPoint maintains a wide area network using 14 servers
located at the six offices that house the insurance operations. In providing
employee benefit administration services, CenterPoint uses a fully automated,
high volume claims adjudication system that allows it to integrate claims
administration, group billing and administration, and accounting.
CenterPoint recognizes the importance of technology in facilitating the
management of its geographically diverse operations and the sharing of
knowledge and professional resources. Accordingly, over time CenterPoint
intends to implement an integrated communications and management control
system. During the initial phase of the implementation, CenterPoint will focus
on developing a communications network using virtual private network facilities
to establish enterprise wide communications capability. This network will serve
as a "bridge," carrying financial and operating data from the individual
CenterPoint Company systems into a corporate data warehouse. This system will
also standardize the different data elements into a form that can be used to
manage, analyze, and report information on a consistent basis. CenterPoint also
intends to deploy workgroup technology that facilitates communication and
collaboration across its workforce. In the next phase, CenterPoint plans to
design and implement centralized financial control systems. During the final
phase, CenterPoint intends to design and implement centralized operational
control systems.
CenterPoint believes that its middle-market clients will increasingly
utilize technology to access the diverse expertise that they are seeking from
their outside advisors. Consistent with its client-focused strategy,
CenterPoint has created a web site that will link clients to each of the
CenterPoint Companies, and it intends to develop and provide additional on-line
connections to a network of technical expertise and consulting capabilities.
59
<PAGE>
Competition
Competitors in the accounting industry range from the Big Five to the
storefront tax firms or sole proprietors. CenterPoint competes in this industry
primarily with regional firms, which provide services primarily to privately
held, middle-market clients, although it also competes for certain clients and
in certain markets with the Big Five and larger local firms. CenterPoint's
insurance brokerage business faces competition from numerous firms, primarily
regional and local insurance brokers, which actively compete with CenterPoint
for customers and insurance carriers. CenterPoint's employee benefit plan
business faces competition from fully insured plan providers and, to a lesser
extent, from other third party administrators. See "Risk Factors--CenterPoint
operates in a competitive market."
The markets in which CenterPoint competes are fragmented and competitive.
This has resulted in the consolidation of many companies in the professional,
business and financial services industries and strategic alliances across
industry lines. As a result, consolidators have emerged. These firms, like
CenterPoint, offer diversified professional services and business and financial
services.
CenterPoint believes that the principal competitive factors in this
market are the strength of client relationships, quality and breadth of service
and product offerings and professional reputation. CenterPoint believes that it
will be able to compete effectively based on its (1) broad range of high
quality services and products, (2) expertise and reputation for quality, (3)
diversity of geographic coverage, (4) operational economies of scale and (5)
integrated operating structure.
Regulation
Accounting Profession. Each state has adopted an accountancy law which
establishes procedures for licensing CPAs and grants licensed CPAs a monopoly
in providing attest services. The state accountancy laws also contain rules and
regulations covering a variety of issues including the permissible forms and
ownership of accounting firms, the use of the CPA designation, the payment and
receipt of referral fees, the use of contingent fee arrangements, engaging in
incompatible occupations and the maintenance of independence. These rules and
regulations differ from state to state.
Each state has adopted laws limiting the practice of accountancy to
licensed CPAs and accounting firms that are wholly-owned by CPAs. Most states
define the "practice of accountancy" to include issuing reports on historical
and prospective financial statements, including audits, compilations and
reviews; issuing certain other reports intended to be relied upon by third
parties; giving advice and opinions regarding accounting principles and
auditing standards; and performing other attest services, e.g., reports on
compliance with laws and contractual obligations and the adequacy of internal
accounting controls. Many state laws restricting the practice of accountancy to
licensed CPAs and firms incorporate the "holding out" concept under which a
person could be deemed to be practicing accountancy simply by proclaiming
expertise in accounting principles or auditing standards or by using the "CPA"
designation on business cards, letterhead or promotional materials while
providing non-attest services. Under this concept, many state regulators have
taken the position that the rendering of other financial services by CPAs while
holding themselves out as CPAs constitutes the practice of accountancy and
therefore is subject to their regulations.
In recent years, accounting firms have sought to expand the scope of
their services, often placing them in competition with investment advisors,
management consultants, actuaries, business brokers and others who are not
required to operate under the constraints imposed upon CPAs. This expansion of
services has also prompted many accounting firms to employ non-CPA
professionals to assist them in providing these new services. As a result, the
accounting profession and its regulators have been engaged in discussions over
the past ten years as to ways in which the accountancy laws might be changed so
that accounting firms can effectively compete in providing these additional
services without compromising the objectivity and integrity of CPAs. These
discussions have resulted in the UAA, which was proposed in 1997 by the AICPA
and the
60
<PAGE>
NASBA. Certain provisions of the UAA have been proposed in various state
legislatures. If and where the UAA is adopted as proposed, state accountancy
laws would become more hospitable to an expanded scope of services and more
uniform. Among the principal changes that the UAA, as proposed, would effect
are the following: (1) permitting non-CPA employees to own up to 49% of the
equity interests in an accounting firm, (2) employing a more narrow definition
of services that can only be provided by licensed CPAs than is currently
included in many state statutes, (3) permitting CPA firms to accept commissions
and contingent fees with respect to clients for whom they do not render reports
on financial statements and (4) facilitating CPAs licensed in one state to
practice in other states.
CenterPoint is adopting the "separate practice format" under which it
will only acquire those aspects of the practices of the professional services
firms which do not fall within the monopoly granted to CPAs under the
accountancy laws of the various states, i.e., the non-attest services. Attest
services will continue to be provided by the CPAs who currently own the
professional services firms via the licensed Attest Firms in which CenterPoint
will have no ownership interest. Pursuant to non-exclusive services agreements,
CenterPoint will provide, for a fee, professional and other personnel,
equipment, office space and business and administration services necessary for
the operation of the Attest Firms. See "Risk Factors--Regulation of the
accounting profession could have a material adverse effect on CenterPoint's
business" and "Certain Transactions--The Mergers--Ancillary Agreements with
Professional Services Firms and their Affiliates--Separate Practice Agreements"
and "--Services and Agreements."
The laws of most states prohibit CPAs from paying or receiving referral
fees with respect to their clients or using fee arrangements that are
contingent upon the outcome of their engagements or the results imparted to
their clients. Certain of these restrictions would be relaxed with the passage
of the UAA, as currently proposed. CenterPoint will comply with these
restrictions in implementing its compensation arrangements.
In addition to regulating the form of practice structures and limiting
fee arrangements, state accountancy laws also include requirements designed to
maintain the objectivity and independence of CPAs while performing attest
services. These independence standards prohibit (a) CPAs, (b) employees of
accounting firms and (c) members of the immediate families of such CPAs and
employees from (x) having certain ownership and other financial relationships
with clients for which the CPA or accounting firm performs attest services and
(y) participating in the management, operations or accounting functions of such
clients. Independence can also be impaired as a result of litigation or other
disputes with the client, common investments with the client or indemnity
agreements relating to attest services. Under recent interpretations, as
applied to CenterPoint's proposed operations, these standards will extend to
CenterPoint's executives, board members and controlling stockholders as well as
CPA employees who own the Attest Firms. In addition to the independence
standards, CPAs who provide litigation consulting services on behalf of
CenterPoint or an Attest Firm will be subject to rules designed to avoid
conflicts of interest, e.g., simultaneous representation of, or other
relationships with, adverse parties. CenterPoint intends to comply with
applicable requirements related to independence and avoidance of conflicts of
interest.
Existing state laws and regulations are subject to evolving
interpretations and enforcement policies and practices and present certain
risks to CenterPoint's operations. CenterPoint cannot ensure that (1) a review
by state judicial or regulatory authorities would not result in a determination
that CenterPoint, its CPA employees or the Attest Firms have violated one or
more provisions of state law, regulations or codes of ethics, (2) the laws,
regulations or codes of ethics of any state, or other elements of the
regulatory environment, will not change so as to materially restrict
CenterPoint's operations or (3) the UAA will be adopted, in its currently
proposed form or any form, by the legislature of any state. CenterPoint's
ability to continue to operate in, or expand its operations in or to, certain
states may depend on its flexibility to modify its operational structure in
response to changes in laws, regulations, ethical codes or their interpretation
or enforcement, which flexibility may, in certain circumstances, be constrained
by provisions of the services agreements with the Attest Firms. Limitations on
CenterPoint's ability to use the separate practice structure in order to comply
with applicable
61
<PAGE>
law could have a material adverse effect on its relationship with the Attest
Firms, their clients and/or CenterPoint's business, financial condition or
results of operations. See "Risk Factors--Regulation of the accounting
profession could have a material adverse effect on CenterPoint's business."
Insurance Business. CenterPoint or its insurance employees must be
licensed to act as agents by state regulatory authorities in the states in
which it provides insurance services. Regulations and licensing laws vary in
individual states and are often complex. The applicable licensing laws and
regulations in all states are subject to amendment or reinterpretation by state
regulatory authorities, and such authorities are vested in most cases with
broad discretion as to the granting, revocation, suspension and renewal of
licenses. See "Risk Factors--Regulation of the insurance industry may adversely
affect CenterPoint's insurance brokerage business."
Employee Welfare Plans. At the federal level, ERISA regulates many
aspects of CenterPoint's services relating to employee welfare plans, including
the duties and responsibilities of persons who provide services or sell
products to such plans. The states also regulate many aspects of employee
benefit plans, principally through the regulation of insurance products
(including stop-loss insurance products sold to self-insured plans). States
also directly regulate third party administrators by requiring licensing and
compliance with state regulations in each state in which they do business. See
"Risk Factors--Regulation of employee welfare plans may impact CenterPoint."
Sales and Marketing
CenterPoint's marketing efforts are primarily relationship based.
Historically, the CenterPoint Companies have acquired new clients and marketed
their services by pursuing client referrals, responding to requests for
engagement proposals, attending trade and industry conferences and using
targeted direct marketing efforts. Many of the professional services firms
generate business through their employees' membership in trade organizations
and civic and community organizations, while other professional services firms
partner with smaller accounting firms who do not have the technological
expertise or resources to take on certain engagements. Generally, the
professional services firms obtain a significant portion of client referrals by
focusing their marketing efforts on existing clients. In addition, some of the
professional services firms have dedicated sales and marketing personnel.
CenterPoint sells its insurance services and products through
approximately 114 producers who are full-time employees. These producers are
assigned to, and become experts with respect to, a variety of specialty risk
groups for which CenterPoint designs specific programs.
In its employee benefits design and administration, CenterPoint's sales
and marketing occurs primarily through referrals and its reputation. In
addition, CenterPoint employs two full time salespeople who market its services
and products.
A key component of CenterPoint's marketing strategy is to introduce its
various services and products to its existing client base and to cross-service
its existing clients through multiple CenterPoint operating units with
complementary service or product expertise. To encourage cross-selling and
servicing of clients, CenterPoint intends to establish incentives among its
operating units. In addition, management intends to pursue marketing,
advertising and training programs to establish national identification for the
CenterPoint name, while preserving and enhancing the value of the established
regional and local names of its various operating units.
Employees
As of February 28, 1999, CenterPoint had a total of 2,165 employees, of
which 1,620 were employed by CenterPoint's professional services firms, 542
were employed by CenterPoint's business and financial
62
<PAGE>
services firms and three were members of CenterPoint's corporate management. Of
the 1,620 people employed in connection with professional services, more than
600 are licensed CPAs. Of the 412 people employed in connection with insurance
brokerage services, 114 are producers. Of the 130 people employed in connection
with third party administration services, two are in sales and 74 are in claims
administration. None of these employees is represented by a labor union.
CenterPoint believes that the CenterPoint Companies' relations with their
employees are good.
Facilities
CenterPoint currently operates 38 leased facilities. The chart below sets
forth certain information regarding such facilities.
<TABLE>
<CAPTION>
Approximate
Location of Facility Company and Operations Conducted Square Feet
---------------------- --------------------------------------- -----------
<S> <C> <C>
Albany, NY............ Urbach--Professional Services 42,000
Atlanta, GA........... Reznick--Professional Services 20,000
Baltimore, MD......... Reznick--Professional Services 33,200
Bangor, ME............ Berry Dunn--Professional Services 26,000
Bellevue, WA.......... Reppond--Insurance Brokerage 25,300
Bethesda, MD.......... Reznick--Professional Services 68,500
Boston, MA............ Reznick--Professional Services 11,000
Brooklyn Park, MN..... Reppond--Insurance Brokerage 350
Charlotte, NC......... Reznick--Professional Services 6,700
Escondido, CA......... Driver--Insurance Brokerage 8,700
Florissant, MO........ Grace--Professional Services 3,000
Fresno, CA............ Driver--Insurance Brokerage 2,600
Glens Falls, NY....... Urbach--Professional Services 4,000
Hamden, CT............ Simione--Professional Services 800
Hartford, CT.......... Simione--Professional Services 225
Houston, TX........... Mann Frankfort--Professional Services 41,600
Lebanon, NH........... Berry Dunn--Professional Services 5,000
Long Beach, CA........ Holthouse--Professional Services 3,200
Los Angeles, CA....... Urbach--Professional Services 5,200
Los Angeles, CA....... Holthouse--Professional Services 10,300
Manchester, NH........ Berry Dunn--Professional Services 7,900
New Haven, CT......... Simione--Professional Services 14,100
New York, NY.......... Urbach--Professional Services 9,600
Newport Beach, CA..... Driver--Insurance Brokerage 11,900
Oakland, NJ........... IDA--Benefits Design and Administration 17,900
Ontario, CA........... Driver--Insurance Brokerage 12,600
Portland, ME.......... Berry Dunn--Professional Services 21,800
Poughkeepsie, NY...... Urbach--Professional Services 1,300
Sacramento, CA........ Driver--Insurance Brokerage 2,300
St. Louis, MO......... Grace--Professional Services 28,900
San Diego, CA......... Driver--Insurance Brokerage 39,400
San Francisco, CA..... Driver--Insurance Brokerage 3,600
San Rafael, CA........ Driver--Insurance Brokerage 3,200
Southfield, MI........ Follmer--Professional Services 35,300
Sterling Heights, MI.. Follmer--Professional Services 19,400
Washington, DC........ Urbach--Professional Services 3,100
Westlake Village, CA.. Holthouse--Professional Services 3,000
Yakima, WA............ Reppond--Insurance Brokerage 1,700
</TABLE>
63
<PAGE>
Litigation
CenterPoint is not involved in any legal proceedings which it believes
are material to its business, financial condition or results of operations.
64
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table lists CenterPoint's directors and executive officers,
as well as those persons who will become directors and executive officers upon
completion of the offering. In addition to the persons named as directors
below, stockholders of CenterPoint intend to elect two additional independent
directors at or prior to the completion of the offering. CenterPoint is in the
process of selecting these two individuals.
<TABLE>
<CAPTION>
Name Age Position
--------------------- --- ----------------------------------------------
<C> <C> <S>
Robert C. Basten..... 39 Chairman of the board, president and chief
executive officer
Thomas W. Corbett.... 52 Executive vice president, president and chief
operating officer of business and financial
services and a director
DeAnn L. Brunts...... 37 Executive vice president, chief financial
officer and a director
Rondol E. Eagle...... 52 Executive vice president and chief integration
officer
Dennis W. Bikun...... 42 Vice president, chief accounting officer and
treasurer
David Reznick........ 61 Director
Richard H. Stein..... 46 Director
Anthony P. Frabotta.. 48 Director
Charles H. Roscoe.... 54 Director
Steven N. Fischer.... 55 Director
Robert F. Gallo...... 53 Director
Wayne J. Grace....... 58 Director
Philip J. Holthouse.. 40 Director
Anthony P. Scillia... 41 Director
Scott H. Lang........ 52 Director
Louis C. Fornetti.... 47 Director
William J. Lynch..... 56 Director
</TABLE>
Robert C. Basten joined CenterPoint in November 1998 as chairman of the
board, president and chief executive officer. Prior to joining CenterPoint, Mr.
Basten was a senior executive at American Express Company and most recently
served as president and chief executive officer of American Express Tax and
Business Services ("TBS"), a subsidiary of American Express. As head of TBS,
Mr. Basten led the firm's development and emergence as one of the fastest-
growing and most innovative, professional and business advisory services firms
in the country. TBS was ranked by Accounting Today as the 11th largest
accounting firm in the United States based on fiscal 1997 revenues. Mr. Basten
has extensive experience in leading the development of new businesses both
inside and outside of American Express. From 1984 to April 1998, he held
leadership roles at American Express in technology, financial services
marketing and brokerage.
Thomas W. Corbett will become a director and the president and chief
operating officer of CenterPoint's business and financial services group upon
the closing of the offering. Mr. Corbett joined Driver in 1977 and assumed the
responsibilities of chief executive officer and chairman of the board of Driver
in 1994. Prior to joining Driver, Mr. Corbett was associated with Allendale
Insurance and spent three years as a loss prevention engineer at Factory Mutual
Engineering Association.
DeAnn L. Brunts joined CenterPoint in March 1999 as executive vice
president, chief financial officer and a director. From 1985 until joining
CenterPoint, Ms. Brunts was associated with PricewaterhouseCoopers LLP, where
she became a partner in 1996. Ms. Brunts' experience includes strategic
planning, mergers and acquisitions consulting and auditing services for public
and private companies. Ms. Brunts received an MBA in 1992 from the Wharton
School.
65
<PAGE>
Rondol E. Eagle joined CenterPoint in January 1999 as executive vice
president and chief integration officer. From 1990 until joining CenterPoint,
Mr. Eagle was a partner and managing director of management consulting services
at Olive LLP, one of the country's 20 largest accounting and consulting firms.
Mr. Eagle is the chairman of the board of the Information Technology Alliance,
one of the oldest and largest trade associations in the accounting profession.
In 1997 and 1998, Mr. Eagle was named in the Accounting Profession's 100 Most
Influential People List as compiled by Accounting Today magazine.
Dennis W. Bikun joined CenterPoint in February 1999 as a vice president,
chief accounting officer and treasurer. Prior to joining CenterPoint, Mr. Bikun
was a senior executive and most recently a vice president and chief financial
officer of Associated Estates Realty Corporation, a publicly-held real estate
investment trust which owned over 120 multifamily apartment properties located
throughout the United States.
David Reznick will become a director of CenterPoint upon the closing of
the offering. Mr. Reznick has been a principal of Reznick since its founding in
1977. Prior to joining Reznick, he was an audit partner of Alexander Grant &
Company (the predecessor to Grant Thornton LLP).
Richard H. Stein will become a director of CenterPoint upon the closing
of the offering. Mr. Stein joined Mann Frankfort in 1977 and is a member of its
management committee. Prior to joining Mann Frankfort, Mr. Stein was associated
with Ernst & Ernst from 1974 to 1977.
Anthony P. Frabotta will become a director of CenterPoint upon the
closing of the offering. Mr. Frabotta joined Follmer in 1974 and has served as
chairman of Follmer's executive committee since 1997.
Charles H. Roscoe will become a director of CenterPoint upon the closing
of the offering. Mr. Roscoe joined Berry Dunn in 1979 and became its president
and managing principal in 1990. Prior to joining Berry Dunn, Mr. Roscoe was
associated with Coopers & Lybrand for 12 years.
Steven N. Fischer will become a director of CenterPoint upon the closing
of the offering. Mr. Fischer has served as president and chief executive
officer of Urbach since 1985. Mr. Fischer is the chairman of Urbach Hacker
Young International Limited and also serves as a trustee for Adelphi
University.
Robert F. Gallo will become a director of CenterPoint upon the closing of
the offering. Mr. Gallo has served as chief executive officer of IDA since
1991. Prior to joining IDA, Mr. Gallo practiced law at a firm which he founded.
Wayne J. Grace will become a director of CenterPoint upon the closing of
the offering. Mr. Grace has been a partner of Grace since its founding in 1983
and served as its managing partner from 1983 to 1998. Prior to establishing
Grace, he was a partner in the accounting firm, Fox & Company from 1969 to
1983, and served as the managing partner of its St. Louis office from 1979 to
1983. Mr. Grace served as a director of Petrolite Corporation from 1995 until
its merger with Baker Hughes Incorporated in 1997.
Philip J. Holthouse will become a director of CenterPoint upon the
closing of the offering. Mr. Holthouse has been a partner of Holthouse since
its founding in 1991. Mr. Holthouse is on the faculty of the University of
Southern California, Masters of Business Taxation Program and a member of the
board of advisors for the Leventhal School of Accounting.
Anthony P. Scillia will become a director of CenterPoint upon the closing
of the offering. Mr. Scillia co-founded Simione in 1996. From 1991 to 1996, Mr.
Scillia was a principal with the accounting firm of Scillia & Larrow, P.C. Mr.
Scillia was associated with McGladrey & Pullen from 1988 to 1991 and Ernst &
Young from 1979 to 1988. Mr. Scillia is a member of the Construction Financing
Committee of the Associated General Contractors of America and the National
Construction Industry Conference Committee of the AICPA.
66
<PAGE>
Scott H. Lang became a director of CenterPoint in November 1998. Since
1996, Mr. Lang has been managing member of BGL Management Company, LLC, which
is the managing member of BGL Capital Partners, LLC, a merchant banking firm
which originates and finances industry consolidations. Mr. Lang is also a
managing director and principal of Brown, Gibbons, Lang & Company, L.P., an
investment banking firm, a position he has held since 1995. From 1985 to 1995,
he served as executive vice president and managing director of investment
banking at Rodman & Renshaw, Inc., a Chicago-based securities firm. Prior to
1985, Mr. Lang practiced law in Washington, D.C., where he was a partner at
Arnold & Porter. Mr. Lang is a director of Compass International Services
Corporation.
Louis C. Fornetti will become a director of CenterPoint upon the closing
of the offering. From 1995 to 1997, Mr. Fornetti was the executive vice
president and chief financial officer of Interra Financial Inc. (now known as
Dain Rauscher, Inc.), a regional brokerage firm, and president and chief
executive officer of Interra Clearing Services. From 1985 to 1995, Mr. Fornetti
held various management positions, including senior vice president and chief
financial officer, with American Express Financial Advisors (formerly IDS), a
subsidiary of American Express Corporation and a manufacturer and distributor
of financial products.
William J. Lynch will become a director of CenterPoint upon the closing
of the offering. Since 1996, Mr. Lynch has been a managing director of Capstone
Partners, LLC, a special situations venture capital firm. From October 1989 to
March 1996, Mr. Lynch was a partner in the law firm Morgan, Lewis & Bockius
LLP. Mr. Lynch is a director of Coach USA, Inc.
Board of Directors
After completion of the Mergers, the board of directors of CenterPoint
will consist of seventeen directors, each serving for a term of one year. At
each annual meeting of stockholders, all directors will be elected by the
holders of the common stock. The current stockholders of CenterPoint have
entered into an agreement with respect to nominating and electing directors
through the fifth annual meeting following the offering. See "Description of
Capital Stock--Stockholders' Agreement." CenterPoint expects that the board of
directors will establish an executive committee, an audit committee, a
compensation committee, and such other committees as the board may determine.
The board expects to appoint the members of each committee at the first meeting
of the board of directors following the completion of the offering.
Director Compensation
Directors who are also employees of CenterPoint or one of its
subsidiaries do not receive compensation for serving as directors. Each
director who is not an employee of CenterPoint or one of its subsidiaries will
receive an annual stipend of $15,000, a fee of $2,000 for attendance at each
board of directors meeting and $1,000 for each committee meeting (unless held
on the same day as a board of directors meeting). Directors are also reimbursed
for out-of-pocket expenses incurred in attending board of directors meetings or
committee meetings or otherwise incurred in their capacity as directors. Upon
completion of the offering, each non-employee director will be granted options
to purchase 15,000 shares of common stock at an exercise price equal to the
initial public offering price. See "--Employee Incentive Compensation Plan."
Executive Compensation; Employment Agreements; Incentive Compensation
Agreements; Covenants-Not-To-Compete
CenterPoint was incorporated in November 1998 and has conducted no
operations and generated no revenues to date. BGL Capital has entered into
agreements with Robert C. Basten, DeAnn L. Brunts, Rondol E. Eagle and Dennis
W. Bikun pursuant to which these individuals provide consulting services to BGL
Capital in connection with the Mergers and the offering. As compensation for
his consulting services, Mr. Basten is receiving annual consulting fees of
$225,000 in addition to a signing bonus of $210,000. Ms. Brunts is receiving
annual consulting fees of $175,000 and a signing bonus of $100,000. Mr. Eagle
is receiving annual consulting fees of $190,000. Mr. Bikun is receiving annual
consulting fees of $175,000. These arrangements
67
<PAGE>
will remain in effect until the earliest of (1) the closing of the offering,
(2) the execution of an employment agreement with CenterPoint or (3)
termination of the consulting agreement. Amounts paid by BGL Capital under the
consulting agreements, together with interest at 8% per annum, will be
reimbursed by CenterPoint from the offering proceeds.
Prior to the closing of the offering, Mr. Basten, Ms. Brunts, Mr. Eagle
and Mr. Bikun will enter into three-year employment agreements with CenterPoint
providing for annual base salaries of $250,000, $225,000, $190,000 and
$175,000, respectively. Each employment agreement will also provide for an
annual bonus of up to 100% of the employee's base salary under CenterPoint's
incentive compensation policies for executive employees based upon performance
targets. Such performance targets and the amount of a bonus, if any, will be
determined by the compensation committee of the board of directors. Unless
terminated or not renewed by CenterPoint or the executive, the term of each
employment agreement will continue after the initial term on a year-to-year
basis on the same terms and conditions existing at the time of renewal. Each
employment agreement will contain a covenant not to compete with CenterPoint
for a period ending on the second anniversary of the date of termination of
employment. Under this covenant, the executive cannot: (1) engage in any
business in competition with CenterPoint anywhere in the United States; (2)
solicit for employment a CenterPoint managerial employee unless that person has
been out of the employ of CenterPoint for at least 180 days; (3) solicit or
sell any competitive products or services to any person or entity which is, or
has been within one year prior to the date of termination, a customer of
CenterPoint, or that was known by the employee to have been actively solicited
by CenterPoint during such period; or (4) call upon a prospective acquisition
candidate which was approached or analyzed by CenterPoint within the one year
prior to the termination date, for the purpose of acquiring the entity. These
provisions may be enforced by injunctions or restraining orders and will be
construed in accordance with the changing activities, businesses and locations
of CenterPoint.
Each of these employment agreements will provide that, if CenterPoint
terminates employment without cause or if the employee terminates for "good
reason," CenterPoint will pay severance compensation to the executive.
Severance compensation consists of (1) the executive's then current salary plus
the bonus paid for the last fiscal year for a period of two years following the
date of termination and (2) bonus for the current year prorated through the
termination date. If termination of employment occurs prior to a change in
control of CenterPoint, payment is due in equal installments on CenterPoint's
normal payroll payment dates during the severance period. If the termination
occurs after a change in control of CenterPoint, severance will be paid in a
lump sum within 30 days of the termination date.
Cause is defined under the agreements to include (1) a final, non-
appealable conviction of a felony or a crime involving moral turpitude, (2)
employee's willful failure to comply with reasonable directions of the board of
directors following notice and opportunity to cure, (3) the determination by
the board of directors that employee has committed fraud, willful dishonesty,
material misconduct or misappropriation of CenterPoint property in the course
of employment, (4) material breach by employee of the non-competition
provisions in the agreement and (5) material breach by employee of other
provisions of the agreement following notice and opportunity to cure. So long
as the executive does not engage in conduct giving rise to the right to
terminate employment for cause, "good reason" includes (a) the failure to elect
the executive to the office previously held, the removal of the executive from
his or her position or the assignment to the executive of any additional duties
or responsibilities or a reduction in executive's duties or responsibilities
which, in either case, are inconsistent with those customarily associated with
such position, (b) a relocation by CenterPoint of the executive's place of
employment beyond a specified area, (c) a material decrease in the executive's
salary or bonus opportunities, (d) material breach by CenterPoint of the
agreement following notice and opportunity to cure and (e) subject to certain
exceptions, termination by CenterPoint of any employee benefit plan in which
the executive participates.
Each of these employment agreements will provide that if, within 30
months from the closing of the offering, the employee voluntarily terminates
his or her employment other than (a) for "good reason" or (b) under
circumstances approved by the board of directors with respect to the chief
executive officer, or approved
68
<PAGE>
by the chief executive officer with respect to other members of management,
restricted shares held by the employee at the date of termination will remain
subject to the Extended Lockup. See "Shares Eligible for Future Sale." Mr.
Basten's employment agreement will further provide that if within 30 months
after the closing of the offering, he voluntarily terminates his employment
other than (a) for "good reason" or (b) under circumstances approved by the
board of directors, he will be required to pay liquidated damages to
CenterPoint within 30 days of his termination. The amount of liquidated damages
will be equal to three times the sum of his base salary and maximum bonus, in
each case as in effect at the time of termination.
Upon the closing of the offering, CenterPoint and Driver will enter into
a five-year employment agreement with Thomas W. Corbett pursuant to which he
will serve as chairman of the board and chief executive officer of Driver and
as president and chief operating officer of CenterPoint's business and
financial services group. Mr. Corbett's annual base salary under this agreement
will be $350,000. Mr. Corbett is also entitled to (a) an annual bonus of up to
$250,000 and (b) additional commission-related compensation of $400,000 per
year. Unless terminated or not renewed by Driver or Mr. Corbett, the term of
the employment agreement will continue after the initial term on a year-to-year
basis on the same terms and conditions existing at the time of renewal. If
Driver terminates Mr. Corbett's employment without cause, or if he voluntarily
terminates his employment within 90 days after a "constructive termination," he
will be entitled to severance benefits equal to $800,000 times the greater of
the number of years left in the employment period or three years. Constructive
termination under Mr. Corbett's employment agreement includes: (1) demotion
from the position of chairman of the board or chief executive officer of
Driver; (2) a reduction in salary, additional compensation, bonus opportunity
or expense allowance; and (3) a change in control of Driver other than pursuant
to a change in control of CenterPoint. In addition, the employment agreements
of Mr. Corbett, Jerold D. Hall and Gregory P. Zimmer contain reciprocal
provisions under which the triggering of Driver's obligations to pay severance
to any of such individuals will constitute a constructive termination of the
other two employees. Messrs. Hall and Zimmer are executive officers of Driver.
Driver's obligation to pay severance to Messrs. Hall and Zimmer under their
employment agreements would be triggered by circumstances similar to those
provided for in Mr. Corbett's agreement. Severance benefits for each of Messrs.
Hall and Zimmer would equal their salary and bonus, as then in effect, for a
three year period. Messrs. Hall and Zimmer's annual base salaries will be
$200,000 and $250,000, respectively, and each of them will be entitled to
receive an annual bonus in an amount up to 100% of his base salary.
Under Mr. Corbett's employment agreement, Messrs. Corbett, Hall and
Zimmer have a limited right of first refusal with respect to a sale of
CenterPoint's insurance business. Should CenterPoint decide to accept an offer
for the sale of its insurance business to a company engaged in the commercial
insurance business, Messrs. Corbett, Hall and Zimmer will have the right, for
45 days after notice, to purchase CenterPoint's insurance business on the same
terms. The agreement will contain a covenant not to compete whereby, until the
second anniversary of the date of termination of employment (other than by the
expiration of Mr. Corbett's employment at the end of the employment period
without renewal of the agreement), Mr. Corbett is prohibited from (1) engaging
in any business in direct competition with Driver or CenterPoint's business and
financial services group in any territory where Driver or CenterPoint conducts
such business, (2) soliciting for employment a CenterPoint employee, (3)
soliciting or selling any competitive products or services to any person or
entity which is, or has been within one year prior to the date of termination,
a customer of Driver or of CenterPoint's business and financial services group,
or that was known by Mr. Corbett to have been actively solicited by CenterPoint
during such period, (4) calling upon a prospective acquisition candidate which
was approached or analyzed by CenterPoint within one year prior to the
termination date, for the purpose of acquiring the entity, or (5) disclosing
the identity of any agents or brokers that produce or finance insurance through
CenterPoint or any current or prospective policyholder or premium finance
customer for any reason or purpose.
Upon the closing of the offering, IDA will enter into a four-year
employment agreement with Robert F. Gallo, pursuant to which he will serve as
IDA's chief executive officer at an annual base salary of $200,000. This
agreement also provides for an annual bonus of up to 50% of base salary for
1999 and up to 100% of base salary thereafter. Unless terminated or not renewed
by IDA or Mr. Gallo, the agreement will continue after the initial term on a
year-to-year basis on the same terms and conditions existing at the time of
renewal. In the
69
<PAGE>
event IDA terminates Mr. Gallo's employment without cause or Mr. Gallo
voluntarily terminates his employment within 60 days after a "constructive
termination," Mr. Gallo will be entitled to severance compensation which
includes his base salary and prorated bonus for the remainder of his employment
term. Constructive termination under Mr. Gallo's agreement includes (1)
demotion to a position substantially below that of IDA's chief executive
officer or the assignment of duties and responsibilities that are not
commensurate with such position, (2) substantial reduction in base salary, (3)
relocation of the place of employment outside the New Jersey area or (4) a
change in control of IDA other than pursuant to a change in control of
CenterPoint. This employment agreement will contain a covenant not to compete
whereby, until the second anniversary of the date of termination of employment,
Mr. Gallo is prohibited from (1) engaging in any business in direct competition
with IDA within any business market where IDA conducts business, (2) soliciting
or selling any competitive products or services to any person or entity which
is, or has been within one year prior to the date of termination, a customer of
IDA or that was known by Mr. Gallo to have been actively solicited by IDA
during such period, (3) enticing an employee of IDA away from IDA, or (4)
calling upon a prospective acquisition candidate which was approached or
analyzed by CenterPoint within one year prior to the termination date, for the
purpose of acquiring the entity.
Upon the closing of the Mergers, each professional services firm and its
former owners and principals will enter into an incentive compensation
agreement with CenterPoint, which agreement will provide for, among other
things, the payment of base compensation and bonus compensation to those
individuals. For a more detailed description of the incentive compensation
agreements, see "Business--Employee Incentives--Professional Services." The
incentive compensation agreements include nonsolicitation covenants by each
employee which are effective until the second anniversary of the date of
termination of employment. Generally, during this period, if the employee
directly or indirectly provides services to any person or entity who was a
client of CenterPoint at or within one year of the employee's termination, the
employee must pay to CenterPoint 125% of the greater of (1) the average annual
fees charged by CenterPoint to such client during the prior three-year period
and (2) the fees charged by CenterPoint to such client during the most recent
12-month period. In addition, if during the restricted period the employee
entices an employee of CenterPoint away from CenterPoint, the employee must pay
to his or her firm 50% of the greater of the solicited person's total cash
compensation for (1) the 12 months preceding such person's termination of
employment or (2) if known, the 12 months following such termination. The
incentive compensation agreements also prohibit employees, until the second
anniversary of their employment termination date, from calling upon prospective
acquisition candidates which were approached or analyzed by CenterPoint within
six months preceding the employment termination date.
Upon completion of the offering, the executive officers of CenterPoint
will be granted options to purchase common stock at an exercise price equal to
the initial public offering price. See "--Employee Incentive Compensation
Plan."
Employee Incentive Compensation Plan
Prior to the offering, the board of directors and stockholders will adopt
CenterPoint's employee incentive compensation plan. The purpose of this plan is
to provide directors, officers, employees, consultants and independent
contractors with additional incentives by increasing their ownership interests
in CenterPoint. Individual awards under this plan may take the form of (1)
incentive stock options or non-qualified stock options, (2) stock appreciation
rights, (3) restricted or deferred stock, (4) dividend equivalents, and (5)
cash awards or other awards not otherwise provided for, the value of which is
based in whole or in part upon the value of the common stock. CenterPoint's
compensation committee will administer the plan and generally select the
individuals who will receive awards and determine the terms and conditions of
those awards.
CenterPoint has reserved shares of common stock for use in
connection with the plan. However, the number of shares available for use under
the plan at any given time will not exceed 15% of the total number of shares of
common stock outstanding at that time. Shares attributable to awards which have
expired, terminated, canceled or forfeited are available for issuance for
future awards.
70
<PAGE>
The plan will remain in effect until terminated by the board of
directors. The plan may be amended by the board of directors without the
consent of the stockholders, except that any amendment, although effective when
made, will be subject to stockholder approval if required by law or by the
rules of any national securities exchange or over-the-counter market on which
the common stock may then be listed or quoted.
Upon completion of the offering, non-qualified stock options to purchase
a total of shares of common stock will be granted. Of this
amount, options to purchase shares of common stock will be granted
to management of CenterPoint, including options to Mr. Basten,
options to Ms. Brunts, options to Mr. Eagle and
options to Mr. Bikun. An aggregate of options will
be granted to the employees of the CenterPoint Companies. The grants will be
effective as of the date of the offering and each option will have an exercise
price equal to the initial public offering price. These options will vest over
periods ranging from three to five years and will expire 10 years from the date
of grant or earlier if there is a termination of employment. Subject to
policies established by CenterPoint's compensation committee, each CenterPoint
Company will have discretion to determine the allocation of options among its
employees.
The plan also provides for (1) the automatic grant to each non-employee
director serving at the closing of the offering of an option to purchase 15,000
shares of common stock, and (2) after the offering, the automatic grant to each
non-employee director of an option to purchase 15,000 shares when the director
is initially elected. In addition, the plan provides for an automatic annual
grant to each non-employee director of an option to purchase 7,500 shares at
each annual meeting of stockholders following the offering. However, if the
first annual meeting of stockholders following a non-employee director's
initial election is within three months of the date of the election or
appointment, the non-employee director will not be granted an option at the
annual meeting. These options will have an exercise price per share equal to
the fair market value of a share at the date of grant, will expire at the
earlier of 10 years from the date of grant or one year after termination of
service as a director, and will be immediately exercisable upon grant.
CenterPoint's compensation committee has discretion to fashion
performance awards for eligible participants with incentives the committee
deems appropriate. It permits the issuance of awards in cash or common stock
based on the satisfaction of specific performance criteria. The performance
goals for any year may be based on a broad array of performance measures as
selected by the compensation committee, including financial results on a
consolidated basis or an operating unit basis depending on the responsibility
of the employee, as well as achievement of personal performance goals. The
maximum value of these awards for any employee in any year is 100% of the
employee's salary. In addition, the compensation committee has discretion to
pay, cancel or provide for the substitution or assumption of these bonus
awards.
Employee Stock Purchase Plan
Prior to the closing of the offering, CenterPoint will adopt the employee
stock purchase plan, under which a total of shares of common stock
will be reserved for issuance. The stock purchase plan, which is intended to
qualify under Section 423 of the Internal Revenue Code of 1986, permits
eligible employees of CenterPoint to purchase common stock through payroll
deductions with all such deductions credited to an account under the stock
purchase plan. Payroll deductions may not exceed $25,000 for all purchase
periods ending within any year.
The stock purchase plan operates on a calendar year basis. To be eligible
to participate, an employee must file all requisite forms prior to a specified
due date known as the "grant date." Generally the first day of each year will
be the grant date and the last day of each year will be an exercise date. The
determination of the grant dates and the exercise dates is within the
discretion of the committee appointed to administer the stock purchase plan. On
each exercise date, payroll deductions credited to participants' accounts will
be automatically applied to the purchase price of common stock at a price per
share equal to eighty-five percent (85%) of the fair market value of the common
stock on the grant date or the exercise date, whichever is less. Employees
71
<PAGE>
may end their participation in the stock purchase plan at any time during an
offering period, and their payroll deductions up to the date of termination
will be refunded. Participation ends automatically upon termination of
employment with CenterPoint.
Employees are eligible to participate in the stock purchase plan if they
are customarily employed by CenterPoint or a designated subsidiary for at least
20 hours per week and for more than six months in any calendar year. No
employee will be able to purchase common stock under the stock purchase plan if
such person, immediately after the purchase, would own stock possessing 5% or
more of the total shares of common stock outstanding or 5% of the value of all
outstanding shares of all classes of stock of CenterPoint.
72
<PAGE>
CERTAIN TRANSACTIONS
Organization of CenterPoint
CenterPoint was incorporated in November 1998 and is currently a 71.4%
subsidiary of CPA Holdings, LLC ("CPA Holdings"), a Delaware limited liability
company. CPA Holdings is owned by a group of investors that includes BGL
Capital, Reznick, Fedder & Silverman, C.P.A.s, L.L.C. ("Reznick LLC"), MFSL
Investments, L.P. ("MFSL Investments") and the "CCP Group," which served as one
of CenterPoint's sponsors and consists of Steven P. Colmar, Benjamin H.
Crawford, William G. Parkhouse, William J. Lynch, Leonard A. Potter and James
G. Lynch. William J. Lynch will become a director of CenterPoint upon the
closing of the offering. CenterPoint has agreed to (a) issue warrants to the
CCP Group to purchase a total of 100,000 shares of common stock at the initial
public offering price and (b) reimburse PSG Funding Corp., a company affiliated
with the CCP Group, for offering expenses totaling $345,000.
Scott H. Lang, a director of CenterPoint, is a managing member of BGL
Management Company, LLC, which is the managing member of BGL Capital which is,
in turn, the managing member of CPA Holdings. Reznick LLC was created by
certain owners of Reznick to hold its co-sponsor interest in CenterPoint. David
Reznick, who will become a director of CenterPoint upon the closing of the
offering, is a member of Reznick LLC. MFSL Investments was created by Mann
Frankfort's shareholders to hold its co-sponsor interest. Richard H. Stein, who
will become a director of CenterPoint upon the closing of the offering, is a
managing member of the general partner of MFSL Investments.
Following the offering, CPA Holdings intends to distribute its shares of
CenterPoint common stock to its members who, in turn, may further distribute
such shares to their respective members or partners. Notwithstanding such
distributions, these shares will remain subject to transfer restrictions
imposed by the underwriters and the stockholders' agreement. See "Shares
Eligible for Future Sale."
The remaining 28.6% of CenterPoint's outstanding shares of common stock
are held by Mr. Basten, Ms. Brunts, Mr. Eagle, Mr. Bikun, Jonathan R. Rutenberg
and Reznick LLC.
Following the approximate -for-one stock split to be effected prior
to the completion of the offering, the shares of common stock initially
issued by CenterPoint to its initial investors and management will total
shares.
73
<PAGE>
The Mergers
The aggregate purchase price to be paid by CenterPoint in the Mergers
consists of approximately $90.0 million in cash and 12,121,258 shares of common
stock, plus certain contingent payments as described below. The following table
sets forth the purchase price to be paid to the stockholders of each of the
CenterPoint Companies.
<TABLE>
<CAPTION>
Shares of
Company Cash common stock
------------------------------------------------------ ------- ------------
(Dollars in
thousands)
<S> <C> <C>
Reznick............................................... $16,899 1,810,553
Driver(1)............................................. 500 2,944,445
Mann Frankfort........................................ 16,503 1,768,200
Follmer............................................... 13,600 1,457,143
Berry Dunn............................................ 6,821 931,357
Urbach................................................ 9,190 1,023,943
IDA(2)................................................ 8,154 873,669
Grace................................................. 2,840 304,286
Holthouse............................................. 5,603 600,343
Reppond(3)............................................ -- 447,428
Simione............................................... 3,808 408,000
------- ----------
Total............................................. $83,918 12,569,367
======= ==========
</TABLE>
- --------
(1) In addition to the consideration set forth in the table, the former
stockholders of Driver will be entitled to receive a contingent cash
payment equal to 6.75 times the amount, if any, by which Driver's adjusted
earnings before interest, taxes, depreciation and amortization ("EBITDA")
for 2000 exceed $11.6 million.
(2) In addition to the consideration set forth in the table, the former
stockholders of IDA will be entitled to a contingent cash payment equal to
the lesser of (a) $3,414,500 and (b) 6.75 times the amount, if any, by
which IDA's adjusted EBITDA for 2000 exceeds $3,290,000.
(3) In addition to the consideration set forth in the table, the former
stockholders of Reppond will be entitled to receive a contingent cash
payment which will be calculated with respect to a specified twelve month
period ending in 2003 and based on the amount by which the adjusted EBITDA
of CenterPoint's employee benefits business (excluding IDA) exceeds
specified thresholds. One of Reppond's stockholders will also be entitled
to receive contingent cash payments with respect to each of the first five
twelve month periods following the closing of the Mergers. Such payments
will be based on the amount by which Reppond's adjusted EBITDA for the
applicable period exceeds specified thresholds.
The price to be paid for the CenterPoint Companies was determined through
arm's-length negotiations between CenterPoint and representatives of each
CenterPoint Company. The factors considered by the parties in determining the
consideration to be paid include, among others, the amount of CenterPoint Base
Earnings for each professional services firm, and the historical operating
results, net worth, level and type of indebtedness and future prospects of each
CenterPoint Company. Each CenterPoint Company was represented by independent
counsel in the negotiation of the terms and conditions of the merger agreement
between CenterPoint, the CenterPoint Company and its owners (the "Merger
Agreement").
Each Merger Agreement contains standard representations and warranties of
each party as well as indemnification provisions relating to (1) breaches of
representations and warranties made by the parties to the agreement and (2)
certain liabilities under federal securities laws. Furthermore, each Merger
Agreement provides that the consummation of the Merger is subject to certain
conditions. These conditions include, among others, (1) the continuing material
accuracy on the closing date of the Mergers of the representations and
warranties of the CenterPoint Company, the owners of the CenterPoint Company
and CenterPoint; (2) the
74
<PAGE>
performance by each of them of all covenants included in the Merger Agreement;
(3) the absence of a material adverse change in the results of operations,
financial condition or business of the CenterPoint Company; (4) the
simultaneous closing of all of the Mergers; (5) the approval of the Merger
Agreement and related transactions by the owners of the CenterPoint Company as
required by applicable law; and (6) CenterPoint's having entered into one or
more credit facilities providing for aggregate commitments of not less than $75
million. In addition to the Merger Agreement, owners of each CenterPoint
Company who have voting power over equity interests sufficient to approve the
Merger have entered into a voting agreement with CenterPoint to vote those
interests in favor of the Merger.
Under applicable state laws, shareholders of Mann Frankfort, Berry Dunn,
Driver, Urbach and Reppond may dissent by voting against the Merger. Dissenting
owners who comply with the requirements of state law will have the right to
demand appraisal of and payment for their shares. Under applicable law, no
dissenting shareholder has any right to contest the validity of the Merger or
to have the Merger set aside or rescinded, except in an action to test whether
the number of shares required to approve the Merger have legally been voted in
favor of the Merger and, in the case of the holders of Reppond, in
circumstances involving fraud. The shareholders of the CenterPoint Companies
have agreed to indemnify CenterPoint for any payments required to be made with
respect to dissenting shares.
Pursuant to each Merger Agreement, the owners of the CenterPoint
Companies have agreed not to compete with CenterPoint, for three years
following the closing of the Mergers, (1) with respect to Driver and Reppond,
within any business market where Driver or Reppond conducts business and (2)
with respect to the other CenterPoint Companies, within a 50-mile radius of any
location at which the particular CenterPoint Company conducts business. The
owners of the CenterPoint Companies have also agreed to restrictions on the
transfer of the shares of common stock they receive in the Mergers. Any
requested waiver of such transfer restrictions must be approved by a majority
of the members of the board of directors who are not subject to transfer
restrictions at the time of such proposed waiver. See "Shares Eligible for
Future Sale."
In connection with the Mergers, and as consideration for their interests
in the CenterPoint Companies, certain directors and officers of CenterPoint
will receive cash and shares of common stock as follows:
<TABLE>
<CAPTION>
Shares of
Name Cash common stock
--------------------------------------------------------- ---- ------------
<S> <C> <C>
David Reznick............................................
Thomas W. Corbett........................................
Richard H. Stein.........................................
Anthony P. Frabotta......................................
Charles H. Roscoe........................................
Steven N. Fischer........................................
Robert F. Gallo..........................................
Wayne J. Grace...........................................
Philip J. Holthouse......................................
Anthony P. Scillia.......................................
</TABLE>
Ancillary Agreements with Professional Services Firms and their Affiliates
With respect to the professional services firms, the closing of their
respective Mergers will be conditioned on the execution and delivery of several
ancillary documents. These documents are as follows:
Incentive Compensation Agreements. Upon the closing of the Mergers,
CenterPoint and each professional services firm will enter into an incentive
compensation agreement with each of the firm's former owners and principals.
Messrs. Reznick, Stein, Frabotta, Roscoe, Fischer, Grace, Holthouse and Scillia
will be parties to their firm's incentive compensation agreements. For a more
detailed description of these agreements, see "Business--Employee Incentives--
Professional Services."
75
<PAGE>
Separate Practice Agreements. Under current state laws and regulations
governing the accounting profession, CenterPoint is prohibited from providing
attest services to its clients. See "Business--Regulation--Accounting
Profession." CenterPoint has required that each professional services firm
divest its attest services prior to the closing of the Mergers. Following the
closing, all attest services formerly provided by a professional services firm
will be provided by a separate Attest Firm in which CenterPoint has no
ownership interest. CenterPoint and the Attest Firm and its owners will enter
into a separate practice agreement, which permits the Attest Firm to provide
attest services to CenterPoint's clients. Under such agreement, the Attest Firm
is responsible for (1) the attest services provided by it, (2) maintenance of
professional liability insurance and (3) compliance with applicable ethical,
professional and legal requirements. The term of each separate practice
agreement will be 40 years. Either CenterPoint's professional services firm or
the Attest Firm may terminate the separate practices agreement (1) if a court
or accounting or other regulatory body finds that the separate practice
structure violates applicable laws, rules or regulations or (2) subject to
applicable cure periods, upon a breach of the separate practice agreement or
services agreement by the non-terminating party.
Services Agreements. Pursuant to non-exclusive services agreements between
CenterPoint and the Attest Firms, CenterPoint will manage and administer the
business functions and business affairs of each Attest Firm. Each Attest Firm
will retain the exclusive authority to direct the professional and ethical
aspects of the attest services that it provides. CenterPoint is responsible for
providing (1) general administrative services, such as billing, collection,
bookkeeping and cash management, (2) office space, facilities, equipment,
furniture and other personal property, (3) professional, administrative,
clerical and other personnel and (4) inventory and supplies.
The term of each agreement will be 40 years. CenterPoint's professional
services firm may terminate a services agreement (1) upon certain bankruptcy
events related to the Attest Firm or (2) if the Attest Firm or any of its
employees fails to adhere to any compliance plan, policy or manual of
CenterPoint, engages in conduct or is formally accused of conduct for which the
Attest Firm's license would be expected to be subject to revocation or
suspension or is otherwise disciplined by any licensing, regulatory or
professional entity or institution. The Attest Firm may terminate a services
agreement (1) upon certain bankruptcy events related to CenterPoint or (2)
subject to applicable cure periods if CenterPoint engages in gross negligence
or fraud in the performance of any material duty or material obligation imposed
under the services agreement, which gross negligence or fraud has not been
cured. The Attest Firm may also at any time terminate CenterPoint's duties to
provide general and administrative services, inventory and supplies by
delivering written notice one year in advance of the termination.
Under each of the services agreements, CenterPoint and the Attest Firm
have agreed that if any provision of the agreement is found to be in violation
of applicable laws or regulations, CenterPoint and the Attest Firm will amend
the agreement as necessary to preserve the underlying economic and financial
arrangements without substantial economic detriment to either party. If the
agreement cannot be so amended, it will terminate. See "Risk Factors--
Regulation of the accounting profession could have a material adverse effect on
CenterPoint's business."
Other Transactions
As of , 1999, BGL Capital had incurred $ million
in expenses in connection with CenterPoint's formation, the offering and the
Mergers. This amount includes (1) payment of certain legal, accounting and
other fees and (2) payment of consulting fees and signing bonuses to Mr.
Basten, Ms. Brunts, Mr. Eagle and Mr. Bikun under their consulting agreements.
See "Management." CenterPoint anticipates that additional amounts will be
advanced by BGL Capital on CenterPoint's behalf prior to completion of the
offering. All amounts advanced by BGL Capital to CenterPoint or paid by BGL
Capital under the consulting agreements, together with interest at 8% per annum
from the date of payment by BGL Capital, will be repaid by CenterPoint from the
proceeds of the offering.
76
<PAGE>
Follmer leases its Southfield, MI space from Lincoln Development
Corporation, a company which is 50% owned by Follmer Rudzewicz Development.
Follmer Rudzewicz Development is a limited partnership which is owned in part
by Anthony P. Frabotta. The lease term began in 1988 and expires in 2004. The
current annual rent is approximately $680,000, which amount increases over the
term of the lease. The annual rent for the 2003 to 2004 term is approximately
$736,000.
At December 31, 1998, the outstanding balance of working capital advances
to Grace from Wayne J. Grace was approximately $60,000.
At December 31, 1998, the outstanding balance of loans made by David
Reznick to Reznick was approximately $66,000.
Pursuant to a promissory note dated as of March 16, 1999, Driver loaned
Thomas W. Corbett $250,000 to enable him to make certain tax payments. Interest
on this amount accrues at the prime rate published in The Wall Street Journal.
All loans and advances between the CenterPoint Companies and their
shareholders, affiliates or employees will be paid in full prior to or at the
time of the closing of the Mergers.
77
<PAGE>
PRINCIPAL STOCKHOLDERS
The following lists information with respect to the beneficial ownership
of the common stock by (1) each person known by CenterPoint to own beneficially
more than 5% of the outstanding shares of common stock; (2) each director and
person who will become a director upon completion of the offering; (3)
CenterPoint's executive officers and (4) all executive officers and directors
as a group. The information in the following table assumes the Mergers have
been completed.
<TABLE>
<CAPTION>
Percentage Owned
Name and Address of Beneficial ------------------------------
Owners(1) Shares Before offering After offering
- ------------------------------------ ---------- --------------- --------------
<S> <C> <C> <C>
CPA Holdings LLC(2).................
Reznick, Fedder & Silverman,
C.P.A.s, L.L.C(3)..................
FRF Holdings, LLC(4)................
Robert C. Basten....................
DeAnn L. Brunts.....................
Rondol E. Eagle.....................
Dennis W. Bikun.....................
David Reznick(5)....................
Thomas W. Corbett...................
Richard H. Stein(6).................
Anthony P. Frabotta(7)..............
Charles H. Roscoe...................
Steven N. Fischer...................
Robert F. Gallo.....................
Wayne J. Grace......................
Philip J. Holthouse.................
Anthony P. Scillia..................
Scott H. Lang(2)(8)(9)..............
Louis C. Fornetti(9)................
William J. Lynch(9).................
All directors and executive officers
as a group (17 persons)............
</TABLE>
- --------
* Less than 1.0%.
(1) Unless otherwise indicated, the address of the beneficial owners is c/o
CenterPoint Advisors, Inc., 225 W. Washington Street, 16th Floor, Chicago,
Illinois 60606.
(2) The address of each of CPA Holdings and Mr. Lang is 225 W. Washington
Street, 16th Floor, Chicago, Illinois 60606.
(3) The address of Reznick, Fedder & Silverman, C.P.A.s, L.L.C. is 4520 East
West Highway, Bethesda, Maryland 20814.
(4) The address of FRF Holdings, LLC is 26200 American Drive, Southfield,
Michigan 48086.
(5) Includes shares owned by Reznick, Fedder & Silverman, C.P.A.s, L.L.C.
Mr. Reznick is a member of its operating committee. Mr. Reznick disclaims
beneficial ownership of the shares held by Reznick, Fedder & Silverman,
C.P.A.s, L.L.C. except to the extent of his pecuniary interest therein.
(6) Includes shares owned by MFSL Investments, L.P. Mr. Stein is one of
the managing members of MFSL GP, L.L.C. which is the general partner of
MFSL Investments, L.P. Mr. Stein disclaims beneficial ownership of the
shares held by MFSL Investments, L.P. except to the extent of his pecuniary
interest therein.
(7) Includes shares owned by FRF Holdings, LLC. Mr. Frabotta is one of
the managing members of FRF Holdings, LLC. Mr. Frabotta disclaims
beneficial ownership of the shares held by FRF Holdings, LLC except to the
extent of his pecuniary interest therein.
(8) Includes shares held by CPA Holdings LLC. Mr. Lang is a managing
member of BGL Management Company, which is the managing member of BGL
Capital, which is the managing member of CPA Holdings LLC. CPA Holdings LLC
intends to distribute its shares of common stock to its members following
the completion of the offering. Mr. Lang disclaims beneficial ownership of
the shares held by CPA Holdings LLC except to the extent of his pecuniary
interest therein.
(9) Includes 15,000 shares of common stock issuable upon the exercise of
options which will be granted and vest upon completion of the offering.
78
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of the offering, the authorized capital stock of
CenterPoint will consist of 50,000,000 shares of common stock, $.01 par value
per share, and 10,000,000 shares of preferred stock, $.01 par value per share.
Common Stock
Of the 50,000,000 shares of common stock authorized, shares
will be outstanding upon completion of the offering. Subject to the rights of
the holders of preferred stock, the holders of outstanding shares of common
stock are entitled to share ratably in dividends declared out of assets legally
available therefor at such time and in such amounts as the board of directors
may from time to time lawfully determine. Each holder of common stock is
entitled to one vote for each share held. Subject to the rights of holders of
any outstanding preferred stock, upon liquidation, dissolution or winding up of
CenterPoint, any assets legally available for distribution to stockholders as
such are to be distributed ratably among the holders of the common stock then
outstanding. All shares of common stock currently outstanding are, and all
shares of common stock offered hereby when duly issued and paid for will be,
fully paid and nonassessable. Shares of common stock are not subject to any
redemption provisions and are not convertible into any other securities of
CenterPoint.
The board of directors will initially consist of seventeen directors,
each serving for a term of one year. At each annual meeting of stockholders,
all directors will be elected by the stockholders. Cumulative voting for the
election of directors is not permitted. Therefore, the holders of a majority of
the outstanding common stock can elect all directors whose terms are then
expiring.
Preferred Stock
The certificate of incorporation of CenterPoint authorizes the board of
directors to issue preferred stock in classes or series and to establish the
designations, preferences, qualifications, limitations or restrictions of any
class or series. Such designations and preferences include the rate and nature
of dividends, the price, terms and conditions on which shares may be redeemed,
the terms and conditions for conversion or exchange into any other class or
series of the stock and voting rights. CenterPoint will have authority, without
approval of the holders of common stock, to issue preferred stock that has
voting, dividend or liquidation rights superior to the common stock and that
may adversely affect the rights of holders of common stock. The issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of common stock and could have the
effect of delaying, deferring or preventing a change in control of CenterPoint.
CenterPoint currently has no plans to issue any shares of preferred stock.
The existence of undesignated preferred stock may enable the board of
directors to discourage or deter any unsolicited takeover attempts, and thereby
protect the continuity of CenterPoint's management. The issuance of shares of
the preferred stock pursuant to the board of directors' authority described
above may adversely affect the rights of the holders of common stock. For
example, preferred stock issued by CenterPoint may rank prior to the common
stock as to dividend rights, liquidation preference or both, may have full or
limited voting rights and may be convertible into shares of common stock.
Accordingly, the issuance of shares of preferred stock may discourage bids for
the common stock or may otherwise adversely affect the market price of the
common stock.
Stockholders' Agreement
Upon the closing of the Mergers, CenterPoint's stockholders (including
initial investors, management and the owners and employees of the CenterPoint
Companies who receive common stock in the Mergers) will enter into a
stockholders' agreement governing the nomination and election of CenterPoint's
directors. The stockholders' agreement sets forth the manner and terms by which
the stockholders may nominate directors.
79
<PAGE>
Each of the parties to the stockholders' agreement has agreed to take all
action necessary as a stockholder, director or officer of CenterPoint,
including voting its common stock, to cause the incumbent directors of
CenterPoint or their successors, as described below, to be nominated and
elected at the first five annual meetings following the closing of the
offering. In the event that an incumbent director designated by BGL Capital or
a CenterPoint Company is unable to or does not stand for reelection,
representatives of BGL Capital or such CenterPoint Company may designate his
successor for nomination. Nominees for other vacancies will be selected by a
majority of the then-incumbent board of directors. The parties to the
stockholders' agreement have also agreed to restrictions on the transfer of
shares of common stock. See "Shares Eligible for Future Sale."
The stockholders' agreement terminates immediately following
CenterPoint's annual meeting of stockholders relating to fiscal year 2003 (but
expected to occur in 2004). The stockholders' agreement may be amended by the
holders of 66 2/3% of the total number of shares of outstanding common stock
then held by the parties to the agreement. In addition, any requested waiver of
the stock transfer restrictions must be approved by a majority of the members
of the board of directors who are not subject to transfer restrictions at the
time of such proposed waiver.
Certain Provisions Affecting Stockholders
Delaware, like many other states, permits a corporation to adopt a number
of measures through amendment of the corporate charter or bylaws or otherwise,
which may have the effect of delaying or deterring any unsolicited takeover
attempts. In addition, Delaware Law restricts certain "business combinations"
with "interested stockholders" (generally a holder of 15% or more of
CenterPoint's voting stock) for three years following the date that person
becomes an interested stockholder. By delaying or deterring unsolicited
takeover attempts, these provisions could adversely affect prevailing market
prices for the common stock.
SHARES ELIGIBLE FOR FUTURE SALE
After the offering, CenterPoint will have outstanding shares
of common stock. The shares being sold in the offering are freely
tradable without restriction unless acquired by CenterPoint's affiliates. The
holders of common stock who did not purchase shares in the offering will own
16,250,676 shares of common stock, including the owners and employees of the
CenterPoint Companies who will receive, in the aggregate, 12,569,367 shares in
connection with the Mergers, and the initial investors and corporate management
of CenterPoint who own, in the aggregate, 3,681,309 shares. The shares issued
in the Mergers will be registered on a Registration Statement on Form S-4 and
will be freely tradeable under federal securities laws unless acquired by
CenterPoint's affiliates. The 3,681,309 shares issued to the initial investors
and corporate management of CenterPoint will not be registered on the Form S-4
and, therefore, may not be sold unless subsequently registered under the
Securities Act or sold pursuant to an exemption from registration, such as the
exemption provided by Rule 144. Under the Merger Agreements and the
stockholders' agreement, all of CenterPoint's stockholders (other than
purchasers in the offering) have agreed, subject to limited exceptions, not to
sell, transfer or otherwise dispose of any of these shares for a period of 18
months following the offering. Effective 18 months after the offering, 20% of
each stockholder's shares will be released from such restrictions, and an
additional 20% of the original number of restricted shares will be released on
the expiration of each six-month period thereafter.
Shares held by stockholders who are CenterPoint employees are subject to
additional restrictions. If a stockholder's employment is terminated within 30
months of the offering, other than under specified circumstances, restricted
shares then held by such stockholder will remain restricted until the fifth
anniversary of the offering. The owners and employees of the CenterPoint
Companies have certain piggyback registration rights, beginning on the second
anniversary of the offering, with respect to shares that have been released
from
80
<PAGE>
transfer restrictions. The certificates representing the shares issued in the
Mergers and shares issued to initial investors and CenterPoint's management
will bear a legend or legends describing the applicable transfer restrictions.
In general, under Rule 144 as currently in effect, if one year has
elapsed since the later of the date of the acquisition of restricted shares of
common stock from either CenterPoint or any affiliate of CenterPoint, the
acquiror or subsequent holder thereof may sell, within any three-month period
commencing 90 days after the date of the prospectus relating to the offering, a
number of shares that does not exceed the greater of one percent of the then
outstanding shares of the common stock, or the average weekly trading volume of
the common stock on The New York Stock Exchange during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about CenterPoint. If two years have elapsed since the later of the
date of the acquisition of restricted shares of common stock from CenterPoint
or any affiliate of CenterPoint, a person who is not deemed to have been an
affiliate of CenterPoint at any time for 90 days preceding a sale would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions or notice requirements.
CenterPoint and all of its stockholders, other than purchasers in the
offering, have agreed, subject to certain exceptions, not to directly or
indirectly, (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of common stock or securities convertible into or exchangeable for
common stock, whether now owned or thereafter acquired by the person executing
the agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or file a registration statement
under the Securities Act with respect to the foregoing or (2) enter into any
swap or other agreement that transfers, in whole or in part, the economic
consequence of ownership of the common stock whether any such swap or
transaction is to be settled by delivery of common stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated on behalf of the underwriters, for a period
of 180 days after the date of this prospectus.
Sales, or the availability for sale of, substantial amounts of the common
stock in the public market after the offering could adversely affect prevailing
market prices of the common stock and the ability of CenterPoint to raise
equity capital, or finance acquisitions using equity capital, in the future.
Transfer Agent and Registrar
The transfer agent and registrar for CenterPoint's common stock is
.
81
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc.,
Thomas Weisel Partners LLC and CIBC Oppenheimer Corp. are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in an underwriting agreement (the "Underwriting
Agreement") between CenterPoint and the underwriters, CenterPoint has agreed to
sell to the underwriters, and each of the underwriters severally has agreed to
purchase from CenterPoint, the number of shares of common stock set forth
opposite its name below.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
Lehman Brothers Inc.............................................
Thomas Weisel Partners LLC......................................
CIBC Oppenheimer Corp...........................................
------
Total......................................................
======
</TABLE>
In the Underwriting Agreement, the several underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of common stock being sold under such agreement if any of the shares of
common stock being sold under such agreement are purchased.
The representatives have advised CenterPoint that the underwriters
propose initially to offer the shares of common stock to the public at the
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share. The underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share of common stock on sales to certain other
dealers. After the public offering, the public offering price, concession and
discount may be changed.
CenterPoint has granted an option to the underwriters, exercisable for 30
days after the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price set
forth on the cover page of this prospectus, less the underwriting discount. The
underwriters may exercise this option to cover over-allotments, if any, made on
the sale of the common stock offered by this prospectus. To the extent that the
underwriters exercise this option, each underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares of common
stock proportionate to such underwriter's initial amount reflected in the
foregoing table.
The following table shows the per share and total underwriting discounts
and commissions to be paid by CenterPoint to the underwriters. This information
is presented assuming either no exercise or full exercise by the underwriters
of their over-allotment option.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discount............................ $ $ $
Proceeds, before expenses, to CenterPoint........ $ $ $
</TABLE>
82
<PAGE>
The expenses of the offering are estimated at $ million and are
payable entirely by CenterPoint. Such expenses include amounts advanced by BGL
Capital on CenterPoint's behalf. See "Certain Transactions--Other
Transactions."
CenterPoint, its executive officers and directors and substantially all
of the existing stockholders have agreed not to offer or sell any other shares
of common stock or common stock equivalents for 180 days after the date of this
prospectus, without the prior written consent of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, on behalf of the underwriters. Common stock equivalents
include securities convertible into or exchangeable for common stock. During
the 180-day period, CenterPoint, its executive officers and directors and the
existing stockholders have also agreed not to (1) sell to third parties any
call option or other right to acquire common stock or common stock equivalents,
(2) purchase from third parties any put option or other right to sell common
stock or common stock equivalents or (3) enter into any swap or other
arrangement that transfers the economic consequences of ownership of common
stock or common stock equivalents, in each case, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of the
underwriters. There are some exceptions to these restrictions, including the
issuance of common stock by CenterPoint in connection with acquisitions as long
as such issued stock is subject to the same restrictions for the remainder of
the restrictive period and grants of stock options under existing employee
benefit plans or exercises of stock options.
Prior to the offering, there has been no public market for CenterPoint's
common stock. The initial public offering price will be determined through
negotiations between CenterPoint and the representatives of the underwriters.
The factors considered in determining the initial public offering price, in
addition to prevailing market conditions, will be price-earnings ratios of
publicly traded companies that the representatives believe to be comparable to
CenterPoint, certain of its financial information, the history of, and the
prospects for, CenterPoint and the industry in which it competes, an assessment
of its management, its past and present operations, the prospects for, and
timing of, its future revenues, the present state of its development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to CenterPoint. There can be no
assurance that an active trading market will develop for the common stock or
that the common stock will trade in the public market subsequent to the
offering at or above the public offering price.
CenterPoint intends to apply to have the common stock listed on The New
York Stock Exchange under the symbol " ."
The underwriters do not intend to confirm sales of the common stock
offered hereby to any accounts over which they exercise discretionary
authority.
CenterPoint has agreed to indemnify the underwriters against certain
liabilities, including certain liabilities under the Securities Act.
Until the distribution of the common stock is completed, rules of the SEC
may limit the ability of the underwriters and certain selling group members to
bid for and purchase the common stock. As an exception to these rules, the
representatives are permitted to engage in certain transactions that stabilize
the price of the common stock. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the common
stock.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the representatives
may reduce that short position by purchasing common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
83
<PAGE>
The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the representatives purchase
shares of common stock in the open market to reduce the underwriters' short
position or to stabilize the price of the common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group
members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the common stock to the extent
that it were to discourage resales of the common stock.
Neither CenterPoint nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the common stock. In
addition, neither CenterPoint nor any of the underwriters makes any
representation that the representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
At CenterPoint's request, the underwriters have reserved up to 5% of the
shares of common stock offered by this prospectus for sale, at the initial
public offering price, to certain of its directors, officers, employees, and
business associates of, and certain other persons designated by CenterPoint who
have expressed an interest in purchasing such shares of common stock. The
number of shares of common stock available for sale to the general public in
the offering will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares
offered by this prospectus.
Thomas Weisel Partners LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners has co-managed sixteen public
offerings of equity securities and has acted as an underwriter in an additional
five public offerings of equity securities. Thomas Weisel Partners does not
have any relationship with CenterPoint or any of its officers, directors or
controlling persons, except with respect to its contractual relationship with
CenterPoint pursuant to the underwriting agreement to be entered into in
connection with the offering.
Affiliates of CIBC Oppenheimer Corp., one of the representatives of the
underwriters, are members of BGL Capital, which is an initial investor in
CenterPoint. See "Certain Transactions--Organization of CenterPoint" and
"Principal Stockholders."
84
<PAGE>
CERTAIN LEGAL MATTERS
The legality of the shares of common stock offered by this prospectus
will be passed upon for CenterPoint by Katten Muchin & Zavis, Chicago,
Illinois. Certain partners of Katten Muchin & Zavis are investors in BGL
Capital, which is an initial investor in CenterPoint. See "Certain
Transactions--Organization of CenterPoint" and "Principal Stockholders."
Certain legal matters concerning the offering will be passed upon for the
underwriters by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
The following financial statements included in this prospectus have been
so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting:
. the financial statements of CenterPoint Advisors, Inc. as of
December 31, 1998 and for the period from November 9, 1998
(inception date) through December 31, 1998;
. the consolidated financial statements of Reznick Fedder &
Silverman, P.C. as of September 30, 1997 and 1998 and for each of
the three years in the period ended September 30, 1998;
. the consolidated financial statements of Robert F. Driver Co.,
Inc. as of July 31, 1998 and for the year ended July 31, 1998;
. the financial statements of Mann Frankfort Stein & Lipp, P.C. as
of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998;
. the consolidated financial statements of Follmer, Rudzewicz &
Company, P.C. as of May 31, 1997 and 1998 and for each of the
three years in the period ended May 31, 1998;
. the consolidated financial statements of Berry, Dunn, McNeil &
Parker, Chartered as of June 30, 1997 and 1998 and for each of the
three years in the period ended June 30, 1998;
. the financial statements of Urbach Kahn & Werlin PC as of October
31, 1997 and 1998 and for each of the two years in the period
ended October 31, 1998;
. the financial statements of Self Funded Benefits, Inc. (d/b/a
Insurance Design Administrators) as of December 31, 1997 and 1998
and for each of the two years in the period ended December 31,
1998;
. the financial statements of Grace & Company, P.C. as of December
31, 1998 and for the year ended December 31, 1998;
. the financial statements of Holthouse Carlin & Van Trigt LLP as of
December 31, 1997 and 1998 and for each of the two years in the
period ended December 31, 1998;
. the combined financial statements of The Reppond Companies as of
December 31, 1998 and for the year ended December 31, 1998; and
. the financial statements of Simione, Scillia, Larrow & Dowling
LLC, as of December 31, 1998 and for the year ended December 31,
1998.
The consolidated financial statements of Robert F. Driver Co., Inc., as
of July 31, 1997 and for each of the years in the two-year period ended July
31, 1997 have been included herein and in the registration statement in
reliance on the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
85
<PAGE>
WHERE YOU MAY FIND ADDITIONAL INFORMATION
CenterPoint has filed a registration statement on Form S-1 (which shall
include all amendments to such registration statement) with the SEC under the
Securities Act concerning the common stock offered by this prospectus. This
prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete and in each instance reference is made to the copy
of such contract or document filed as an exhibit to the registration statement
and each such statement is qualified in all respects by such reference. For
further information concerning CenterPoint, you should refer to the
registration statement and such exhibits and schedules filed as a part of such
registration statement, which may be inspected without charge, at the Public
Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains a web site that contains reports,
proxy and information statements regarding registrants that file electronically
with the SEC. The address of this web site is http://www.sec.gov. You may
obtain copies of all or any part of the registration statement from the Public
Reference Section of the SEC, upon payment of the required fees.
CenterPoint intends to furnish its stockholders with an annual report
containing audited financial statements and an opinion of such registration
statement expressed by independent auditors for each fiscal year and with
quarterly reports containing unaudited summary information for the first three
quarters of each fiscal year.
86
<PAGE>
CENTERPOINT ADVISORS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CenterPoint Advisors, Inc.
Unaudited Pro Forma Combined Financial Statements
Introduction to Unaudited Pro Forma Combined Financial Statements...... F- 3
Unaudited Pro Forma Combined Balance Sheet............................. F- 4
Unaudited Pro Forma Combined Statement of Operations................... F- 6
Notes to Unaudited Pro Forma Combined Financial Statements............. F- 7
Historical Financial Statements
Report of Independent Accountants...................................... F-14
Balance Sheet.......................................................... F-15
Statement of Operations................................................ F-16
Notes to Financial Statements.......................................... F-17
CENTERPOINT COMPANIES
Reznick Fedder & Silverman, P.C.
Report of Independent Accountants........................................ F-21
Consolidated Balance Sheet............................................... F-22
Consolidated Statement of Income......................................... F-23
Consolidated Statement of Stockholders' Equity........................... F-24
Consolidated Statement of Cash Flows..................................... F-25
Notes to Consolidated Financial Statements............................... F-26
Robert F. Driver Co., Inc.
Report of Independent Accountants........................................ F-35
Consolidated Balance Sheet............................................... F-37
Consolidated Statement of Income......................................... F-38
Consolidated Statement of Stockholders' Equity........................... F-39
Consolidated Statement of Cash Flows..................................... F-40
Notes to Consolidated Financial Statements............................... F-42
Mann Frankfort Stein & Lipp, P.C.
Report of Independent Accountants........................................ F-54
Balance Sheet............................................................ F-55
Statement of Income...................................................... F-56
Statement of Shareholders' Equity........................................ F-57
Statement of Cash Flows.................................................. F-58
Notes to Financial Statements............................................ F-59
Follmer, Rudzewicz & Company, P.C.
Report of Independent Accountants........................................ F-64
Consolidated Balance Sheet............................................... F-65
Consolidated Statement of Operations..................................... F-66
Consolidated Statement of Stockholder's Equity........................... F-67
Consolidated Statement of Cash Flows..................................... F-68
Notes to Consolidated Financial Statements............................... F-69
Berry, Dunn, McNeil & Parker, Chartered
Report of Independent Accountants........................................ F-77
Consolidated Balance Sheet............................................... F-78
Consolidated Statement of Income......................................... F-79
Consolidated Statement of Shareholders' Equity........................... F-80
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Consolidated Statement of Cash Flows.................................... F- 81
Notes to Consolidated Financial Statements.............................. F- 82
Urbach Kahn & Werlin P.C.
Report of Independent Accountants....................................... F- 89
Balance Sheet........................................................... F- 90
Statement of Income..................................................... F- 91
Statement of Shareholders' Equity....................................... F- 92
Statement of Cash Flows................................................. F- 93
Notes to Financial Statements........................................... F- 94
Self Funded Benefits, Inc. d/b/a Insurance Design Administrators
Report of Independent Accountants....................................... F-103
Balance Sheet........................................................... F-104
Statement of Income..................................................... F-105
Statement of Shareholders' Equity....................................... F-106
Statement of Cash Flows................................................. F-107
Notes to Financial Statements........................................... F-108
Grace & Company, P.C.
Report of Independent Accountants....................................... F-113
Balance Sheet........................................................... F-114
Statement of Income..................................................... F-115
Statement of Shareholders' Equity....................................... F-116
Statement of Cash Flows................................................. F-117
Notes to Financial Statements........................................... F-118
Holthouse Carlin & Van Trigt LLP
Report of Independent Accountants....................................... F-124
Balance Sheet........................................................... F-125
Statement of Income..................................................... F-126
Statement of Partners' Equity........................................... F-127
Statement of Cash Flows................................................. F-128
Notes to Financial Statements........................................... F-129
The Reppond Companies
Report of Independent Accountants....................................... F-134
Combined Balance Sheet.................................................. F-135
Combined Statement of Income............................................ F-136
Combined Statement of Shareholders' Equity.............................. F-137
Combined Statement of Cash Flows........................................ F-138
Notes to Combined Financial Statements.................................. F-139
Simione, Scillia, Larrow & Dowling LLC
Report of Independent Accountants....................................... F-145
Balance Sheet........................................................... F-146
Statement of Income..................................................... F-147
Statement of Members' Equity............................................ F-148
Statement of Cash Flows................................................. F-149
Notes to Financial Statements........................................... F-150
</TABLE>
F-2
<PAGE>
CENTERPOINT ADVISORS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the acquisitions by CenterPoint Advisors, Inc. ("CenterPoint") of the
outstanding capital stock of: Reznick Fedder & Silverman, P.C. ("Reznick");
Robert F. Driver Co., Inc. ("Driver"); Mann Frankfort Stein & Lipp, P.C. ("Mann
Frankfort"); Follmer, Rudzewicz & Company, P.C. ("Follmer"); Berry, Dunn,
McNeil & Parker, Chartered ("Berry Dunn"); Urbach Kahn & Werlin PC ("Urbach");
Self Funded Benefits, Inc. d/b/a Insurance Design Administrators ("IDA"); Grace
& Company, P.C. ("Grace"); Holthouse Carlin & Van Trigt LLP ("Holthouse"); the
Reppond Companies ("Reppond"); and Simione, Scillia, Larrow & Dowling LLC
("Simione") (together, the "CenterPoint Companies"). These acquisitions (the
"Mergers") will occur simultaneously with the closing of CenterPoint's initial
public offering and will be accounted for using the purchase method of
accounting. In accordance with the provisions of Staff Accounting Bulletin No.
97, CenterPoint is deemed to be the accounting acquiror as its stockholders
will receive the largest portion of the voting rights in the combined
corporation.
The unaudited pro forma combined balance sheet gives effect to the
Mergers and the offering as if they had occurred on December 31, 1998. The
unaudited pro forma combined statement of operations gives effect to these
transactions as if they had occurred on January 1, 1998.
CenterPoint has preliminarily analyzed the savings that it expects to
realize from changes in salaries and certain benefits to the CenterPoint
Companies' former owners. To the extent these individuals have contractually
agreed prospectively to changes in salaries, bonuses, and benefits, these
changes have been reflected in the pro forma combined statement of operations.
With respect to other potential cost savings, CenterPoint has not and cannot
quantify these savings at this time. It is anticipated that CenterPoint will
incur costs related to its new corporate management and costs associated with
being a public company. However, these costs, like the savings, cannot be
accurately quantified at this time. Except for prospective compensation payable
pursuant to employment agreements with management of CenterPoint and savings
expected to be realized from changes in salaries and certain benefits to the
CenterPoint Companies' former owners, neither the anticipated savings nor the
anticipated costs have been included in the pro forma financial information of
CenterPoint.
The pro forma adjustments are based on estimates, available information
and certain assumptions and may be revised as additional information becomes
available. The pro forma combined financial data do not purport to represent
what CenterPoint's financial position or results of operations would actually
have been if such transactions in fact had occurred on those dates and are not
necessarily representative of CenterPoint's financial position or results of
operations for any future period. Since the CenterPoint Companies were not
under common control or management and were operating with different
compensation structures, historical pro forma combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this prospectus.
See "Risk Factors" included elsewhere herein.
F-3
<PAGE>
CENTERPOINT ADVISORS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Merger
Center Mann Berry Adjustments
ASSETS Point Reznick Driver Frankfort Follmer Dunn Urbach IDA Grace Holthouse Reppond Simione (See Note 3)
- ------ ------ ------- ------- --------- ------- ------ ------- ------ ------ --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents....... $-- $ 995 $ 2,989 $ 606 $ 47 $ 60 $ 25 $ 857 $ 6 $ 644 $ 148 $ 169 $ (4,487)
Funds held for
customers......... -- -- 12,155 -- 38 -- -- 660 -- -- -- -- --
Investments....... -- -- -- -- -- -- 1,292 -- -- 285 -- -- (1,577)
Receivables,
net............... -- 10,959 11,005 4,077 4,286 3,798 7,656 675 1,531 1,816 842 1,562 (31,712)
Unbilled fees at
net realizable
value............. -- 6,439 -- 431 3,283 1,705 836 -- 815 610 -- 254 (7,552)
Notes
receivable........ -- -- -- -- -- -- -- -- -- -- -- 12 (12)
Due from related
parties and
stockholders...... -- -- -- 14 -- -- 799 164 -- -- -- -- (977)
Prepaid expenses
and other current
assets............ -- 418 719 81 202 169 709 160 204 15 77 23 (162)
Deferred offering
costs............. 800 -- -- -- -- -- -- -- -- -- -- -- --
Deferred income
taxes............. -- 1,700 -- -- -- -- -- -- -- -- -- -- (1,700)
---- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------ --------
Total current
assets.......... 800 20,511 26,868 5,209 7,856 5,732 11,317 2,516 2,556 3,370 1,067 2,020 (48,179)
Property and
equipment, net..... -- 2,822 1,275 1,142 1,357 2,015 982 747 515 276 792 133 (938)
Goodwill and other
intangible assets,
net................ -- 399 21,396 -- -- 1,179 -- -- -- -- -- -- 211,259
Long-term
investments........ -- -- -- -- -- -- 1,048 -- -- -- -- -- (970)
Deferred income
taxes.............. -- 1,353 905 -- 1,306 423 2,248 -- 11 -- 7 -- (4,127)
Other assets....... -- 558 786 6 3,160 31 347 38 1,023 44 27 89 (5,280)
---- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------ --------
Total assets.... $800 $25,643 $51,230 $6,357 $13,679 $9,380 $15,942 $3,301 $4,105 $3,690 $1,893 $2,242 $151,765
==== ======= ======= ====== ======= ====== ======= ====== ====== ====== ====== ====== ========
<CAPTION>
Pro Offering
Forma Adjustments As
ASSETS Combined (See Note 3) Adjusted
- ------ -------- ------------ --------
<S> <C> <C> <C>
Current assets:
Cash and cash
equivalents....... $ 2,059 $ 16,113 $ 18,172
Funds held for
customers......... 12,853 -- 12,853
Investments....... -- -- --
Receivables,
net............... 16,495 -- 16,495
Unbilled fees at
net realizable
value............. 6,821 -- 6,821
Notes
receivable........ -- -- --
Due from related
parties and
stockholders...... -- -- --
Prepaid expenses
and other current
assets............ 2,615 -- 2,615
Deferred offering
costs............. 800 (800) --
Deferred income
taxes............. -- -- --
-------- ------------ --------
Total current
assets.......... 41,643 15,313 56,956
Property and
equipment, net..... 11,118 -- 11,118
Goodwill and other
intangible assets,
net................ 234,233 -- 234,233
Long-term
investments........ 78 -- 78
Deferred income
taxes.............. 2,126 -- 2,126
Other assets....... 829 -- 829
-------- ------------ --------
Total assets.... $290,027 $ 15,313 $305,340
======== ============ ========
</TABLE>
F-4
<PAGE>
CENTERPOINT ADVISORS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' Center Mann Berry
EQUITY Point Reznick Driver Frankfort Follmer Dunn Urbach IDA Grace Holthouse Reppond Simione
- --------------- ------- ------- ------- --------- ------- ------ ------- ------ ------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current
liabilities:
Short-term debt,
including current
maturities of
long-term debt.... $ -- $ 1,831 $ 2,042 $ 879 $ 503 $2,038 $ 721 $ 153 $ 742 $ -- $ 368 $1,101
Accounts
payable........... -- 517 3,883 23 235 329 1,593 123 160 71 248 115
Insurance
premiums
payable........... -- -- 18,639 -- -- -- -- -- -- -- -- --
Accrued
compensation and
related costs..... -- 14,231 -- 126 6,121 745 1,337 91 530 72 243 --
Deferred
compensation...... -- 91 -- -- -- 694 257 -- -- -- -- --
Income taxes
payable........... -- -- -- 27 328 -- -- -- -- -- 103 --
Deferred income
taxes............. -- -- -- 1,569 777 653 2,805 -- 766 -- 120 --
Current portion
of customer
deposits.......... -- -- -- -- -- -- -- 660 -- -- -- --
Due to related
parties........... 892 -- -- -- 399 3,101 -- -- 601 -- -- 178
Other accrued
liabilities....... 1,107 -- -- -- -- 334 464 185 93 104 5 142
------- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------
Total current
liabilities..... 1,999 16,670 24,564 2,624 8,363 7,894 7,177 1,212 2,892 247 1,087 1,536
Long-term debt, net
of current
maturities......... -- 2,880 15,083 473 77 -- 1,513 154 419 -- 130 153
Deferred
compensation....... -- 820 1,325 -- 3,627 500 4,896 -- -- -- -- --
Deferred income
taxes.............. -- -- -- 85 -- -- -- -- -- -- -- --
Other long-term
liabilities........ -- 2,411 -- -- -- 75 149 -- -- -- -- 113
------- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------
Total
liabilities..... 1,999 22,781 40,972 3,182 12,067 8,469 13,735 1,366 3,311 247 1,217 1,802
Redeemable
preferred stock of
subsidiary......... -- -- 4,000 -- -- -- -- -- -- -- -- --
Stockholders'
equity:
Members' equity... -- -- -- -- -- -- -- -- -- 3,443 (26) 440
Common stock...... 34 -- 9 2 10 1,357 -- -- 17 -- 1 --
Additional paid-
in capital........ 842 1,422 8,334 58 1,210 -- 3,199 208 350 -- 56 --
Retained earnings
(deficit)......... (1,961) 1,440 (1,245) 3,115 532 (216) (1,224) 1,727 516 -- 673 --
Note receivable
from
shareholder....... -- -- (840) -- -- (230) -- -- -- -- (28) --
Stock
subscriptions
receivable........ (114) -- -- -- -- -- -- -- -- -- -- --
Accumulated other
comprehensive
income............ -- -- -- -- -- -- 232 -- -- -- -- --
Treasury stock.... -- -- -- -- (140) -- -- -- (89) -- -- --
------- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------
Total
stockholders'
equity.......... (1,199) 2,862 6,258 3,175 1,612 911 2,207 1,935 794 3,443 676 440
------- ------- ------- ------ ------- ------ ------- ------ ------ ------ ------ ------
Total liabilities
and stockholders'
equity............. $ 800 $25,643 $51,230 $6,357 $13,679 $9,380 $15,942 $3,301 $4,105 $3,690 $1,893 $2,242
======= ======= ======= ====== ======= ====== ======= ====== ====== ====== ====== ======
<CAPTION>
LIABILITIES AND Merger Pro Offering
STOCKHOLDERS' Adjustments Forma Adjustments As
EQUITY (See Note 3) Combined (See Note 3) Adjusted
- --------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Current
liabilities:
Short-term debt,
including current
maturities of
long-term debt.... $ (32) $ 10,346 $ (7,921) $ 2,425
Accounts
payable........... -- 7,297 -- 7,297
Insurance
premiums
payable........... -- 18,639 -- 18,639
Accrued
compensation and
related costs..... (18,373) 5,123 -- 5,123
Deferred
compensation...... (91) 951 -- 951
Income taxes
payable........... -- 458 -- 458
Deferred income
taxes............. (5,343) 1,347 -- 1,347
Current portion
of customer
deposits.......... -- 660 -- 660
Due to related
parties........... 79,639 84,810 (84,810) --
Other accrued
liabilities....... 250 2,684 (1,357) 1,327
------------ --------- ------------ ---------
Total current
liabilities..... 56,050 132,315 (94,088) 38,227
Long-term debt, net
of current
maturities......... (253) 20,629 (20,629) --
Deferred
compensation....... (9,425) 1,743 -- 1,743
Deferred income
taxes.............. 138 223 -- 223
Other long-term
liabilities........ (2,411) 337 -- 337
------------ --------- ------------ ---------
Total
liabilities..... 44,099 155,247 (114,717) 40,530
Redeemable
preferred stock of
subsidiary......... -- 4,000 (4,000) --
Stockholders'
equity:
Members' equity... (3,857) -- -- --
Common stock...... (1,267) 163 106 269
Additional paid-
in capital........ 116,899 132,578 133,924 266,502
Retained earnings
(deficit)......... (5,318) (1,961) -- (1,961)
Note receivable
from
shareholder....... 1,098 -- -- --
Stock
subscriptions
receivable........ 114 -- -- --
Accumulated other
comprehensive
income............ (232) -- -- --
Treasury stock.... 229 -- -- --
------------ --------- ------------ ---------
Total
stockholders'
equity.......... 107,666 130,780 134,030 264,810
------------ --------- ------------ ---------
Total liabilities
and stockholders'
equity............. $151,765 $290,027 $ 15,313 $305,340
============ ========= ============ =========
</TABLE>
F-5
<PAGE>
CENTERPOINT ADVISORS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Center Mann Berry
Point Reznick Driver Frankfort Follmer Dunn Urbach IDA Grace Holthouse Reppond Simione
------- ------- ------- --------- ------- ------- ------- ------- ------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Professional
services....... $ -- $48,387 $ -- $21,631 $20,564 $18,662 $17,753 $ -- $9,691 $9,446 $ -- $6,217
Business and
financial
services....... -- -- 34,303 -- -- -- -- 10,933 -- -- 7,892 --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Total revenues.. -- 48,387 34,303 21,631 20,564 18,662 17,753 10,933 9,691 9,446 7,892 6,217
Expenses:
Professional
services
compensation
and related
costs.......... -- 39,825 -- 17,750 16,629 13,722 12,612 -- 7,784 3,089 -- 4,396
Business and
financial
services
compensation
and related
costs.......... -- -- 25,470 -- -- -- -- 6,361 -- -- 5,067 --
Other operating
expenses....... 1,961 7,575 6,060 3,081 3,711 3,753 4,510 2,808 1,190 1,505 1,982 1,333
Depreciation and
amortization... -- 976 1,664 266 539 1,000 280 242 190 73 332 31
------- ------- ------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Income from
operations..... (1,961) 11 1,109 534 (315) 187 351 1,522 527 4,779 511 457
Other (income)
expense: --
Interest
expense........ -- 532 1,039 58 109 299 664 32 122 -- 72 130
Interest
income......... -- (43) (852) (69) (48) (238) (109) (77) (23) (25) (43) --
Other, net...... -- (143) (417) (26) 14 126 (486) 82 (95) -- 22 50
------- ------- ------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Income before
income taxes.... (1,961) (335) 1,339 571 (390) -- 282 1,485 523 4,804 460 277
Provision
(benefit) for
income taxes.... -- (109) 688 213 165 -- 176 25 232 -- 113 --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Net income
(loss).......... $(1,961) $ (226) $ 651 $ 358 $ (555) $ -- $ 106 $ 1,460 $ 291 $4,804 $ 347 $ 277
======= ======= ======= ======= ======= ======= ======= ======= ====== ====== ====== ======
Net income per
share, basic and
diluted.........
Shares used in
computing pro
forma net income
per share
(see Note 5)....
<CAPTION>
Pro Forma
Adjustments Pro
(See Note Forma
4) Combined
------------- ---------
<S> <C> <C>
Revenues:
Professional
services....... $ -- $152,351
Business and
financial
services....... -- 53,128
------------- ---------
Total revenues.. -- 205,479
Expenses:
Professional
services
compensation
and related
costs.......... (20,524)(A) 95,283
Business and
financial
services
compensation
and related
costs.......... (1,540)(A) 35,358
Other operating
expenses....... (281)(B) 39,188
Depreciation and
amortization... 5,190 (C) 10,783
------------- ---------
Income from
operations..... 17,155 24,867
Other (income)
expense:
Interest
expense........ (2,308)(D) 749
Interest
income......... 156 (E) (1,371)
Other, net...... -- (873)
------------- ---------
Income before
income taxes.... 19,307 26,362
Provision
(benefit) for
income taxes.... 11,384 (F) 12,887
------------- ---------
Net income
(loss).......... $ 7,923 $ 13,475
============= =========
Net income per
share, basic and
diluted.........
=========
Shares used in
computing pro
forma net income
per share
(see Note 5)....
=========
</TABLE>
F-6
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1--General
CenterPoint Advisors, Inc. ("CenterPoint") was founded in 1998 to acquire
eleven professional, business and financial services firms ("CenterPoint
Companies") and create a leading provider of diversified professional, business
and financial services and products to a broad spectrum of middle-market
clients.
The historical financial statements reflect the financial position and
results of operations of CenterPoint and the CenterPoint Companies and were
derived from the respective CenterPoint Companies' financial statements. The
periods included in these financial statements for all of the individual
CenterPoint Companies, with the exception of Driver, Follmer and Urbach, are as
of and for the year ended December 31, 1998. The financial statements for
Driver, Follmer and Urbach are as of and for the year ended January 31, 1999,
November 30, 1998 and January 31, 1999, respectively. The audited historical
financial statements included elsewhere herein have been included in accordance
with Staff Accounting Bulletin No. 80.
Note 2--Acquisition of CenterPoint Companies
Concurrently with and as a condition to the closing of this offering,
CenterPoint will acquire all of the outstanding common stock or partnership or
membership interests of the CenterPoint Companies. The Mergers will be
accounted for using the purchase method of accounting with CenterPoint being
treated as the accounting acquiror in accordance with Staff Accounting Bulletin
No. 97 and APB 16. The carrying value of intangible assets is periodically
reviewed by CenterPoint based on the expected future undiscounted operating
cash flows of the related business unit. In the event CenterPoint determines
that the balance of such intangible assets is not recoverable, CenterPoint will
recognize an impairment loss in an amount necessary to write down the excess of
cost over fair value of net assets acquired to the fair value equal to the
corresponding undiscounted expected future cash flows.
The following table sets forth: (i) the consideration to be paid in (a)
cash and (b) shares of common stock to the stockholders of each of the
CenterPoint Companies; (ii) the allocation of the consideration to net assets
acquired; and (iii) the resulting goodwill for the companies acquired by
CenterPoint as the accounting acquiror.
<TABLE>
<CAPTION>
Shares of
Common Value of Total
Cash Stock Shares (1) Consideration (2)
------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Reznick.................... $16,899 1,810,553 $ 19,011 $ 35,910
Driver..................... 500 2,944,445 30,917 31,417
Mann Frankfort............. 16,503 1,768,200 18,566 35,069
Follmer.................... 13,600 1,457,143 15,300 28,900
Berry Dunn................. 6,821 931,357 9,779 16,600
Urbach..................... 9,190 1,023,943 10,751 19,941
IDA........................ 8,154 873,669 9,173 17,327
Grace...................... 2,840 304,286 3,195 6,035
Holthouse.................. 5,603 600,343 6,304 11,907
Reppond.................... -- 447,428 4,698 4,698
Simione.................... 3,808 408,000 4,284 8,092
------- ---------- -------- --------
$83,918 12,569,367 $131,978 $215,896
======= ========== ======== ========
</TABLE>
F-7
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
- --------
(1) For the computation of the estimated purchase price for accounting
purposes, the value of shares is based upon an assumed initial public
offering price of $ , less a 25% discount from the assumed offering
price due to restrictions on the transferability of the common stock to be
issued to owners and employees of CenterPoint and the CenterPoint
Companies. Under the terms of the Merger Agreements and a Stockholders'
Agreement, the former owners of the CenterPoint Companies and the initial
investors and management of CenterPoint have agreed, subject to limited
exceptions, not to sell, transfer or otherwise dispose of any shares for a
period of 18 months following the offering. Effective 18 months after the
offering, 20% of each stockholder's shares will be released from such
restrictions, and an additional 20% of the original number of restricted
shares will be released on the expiration of each six-month period
thereafter. Any requested waiver of the restrictions must be approved by a
majority of the members of the board of directors who are not subject to
transfer restrictions at the time of such proposed waiver. The owners of
the CenterPoint shares will not be entitled to registration rights until
two years following the offering; thereafter the former owners of the
CenterPoint Companies will have "piggyback" registration rights with
respect to shares that have been released from the contractual transfer
restrictions. Restrictions on transferability of the common stock issued to
the former owners of the CenterPoint Companies equate, economically, to the
value of a put option on those shares. The 25% discount was determined
using the Black Scholes option pricing methodology and the put/call parity
relationship using a term of 2.5 years (weighted average period of
restriction), a volatility factor based on comparable public company
transactions and an appropriate risk-free interest rate.
(2) In addition to the consideration set forth in the table, the former
stockholders of Driver will be entitled to receive a contingent cash
payment equal to 6.75 times the amount, if any, by which Driver's adjusted
earnings before interest, taxes, depreciation and amortization ("EBITDA")
for 2000 exceed $11,600. The former stockholders of IDA will be entitled to
a contingent cash payment equal to the lesser of (a) $3,415 and (b) 6.75
times the amount, if any, by which IDA's adjusted EBITDA for 2000 exceeds
$3,290. The former stockholders of Reppond will be entitled to receive a
contingent cash payment which will be calculated with respect to a
specified twelve month period ending in 2003 and based on the amount by
which the adjusted EBITDA of CenterPoint's employee benefits business
(excluding IDA) exceeds specified thresholds. One of Reppond's stockholders
will also be entitled to receive contingent cash payments with respect to
each of the first five twelve month periods following the closing of the
Mergers. Such payments will be based on the amount by which Reppond's
adjusted EBITDA for the applicable period exceeds specified thresholds.
The purchase price has been allocated to the assets and liabilities
acquired based on their respective carrying values, as those are deemed to
represent fair market value of such assets and liabilities. The allocation of
the purchase price is considered preliminary until such time as the closing of
the transaction and consummation of the Mergers. CenterPoint does not
anticipate that the final allocation of the purchase price will differ
materially from that presented.
<TABLE>
<CAPTION>
Total Net Assets
Consideration Acquired Goodwill
------------- ---------- --------
<S> <C> <C> <C>
Reznick.................................. $ 35,910 $ (1,437) $ 37,347
Driver................................... 31,417 (16,332) 47,749
Mann Frankfort........................... 35,069 (197) 35,266
Follmer.................................. 28,900 900 28,000
Berry Dunn............................... 16,600 (394) 16,994
Urbach................................... 19,941 (685) 20,626
IDA...................................... 17,327 525 16,802
Grace.................................... 6,035 (558) 6,593
Holthouse................................ 11,907 376 11,531
Reppond.................................. 4,698 676 4,022
Simione.................................. 8,092 (1,211) 9,303
-------- --------- --------
$215,896 $(18,337) $234,233
======== ========= ========
</TABLE>
F-8
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Note 3--Unaudited Pro Forma Combined Balance Sheet Adjustments
The following table summarizes unaudited pro forma combined balance sheet
adjustments:
<TABLE>
<CAPTION>
Offering
Merger Adjustments Total Adjustments Total
---------------------------- Merger ------------------- Offering
(A) (B) (C) Adjustments (D) (E) Adjustments
-------- -------- -------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ (4,487) $ -- $ -- $ (4,487) $134,830 $(118,717) $ 16,113
Investments............. -- (1,577) -- (1,577) -- -- --
Receivables, net........ (31,211) (501) -- (31,712) -- -- --
Unbilled fees at net
realizable value....... (7,552) -- -- (7,552) -- -- --
Notes receivable........ -- (12) -- (12) -- -- --
Due from related
parties................ -- (977) -- (977) -- -- --
Prepaid expenses and
other current assets... -- (162) -- (162) -- -- --
Deferred offering
costs.................. -- -- -- -- (800) -- (800)
Deferred income taxes... -- (1,700) -- (1,700) -- -- --
-------- -------- -------- -------- -------- --------- --------
Total current
assets.............. (43,250) (4,929) -- (48,179) 134,030 (118,717) 15,313
Property and equipment,
net.................... -- (938) -- (938) -- -- --
Goodwill, net........... -- (22,974) 234,233 211,259 -- -- --
Long-term investments... -- (970) -- (970) -- -- --
Deferred income taxes... -- (4,127) -- (4,127) -- -- --
Other assets............ -- (5,280) -- (5,280) -- -- --
-------- -------- -------- -------- -------- --------- --------
Total assets......... $(43,250) $(39,218) $234,233 $151,765 $134,030 $(118,717) $ 15,313
======== ======== ======== ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Short-term debt,
including current
maturities of long-term
debt................... $ -- $ (32) $ -- $ (32) $ -- $ (7,921) $ (7,921)
Accrued compensation and
related costs.......... -- (18,373) -- (18,373) -- -- --
Deferred compensation... -- (91) -- (91) -- -- --
Deferred income taxes... -- (5,343) -- (5,343) -- -- --
Due to related parties.. -- (4,279) 83,918 79,639 -- (84,810) (84,810)
Other accrued
liabilities............ -- 250 -- 250 -- (1,357) (1,357)
-------- -------- -------- -------- -------- --------- --------
Total current
liabilities......... -- (27,868) 83,918 56,050 -- (94,088) (94,088)
Long-term debt, net..... -- (253) -- (253) -- (20,629) (20,629)
Deferred compensation... -- (9,425) -- (9,425) -- -- --
Deferred income taxes... -- 138 -- 138 -- -- --
Other long-term
liabilities............ -- (2,411) -- (2,411) -- -- --
-------- -------- -------- -------- -------- --------- --------
Total liabilities.... -- (39,819) 83,918 44,099 -- (114,717) (114,717)
-------- -------- -------- -------- -------- --------- --------
Redeemable preferred
stock.................. -- -- -- -- -- (4,000) (4,000)
-------- -------- -------- -------- -------- --------- --------
Stockholders' equity:
Members' equity........ (4,419) (298) 860 (3,857) -- -- --
Common stock........... -- -- (1,267) (1,267) 106 -- 106
Additional paid-in
capital................ -- (840) 117,739 116,899 133,924 -- 133,924
Retained earnings
(deficit).............. (38,831) 1,103 32,410 (5,318) -- -- --
Notes receivable from
shareholder............ -- 868 230 1,098 -- -- --
Stock subscriptions
receivable............. -- -- 114 114 -- -- --
Accumulated other
comprehensive income... -- (232) -- (232) -- -- --
Treasury stock......... -- -- 229 229 -- -- --
-------- -------- -------- -------- -------- --------- --------
Total stockholders'
equity.............. (43,250) 601 150,315 107,666 134,030 -- 134,030
-------- -------- -------- -------- -------- --------- --------
Total liabilities and
stockholders'
equity.............. $(43,250) $(39,218) $234,233 $151,765 $134,030 $(118,717) $ 15,313
======== ======== ======== ======== ======== ========= ========
</TABLE>
F-9
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
- --------
(A) Reflects the contractual distributions of excess working capital,
calculated as accounts receivable and work in process in excess of: (i)
accounts payable and accrued expenses; less (ii) prepaid expenses; plus
(iii) 1% of trailing twelve months' revenues to the owners of the
CenterPoint Companies.
(B) Reflects the contractual distribution of certain assets and liabilities to
the owners of the CenterPoint Companies in connection with the mergers and
the establishment of deferred tax balances to be established upon the
conversion of IDA, Holthouse, and Simione from S Corporation or partnership
status to C Corporation status.
(C) Reflects the purchase of the CenterPoint Companies for consideration
consisting of $83,918 in cash and 12,569,367 shares of common stock valued
at $ per share (or a total of $131,978) for a total estimated purchase
price of $215,896, resulting in an excess purchase price over the fair
value of assets acquired of $234,233. See Note 2 for discussion of
valuation of stock.
(D) Reflects the cash proceeds from the issuance of shares of common
stock net of estimated expenses of the offering (based on an estimated
initial public offering price of $ per share). Expenses of the
offering primarily consist of the underwriting discount, accounting fees,
legal fees, printing expenses, consulting fees and signing bonuses.
(E) Reflects the use of offering proceeds to: (i) fund the cash portion of the
consideration due to the owners of the CenterPoint Companies in connection
with the Mergers (excluding certain contingent payments described in Note
2); (ii) fund the redemption by Driver of its redeemable preferred stock of
$4,000; (iii) repay $28,550 of indebtedness of certain of the CenterPoint
Companies; (iv) reimburse amounts previously advanced by BGL Capital and
CCP Group and other related accruals totaling $1,999; and (v) pay $250 for
settlement of a consulting agreement of Driver.
F-10
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Note 4--Unaudited Pro Forma Combined Statements of Operations Adjustments
(A) Reflects the reduction in compensation and benefits to the owners of
the CenterPoint Companies to which they have agreed prospectively in incentive
compensation and employment agreements to be effective upon completion of the
offering, net of compensation to management of CenterPoint as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Professional Services:
Reznick..................................................... $ 6,013
Mann Frankfort.............................................. 5,510
Follmer..................................................... 5,315
Berry Dunn.................................................. 2,013
Urbach...................................................... 3,020
Grace....................................................... 533
Holthouse................................................... (2,792)
Simione..................................................... 912
-------
$20,524
=======
Business and Financial Services:
Driver...................................................... $ (100)
IDA......................................................... 1,092
Reppond..................................................... 548
-------
$ 1,540
=======
</TABLE>
The senior professionals of each professional services firm will enter
firm-specific incentive compensation agreements with CenterPoint. The
compensation adjustment has been calculated as the difference between (x)
operating income adjusted to add back depreciation and amortization and member
compensation less the "CenterPoint Base Earnings" which is a fixed dollar
amount negotiated with each professional services firm, and (y) the
compensation and related costs of any senior professional recorded in the
historical accounts.
(B) Reflects the reduction in stock compensation and signing bonuses to
consultants of CenterPoint which will not be ongoing activities of the Company
in accordance with the Employee Incentive Compensation Plan and employment
agreements to be effective upon completion of the offering, net of prospective
salaries of management of CenterPoint, pursuant to employment agreements.
(C) Reflects the amortization of $234,233 of goodwill to be recorded as a
result of the Mergers over a 40 year estimated life, net of amortization
expense already recorded in the accounts of the CenterPoint Companies of $666
in the year ended December 31, 1998, resulting in a net adjustment of $5,190.
F-11
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
(D) Reflects the net reduction in interest expense associated with debt
to be paid in conjunction with the closing of this transaction, as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Reznick....................................................... $ 260
Driver........................................................ 939
Mann Frankfort................................................ 58
Follmer....................................................... 35
Berry Dunn.................................................... 299
Urbach........................................................ 600
IDA........................................................... 32
Grace......................................................... 17
Holthouse..................................................... --
Reppond....................................................... 39
Simione....................................................... 29
------
$2,308
======
</TABLE>
(E) Reflects the net reduction in interest income of $37 at Urbach and
$119 at Grace associated with the elimination of certain assets retained in
conjunction with the closing of the Mergers.
(F) Reflects the incremental provision for federal and state income taxes
at a rate of 40% assuming all entities were subject to federal and state income
tax. The adjustment relates primarily to other statements of operations'
adjustments and income taxes on partnership and S Corporation income.
Note 5--Net Income Per Share
The shares used in computing net income per share includes: (i) 3,681,309
shares issued to the initial investors in and management of CenterPoint; (ii)
12,569,367 shares to be issued to the owners of the CenterPoint Companies in
connection with the Mergers; and (iii) shares representing the
number of shares sold in this offering, net of the underwriting discount
necessary to pay the $83,918 cash portion of the consideration for the Mergers
(excluding certain contingent payments described in Note 2), to repay certain
indebtedness of $28,550 of the CenterPoint Companies, to repay other
obligations of $4,250 and to pay estimated expenses of the offering.
Note 6--Attest Services
CenterPoint is adopting the "separate practice format" under which it
will only acquire those aspects of the practices of the professional services
firms which do not fall within the monopoly granted to CPAs under the
accountancy laws of the various states, i.e., the non-attest services. Attest
services will continue to be provided by the CPAs who currently own the
professional services firms via the licensed Attest Firms in which CenterPoint
will have no ownership interest. Pursuant to non-exclusive services agreements,
CenterPoint will provide, for a fee, the professional and other personnel,
equipment, office space and business and administration services necessary for
the operation of the Attest Firms.
F-12
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)
The revenues which would have been derived by CenterPoint under the
services agreements would have materially approximated the attest services
revenues historically recorded by the professional services firms.
Additionally, absent consideration of economies of scale, CenterPoint's
operating costs incurred in performing its responsibilities under the services
agreements would not have been materially different from the attest services'
expenses historically recorded by such firms. Accordingly, no carve-out or pro
forma elimination of attest services' revenues and expenses has been reflected
in the accompanying Unaudited Pro Forma Combined Statement of Operations.
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
CenterPoint Advisors, Inc.
The stock split described in Note 1 to the financial statements has not
been consummated at April 5, 1999. When it has been consummated, we will be in
position to furnish the following report:
In our opinion, the accompanying balance sheet and the related statement
of operations present fairly, in all material respects, the financial position
of CenterPoint Advisors, Inc. at December 31, 1998, and the results of its
operations for the period from November 9, 1998 (inception date) through
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
April 5, 1999
F-14
<PAGE>
CENTERPOINT ADVISORS, INC.
BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS
Deferred offering costs........................................... $ 800
-------
Total assets.................................................. $ 800
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued liabilities............................................... $ 1,107
Payable to related parties........................................ 892
-------
Total liabilities............................................. 1,999
-------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
3,681,309 shares issued and outstanding........................ 34
Additional paid-in capital...................................... 842
Retained deficit................................................ (1,961)
Stock subscriptions receivable.................................. (114)
-------
Total stockholders' equity.................................... (1,199)
-------
Total liabilities and stockholders' equity.................... $ 800
=======
</TABLE>
F-15
<PAGE>
CENTERPOINT ADVISORS, INC.
STATEMENT OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Period from
November 9, 1998
(inception date)
through December
31, 1998
----------------
<S> <C>
Total revenues................................................. $ --
-------
Operating expenses............................................. 1,961
-------
Loss before income taxes....................................... (1,961)
Provision for income taxes..................................... --
-------
Net loss....................................................... $(1,961)
=======
</TABLE>
F-16
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
Note 1--Business and Organization
CenterPoint Advisors, Inc. ("CenterPoint" or the "Company") was founded
in 1998 to create a leading provider of diversified professional, business and
financial services and products to a broad spectrum of middle-market clients
that operate across a broad spectrum of industries. CenterPoint intends to
acquire eleven companies (the "Mergers") upon consummation of an initial public
offering of its common stock (the "Offering").
CenterPoint has not conducted any operations, and all activities to date
have related to the Offering and the Mergers. The Company's operations have all
been non-cash in nature stemming from the initial capitalization of the
Company. Accordingly, the statement of cash flows for this period would not
provide meaningful information and has been omitted. CenterPoint is dependent
upon the Offering to execute the pending Mergers. There is no assurance that
the pending Mergers discussed will be completed or that CenterPoint will be
able to generate future operating revenues.
In connection with the organization and initial capitalization of
CenterPoint, 3,369,345 shares of the Company's common stock were subscribed by
sponsoring parties for total consideration of $143. Of this amount, $29 had
been received as of December 31, 1998. In addition, at the time of organization
the Company agreed to issue warrants to the CCP Group to purchase a total of
100,000 shares of the Company's common stock at the initial public offering
price.
On , the Board of Directors approved several actions in
connection with the Offering. These actions included a 210.3605 stock split
which will occur prior to the effectiveness of the Company's Registration
Statement. All common stock related information included in the financial
statements has been adjusted to reflect this split.
Note 2--Significant Accounting Policies
Stock-Based Compensation
CenterPoint will measure compensation expense for its stock-based
employee compensation plans using the intrinsic value method. Following the
issuance of any options the Company will be required to make pro forma
disclosures of net income and earnings per share as if the fair value method of
accounting had been applied.
Earnings Per Share
Following the Offering, the Company will adopt Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No.
128 requires a presentation of basic earnings per share ("basic EPS") and
diluted earnings per share ("diluted EPS"). Basic EPS excludes dilution and is
determined by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock.
Income Taxes
Income taxes have been computed using the asset and liability approach.
Under this approach deferred income tax assets and liabilities are determined
based on the differences between the financial statement and
F-17
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
tax basis of assets and liabilities using currently enacted tax rates in effect
for the years in which the differences are expected to reverse. For the period
from November 9, 1998 (inception date) to December 31, 1998, no income tax
benefit was recorded associated with the pre-tax loss because such realization
could not be construed to be more likely than not.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. While management believes that the
estimates and related assumptions used in the preparation of the financial
statements are appropriate, actual results could differ from those estimates.
Estimates are made when accounting for the income taxes.
Note 3--Stockholders' Equity
Issuance of Common Stock to Management Personnel
During the period from November 9, 1998 (inception date) to December 31,
1998, 70,050 shares were issued to Rondol E. Eagle, Chief Integration Officer,
for $3 of consideration. For accounting purposes, compensation expense of $732
has been reflected in the accompanying Statement of Operations.
Employee Incentive Compensation Plan
Prior to the offering, the Company's Board of Directors and stockholders
will adopt the Company's Employee Incentive Compensation Plan (the "Incentive
Plan"). Awards under this plan may take the form of: (1) incentive stock
options or non-qualified stock options; (2) stock appreciation rights; (3)
restricted or deferred stock; (4) dividend equivalents; and (5) cash awards or
other awards not otherwise provided for, the value of which is based in whole
or in part upon the value of the common stock. CenterPoint's compensation
committee will administer the plan and generally select the individuals who
will receive awards as well as determine the terms and conditions of those
awards.
Upon adopting the Incentive Plan, CenterPoint will reserve shares of
common stock for use in connection with the plan. The number of shares
available for use under the plan at any given time will not exceed fifteen
percent of the total number of shares of common stock outstanding at that time.
Shares attributable to awards which have expired, terminated, canceled or
forfeited are available for issuance for future awards.
Upon completion of the Offering, non-qualified stock options to purchase
an aggregate number of shares up to 7.5 percent of the total shares then
outstanding (less 75,000 shares issuable to non-employee directors as described
below) will be granted. Such options will be allocated among management of
CenterPoint and the employees of the CenterPoint Companies. The grants will be
effective as of the date of the offering and each option will have an exercise
price equal to the initial public offering price. These options will vest over
periods ranging from three to five years and will expire ten years from the
date of grant or earlier if there is a termination of employment.
The plan also provides for: (a) the automatic grant to each non-employee
director serving at the closing of the offering of an option to purchase 15,000
shares of common stock; and (b) after the offering, the
F-18
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
automatic grant to each non-employee director of an option to purchase 15,000
shares when the director is initially elected. In addition, the plan provides
for an automatic annual grant to each non-employee director of an option to
purchase 7,500 shares at each annual meeting of stockholders following the
offering. However, if the first annual meeting of stockholders following a non-
employee director's initial election is within three months of the date of the
election or appointment, the non-employee director will not be granted an
option at the annual meeting. These options will have an exercise price per
share equal to the fair market value of a share at the date of grant, will
expire at the earlier of ten years from the date of grant or one year after
termination of service as a director, and will be immediately exercisable upon
grant.
The Company intends to file a registration statement on Form S-8 under
the Securities Act registering the issuance of shares upon exercise of options
granted under the Incentive Plan.
Employee Stock Purchase Plan
Prior to the closing of the Offering, CenterPoint plans to adopt an
employee stock purchase plan. For purposes of such plan, generally the first
day of each year will be the grant date and the last day of each year will be
the exercise date. On each exercise date, payroll deductions credited to
participants' accounts will be automatically applied to the purchase price of
Common Stock at a price per share equal to 85 percent of the fair market value
of the Common Stock on the grant or exercise date, whichever is less.
Note 4--Related Party Transactions
As of December 31, 1998, CenterPoint has outstanding payables to related
parties of $892 due to BGL Capital, a CenterPoint shareholder, and CCP Group.
These payables represent out-of-pocket expenses which have been expensed in the
Statement of Operations in the period from November 9, 1998 (inception date)
through December 31, 1998.
Note 5--Subsequent Events
CenterPoint has signed definitive agreements to acquire all of the
outstanding common stock of eleven companies ("CenterPoint Companies") to be
consummated contemporaneously with this Offering. The CenterPoint Companies are
Reznick Fedder & Silverman, P.C. ("Reznick"); Robert F. Driver Co., Inc.
("Driver"); Mann Frankfort Stein & Lipp, P.C. ("Mann Frankfort"); Follmer
Rudzewicz & Company, P.C. ("Follmer"); Berry, Dunn, McNeil & Parker, Chartered
("Berry Dunn"); Urbach Kahn & Werlin, P.C. ("Urbach"); Self Funded Benefits,
Inc. D/B/A Insurance Design Administrators ("IDA"); Grace & Company, P.C.
("Grace"); Holthouse Carlin & Van Trigt LLP ("Holthouse"); the Reppond
Companies ("Reppond"); and Simione, Scillia, Larrow & Dowling LLC ("Simione").
Concurrently with and as a condition to closing of the Offering,
CenterPoint will acquire all of the outstanding common stock of the CenterPoint
Companies. The Mergers will be accounted for using the purchase method of
accounting with CenterPoint being treated as the accounting acquiror in
accordance with Staff Accounting Bulletin No. 97 and APB 16.
F-19
<PAGE>
CENTERPOINT ADVISORS, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
The following table reflects the consideration to be paid in cash and
shares of Common Stock:
<TABLE>
<CAPTION>
Shares of
Cash(1) Common Stock
------- ------------
<S> <C> <C>
Reznick............................................... $16,899 1,810,553
Driver................................................ 500 2,944,445
Mann Frankfort........................................ 16,503 1,768,200
Follmer............................................... 13,600 1,457,143
Berry Dunn............................................ 6,821 931,357
Urbach Kahn........................................... 9,190 1,023,943
IDA................................................... 8,154 873,669
Grace................................................. 2,840 304,286
Holthouse............................................. 5,603 600,343
Reppond............................................... -- 447,428
Simione............................................... 3,808 408,000
------- ----------
Total............................................. $83,918 12,569,367
======= ==========
</TABLE>
- --------
(1) In addition to the consideration set forth in the table, the former
stockholders of Driver will be entitled to receive a contingent cash
payment equal to 6.75 times the amount, if any, by which Driver's adjusted
earnings before interest, taxes, depreciation and amortization ("EBITDA")
for 2000 exceed $11,600. The former stockholders of IDA will be entitled to
a contingent cash payment equal to the lesser of (a) $3,415 and (b) 6.75
times the amount, if any, by which IDA's adjusted EBITDA for 2000 exceeds
$3,290. The former stockholders of Reppond will be entitled to receive a
contingent cash payment which will be calculated with respect to a
specified twelve month period ending in 2003 and based on the amount by
which the adjusted EBITDA of CenterPoint's employee benefits business
(excluding IDA) exceeds specified thresholds. One of Reppond's stockholders
will also be entitled to receive contingent cash payments with respect to
each of the first five twelve month periods following the closing of the
Mergers. Such payments will be based on the amount by which Reppond's
adjusted EBITDA for the applicable period exceeds specified thresholds.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the CenterPoint Companies cease providing attest services prior to the
closing of the acquisition, if applicable. Following the closing, all attest
services formerly provided by the CenterPoint Companies will be provided by
newly created separate legal entities (the Attest Firms) which will be owned by
former owners of the CenterPoint Companies who are certified public
accountants. Pursuant to services agreements, CenterPoint will provide
professional and other personnel, equipment, office space and business and
administrative services necessary to operate the Attest Firms.
On April 7, 1999, CenterPoint filed a registration statement on Form S-1
for this Offering.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Reznick Fedder & Silverman, P.C.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Reznick Fedder & Silverman, P.C. (the Company) and its subsidiaries at
September 30, 1997 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 29, 1999
F-21
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
September 30,
--------------- December 31,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 3,962 $ 5,774 $ 995
Fees receivable, net of allowance for doubtful
accounts of $3,037, $3,526 and $3,745, respec-
tively......................................... 11,934 14,528 10,959
Unbilled fees, at net realizable value.......... 1,932 2,542 6,439
Deferred income taxes........................... 2,035 1,752 1,700
Prepaid expenses and other current assets....... 242 244 418
------- ------- -------
Total current assets.......................... 20,105 24,840 20,511
Property and equipment, net....................... 2,389 2,863 2,822
Cash surrender value of life insurance............ 580 558 558
Intangible assets, net............................ 414 403 399
Deferred income taxes............................. 1,147 1,327 1,353
------- ------- -------
Total assets.................................. $24,635 $29,991 $25,643
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................. $ -- $ -- $ 900
Current portion of long-term debt............... 1,201 1,063 931
Accounts payable and accrued expenses........... 1,347 1,217 517
Accrued compensation and related costs to
employees...................................... 1,384 2,274 1,008
Accrued compensation and related costs to
shareholders................................... 13,252 18,214 13,223
Deferred compensation due to former shareholders
and shareholder................................ 106 91 91
------- ------- -------
Total current liabilities..................... 17,290 22,859 16,670
Long-term debt.................................... 1,150 999 2,880
Deferred compensation due to former shareholders.. 963 865 820
Accrued bonus..................................... 2,090 2,347 2,411
------- ------- -------
Total liabilities............................. 21,493 27,070 22,781
------- ------- -------
Shareholders' equity:
Common stock, no par value; 10,000 shares
authorized;
2,900 shares issued and outstanding............ -- -- --
Additional paid-in capital...................... 1,422 1,422 1,422
Retained earnings............................... 1,720 1,499 1,440
------- ------- -------
Total shareholders' equity.................... 3,142 2,921 2,862
------- ------- -------
Total liabilities and shareholders' equity.... $24,635 $29,991 $25,643
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-22
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended September 30, Ended December 31,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Professional services....... $31,483 $35,103 $47,877 $ 9,338 $ 9,848
------- ------- ------- --------- ---------
Expenses:
Shareholder and officer
compensation and related
costs...................... 7,784 8,170 13,516 1,360 769
Employee compensation and
related costs.............. 17,477 19,617 25,792 5,829 6,937
Occupancy costs............. 1,977 2,363 2,746 677 691
Office operating expenses... 669 958 1,020 231 273
Depreciation and
amortization............... 732 869 984 254 246
Other selling, general and
administrative expenses.... 2,853 3,340 3,752 1,010 1,011
------- ------- ------- --------- ---------
31,492 35,317 47,810 9,361 9,927
------- ------- ------- --------- ---------
Operating income (loss)... (9) (214) 67 (23) (79)
------- ------- ------- --------- ---------
Other (income) expense:
Interest expense............ 399 430 543 69 58
Interest income............. (53) (242) (40) (13) (16)
Other....................... (125) (122) (112) (5) (36)
------- ------- ------- --------- ---------
221 66 391 51 6
------- ------- ------- --------- ---------
Loss before benefit for income
taxes........................ (230) (280) (324) (74) (85)
Benefit for income taxes...... (74) (81) (103) (20) (26)
------- ------- ------- --------- ---------
Net loss...................... $ (156) $ (199) $ (221) $ (54) $ (59)
======= ======= ======= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-23
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------- Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1995..... 2,000 $ -- $ 2 $2,946 $2,948
Issuance of common stock..... 100 -- -- -- --
Net income................... -- -- -- (156) (156)
----- ----- ------ ------ ------
Balance at September 30, 1996.. 2,100 -- 2 2,790 2,792
Issuance of common stock..... 100 -- -- -- --
Issuance of common stock
for acquisition............. 500 -- 1,420 -- 1,420
Declaration of deferred com-
pensation to
shareholder................. -- -- (449) (449)
Redemption of common stock... (100) -- -- (422) (422)
Net loss..................... -- -- -- (199) (199)
----- ----- ------ ------ ------
Balance at September 30, 1997.. 2,600 -- 1,422 1,720 3,142
Issuance of common stock..... 300 -- -- -- --
Net income................... -- -- -- (221) (221)
----- ----- ------ ------ ------
Balance at September 30, 1998.. 2,900 -- 1,422 1,499 2,921
Net loss (unaudited)......... -- -- -- (59) (59)
----- ----- ------ ------ ------
Balance at December 31, 1998
(unaudited)................... 2,900 $ -- $1,422 $1,440 $2,862
===== ===== ====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-24
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended September 30, Ended December 31,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating ac-
tivities:
Net loss.................... $ (156) $ (199) $ (221) $ (54) $ (59)
Adjustments to reconcile net
income to net cash
provided by (used in) oper-
ating activities:
Depreciation and amortiza-
tion..................... 732 869 984 254 246
Changes in deferred income
taxes.................... 74 81 103 20 26
Changes in operating as-
sets and liabilities:
Fees receivable......... (1,273) (163) (2,594) 1,882 3,569
Unbilled fees........... (234) 64 (610) (4,578) (3,897)
Prepaid expenses and
other assets........... 81 (215) 20 340 (174)
Accounts payable and ac-
crued expenses......... (119) 219 (130) (379) (700)
Accrued compensation and
related costs.......... 552 (138) 890 (600) (1,266)
Accrued compensation and
related costs to
shareholders........... 1,572 929 4,962 (2,197) (4,991)
Accrued bonus........... 183 203 257 321 64
------- ------- ------- --------- ---------
Net cash provided by
(used in) operating
activities........... 1,412 1,650 3,661 (4,991) (7,182)
------- ------- ------- --------- ---------
Cash flows from investing ac-
tivities:
Purchase of property and
equipment.................. (684) (1,317) (1,447) (779) (201)
Business acquisition (net of
cash acquired)............. -- 9 -- -- --
------- ------- ------- --------- ---------
Net cash used in in-
vesting activities... (684) (1,308) (1,447) (779) (201)
------- ------- ------- --------- ---------
Cash flows from financing ac-
tivities:
Proceeds from the issuance
of long-term debt.......... 1,343 3,336 3,425 2,478 1,080
Payments of long-term debt.. (1,421) (2,716) (3,714) (380) (228)
Borrowings under short-term
agreements................. -- -- -- -- 900
Payments to former share-
holders.................... (84) (111) (113) (59) (45)
Loan from shareholders...... 643 641 647 647 897
Payments to shareholders.... (643) (641) (647) -- --
------- ------- ------- --------- ---------
Net cash (used in)
provided by financing
activities........... (162) 509 (402) 2,686 2,604
------- ------- ------- --------- ---------
Net increase (decrease) in
cash and cash equivalents.... 566 851 1,812 (3,084) (4,779)
Cash and cash equivalents at
beginning of period.......... 2,545 3,111 3,962 3,962 5,774
------- ------- ------- --------- ---------
Cash and cash equivalents at
end of period................ $ 3,111 $ 3,962 $ 5,774 $ 878 $ 995
======= ======= ======= ========= =========
Supplemental disclosure of
cash flow information:
Cash paid during the period
for:
Interest.................. $ 268 $ 264 $ 209 $ 69 $ 58
Income taxes.............. $ -- $ -- $ -- $ -- $ --
Noncash transactions:
Value of common stock issued
for acquisition............ $ -- $ 1,420 $ -- $ -- $ --
Reclassification of amounts
due to former shareholders
and shareholder from equity
to liability............... $ -- $ 871 $ -- $ -- $ --
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-25
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Reznick Fedder & Silverman, P.C. (the Company) is a Maryland professional
service corporation, with approximately 500 professional staff members, which
provide professional accounting services. The firm has offices in Bethesda,
Maryland; Baltimore, Maryland; Charlotte, North Carolina; Boston,
Massachusetts; and Atlanta, Georgia.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances are eliminated in consolidation.
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
5 to 27.5 years. Expenditures for maintenance and repairs and minor renewals
and betterments which do not improve or extend the life of the respective
assets are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
F-26
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through September 30, 1998.
Intangible Assets:
Intangible assets consist of goodwill, which represents the excess of
cost over the fair value of assets acquired in business combinations accounted
for under the purchase method. Substantially all goodwill is amortized on a
straight-line basis over an estimated useful life of 40 years.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable and accrued
liabilities and debt approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and tax basis of asset
and liabilities using currently enacted tax rates in effect for the years in
which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amount of revenues
and expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the consolidated
financial statements are appropriate, actual amounts could differ from those
estimates. Estimates are made when accounting for allowances for doubtful
accounts, depreciation and amortization, and income taxes.
Unaudited Interim Financial Statements:
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at December 31, 1998, and
the results of its operations and its cash flows for the three months ended
December 31, 1997 and 1998, as presented in the accompanying unaudited interim
financial statements.
F-27
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 3--BUSINESS COMBINATION
Effective August 1, 1997, the Company issued 500 shares of its common
stock in exchange for all the outstanding common stock of Sacks, McGibney,
Trotta & Koppelman, P.A. (SMTK), a Maryland professional corporation engaged in
providing accounting, attestation, tax and consulting services principally to
clients in the healthcare industry. The merger has been accounted for using the
purchase method of accounting whereby the total acquisition cost has been
allocated to the consolidated assets and liabilities based upon their estimated
respective fair values. The total acquisition cost is allocated to the acquired
net assets as follows:
<TABLE>
<S> <C>
Cash.............................................................. $ 9
Accounts receivable............................................... 1,804
Property and equipment............................................ 133
Goodwill.......................................................... 414
Accrued expenses.................................................. (151)
Notes payable..................................................... (375)
Accrued bonus..................................................... (414)
------
Value of stock issued............................................. $1,420
======
</TABLE>
Unaudited pro forma results of operations of the Company for the years
ended September 30, 1996 and 1997 are included below. Such pro forma
presentation has been prepared assuming that the SMTK acquisition had occurred
as of October 1, 1995 and 1996, respectively.
<TABLE>
<CAPTION>
September 30,
---------------
1996 1997
------- -------
<S> <C> <C>
Revenues.................................................. $38,849 $39,426
Net income................................................ 864 (536)
</TABLE>
F-28
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--SELECTED FINANCIAL STATEMENT INFORMATION
Additional information concerning consolidated financial accounts
includes the following:
<TABLE>
<CAPTION>
September 30,
---------------- December 31,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Property and equipment, net:
Leasehold improvements.................. $ 506 $ 589 $ 589
Furniture and fixtures.................. 1,941 2,307 2,520
Land.................................... 67 67 67
Buildings............................... 460 445 445
Equipment............................... 2,712 3,322 3,435
------- ------- -------
5,686 6,730 7,056
Less accumulated depreciation and
amortization............................. (3,297) (3,867) (4,234)
------- ------- -------
$ 2,389 $ 2,863 $ 2,822
======= ======= =======
Intangible assets, net:
Goodwill................................ $ 414 $ 414 $ 414
Less accumulated amortization........... -- (11) (15)
------- ------- -------
$ 414 $ 403 $ 399
======= ======= =======
Accounts payable and accrued liabilities:
Accrued insurance....................... $ 253 $ 353 $ --
Accrued rent............................ 389 296 273
Accrued legal........................... 250 250 --
Other................................... 455 318 244
------- ------- -------
$ 1,347 $ 1,217 $ 517
======= ======= =======
</TABLE>
NOTE 5--COMPENSATION--RELATED ACCRUALS
Accrued Bonus:
Upon termination or as otherwise determined by the Shareholders or the
Executive Committee, each shareholder or non-shareholder officer receives a
bonus (the "accrued bonus") which is calculated as follows: (1) if the
shareholder or non-shareholder officer held that position since October 1, 1985
or earlier, $250, except for one individual for whom the amount of accrued
bonus is $500 or (2) if the shareholder or non-shareholder officer has held
that position after October 1, 1985, 10 percent of the total cash compensation
paid him during the time he has been a shareholder or non-shareholder officer,
provided that the individual has held the position of shareholder or non-
shareholder officer for at least two years as of the date that the amount
becomes payable, and in no event will the bonus exceed $100.
F-29
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Net accrued bonus cost for the Company includes the following components:
<TABLE>
<CAPTION>
Fiscal Year Ended
September 30,
-----------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Service cost............................................ $ 17 $ 30 $ 49
Interest cost........................................... 114 121 156
Amortization of prior service cost...................... 53 53 53
----- ----- -----
Net deferred compensation cost.......................... $ 184 $ 204 $ 258
===== ===== =====
</TABLE>
Assumptions used in the development of pension data follow:
<TABLE>
<CAPTION>
Fiscal Year Ended
September 30,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Discount rate........................................ 7.0% 7.0% 7.0%
</TABLE>
The Company's accrued bonus plan is currently not funded. The following
table presents the status of the Company's accrued bonus benefits:
<TABLE>
<CAPTION>
September 30,
----------------
1997 1998
------- -------
<S> <C> <C>
Projected benefit obligation............................ $ 2,595 $ 2,267
Funded status........................................... $(2,595) $(2,267)
Unrecognized prior service cost......................... 210 158
Unrecognized (gain) loss................................ 295 (238)
------- -------
Accrued deferred compensation cost...................... $(2,090) $(2,347)
======= =======
</TABLE>
Amounts Due to Former Shareholders and Shareholder:
Annually, each shareholder is allocated accrued compensation (as defined
in the Shareholders' Agreement). Accrued compensation bears interest at 7
percent per annum. To the extent that each shareholder's balance exceeds $200,
interest is expensed and paid to the shareholder. Unpaid interest is included
in the accrued compensation to shareholders account balance.
Upon termination or as otherwise determined by the shareholders or the
Executive Committee, the unpaid balance of accrued compensation and interest is
transferred to amounts due to former shareholders and shareholder and bears
interest at the rate of 10 percent, except in the case of voluntary
termination, in which case the interest rate is 7 percent. The unpaid portion
of the accrued compensation is paid in equal monthly installments of principal
and interest in an amount equal to one-quarter of the individual's average
monthly compensation for the last five years of employment. The period of
payment for the accrued compensation shall be the shorter of the period
resulting from the computation of payments or fifteen years (and the
amortization of payments shall be determined accordingly).
F-30
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 6--CREDIT FACILITIES
Short-Term Debt:
The Company has a Short-Term Credit Agreement which allows for cash
borrowings at prime rate of up to $3,500. The Short-Term Credit Agreement
expires annually on May 31. Upon expiration, the Short-Term Credit Agreement
may be renewed, with the consent of the bank, annually. No cash borrowings were
outstanding under this agreement at September 30, 1997 or 1998. At December 31,
1998, $900 was outstanding under this agreement. This agreement is fully
collateralized through the Company's current accounts receivable.
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
---------------- December 31,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Loans from bank............................. $ 1,687 $ 1,719 $2,566
Mortgage loans.............................. 289 281 285
Note payable................................ 125 62 63
Note payable to bank........................ 250 -- --
Loan from shareholders...................... -- -- 897
------- ------- ------
2,351 2,062 3,811
Less current portion........................ (1,201) (1,063) (931)
------- ------- ------
Total..................................... $ 1,150 $ 999 $2,880
======= ======= ======
</TABLE>
The loans from bank bear interest at variable and fixed rates ranging
from 8.18 percent to 8.9 percent. The loans allow for borrowing to a specified
limit until a point in time. At that point in time, the loans are repaid in
monthly installments of principal and interest rates ranging from prime to
prime plus 1 percent. The loan agreements include customary representations and
restrictive covenants.
Mortgage loans bear interest at fixed rates ranging from 7.75 percent to
9.25 percent. Principal and interest payments are paid monthly over a 30-year
period. Real property is pledged as collateral for these loans.
In connection with the SMTK acquisition (Note 3), the Company assumed a
note payable maturing on March 1, 1999. The total amount owed at the date of
acquisition was $125.
Assumed in the SMTK acquisition (Note 3), the note payable to the bank is
a $450 revolving credit facility that bears interest at the bank's prime rate
plus 1 percent. The balance is due upon demand. Interest is payable monthly.
The entire balance is collateralized by accounts receivable and equipment of
SMTK.
F-31
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999................................................................ $1,063
2000................................................................ 664
2001................................................................ 206
2002................................................................ 32
2003................................................................ 32
Thereafter.......................................................... 65
------
Total............................................................. $2,062
======
</TABLE>
Interest expense was $209, $264, $268, $69 (unaudited) and $58
(unaudited) for the fiscal years ended September 30, 1996, 1997 and 1998 and
the three months ended December 31, 1997 and 1998, respectively.
NOTE 7--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Fiscal Year
Ended September
30,
-----------------
1996 1997 1998
---- ---- -----
<S> <C> <C> <C>
Deferred tax expense:
Federal.............................................. $(64) $(71) $ (90)
State................................................ (10) (10) (13)
---- ---- -----
Total benefit for income taxes..................... $(74) $(81) $(103)
==== ==== =====
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
September 30,
------------- December 31,
1997 1998 1998
------ ------ ------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Accrual to cash adjustment.................... $2,035 $1,752 $1,700
Accrued bonuses............................... 836 939 965
Depreciation.................................. 280 367 367
Net operating loss carryforwards.............. 31 21 21
------ ------ ------
Net deferred tax assets......................... $3,182 $3,079 $3,053
====== ====== ======
Net current deferred tax asset.................. $2,035 $1,752 $1,700
Net long-term deferred tax asset................ 1,147 1,327 1,353
------ ------ ------
Net deferred tax asset.......................... $3,182 $3,079 $3,053
====== ====== ======
</TABLE>
F-32
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
The Company's effective rate varied from the U.S. statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended Ended
September 30, December 31,
------------------ ----------------
1996 1997 1998 1997 1998
---- ---- ---- ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Statutory rate........................ (35)% (35)% (35)% (35)% (35)%
Non-temporary differences:
State tax........................... (5) (5) (5) (5) (5)
Non-deductible items................ 8 11 8 13 9
--- --- --- ------ ------
Total provision................... (32)% (29)% (32)% (27)% (31)%
=== === === ====== ======
</TABLE>
NOTE 8--LEASE COMMITMENTS
The Company leases office space at five locations. The Company's main
office in Bethesda, Maryland is an eleven-year lease expiring on October 31,
2001 with two five-year options to renew and a four-year sublease agreement
expiring July 30, 2000. The Company's Baltimore, Maryland office is leased
under a ten-year lease expiring on October 31, 2007 with two five-year options
to renew. The Company's Charlotte, North Carolina office has exercised their
second one-year option to renew their original ten-year lease, extending the
expiration to September 30, 2000. The Company's Boston, Massachusetts office is
a five-year lease with one five-year option to renew. The Company's Atlanta,
Georgia office is leased under a seven-year lease expiring on November 30, 2004
with one five-year option to renew. All leases are subject to future periodic
adjustments to reflect the increases in operating expenses incurred by the
lessor. The Company has entered into other lease agreements with unrelated
parties with various base rents and terms in connection with photocopiers
utilized at the Company's five offices.
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999............................................................... $ 2,935
2000............................................................... 3,111
2001............................................................... 2,641
2002............................................................... 1,223
2003............................................................... 1,114
Thereafter......................................................... 3,020
-------
Total............................................................ $14,044
=======
</TABLE>
Rent expense for all operating leases for the fiscal years ended
September 30, 1996, 1997 and 1998 and the three months ended December 31, 1997
and 1998 was approximately $1,977, $2,363, $2,745, $677 (unaudited) and $691
(unaudited), respectively.
F-33
<PAGE>
REZNICK FEDDER & SILVERMAN, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 9--EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan (Plan) for substantially all
employees. The amended and restated provisions of the Plan became effective in
July, 1997. The Company makes annual matching contributions to the savings plan
equaling 50 percent of the amount of salary reduction elected by the employee
which does not exceed 5 percent of the employee's annual compensation subject
to 20 percent vesting per year over a 5 year period based upon years of
service. The Company may amend or terminate the Plan at any time; however, no
such indication to terminate the Plan has been made.
Contributions by the Company for eligible employees to the Plan for the
years ended September 30, 1996, 1997 and 1998 and the three months ended
December 31, 1997 and 1998 totaled $179, $254, $317, $97 (unaudited) and $148
(unaudited), respectively.
NOTE 10--COMMON STOCK
The Company has authorized capital stock consisting of 10,000 shares of
common stock with no par value. Each shareholder or non-shareholder officer
earns one vote per year at the beginning of each of his first six years as a
shareholder or non-shareholder officer. In no event shall a shareholder or non-
shareholder officer have more than six votes.
NOTE 11--COMMITMENTS AND CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 12--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its shareholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which,
following the conversion of the Company from a professional corporation to a
business corporation, a wholly-owned subsidiary of CenterPoint will merge with
and into the Company. All of the Company's outstanding shares will be exchanged
for cash and common stock of CenterPoint concurrently with the consummation of
the initial public offering of the common stock of CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former owners of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Robert F. Driver Co., Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Robert F.
Driver Co., Inc. and its subsidiaries at July 31, 1998, and the results of
their operations and their cash flows for the periods from August 1, 1997
through May 31, 1998 (date of acquisition of the predecessor company) and June
1, 1998 through July 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 10, 1999
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Robert F. Driver Co., Inc.:
We have audited the accompanying consolidated balance sheet of Robert F. Driver
Co., Inc. and subsidiaries (the Company) as of July 31, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the two-year period ended July 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Robert F. Driver
Co., Inc. and subsidiaries as of July 31, 1997 and the results of their
operations and their cash flows for each of the years in the two-year period
ended July 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
San Diego, California
September 10, 1997
F-36
<PAGE>
ROBERT F. DRIVER CO., INC.
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
July 31,
-------------------- January 31,
1997 1998 1999
------------ ------- -----------
(Predecessor (Unaudited)
Company) (Successor Company)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 798 $ 2,356 $ 2,989
Premium trust cash......................... 22,053 22,855 12,155
Insurance premiums receivable.............. 8,689 11,665 11,005
Other current assets....................... 230 1,935 719
------- ------- -------
Total current assets..................... 31,770 38,811 26,868
Property and equipment, net.................. 1,214 1,151 1,275
Goodwill, net................................ -- 17,895 20,626
Customer lists acquired, net................. 938 826 770
Deferred income taxes........................ 433 889 905
Other assets................................. 92 800 786
------- ------- -------
Total assets............................. $34,447 $60,372 $51,230
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt............................ $ -- $ 253 $ 253
Current portion of long-term debt.......... 219 1,267 1,789
Accounts payable and accrued expenses...... 4,903 6,005 3,883
Insurance premiums payable................. 23,670 26,250 18,639
Income taxes payable....................... 256 616 --
------- ------- -------
Total current liabilities................ 29,048 34,391 24,564
Long-term debt, net of current portion....... 356 14,263 15,083
Deferred compensation........................ 590 1,331 1,325
------- ------- -------
Total liabilities........................ 29,994 49,985 40,972
------- ------- -------
Class A redeemable preferred stock, $.01 par
value: authorized, issued and outstanding
4,000 shares at July 31, 1998 and January
31, 1999 (unaudited); redeemable at $1,000
per share................................... -- 4,000 4,000
------- ------- -------
Commitments and contingencies
Common stockholders' equity:
Class A common stock, $.01 par value:
authorized 10,000,000 shares; outstanding
738,540 shares at July 31, 1998 and
January 31, 1999 (unaudited).............. -- 7 9
Common stock, $1 par value: authorized
1,650,000 shares; issued and outstanding
1,031,568 shares at July 31, 1997......... 1,032 -- --
Additional paid-in capital................. 418 6,711 8,334
Retained earnings (deficit)................ 3,368 509 (380)
Unearned compensation...................... -- -- (865)
Unearned ESOP contribution................. (365) -- --
------- ------- -------
4,453 7,227 7,098
Stockholder notes receivable............... -- (840) (840)
------- ------- -------
Total stockholders' equity............... 4,453 6,387 6,258
------- ------- -------
Total liabilities and stockholders' equi-
ty...................................... $34,447 $60,372 $51,230
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-37
<PAGE>
ROBERT F. DRIVER CO., INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Six Months Ended
Ended July 31, Period From January 31,
---------------- ---------------------------- -----------------------
August 1, 1997 June 1, 1998
Through Through
1996 1997 May 31, 1998 July 31, 1998 1998 1999
------- ------- -------------- ------------- ------------ ----------
(Unaudited)
(Predecessor Company) (Successor (Predecessor (Successor
Company) Company) Company)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Commissions and fees.. $26,939 $28,170 $24,446 $8,440 $13,474 $14,891
------- ------- ------- ------ ------- -------
Expenses:
Producer
compensation......... 13,074 12,965 11,630 3,792 6,553 6,626
Employee compensation
and related costs.... 7,261 7,433 6,760 1,715 4,011 5,511
Occupancy costs....... 1,453 1,378 1,144 230 667 714
Office operating
expenses............. 716 759 650 230 355 449
Depreciation and
amortization......... 329 463 656 337 305 976
Other selling, general
and administrative
expenses............. 3,716 3,948 2,162 1,222 1,334 1,615
------- ------- ------- ------ ------- -------
26,549 26,946 23,002 7,526 13,225 15,891
------- ------- ------- ------ ------- -------
Operating income
(loss)............. 390 1,224 1,444 914 249 (1,000)
------- ------- ------- ------ ------- -------
Other (income) expense:
Interest expense...... 70 42 36 220 18 801
Interest income....... (580) (654) (599) (193) (399) (459)
Other................. (109) (213) (161) (6) (5) (255)
------- ------- ------- ------ ------- -------
(619) (825) (724) 21 (386) 87
------- ------- ------- ------ ------- -------
Income (loss) before
provision for income
taxes.................. 1,009 2,049 2,168 893 635 (1,087)
Provision (benefit) for
income taxes........... 354 933 970 384 290 (376)
------- ------- ------- ------ ------- -------
Net income (loss)....... $ 655 $ 1,116 $ 1,198 $ 509 $ 345 $ (711)
======= ======= ======= ====== ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-38
<PAGE>
ROBERT F. DRIVER CO., INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock Additional Retained Stockholder Unearned Total
-------------- ------------------- Paid-In Earnings Notes Unearned ESOP Stockholders'
Shares Amount Shares Amount Capital (Deficit) Receivable Compensation Contributions Equity
------- ------ ---------- ------- ---------- -------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July
31, 1995........ -- $ -- 1,018,697 $ 1,019 $ 10 $ 1,750 $ -- $ -- $ (389) $ 2,390
Net income...... -- -- -- -- -- 655 -- -- -- 655
Stock
repurchased and
retired........ -- -- (25) -- (1) -- -- -- -- (1)
Advances and
unearned
contributions
to ESOP........ -- -- -- -- -- -- -- -- (1,340) (1,340)
Allocation of
contributions
to ESOP........ -- -- -- -- -- -- -- -- 900 900
Repayment by
ESOP of
unearned
compensation... -- -- -- -- -- -- -- -- 64 64
------- ----- ---------- ------- ------ ------- ------- ----- ------ -------
Balance at July
31, 1996........ -- -- 1,018,672 1,019 9 2,405 -- -- (765) 2,668
Net income...... -- -- -- -- -- 1,116 -- -- -- 1,116
Stock issued.... -- -- 21,081 21 418 -- -- -- -- 439
Stock
repurchased and
retired........ -- -- (8,185) (8) (9) (153) -- -- -- (170)
Advances and
unearned
contributions
to ESOP........ -- -- -- -- -- -- -- -- (400) (400)
Allocation of
contributions
to ESOP........ -- -- -- -- -- -- -- -- 800 800
------- ----- ---------- ------- ------ ------- ------- ----- ------ -------
Balance at July
31, 1997........ -- -- 1,031,568 1,032 418 3,368 -- -- (365) 4,453
Net income...... -- -- -- -- -- 1,198 -- -- -- 1,198
Stock issued.... -- -- 500 1 10 -- -- -- -- 11
Stock
repurchased and
retired........ -- -- (4,699) (6) (128) -- -- -- -- (134)
Advances to
ESOP........... -- -- -- -- -- -- -- -- (542) (542)
Repayment of
advances to
ESOP........... -- -- -- -- -- -- -- -- 907 907
Adjustment of
Predecessor
Company balance
due to
leveraged
buyout......... -- -- (1,027,369) (1,027) (300) (4,566) -- -- -- (5,893)
Capitalization
of
Successor
Company........ 444,301 4 -- -- 3,772 -- -- -- -- 3,776
Issuance of
Class A
Common Stock... 294,239 3 -- -- 2,939 -- (1,183) -- -- 1,759
------- ----- ---------- ------- ------ ------- ------- ----- ------ -------
Balance at May
31, 1998........ 738,540 7 -- -- 6,711 -- (1,183) -- -- 5,535
Net income...... -- -- -- -- -- 509 -- -- -- 509
Payments on
stockholder
notes
receivable..... -- -- -- -- -- -- 343 -- -- 343
------- ----- ---------- ------- ------ ------- ------- ----- ------ -------
Balance at July
31, 1998........ 738,540 7 -- -- 6,711 509 (840) -- -- 6,387
Unaudited data:
Net income...... -- -- -- -- -- (711) -- -- -- (711)
Issuance of
Class A
Common Stock... 135,000 2 -- -- 1,348 -- -- (865) -- 485
Issuance of
warrants....... -- -- -- -- 275 -- -- -- -- 275
Dividends paid.. -- -- -- -- -- (178) -- -- -- (178)
------- ----- ---------- ------- ------ ------- ------- ----- ------ -------
Balance at
January 31, 1999
(unaudited)..... 873,540 $ 9 -- $ -- $8,334 $ (380) $ (840) $(865) $ -- $ 6,258
======= ===== ========== ======= ====== ======= ======= ===== ====== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-39
<PAGE>
ROBERT F. DRIVER CO., INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Period From
----------------------------
Fiscal Year Six Months
Ended July 31, August 1, 1997 June 1, 1998 Ended January 31,
--------------- Through Through -----------------------
1996 1997 May 31, 1998 July 31, 1998 1998 1999
------- ------ -------------- ------------- ------------ ----------
(Unaudited)
(Predecessor Company) (Successor (Predecessor (Successor
Company) Company) Company)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)...... $ 655 $1,116 $ 1,198 $ 509 $ 345 $ (711)
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Stock based
compensation........ -- -- -- -- -- 85
Depreciation and
amortization........ 329 463 656 337 305 976
Change in deferred
income taxes........ 46 (342) (217) (239) (106) (16)
Changes in operating
assets and
liabilities:
Premium trust
cash.............. 332 (4,788) 7,348 (8,150) 11,440 10,700
Insurance premiums
receivable........ 352 801 (3,636) 659 738 660
Other assets....... (173) 301 (579) (157) (144) (841)
Accounts payable
and accrued
expenses.......... 567 17 (870) 1,972 (1,502) (2,122)
Insurance premiums
payable........... (1,658) 2,129 (2,797) 5,377 (9,576) (7,611)
Income taxes
payable........... 65 139 249 111 (611) (616)
Deferred
compensation...... -- 590 500 241 260 (6)
------- ------ -------- ------- ------- -------
Net cash provided
by operating
activities....... 515 426 1,852 660 1,149 498
------- ------ -------- ------- ------- -------
Cash flows from
investing activities:
Purchase of predecessor
company............... -- -- (17,064) -- -- --
Purchase of Sedgwick of
California............ -- -- -- -- -- (2,750)
Purchase of Ochinero... -- -- -- -- -- (250)
Purchases of equipment
and leasehold
improvements.......... (382) (351) (479) (51) (208) (468)
Collections on notes
receivable............ 55 49 -- -- -- --
Purchase of customer
lists................. -- (193) -- -- -- --
Cash received in
acquisition of Cal-
Central............... -- 4 -- -- -- --
------- ------ -------- ------- ------- -------
Net cash used in
investing
activities....... (327) (491) (17,543) (51) (208) (3,468)
------- ------ -------- ------- ------- -------
Cash flows from
financing activities:
Proceeds from debt
issuance.............. -- -- 16,178 -- -- 1,924
Proceeds from revolving
line of credit........ 500 -- 253 -- -- --
Principal payments on
debt.................. (669) (294) (1,027) (202) (11) (582)
Repurchase of common
stock................. (1) (170) -- -- (102) --
Proceeds from issuance
of common stock
warrants.............. -- -- 730 -- -- 275
Proceeds from issuance
of common stock....... -- -- -- -- -- 400
Payments received on
stockholder notes..... -- -- -- 343 -- 1,764
Dividends paid......... -- -- -- -- -- (178)
Contributions
(advances) to ESOP.... (440) 400 (542) -- -- --
Repayment received from
ESOP.................. 64 -- 907 -- -- --
------- ------ -------- ------- ------- -------
Net cash (used in)
provided by
financing
activities....... (546) (64) 16,499 141 (113) 3,603
------- ------ -------- ------- ------- -------
Net (decrease) increase
in cash and cash
equivalents............ (358) (129) 808 750 828 633
Cash and cash
equivalents at
beginning of period.... 1,285 927 798 1,606 798 2,356
------- ------ -------- ------- ------- -------
Cash and cash
equivalents at end of
period................. $ 927 $ 798 $ 1,606 $ 2,356 $ 1,626 $ 2,989
======= ====== ======== ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-40
<PAGE>
ROBERT F. DRIVER CO., INC.
CONSOLIDATED STATEMENT OF CASH FLOWS--(Continued)
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year
Ended
July 31, Period From
------------ ----------------------------
August 1, 1997 June 1, 1998
Through Through
1996 1997 May 31, 1998 July 31, 1998
---- ------- -------------- -------------
(Predecessor Company) (Successor
Company)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Supplementary disclosures of cash
flow information:
Cash payments for:
Interest........................ $ 66 $ 42 $ 220 $ 36
Income taxes.................... $244 $ 1,135 $ 512 $ 938
Supplementary disclosure of noncash
investing activities:
The Company's 1997 business
acquisitions involved the
following:
Fair value of assets acquired
other than cash and cash
equivalents.................... $-- $ 1,166 $ 30,230 $ --
Liabilities assumed............. -- (1,184) (26,957) --
---- ------- -------- -----
Net liabilities assumed, other
than cash and cash
equivalents.................. $-- $ (18) $ 3,273 $ --
==== ======= ======== =====
Supplementary disclosure of noncash
financing activities:
Issuance of common stock for
acquisition...................... $-- $ 439 $ 3,776 $ --
Debt assumed in acquisitions...... $-- $ 219 $ 455 $ --
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-41
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands, Except Per Share)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Robert F. Driver Co., Inc. and subsidiaries (the Company) operates
general insurance agencies in California and Texas with minimal activity in
Nevada. The Company has three wholly-owned subsidiaries, FHI Benefit Plans,
Inc., Robert F. Driver of Nevada, Inc. and Cal-Central Insurance and Management
Services, Inc. (Cal-Central).
NOTE 2--BASIS OF PRESENTATION
Effective May 31, 1998, Robert F. Driver Co., Inc. (Driver or the
Predecessor Company) was acquired by RFDC Acquisition Corporation (RFDC) (the
Transaction), a holding company formed by certain members of management for the
purpose of completing the Transaction. RFDC purchased all of the outstanding
shares of Driver, merged with Driver and then canceled all of Driver's shares.
RFDC then changed its name to Robert F. Driver Co., Inc. This merged entity is
hereinafter referred to as the Company. The Transaction was accounted for under
the purchase method of accounting for financial reporting purposes, and the
purchase price of approximately $25.2 million has been allocated to the
underlying net assets acquired. The Transaction has resulted in the Company
having substantial goodwill and debt.
As a result of the Transaction, the financial position and results of
operations of the Company subsequent to the Transaction are not necessarily
comparable to the financial position and results of operations of the Company
prior to the Transaction. In the accompanying consolidated financial
statements, the Company's results of operations prior to the Transaction are
indicated as relating to the "Predecessor Company" while the financial position
and results of operations subsequent to the Transaction are indicated as
relating to the "Successor Company." Amounts reported for financial reporting
purposes in fiscal 1998 represent the activity of the Successor Company
beginning June 1, 1998.
In connection with accounting for the Transaction, the Company applied
the provisions of Emerging Issues Task Force Issue 88-16, "Basis in Leveraged
Buyout Transactions" (EITF 88-16), whereby the carryover equity interests of
certain stockholders from the Predecessor Company to the Successor Company were
recorded at their predecessor basis. The remaining interests were recorded at
the fair value of the Predecessor Company.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Revenue Recognition:
The Company recognizes commission income principally on the later of the
effective date of the policy or the billing date. Commissions on premiums
billed and collected directly by the insurance company are principally
recognized as income when received by the Company. Contingent commissions are
recorded when received. Service fee income is recognized as earned, which is
ordinarily over the period in which the services are provided.
F-42
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased, such as
money market accounts, with an original maturity of three months or less to be
cash equivalents.
Premium Trust Cash:
Premiums collected but not yet remitted to insurance companies are
restricted as to use by law. The Company maintains segregated fiduciary funds
in accordance with the requirements of the California Insurance Commissioner.
Property and Equipment:
Property and equipment are carried at cost, less accumulated
depreciation. Depreciation of property and equipment is computed on the
straight-line method over estimated useful asset lives generally ranging from 5
to 7 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
retirements and disposals using the specific identification method, with the
resulting gain or loss included in operations.
Intangible Assets:
Goodwill related to the Transaction is being amortized over forty years
on a straight-line basis. Customer lists are amortized on a straight-line basis
over the ten-year estimated useful life of the asset. Deferred organization
costs are being amortized over fourteen months on a straight-line basis, and
deferred finance costs are being amortized over the life of each loan. The
realizability of intangibles is evaluated periodically as events or
circumstances indicate a possibility to recover their carrying amount.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Income Taxes:
The Company files its federal income tax return and a California
franchise tax return on a consolidated basis.
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that are currently in effect.
Concentrations of Credit Risk:
During 1998, a substantial portion of the Company's commissions and fees
were received from insureds in the state of California. Accordingly, the
occurrence of adverse economic conditions or an adverse
F-43
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
regulatory climate in California could have a material adverse effect on the
Company. However, the Company believes, based on its diversified customer base
and product lines, that there is minimal risk of a material adverse occurrence
due to the concentration of operations in California.
Financial instruments, which potentially subject the Company to
significant concentrations of credit risk, consist principally of cash
investments.
The Company maintains cash and cash equivalents with various major
financial institutions. The Company performs periodic evaluations of the
relative credit standings of these financial institutions. The Company limits
the amount of risk by selecting financial institutions with a strong relative
credit standing.
Fair Value of Financial Instruments:
The carrying amount of the Company's financial instruments including cash
and cash equivalents, premium trust cash, insurance premiums receivable,
accounts payable, insurance premiums payable, accrued expenses, debt and
deferred compensation approximate their fair value as these items are either
liquid, short-term in nature or their current rates approximate market rates.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. While management believes that the estimates and related
assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made when accounting for the allowances for doubtful accounts and deprecation.
New Accounting Standards:
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income." The
Company plans to adopt this Statement in fiscal year 1999. The Company believes
that this Statement will not require any significant information beyond that
already provided in the Company's consolidated financial statements.
Reclassifications:
Certain reclassifications have been made to 1996 and 1997 financial
statements to conform to current year presentation. The reclassifications have
no impact on previously reported net income or stockholders' equity.
Unaudited Interim Financial Statements:
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at January 31, 1999 and
the results of its operations and its cash flows for the six months ended
January 31, 1998 and 1999, as presented in the accompanying unaudited interim
financial statements.
F-44
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
NOTE 4--BUSINESS COMBINATIONS
On July 31, 1997 at the close of business, the Company acquired all of
the outstanding shares of common stock of Cal-Central in exchange for 21,081
shares of the Company's common stock. Cal-Central is a general insurance agency
in Fresno, California.
The acquisition was accounted for as a purchase. The purchase price has
been allocated to tangible and intangible assets acquired and liabilities
assumed based on the fair market values on the date of the acquisition. The
allocation of purchase price is summarized as follows:
<TABLE>
<S> <C>
Cash............................................................... $ 4
Premium trust cash................................................. 903
Insurance premiums receivable...................................... 215
Equipment.......................................................... 48
Notes payable...................................................... (48)
Insurance premiums payable......................................... (1,084)
Accounts payable and accrued expenses.............................. (52)
Customer list...................................................... 453
------
Cash value of shares issued...................................... $ 439
======
</TABLE>
F-45
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
NOTE 5--SELECTED FINANCIAL STATEMENT INFORMATION
<TABLE>
<CAPTION>
July 31,
-----------------------
1997 1998
------------ ----------
(Predecessor (Successor
Company) Company)
<S> <C> <C>
Other current assets:
Current portion of
employee receivable.... $ 41 $ 18
Stockholder notes
receivable............. -- 1,759
Prepaid expenses and
other.................. 189 158
------- -------
$ 230 $ 1,935
======= =======
Property and equipment,
net:
Furniture and fixtures.. $ 1,418 $ 184
Computer equipment...... 2,290 1,062
Leasehold improvements.. 588 50
------- -------
4,296 1,296
Less accumulated
depreciation and
amortization........... (3,082) (145)
------- -------
$ 1,214 $ 1,151
======= =======
Intangible assets, net:
Goodwill................ $ -- $17,969
Customer lists.......... 1,121 1,121
------- -------
1,121 19,090
Less accumulated
amortization............. (183) (369)
------- -------
$ 938 $18,721
======= =======
Other assets:
Cash surrender value of
life insurance......... $ 12 $ 13
Employee receivable, net
of current portion..... 52 6
Deferred financing
costs.................. -- 329
Other................... 28 452
------- -------
$ 92 $ 800
======= =======
Accounts payable and
accrued expenses:
Producers' commissions.. $ 3,148 $ 4,080
Accrued personnel costs,
vacation and bonuses... 700 953
Other................... 1,055 972
------- -------
$ 4,903 $ 6,005
======= =======
</TABLE>
F-46
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
NOTE 6--CREDIT FACILITIES
Short-Term Debt:
The Company currently has a revolving credit agreement with a bank that
provides a line of credit up to $2,000 at the prime rate plus .25 percent (8.75
percent at July 31, 1998). Under this agreement, $253 was outstanding at July
31, 1998.
In 1996 and 1997, the Company had a revolving credit agreement with a
bank which provides a line of credit up to $2,000 through February 23, 1998 at
the prime rate plus .25 percent. Under this agreement, no borrowings were
outstanding at July 31, 1997. There were no borrowings under this agreement
during the year ended July 31, 1997.
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
July 31,
-----------------------
1997 1998
------------ ----------
(Predecessor (Successor
Company) Company)
<S> <C> <C>
$12,000 note payable, secured by the Company's assets.
Payable in varying monthly amounts at prime plus .25%
(effective rate of 8.75% at July 31, 1998), with a
balloon payment of $4,470 due on May 15, 2003......... $-- $11,840
$4,000 unsecured senior subordinated debt. Interest
payable quarterly at rate of 12%. Principal due May
28, 2005.............................................. -- 3,295
$510 note payable, secured by various assets. Principal
and interest of $11 payable monthly at prime plus .25%
(effective rate of 8.75% at July 31, 1998), maturing
July 26, 1999......................................... 227 120
$219 unsecured note payable, principal and interest of
$16 payable quarterly at a rate of 8% through April
30, 2001.............................................. 207 158
$191 unsecured note payable, principal and interest
payable monthly at a rate of 9% through August 15,
1999.................................................. -- 41
$260 unsecured note payable, principal of $10 and
interest payable quarterly at an imputed rate of 6%
through July 1, 1999.................................. 75 39
$59 unsecured note payable to related party, principal
and interest of $1 payable monthly at a rate of 12%
through April 13, 2001................................ 48 37
$80 unsecured note payable to related party, principal
of $20 and interest payable
annually at an imputed rate of 8% through February 1,
1998................................................. 18 --
---- -------
575 15,530
Less current portion of long-term debt................. (219) (1,267)
---- -------
Long-term debt, net of current portion................. $356 $14,263
==== =======
</TABLE>
F-47
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
Maturities of long-term debt as of July 31, 1998, are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999.............................................................. $ 1,267
2000.............................................................. 1,475
2001.............................................................. 1,873
2002.............................................................. 1,800
2003.............................................................. 5,820
Thereafter........................................................ 3,295
-------
Total maturities of long-term debt.............................. $15,530
=======
</TABLE>
The $12,000 note payable and the $4,000 unsecured senior subordinated
debt requires the Company to maintain certain minimum net worth and debt
service coverage ratios. The Company was in compliance with these requirements
at July 31, 1998 and January 31, 1999 (unaudited).
Note 7--INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ended July 31, Period From Ended January 31,
--------------- ---------------------------- -----------------------
August 1, 1997 June 1, 1998
Through Through
1996 1997 May 31, 1998 July 31, 1998 1998 1999
--------------- -------------- ------------- ------------ ----------
(Unaudited)
(Predecessor Company) (Successor (Predecessor (Successor
Company) Company) Company)
<S> <C> <C> <C> <C> <C> <C>
Income taxes, currently
payable:
Federal............... $ 231 $ 991 $ 923 $ 495 $ 311 $(283)
State................. 78 283 264 128 85 (77)
------ -------- ------ ----- ----- -----
309 1,274 1,187 623 396 (360)
------ -------- ------ ----- ----- -----
Deferred:
Federal............... 31 (282) (172) (199) (88) (1)
State................. 14 (59) (45) (40) (18) (15)
------ -------- ------ ----- ----- -----
45 (341) (217) (239) (106) (16)
------ -------- ------ ----- ----- -----
$ 354 $ 933 $ 970 $ 384 $ 290 $(376)
====== ======== ====== ===== ===== =====
</TABLE>
F-48
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
July 31,
---------------------- January 31,
1997 1998 1999
------------ --------- -------------
(Predecessor (Unaudited)
Company) (Successor Company)
<S> <C> <C> <C>
Deferred tax assets:
Deferred compensation.................. $ 259 $ 530 $ 574
State taxes............................ 94 134 --
Errors and omissions liability......... 113 120 120
Compensated absences and bonuses,
principally due to accrual for
financial reporting purposes.......... 100 130 130
Amortization of agency acquisitions.... 12 41 39
Allowance for bad debt................. -- 10 6
Deferred financing costs............... -- -- 64
----- --------- ---------
Total deferred tax assets............ 578 965 933
----- --------- ---------
Deferred tax liabilities:
Equipment and leasehold improvements,
principally due to differences in
depreciation.......................... (145) (76) (23)
State taxes............................ -- -- (5)
----- --------- ---------
Total deferred tax liabilities....... (145) (76) (28)
----- --------- ---------
Net deferred tax assets.................. $ 433 $ 889 $ 905
===== ========= =========
</TABLE>
Based upon the level of taxable income in previous years and
projections, for future taxable income over the period in which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences.
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Fiscal
Year
Ended Six Months Ended
July 31, Period From January 31,
---------- ---------------------------- -----------------------
August 1, 1997 June 1, 1998
Through Through
1996 1997 May 31, 1998 July 31, 1998 1998 1999
---- ---- -------------- ------------- ------------ ----------
(Unaudited)
(Successor (Predecessor (Successor
(Predecessor Company) Company) Company) Company)
<S> <C> <C> <C> <C> <C> <C>
Computed expected income
taxes.................. 34% 34% 34% 34% 34% (34)%
State income taxes, net
of federal income tax
benefit................ 7 7 7 6 7 (5)
Other, net.............. (6) 4 3 5 5 4
--- --- --- --- --- ---
35% 45% 44% 45% 46% (35)%
=== === === === === ===
</TABLE>
F-49
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
NOTE 8--LEASE COMMITMENTS
The Company leases office space under various operating leases. The
Company's downtown office in the Driver Office Building is leased from a
limited partnership, which is a related party. The lease agreement expires
December 31, 2007, with current monthly rent of approximately $61. Management
expects that, in the normal course of business, leases that expire will be
renewed or replaced by other leases. The Company's rent expense under these
leases was $849 and $781 in 1996 and 1997 and $968 for the period from August
1, 1997 to May 31, 1998 and $199 for the period from June 1, 1998 to July 31,
1998.
Future minimum rental payments at July 31, 1998, under agreements
classified as operating leases with noncancelable terms in excess of one year
are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999................................................................ $1,213
2000................................................................ 1,081
2001................................................................ 1,086
2002................................................................ 992
2003................................................................ 962
Thereafter.......................................................... 3,550
------
$8,884
======
</TABLE>
NOTE 9--EMPLOYEE BENEFIT PLANS
Savings Plan:
The Company has established a defined contribution plan, the Savings and
Retirement Program of Robert F. Driver Company, Inc. 401(k), which covers all
full-time employees of the Company who have at least one year of service and
are age 21 or over. There are no matching employer contributions.
Deferred Compensation Plan:
Effective August 1, 1996, the Company adopted a deferred compensation
plan for certain key employees of the Company. Under the Plan, the Company
makes a mandatory contribution in an amount equal to a specific percentage of
the gross monthly commission of the participant, as defined in the Plan
document. In addition, the participant may elect to defer a minimum of 1
percent up to a maximum of 5 percent of their plan commission. The deferred
compensation earns a rate of return based on a crediting rate set by the
deferred compensation plan committee immediately following the end of each
fiscal year. A participant shall be fully vested in contributions upon
termination of employment other than a termination for cause, as defined in the
Plan document. Under the Plan, benefits are paid upon the earlier of a
participant's termination of employment or the complete termination of the Plan
by the Company. A participant with vested amounts valued at $50 or less shall
receive a lump-sum payment. A participant with vested amounts valued at more
than $50 shall receive installment payments over a maximum period of three
years. As of July 31, 1998, the Company had accrued $1,331 for its obligations
under the Plan. The Company's expense was $590 for the year ended July 31, 1997
and $241 for the period from June 1, 1998 through July 31, 1998.
F-50
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
Employee Stock Option Plan (ESOP):
In 1996 and 1997, the Company maintained a defined contribution employee
stock ownership plan (ESOP) covering substantially all employees. The ESOP had
assets principally comprised of shares of the Company's common stock at July
31, 1996 and 1997. The Company made annual contributions to the ESOP in cash or
shares of the Company's common stock in amounts determined by the Company's
Board of Directors. For the years ended July 31, 1996 and 1997, the Company
contributed $900 and $800, respectively, to the ESOP in cash.
In conjunction with the Transaction, the ESOP's participants' accounts
were converted to cash and the ESOP was merged into the Company's 401(k) plan.
Producer Stock Equity Plan and Stock Ownership Plan (Unaudited):
In February 1999, the Company entered into a Producer Stock Equity Plan
and Stock Ownership Plan (the Plan). The Plan provides for three forms of
incentive compensation: stock grants, stock purchase rights and incentive stock
options. All of the shares granted under the Plan are subject to the stock
repurchase option described in Note 10.
Under the stock grants, participants received a one-time grant of Class A
Common Stock determined by the aggregate net commissions earned during the 1998
calendar year. Under this option the Company granted 108,000 shares of its
Class A Common Stock during February 1999.
The stock purchase right provides that certain participants are eligible
to purchase a number of shares determined by the aggregate net commissions
earned during the 1998 calendar year. Under this provision, the Company granted
stock purchase rights at $10.00 per share for 45,000 shares of its Class A
Common Stock during February 1999. These rights were all exercised during
February 1999.
The Company has reserved 111,000 shares of the Company's Class A Common
Stock to be issued from 1999 to 2004 under the incentive stock option
provisions of the Plan. No options will be issued under the Plan until
subsequent to December 31, 1999.
NOTE 10--STOCKHOLDERS' EQUITY
Redeemable Preferred Stock:
In 1998, the Company issued 4,000 shares of Class A Preferred Stock to
the Robert F. Driver Family Trust, a related party, as part of the financing of
the Transaction. Dividends are cumulative at 7.5 percent annually through May
1998, and at 10 percent annually thereafter. Payment of dividends or preferred
shares ranks senior to all other classes of stock. These shares are nonvoting
unless dividends are more than five quarters in arrears. The shares are
redeemable at the option of either the board of directors or the holders upon
the death of Robert F. Driver at $1,000 per share.
Stockholder Notes Receivable:
Stockholder notes receivable represent obligations by certain members of
management in connection with their purchase of Class A Common Stock. Payments
made in August 1998, totaling $1,759, have been classified as an other current
asset on the balance sheet.
F-51
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
Common Stock Warrants:
Senior subordinated debt (see Note 6) issued in connection with the
Transaction has 73,042 detachable warrants. Each warrant is convertible into
one share of Class A Common Stock at an exercise price of $0.01 per share up
through the earlier of May 28, 2008 or the sale of initial public offering of
the Company. The value assigned to these warrants ($730 as of July 31, 1998) is
included in additional paid-in capital.
The Company also issued 13,333 common stock warrants to an outside
advisor as part of the Transaction. The warrants have an exercise price of
$2.50 each. The fair value of the warrants is included in deferred financing
costs.
Class B and Class C Common:
On November 12, 1997, the Company authorized 10,000,000 shares of Class B
Common Stock and 5,000,000 shares of Class C Common Stock. Both Class B and
Class C have a par value of $.01 per share, and no shares of either were
outstanding as of July 31, 1998 or January 31, 1999 (unaudited).
Stock Repurchase Option:
Stock granted subsequent to the May 31, 1998 transaction (see Note 2), is
subject to a repurchase option by the Company. The repurchase clause stipulates
that upon termination from employment the Company may repurchase a specified
number of shares at the original fair market grant price. The specified shares
that are not subject to repurchase are the total number of shares held less
than five years multiplied by a fraction of the number of calendar years
completed following May 31, 1998, divided by five years.
Stock Options:
In January 1999, the Company granted and issued to certain key executives
40,000 stock options of its Class A Common Stock with an exercise price of
$10.00 a share. These options were exercised in January 1999, and the shares
issued in connection therewith are subject to the aforementioned stock
repurchase option.
Stock Grants:
In January 1999, the Company issued 95,000 shares of its Class A Common
Stock to certain key executives. These shares included 65,000 shares which were
unrestricted, but are subject to the aforementioned stock repurchase option.
The remaining 30,000 shares were 20 percent vested upon issuance, with the
remainder subject to a four year vesting period. Unearned compensation for the
non-vested portion was recorded at the date of these awards based on the market
value of the shares. Unearned compensation shown as a separate component of
stockholders' equity is being amortized to expense over the four year vesting
period. In connection with this grant, the Company loaned certain key
executives an amount to pay their Federal and State income taxes. The note is
payable in five equal annual instalments commencing November 1, 1999 and bears
interest at the lesser of the maximum rate permitted by the State of California
or the prime rate. As of January 31, 1999, these amounts totalling $191 are
included in other current assets.
F-52
<PAGE>
ROBERT F. DRIVER CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
NOTE 11--CONTINGENCIES
The Company is occasionally involved in routine insurance policy-related
and employment practices litigation which has arisen in the ordinary course of
its business. The litigation is covered in whole or in part by insurance. The
conclusions of such matters are not expected to have a material adverse effect
on the Company's consolidated financial statements.
NOTE 12--SUBSEQUENT EVENTS (Unaudited)
During November 1998, the Company acquired all of the assets of Sedgwick
of California and Ochinero/Barlocken for a purchase price of $2,583 and $227,
respectively. During March 1999, the Company acquired all the assets of
Averbeck and Sher Insurance Services for a purchase price of $4,989 and $2,648,
respectively.
Immediately following the acquisition of Sedgwick, the Company issued to
certain key executives of Sedgwick 8,500 shares of Class A Common Stock. The
shares are unrestricted, but are subject to the stock repurchase option
described in Note 10.
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company will merge with a wholly-owned subsidiary of CenterPoint. All of the
Company's outstanding shares of common stock will be exchanged for cash and
common stock of CenterPoint concurrently with the consummation of the initial
public offering of the common stock of CenterPoint.
F-53
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mann Frankfort Stein & Lipp, P.C.
In our opinion, the accompanying balance sheet and the related statements of
income, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Mann Frankfort Stein & Lipp, P.C.
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 29, 1999
F-54
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 288 $ 606
Fees receivable, less allowance for doubtful accounts of $1,124
and $1,356, respectively...................................... 3,475 4,077
Unbilled fees, at net realizable value......................... 628 431
Due from principals............................................ 119 14
Prepaid expenses and other current assets...................... 75 81
------ ------
Total current assets......................................... 4,585 5,209
Property and equipment, net...................................... 874 1,142
Other assets..................................................... 6 6
------ ------
Total assets................................................. $5,465 $6,357
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............................. $ 160 $ 879
Accounts payable............................................... 68 23
Accrued compensation and related costs......................... 133 126
Income taxes payable........................................... 2 27
Deferred income taxes.......................................... 1,420 1,569
------ ------
Total current liabilities.................................... 1,783 2,624
Long-term debt................................................... 794 473
Deferred income taxes............................................ 71 85
------ ------
Total liabilities............................................ 2,648 3,182
------ ------
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value; 1,000,000 shares authorized, 1,573
common shares issued and outstanding.......................... 2 2
Additional paid-in-capital..................................... 58 58
Retained earnings.............................................. 2,757 3,115
------ ------
Total shareholders' equity................................... 2,817 3,175
------ ------
Total liabilities and shareholders' equity................... $5,465 $6,357
====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-55
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Revenues:
Professional services..... $9,921 $17,475 $21,631
------ ------- -------
Expenses:
Member compensation and
related costs............ 4,412 6,636 8,921
Employee compensation and
related costs............ 3,608 6,405 8,829
Occupancy costs........... 317 527 659
Office operating
expenses................. 776 1,398 1,670
Other selling, general and
administrative expenses.. 670 1,071 1,018
------ ------- -------
9,783 16,037 21,097
------ ------- -------
Operating income........ 138 1,438 534
------ ------- -------
Other (income) expense:
Interest expense.......... 32 32 58
Interest income........... (20) (31) (69)
Other..................... (6) (2) (26)
------ ------- -------
6 (1) (37)
------ ------- -------
Income before provision for
income taxes............... 132 1,439 571
Provision for income taxes.. 58 557 213
------ ------- -------
Net income.................. $ 74 $ 882 $ 358
====== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-56
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock Total
------------- Paid-in- ---------------- Retained Shareholders'
Shares Amount Capital Shares Amount Earnings Equity
------ ------ ---------- ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 1,180 $ 1 $108 $ (85) $1,221 $1,245
Issuances of common
stock................ -- -- 35 -- -- 35
Net income............ -- -- -- -- 74 74
----- --- ---- ------ ------- ------ ------
Balance at December 31,
1996................... 1,180 1 143 (85) 1,295 1,354
Cancellation of
treasury stock....... -- -- (85) 85 -- --
Issuances of common
stock for pooling of
interests business
combination.......... 393 1 -- -- 580 581
Net income............ -- -- -- -- 882 882
----- --- ---- ------ ------- ------ ------
Balance at December 31,
1997................... 1,573 2 58 -- 2,757 2,817
Net income............ -- -- -- -- 358 358
----- --- ---- ------ ------- ------ ------
Balance at December 31,
1998................... 1,573 $ 2 $ 58 $ -- $3,115 $3,175
===== === ==== ====== ======= ====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-57
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1996 1997 1998
----- ------- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 74 $ 882 $ 358
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 139 132 266
Change in deferred income taxes..................... 37 758 163
Changes in operating assets and liabilities:
Fees receivable................................... (90) (1,856) (602)
Unbilled fees..................................... (37) (246) 197
Prepaid expenses and other current assets......... (21) 45 99
Accounts payable.................................. 14 6 (45)
Accrued compensation and related costs............ (194) 70 (7)
Other............................................. (25) 13 25
----- ------- -----
Net cash provided by (used in) operating
activities..................................... (103) (196) 454
----- ------- -----
Cash flows from investing activities:
Purchase of property and equipment.................... (77) (714) (534)
----- ------- -----
Net cash used in investing activities........... (77) (714) (534)
----- ------- -----
Cash flows from financing activities:
Proceeds from issuance of long-term debt.............. 300 1,200 750
Payments of long-term debt............................ (467) (679) (352)
Proceeds from issuance of common stock................ 35 581 --
----- ------- -----
Net cash provided by (used in) financing
activities..................................... (132) 1,102 398
----- ------- -----
Net increase (decrease) in cash and cash equivalents.... (312) 192 318
Cash and cash equivalents at beginning of period........ 408 96 288
----- ------- -----
Cash and cash equivalents at end of period.............. $ 96 $ 288 $ 606
===== ======= =====
Supplemental disclosures of cash flow information:
Interest paid......................................... $ 32 $ 32 $ 58
Income taxes paid..................................... $ 33 $ 13 $ 19
</TABLE>
See accompanying Notes to Financial Statements.
F-58
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
NOTES TO FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Mann Frankfort Stein & Lipp, P.C. (the Company) is a full service firm of
professional accountants and business advisors which offers accounting, tax and
consulting services to a variety of clients in the Houston, Texas market.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
5 to 12 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
F-59
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable, accrued
liabilities and debt approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and tax basis of
assets and liabilities using currently enacted tax rates in effect for the
years in which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the consolidated
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made when accounting for the allowances for doubtful
accounts, depreciation and amortization and income taxes.
NOTE 3--BUSINESS COMBINATIONS
On January 1, 1997, the Company merged with Schulse Hartwig Richter &
Company, L.L.P. (SHRCO), in a business combination accounted for as a pooling
of interests. Former partners in SHRCO exchanged their partnership interests
for common stock in the Company, and received stock totaling 25 percent of the
outstanding stock immediately following the merger. The results of SHRCO's
operations during the year ended December 31, 1996 were not significant.
Accordingly, the Company's 1996 financial statements were not retroactively
restated to reflect SHRCO's results of operations.
F-60
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Property and equipment, net:
Furniture and fixtures................................. $ 877 $ 1,036
Computer equipment..................................... 1,132 1,459
Leasehold improvements................................. 27 75
------- -------
2,036 2,570
Less accumulated depreciation and amortization......... (1,162) (1,428)
------- -------
$ 874 $ 1,142
======= =======
</TABLE>
NOTE 5--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1996 1997 1998
----- ------ ------
<S> <C> <C> <C>
Balance at beginning of period...................... $ 581 $ 552 $1,124
Additions to costs and expenses..................... 489 755 687
Write-offs.......................................... (518) (183) (455)
----- ------ ------
Balance at end of period............................ $ 552 $1,124 $1,356
===== ====== ======
</TABLE>
NOTE 6--CREDIT FACILITIES
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
----- ------
<S> <C> <C>
Notes payable, secured by certain assets of the Company,
interest rate 7.25%, maturities from 1999 through 2003.. $ 954 $1,352
Less current maturities of long-term debt................ (160) (879)
----- ------
Total long-term debt................................... $ 794 $ 473
===== ======
</TABLE>
Maturities on long-term debt, including capital lease obligations, are
as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 879
2000.............................................................. 136
2001.............................................................. 148
2002.............................................................. 159
2003.............................................................. 30
------
Total maturities of long-term debt.............................. $1,352
======
</TABLE>
F-61
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 7--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Income taxes currently payable:
Federal.................................................. $21 $ 25 $ 50
--- ---- ----
Deferred income tax expense:
Federal.................................................. 37 532 163
--- ---- ----
Total provision for income taxes....................... $58 $557 $213
=== ==== ====
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts........................... $ 467 $ 512
Accrued liabilities....................................... 40 34
------ ------
Total current deferred tax assets....................... 507 546
Current deferred tax liabilities:
Accounts receivable and unbilled fees..................... 1,903 2,090
Other..................................................... 24 25
------ ------
Total current deferred tax liabilities.................. 1,927 2,115
------ ------
Net current deferred tax liabilities.................... 1,420 1,569
Non-current deferred tax liabilities:
Property and equipment.................................... 71 85
------ ------
Net deferred tax liability.................................. $1,491 $1,654
====== ======
</TABLE>
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate................................. 35% 35% 35%
Other....................................................... (2) 2 2
--- --- ---
Effective income tax rate................................... 33% 37% 37%
=== === ===
</TABLE>
NOTE 8--LEASE COMMITMENTS
The Company leases office facilities under a noncancelable lease
agreement, which expires in 2002. This lease allows the Company, at its
option, to extend the lease term at the end of the lease term, generally at
F-62
<PAGE>
MANN FRANKFORT STEIN & LIPP, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
fair market value. Future minimum lease payments under noncancelable operating
leases are as follows [conform periods to fiscal years following most recent
audited period]:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1999............................................................. $ 603
2000............................................................. 621
2001............................................................. 621
2002............................................................. 103
------
Total minimum lease payments..................................... $1,948
======
</TABLE>
Rent expense for this operating lease for the fiscal years ended December
31, 1996, 1997 and 1998 was $257, $429 and $530, respectively.
NOTE 9--EMPLOYEE BENEFIT PLAN
401(k) Plan:
The Company sponsors a 401(k) savings plan for the benefit of its
employees. Generally, employees who have attained the age of 21 and have one
year's creditable service may make salary deferrals to the plan, up to 6
percent of their salary on a pre-tax basis and up to 15 percent of their salary
on an after-tax basis. The Company, at its discretion, may make matching
contributions from its earnings. Contributions for each of the three years
ended December 31, 1996, 1997 and 1998 were $33, $61 and $67, respectively.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 11--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company will convert from a professional corporation to a business corporation
by adopting a plan of conversion and amending its organizational documents (the
"MFSL Company"). Thereafter, a wholly-owned subsidiary of CenterPoint will
merge with and into MFSL Company. All of the MFSL Company's outstanding shares
will be exchanged for cash and common stock of CenterPoint concurrently with
the consummation of the initial public offering of the common stock of
CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the
closing of the acquisition. Following the closing, all attest services formerly
provided by the Company will be provided by a newly created separate legal
entity (the Attest Firm) which will be owned by former owners of the Company
who are certified public accountants. Pursuant to a services agreement,
CenterPoint will provide professional and other personnel, equipment, office
space and business and administrative services necessary to operate the Attest
Firm.
F-63
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Follmer, Rudzewicz & Company, P.C.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Follmer, Rudzewicz
and Company, P.C. and its subsidiary at May 31, 1997 and 1998 and the results
of their operations and their cash flows for each of the three years in the
period ended May 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 4, 1999
F-64
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
May 31,
---------------- November 30,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 253 $ 771 $ 47
Funds held in trust for clients............... 8 10 38
Fees receivable, less allowance for doubtful
accounts of $885, $693 and $712,
respectively................................. 4,988 5,553 4,286
Unbilled fees, at net realizable value........ 3,062 2,334 3,283
Prepaid expenses and other current assets..... 846 294 202
------- ------- -------
Total current assets........................ 9,157 8,962 7,856
Property and equipment, net..................... 1,418 1,234 1,357
Cash surrender value, life insurance............ 2,188 2,832 3,063
Deferred income taxes........................... 622 1,066 1,306
Other assets.................................... 126 106 97
------- ------- -------
Total assets................................ $13,511 $14,200 $13,679
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt............................... $ 643 $ 345 $ 503
Notes payable to shareholders................. 1,316 1,693 399
Accounts payable and other accrued expenses... 139 55 235
Accrued compensation and related costs to
shareholders................................. 4,535 4,080 5,487
Accrued compensation and related costs to
employees.................................... 1,060 1,239 634
Income taxes payable.......................... -- -- 328
Deferred income taxes......................... 1,230 1,245 777
------- ------- -------
Total current liabilities................... 8,923 8,657 8,363
Long-term debt.................................. 414 371 77
Retirement plan................................. 1,770 2,978 3,627
------- ------- -------
Total liabilities........................... 11,107 12,006 12,067
------- ------- -------
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value; 50,000 shares
authorized, 10,000, 10,400 and 10,400 shares
issued and 10,000, 10,400 and 10,400 shares
outstanding at May 31, 1997 and 1998 and
November 30, 1998, respectively.............. 10 10 10
Additional paid-in-capital.................... 1,082 1,210 1,210
Treasury stock, 90, 250 and 250 shares at May
31, 1997 and 1998 and November 30, 1998,
respectively................................. (230) (140) (140)
Retained earnings............................. 1,542 1,114 532
------- ------- -------
Total shareholders' equity.................. 2,404 2,194 1,612
------- ------- -------
Total liabilities and shareholders' equity.. $13,511 $14,200 $13,679
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-65
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended Ended
May 31, November 30,
------------------------- --------------
1996 1997 1998 1997 1998
------- ------- ------- ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Professional services............. $15,528 $17,954 $19,417 $7,790 $8,937
------- ------- ------- ------ ------
Expenses:
Shareholder compensation and
related costs.................... 4,833 6,646 7,339 2,488 3,154
Employee compensation and related
costs............................ 6,649 7,567 8,225 3,444 3,843
Occupancy costs................... 908 1,045 990 448 558
Office operating expenses......... 790 861 870 369 525
Depreciation and amortization..... 362 394 475 172 236
Other selling, general and
administrative expenses.......... 1,721 1,742 1,556 970 999
------- ------- ------- ------ ------
15,263 18,255 19,455 7,891 9,315
Operating (loss) income......... 265 (301) (38) (101) (378)
------- ------- ------- ------ ------
Other (income) expense:
Interest expense.................. 105 79 101 67 75
Interest income................... (19) (51) (22) 18 (8)
Other............................. 34 (156) (192) (20) 186
------- ------- ------- ------ ------
120 (128) (113) 65 253
------- ------- ------- ------ ------
Income (Loss) before provision for
income taxes....................... 145 (173) 75 (166) (631)
Provision (benefit) for income
taxes.............................. 316 191 286 72 (49)
------- ------- ------- ------ ------
Net loss............................ $ (171) $ (364) $ (211) $ (238) $ (582)
======= ======= ======= ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-66
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Treasury
Common Stock Additional Stock Total
------------- Paid-in- -------------- Retained Shareholders'
Shares Amount Capital Shares Amount Earnings Equity
------ ------ ---------- ------ ------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31,
1995................... 10 $10 $ 862 90 $ (230) $2,077 $2,719
Capital contribution.. -- -- 220 -- -- -- 220
Purchases of treasury
stock................ -- -- -- 2,900 (959) -- (959)
Net loss.............. -- -- -- -- -- (171) (171)
--- --- ------ ------ ------ ------ ------
Balance at May 31,
1996................... 10 10 1,082 2,990 (1,189) 1,906 1,809
Reissuances of
treasury stock....... -- -- -- (2,900) 959 -- 959
Net loss.............. -- -- -- -- -- (364) (364)
--- --- ------ ------ ------ ------ ------
Balance at May 31,
1997................... 10 10 1,082 90 (230) 1,542 2,404
Issuances of common
stock................ -- -- 141 -- -- -- 141
Purchases of treasury
stock................ -- -- -- 250 (140) -- (140)
Retirement of treasury
stock................ -- -- (13) (90) 230 (217) --
Net loss.............. -- -- -- -- -- (211) (211)
--- --- ------ ------ ------ ------ ------
Balance at May 31,
1998................... 10 10 1,210 250 (140) 1,114 2,194
Net loss (unaudited).. -- -- -- -- -- (582) (582)
--- --- ------ ------ ------ ------ ------
Balance at November 30,
1998
(unaudited)............ 10 $10 $1,210 250 $ (140) $ 532 $1,612
=== === ====== ====== ====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-67
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ended May 31, Ended November 30,
---------------------- --------------------
1996 1997 1998 1997 1998
----- ------- ------ --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss....................... $(171) $ (364) $ (211) $ (238) $ (582)
Adjustments to reconcile income
to net cash provided by (used
in) operating activities:
Depreciation and
amortization................ 362 394 466 172 236
Change in deferred taxes..... (154) (85) (429) (932) (708)
Loss on disposal of property
and equipment............... 25 5 1 3 --
Changes in operating assets
and liabilities:
Funds held in trust........ 8 9 (2) (9) (28)
Fees receivable............ (316) (154) (565) 1,057 1,267
Unbilled fees.............. (222) (1,059) 728 (412) (949)
Prepaid expenses and other
current assets............ (85) (654) 552 632 92
Account payable............ 24 25 (87) 35 153
Accrued compensation and
related costs............. 420 1,118 (276) 664 802
Income taxes payable....... (5) (256) -- 832 328
Retirement plans........... 658 1,015 1,208 604 649
Other...................... (258) 232 23 (35) 35
----- ------- ------ --------- ---------
Net cash provided by
operating activities.... 286 226 1,408 2,373 1,295
----- ------- ------ --------- ---------
Cash flows from investing
activities:
Purchase of property and
equipment..................... (632) (646) (307) (242) (358)
Proceeds from sale of property
and equipment................. -- 36 24 22 --
Increase in cash surrender
value......................... (326) (612) (644) (237) (231)
----- ------- ------ --------- ---------
Net cash used in
investing activities.... (958) (1,222) (927) (457) (589)
----- ------- ------ --------- ---------
Cash flows from financing
activities:
Proceeds from issuance of long-
term debt..................... 750 -- 500 500 --
Payments of long-term debt..... (88) (139) (481) (314) (171)
Proceeds from (payments of)
short-term debt, net.......... -- 500 (500) (500) 150
Advances (repayments) to
shareholders.................. (941) 857 377 (1,316) (1,409)
Acquisition of treasury stock.. -- -- -- 77 --
Proceeds from issuance of
stock......................... 220 -- 141 115 --
----- ------- ------ --------- ---------
Net cash provided by
(used in) financing
activities.............. (59) 1,218 37 (1,438) (1,430)
----- ------- ------ --------- ---------
Net increase (decrease) in cash
and cash equivalents............ (731) 222 518 478 (724)
Cash and cash equivalents at
beginning of period............. 762 31 253 253 771
----- ------- ------ --------- ---------
Cash and cash equivalents at end
of period....................... $ 31 $ 253 $ 771 $ 731 $ 47
===== ======= ====== ========= =========
Supplemental disclosures of cash
flow information:
Interest paid.................. $ 57 $ 75 $ 101 $ 65 $ 84
Income taxes paid.............. $ 168 $ 347 $ 841 $ 109 $ 180
</TABLE>
Noncash transactions:
During 1998, the Company reacquired 200 shares of treasury stock in the
amount of $140 through issuance of a note payable to shareholder.
During 1997, the Company issued 2,900 shares of treasury stock in the amount
of $959 through retirement of a note payable to shareholder.
During 1996, the Company reacquired 2,900 shares of treasury stock in the
amount of $959 through issuance of a note payable to the shareholder.
See accompanying Notes to Consolidated Financial Statements.
F-68
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Follmer, Rudzewicz & Company (the Company) is a full service firm of
professional accountants and business advisors to privately held companies and
their owners. The Company was founded in 1968 and primarily operates in
Michigan.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Bridgeco, Inc. All significant intercompany
transactions and accounts are eliminated in consolidation.
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Funds Held in Trust for Clients:
Funds held in trust for clients are restricted amounts held for client
trust fund. A corresponding liability is recorded by the Company and is
included in other long-term liabilities.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
3 to 39 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and
F-69
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands, Except Per Share)
betterments are capitalized. The assets and related depreciation accounts are
adjusted for property retirements and disposals with the resulting gain or loss
included in operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through November 30, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable, accrued
liabilities and debt approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and tax basis of
assets and liabilities using currently enacted tax rates in effect for the
years in which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the consolidated
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made when accounting for the allowances for doubtful
accounts, depreciation and amortization and income taxes.
Unaudited Interim Financial Statements:
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at November 30, 1998, and
the results of its operations and its cash flows for the six months ended
November 30, 1997 and 1998, as presented in the accompanying unaudited interim
financial statements.
F-70
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised as follows:
<TABLE>
<CAPTION>
May 31,
---------------- November 30,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Property and equipment, net
Furniture and fixtures................. $ 663 $ 729 $ 740
Computer equipment...................... 1,538 1,729 2,035
Automobiles............................. 31 -- 41
Leasehold improvements.................. 249 261 261
------- ------- -------
2,481 2,719 3,077
Less accumulated depreciation and
amortization........................... (1,063) (1,485) (1,720)
------- ------- -------
$ 1,418 $ 1,234 $ 1,357
======= ======= =======
</TABLE>
NOTE 4--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ended May 31, Ended November 30,
------------------- ------------------
1996 1997 1998 1997 1998
----- ----- ----- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of peri-
od............................ $ 474 $ 598 $ 885 $ 885 $ 693
Additions to costs and ex-
penses........................ 619 579 375 327 260
Less write-offs................ (495) (292) (567) (185) (241)
----- ----- ----- --------- --------
Balance at end of period....... $ 598 $ 885 $ 693 $ 1,027 $ 712
===== ===== ===== ========= ========
</TABLE>
NOTE 5--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
--------- November 30,
1997 1998 1998
---- ---- ------------
(Unaudited)
<S> <C> <C> <C>
Line of credit...................................... $500 $-- $150
Current maturities of long-term debt................ 143 345 353
---- ---- ----
Total short-term debt........................... $643 $345 $503
==== ==== ====
</TABLE>
The Company has available a $1,500 line of credit with Comerica Bank,
used to finance short-term cash flow needs. Interest on the line is payable
monthly at prime rate, and is collateralized by any of the Company's assets in
the bank's possession. There are no significant covenants related to this
line.
F-71
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
------------ November 30,
1997 1998 1998
----- ----- ------------
(Unaudited)
<S> <C> <C> <C>
Notes payable, secured by certain assets of the
Company, interest rates ranging from 8% to
10%, maturities from August 2000 through
December 2002................................. $ 557 $ 716 $430
Less current maturities of long-term debt...... (143) (345) (353)
----- ----- ----
Total long-term debt....................... $ 414 $ 371 $ 77
===== ===== ====
</TABLE>
Maturities on long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999................................................................. $345
2000................................................................. 201
2001................................................................. 123
2002................................................................. 32
2003................................................................. 15
----
Total maturities of long-term debt............................... $716
====
</TABLE>
NOTE 6--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ended Ended
May 31, November 30,
------------------ --------------
1996 1997 1998 1997 1998
----- ---- ----- ------- -----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income taxes currently payable
Federal........................... $ 272 $ 90 $ 493 $ 851 $ 510
State.............................. 198 186 222 153 149
----- ---- ----- ------- -----
470 276 715 1,004 659
Deferred income tax expense
(benefit):
Federal............................ (146) (80) (406) (1,018) (724)
State.............................. (8) (5) (23) (58) (42)
----- ---- ----- ------- -----
Total provision (benefit) for
taxes........................... $ 316 $191 $ 286 $ (72) $(107)
===== ==== ===== ======= =====
</TABLE>
F-72
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
May 31,
---------------- November 30,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Current deferred tax liabilities:
Accrual to cash adjustment............... $(1,230) $(1,245) $ (719)
Long-term deferred tax liabilities:
Property and equipment................... (33) (36) (36)
Supplemental Executive Retirement Plan... 655 1,102 1,342
------- ------- ------
Total long-term deferred tax asset..... 622 1,066 1,306
------- ------- ------
Net deferred tax (liability) asset......... $ (608) $ (179) $ 587
======= ======= ======
</TABLE>
The Company's income tax expense varied from the amounts resulting from
applying the applicable U.S. federal statutory tax rate to pre-tax income as
follows:
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended
Ended May 31, November 30,
---------------- -------------
1996 1997 1998 1997 1998
---- ---- ---- ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Tax provision (benefit) at U.S. federal
statutory rate........................ $ 51 $(61) $ 26 $ (58) $ (221)
Net increase in life insurance cash
surrender value....................... (14) (15) (14) (7) (7)
Nondeductible expenses................. 89 90 83 43 76
State tax rate......................... 3 (3) 2 (12) (16)
State permanent differences............ 187 180 189 106 119
---- ---- ---- ----- ------
Total provision (benefit) for taxes.... $316 $191 $286 $ 72 $ (49)
==== ==== ==== ===== ======
</TABLE>
NOTE 7--LEASE COMMITMENTS
The Company leases various office facilities and vehicles under
noncancelable lease agreements, which expire at various dates. Certain of these
leases allow the Company, at its option to extend the lease term and/or
purchase the leased asset at the end of the lease term, generally at fair
market value. Future minimum lease payments under noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999............................................................... $1,042
2000............................................................... 1,073
2001............................................................... 1,090
2002............................................................... 1,065
2003............................................................... 1,091
Thereafter......................................................... 1,276
------
Total minimum lease payments....................................... $6,637
======
</TABLE>
F-73
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Rent expense for all operating leases for the fiscal years ended May 31,
1996, 1997 and 1998 and the six months ended November 30, 1997 and 1998 was
$993, $1,077, $1,129, $550 (unaudited) and $585 (unaudited), respectively.
NOTE 8--EMPLOYEE BENEFIT PLANS
401(k) Plan:
The Company has a contributory defined contribution benefit plan covering
substantially all employees who have completed one year of service and have
attained the age of 21. Company contributions are discretionary and amounted to
$150, $150, $115, $72 (unaudited) and $88 (unaudited) for the fiscal years
ended May 31, 1996, 1997 and 1998 and the six months ended November 30, 1997
and 1998, respectively.
Supplemental Executive Retirement Plan:
During November 1995, the Company adopted a Supplemental Executive
Retirement Plan (SERP) to provide benefits to certain shareholders and
employees (the Participants) or their beneficiaries. A Participant becomes
eligible to participate in the SERP on June 1 of the year following the
Participant's second anniversary as an account executive.
If the Participants retire from employment with the Company on or after
attaining age 65, they are entitled to an annual SERP benefit of 66.67% of
their highest three year average compensation for the period following their
eligibility to participate in the SERP. If the Participant retires from the
Company prior to obtaining age 65, the benefit otherwise payable is multiplied
by a scheduled vesting factor corresponding to the Participant's total years of
service. If the Participant retires as a result of a total and permanent
disability or dies before retiring, the Participant's (or their beneficiaries')
supplemental disability benefit is deemed to be 33.33% of the Participant's
highest three year average compensation for the period following their
eligibility to participate in the SERP, multiplied by a scheduled vesting
factor corresponding to the Participant's total years of service. In all cases,
SERP benefits are payable for a period of seven years.
The Company may terminate or freeze benefits under the SERP at any time,
provided it commences payment of the present value of the Participant's vested
benefit at the time of such termination.
Net deferred compensation cost for the Company includes the following
components:
<TABLE>
<CAPTION>
Fiscal Year Ended
May 31,
------------------
1996 1997 1998
---- ------ ------
<S> <C> <C> <C>
Service cost........................................... $203 $ 344 $ 384
Interest cost.......................................... 236 420 476
Amortization of prior service cost..................... 219 348 348
---- ------ ------
Net deferred compensation cost......................... $658 $1,112 $1,208
==== ====== ======
</TABLE>
F-74
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Assumptions used in the development of pension data follow:
<TABLE>
<CAPTION>
Fiscal Year Ended
May 31,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Discount rate...................................... 7.0% 7.0% 7.0%
Rates of increase in compensation levels........... 4.0% 4.0% 4.0%
</TABLE>
The Company's SERP is currently unfunded. However, the Company does
maintain life insurance policies on the SERP's participants. The following
table presents the status of the Company's SERP benefits:
<TABLE>
<CAPTION>
May 31,
------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Projected benefit obligation:
Active plan participants...................... $5,655 $ 6,419 $ 7,291
Retirees...................................... -- -- --
------ ------- -------
Funded status................................... (5,655) (6,419) (7,291)
Unrecognized prior service cost................. 4,997 4,649 4,301
Unrecognized gain............................... -- -- 12
------ ------- -------
Accrued SERP cost............................... $ (658) $(1,770) $(2,978)
====== ======= =======
</TABLE>
NOTE 9--CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 10--RELATED PARTY TRANSACTIONS
Report Systems, Inc. (Report Systems) (which is owned by the shareholders
of the Company) provides bookkeeping services to certain clients of the
Company. Through the end of fiscal year 1997, the Company had leased computer
equipment from Report Systems. Additionally, Report Systems provides certain
bookkeeping services to the Company. The cost of these services were negotiated
on an arms length basis and amounted to $130, $64, $10, $7 (unaudited) and $3
(unaudited) for the years ended May 31, 1996, 1997 and 1998 and the six months
ended November 30, 1997 and 1998, respectively.
Notes payable to shareholders represent amounts due under the partner
bonus program. Partner bonuses are accrued at fiscal year end and repaid,
together with interest, over the six month period ending December 31. The notes
accrue interest at 8.25 percent.
There are notes receivable from certain shareholders in the aggregate
amount of $10, $15 and $25 (unaudited) at May 31, 1997 and 1998 and November
30, 1998, respectively, which are included with other assets.
F-75
<PAGE>
FOLLMER, RUDZEWICZ & COMPANY, P.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
The Company leases its Southfield, Michigan space from Lincoln
Development Corporation, a company which is 50 percent owned by Follmer
Rudzewicz Development. Follmer Rudzewicz Development is a limited partnership
which is owned in part by Anthony P. Frabotta. The lease term began in 1988 and
expires in 2004. The current annual rent is approximately $680, which increases
over the term of the lease. The annual rent for the 2003 to 2004 term is
approximately $736.
NOTE 11--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company stockholders will create FRF Holding LLC and capitalize it with their
stock of the Company. The Company will convert from a professional corporation
to a business corporation. Thereafter, a wholly-owned subsidiary of CenterPoint
will merge with and into the Company. All of the Company's outstanding shares
will be exchanged for cash and common stock of CenterPoint concurrently with
the consummation of the initial public offering of the common stock of
CenterPoint.
In connection with the merger described in the previous paragraph, the
shareholders have tentatively agreed to rescind all shareholders' benefits
related to the SERP Plan described in Note 8.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former owners of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-76
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Berry, Dunn, McNeil & Parker, Chartered
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Berry,
Dunn, McNeil & Parker, Chartered at June 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 9, 1999
F-77
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 30,
--------------- December 31,
1997 1998 1998
------ ------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $1,167 $ 2,013 $ 60
Fees receivable, less allowance for doubtful
accounts of $814, $924 and $847,
respectively.................................. 3,829 4,349 3,798
Unbilled fees, at net realizable value......... 1,240 1,341 1,705
Prepaid expenses and other current assets...... 353 183 169
------ ------- ------
Total current assets......................... 6,589 7,886 5,732
Property and equipment, net...................... 1,672 1,763 2,015
Intangible assets, net........................... 708 1,058 1,179
Deferred income taxes............................ 460 423 423
Other assets..................................... 43 15 31
------ ------- ------
Total assets................................. $9,472 $11,145 $9,380
====== ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................ $2,268 $ 2,612 $2,038
Due to principals.............................. 3,721 4,906 3,101
Accounts payable............................... 204 99 329
Accrued employee compensation and related
costs......................................... 635 785 745
Deferred compensation.......................... 380 619 694
Deferred income taxes.......................... 690 653 653
Other accrued liabilities...................... 222 208 334
------ ------- ------
Total current liabilities.................... 8,120 9,882 7,894
Deferred compensation............................ 628 542 500
Other long-term liabilities...................... -- 4 75
------ ------- ------
Total liabilities............................ 8,748 10,428 8,469
------ ------- ------
Commitments and contingencies
Shareholders' equity:
Common stock and contributed capital, no par
value; 10,000 shares authorized, 31, 32 and 31
common shares issued and outstanding at June
30, 1997 and 1998 and December 31, 1998
(unaudited), respectively..................... 1,167 1,222 1,357
Accumulated deficit............................ (216) (216) (216)
Related party advances......................... (227) (289) (230)
------ ------- ------
Total shareholders' equity................... 724 717 911
------ ------- ------
Total liabilities and shareholders' equity... $9,472 $11,145 $9,380
====== ======= ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-78
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
CONSOLIDATED STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Six Months
Ended June 30, Ended December 31,
------------------------- --------------------
1996 1997 1998 1997 1998
------- ------- ------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Professional services....... $14,844 $16,812 $17,916 $ 7,229 $ 7,975
------- ------- ------- --------- ---------
Expenses:
Shareholder compensation and
related costs.............. 5,024 6,214 7,113 1,961 2,023
Employee compensation and
related costs.............. 6,037 6,441 6,318 3,063 3,292
Occupancy costs............. 1,188 1,248 1,256 558 642
Office operating expenses... 1,434 1,690 1,811 532 627
Other selling, general and
administrative expenses.... 1,105 1,175 1,338 1,087 1,256
------- ------- ------- --------- ---------
14,788 16,768 17,836 7,201 7,840
------- ------- ------- --------- ---------
Operating income.......... 56 44 80 28 135
------- ------- ------- --------- ---------
Other (income) expense:
Interest expense............ 275 291 326 194 167
Interest income............. (215) (254) (261) (167) (144)
Other....................... (4) 7 15 1 112
------- ------- ------- --------- ---------
56 44 80 28 135
------- ------- ------- --------- ---------
Net income.................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-79
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Related Total
------------- Accumulated Party Shareholders'
Shares Amount Deficit Advances Equity
------ ------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995..... 21 $ 857 $(216) $(513) $128
Capital contributed by
principals................ 6 166 -- -- 166
Net decrease in related
party advances............ -- -- -- 88 88
--- ------ ----- ----- ----
Balance at June 30, 1996..... 27 1,023 (216) (425) 382
Capital contributed by
principals................ 4 144 -- -- 144
Net decrease in related
party advances............ -- -- -- 198 198
--- ------ ----- ----- ----
Balance at June 30, 1997..... 31 1,167 (216) (227) 724
Capital contributed by
principals................ 2 92 -- -- 92
Redemption of capital
contributed by
principals................ (1) (37) -- -- (37)
Net increase in related
party advances............ -- -- -- (62) (62)
--- ------ ----- ----- ----
Balance at June 30, 1998..... 32 1,222 (216) (289) 717
Unaudited data:
Capital contributed by
principals................ -- 190 -- -- 190
Redemption of capital
contributed by
principals................ (1) (55) -- -- (55)
Net decrease in related
party advances............ -- -- -- 59 59
--- ------ ----- ----- ----
Balance at December 31, 1998
(unaudited)................. 31 $1,357 $(216) $(230) $911
=== ====== ===== ===== ====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-80
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended December
Ended June 30, 31,
------------------------- ----------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $ -- $ -- $ -- $ -- $ --
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and
amortization................. 599 810 908 476 568
Provision for uncollectible
fees receivable.............. 233 210 278 108 59
Loss on disposal of property
and equipment................ -- -- -- -- 118
Changes in operating assets
and liabilities:
Fees receivable............. (1,254) (735) (798) 23 492
Unbilled fees............... (12) (233) (101) (477) (364)
Prepaid expenses and other
current assets............. (26) (238) (87) (221) 14
Due to principals........... 541 1,232 1,185 (618) (1,544)
Accounts payable............ 115 (26) (105) (134) 230
Other accrued liabilities... 5 154 (15) (23) 126
Accrued compensation and
related costs.............. (181) 121 150 217 (301)
Other....................... 9 (239) 157 205 105
------- ------- ------- ------- -------
Net cash provided by (used
in) operating
activities............... 29 1,056 1,572 (444) (497)
------- ------- ------- ------- -------
Cash flows from investing
activities:
Business acquisitions........... (300) (453) (390) (157) (169)
Purchase of property and
equipment...................... (954) (665) (702) (575) (899)
Other........................... (19) (15) 29 (2) (8)
------- ------- ------- ------- -------
Net cash used in investing
activities............... (1,273) (1,133) (1,063) (734) (1,076)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Repayments (advances) to related
parties........................ 88 198 (62) 43 59
Proceeds from (payments of)
short-term debt, net........... 247 776 344 39 (574)
Redemption of capital
contributed by principals...... -- -- (37) (37) (55)
Capital contributed by
principals..................... 166 144 92 66 190
------- ------- ------- ------- -------
Net cash provided by (used
in) financing
activities............... 501 1,118 337 111 (380)
------- ------- ------- ------- -------
Net increase (decrease) in cash
and cash equivalents............. (743) 1,041 846 (1,067) (1,953)
Cash and cash equivalents at
beginning of period.............. 869 126 1,167 1,167 2,013
------- ------- ------- ------- -------
Cash and cash equivalents at end
of period........................ $ 126 $ 1,167 $ 2,013 $ 100 $ 60
======= ======= ======= ======= =======
Supplemental disclosures of cash
flow information:
Interest paid................... $ 275 $ 291 $ 326 $ 194 $ 167
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-81
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Berry, Dunn, McNeil & Parker, Chartered (the Company) provides
professional accounting, auditing, tax and consulting services primarily in
northern New England.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiary, BDMP Decision Development, LLC. All
significant intercompany transactions and accounts are eliminated in
consolidation.
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value of services
provided by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives or the
shorter of asset life or lease term for leasehold improvements, generally
ranging from 3 to 10 years. Expenditures for maintenance and repairs and minor
renewals and betterments that do not improve or extend the life of the
respective assets are expensed. All other expenditures for renewals and
betterments are capitalized. The assets and related depreciation (amortization)
accounts are adjusted for property retirements and disposals with the resulting
gain or loss included in operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment loss is recognized to the extent
F-82
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
that the sum of undiscounted estimated future cash flows expected to result
from use of the assets is less than the carrying value. No impairment has been
recognized by the Company.
Intangible Assets:
Intangible assets consist of goodwill, which represents the excess of
cost over the fair value of assets acquired in business combinations accounted
for under the purchase method. Substantially all goodwill is amortized on a
straight-line basis over an estimated useful life of 40 years.
Investments:
Investments in companies in which the Company has significant ownership
and influence, but not control, are included in the consolidated financial
statements under the equity method of accounting. Other investments in
companies are stated at cost.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable and accrued
liabilities approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and tax basis of
assets and liabilities using currently enacted tax rates in effect for the
years in which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the consolidated
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made when accounting for the allowances for doubtful
accounts, unbilled fees, depreciation and amortization and income taxes.
F-83
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Unaudited Interim Financial Statements:
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at December 31, 1998, and
the results of its operations and its cash flows for the six months ended
December 31, 1997 and 1998, as presented in the accompanying unaudited interim
financial statements.
NOTE 3--BUSINESS COMBINATIONS
On January 10, 1995, the Company acquired the firm of Brooks & Carter
(B&C) for one dollar and additional contingent consideration. The additional
contingent consideration is based on actual cash receipts of future gross
billings to former B&C clients for each calendar quarter during the period 1995
through 1999. However, the agreement limits the Company's payments to the
former owners of B&C based on amounts that B&C had collected from its clients
during 1994. Total payments made to the former owners of B&C for the years
ended June 30, 1996, 1997 and 1998, and the six months ended December 31, 1998
(unaudited) were approximately $19, $30, $34 and $14, respectively. These
amounts are being amortized over the remaining portion of a forty-year period
from the date of acquisition.
On January 31, 1995, the Company acquired the firm of Smith, Batchelder &
Rugg ("SBR") for $117 and other consideration as described below. In addition,
the Company paid a $425 note payable from SBR to State Street Bank and Trust
Co. The purchase price consideration also includes payments of $38 per year for
five years, plus variable percentages of cash receipts of future gross billings
to former clients of SBR for and during the five year period starting February
1, 1995 and terminating January 31, 2000. Excluding the initial acquisition
payment of $117, the maximum amount payable to the former owners of SBR under
the terms of the purchase agreement is $1,688. Total payments made to the
former owners of SBR for the years ended June 30, 1996, 1997 and 1998, and the
six months ended December 31, 1998 (unaudited), were approximately $134, $245,
$270 and $91, respectively. These amounts are being amortized over the
remaining portion of a forty-year period from the date of acquisition.
On January 1, 1996, the Company acquired the firm of Ade & Associates
(Ade) for $45 and additional contingent consideration. The additional
contingent consideration is based on actual cash receipts of future gross
billings to former Ade clients for and during the seven year period commencing
January 1, 1996, and terminating December 31, 2002, including all work-in-
process as of December 31, 2002, for former clients of Ade, if and when
collected by the Company. Total contingent payments made to the former owners
of Ade for the years ended June 30, 1996, 1997 and 1998, and the six months
ended December 31, 1998 (unaudited) were approximately $103, $178, $86 and $64,
respectively. These amounts are being amortized over the remaining portion of a
forty-year period from the date of acquisition.
F-84
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--SELECTED FINANCIAL STATEMENT INFORMATION
Additional information concerning consolidated financial statement
accounts include the following:
<TABLE>
<CAPTION>
June 30,
---------------- December 31,
1997 1998 1998
------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Property and equipment, net:
Furniture and fixtures.................. $ 3,001 $ 2,942 $ 2,223
Computer equipment...................... 450 828 667
Automobiles............................. 579 839 807
Leasehold improvements.................. 463 652 720
------- ------- -------
4,493 5,261 4,417
Less accumulated depreciation and
amortization........................... (2,821) (3,498) (2,402)
------- ------- -------
$ 1,672 $ 1,763 $ 2,015
======= ======= =======
Intangible assets, net:
Goodwill................................ $ 744 $ 1,134 $ 1,291
Less accumulated amortization........... (36) (76) (112)
------- ------- -------
$ 708 $ 1,058 $ 1,179
======= ======= =======
</TABLE>
NOTE 5--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended Ended
June 30, December 31,
-------------------- -------------
1996 1997 1998 1997 1998
----- ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period........ $ 536 $ 789 $ 814 $ 814 $ 924
Additions to costs and expenses....... 233 210 278 108 59
Less (write-offs) recoveries.......... 20 (185) (168) (27) (136)
----- ------ ------ ----- ------
Balance at end of period.............. $ 789 $ 814 $ 924 $ 895 $ 847
===== ====== ====== ===== ======
</TABLE>
NOTE 6--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of notes payable to shareholders' and
shareholders' families, which bear interest at a variable rate of prime plus
1.0%. Amounts are due upon demand. The prime rate was 8.5 percent, 8.5 percent
and 7.75 percent at June 30, 1997, 1998 and December 31, 1998, respectively.
F-85
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
In addition, the Company has a $3 million line of credit with Peoples
Heritage Bank, with interest payable monthly at prime plus 0.5 percent,
expiring November 1, 1999. At June 30, 1997 and 1998 and December 31, 1998
(unaudited), there were no borrowings outstanding under the line of credit. The
line of credit is collateralized by substantially all assets of the Company,
and guaranteed by the Company's shareholders.
NOTE 7--INCOME TAXES
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
June 30,
--------- December 31,
1997 1998 1998
---- ---- ------------
(Unaudited)
<S> <C> <C> <C>
Long-term deferred tax assets:
Deferred compensation............................. $252 $225 $225
Net operating loss carryforward................... 159 141 141
Property and equipment............................ 49 57 57
---- ---- ----
Total long-term deferred tax assets............. 460 423 423
Deferred tax liabilities:
Intangible assets................................. 166 119 119
Accrual to cash adjustment........................ 524 534 534
---- ---- ----
Total deferred tax liabilities.................. 690 653 653
---- ---- ----
Net deferred tax liability.......................... $230 $230 $230
==== ==== ====
</TABLE>
NOTE 8--LEASE COMMITMENTS
The Company leases various office facilities and equipment under
noncancelable lease agreements, which expire at various dates through November
2011. Certain of these leases allow the Company, at its option to extend the
lease term and/or purchase the leased asset at the end of the lease term,
generally at fair market value. Future minimum lease payments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999............................................................... $ 707
2000............................................................... 707
2001............................................................... 735
2002............................................................... 681
2003............................................................... 608
Thereafter......................................................... 3,353
------
Total minimum lease payments....................................... $6,791
======
</TABLE>
Rent expense for all operating leases for the fiscal years ended June 30,
1996, 1997 and 1998, and the six months ended December 31, 1997 and 1998 was
$717, $603, $806, $395 (unaudited) and $433 (unaudited), respectively.
F-86
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 9--EMPLOYEE BENEFIT PLANS
401(k) and Profit Sharing Plan:
The Company has a contributory defined contribution benefit plan covering
substantially all employees. Total Company contributions to the plan for the
fiscal years ended June 30, 1996, 1997 and 1998, and the six months ended
December 31, 1997 and 1998 was $504, $493, $503, $256 (unaudited) and $252
(unaudited), respectively.
Deferred Compensation Plan:
The Company has a nonqualified deferred compensation plan with its
retired principals for retirement benefits earned by the retired principals
through 1985 under a benefit plan which is no longer in place, and
undistributed shareholder income related to a change in the Company's fiscal
year end during 1990. The benefit to retired principals is paid in 120 equal
monthly instalments. In addition, unpaid salaries and bonuses payable to the
retired principals are included in the deferred compensation balances. These
amounts bear interest at prime plus 1.5 percent.
NOTE 10--SHAREHOLDERS' EQUITY
Each shareholder of the Company (Shareholder) is issued one share of the
Company's no par common stock upon admission as a shareholder. The price of
each share is determined by the Board of Directors. After five years as a
principal, a Shareholder is required to have a capital contribution equal to 50
percent of their salary. Upon retirement, resignation, death, or other defined
events, each Shareholder or Shareholder beneficiary has the right to receive
the amount paid to the Company by each Shareholder for his/her share of common
stock.
NOTE 11--COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 12--RELATED PARTY TRANSACTIONS
Prior to June 30, 1996, the Company loaned $438 to BDMP Realty LLC
(BDMP), a related party owned by the Company's principals, for the purchase of
certain real property. The loan bears interest at prime and does not require
scheduled payments. The Company also periodically advances funds to its
shareholders.
Loans to BDMP and advances to shareholders have been included in the
consolidated balance sheet as related party advances.
The Company also leases the Bangor office from BDMP under a 15-year
lease. Annual rent is $230 and the lease is renewable for two periods of five
years each.
As described in Note 7, the Company periodically receives loans from the
Company's Shareholders and Shareholders' families.
F-87
<PAGE>
BERRY, DUNN, MCNEIL & PARKER, CHARTERED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Amounts due to principals consist of accrued bonuses and accrued
salaries. Accrued bonuses and salaries earn interest at prime plus 1.5 percent.
NOTE 13--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company stockholders will transfer their Company shares to a newly formed Maine
limited liability company ("BDM&P Holdings"). The Company will be converted
from a professional corporation to a business corporation. A wholly-owned
subsidiary of CenterPoint will merge with and into the Company. All of the
Company's outstanding shares will be exchanged for cash and common stock of
CenterPoint concurrently with the consummation of the initial public offering
of the common stock of CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former owners of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-88
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Urbach Kahn & Werlin PC
In our opinion, the accompanying balance sheet and the related statements of
income, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Urbach Kahn & Werlin PC at October
31, 1997 and 1998, and the results of its operations and its cash flows for
each of the two years in the period ended October 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 9, 1999
F-89
<PAGE>
URBACH KAHN & WERLIN PC
BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
October 31,
---------------- January 31,
1997 1998 1999
------- ------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 18 $ 189 $ 25
Marketable securities.......................... 1,028 1,152 1,292
Fees receivable, less allowance for doubtful
accounts of $1,070,
$1,177 and $1,294 (unaudited), respectively... 6,905 7,741 7,656
Unbilled fees, at net realizable value......... 138 299 836
Due from shareholders.......................... 394 570 799
Prepaid expenses and other current assets...... 821 829 709
------- ------- -------
Total current assets......................... 9,304 10,780 11,317
Property and equipment, net...................... 778 699 982
Investments...................................... 667 927 1,048
Deferred income taxes............................ 2,075 2,188 2,248
Other assets..................................... 239 319 347
------- ------- -------
Total assets................................. $13,063 $14,913 $15,942
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................ $ 429 $ 946 $ 721
Accounts payable............................... 407 340 1,593
Accrued compensation and related costs to
employees..................................... 265 249 261
Accrued compensation and related costs to
shareholders.................................. 882 1,337 1,076
Deferred compensation.......................... 294 262 257
Deferred income taxes.......................... 2,353 2,603 2,805
Other accrued liabilities...................... 159 564 464
------- ------- -------
Total current liabilities.................... 4,789 6,301 7,177
Long-term debt................................... 2,068 1,622 1,513
Deferred compensation............................ 4,475 4,805 4,896
Other............................................ -- 149 149
------- ------- -------
Total liabilities............................ 11,332 12,877 13,735
------- ------- -------
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value; 100,000 shares
authorized,
17,690, 18,425 and 18,425 (unaudited) common
shares issued
and outstanding at October 31, 1997 and 1998
and January 31,
1999, respectively............................ -- -- --
Additional paid-in-capital..................... 2,958 3,186 3,199
Accumulated other comprehensive income......... 91 151 232
Accumulated deficit............................ (1,318) (1,301) (1,224)
------- ------- -------
Total shareholders' equity................... 1,731 2,036 2,207
------- ------- -------
Total liabilities and shareholders' equity... $13,063 $14,913 $15,942
======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-90
<PAGE>
URBACH KAHN & WERLIN PC
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended October 31, Ended January 31,
------------------ ------------------
1997 1998 1998 1999
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Professional services................ $ 16,012 $ 17,085 $ 3,678 $ 4,346
-------- -------- -------- --------
Expenses:
Shareholder compensation and related
costs............................... 4,798 4,853 752 1,221
Employee compensation and related
costs............................... 6,590 7,147 1,674 1,817
Occupancy costs...................... 1,036 1,136 280 282
Office operating expenses............ 674 736 188 171
Depreciation and amortization........ 222 261 60 79
Other selling, general and
administrative expenses............. 2,385 2,727 679 605
-------- -------- -------- --------
15,705 16,860 3,633 4,175
-------- -------- -------- --------
Operating income................... 307 225 45 171
-------- -------- -------- --------
Other (income) expense:
Interest expense..................... 594 643 127 148
Interest income...................... (78) (108) (12) (13)
Other................................ (489) (435) (73) (124)
-------- -------- -------- --------
27 100 42 11
-------- -------- -------- --------
Income before provision for income
taxes................................. 280 125 3 160
Provision for income taxes............. 172 105 12 83
-------- -------- -------- --------
Net income (loss)...................... $ 108 $ 20 $ (9) $ 77
======== ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-91
<PAGE>
URBACH KAHN & WERLIN PC
STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total Total
-------------- Paid-in- Accumulated Comprehensive Shareholders' Comprehensive
Shares Amount Capital Deficit Income Equity Income
------ ------ ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31,
1996................... 17,835 $-- $2,944 $(1,299) $-- $1,645
Cash dividends, $.17
per share............ -- -- -- (3) -- (3)
Issuances of common
stock/ payments of
subscriptions........ 1,125 -- 333 -- -- 333
Retirement of common
stock................ (1,270) -- (319) (124) -- (443)
Unrealized gain on
available for sale
securities........... -- -- -- -- 91 91 $ 91
Net income............ -- -- -- 108 -- 108 108
------ ---- ------ ------- ---- ------ ----
Total comprehensive
income.............. -- -- -- -- -- -- $199
====
Balance at October 31,
1997................... 17,690 -- 2,958 (1,318) 91 1,731
Cash dividends, $.17
per share............ -- -- -- (3) -- (3)
Issuances of common
stock/ payments of
subscriptions........ 735 -- 228 -- -- 228
Unrealized gain on
available for sale
securities........... -- -- -- -- 60 60 $ 60
Net income............ -- -- -- 20 -- 20 20
------ ---- ------ ------- ---- ------ ----
Total comprehensive
income.............. -- -- -- -- -- -- $ 80
====
Balance at October 31,
1998................... 18,425 -- 3,186 (1,301) 151 2,036
Unaudited data:
Issuances of common
stock/ payments of
subscriptions........ -- -- 13 -- -- 13
Unrealized gain on
available for sale
securities........... -- -- -- -- 81 81 $ 81
Net income............ -- -- -- 77 -- 77 77
------ ---- ------ ------- ---- ------ ----
Total comprehensive
income.............. -- -- -- -- -- -- $158
====
Balance at January 31,
1999 (unaudited)....... 18,425 $-- $3,199 $(1,224) $232 $2,207
====== ==== ====== ======= ==== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-92
<PAGE>
URBACH KAHN & WERLIN PC
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Three
Fiscal Year Months
Ended Ended
October 31, January 31,
-------------- ------------
1997 1998 1998 1999
------- ----- ----- -----
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 108 $ 20 $ (9) $ 77
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................ 222 261 60 79
Change in deferred income taxes.............. 148 105 11 83
Increase in related entities' and investment
equity...................................... (367) (346) (84) (121)
Changes in current assets and liabilities:
Fees receivable............................ 126 (836) (11) 85
Unbilled fees.............................. 92 (161) (626) (537)
Prepaid expenses and other current assets.. (253) (8) 225 120
Accounts payable........................... (607) (67) 178 1,253
Accrued liabilities........................ (74) 405 245 (101)
Accrued compensation and related costs to
employees................................. (173) (16) (39) 12
Accrued compensation and related costs to
shareholders.............................. 45 455 (2) (261)
Deferred compensation...................... 602 298 117 86
Other...................................... 140 47 2 1
------- ----- ----- -----
Net cash provided by operating
activities.............................. 9 157 67 776
------- ----- ----- -----
Cash flows from investing activities:
Due from shareholders.......................... 41 (176) (153) (229)
Purchase of property and equipment............. (283) (187) (48) (362)
Dividends from corporate joint venture equity
investment.................................... 176 85 -- --
Purchase of investments........................ (37) (31) -- --
Other.......................................... (75) (40) -- (28)
------- ----- ----- -----
Net cash used in investing activities.... (178) (349) (201) (619)
------- ----- ----- -----
Cash flows from financing activities:
Proceeds from issuance of long-term debt....... 1,700 -- -- --
Payments of long-term debt..................... (296) (429) (106) (109)
Proceeds from (payments of) short-term debt,
net........................................... (1,100) 500 351 (225)
Payments of dividends.......................... (3) (3) -- --
Proceeds from issuance of common stock/payments
of subscriptions.............................. 333 228 15 13
Payments to retire common stock................ (443) -- -- --
Other.......................................... (10) 67 -- --
------- ----- ----- -----
Net cash provided by (used in) financing
activities.............................. 181 363 260 (321)
------- ----- ----- -----
Net increase (decrease) in cash and cash
equivalents..................................... 12 171 126 (164)
Cash and cash equivalents at beginning of
period.......................................... 6 18 18 189
------- ----- ----- -----
Cash and cash equivalents at end of period....... $ 18 $ 189 $ 144 $ 25
======= ===== ===== =====
Supplemental disclosures of cash flow
information:
Interest paid.................................. $ 238 $ 254 $ 46 $ 48
Income taxes paid.............................. $ 11 $ 34 $ 9 $ 6
</TABLE>
See accompanying Notes to Financial Statements.
F-93
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
The Company:
Urbach Kahn & Werlin PC (the Company or UKW), which was founded in 1964,
is a professional accountancy corporation engaged in providing tax, accounting
and auditing, and consulting services. The Company is headquartered in Albany,
New York and also conducts its practice in five other operating offices, which
are located in: Glens Falls, NY; Poughkeepsie, NY; New York, NY; Los Angeles,
CA; and Washington, DC.
NOTE 2--RELATED ENTITIES AND INVESTMENTS
The accounts and operations of several entities which are affiliated with
the Company through partnership arrangements and/or common stock investments
are not material, are generally carried at the Company's net equity and are
classified as investments. The Company's interest in a corporate joint venture,
which provides malpractice insurance to its members, is also carried at net
equity in underlying net assets and is also classified as an investment.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Marketable Securities:
The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
F-94
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Marketable securities consisted of investments in equity securities and
are classified as available for sale securities. At October 31, 1997 and 1998
and January 31, 1999, the fair market value of the marketable securities
exceeds the adjusted cost. The unrealized gains, net of deferred income taxes,
are reported as an increase to shareholders' equity.
Marketable securities consisted of:
<TABLE>
<CAPTION>
October 31,
------------- January 31,
1997 1998 1999
------ ------ -----------
(Unaudited)
<S> <C> <C> <C>
Adjusted cost.................................... $ 889 $ 920 $ 920
Unrealized holding gains......................... 139 232 372
------ ------ ------
Fair market value................................ $1,028 $1,152 $1,292
====== ====== ======
</TABLE>
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
4 to 10 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
Intangible Assets:
Intangible assets consist of goodwill, which represents the excess of
cost over the fair value of assets acquired in practice acquisitions accounted
for under the purchase method. Substantially all goodwill is amortized on a
straight-line basis over an estimated useful life of 40 years.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through October 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable, accrued
liabilities and debt approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and
F-95
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
tax basis of assets and liabilities using currently enacted tax rates in effect
for the years in which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. While management believes that the estimates and related
assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made when accounting for the allowances for doubtful accounts, depreciation and
amortization, income taxes and deferred compensation liability.
Unaudited Interim Financial Statements:
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at January 31, 1999, and
the results of its operations and its cash flows for the three months ended
January 31, 1998 and 1999, as presented in the accompanying unaudited interim
financial statements.
F-96
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--SELECTED FINANCIAL STATEMENT INFORMATION
Additional information concerning consolidated financial statement
accounts include the following:
<TABLE>
<CAPTION>
October 31,
-------------- January 31,
1997 1998 1999
------ ------ -----------
(Unaudited)
<S> <C> <C> <C>
Property and equipment, net:
Furniture and fixtures..................... $3,656 $3,795 $4,153
Leasehold improvements..................... 648 696 700
------ ------ ------
4,304 4,491 4,853
Less accumulated depreciation and
amortization.............................. (3,526) (3,792) (3,871)
------ ------ ------
$ 778 $ 699 $ 982
====== ====== ======
Prepaid expenses and other current assets:
Prepaid insurance.......................... $ 299 $ 306 $ 169
Prepaid taxes.............................. 81 65 106
Prepaid rent............................... 150 166 --
Other receivables.......................... 128 138 121
Notes receivables.......................... 75 83 60
Other...................................... 88 71 253
------ ------ ------
$ 821 $ 829 $ 709
====== ====== ======
Other accrued liabilities:
401K employer matching contribution........ $ 60 $ 245 $ 259
Other...................................... 99 319 205
------ ------ ------
$ 159 $ 564 $ 464
====== ====== ======
</TABLE>
NOTE 5--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months
October 31, Ended
------------------ January 31,
1997 1998 1999
-------- -------- ------------
(Unaudited)
<S> <C> <C> <C>
Balance at beginning of period............ $ 1,385 $ 1,070 $1,177
Additions to costs and expenses........... 174 420 117
Less write-offs........................... (489) (313) --
-------- -------- ------
Balance at end of period.................. $ 1,070 $ 1,177 $1,294
======== ======== ======
</TABLE>
F-97
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 6--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
October
31,
--------- January 31,
1997 1998 1999
---- ---- -----------
(Unaudited)
<S> <C> <C> <C>
Lines of credit...................................... $-- $500 $275
Current maturities of long-term debt................. 429 446 446
---- ---- ----
Total short-term debt.............................. $429 $946 $721
==== ==== ====
</TABLE>
The Company has several bank lines of credit with borrowing capacity of
$6,000. The interest rates range from prime plus .25 percent to prime minus
1.25 percent. The lines of credit are unsecured. The most significant covenant
related to these lines is a debt to equity ratio.
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
October 31,
-------------- January 31,
1997 1998 1999
------ ------ -----------
(Unaudited)
<S> <C> <C> <C>
Note payable, unsecured, interest rates
ranging from 8% to 8.5%. Maturities from
April 2001 through July 2004................. $2,497 $2,068 $1,959
Less current maturities of long-term debt..... (429) (446) (446)
------ ------ ------
Total long-term debt........................ $2,068 $1,622 $1,513
====== ====== ======
</TABLE>
Maturities on long-term debt as of October 31, 1998, including capital
lease obligations, are as follows:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999............................................................... $ 446
2000............................................................... 467
2001............................................................... 364
2002............................................................... 264
2003............................................................... 287
Thereafter......................................................... 240
------
Total maturities of long-term debt............................... $2,068
======
</TABLE>
F-98
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 7--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended Ended January
October 31, 31,
----------- -------------
1997 1998 1998 1999
----- ----- ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Income taxes currently payable:
State......................................... $ 24 $ -- $ 1 $ --
----- ----- ----- ------
24 -- 1 --
Deferred income tax expense (benefit):
Federal....................................... 128 81 9 67
State......................................... 20 24 2 16
----- ----- ----- ------
Total provision for income taxes............ $ 172 $ 105 $ 12 $ 83
===== ===== ===== ======
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
October 31,
------------- January 31,
1997 1998 1999
------ ------ -----------
(Unaudited)
<S> <C> <C> <C>
Long-term deferred tax assets:
Deferred compensation........................ $1,880 $2,018 $2,078
Fixed assets................................. 112 120 120
Net operating loss and tax credit
carryforwards............................... 83 50 50
------ ------ ------
Total long-term deferred tax assets........ 2,075 2,188 2,248
------ ------ ------
Current deferred tax liabilities:
Accrual to cash adjustments.................. 2,305 2,522 2,665
Unrealized gains on investments.............. 48 81 140
------ ------ ------
Total current deferred tax liabilities..... 2,353 2,603 2,805
------ ------ ------
Net deferred tax liability..................... $ 278 $ 415 $ 557
====== ====== ======
</TABLE>
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Fiscal Year
Ended Three Months
October 31, Ended
----------- January 31,
1997 1998 1999
----- ----- ------------
(Unaudited)
<S> <C> <C> <C>
Income taxes currently payable:
U.S. federal statutory rate................... $ 98 $ 44 $55
State income taxes, net of federal income tax
benefit...................................... 44 24 16
Non-deductible expenses....................... 30 37 12
----- ----- ---
Actual income tax provision..................... $ 172 $ 105 $83
===== ===== ===
</TABLE>
F-99
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 8--LEASE COMMITMENTS
The Company leases its office facilities under noncancelable lease
agreements, which expire at various dates. Certain of these leases allow the
Company, at its option, to extend the lease term and/or purchase the leased
asset at the end of the lease term, generally at fair market value. Future
minimum lease payments under noncancelable operating leases are as follows as
of October 31, 1998:
<TABLE>
<CAPTION>
Fiscal Year:
------------
<S> <C>
1999............................................................... $ 827
2000............................................................... 682
2001............................................................... 682
2002............................................................... 635
2003............................................................... 535
Thereafter......................................................... 871
------
Total minimum lease payments..................................... $4,232
======
</TABLE>
Rent expense for all operating leases for the fiscal years ended October
31, 1997 and 1998 and the three months ended January 31, 1998 and 1999 was
$915, $1,043, $253 (unaudited) and $264 (unaudited), respectively.
NOTE 9--EMPLOYEE BENEFIT PLANS
401(k) Plan:
The Company contributes to a 401(k) employee retirement plan based upon
requirements to fund benefits for covered employees. The Company matches ten
percent of an employee's contribution up to six percent of an employee's
salary.
Deferred Compensation:
The Company is liable, under the terms of its wage continuation plan, for
deferred benefits to active shareholders and retired shareholders or
beneficiaries of deceased shareholders. The benefits are based on years of
service and average annual compensation levels, as defined.
The Company is required to purchase all shares of stock held by a
retiring shareholder at the close of the fiscal year in which the separation
takes place.
Net deferred compensation cost for the Company includes the following
components:
<TABLE>
<CAPTION>
Fiscal Year
Ended
October 31,
-----------
1997 1998
----- -----
<S> <C> <C>
Service cost.................................................. $ 141 $ 144
Interest cost................................................. 355 389
Amortization of prior service cost............................ 58 58
----- -----
Net deferred compensation cost................................ $ 554 $ 591
===== =====
</TABLE>
F-100
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Assumptions used in the development of pension data follow:
<TABLE>
<CAPTION>
Fiscal Year
Ended
October 31,
-----------
1997 1998
----- -----
<S> <C> <C>
Discount rate.................................................. 7.5% 7.5%
Rates of increase in compensation levels....................... 4.0% 4.0%
</TABLE>
The Company's deferred compensation plan is not funded. The following
table presents the status of the Company's deferred compensation benefits:
<TABLE>
<CAPTION>
October 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Projected benefit obligation:
Retirees.............................................. $ 1,393 $ 1,223
Active participants................................... 3,387 3,796
Funded status........................................... (4,780) (5,019)
Unrecognized prior service cost......................... 234 175
Unrecognized gain....................................... (223) (223)
------- -------
Accrued deferred compensation cost...................... $(4,769) $(5,067)
======= =======
</TABLE>
NOTE 10--SHAREHOLDERS' EQUITY
Shareholders' equity accounts are reported net of related amounts due
from the respective individuals for the portion of common stock that the
Company considers subscribed. The terms of subscription arrangements with
shareholders generally provide for payments (with interest) over a five-year
term. The number of common shares recognized as issued (1,125 shares in 1997
and 735 shares in 1998) were substantially all subscribed shares. Additional
paid-in capital is only recognized as cash payments are made.
On November 1, 1997, Common Stock (1,125 shares) was issued to new
shareholders in the amount of $333, including payments of subscriptions. Also
in 1997, Common Stock (1,270 shares) was acquired and retired on April 1 and
August 1 for consideration totaling $443.
On November 1, 1998, Common Stock (735 shares) was issued to new
shareholders in the amount of $228, including payments of subscriptions.
Dividends were declared and paid in both 1997 and 1998 in the amounts of
$3.
NOTE 11--CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
F-101
<PAGE>
URBACH KAHN & WERLIN PC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 12--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its shareholders entered into a definitive
agreement with a newly formed Massachusetts corporation (the "UKW Company").
The shareholders of UKW Company will exchange all their stock for proportionate
membership interests in a newly formed Delaware limited liability company ("UKW
LLC"). Thereafter, CenterPoint will merge with and into UKW LLC. All of the UKW
LLC interests will be exchanged for cash and common stock of CenterPoint
concurrently with the consummation of the initial public offering of the common
stock of CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former shareholders of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-102
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Self Funded Benefits, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Self Funded Benefits, Inc. d/b/a
Insurance Design Administrators at December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the two years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 5, 1999
F-103
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 194 $ 857
Restricted cash................................................ 190 --
Administration fees and commissions receivable................. 708 675
Funds held for customers....................................... 612 660
Prepaid expenses and other current assets...................... 28 160
Due from principal............................................. -- 164
------ ------
Total current assets......................................... 1,732 2,516
Property and equipment, net...................................... 966 747
Due from principal............................................... 155 --
Other assets-security deposits................................... 43 38
------ ------
Total assets................................................. $2,896 $3,301
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............................. $ 200 $ 153
Accounts payable............................................... 53 123
Accrued liabilities............................................ 266 185
Accrued compensation and related costs......................... 62 91
Deferred income................................................ 69 --
Current portion of customer deposits........................... 526 660
------ ------
Total current liabilities.................................... 1,176 1,212
Long-term debt, less current portion............................. 309 154
Customer deposits, less current portion.......................... 86 --
------ ------
Total liabilities............................................ 1,571 1,366
------ ------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 200 shares authorized, 150 common
shares issued and outstanding................................. -- --
Additional paid-in-capital..................................... 208 208
Retained earnings.............................................. 1,117 1,727
------ ------
Total shareholders' equity................................... 1,325 1,935
------ ------
Total liabilities and shareholders' equity................... $2,896 $3,301
====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-104
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Revenues:
Administration fees........................................... $6,583 $6,703
Reinsurance commissions....................................... 1,960 1,343
Other......................................................... 1,213 2,887
------ ------
9,756 10,933
------ ------
Expenses:
Employee compensation and related costs....................... 6,047 6,361
Occupancy costs............................................... 296 299
Other operating expenses...................................... 1,121 1,132
Depreciation and amortization................................. 206 242
Other selling, general and administrative expenses............ 1,045 1,377
------ ------
8,715 9,411
------ ------
Operating income............................................ 1,041 1,522
------ ------
Other (income) expense:
Interest expense.............................................. 28 32
Interest income............................................... (80) (77)
Other......................................................... 132 82
------ ------
80 37
------ ------
Income before provision for income taxes........................ 961 1,485
Provision for income taxes...................................... 31 25
------ ------
Net income...................................................... $ 930 $1,460
====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-105
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------- Paid-in- Retained Shareholders'
Shares Amount Capital Earnings Equity
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... 150 $-- $208 $1,167 $1,375
Cash dividends, $6,533 per
share....................... -- -- -- (980) (980)
Net income................... -- -- -- 930 930
--- ---- ---- ------ ------
Balance at December 31, 1997... 150 -- 208 1,117 1,325
Cash dividends, $5,666 per
share....................... -- -- -- (850) (850)
Net income................... -- -- -- 1,460 1,460
--- ---- ---- ------ ------
Balance at December 31, 1998... 150 $-- $208 $1,727 $1,935
=== ==== ==== ====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-106
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1997 1998
----- -------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 930 $ 1,460
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 206 242
Loss on disposal of property and equipment................. 49 82
Changes in current assets and liabilities:
Administration fees and commissions receivable........... (215) 33
Funds held for customers................................. 190 (48)
Restricted cash.......................................... (6) 190
Prepaid expenses and other current assets................ (11) (132)
Accounts payable......................................... 19 70
Accrued liabilities...................................... 216 (81)
Accrued compensation and related costs................... 26 29
Deferred income.......................................... (47) (69)
Customer deposits........................................ (275) 48
Other.................................................... (86) (4)
----- -------
Net cash provided by operating activities.............. 996 1,820
----- -------
Cash flows from investing activities:
Purchase of property and equipment........................... (451) (105)
----- -------
Net cash used in investing activities.................. (451) (105)
----- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................... 400 --
Payments of long-term debt................................... (150) (202)
Payments of dividends........................................ (980) (850)
----- -------
Net cash used in financing activities.................. (730) (1,052)
----- -------
Net increase (decrease) in cash and cash equivalents........... (185) 663
Cash and cash equivalents at beginning of year................. 379 194
----- -------
Cash and cash equivalents at end of year....................... $ 194 $ 857
===== =======
Supplemental disclosures of cash flow information:
Interest paid................................................ $ 28 $ 32
Income taxes paid............................................ $ 29 $ 27
</TABLE>
See accompanying Notes to Financial Statements.
F-107
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
NOTES TO FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Self Funded Benefits, Inc. d/b/a Insurance Design Administrators (the
Company) administers self-funded benefit plans of employees of their customers
in both the public sector and private industry primarily in New Jersey.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills administration fees for administering their customers' self-
insured health plans. Administration fees are based on a fixed amount per
eligible life per month. The Company receives reinsurance commissions from the
various reinsurance carriers utilized. The reinsurance commissions are
determined by the terms of the reinsurance carrier agreements. Outstanding fees
receivable are evaluated each period to assess the adequacy of the allowance
for doubtful accounts. As of December 31, 1997 and 1998, the Company has
determined that no allowance for doubtful accounts was necessary.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
5 to 7 years. Expenditures for maintenance and repairs and minor renewals and
betterment's which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, administration fees and commissions receivable,
accounts payable, accrued liabilities and debt approximate fair value.
F-108
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Income Taxes:
During the year ended December 31, 1995, the Company elected S
corporation status for Federal and New Jersey income tax purposes. The Company
received a tax determination letter approving the S corporation status from the
Internal Revenue Service. This election resulted in an elimination of Federal
income taxes and a reduction of New Jersey income taxes at the corporation
level.
State income taxes have been computed using the asset and liability
approach. Under this approach, deferred income tax assets and liabilities are
determined based on the differences between the financial statement and tax
basis of assets and liabilities using currently enacted tax rates in effect for
the years in which the differences are expected to reverse.
Customer Deposits:
The Company holds client funds as deposits to pay claims of participants
in various self insurance plans. The related asset is accounted for as funds
held for customers and the corresponding liability is accounted for as customer
deposits on the balance sheet.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of administration fees and
commissions receivable. Receivables are not collateralized and, as a result,
management continually monitors the financial condition of its clients and
requires customer deposits for certain customers to reduce the risk of loss.
Sales Concentration:
A significant portion of the Company's total revenue comes from several
major customers. The following is a summary of the customers and corresponding
revenue for customers which consists of 10 percent or more of the Company's
total revenue for the years ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
December 31,
-------------
Customer 1997 1998
-------- ------ ------
<S> <C> <C>
County of Bergen............................................ $1,228 $ 995
Trump Casino Services, LLC.................................. 1,583 1,556
North Jersey School......................................... 1,212 1,199
------ ------
$4,023 $3,750
====== ======
</TABLE>
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. While management believes that the estimates and related
assumptions used in the preparation of the financial statements are
appropriate, actual
F-109
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
results could differ from those estimates. Estimates are made when accounting
for the allowances for doubtful accounts, depreciation and amortization and
income taxes.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised as follows:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------ -------
<S> <C> <C>
Property and equipment, net:
Furniture and fixtures.................................. $ 349 $ 284
Computer equipment and software......................... 1,444 1,626
Automobiles............................................. 14 14
Leasehold improvements.................................. 74 70
------ -------
1,881 1,994
Less accumulated depreciation and amortization.......... (915) (1,247)
------ -------
$ 966 $ 747
====== =======
</TABLE>
NOTE 4--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December
31,
---------
1997 1998
---- ----
<S> <C> <C>
Notes payable, secured by certain assets of the Company,
interest rate 7.5% to 11.5%, maturities from 1999 through
2002........................................................... $506 $307
Other........................................................... 3 --
---- ----
509 307
Less current maturities of long-term debt....................... 200 153
---- ----
Total long-term debt.......................................... $309 $154
==== ====
</TABLE>
Maturities on long-term debt are as follows:
<TABLE>
<S> <C>
1999................................................................. $153
2000................................................................. 106
2001................................................................. 34
2002................................................................. 14
----
Total maturities of long-term debt................................. $307
====
</TABLE>
NOTE 5--LEASE COMMITMENTS
The Company leases various types of office facilities, equipment, and
furniture and fixtures under noncancelable operating lease agreements, which
expire at various dates. Certain of these leases allow the
F-110
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Company, at its option to extend the lease term and/or purchase the leased
asset at the end of the lease term, generally at fair market value. Future
minimum lease payments under noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1999............................................................... $ 285
2000............................................................... 255
2001............................................................... 253
2002............................................................... 230
2003............................................................... 230
Thereafter......................................................... 211
------
Total minimum lease payments..................................... $1,464
======
</TABLE>
Rent expense for all operating leases for the fiscal years ended December
31, 1997 and 1998 was $253 and $269, respectively.
NOTE 6--EMPLOYEE BENEFIT PLAN
401(k) Plan:
The Company has a 401(K) plan in which all full time employees can
participate. Employees can contribute up to 15 percent of their earnings. The
Company matches 40 percent of the employees' contributions up to a maximum of 5
percent of compensation. The 401(K) employee benefit expense for the fiscal
years ended December 31, 1997 and 1998 was $39 and $37, respectively.
NOTE 7--COMMITMENTS AND CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
Letter of Credit:
The Company obtained a letter of credit from Bergen Commercial Bank for
the benefit of a health insurance carrier on January 5, 1993 for $250. On
January 5, 1998, the letter of credit was reduced to $200. The letter of credit
was secured by a restricted money market account at the bank and expired on
December 31, 1998. Letter of credit fees incurred by the Company for each of
the years ended December 31, 1997 and 1998 were $1.
NOTE 8--RELATED PARTY TRANSACTIONS
The Company purchased certain leasehold improvements and travel related
services from two companies owned by a shareholder of the Company. During the
fiscal years ended December 31, 1997 and 1998, these expenditures totaled $74
and $14, respectively. There were no outstanding payable balances related to
these purchased items or services as of December 31, 1997 and 1998.
F-111
<PAGE>
SELF FUNDED BENEFITS, INC. D/B/A INSURANCE DESIGN ADMINISTRATORS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
The Company has a loan receivable balance due from a shareholder of the
Company. The outstanding balance of the loan as of December 31, 1997 and 1998
was $155 and $164, respectively. The loan bears interest at 5.63 percent and
5.85 percent as of December 31, 1997 and 1998, respectively.
NOTE 9--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which a
wholly-owned subsidiary of CenterPoint will merge with and into the Company.
All of the Company's outstanding shares will be exchanged for cash and common
stock of CenterPoint concurrently with the consummation of the initial public
offering of the common stock of CenterPoint.
F-112
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Grace & Company, P.C.
In our opinion, the accompanying balance sheet and the related statements of
income, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Grace & Company, P.C. at December
31, 1998, and the results of its operations and its cash flows for the period
then ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 12, 1999
F-113
<PAGE>
GRACE & COMPANY, P.C.
BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Cash............................................................ $ 6
Fees receivable, less allowance for doubtful accounts of $761... 1,531
Unbilled fees, at net realizable value.......................... 815
Prepaid expenses and other current assets....................... 204
------
Total current assets.......................................... 2,556
Property and equipment, net....................................... 515
Cash surrender value of life insurance............................ 993
Deferred income taxes............................................. 11
Other assets...................................................... 30
------
Total assets.................................................. $4,105
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................................. $ 742
Due to shareholders............................................. 601
Accounts payable................................................ 160
Accrued compensation and related costs.......................... 530
Deferred income taxes........................................... 766
Other accrued liabilities....................................... 93
------
Total current liabilities..................................... 2,892
Long-term debt.................................................... 419
------
Total liabilities............................................. 3,311
------
Commitments
Shareholders' equity:
Common stock, $1 stated value; 30,000 shares authorized, 16,500
shares issued and 15,000 outstanding........................... 17
Additional paid-in-capital...................................... 350
Treasury stock, 1,500 shares.................................... (89)
Retained earnings............................................... 516
------
Total shareholders' equity.................................... 794
------
Total liabilities and shareholders' equity.................... $4,105
======
</TABLE>
See accompanying Notes to Financial Statements.
F-114
<PAGE>
GRACE & COMPANY, P.C.
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Revenues:
Professional services............................................ $9,691
Expenses:
Member compensation and related costs............................ 2,709
Employee compensation and related costs.......................... 5,075
Occupancy costs.................................................. 406
Office operating expenses........................................ 95
Depreciation and amortization.................................... 190
Other selling, general and administrative expenses............... 689
------
9,164
------
Operating income............................................... 527
------
Other (income) expense:
Interest expense................................................. 122
Interest income.................................................. (23)
Other............................................................ (135)
Loss on equity investment........................................ 40
------
4
------
Income before provision for income taxes........................... 523
Provision for income taxes......................................... 232
------
Net income......................................................... $ 291
======
</TABLE>
See accompanying Notes to Financial Statements.
F-115
<PAGE>
GRACE & COMPANY, P.C.
STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Treasury
Common Stock Additional Stock Total
------------- Paid-in- ------------- Retained Shareholders'
Shares Amount Capital Shares Amount Earnings Equity
------ ------ ---------- ------ ------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997................... 13,500 $14 $182 1,500 $(89) $225 $332
Issuances of common
stock................ 3,000 3 168 -- -- -- 171
Net income............ -- -- -- -- -- 291 291
------ --- ---- ----- ---- ---- ----
Balance at December 31,
1998................... 16,500 $17 $350 1,500 $(89) $516 $794
====== === ==== ===== ==== ==== ====
</TABLE>
See accompanying Notes to Financial Statements.
F-116
<PAGE>
GRACE & COMPANY, P.C.
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $291
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 190
Change in deferred income taxes............................... 127
Changes in operating assets and liabilities:
Fees receivable............................................. (581)
Unbilled fees............................................... 113
Prepaid expenses and other current assets................... 44
Other assets................................................ (15)
Accounts payable............................................ (3)
Accrued compensation and related costs...................... (13)
Other accrued liabilities................................... 84
----
Net cash provided by operating activities................. 237
----
Cash flows from investing activities:
Purchase of property and equipment.............................. (328)
Proceeds from sale of property and equipment.................... 6
Increase in cash surrender value................................ (171)
----
Net cash used in investing activities..................... (493)
----
Cash flows from financing activities:
Proceeds from issuance of long-term debt........................ 450
Payments of long-term debt...................................... (77)
Payments of short-term debt, net................................ (292)
Issuance of common stock........................................ 171
----
Net cash provided by financing activities................. 252
----
Net decrease in cash.............................................. (4)
Cash at beginning of period....................................... 10
----
Cash at end of period............................................. $ 6
====
Supplemental disclosures of cash flow information:
Interest paid................................................... $134
Income taxes paid............................................... $ 20
</TABLE>
See accompanying Notes to Financial Statements.
F-117
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Grace & Company, P.C. (the Company) is a full service firm of
professional accountants and business advisors serving privately-held companies
and their owners and is based in St. Louis, Missouri.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
3 to 10 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash, fees receivable, accounts payable, notes payable, accrued liabilities and
debt approximate fair value.
F-118
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Income Taxes:
Income taxes have been computed using the asset and liability approach.
Under this approach, deferred income tax assets and liabilities are determined
based on the differences between the financial statement and tax basis of
assets and liabilities using currently enacted tax rates in effect for the
years in which the differences are expected to reverse.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. While management believes that the estimates and related
assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made when accounting for the allowance for doubtful accounts, net realizability
of unbilled fees, depreciation and amortization, and income taxes.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Property and equipment, net:
Furniture and fixtures........................................... $ 663
Computer equipment............................................... 1,079
Automobiles...................................................... 47
Leasehold improvements........................................... 56
-------
1,845
Less accumulated depreciation and amortization................... (1,330)
-------
$ 515
=======
</TABLE>
F-119
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The rollforward of activity within the allowance for doubtful accounts is
as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Balance at beginning of period................................ $903
Additions to costs and expenses............................... 96
Recoveries of previously reserved amounts..................... (105)
Less write-offs............................................... (133)
----
Balance at end of period...................................... $761
====
</TABLE>
NOTE 5--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Line of credit................................................ $595
Current maturities of long-term debt.......................... 147
----
Total short-term debt....................................... $742
====
</TABLE>
The Company has a $1,600 line of credit with Commerce Bank, N.A. with
interest payable monthly at the Federal Funds rate plus 2.75 percent expiring
April 30, 1999. The line of credit is collateralized by accounts receivable,
unbilled fees and all fixed assets. The line of credit is also partially
guaranteed by nine shareholders of the Company. Each shareholder has guaranteed
$100. The most significant covenant related to this line requires the Company
to maintain a minimum tangible net worth of not less than $1,100.
F-120
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Notes payable, secured by certain assets of the Company,
interest rate 7.90% to 8.33%, maturities from April 2001
through October 2002...................................... $ 566
Less current maturities of long-term debt.................. (147)
-----
Total long-term debt..................................... $ 419
=====
The notes payable include $118 due to former shareholders
of the Company.
Maturities of long-term debt are as follows:
1999....................................................... $ 147
2000....................................................... 148
2001....................................................... 197
2002....................................................... 49
2003....................................................... 5
Thereafter................................................. 20
-----
Total maturities of long-term debt....................... $ 566
=====
</TABLE>
NOTE 6--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Income taxes currently payable:
Federal..................................................... $ 94
State....................................................... 11
----
Deferred income tax expense (benefit):
Federal..................................................... 114
State....................................................... 13
----
Total provision for income taxes.......................... $232
====
</TABLE>
F-121
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Long-term deferred tax assets:
Property and equipment/intangible assets.................... $ 11
-----
Total long-term deferred tax assets....................... 11
Current deferred tax liabilities:
Accrual to cash............................................. (766)
-----
Total current deferred tax liabilities.................... (766)
-----
Net deferred tax liability.................................... $(755)
=====
</TABLE>
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
U.S. federal statutory rate................................... 35%
State income taxes, net of federal income tax benefit......... 4
Meals and entertainment....................................... 5
---
Effective income tax rate..................................... 44%
===
</TABLE>
NOTE 7--LEASE COMMITMENTS
The Company leases various types of office facilities, equipment, and
furniture and fixtures under noncancelable lease agreements, which expire at
various dates. Certain of these leases allow the Company, at its option to
extend the lease term. Future minimum lease payments under noncancelable
operating leases are as follows at December 31, 1998:
<TABLE>
<S> <C>
1999............................................................... $ 576
2000............................................................... 576
2001............................................................... 552
2002............................................................... 561
2003............................................................... 505
Thereafter......................................................... 1,115
------
Total minimum lease payments....................................... $3,885
======
</TABLE>
Rent expense for all operating leases for the year ended December 31,
1998 was $399.
NOTE 8--EMPLOYEE BENEFIT PLAN
401(k) Plan:
The Company offers a qualified contributory 401k plan (the Plan) to all
its employees. Employee participation in the Plan is optional; participants
contribute at least one percent but no more than 18 percent of
F-122
<PAGE>
GRACE & COMPANY, P.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
base compensation. The Company makes a matching contribution based on the
amount of eligible employee contributions. The Company matches 50 percent of
the first 4 percent of the eligible contributions made by employees. The
Company's total expense for this plan was $112 in 1998.
NOTE 9--COMMITMENTS
The Company entered into an agreement with a current non-equity
principal to guarantee that principal's base salary through September 30,
2004.
NOTE 10--RELATED PARTY TRANSACTIONS
In September 1998, the Company invested $40 in Better Business Methods
(BBM). The Company subsequently loaned $184 to BBM for working capital needs.
The Company also had an obligation to guarantee or loan up to an additional
$176. For the period from investment through disposition, the Company recorded
its 50 percent equity share in BBM's net losses substantially eliminating the
carrying value of the investment.
Effective December 1, 1998, the Company sold its investment and note
receivable to Grace Capital, LLP whose partners are largely comprised of
shareholders of the Company. Both transactions were consummated at net book
value. In connection with this sale, the Company was relieved of all
obligations for additional funding to BBM.
The Company has a receivable of $11 from employees for expense advances.
The Company has a note payable of $21 on behalf of shareholders which
was paid in January 1999.
The Company has $840 in notes payable to shareholders and principals of
the Company. The notes payable are offset by receivables from the shareholders
of $55. These notes are payable on demand and, if no demand is made, then
payable in full on December 31, 1999.
NOTE 11--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its shareholders entered into a
definitive agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to
which the stockholders of the Company have transferred their Company shares to
a newly formed Missouri limited liability partnership ("Grace Capital"). The
Company will be converted from a professional corporation to a business
corporation. Thereafter, a wholly-owned subsidiary of CenterPoint will merge
with and into the Company. All of the Company's outstanding shares will be
exchanged for cash and common stock of CenterPoint concurrently with the
consummation of the initial public offering of the common stock of
CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is
requiring that the Company cease providing attest services prior to the
closing of the acquisition. Following the closing, all attest services
formerly provided by the Company will be provided by a newly created separate
legal entity (the Attest Firm) which will be owned by former owners of the
Company who are certified public accountants. Pursuant to a services
agreement, CenterPoint will provide professional and other personnel,
equipment, office space and business and administrative services necessary to
operate the Attest Firm.
F-123
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Holthouse Carlin & Van Trigt LLP
In our opinion, the accompanying balance sheet and the related statements of
income, of partners' capital equity and of cash flows present fairly, in all
material respects, the financial position of Holthouse Carlin & Van Trigt LLP
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 31, 1999
F-124
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 524 $ 644
Marketable securities.......................................... 273 285
Fees receivable, less allowance for doubtful accounts of $443
and $655, respectively........................................ 1,394 1,816
Unbilled fees, at net realizable value......................... 493 610
Prepaid expenses and other current assets...................... 63 15
------ ------
Total current assets......................................... 2,747 3,370
Property and equipment, net...................................... 219 276
Other assets..................................................... 28 44
------ ------
Total assets................................................. $2,994 $3,690
====== ======
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 63 $ 71
Accrued compensation and related costs......................... 26 72
Accrued vacation............................................... 58 104
------ ------
Total current liabilities.................................... 147 247
------ ------
Commitments and contingencies
Partners' equity
Total partners' capital accounts............................. 2,847 3,443
------ ------
Total liabilities and partners' equity....................... $2,994 $3,690
====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-125
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Revenues:
Professional services......................................... $7,720 $9,446
------ ------
Expenses:
Employee compensation and related costs....................... 2,617 3,089
Occupancy costs............................................... 286 360
Office operating expenses..................................... 306 326
Depreciation and amortization................................. 55 73
Other selling, general and administrative expenses............ 801 819
------ ------
4,065 4,667
------ ------
Operating income............................................ 3,655 4,779
------ ------
Other (income) expense:
Interest income............................................... (31) (25)
Other......................................................... 5 --
------ ------
(26) (25)
------ ------
Net income...................................................... $3,681 $4,804
====== ======
</TABLE>
See accompanying Notes to Financial Statements.
F-126
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
STATEMENT OF PARTNERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Total
Partners'
Equity
---------
<S> <C>
Balance at December 31, 1996.......................................... $2,696
Net income.......................................................... 3,681
Partners' withdrawals............................................... (3,530)
------
Balance at December 31, 1997.......................................... 2,847
Net income.......................................................... 4,804
Partners' withdrawals............................................... (4,238)
Capital contribution................................................ 30
------
Balance at December 31, 1998.......................................... $3,443
======
</TABLE>
See accompanying Notes to Financial Statements.
F-127
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 3,681 $ 4,804
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................ 55 73
Bad debt expense......................................... 281 340
Changes in current assets and liabilities:
Fees receivable........................................ (309) (762)
Unbilled fees.......................................... (77) (117)
Prepaid expenses and other assets...................... 9 31
Accounts payable....................................... 11 8
Accrued compensation and related costs................. (18) 46
Accrued vacation....................................... 58 46
------- -------
Net cash provided by operating activities............ 3,691 4,469
------- -------
Cash flows from investing activities:
Purchase of property and equipment......................... (104) (130)
Purchase of investments.................................... (178) (148)
Proceeds from sale of investments.......................... 167 136
------- -------
Net cash used in investing activities................ (115) (142)
------- -------
Cash flows from financing activities:
Payments of partner capital................................ (3,531) (4,237)
Capital contributed by principals.......................... -- 30
------- -------
Net cash used in financing activities................ (3,531) (4,207)
------- -------
Net increase in cash and cash equivalents.................... 45 120
Cash and cash equivalents at beginning of period............. 479 524
------- -------
Cash and cash equivalents at end of period................... $ 524 $ 644
======= =======
</TABLE>
See accompanying Notes to Financial Statements.
F-128
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Holthouse Carlin & Van Trigt LLP (the Company) was formed in 1991 as a
general partnership pursuant to the provisions of the California Uniform
Partnership Act and provides tax, accounting and consulting services for
closely-held businesses and the related individuals primarily in the southern
California region. In 1996, the Company elected to convert from a general
partnership to a registered limited liability partnership pursuant to the
California Corporations Code.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Marketable Securities:
The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Marketable securities consisted of investments in various state and local
city debt securities and are classified as available for sale. At December 31,
1997 and 1998, the fair market value of the securities approximated their
original cost.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives
generally ranging from 5 to 7 years. Expenditures for maintenance and repairs
and minor renewals and betterments which do not improve or extend the life of
the respective assets are expensed.
F-129
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
All other expenditures for renewals and betterments are capitalized. The assets
and related depreciation accounts are adjusted for property retirements and
disposals with the resulting gain or loss included in operations.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable and accrued
liabilities approximate fair value.
Income Taxes:
The Company is a limited liability partnership. As such, the Company has
no current or deferred income tax assets or liabilities outstanding at December
31, 1997 and 1998 as the taxes associated with net income of the Company is
borne by the individual partners.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the consolidated
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made when accounting for the allowance for doubtful
accounts, unbilled fees, depreciation and amortization and the valuation of
investments.
F-130
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 3--SELECTED FINANCIAL STATEMENT INFORMATION
Additional information concerning financial statement accounts include
the following:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Property and equipment, net:
Furniture and fixtures................................... $ 206 $ 268
Computer equipment....................................... 173 241
------ ------
379 509
Less accumulated depreciation and amortization........... (160) (233)
------ ------
$ 219 $ 276
====== ======
Prepaid expenses and other current assets:
Prepaid expenses......................................... $ 35 $ 2
Employee receivables..................................... 28 13
------ ------
$ 63 $ 15
====== ======
</TABLE>
NOTE 4--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Balance at beginning of period............................. $ 309 $ 443
Additions to costs and expenses............................ 282 343
Write-offs................................................. (148) (131)
------ ------
Balance at end of period................................... $ 443 $ 655
====== ======
</TABLE>
NOTE 5--LEASE COMMITMENTS
The Company leases various office facilities under noncancelable lease
agreements, which expire at various dates. Certain of these leases allow the
Company, at its option to extend the lease term at the end of the original
lease term, generally at fair market rates. Future minimum lease payments under
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1999............................................................... $ 347
2000............................................................... 357
2001............................................................... 316
2002............................................................... 233
2003............................................................... 175
------
Total minimum lease payments.................................... $1,428
======
</TABLE>
F-131
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Rent expense for all operating leases for the fiscal years ended December
31, 1997 and 1998, are $242 and $291, respectively.
NOTE 6--LINE OF CREDIT
The Company has a line of credit available with Union Bank of California
at December 31, 1997 and 1998 in the amount of $250. There were no balances
outstanding on this line at December 31, 1997 or 1998.
NOTE 7--EMPLOYEE BENEFIT PLAN
401(K):
The Company sponsors the Holthouse Carlin & Van Trigt 401(K) Plan which
is available to all of its employees. The employees are eligible to participate
in the plan after 90 days of employment. The plan is contributory by the
employee only as the Company makes no matching contribution.
NOTE 8--PARTNERS' EQUITY
The Company is a California Registered limited liability partnership with
seven common partners, one of which is the managing partner. In accordance with
the Partnership agreement each partner contributed $30 to the partners'
applicable capital account upon acceptance. One new partner was accepted during
1998 increasing the total number of partners from six partners in 1997 to seven
partners in 1998.
NOTE 9--CONTINGENCIES
Litigation:
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
NOTE 10--RELATED PARTY TRANSACTIONS
The Company has loans outstanding to certain of its employees, excluding
partners, during 1997 and 1998. These loans are for the employees' personal
uses and are collected via monthly payroll deductions since inception. The
Company decided to eliminate the issuance of such loans during 1998. Employee
loans totaled $28 and $13 at December 31, 1997 and 1998.
One of the Company's partners is a partial owner of a legal service firm
located in Orange County, California. This legal service firm is a client of
the Company during 1997 and 1998. There were no material transactions with this
legal service firm during 1997 or 1998.
Certain partners of the Company are investors in business ventures
conducted by certain of the Company's clients. All of these clients receive
only tax consultation services from the Company. The respective partners'
investments are made and held individually rather than by the Company at
December 31, 1997 and 1998.
F-132
<PAGE>
HOLTHOUSE CARLIN & VAN TRIGT LLP
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 11--SUBSEQUENT EVENTS
Effective January 1, 1999, the Company admitted William L. Warburton as a
probationary partner bringing the total number of partners to eight. As a
probationary partner, Mr. Warburton does not have voting privileges for a
period of two years, other than the right to vote on any prospective partner.
Cornerstone Transaction (Unaudited):
In March 1999, the Company and its stockholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company will transfer all of its assets to a newly formed Delaware limited
liability company ("HCVT Company") followed by a dissolution of the Company.
Thereafter, seven wholly-owned subsidiaries and one wholly-owned limited
liability company of CenterPoint will merge with and into the seven corporate
members of HCVT Company and the sole limited liability company member of HCVT
Company, respectively. All of the Company's outstanding partnership interests
will be exchanged for cash and common stock of CenterPoint concurrently with
the consummation of the initial public offering of the common stock of
CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company divest its attest functions prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former owners of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-133
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Reppond Companies
In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of The Reppond
Company, Inc., the Reppond Administrators L.L.C. and Verasource Excess Risk
Ltd. (collectively, The Reppond Companies or the Company) at December 31, 1998,
and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 29, 1999
F-134
<PAGE>
THE REPPOND COMPANIES
COMBINED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 148
Accounts receivable............................................. 842
Prepaid expenses................................................ 77
------
Total current assets.......................................... 1,067
Property and equipment, net....................................... 792
Deferred income taxes-non-current................................. 7
Other assets...................................................... 27
------
Total assets.................................................. $1,893
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt................................................. $ 368
Accounts payable................................................ 248
Accrued compensation and related costs.......................... 243
Income taxes payable............................................ 103
Deferred income taxes........................................... 120
Other accrued liabilities....................................... 5
------
Total current liabilities..................................... 1,087
Long-term debt.................................................... 130
------
Total liabilities............................................. 1,217
------
Commitments
Shareholders' equity:
Members' equity of the Reppond Administrators L.L.C............. (26)
Common stock of The Reppond Company, $1 par value; 50,000 shares
authorized; 500 shares issued and outstanding.................. 1
Common stock of Verasource Excess Risk Ltd., $1 par value;
50,000 shares authorized; 250 shares issued and outstanding.... --
Additional paid-in capital...................................... 56
Note receivable from shareholder................................ (28)
Retained earnings............................................... 673
------
Total shareholders' equity.................................... 676
------
Total liabilities and shareholders' equity.................... $1,893
======
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-135
<PAGE>
THE REPPOND COMPANIES
COMBINED STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Revenue:
Commission....................................................... $6,423
Fee for service.................................................. 1,469
------
7,892
------
Expenses:
Producer compensation and related costs.......................... 2,359
Employee compensation and related costs.......................... 2,708
Occupancy costs.................................................. 391
Office operating expenses........................................ 501
Depreciation and amortization.................................... 332
Other selling, general and administrative expenses............... 1,090
------
7,381
------
Operating income............................................... 511
------
Other (income) expense:
Interest expense................................................. 72
Interest income.................................................. (43)
Other............................................................ 22
------
51
------
Income before provision for income taxes........................... 460
Provision for income taxes......................................... 113
------
Net income......................................................... $ 347
======
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-136
<PAGE>
THE REPPOND COMPANIES
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Members'
Common Stock Equity of the Common Stock
of the Reppond of Verasource
Reppond Administrators Excess Risk, Note Accumulated
Company L.L.C. Ltd. Additional Receivable Other Total
------------- -------------- ------------- Paid-in Retained from Comprehensive Shareholders'
Shares Amount Amount Shares Amount Capital Earnings Shareholder Income (Loss) Equity
------ ------ -------------- ------ ------ ---------- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1998........... 500 $ 1 $(215) 313 $-- $70 $518 $(28) $(10) $336
Repurchase of
62.5 shares of
Verasource
stock............ -- -- -- (63) -- (14) (3) -- -- (17)
Unrealized loss
on marketable
securities....... -- -- -- -- -- -- -- -- 10 10
Net income........ -- -- 189 -- -- -- 158 -- -- 347
--- --- ----- --- ---- --- ---- ---- ---- ----
Total
comprehensive
income.........
Balance at December
31, 1998.......... 500 $ 1 $ (26) 250 $-- $56 $673 $(28) $-- $676
=== === ===== === ==== === ==== ==== ==== ====
<CAPTION>
Total
Comprehensive
Income
-------------
<S> <C>
Balance at January
1, 1998...........
Repurchase of
62.5 shares of
Verasource
stock............
Unrealized loss
on marketable
securities....... $ 10
Net income........ 490
-------------
Total
comprehensive
income......... $500
=============
Balance at December
31, 1998..........
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-137
<PAGE>
THE REPPOND COMPANIES
COMBINED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $ 347
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 332
Changes in current operating assets and liabilities:
Accounts receivable......................................... 41
Prepaid expenses and other current assets................... (38)
Accounts payable............................................ 102
Accrued compensation and related costs...................... 78
Income taxes payable........................................ 184
Deferred income taxes....................................... (67)
Other assets................................................ (20)
-----
Net cash provided by operating activities................. 959
-----
Cash flows from investing activities:
Purchase of property and equipment.............................. (301)
-----
Net cash used in investing activities..................... (301)
-----
Cash flows from financing activities:
Payments of long-term debt...................................... (346)
Repurchase of common stock...................................... (17)
Payments of short-term debt, net................................ (185)
-----
Net cash used in financing activities..................... (548)
-----
Net increase in cash and cash equivalents......................... 110
Cash and cash equivalents at beginning of period.................. 38
-----
Cash and cash equivalents at end of year.......................... $ 148
=====
Supplemental disclosures of cash flow information:
Interest paid................................................... $ 72
Income taxes paid............................................... $ 111
</TABLE>
See accompanying Notes to Combined Financial Statements.
F-138
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars In Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
The Reppond Companies (the Company) comprises three business entities,
The Reppond Company, Inc. (TRC), Reppond Administrators L.L.C. (RA) and
Verasource Excess Risk Ltd. (VS).
TRC is a group insurance brokerage firm in the Pacific Northwest
primarily marketing group medical, dental and life insurance products. Ben
Reppond and Louis Baransky own 75 percent and 25 percent of TRC, respectively.
TRC represents 77 percent of the Company's total revenues for the year ended
December 31, 1998.
RA provides administrative services for a fee primarily to TRC's client
base. RA administers COBRA plans, flexible spending accounts, direct dental
reimbursement and single billing. Ben and Deborah Reppond (husband and wife)
and Louis Baransky own 99 percent and 1 percent of RA, respectively. RA
represents 19 percent of the Company's total revenues for the year ended
December 31, 1998.
VS is a reinsurance brokerage firm marketing stop loss coverage to mid-
size companies that wish to limit losses related to its self-insured plans. Ben
Reppond and Scott Perry each own 50 percent of VS. VS represents 4 percent of
the Company's total revenues for the year ended December 31, 1998.
NOTE 2--BASIS OF PRESENTATION
The combined financial statements present the combined financial position
and results of operations of TRC, RA and VS. TRC, RA and VS are related through
common management. In view of their close operating and financial
relationships, the preparation of combined financial statements is considered
appropriate. The combined statements, however, do not refer to a legal entity.
All significant transactions and accounts among TRC, RA and VS have been
eliminated.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes commission income on the later of the effective
date of the policy or the billing date. Contingent commissions are recorded
when received. Service fee income is recognized as earned, which is over the
period in which the services are provided.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on a straight-line basis over estimated useful asset lives (shorter of
asset life or lease term for leasehold improvements), generally ranging from 3
to 7 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
F-139
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, accounts receivable, accounts payable, accrued
liabilities and debt approximate fair value.
Income Taxes:
Income taxes have been computed using the asset and liability approach
for TRC and VS. Under this approach, deferred income tax assets and liabilities
are determined based on the differences between the financial statement and tax
basis of assets and liabilities using currently enacted tax rates in effect for
the years in which the differences are expected to reverse.
RA's members elected to treat RA as a partnership for federal and state
income tax purposes. Under the election, RA's results of operations are passed
through to, and taken into account by, its members in computing their
individual tax liabilities. These items are not taxed at the entity's level;
thus, no provision for income taxes has been made, with respect to RA, in the
combined financial statements.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
Receivables arising from services provided to clients are not collateralized
and, as a result, management continually monitors the financial condition of
its clients to reduce the risk of loss.
Use of Estimates:
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the combined financial statements and the reported amounts of revenues and
expenses during the reporting period. While management believes that the
estimates and related assumptions used in the preparation of the combined
financial statements are appropriate, actual results could differ from those
estimates. Estimates are made when accounting for accounts receivable,
depreciation and income taxes.
F-140
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised as follows:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Property and equipment:
Furniture and fixtures...................................... $ 438
Computer equipment.......................................... 823
Leasehold improvements...................................... 103
Office equipment............................................ 302
Vehicles.................................................... 19
Computer software........................................... 286
-------
1,971
Less accumulated depreciation and amortization................ (1,179)
-------
$ 792
=======
</TABLE>
NOTE 5--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Line of credit................................................ $183
Current maturities of long-term debt.......................... 185
----
Total short-term debt....................................... $368
====
</TABLE>
The Company has a $525 line of credit with The Commerce Bank of
Washington, N.A. with interest payable monthly at prime (7.75 percent at
December 31, 1998) plus 0.25 percent expiring April 30, 1999. The line of
credit is collateralized by substantially all assets.
F-141
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Note payable, secured by certain assets of the Company,
interest rate ofprime (7.75 percent at December 31, 1998)
plus 0.25 percent........................................... $315
Less current maturities of long-term debt.................... 185
----
Total long-term debt..................................... $130
====
Maturities on long-term debt, are as follows:
1999......................................................... $185
2000......................................................... 130
----
Total maturities of long-term debt....................... $315
====
</TABLE>
NOTE 6--INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Income taxes currently payable:
Federal..................................................... $180
----
Deferred income tax expense (benefit):
Federal..................................................... (67)
----
Total provision for income taxes.......................... $113
====
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Non-current deferred tax assets:
Property and equipment...................................... $ 7
====
Current deferred tax liabilities:
Accrual to cash differences................................. $116
Unrealized losses........................................... 4
----
$120
====
</TABLE>
F-142
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
U.S. federal statutory rate................................. 34%
Limited liability company income not subject to level
taxation................................................... (14)
Meals and entertainment..................................... 4
Other....................................................... 1
---
Effective income tax rate................................... 25%
===
</TABLE>
NOTE 7--LEASE COMMITMENTS
The Company leases various types of office facilities, equipment, and
furniture and fixtures under noncancelable lease agreements, which expire at
various dates. Certain of these leases allow the Company, at its option to
extend the lease term and/or purchase the leased asset at the end of the lease
term, generally at fair market value. Future minimum lease payments under
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1999 $ 325
2000 369
2001 382
2002 388
2003 388
------
Total minimum lease payments....................................... $1,852
======
</TABLE>
Rent expense for all operating leases for the fiscal year ended December
31, 1998 was $386.
NOTE 8--EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution pension plan covering
substantially all employees. At its discretion, the Company may make
contributions to the plan up to 6 percent of employees wages. Contributions
for the year ended December 31, 1998 were $25.
NOTE 9--RELATED PARTY TRANSACTIONS
The December 31, 1998 accounts receivable balance includes a $17
receivable from a related party. This amount represents expenses that were
paid by the Company on behalf of the related party.
The Company is a party to a sublicense agreement in which it pays a
related party approximately $25 per year for the use of a luxury box at the
Key Arena in Seattle, Washington.
F-143
<PAGE>
THE REPPOND COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 10--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its shareholders entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which three
wholly owned subsidiaries of CenterPoint will merge with and into The Reppond
Company, Inc., Reppond Administrators L.L.C. and Vera Source Excess Risk Ltd.,
respectively. All of the Company's outstanding shares and membership interests
will be exchanged for cash and common stock of CenterPoint concurrently with
the consummation of the initial public offering of the common stock of
CenterPoint.
F-144
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Members of
Simione, Scillia, Larrow & Dowling LLC
In our opinion, the accompanying balance sheet and the related statements of
income, of members' equity and of cash flows present fairly, in all material
respects, the financial position of Simione, Scillia, Larrow & Dowling LLC at
December 31, 1998, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 29, 1999
F-145
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 169
Fees receivable, less allowance for doubtful accounts of $177.... 1,562
Notes receivable................................................. 12
Unbilled fees, at net realizable value........................... 254
Prepaid expenses and other current assets........................ 23
------
Total current assets........................................... 2,020
Property and equipment, net........................................ 133
Fees receivable.................................................... 43
Notes receivable................................................... 46
------
Total assets................................................... $2,242
======
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Short-term debt.................................................. $1,101
Loans from managers.............................................. 26
Due to managers.................................................. 152
Accounts payable................................................. 115
Accrued expenses................................................. 142
------
Total current liabilities...................................... 1,536
Long-term debt..................................................... 153
Deferred rent...................................................... 113
------
Total liabilities.............................................. 1,802
------
Commitments and contingencies
Members' equity:
Members.......................................................... --
Managers......................................................... 440
------
Total members' equity.......................................... 440
------
Total liabilities and members' equity.......................... $2,242
======
</TABLE>
See accompanying Notes to Financial Statements.
F-146
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Revenues:
Professional services............................................ $6,217
------
Expenses:
Members' and managers' compensation and related costs............ 2,306
Employee compensation and related costs.......................... 2,090
Occupancy costs.................................................. 372
Office operating expenses........................................ 494
Depreciation and amortization.................................... 31
Other selling, general and administrative expenses............... 467
------
5,760
------
Operating income............................................... 457
------
Other expense:
Interest expense................................................. 130
Other............................................................ 50
------
180
Net income......................................................... $ 277
======
</TABLE>
See accompanying Notes to Financial Statements.
F-147
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
STATEMENT OF MEMBERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Total
Members' Managers' Members'
Equity Equity Equity
-------- --------- --------
<S> <C> <C> <C>
Balance at January 1, 1998.......................... $-- $163 $163
Net income.......................................... -- 277 277
---- ---- ----
Balance at December 31, 1998........................ $-- $440 $440
==== ==== ====
</TABLE>
See accompanying Notes to Financial Statements.
F-148
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $ 277
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 31
Provision for losses on accounts receivable................... 56
Changes in deferred rent expense.............................. 17
Changes in current assets and liabilities:
Fees receivable............................................. (266)
Unbilled fees............................................... (159)
Prepaid expenses and other current assets................... (2)
Due to managers............................................. 152
Accounts payable............................................ (10)
Accrued expenses............................................ 33
-----
Net cash provided by operating activities................. 129
-----
Cash flows from investing activities:
Purchase of property and equipment.............................. (11)
-----
Net cash used in investing activities..................... (11)
-----
Cash flows from financing activities:
Payments of long-term debt...................................... (133)
Proceeds from short-term debt................................... 197
Payments of loans from members.................................. (16)
-----
Net cash provided by financing activities................. 48
-----
Net increase in cash.............................................. 166
Cash and cash equivalents at beginning of year.................... 3
-----
Cash and cash equivalents at end of year.......................... $ 169
=====
Supplemental disclosure of cash flow information:
Interest paid................................................... $ 130
</TABLE>
See accompanying Notes to Financial Statements.
F-149
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE 1--BACKGROUND AND BUSINESS DESCRIPTION
Nature of Operations and Organization:
Simione, Scillia, Larrow & Dowling LLC (the Company) is a limited
liability company engaged in the practice of providing audit, accounting, tax,
and management consulting services. The Company has offices in New Haven,
Hartford, and Hamden, Connecticut. The primary area is Connecticut, although
the Company has clients throughout the United States. The Company specializes
in providing services for small and mid-sized privately owned business and
governmental clients. More than half of the Company's revenue is derived from
audit and accounting services.
The Company was formed pursuant to the Connecticut Limited Liability
Company Act. The term of the Company began as of January 1, 1996 and shall
continue until December 31, 2046 unless sooner terminated in accordance with
the Operating Agreement. Ownership in the Company consists of members, certain
of which are designated as managers. Members have limited personal liability
for the obligations or debts of the Company. The managers are responsible for
the business, property, and affairs of the Company. Each individual who becomes
a manager of the Company shall have capital in the Company to the extent of:
(i) capital contributions actually made, and (ii) the amount of guaranteed
payments (as defined) "contributed" in relation to total guaranteed payments
"contributed" by all managers, with such percentage interest applied to
unallocated capital of the Company.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition:
The Company recognizes revenue as the related services are provided. The
Company bills clients based upon actual hours incurred on client projects at
expected net realizable rates per hour, plus any out-of-pocket expenses. The
cumulative impact of any subsequent revision in the estimated realizable value
of unbilled fees for a particular client project is reflected in the period in
which the change becomes known. Any anticipated losses expected to be incurred
in connection with the completion of a project are recognized when known.
Outstanding fees receivable are evaluated each period to assess the adequacy of
the allowance for doubtful accounts.
Unbilled Fees:
Unbilled fees represent the anticipated net realizable value for hours
incurred by the Company's professional and administrative staff, plus out-of-
pocket expenses, on projects which had not yet been billed to clients as of
period end.
Cash and Cash Equivalents:
The Company considers temporary cash investments with original maturities
of three months or less from the date of purchase to be cash equivalents.
F-150
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
Property and Equipment:
Property and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
computed on the straight-line method over estimated useful asset lives (shorter
of asset life or lease term for leasehold improvements), generally ranging from
5 to 7 years. Expenditures for maintenance and repairs and minor renewals and
betterments which do not improve or extend the life of the respective assets
are expensed. All other expenditures for renewals and betterments are
capitalized. The assets and related depreciation accounts are adjusted for
property retirements and disposals with the resulting gain or loss included in
operations.
Income Taxes:
The Company is treated as a partnership for income tax purposes. As such,
the Company has no current or deferred income tax assets or liabilities
outstanding at December 31, 1998 as the taxes associated with net income of the
Company is borne by the individual members.
Asset Impairment Assessments:
The Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying value of such assets may not be fully
recoverable. An impairment is recognized to the extent that the sum of
undiscounted estimated future cash flows expected to result from use of the
assets is less than the carrying value. No impairment has been recognized
through December 31, 1998.
Fair Value of Financial Instruments:
The carrying amounts of the Company's financial instruments including
cash and cash equivalents, fees receivable, accounts payable, accrued
liabilities and debt approximate fair value.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of fees receivable. Receivables
arising from services provided to clients are not collateralized and, as a
result, management continually monitors the financial condition of its clients
to reduce the risk of loss.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. While management believes that the estimates and related
assumptions used in the preparation of the financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made when accounting for the allowances for doubtful accounts and deprecation.
F-151
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment, net reflected on the accompanying balance sheet
is comprised as follows:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Property and equipment, net:
Furniture and fixtures...................................... $197
Computer equipment.......................................... 19
----
216
Less accumulated depreciation and amortization.............. (83)
----
$133
====
</TABLE>
NOTE 4--DETAIL OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a rollforward of activity within the allowance for
doubtful accounts:
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Balance at beginning of period................................ $255
Additions to costs and expenses............................... 56
Less write-offs............................................... (134)
----
Balance at end of period...................................... $177
====
</TABLE>
NOTE 5--CREDIT FACILITIES
Short-Term Debt:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Line of credit borrowings..................................... $ 969
Current maturities of long-term debt.......................... 132
------
Total short-term debt....................................... $1,101
======
</TABLE>
Line of credit borrowings consist of amounts outstanding under the
Company's $1,500 commercial note and revolving loan agreement with a bank.
That note and loan agreement bears interest at the bank's prime rate (as
defined) plus .5 percent (8.25 percent at December 31, 1998). The line of
credit borrowings are secured by all assets of the Company and are personally
guaranteed by the Managers. To the extent the line of credit borrowings exceed
$1,000, such borrowings cannot exceed 85 percent of the Company's eligible
accounts receivable (as defined). The revolving line of credit matures on
April 30, 1999.
F-152
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
As a condition of the line of credit borrowings, the Company is required
to comply with certain loan covenants. The financial covenants require the
Company to cause its members' equity to increase by a minimum of $250 for the
fiscal year ending December 31, 1998 and for each year thereafter.
Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Commercial promissory note, due in 48 monthly principal
installments of $11 plus interest at the bank's prime rate
(as defined) plus .5%(8.25% at December 31, 1998) through
March 1, 2001. The note is secured by all assets of the
Company................................................... $285
Less current maturities of long-term debt.................. (132)
----
Total long-term debt................................... $153
====
Maturities on long-term debt as of December 31, 1998 are
as follows:
1999....................................................... $132
2000....................................................... 132
2001....................................................... 21
----
Total.................................................. $285
====
</TABLE>
NOTE 6--LEASE COMMITMENTS
The Company leases office equipment and office space under operating
leases expiring at various dates through April 2006. The office space lease has
a renewal option and requires the Company to pay a proportionate share of
common area costs in addition to the base rental amount. Further, the office
space lease includes scheduled base rent increases over the term of the lease.
The total amount of the base rent payments is being charged to expense on the
straight-line method over the term of the lease. The Company has recorded a
deferred credit as a long-term liability to reflect the excess of rent expense
over cash payments since inception of the lease. Rent expense totaled
approximately $505 in 1998.
Total future minimum rental payments under noncancelable operating leases
at December 31, 1998 were as follows:
<TABLE>
<S> <C>
1999................................................................ $ 444
2000................................................................ 416
2001................................................................ 336
2002................................................................ 311
2003................................................................ 311
Thereafter.......................................................... 726
------
$2,544
======
</TABLE>
F-153
<PAGE>
SIMIONE, SCILLIA, LARROW & DOWLING LLC
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Dollars In Thousands)
NOTE 7--EMPLOYEE BENEFIT PLAN
The Company has a defined contribution 401(k) savings plan. The plan is
available to all full time employees and members who have completed one year of
employment and worked a minimum of 1,000 hours. The Company contributes an
amount equal to 15 percent of the compensation earned by each eligible
participant up to $1. At its discretion, the Company may also contribute a
portion of its net income. No discretionary contributions were made to the plan
during 1998. Contributions to the plan by the Company amounted to $22 in 1998.
NOTE 8--RELATED PARTY TRANSACTIONS
The Company is indebted to a partnership comprised of certain managers of
the Company. The unsecured note payable is due in 36 monthly installments of
$2, including interest at 10 percent through April 1, 2000.
The Company leases office space from a partnership, including two of the
managers. The lease is classified as an operating lease and provides for month
to month rentals of $1.
NOTE 9--CONTINGENCIES
Litigation:
The Company, two managers, and two predecessor firms are defendants in a
lawsuit filed by a former client claiming fraud, negligence, and breach of
fiduciary duty, among other allegations. The plaintiff seeks unspecified
damages but has indicated through responses to discovery that damages could
exceed $1,000. The Company and outside counsel for the Company believe the suit
to be without merit and intend to defend the suit vigorously.
NOTE 10--SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company and its members entered into a definitive
agreement with CenterPoint Advisors, Inc. (CenterPoint) pursuant to which the
Company will transfer all of its assets and liabilities other than the assets
and liabilities relating to the provision of attest services to a newly formed
Delaware limited liability company ("SSLD LLC"). Thereafter, SSLD LLC will
merge with and into a wholly-owned subsidiary of CenterPoint. All of the
members' equity in SSLD LLC will be exchanged for cash and common stock of
CenterPoint concurrently with the consummation of the initial public offering
of the common stock of CenterPoint.
In order to comply with standards of the accounting profession and
applicable state regulations governing the profession, CenterPoint is requiring
that the Company cease providing attest services prior to the closing of the
acquisition. Following the closing, all attest services formerly provided by
the Company will be provided by a newly created separate legal entity (the
Attest Firm) which will be owned by former members of the Company who are
certified public accountants. Pursuant to a services agreement, CenterPoint
will provide professional and other personnel, equipment, office space and
business and administrative services necessary to operate the Attest Firm.
F-154
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Shares
CenterPoint Advisors, Inc.
Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
Lehman Brothers
Thomas Weisel Partners LLC
CIBC World Markets
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by
CenterPoint in connection with the issuance and distribution of the common
stock pursuant to the prospectus contained in this Registration Statement.
CenterPoint will pay all of these expenses.
<TABLE>
<CAPTION>
Approximate
Amount
-----------
<S> <C>
Securities and Exchange Commission registration fee............ 41,700
NASD filing fee................................................ 15,500
NYSE listing fee............................................... *
Accountants' fees and expenses................................. *
Blue Sky fees and expenses..................................... *
Legal fees and expenses........................................ *
Transfer Agent and Registrar fees and expenses................. *
Printing and engraving......................................... *
Miscellaneous expenses......................................... *
------
Total...................................................... $ *
======
</TABLE>
- --------
*To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
CenterPoint's certificate of incorporation provides that CenterPoint
shall, to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law, as amended from time to time, indemnify all persons whom it
may indemnify pursuant thereto.
Section 145 of the Delaware General Corporation Law permits a
corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees, or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to be indemnified for such expenses despite such
adjudication of liability.
CenterPoint's certificate of incorporation provides that CenterPoint's
directors will not be personally liable to CenterPoint or its stockholders for
monetary damages resulting from breaches of their fiduciary duty as directors
except (a) for any breach of the duty of loyalty to CenterPoint or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 164 of
the Delaware General Corporation Law, which makes directors liable for unlawful
dividends or unlawful stock repurchase or redemptions or (d) for transactions
from which directors derive improper personal benefit.
II-1
<PAGE>
Section of the Underwriting Agreement filed as Exhibit 1.1 provides
that the Underwriters named therein will indemnify and hold harmless
CenterPoint and each director, officer or controlling person of CenterPoint
from and against certain liabilities, including liabilities under the
Securities Act. CenterPoint expects to have director and officer insurance
coverage concurrently with the consummation of this offering.
Item 15. Recent Sales of Unregistered Securities.
The following information relates to securities of CenterPoint issued or
sold by CenterPoint since inception that were not registered under the
Securities Act:
1. CenterPoint was incorporated on November 9, 1998 and issued 2,992
shares of its common stock to its founders at a price of $10.00 per
share. Of such shares, 100 were issued to BGL Capital Partners,
L.L.C. ("BGL Capital") and 2,892 were issued to Robert C. Basten.
2. On December 30, 1998, CenterPoint issued 333 shares to Rondol E.
Eagle at $10.00 per share.
3. On February 1, 1999, CenterPoint issued 12,400 shares to CPA Holdings
LLC for total consideration of $108,000 in cash and 40 shares of
common stock of Professional Service Group, Inc.
4. On February 15, 1999, CenterPoint issued 150 shares to Dennis W.
Bikun at a price of $40.00 per share.
5. On March 8, 1999, CenterPoint issued an aggregate of 625 shares to
Jonathan R. Rutenberg and Reznick, Fedder & Silverman, C.P.A.s,
L.L.C. at a price of $10.00 per share.
6. On March 9, 1999, CenterPoint issued 1,000 shares to DeAnn L. Brunts
at a price of $40.00 per share.
The offer and sale of these shares were exempt from registration under
the Securities Act in reliance on the exemption provided by Section 4(2)
thereof. Prior to the completion of the offering, the number of these shares
will be increased to by the approximately -for-one stock
split.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Merger Agreement between CenterPoint, Reznick Fedder & Silverman,
Inc., Reznick Mergersub Inc., Reznick, Fedder & Silverman,
C.P.A.s, L.L.C., and the members of Reznick, Fedder & Silverman,
C.P.A.s, L.L.C., dated as of March 31, 1999.
2.2* Merger Agreement between CenterPoint, Robert F. Driver Co., Inc.,
RFD Mergersub, Inc. and the stockholders of Robert F. Driver Co.,
Inc., dated as of March 31, 1999.
2.3 Merger Agreement between CenterPoint, Follmer, Rudzewicz &
Company, P.C., FRF Holding, LLC, FRC Mergersub Inc. and the
stockholders of Follmer Rudzewicz & Co., P.C., dated as of March
31, 1999.
2.4 Merger Agreement between CenterPoint, Mann Frankfort Stein &
Lipp, P.C., MFSL Mergersub Inc. and the stockholders of Mann
Frankfort & Stein & Lipp, P.C., dated as of March 31, 1999.
2.5 Merger Agreement between CenterPoint, Berry, Dunn, McNeil &
Parker, Chartered, Berry Dunn Mergersub Inc., BDM&P Holdings, LLC
and certain members of BDM&P Holdings, LLC, dated as of March 31,
1999.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
2.6 Merger Agreement between CenterPoint, Urbach Kahn & Werlin, PC, a
New York professional corporation, Urbach, Kahn & Werlin, P.C.,
UKW Mergersub Inc., UKW Management LLC and the members of UKW
LLC, dated as of March 31, 1999.
2.7 Merger Agreement between CenterPoint, Self Funded Benefits, Inc.
(d/b/a Insurance Design Administrators), IDA Mergersub Inc. and
the stockholders of Self Funded Benefits, Inc. (d/b/a Insurance
Design Administrators), dated as of March 31, 1999.
2.8 Merger Agreement between CenterPoint, Holthouse Carlin & Van
Trigt LLP, certain merger subsidiaries of CenterPoint, the
partners of Holthouse Carlin & Van Trigt LLP, the members of the
LLC Partner and the stockholders of the Corporate Partners, dated
as of March 31, 1999.
2.9 Merger Agreement between CenterPoint, Grace & Company, P.C.,
Grace Capital, LLP, Grace Mergersub Inc. and the partners of
Grace Capital, LLP, dated as of March 31, 1999.
2.10 Merger Agreement between CenterPoint, The Reppond Company Inc.,
Reppond Administrators, LLC and Vera Source Excess Risk Ltd.,
Reppond Mergersub Inc., RA Mergersub LLC and Verasource Mergersub
Inc., dated as of March 31, 1999.
2.11 Merger Agreement between CenterPoint, Simione, Scillia, Larrow &
Dowling LLC, SSLD Mergersub LLC and the members of Simione,
Scillia, Larrow & Dowling LLC, dated as of March 31, 1999.
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Form of Amended and Restated Bylaws of the Registrant.
4.1* Specimen stock certificate representing common stock.
5* Opinion of Katten Muchin & Zavis as to the legality of the
securities being registered (including consent).
10.1* Form of Employment Agreement between CenterPoint and Robert C.
Basten.
10.2* Form of Employment Agreement between CenterPoint and DeAnn L.
Brunts.
10.3* Form of Employment Agreement between CenterPoint and Rondol E.
Eagle.
10.4* Form of Employment Agreement between CenterPoint and Dennis W.
Bikun.
10.5* Form of Employment Agreement between CenterPoint, Robert F.
Driver Co., Inc. and Thomas W. Corbett.
10.6* Form of Employment Agreement between Self Funded Benefits, Inc.
(d/b/a Insurance Design Administrators) and Robert F. Gallo.
10.7 Form of Stockholders' Agreement.
10.8 Form of Incentive Compensation Agreement.
10.9 Form of Separate Practice Agreement.
10.10 Form of Services Agreement.
10.11* Form of Employee Incentive Compensation Plan.
10.12* Form of Stock Purchase Plan.
23.1 Consent of PricewaterhouseCoopers LLP.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of KPMG LLP.
23.3* Consent of Katten Muchin & Zavis (contained in its opinion to be filed as Exhibit 5 hereto).
23.4 Consent to be named as prospective director (David Reznick)
23.5 Consent to be named as prospective director (Thomas W. Corbett)
23.6 Consent to be named as prospective director (Richard H. Stein)
23.7 Consent to be named as prospective director (Anthony P. Frabotta)
23.8 Consent to be named as prospective director (Charles H. Roscoe)
23.9 Consent to be named as prospective director (Steven N. Fischer)
23.10 Consent to be named as prospective director (Robert F. Gallo)
23.11 Consent to be named as prospective director (Wayne J. Grace)
23.12 Consent to be named as prospective director (Philip J. Holthouse)
23.13 Consent to be named as prospective director (Anthony P. Scillia)
23.14 Consent to be named as prospective director (Louis C. Fornetti)
23.15 Consent to be named as prospective director (William J. Lynch)
24 Power of Attorney (see signature page).
</TABLE>
- --------
*To be filed by amendment.
(b) Financial Statement Schedules.
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by CenterPoint pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suite or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter had been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
and State of Illinois on the 6th day of April, 1999.
CenterPoint Advisors, Inc.
/s/ Robert C. Basten
By: _________________________________
Robert C. Basten
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert C. Basten his true and lawful attorney-in-fact and agent, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-1 (including
registration statements filed pursuant to Rule 462(b) under the Securities Act
of 1933, and all amendments thereto) and to file the same, with all exhibits
thereto and any other documents in connection therewith, with the Commission
under the Securities Act of 1933, granting unto said attorneys-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as each might or could do in person, hereby ratifying
and confirming each act that said attorneys-in-fact and agent may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert C. Basten Chairman of the Board, April 6, 1999
____________________________________ President and Chief
Robert C. Basten Executive Officer
/s/ DeAnn L. Brunts Executive Vice President, April 6, 1999
____________________________________ Chief Financial Officer and
DeAnn L. Brunts a Director
/s/ Dennis W. Bikun Vice President and April 6, 1999
____________________________________ Chief Accounting Officer
Dennis W. Bikun
/s/ Scott H. Lang Director April 6, 1999
____________________________________
Scott H. Lang
</TABLE>
II-5
<PAGE>
EXHIBIT 2.1
-------------------------------
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
REZNICK MERGERSUB INC.,
REZNICK FEDDER & SILVERMAN,
CERTIFIED PUBLIC ACCOUNTANTS,
A PROFESSIONAL CORPORATION,
REZNICK FEDDER & SILVERMAN, C.P.A.s, L.L.C.
and
the Members of REZNICK FEDDER & SILVERMAN, C.P.A.s, L.L.C.
March 31, 1999
-------------------------------
<PAGE>
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER........................................................... 2
1.1 The Merger.................................................... 2
----------
1.2 Effects of the Merger......................................... 2
---------------------
1.3 Directors and Officers of the Surviving Corporation........... 3
---------------------------------------------------
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT.................................. 3
2.1 Merger Consideration.......................................... 3
--------------------
2.1.1 Basic Purchase Consideration........................... 3
----------------------------
2.1.2 Treasury Stock......................................... 3
--------------
2.1.3 Dissenters............................................. 3
----------
2.1.4 Conversion of Mergersub Stock.......................... 3
-----------------------------
2.1.5 Exchange of Certificates............................... 4
------------------------
2.2 Purchase of AR................................................ 4
--------------
2.3 Post-Closing Adjustments to Basic Purchase Consideration...... 4
--------------------------------------------------------
2.3.1 Adjustments for Net Working Capital Shortfall/Excess... 4
----------------------------------------------------
2.3.2 Preliminary Balance Sheet and Adjustment............... 4
----------------------------------------
2.3.3 Interim Adjustment..................................... 4
------------------
2.3.4 Final Adjustment....................................... 4
----------------
2.3.5 Disputes............................................... 5
--------
2.3.6 Payment of Adjustments................................. 5
----------------------
2.4 Post-Closing Management of AR................................. 5
-----------------------------
2.5 Assignment of Uncollected AR.................................. 6
----------------------------
2.6 Definitions................................................... 6
-----------
ARTICLE III
THE CLOSING AND CONSUMMATION DATE.................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY............. 7
4.1 Organization and Qualification................................ 7
------------------------------
4.2 Company Subsidiaries.......................................... 7
--------------------
4.3 Authority; Non-Contravention; Approvals....................... 8
---------------------------------------
4.4 Capitalization................................................ 9
--------------
4.5 Year 2000.................................................... 10
---------
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.6 Financial Statements............................................ 10
--------------------
4.7 Absence of Undisclosed Liabilities.............................. 10
----------------------------------
4.8 Unbilled Fees and Expenses...................................... 11
--------------------------
4.9 Absence of Certain Changes or Events............................ 11
------------------------------------
4.10 Litigation...................................................... 13
----------
4.11 Compliance with Applicable Laws................................. 14
-------------------------------
4.12 Licenses........................................................ 14
--------
4.13 Material Contracts.............................................. 15
------------------
4.14 Properties...................................................... 17
----------
4.15 Intellectual Property........................................... 19
---------------------
4.16 Taxes........................................................... 20
-----
4.17 Employee Benefit Plans; ERISA................................... 20
-----------------------------
4.18 Labor Matters................................................... 22
-------------
4.19 Environmental Matters........................................... 23
---------------------
4.20 Insurance....................................................... 23
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions..... 24
-----------------------------------------------------------
4.22 Business Relationships.......................................... 24
----------------------
4.23 Compensation.................................................... 24
------------
4.24 Bank Accounts................................................... 25
-------------
4.25 Professional Credentials........................................ 25
------------------------
4.26 Disclosure; No Misrepresentation................................ 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS.......................... 26
5.1 Several Representations and Warranties.......................... 26
--------------------------------------
5.1.1 Capitalization........................................... 26
--------------
5.1.2 Authority................................................ 26
---------
5.1.3 Non-Contravention........................................ 26
-----------------
5.1.4 Approvals................................................ 27
---------
5.1.5 Litigation............................................... 27
----------
5.1.6 No Transfer.............................................. 27
-----------
5.1.7 Disclosure............................................... 27
----------
5.1.8 Representations and Warranties of Seller and the Company. 27
--------------------------------------------------------
5.2 Joint and Several Representations and Warranties................ 28
------------------------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT.......................... 28
6.1 Organization And Qualification.................................. 28
------------------------------
6.2 Capitalization.................................................. 28
--------------
6.3 No Subsidiaries................................................. 29
---------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.4 Authority; Non-Contravention; Approvals........................... 29
---------------------------------------
6.5 Absence of Undisclosed Liabilities................................ 30
----------------------------------
6.6 Litigation........................................................ 30
----------
6.7 Compliance with Applicable Laws................................... 31
-------------------------------
6.8 No Misrepresentation.............................................. 31
--------------------
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS........................................ 31
7.1 Conduct of Business by the Company Pending the Acquisition........ 31
----------------------------------------------------------
7.2 No-Shop........................................................... 34
-------
7.3 Schedules......................................................... 34
---------
7.4 Company Stockholders Meeting...................................... 35
----------------------------
7.5 Conversion........................................................ 35
----------
ARTICLE VIII
ADDITIONAL AGREEMENTS.................................................... 36
8.1 Access to Information............................................. 36
---------------------
8.2 Registration Statements........................................... 36
-----------------------
8.3 Expenses and Fees................................................. 38
-----------------
8.4 Agreement to Cooperate............................................ 38
----------------------
8.5 Public Statements................................................. 38
-----------------
8.6 Registration Rights............................................... 38
-------------------
8.7 CenterPoint Covenants............................................. 40
---------------------
8.8 Release of Guarantees............................................. 40
---------------------
8.9 Lock-Up Agreement................................................. 41
-----------------
8.10 Preparation and Filing of Tax Returns............................. 41
-------------------------------------
8.11 Maintenance of Insurance.......................................... 41
------------------------
8.12 Administration.................................................... 41
--------------
8.13 Payment of Deferred Compensation.................................. 41
--------------------------------
8.14 Retention of Cash, Etc............................................ 42
----------------------
ARTICLE IX
INDEMNIFICATION.......................................................... 42
9.1 Indemnification by the Members and Seller......................... 42
-----------------------------------------
9.2 Indemnification by CenterPoint.................................... 44
------------------------------
9.3 Indemnification Procedure for Third Party Claims.................. 45
------------------------------------------------
9.4 Direct Claims..................................................... 46
-------------
9.5 Failure to Give Timely Notice..................................... 47
-----------------------------
9.6 Reduction of Loss................................................. 47
-----------------
9.7 Limitation on Indemnities......................................... 47
-------------------------
</TABLE>
(iii)
<PAGE>
<TABLE>
PAGE
----
<S> <C>
9.7.1 Threshold for the Members......................................................................... 47
-------------------------
9.7.2 Threshold for CenterPoint......................................................................... 47
-------------------------
9.7.3 Limitations on Claims Against the Members......................................................... 48
-----------------------------------------
9.7.4 Limitation on Claims Against CenterPoint.......................................................... 48
----------------------------------------
9.8 Survival of Representations, Warranties and Covenants of the Members, Seller and the Company; Time
--------------------------------------------------------------------------------------------------
Limits on Indemnification Obligations.................................................................... 48
-------------------------------------
9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time Limits on Indemnification
----------------------------------------------------------------------------------------------------
Obligations.............................................................................................. 48
-----------
9.10 Defense of Claims; Control of Proceedings................................................................ 49
-----------------------------------------
9.11 Fraud; Exclusive Remedy.................................................................................. 49
-----------------------
9.12 Manner of Satisfying Indemnification Obligations......................................................... 49
------------------------------------------------
9.13 Member Representative.................................................................................... 49
---------------------
ARTICLE X
CLOSING CONDITIONS.............................................................................................. 50
10.1 Conditions to Each Party's Obligation to Effect the Acquisition.......................................... 50
---------------------------------------------------------------
10.2 Conditions to Obligation of the Members, Seller and the Company to Effect the Acquisition................ 51
-----------------------------------------------------------------------------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition........................................ 52
-----------------------------------------------------------------
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER............................................................................... 54
11.1 Termination.............................................................................................. 54
-----------
11.2 Effect of Termination.................................................................................... 55
---------------------
11.3 Amendment................................................................................................ 55
---------
11.4 Waiver................................................................................................... 56
------
ARTICLE XII
TRANSFER RESTRICTIONS........................................................................................... 56
12.1 Transfer Restrictions.................................................................................... 56
---------------------
12.2 Release of Restrictions.................................................................................. 56
-----------------------
12.3 Legend................................................................................................... 57
------
ARTICLE XIII
NONCOMPETITION.................................................................................................. 57
13.1 Prohibited Activities.................................................................................... 57
---------------------
13.2 Damages.................................................................................................. 58
-------
13.3 Reasonable Restraint..................................................................................... 58
--------------------
13.4 Severability; Reformation................................................................................ 59
-------------------------
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
13.5 Independent Covenant.......................................... 59
--------------------
13.6 Materiality................................................... 59
-----------
ARTICLE XIV
[Reserved]........................................................... 59
ARTICLE XV
GENERAL PROVISIONS................................................... 60
15.1 Brokers....................................................... 60
-------
15.2 Notices....................................................... 60
-------
15.3 Interpretation................................................ 61
--------------
15.4 Certain Definitions........................................... 61
-------------------
15.5 Entire Agreement; Assignment.................................. 61
----------------------------
15.6 Applicable Law................................................ 62
--------------
15.7 Counterparts.................................................. 62
------------
15.8 Parties in Interest........................................... 62
-------------------
</TABLE>
(v)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.6 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
(vi)
<PAGE>
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Employee Plans and Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Members' Guarantees
Schedule 8.13 Payees
Schedule 15.1 Brokers
Schedule 15.2.3 Members and Their Counsel
(vii)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Members of Seller
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Seller, the Company and
Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Members' Release
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(viii)
<PAGE>
DEFINED TERMS
-------------
Accounting Licenses................................. Section 4.12
Actions........................................... Section 4.10.1
Acquisition......................................... Introduction
Acquisition Transaction............................. Section 13.1
Affiliate........................................... Section 15.4
Affiliate Transactions.............................. Section 4.21
Agreement........................................... Introduction
AR................................................... Section 2.6
Arbitrator......................................... Section 2.3.5
Attestation Practice................................ Introduction
Basic Purchase Consideration....................... Section 2.1.1
Business............................................ Introduction
Cash Consideration................................. Section 2.1.1
CenterPoint......................................... Introduction
CenterPoint Accountants............................ Section 2.3.2
CenterPoint Common Stock........................... Section 2.1.1
CenterPoint Indemnified Party(ies)................... Section 9.1
CenterPoint Material Adverse Effect................ Section 6.4.3
CenterPoint Representatives........................ Section 8.1.1
CenterPoint Required Statutory Approvals........... Section 6.4.3
Closing.............................................. Article III
Closing Balance Sheet.............................. Section 2.3.2
Closing Date......................................... Article III
Code................................................ Introduction
(ix)
<PAGE>
Company............................................. Introduction
Company Material Adverse Effect.................... Section 4.3.3
Company Representatives............................ Section 8.1.1
Company Shareholders' Agreement.................... Section 7.1.4
Company Stock...................................... Section 2.1.1
Company Subsidiary(ies).............................. Section 4.2
Contracts........................................... Section 4.13
Conversion.......................................... Introduction
Copyrights.......................................... Section 4.15
Defense Notice..................................... Section 9.3.1
DGCL................................................. Section 1.1
Direct Claim......................................... Section 9.4
Disputed Item...................................... Section 2.3.5
Dissenting Shares.................................. Section 2.1.3
Effective Time....................................... Section 1.1
Employee Plan.................................. Section 4.17.5(a)
Environmental and Safety Requirements............... Section 4.19
ERISA.......................................... Section 4.17.5(b)
Excluded Assets.................................... Section 7.1.4
Excluded Liabilities............................... Section 7.1.4
Final Adjustment................................... Section 2.3.4
Financial Statements................................. Section 4.6
First Person................................... Section 4.17.5(c)
Form S-1........................................... Section 4.3.3
Form S-4........................................... Section 4.3.3
(x)
<PAGE>
Founding Companies.................................. Introduction
GAAP................................................. Section 4.6
general increase.................................... Section 4.23
Governmental Authority............................. Section 4.3.2
Hazardous Materials................................. Section 4.19
herein.............................................. Section 15.3
hereof.............................................. Section 15.3
hereunder........................................... Section 15.3
HSR Act............................................ Section 4.3.3
Incentive Compensation Agreement................. Section 10.2(d)
Indemnified Party.................................. Section 9.3.1
Indemnifying Party................................. Section 9.3.1
Intellectual Property............................... Section 4.15
Intellectual Property Licenses...................... Section 4.15
Interim Adjustment................................. Section 2.3.3
IPO................................................. Introduction
Knowledge........................................... Section 15.4
Latest Balance Sheet................................. Section 4.6
Laws................................................ Section 4.11
Leased Property................................... Section 4.14.1
Licenses............................................ Section 4.12
Lien(s)............................................ Section 4.3.2
Liquidated Damages Amount............................ Section 7.3
Losses............................................... Section 9.1
Market Price........................................ Section 9.12
(xi)
<PAGE>
Marks............................................... Section 4.15
Material Contracts.................................. Section 4.13
Member(s)........................................... Introduction
Member Indemnified Party............................. Section 9.2
Member Representative............................... Section 9.13
Merger.............................................. Introduction
Mergersub........................................... Introduction
Mergersub Stock.................................... Section 6.2.1
Merger Documents..................................... Section 1.1
Net Working Capital.................................. Section 2.6
1933 Act........................................... Section 4.3.3
1934 Act.......................................... Section 9.1(c)
Organizational Documents............................. Section 4.1
Other Agreements.................................... Introduction
Other Acquisitions.................................. Introduction
Other Founding Companies............................. Section 9.1
Owned Property.................................... Section 4.14.1
Patents............................................. Section 4.15
Person.............................................. Section 15.4
Plan Affiliate................................. Section 4.17.5(c)
Purchased AR......................................... Section 2.2
Real Property..................................... Section 4.14.1
Registration Statements............................ Section 4.3.3
Resolution Period.................................. Section 2.3.5
Restricted Shares................................... Section 12.1
(xii)
<PAGE>
Returns........................................... Section 4.16.1
Schedules............................................ Section 7.3
SEC................................................ Section 4.3.3
Securities Act..................................... Section 4.3.3
Seller.............................................. Introduction
Special Bonus Plan................................... Section 2.6
Stock Consideration................................ Section 2.1.1
Stockholders Agreement........................... Section 10.2(f)
Surviving Corporation................................ Section 1.2
Target............................................... Section 2.6
Tax Accrual.......................................... Section 2.6
Taxes............................................. Section 4.16.2
Territory........................................ Section 13.1(a)
Third Party Claim.................................. Section 9.3.1
Trade Secrets....................................... Section 4.15
Underwriters....................................... Section 8.1.1
Voting Agreement.................................... Introduction
(xiii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Reznick Mergersub Inc., a Delaware corporation and wholly owned subsidiary of
CenterPoint ("MERGERSUB"), Reznick Fedder & Silverman, C.P.A.s, L.L.C., a
Maryland limited liability company (the "SELLER"), Reznick Fedder & Silverman,
Certified Public Accountants, A Professional Corporation, a Maryland
professional corporation (the "COMPANY"), and the members of Seller identified
on Exhibit A to this Agreement (each a "MEMBER" and, collectively, the
---------
"MEMBERS").
WITNESSETH:
WHEREAS, Seller is the sole owner and holder of record of all of the
outstanding shares of capital stock of the Company;
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "ATTESTATION
PRACTICE", (b) the Members will cause the conversion of the Company from a
professional corporation to a business corporation by amending the Company's
Organizational Documents (as defined in Section 4.1) such that it converts to a
-----------
business corporation, and (c) the Members will cause Seller to terminate the
Company's close corporation status (the actions described in the foregoing (a),
(b) and (c), the "CONVERSION");
WHEREAS, the Boards of Directors of the Company, CenterPoint and Mergersub
deem it advisable and in the best interests of their respective shareholders to
approve and consummate the business combination transaction provided for herein
in which Mergersub would merge with the Company, with the Company being the
surviving corporation in the merger (the "ACQUISITION" or "MERGER");
WHEREAS, certain Members have entered into a Voting Agreement dated the
date hereof (the "VOTING AGREEMENT") pursuant to which among other things such
Members have agreed to vote the shares of capital stock of the Company that such
Members own or control, directly or indirectly, to approve the Merger and the
transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Robert F.
Driver Company, Inc., Mann Frankfort Stein & Lipp, P.C., The Reppond Company,
Inc., Reppond Administrators, LLC, Verasource Excess Risk Ltd., Berry, Dunn,
McNeil & Parker, Chartered, Urbach Kahn & Werlin
<PAGE>
PC, Self Funded Benefits, Inc. d/b/a Insurance Design Administrators, Grace &
Company, P.C., Simione, Scillia, Larrow & Dowling LLC, Follmer Rudzewicz & Co.,
P.C., and Holthouse, Carlin & Van Trigt (which companies together with the
Company are collectively referred to herein as the "FOUNDING COMPANIES"),
which agreements provide for the merger of a wholly owned subsidiary of
CenterPoint with each such Founding Company (the "OTHER ACQUISITIONS")
simultaneously with the Acquisition; CenterPoint has provided a side letter to
each holder of equity interests of the Company to such effect;
WHEREAS, simultaneously with the consummation of the Acquisition,
CenterPoint will close an initial public offering (the "IPO") of CenterPoint
Common Stock (as defined in Section 2.1); and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
----------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, the result of which
will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of Maryland. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"MERGER DOCUMENTS"), with the Secretary of State of the State of Maryland, as
provided in the Maryland General Corporation Law, as amended (the "MGCL"), and
with the Secretary of State of the State of Delaware, as provided in the General
Corporation Law of the State of Delaware (the "DGCL"). The Merger shall become
effective (the "EFFECTIVE TIME") upon the filing of the Merger Documents with
the Secretary of State of the State of Maryland and the Secretary of State of
the State of Delaware or at such later time, contemporaneously with the closing
of the IPO, as agreed by CenterPoint and the Company and specified in the Merger
Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to CenterPoint and as specified in
2
<PAGE>
the Merger Documents, (iii) the Merger shall have all the effects provided by
applicable law, and (iv) the Company shall be a wholly-owned subsidiary of
CenterPoint.
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holder thereof, the outstanding
shares of capital stock, consisting of 2,900 shares of common stock, no par
value, of the Company (the "COMPANY STOCK") shall be converted into the right to
receive: (a) that number of shares of CenterPoint common stock, par value $.01
per share (the "CENTERPOINT COMMON STOCK") determined in accordance with the
formula in Schedule 2.1 (the "STOCK CONSIDERATION") and (b) the amount of cash
------------
in Schedule 2.1 (the "CASH CONSIDERATION"). The sum of the Cash Consideration
------------
and the Stock Consideration is herein referred to as "BASIC PURCHASE
CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of the Company held
--------------
in treasury of the Company shall be canceled and retired and no payment shall be
made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of the
----------
Company the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "DISSENTING SHARES") shall not be converted into the right to receive
Basic Purchase Consideration, and the holder thereof shall be entitled only to
such rights as are granted by applicable law. The Company shall give
CenterPoint prompt notice upon receipt by the Company of any such written
demands for payment of fair value of shares of capital stock of the Company and
any other instruments provided pursuant to applicable law. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of the Surviving Corporation. Such newly issued
shares shall thereafter constitute all of the issued and outstanding capital
stock of the Surviving Corporation.
3
<PAGE>
2.1.5 Exchange of Certificates. At the Closing, Seller shall deliver
------------------------
to CenterPoint the original Company Stock certificates, duly endorsed in blank
by Seller or accompanied by blank stock powers, in exchange for the allocated
share of (a) CenterPoint Common Stock certificates representing the Stock
Consideration and (b) payment of the Cash Consideration by certified check,
cashier's check or wire transfer of immediately available funds to a bank
account or bank accounts in the amounts and manner specified by Seller in a
writing delivered to CenterPoint at least three (3) business days prior to the
Closing Date. The shares represented by the Company Stock certificates so
delivered to Centerpoint shall be canceled. Until surrendered as contemplated by
this Section 2.1.5, each certificate representing shares of Company Stock
-------------
represents only the right to receive Basic Purchase Consideration, as adjusted
in accordance with this Article II.
2.2 Purchase of AR. On or after the second business day after the
--------------
Closing, but no later than within five (5) business days after the Closing,
Seller shall purchase from the Company all AR (the "PURCHASED AR") for
$16,898,500, less any collections of AR from date of Closing to the date of such
purchase, and the Company shall sell and assign the Purchased AR to Sellers
pursuant to sale and assignment documents acceptable to CenterPoint.
2.3 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.3.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Basic Purchase Consideration shall be (a) reduced dollar-for-dollar to the
extent Net Working Capital on the Closing Date is less than the Target or
(b) increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.3.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm PricewaterhouseCoopers LLP
(the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.3.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Member Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.3.1 (the "INTERIM ADJUSTMENT").
-------------
2.3.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days
of receipt of such calculation, CenterPoint will deliver to the Member
Representative a written report indicating the amount and nature of any
adjustment to the
4
<PAGE>
Basic Purchase Consideration determined in accordance with Section 2.3.1
-------------
(the "FINAL ADJUSTMENT").
2.3.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Member Representative does not object (or otherwise respond) in writing to
the Final Adjustment report within 30 days after its delivery, the Final
Adjustment shall automatically become final, binding and conclusive on all
parties hereto. Any objection to the Final Adjustment report shall be in
writing and shall specify the item or items in dispute (each a "DISPUTED
ITEM").
If the Member Representative and CenterPoint are unable to resolve
any Disputed Item within 30 days after notice from the Member
Representative that a dispute exists (the "RESOLUTION PERIOD"), then a
representative from the office of a nationally recognized accounting firm
(the "ARBITRATOR") selected jointly by CenterPoint and the Member
Representative will arbitrate the dispute. The Member Representative and
CenterPoint shall, within 20 days after expiration of the Resolution
Period, present their respective positions with respect to any Disputed
Item to the Arbitrator together with such materials as the Arbitrator deems
appropriate. To the extent any Disputed Item is similar to a disputed item
under the Other Agreements, the Arbitrator shall arbitrate the Disputed
Item based on the submitted materials and without regard to the disputed
item under the Other Agreements. The Arbitrator shall, after the submission
of the materials, submit a written decision on each Disputed Item to the
Member Representative and CenterPoint and such determination shall be final
and binding on the parties hereto. The arbitration shall be conducted in
Chicago, Illinois. The parties hereto agree that the cost of the Arbitrator
shall be borne by the non-prevailing party or as determined by the
Arbitrator.
2.3.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, Seller and the Members shall pay the amount of the
shortfall to CenterPoint. In the event Net Working Capital is greater than
the Target, CenterPoint shall pay the amount of the excess to Seller. Any
payment required to be made pursuant to this paragraph shall be made,
within ten days of delivery of the report indicating any adjustment, by
wire transfer of immediately available funds to an account designated in
writing by the party that is to receive payment of such adjustment. In
respect of the Final Adjustment, the party making a payment required by
such adjustment shall make such payment within ten days after the Final
Adjustment becomes final and shall receive credit for or return of any
amount previously paid in connection with the Interim Adjustment.
2.4 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in
5
<PAGE>
respect of services rendered or expenses advanced by the Company shall be
applied as follows: in the event any such payment specifically references the
invoice being paid or clearly relates to an outstanding invoice, the payment
will be applied to the corresponding invoice; and, in any other case, the
payment will be applied to satisfy AR relating to such obligor in the order that
such AR arose. Any adjustment, modification or write-off affecting AR and fees
and expenses receivable and unbilled fees and expenses of the Company incurred
after Closing with respect to the same client engagement shall be allocated
ratably to the pre-Closing and post-Closing periods.
2.5 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to Seller. Notwithstanding the foregoing, the Company will retain
the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.4.
-----------
2.6 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the Closing
Date, whenever calculated, equal to difference between: (i) the sum of any
AR, prepaid expenses and other current assets less (ii) the sum of accounts
----
payable, accrued current liabilities, the items listed on Schedule 2.6, the
------------
Tax Accrual and the portion of employer-paid FICA attributable to Medicare,
payable in connection with accrued salary and bonus accounts and the
Special Bonus Plan. For purposes of this Section 2.6(b), the Special Bonus
Plan accrual shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan dated
March 1, 1999.
(d) "TARGET" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to Closing.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan times (ii) the sum of 34%
plus the effective state tax rate on the Company (net of any federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i).
6
<PAGE>
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Katten
Muchin & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
Seller and the Company hereby jointly and severally represent and warrant
to CenterPoint, as of the date hereof and, subject to Section 7.3, as of the
-----------
date on which CenterPoint and the lead Underwriter (as defined in Section 8.1.1)
-------------
execute and deliver the Underwriting Agreement related to the IPO and as of the
Closing Date, as follows:
4.1 Organization and Qualification. The Company is a professional
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and, following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the State of Maryland. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of Maryland.
Each Company Subsidiary (as defined in Section 4.2) is duly organized, validly
-----------
existing and in good standing under the laws of the state of its organization
set forth on Schedule 4.2. Each of Seller, the Company and the Company
------------
Subsidiaries has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted,
and is qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. True, accurate and
complete copies of Seller's, the Company's and each Company Subsidiary's
Organizational Documents, in each case as in effect on the date hereof, have
heretofore been delivered to CenterPoint. "ORGANIZATIONAL DOCUMENTS" means (a)
the articles or certificate of incorporation and the bylaws of a corporation
(professional or otherwise), (b) the partnership agreement and any statement of
partnership of a general partnership, (c) the limited partnership agreement and
the certificate of limited partnership of any limited partnership, (d) the
operating or limited liability company agreement and certificate of formation of
any limited liability company, (e) any charter or similar document adopted and
filed in connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests
7
<PAGE>
having the power to elect a majority of such Person's board of directors or
similar governing body, or otherwise having the power to direct the business and
policies of such Person (each a "COMPANY SUBSIDIARY" and collectively, the
"COMPANY SUBSIDIARIES"). Except as set forth on Schedule 4.2, the Company does
------------
not, directly or own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 Each of Seller and the Company has full right, power and
authority to enter into this Agreement and, subject to the approval of the
Merger and the transactions contemplated hereby by the Company's
stockholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller and the
Company have been duly authorized by all necessary limited liability
company and corporate action on the part of Seller and the Company, subject
to the approval of the Merger and the transactions contemplated hereby by
the Company's stockholders. This Agreement has been duly executed and
delivered by Seller and the Company, and, assuming the due authorization,
execution and delivery hereof by CenterPoint, constitutes a valid and
legally binding agreement of Seller and the Company, enforceable against
Seller and the Company in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by each of Seller
and the Company does not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of
any claim, lien, privilege, mortgage, charge, hypothecation, assessment,
security interest, pledge or other encumbrance, conditional sales contract,
equity charge, restriction, or adverse claim of interest of any kind or
nature whatsoever (each a "LIEN" and collectively, the "LIENS"), upon any
of the properties or assets of the Company or any Company Subsidiary under,
any of the terms, conditions or provisions of (i) the Organizational
Documents of Seller, the Company or any Company Subsidiary, (ii) following
completion of the Conversion, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any court or federal, state, provincial, local or foreign government, or
any subdivision, agency or authority of any thereof ("GOVERNMENTAL
AUTHORITY") applicable to Seller, the Company, any Company Subsidiary, or
the Business, properties or assets of Seller, the Company or any Company
Subsidiary, except for those items discussed in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy, or
(iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which any of Seller, the Company or
any Company Subsidiary is a party or by which any of Seller, the Company,
any Company Subsidiary or any of the properties or assets of Seller, the
Company or any Company
8
<PAGE>
Subsidiary may be bound or affected. The consummation by Seller and the
Company of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, creation or acceleration
of Liens under the terms, conditions or provisions of the items described
in clauses (i) through (iii) of the immediately preceding sentence, subject
in the case of the terms, conditions or provisions of the items described
in clause (iii) above, to obtaining (prior to the Closing Date) such
consents required from third parties set forth on Schedule 4.3.2 and except
--------------
for those items described in and (iii) above, relating to regulating,
licensing or permitting the practice of public accountancy and any filing
which may be required under the HSR Act.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
are collectively the "REGISTRATION STATEMENTS") with the Securities and
Exchange Commission (the"SEC") pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "1 blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Seller or the Company or the consummation by
Seller or the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
would not, individually or in the aggregate, have a "COMPANY MATERIAL
ADVERSE EFFECT," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the
Company or any Company Subsidiary.
4.4 Capitalization.
--------------
4.4.1 The authorized capital stock of the Company consists of 10,000
shares of Company Stock, of which 2,900 shares are issued and outstanding.
The authorized capital stock of each of the Company Subsidiaries, if any,
and the number of such shares issued and outstanding is completely and
accurately set forth in Schedule 4.4. All of such issued and outstanding
------------
shares are validly issued and are fully paid, nonassessable and free of
preemptive rights. Seller owns beneficially and of record all of the
issued and outstanding shares of the Company Stock, which shares constitute
all of the outstanding shares of capital stock of the Company. The Company
owns all shares of the Company Subsidiaries as indicated on Schedule 4.4,
------------
in each case free and clear of all Liens, and the Company has good and
marketable title to such shares of the Company Subsidiaries. All of such
issued and outstanding shares are validly issued and are fully paid,
nonassessable and free of preemptive rights.
9
<PAGE>
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such agreement or commitment or obligating Seller
or the Company or any Company Subsidiary to convey or transfer any Company
Stock or Company Subsidiary stock, as the case may be. As of the Closing
Date, there will be no voting trusts, proxies or other agreements or
understandings to which the Company or any Company Subsidiary is a party or
is bound with respect to the voting of any shares of capital stock or other
equity interests of the Company or any Company Subsidiary.
4.5 Year 2000. To the Knowledge of Seller or the Company, all of the
---------
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company or any
Company Subsidiary in the conduct of the Business will not malfunction, will not
cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth (20/th/) and twenty-first (21/st/) centuries
and (ii) date-related data in connection with any valid date in the twentieth
(20/th/) and twenty-first (21/st/) centuries, except for any malfunctions or
generations of incorrect data or results that would not individually or in the
aggregate have a 1 Company Material Adverse Effect. Nothing in this Section 4.5
is intended or shall be construed as a representation or warranty with respect
to embedded systems.
4.6 Financial Statements. Seller and the Company have previously
--------------------
furnished to CenterPoint copies of the audited consolidated balance sheets of
the Company as of September 30 in each of the years 1997 and 1998 and an
unaudited consolidated balance sheet of the Company for the three month period
ending December 31, 1998 (the "LATEST BALANCE SHEET"), and the related audited
consolidated statements of income, stockholders' equity and cash flow for each
of the years in the three (3) year period ended September 30, 1998, including
all notes thereto, and related unaudited consolidated statements of income,
stockholders' equity and cash flow for the three month period ending December
31, 1998, including all notes thereto (collectively, the "FINANCIAL
STATEMENTS"). Each of the Financial Statements is accurate and complete in all
material respects, is consistent with the books and records of the Company and
the Company Subsidiaries (which, in turn, are accurate and complete in all
material respects), and fairly presents in all material respects the financial
condition, assets and liabilities of the Company and the Company Subsidiaries as
of its date and the results of operations and cash flows for the periods related
thereto, in each case in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
- ---
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
10
<PAGE>
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Company's and the Company
Subsidiaries' past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim, or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably
11
<PAGE>
advanced for the benefit of, customers in the ordinary course of business
consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
-------
15.4) of the Company or any Company Subsidiary, except bonuses and
----
distributions to employees and stockholders of the Company disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary
12
<PAGE>
of any material obligation or liability, other than current liabilities
paid in the ordinary course of its business consistent with past custom and
practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which Seller or the Company
has Knowledge, is reasonably expected to result in a Company Material
Adverse Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of Seller or the Company, threatened
against the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any such
plan (or pending or, to the Knowledge of Seller or the Company, threatened
against any of the officers, directors, members, stockholders, partners or
employees of the Company or any Company Subsidiary with respect to its
business or proposed business activities), or to which the Company or any
Company Subsidiary is otherwise a party, or that is reasonably expected to
have a Company Material Adverse Effect, before any court, or before any
Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of Seller or the Company, is there any basis for any
such Action.
13
<PAGE>
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither the Company nor any Company Subsidiary, to
the Knowledge of Seller or the Company, is otherwise exposed, from a legal
standpoint, to any liability or disadvantage that is reasonably expected to
result in a Company Material Adverse Effect, and neither the Company nor
any Company Subsidiary is a party to any legal action to recover monies due
it or for damages sustained by it, other than collection of past due
charges for services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation matters
-------------
to which the Company or any Company Subsidiary was a party during the five
(5) year period preceding the Closing Date, the date such litigation was
commenced and concluded, and the nature of the resolution thereof
(including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "LAWS") applicable to it or to the
operation of the Business, and neither Seller, the Company nor any Company
Subsidiary has received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of Seller or the Company, no event has occurred or
circumstances exist that (with or without notice or lapse of time) is reasonably
expected to constitute or result in a violation by the Company or any Company
Subsidiary of any Law that gives rise to any liability on the part of the
Company or any Company Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and
-------- -------------
the Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12
-------------
lists all licenses, certificates, approvals, registrations and other similar
documents and authorizations, and applications therefor, relating to the
practice of public accountancy (the "ACCOUNTING LICENSES") held by the Company
or a Company Subsidiary and issued by, or submitted by the Company or any
Company Subsidiary to, any Governmental Authority or other Person. All such
Licenses and Accounting Licenses are valid, binding and in full force and
effect. Except as described on Schedule 4.12, the execution, delivery and
-------------
performance of this Agreement and the consummation of the transactions
contemplated hereby will not adversely affect any such Licenses. To the
Knowledge of Seller or the Company, the Company
14
<PAGE>
and the Company Subsidiaries have taken all necessary action to maintain such
Licenses. Except as set forth on Schedule 4.12, no loss or expiration of any
-------------
such License is pending or, to Seller's or the Company's Knowledge, threatened
or reasonably foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements that may be terminated by the Company or a Company Subsidiary on
not more than 30 days notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
15
<PAGE>
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in either case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
16
<PAGE>
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
Seller and the Company have provided CenterPoint with a true and complete
copy of each written Material Contract and a true and complete summary of each
oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
-------------
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against, the Company or a Company Subsidiary, as applicable, and,
to the Knowledge of Seller or the Company, the other parties thereto, and is in
full force and effect, subject only to bankruptcy, reorganization, receivership
and other laws affecting creditors' rights generally and equitable principles.
Except as set forth on Schedule 4.13, the Company or one of the Company
-------------
Subsidiaries, as applicable, has performed in all material respects all
obligations required to be performed by it as of the date hereof and will have
performed in all material respects all obligations required to be performed by
it as of the Closing Date under each Material Contract and neither the Company
or Company Subsidiary, as applicable, nor, to the Knowledge of Seller or the
Company, any other party to any Material Contract is in breach or default
thereunder, and, to the Knowledge of Seller or the Company, there exists no
condition which would, with or without the lapse of time or the giving of
notice, or both, constitute a breach or default thereunder. Neither Seller nor
the Company has been notified that any party to any Material Contract intends to
cancel, terminate, not renew, or exercise an option under any Material Contract,
whether in connection with the transactions contemplated hereby or otherwise.
4.14 Properties.
----------
4.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the Landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "REAL PROPERTY"), in each case free and clear of all Liens, assessments
or restrictions (including, without limitation, inchoate liens arising out
of the provision of labor, services or materials to any such real estate)
other than (a) mortgages shown on the Financial Statements as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of
the property, if any, none of which
17
<PAGE>
materially impairs the current operations of the Company, any Company
Subsidiary or the Business, and (ii) zoning laws and other land use
restrictions or restrictive covenants that do not materially impair the
present use of the property subject thereto, and (d) Liens, assessments,
and restrictions pursuant to and by virtue of the terms of the lease of the
Leased Property. The Real Property constitutes all real properties
reflected on the Financial Statements or used or occupied by the Company or
any Company Subsidiary in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of Seller or the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
- -----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of Seller or the Company, no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof; and
(ii) to the Knowledge of Seller or the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the Leased
Property and there is no threatened condemnation or proceeding with respect
thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth
18
<PAGE>
on Schedule 4.14.2, the Company or one of the Company Subsidiaries has good
---------------
and marketable title to, or a valid leasehold interest in, or valid license
of, such personal property (including, without limitation, machinery,
equipment and computers), in each case free and clear of any Liens (other
than Liens that are part of such leasehold or license), and each such asset
is in working order and has been maintained in a commercially reasonable
manner and does not contain, to the Knowledge of Seller or the Company, any
material defect. Except as set forth in Schedule 4.14.2, no personal
---------------
property (including, without limitation, software and databases maintained
on off-premises computers) used by the Company or any Company Subsidiary in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement
or is located other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "TRADE SECRETS") owned, used or licensed by the
Company or any Company Subsidiary (collectively, the "INTELLECTUAL PROPERTY")
are all those necessary to enable the Company and the Company Subsidiaries to
conduct and to continue to conduct the Business substantially as it is currently
conducted. Schedule 4.15 contains a complete and accurate list of all material
-------------
Patents, Marks and Copyrights and a brief description of all material Trade
Secrets owned, used by or directly licensed to the Company or any Company
Subsidiary, and a list of all material license agreements and arrangements with
respect to any of the Intellectual Property to which the Company or any Company
Subsidiary is a party, whether as licensee, licensor or otherwise (collectively,
the "INTELLECTUAL PROPERTY LICENSES"). Except as set forth on Schedule 4.15, (i)
-------------
all of the Intellectual Property is owned or, to the Knowledge of Seller or the
Company, used under a valid Intellectual Property License, by the Company or one
of the Company Subsidiaries, and is free and clear of all Liens and other
adverse claims; (ii) none of Seller, the Company nor any Company Subsidiary has
received any written notice that it is or has infringed on, misappropriated or
otherwise conflicted with, or otherwise has Knowledge that it is infringing on,
misappropriating, or otherwise conflicting with the intellectual property rights
of any third parties; (iii) there is no claim pending or, to the Knowledge of
Seller or the Company, threatened against the Company or any Company Subsidiary
with respect to the alleged infringement or misappropriation by the Company or
Company Subsidiary, or a conflict with, any intellectual property rights of
others; (iv) the operation of any aspect of the Business in the manner in which
it has heretofore been operated or is presently operated does not give rise to
any such infringement or misappropriation; and (v) there is no infringement or
misappropriation of the Intellectual Property by a third party or claim, pending
or, to the Knowledge of Seller or the Company, threatened, against any third
party with respect to the alleged infringement or misappropriation of the
Intellectual Property.
19
<PAGE>
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
-----------------
and the Company Subsidiaries has timely and accurately prepared and filed
or been included in or will timely and accurately prepare and file or be
included in all federal, state, local and foreign returns, declarations and
reports, information returns and statements (collectively, the "RETURNS")
for Taxes (as defined in Section 4.16.2) required to be filed by or with
--------------
respect to the Company or the Company Subsidiaries before the Closing Date,
and has paid or caused to be paid, or has made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which Returns are due on or prior to the
Closing Date, and will establish an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period, including portions
thereof, subsequent to the last of said periods required to be so accrued
or reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. Seller and the Company have delivered to CenterPoint
true and complete copies of all Returns referred to in the first sentence
of this Section 4.16.1 (including any amendments thereof) for the five (5)
--------------
most recent taxable years. Neither the Company nor any Company Subsidiary
is delinquent in the payment of any Tax, and no material deficiencies for
any Tax, assessment or governmental charge have been threatened, claimed,
proposed or assessed. No waiver or extension of time to assess any Taxes
has been given or requested. No written claim, or any other claim, by any
taxing authority in any jurisdiction where the Company or any Company
Subsidiary does not file Tax returns is pending pursuant to which the
Company or Company Subsidiary, as applicable, is or may be subject to
taxation by that jurisdiction. The Company's and the Company Subsidiaries'
Returns were last audited by the Internal Revenue Service or comparable
state, local or foreign agencies on the dates set forth on Schedule 4.16.1-
----------------
2.
-
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean all
taxes, charges, withholdings, fees, levies, penalties, additions, interest
or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither the Company nor
---------------
any Company Subsidiary has or is reasonably expected to have any liability
(including contingent liability) whether direct or indirect (and regardless
of whether it would be derived from a current or former Plan Affiliate, as
defined in Section 4.17.5(c)) with respect to any of the following (whether
written, unwritten or terminated): (i) any employee welfare benefit plan,
as defined in Section 3(1) of "ERISA," including, but not limited to,
20
<PAGE>
any medical plan, life insurance plan, short-term or long-term disability
plan or dental plan; (ii) any "employee pension benefit plan," as defined
in Section 3(2) of ERISA (as defined in Section 4.17.5(b)), including, but
-----------------
not limited to, any excess benefit plan, top hat plan or deferred
compensation plan or arrangement, nonqualified retirement plan or
arrangement, qualified defined contribution or defined benefit arrangement;
or (iii) any other benefit plan, policy, program, arrangement or agreement,
including, but not limited to, any material fringe benefit plan or program,
personnel policy, bonus or incentive plan, stock option, restricted stock,
stock bonus, holiday pay, vacation pay, sick pay, bonus program, service
award, moving expense, reimbursement program, tool allowance, safety
equipment allowance, deferred bonus plan, salary reduction agreement,
change-of-control agreement, employment agreement or consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "1 prohibited transaction," as such
terms are defined in ERISA or the Code; (ii) breached a fiduciary
obligation or (iii) any liability for any failure to act or comply in
connection with the administration or investment of the assets of such
plan; and no Employee Plan has any liability and there is no liability in
connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii)
21
<PAGE>
which is discretionary or terminable at will by the Company or one of the
Company Subsidiaries without incurring any such liability, or (iii) which
is adequately funded under a funding arrangement separate from the assets
of the Company, any Company Subsidiary or a Plan Affiliate (and only to the
extent of such funding). Any contribution made or accrued with respect to
any Employee Plan is fully deductible by the Company, a Company Subsidiary
or a Plan Affiliate.
4.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple
employer welfare arrangement" within the meaning of Section 3(40) of ERISA,
(v) subject to the funding requirements of Section 412 of the Code or to
Title IV of ERISA, or (vi) provides for post-retirement medical, life
insurance or other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
--------------
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term "PLAN
AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or
which would be treated or have been treated with the First Person as
under common control or whose employees would be or have been treated
as employed by the First Person, under Section 414 of the Code or
Section 4001(b) of ERISA and any regulations, administrative rulings
and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of
Seller or the Company, threatened against the Company or any Company Subsidiary,
or that is reasonably expected to affect the Company or any Company Subsidiary;
nor, to the Knowledge of Seller or the Company, is there any basis for any such
allegation, charge, or complaint. There is no request for representation
pending and, to the Knowledge of Seller or the Company, no question concerning
representation has been raised. There is no grievance pending that is
reasonably expected to result in a Company Material Adverse Effect nor any
arbitration proceeding arising out
22
<PAGE>
of a union agreement. To the Knowledge of Seller or the Company, no employee who
is key to the Business and no group of employees has announced or otherwise
indicated any plans to terminate employment with the Company or any Company
Subsidiary. Each of the Company and any Company Subsidiary has complied with all
applicable laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes. Neither the Company nor any
Company Subsidiary is liable for any arrears of wages or any taxes or penalties
for failure to comply with any such laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Operating Committee of Seller and the Board of Directors of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company or Company Subsidiary (other than those present in
office supplies and cleaning/maintenance materials) for which the Company or a
Company Subsidiary is or is reasonably expected to be responsible, or otherwise
have any liability, for response costs under any Environmental and Safety
Requirements; (iii) each of the Company and the Company Subsidiaries has
disposed of all waste materials generated by the Company or such Company
Subsidiary at any real property currently or formerly owned, leased or used by
the Company or Company Subsidiary in compliance with applicable Environmental
and Safety Requirements; and (iv) there are and have been no facts, events,
occurrences or conditions at or related to any real property currently or
formerly owned, leased or used by the Company or Company Subsidiary that is
reasonably expected to cause or give rise to liabilities or response obligations
of the Company or any Company Subsidiary under any Environmental and Safety
Requirements. The term "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any
federal, state and local laws, statutes, regulations or other requirements
relating to the protection, preservation or conservation of the environment or
worker health and safety, all as amended or reauthorized. The term "HAZARDOUS
MATERIALS" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery Act,
42 U.S.C. (S) 6901 et seq., asbestos in any form or condition, polychlorinated
biphenyls and any other material, substance or waste to which liability or
standards of conduct may be imposed under any Environmental and Safety
Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To
Seller's or the Company's Knowledge, each of the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
-------------
correct list of all such insurance policies. None of Seller, the Company nor
any Company Subsidiary has received any notice of cancellation or intent to
cancel or increase
23
<PAGE>
premiums with respect to such insurance policies. Schedule 4.20 also contains a
-------------
list of all claims or asserted claims reported to insurers under such policies
relating to the ownership or interest in the Company's and the Company
Subsidiaries' assets, or operation of the Business, including all professional
malpractice claims and similar types of claims, actions or proceedings asserted
against the Company or any Company Subsidiary arising out of the Business at any
time within the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of Seller, the Company, any Member, any Affiliate of a Member nor
any Affiliate of Seller, the Company or any Company Subsidiary (i) possesses,
directly or indirectly, any financial interest in, or is a director, officer,
employee or affiliate of, any Person that is a client, supplier, customer,
lessor, lessee or competitor of the Company or any Company Subsidiary, (ii)
owns, directly or indirectly, in whole or in part, or has any interest in any
tangible or intangible property used in the conduct of the Business, or (iii) is
a party to an agreement or relationship, that involves the receipt by such
Person of compensation or property from the Company or any Company Subsidiary
other than through a customary employment relationship or through distributions
made with respect to the Company Stock or equity interests in any Company
Subsidiary (provided such distributions have been made consistent with the
Company's or any Company Subsidiary's, as the case may be, past custom and
practices). Schedule 4.21 sets forth the parties to and the date, nature and
-------------
amount of each transaction during the last five years involving the transfer of
any cash, property or rights to or from the Company or any Company Subsidiary
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Stock) ("
AFFILIATE TRANSACTIONS"), and any existing commitments of the Company or any
Company Subsidiary to engage in the future in any Affiliate Transactions. Except
as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenue for the twelve (12) months ended December 31,
1998. Except as set forth on Schedule 4.22, since December 31, 1998, none of
-------------
such clients has canceled or substantially reduced its business with the Company
or Company Subsidiary, as applicable, nor are any of such clients threatening to
do so. To the Knowledge of Seller or the Company, no client that accounts for
one percent (1%) or more of the Company's consolidated net revenue, or supplier
of the Company or any Company Subsidiary, will cease to do business with, or
substantially reduce its business with, the Company or any Company Subsidiary,
as applicable, after the consummation of the transactions contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as
24
<PAGE>
set forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiaries' ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
and Company Subsidiaries' ordinary course of business, consistent with past
custom and practices. The term "GENERAL INCREASE" as used herein means any
increase generally applicable to a class or group, but does not include
increases granted to individuals for merit, length of service or change in
position or responsibility made on the basis of the custom and past practices of
the Company or any Company Subsidiary. Schedule 4.23 includes the date and
-------------
amount of the last bonus or similar distribution or increase in compensation for
each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each such account or box, and the names of all Persons
authorized to draw thereon or to have access thereto.
4.25 Professional Credentials. Each Member is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Members by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
Seller or the Company contained in this Agreement or in any of the
certification, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to CenterPoint as contemplated by any provision
hereof contains any untrue statement regarding a material fact or omits to state
a material fact necessary in order to make the statements made herein or therein
not misleading. To the Knowledge of Seller or the Company, there is no fact or
circumstance that has not been disclosed to CenterPoint herein that has or is
reasonably expected to have a Company Material Adverse Effect.
25
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
5.1 Several Representations and Warranties. Each Member, severally and
--------------------------------------
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
5.1.1 Capitalization. Except as set forth on Schedule 4.4,
-------------- ------------
immediately prior to the contribution thereof by such Member to the capital
of Seller, such Member owned beneficially and of record, and had good and
marketable title to, all of the issued and outstanding shares of the
Company Stock as set forth opposite the name of such Member in Schedule
--------
4.4, free and clear of all Liens. Upon contribution of such Company Stock
---
to the capital of Seller, Seller acquired, and at the Closing as provided
in this Agreement, CenterPoint will acquire, good and valid title to such
Company Stock, free and clear of any Lien other than any Lien created by
CenterPoint.
5.1.2 Authority. Such Member has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by such Member, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Member, enforceable against such Member in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
5.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by such Member does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of Seller, the Company or any
Company Subsidiary under, any of the terms, conditions or provisions of (i)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority
applicable to such Member, except for those items relating to regulating,
licensing or permitting the practice of public accountancy or (ii) other
than those licenses, franchises, permits, concessions or instruments of any
Governmental Authority, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which such Member is a
party or by which such Member may be bound or affected. The consummation by
such Member of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, creation or acceleration
of Liens under the of the terms, conditions or provisions of the items
described in clauses (i) and (ii) of the
26
<PAGE>
immediately preceding sentence, subject to obtaining (prior to the Closing
Date) the consents set forth on Schedule 4.3.2 and except for those items
--------------
described above relating to regulating, licensing or permitting the
practice of public accountancy and any filing which may be required under
the HSR Act.
5.1.4 Approvals. To the Knowledge of such Member, and except with
---------
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Member or the consummation by such
Member of the transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Member, threatened against such Member relating to
(i) the transactions contemplated by this Agreement, (ii) any action taken
by such Member or contemplated by such Member in connection with the
consummation by such Member of the transactions contemplated hereby or
(iii) the practice of public accountancy by such Member.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Member or obligating such Member to grant, extend or enter into any
such agreement or commitment or obligating such Member to convey or
transfer any Company Stock. As of the Closing Date, there will be no
voting trusts, proxies or other agreements or understandings to which such
Member is a party or is bound with respect to the voting of any shares of
capital stock or other equity interests of the Company other than the
Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Member contained in this Agreement or any of the written statements or
certificates furnished at or prior to the Closing by or on behalf of such
Member to CenterPoint or its representatives in connection herewith or
pursuant hereto, contains any untrue statement of a material fact, or omits
or will omit to state any material fact required to make the statements
contained herein or therein not misleading.
5.1.8 Representations and Warranties of Seller and the Company. To
--------------------------------------------------------
such Member's actual knowledge, the representations and warranties of
Seller and the Company set forth in Article IV of this Agreement are true
----------
and correct.
27
<PAGE>
5.2 Joint and Several Representations and Warranties. The Members jointly
------------------------------------------------
and severally represent and warrant to CenterPoint that the authorized capital
stock of the Company consists of 10,000 shares of Company Stock, of which 2,900
shares are issued and outstanding, all of which are validly issued and are fully
paid, nonassessable and free of preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to Seller, the Company and the Members
as of the date hereof and, subject to Section 7.3, as of the date on which
-----------
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Seller and the Company.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in the Form S-1 will be issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be issued and outstanding. Other than (i) shares of CenterPoint
Common Stock issued pursuant to a split of the shares outstanding as of the
date of this Agreement, (ii) shares of CenterPoint Common Stock issued in
accordance with the Acquisition and the Other Acquisitions, and (iii)
shares of CenterPoint Common Stock that may be issued to new members of
management in lieu of shares previously issued to current members of
management, but which will not increase the number of shares of outstanding
CenterPoint Common Stock, no shares of CenterPoint Common Stock will be
issued prior to the consummation of the IPO. Mergersub's authorized
capital stock consists solely of 1,000 shares of common stock, par value
$.01 per share (the "MERGERSUB STOCK"), all of which are issued and
outstanding, are owned free and clear of any Liens by CenterPoint, and are
fully paid, nonassessable and free of preemptive rights.
28
<PAGE>
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Seller in the Acquisition will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation, and
Mergersub (and similar entities created for similar purposes with respect to the
Other Agreements) CenterPoint has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Boards of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by
Seller, the Company and the Members, constitutes a valid and legally
binding agreement of CenterPoint and Mergersub , enforceable against each
of them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to
29
<PAGE>
CenterPoint or Mergersub or any of their respective properties or assets,
or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which CenterPoint or Mergersub is
now a party or by which CenterPoint, Mergersub or any of their respective
properties or assets, may be bound or affected, except those items
described in clause (ii) relating to regulating, licensing or permitting
the practice of public accountancy. The consummation by CenterPoint and
Mergersub of the transactions contemplated hereby will not result in any
violation, conflict, breach, right of termination or acceleration or
creation of Liens under any of the terms, conditions or provisions of the
items described in clauses (i) through (iii) of the immediately preceding
sentence, subject, in the case of the terms, conditions or provisions of
the items described in clause (ii) above, to obtaining (prior to the
Closing Date) CenterPoint Required Statutory Approvals and except for those
items described in (ii) above relating to regulating, licensing or
permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii) any
filing which may be required under the HSR Act, (iii) any filing which may
be required by any Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy (the
filings and approvals referred to in clauses (i) through (iii) are
collectively referred to as the "CENTERPOINT REQUIRED STATUTORY APPROVALS")
no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by CenterPoint or Mergersub or the consummation by CenterPoint or Mergersub
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be, are not reasonably
expected to, in the aggregate, have a material adverse effect on the
business operations, properties, assets, condition (financial or other),
results of operations or prospects of CenterPoint and its subsidiaries,
taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the
Acquisition or the IPO or which could reasonably be expected, either alone or in
the aggregate with all such claims, actions or proceedings, to have a
CenterPoint Material Adverse Effect. CenterPoint is not subject to any
unsatisfied or continuing judgment, order or
30
<PAGE>
decree of any court or Governmental Authority. CenterPoint is not a party to any
legal action to recover monies due it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to Seller, the Company or the Members as
contemplated by any provision hereof contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. To the Knowledge of CenterPoint,
there is no fact or circumstance that has not been disclosed to the Company
herein that has or is reasonably expected to have a Company Material Adverse
Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Pending the Acquisition.
----------------------------------------------------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects conduct the Business in the
ordinary and usual course and consistent with past customs and
practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or
reclassify its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property
or otherwise except dividends or distributions which (A) are
consistent with past customs and practices and (B) do not result in a
Company Material Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any
31
<PAGE>
kind to acquire any shares of, its capital stock or equity interests
of any class, (ii) any debt with voting rights or (iii) any debt or
equity securities convertible into or exchangeable for, or any rights,
warrants, calls, subscriptions, or options to acquire, any such
capital stock, debt with voting rights or convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated by Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of the
Company or any Company Subsidiary, as applicable, (ii) pay or agree to
pay any additional pension, retirement allowance or other employee
benefit under any Employee Plan to any such Person, whether past or
present, (iii) enter into any new employment, severance, consulting,
or other compensation agreement with any of its existing employees,
partners, members or owners, (iv) amend or enter into a new Employee
Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial
32
<PAGE>
equity interest in or substantial portion of the assets of, or by any
other manner, any businesses or any Person or division thereof or
otherwise acquire or agree to acquire any assets in each case which
are material to it other than in the ordinary course of business in a
manner consistent with past customs and practices;
(j) not sell, lease, license, encumber or otherwise dispose
of, or agree to sell, lease, license, encumber or otherwise dispose
of, any of its assets other than in the ordinary course of business,
consistent with past customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual
course and consistent with past custom and practices.
7.1.2 Prior to the Closing, the Members shall have used their
diligent efforts to have secured, or have caused Seller to have secured,
all licenses, permits, approvals and authorizations necessary to conduct
the Attestation Practice in accordance with applicable laws and
regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Members, Seller or the
Company shall take, or permit any Company Subsidiary to take, any action
that would or is reasonably likely to result in any of the representations
or warranties of the Members, Seller and the Company set forth in this
Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X (other than
---------
Section 10.1(i)) not being satisfied.
7.1.4 Prior to the Closing, (i) the Company and/or the Members, as
applicable, shall terminate, without any liability to the Company or the
Company Subsidiaries, all agreements relating to the voting of the
Company's capital stock, and all agreements and obligations of the Company
and the Company Subsidiaries relating to borrowed money and/or involving
payments to or for the benefit of a Member or present or former stockholder
of the Company, or an Affiliate or family member of a Member or present or
former stockholder of the Company, including without limitation those set
forth on Schedule 7.1.4(i), but excluding (A) debt reflected on Schedule
----------------- --------
2.1 as Debt Assumed By CenterPoint, (B) items reflected on Schedule 2.6,
--- ------------
(C) to the extent such agreements and obligations result in Indirect Costs
under the Incentive Compensation Agreement, (D) that certain Second Amended
and Restated Shareholders' and Non-Shareholder Officers' Agreement dated as
of December 31, 1998, a true and complete copy of which has been delivered
to CenterPoint (the "COMPANY SHAREHOLDERS' AGREEMENT"), and which Company
Shareholders' Agreement shall not be amended further, and (E) items
approved by CenterPoint in writing; and (ii) notwithstanding anything
contained in this Section 7.1
-----------
33
<PAGE>
to the contrary, the Company will transfer and distribute the assets listed
on Schedule 7.1.4(ii) (the "EXCLUDED ASSETS") to the Persons listed on
------------------
Schedule 7.1.4(ii), subject to all liabilities and obligations of any
------------------
nature (whether known or unknown, accrued, absolute, contingent, direct,
indirect, perfected, inchoate, unliquidated or otherwise) relating to the
Excluded Assets (collectively, the "EXCLUDED LIABILITIES"); provided,
however, that prior to the Closing, the Company and the Members shall
obtain novations or other releases or agreements discharging the Company
from all Excluded Liabilities (so that the respective Excluded Liabilities
will become direct liabilities and obligations, of the assignee), and
provide copies thereof to CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, Seller, the Company and the Members shall
(i) not, and each of Seller and the Company shall use its diligent efforts
to cause the Company Subsidiaries and any officer, director or employee of,
or any attorney, accountant, investment banker, financial advisor or other
agent retained by Seller, the Company or any Company Subsidiary not to,
initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of the Company
or any Company Subsidiary, or any capital stock or other equity interests
of Seller, the Company or any Company Subsidiary, whether by merger,
purchase of assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture or
partnership or similar arrangement, and (ii) promptly advise CenterPoint of
the terms of any communications Seller, the Company or the Members may
receive or become aware of relating to any bid for part or all of Seller,
the Company or any Company Subsidiary.
(b) Seller, the Company and the Members (i) acknowledge that a breach
of any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or
34
<PAGE>
supplemented pursuant to this Section 7.3. In the event that (i) one of the
-----------
other Founding Companies seeks to amend or supplement a Schedule pursuant to
Section 7.3 of one of the Other Agreements, (ii) such amendment or supplement
- -----------
constitutes or reflects a Company Material Adverse Effect (as defined in such
Other Agreement) or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such
------------ ------------ ------------
Other Agreement, and (iii) CenterPoint and a majority of the Founding Companies
consent to such amendment or supplement, but Seller, the Company and a majority
of the Members do not, Seller, the Company and a majority of the Members may
terminate this Agreement at any time prior to the Closing Date. In the event
that (i) Seller, the Company or the Members seek to amend or supplement a
Schedule pursuant to this Section 7.3, (ii) such amendment or supplement
-----------
constitutes or reflects a Company Material Adverse Effect or affects Schedule
--------
4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority of the
- --- ------------ ------------
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to Seller's, the Company's or any Member's
breach of a representation or warranty as of the date of this Agreement in which
case the Company shall pay to CenterPoint, as CenterPoint's exclusive remedy
(notwithstanding anything to the contrary) and as liquidated damages, and not as
a penalty, an amount equal to $2,000,000 (the "LIQUIDATED DAMAGES AMOUNT"). The
Company agrees that in the case of such termination CenterPoint and the Founding
Companies (excluding the Company) will sustain immediate and irreparable
economic harm and loss of goodwill and that actual losses suffered by such
parties will be difficult, if not impossible, to ascertain, but the Liquidated
Damages Amount set forth herein is reasonable and has been arrived at after a
good faith effort to estimate such losses. Payment of the Liquidated Damages
Amount shall be made in cash to CenterPoint within thirty (30) days of a
termination pursuant to this Section 7.3 in connection with an amendment of or
-----------
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement.
7.4 Company Stockholders Meeting. The Company shall take all action in
----------------------------
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Company's
stockholders to be held on the earliest practicable date determined in
consultation with CenterPoint to consider and vote upon approval of the Merger,
this Agreement and the transactions contemplated hereby. The Company shall
solicit the approval of the Merger, this Agreement and the transactions
contemplated hereby by Company's stockholders, and the Company's Board of
Directors shall recommend approval of the Merger, this Agreement and the
transactions contemplated hereby by the Company's stockholders.
7.5 Conversion. Prior to the Closing but effective only if, as and when
----------
the Closing occurs, Seller and the Members shall complete, and shall cause the
Company to complete, and the Company shall complete, the Conversion, pursuant to
applicable law and present such evidence of the Conversion at the Closing, as
CenterPoint or its counsel may require.
35
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an "UNDERWRITER" and collectively,
the "UNDERWRITERS") and their counsel (collectively, the "CENTERPOINT
REPRESENTATIVES"), and to the other Founding Companies and their
accountants, counsel, financial advisors and other representatives, and
CenterPoint shall afford to the Members, Seller and the Company and their
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Members, Seller and the Company shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence
all non-public information furnished to it in connection with the
transactions contemplated by this Agreement, except that each of
CenterPoint, the Members and the Company may disclose any information that
it is required by law or judicial or administrative order to disclose. In
addition, CenterPoint will cause each of the other Founding Companies and
their members and stockholders to enter into a provision similar to this
Section 8.1 requiring each such Founding Company to keep confidential any
-----------
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Company based on the information in such material shall
be destroyed (and CenterPoint and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy such documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by
an authorized officer supervising such destruction.
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the
36
<PAGE>
Registration Statements declared effective by the SEC as promptly as
practicable. CenterPoint shall also take any action required to be taken
under applicable state "blue sky" or securities laws in connection with the
issuance of CenterPoint Common Stock. CenterPoint, Seller, the Company and
the Members shall promptly furnish to each other all information, and take
such other actions, as may reasonably be requested in connection with
making such filings. All information provided and to be provided by
CenterPoint, Seller, the Members and the Company, respectively, for use in
the Registration Statements shall be true and correct in all material
respects without omission of any material fact which is required to make
such information not false or misleading as of the date thereof and in
light of the circumstances under which given or made. Seller, the Company
and the Members agree promptly to advise CenterPoint if at any time during
the period in which a prospectus relating to the offering or the Merger is
required to be delivered under the Securities Act, any information
contained in the prospectus concerning the Company, the Company
Subsidiaries, Seller or the Members becomes incorrect or incomplete in any
material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
8.2.1 CenterPoint agrees that it will provide to Seller and its
counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto) unless Seller
and its counsel (x) have had at least two days to review the revised
information contained therein (which changes shall be highlighted by
computer generated marks indicating the additions and deletions made from
the prior draft reviewed by Seller's counsel) and (y) have not objected to
the substance of the information contained therein. Any objections posed by
Seller or its counsel shall be in writing and state with specificity the
material in question, the reason for the objection, and Seller's proposed
alternative. If the objection is founded upon a rule promulgated under the
Securities Act, the objection shall cite the rule. Notwithstanding the
foregoing, during the five (5) business days immediately preceding the date
scheduled for the filing of the Registration Statements and any amendment
thereto, Seller and its counsel shall be obligated to respond to proposed
changes electronically transmitted to them within two (2) hours from the
time the proposed changes (in the case of the initial filing of the
Registration Statements, from the last circulated draft of the Registration
Statements; and, in the case of any subsequent filing of the Registration
Statements or any amendment thereof, from the most recently filed
Registration Statements or amendment thereof) are transmitted to Seller's
counsel; provided, that, CenterPoint has provided to Seller or its counsel
-------- ----
reasonable advance notice of such proposed changes; provided, further, that
-------- -------
such changes are highlighted by computer generated marks indicating the
additions and deletions made from the prior draft reviewed by Seller's
counsel.
8.2.3 CenterPoint will advise the Member Representative of the
effectiveness of the Registration Statements, advise the Member
Representative of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any
37
<PAGE>
proceeding for that purpose, and, if such stop order shall be entered, use
its best efforts promptly to obtain the lifting or removal thereof. Upon
the written request of Seller, CenterPoint will furnish to Seller a
reasonable number of copies of the final prospectus associated with the
IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither Seller, the Company nor the Members will be liable
for any portion of the above expenses in the event the IPO is not completed.
CenterPoint shall also pay the underwriting discounts and commissions payable in
connection with the sale of CenterPoint Common Stock in the IPO. All other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint, Seller and the Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give Seller and the Member Representative prompt written
notice of its intent to do so. Promptly after receipt of such notice,
Seller and the Member Representative shall provide written notice to
CenterPoint of all Members (and their respective current mailing address)
that beneficially own shares of CenterPoint Common Stock. Thereafter, upon
the written request of Seller or any of the Members given within thirty
(30) days after receipt of such notice, CenterPoint will use its best
efforts to cause to be included in such registration all of the CenterPoint
Common Stock which Seller or any such Member requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
-----------
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
38
<PAGE>
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by Seller or any Member at any time when such
shares are not then transferable in accordance with Section 12.2 hereof.
------------
Registration rights under this Section 8.6 may be transferred in whole or
-----------
in part in connection with the transfer of any shares of CenterPoint Common
Stock received pursuant to this Agreement other than the transferee of the
kind described in clause (x) of Section 12.2 hereof.
------------
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect
to the CenterPoint Common Stock (and such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be required by applicable law) and use its best
efforts to cause such registration to promptly become and remain
effective for a period of at least one hundred twenty (120) days (or
such shorter period during which holders shall have sold all
CenterPoint Common Stock which they requested to be registered);
(b) upon the written request of a Member whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to
such Member a reasonable number of copies of the prospectus covering
the offering and sale by the Member of the shares to be covered
thereby;
(c) use its best efforts to register and qualify the
CenterPoint Common Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably
request for the distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise Seller and each Member whose CenterPoint Common
Stock is to be covered by such registration of the effectiveness of
such registration statement, advise Seller and each such Member of the
entry of any stop order suspending the effectiveness of such
registration statement or of the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best
efforts promptly to obtain the lifting or removal thereof; and
39
<PAGE>
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify
Seller and each Member whose CenterPoint Common Stock is to be covered
by such registration, of the happening of any event as a result of
which the registration statement, the prospectus or any document
incorporated therein by reference includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading and, at the request of Seller or such Member, prepare and
furnish to Seller or such Member a post-effective amendment or
supplement to the registration statement or the related prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of such shares, such prospectus shall not include any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein not
misleading.
8.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and
---
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
8.6.4 In consideration of the granting to Seller and the Members of
the registration rights under this Section 8.6, Seller and the Members
-----------
agree, and agree to enter into an agreement with the underwriters in
connection with an underwritten registration to the effect, that it/they
will not sell, transfer or otherwise dispose of, including, without
limitation, through put or short sale arrangements, shares of CenterPoint
Common Stock in the ten (10) days prior to the effectiveness of any
registration of CenterPoint Common Stock for sale to the public and for up
to ninety (90) days following the effectiveness of such registration,
provided that all directors, executive officers and holders of more than
five percent (5%) of the outstanding CenterPoint Common Stock agree to the
same restrictions; and further provided that, with respect to the first
public offering of shares of the CenterPoint Common Stock within three (3)
years following the IPO, Seller and the Members shall have been afforded a
meaningful opportunity to include shares in such registration after any
reduction by reason of underwriters' written advice.
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
---------------------
Date or earlier termination of this Agreement in accordance with its terms,
CenterPoint shall comply in all material respects with all applicable Laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Members released from any and all
guarantees on any indebtedness and
40
<PAGE>
leases that they personally guaranteed for the benefit of the Company as set
forth on Schedule 8.8, with all such guarantees on indebtedness and leases being
------------
assumed by CenterPoint, if necessary to achieve such releases. If any guaranteed
indebtedness is repaid in full with proceeds from the IPO and the Members'
guarantees thereafter shall have no further force or effect, then CenterPoint
shall not be obligated to use any efforts to obtain a release of such guarantee.
In the event that CenterPoint cannot obtain such releases from the lenders of
any such guaranteed indebtedness or lessors of any guaranteed leases,
CenterPoint agrees to indemnify, defend and hold harmless the Members against
any and all claims made by lenders or landlords under such guarantees.
8.9 Lock-Up Agreement. Seller and each Member agree, and agree to enter
-----------------
into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, Seller and the
Members will not offer, sell, contract to sell or otherwise dispose of any
shares of CenterPoint Common Stock, or any securities convertible into or
exercisable or exchangeable for CenterPoint Common Stock, for a period of 180
days after the date of the final Prospectus of the IPO without the prior written
consent of the Underwriter except for shares of CenterPoint Common Stock
disposed of as bona fide gifts, subject to any remaining portion of the 180-day
period applying to any shares so disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
8.10.2 Each of Seller, the Company, CenterPoint and the Members
shall comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that all
------------------------
insurance policies listed, or required to be listed, on Schedule 4.20 will be
-------------
maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of Seller,
--------------
CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule
--------
7.1.4(ii) using reasonable care and in accordance with the Company's policies in
- ---------
effect at Closing.
8.13 Payment of Deferred Compensation. Upon receipt by the Company of cash
--------------------------------
in accordance with Section 2.2 above plus any collection of AR from the Closing
-----------
Date to the date of
41
<PAGE>
purchase under Section 2.2, CenterPoint shall cause the Company to pay to the
-----------
Members and certain non-shareholder officers and associate principals of the
Company accrued salary and accrued bonus accounts equal to the amounts set forth
on Schedule 8.13 next to each such payee's name; provided, however, if the
-------------
aggregate amount otherwise payable pursuant to this Section 8.13 exceeds the
------------
amount received by the Company pursuant to Section 2.2 above plus any collection
-----------
of AR from the Closing Date to the date of purchase under Section 2.2, such
-----------
payment shall be reduced to such lower amount, and the amount payable to each
payee as set forth on Schedule 8.13 shall be reduced accordingly, pro
-------------
rata based on the amounts set forth on Schedule 8.13.
-------------
8.14 Retention of Cash, Etc. Seller shall retain, for a period of at
-----------------------
least twelve (12) months after the Closing Date, cash, cash equivalents or
accounts receivable in an amount equal to at least $500,000.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Members and Seller. Subject to Sections 9.7
----------------------------------------- ------------
and 9.8, with respect to Sections 9.1(a) through (d), the Members, and with
--- --------------- ---
respect to Section 9.1(e), Seller and any Member individually named as a
--------------
defendant in the litigation matters referred to in Section 9.1(e), in each case
--------------
jointly and severally, agree to indemnify, defend and save the CenterPoint
Indemnified Parties (hereinafter defined), forever harmless from and against,
and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party, resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Member or any action, demand
or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the Members
to indemnify, defend and save harmless for any misrepresentation or breach
of representation or warranty made in Section 5.1 hereof or in any
------------
certificate, schedule, document, exhibit or other instrument delivered in
respect thereof shall not be joint and several, but such obligation shall
be several only and limited to the several Member(s) making such
misrepresentation or breach;
(b) any failure by Seller, the Company or any Member to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing, except that the obligation of the Members
to indemnify, defend and save harmless for any breach of a covenant or
agreement by a Member shall not be joint and several, but such obligation
shall be several only and limited to the several Member(s) committing such
breach;
42
<PAGE>
(c) any liability under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 ACT"), or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
the Company, contained in any preliminary prospectus relating to the IPO,
the Registration Statements or any proxy statement or prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising
out of or based upon any omission to state therein a material fact relating
to the Company required to be stated therein or necessary to make the
statements therein not misleading, and not provided to CenterPoint or its
counsel by the Company; provided, however, that such indemnity shall not
-------- -------
inure to the benefit of any CenterPoint Indemnified Party to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and
(i) the Company provided, in writing, corrected information to CenterPoint
or its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included, or (ii)
CenterPoint did not provide the Company and its counsel with the
information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.1(c);
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Members, Seller
or the Company in connection with the Acquisition or the transactions
contemplated by this Agreement with respect to brokerage, finders and other
fees or commissions, (ii) disallowance of any tax deduction to CenterPoint
or the Company with respect to any item listed on Schedule 2.6 and
------------
considered in determining Net Working Capital, (iii) any matter which is
listed on Schedule 7.1.4 hereto or which should be listed on Schedule 4.10
-------------- -------------
hereto, (iv) the Excluded Assets, the Excluded Liabilities, and the
transactions contemplated under Section 7.1.4, and (v) any payment with
-------------
respect to Dissenting Shares; or
(e) notwithstanding anything in this Agreement to the contrary, any
matter which is listed on Schedule 4.10 hereto.
-------------
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided, further that the
-------- -------
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
----------
43
<PAGE>
Article IX, the Other Founding Companies, and each of their respective officers,
- ----------
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall be deemed to
be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Members and their respective Affiliates, and their
Affiliates' respective officers, directors, employees and agents (each, a
"MEMBER INDEMNIFIED PARTY") forever harmless from and against, and to promptly
pay to a Member Indemnified Party or reimburse a Member Indemnified Party for,
any and all Losses sustained or incurred by any Member Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Member Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Seller, the Company or the Members, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
44
<PAGE>
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to Seller, the Company or the
Members required to be stated therein or necessary to make the statements
therein not misleading, to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) Seller, the Company or Members
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Seller, the Member Representative and their counsel with
the information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
-------------
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person
entitled to indemnification under this Agreement (an "INDEMNIFIED PARTY")
receives notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a
"THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Members, may be granted by
45
<PAGE>
the Member Representative (as defined in Section 9.13)), which consent
------------
shall not be unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
9.3.4 Any judgment entered, order issued or settlement agreed upon
in the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT
46
<PAGE>
CLAIM") will be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, together with a statement of any available information
regarding such claim, and the Indemnifying Party will have a period of thirty
(30) calendar days within which to satisfy such Direct Claim. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnified Party will be free to pursue such remedies as may be
available to the Indemnified Party under this Article IX.
----------
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Members. With respect to representations and
-------------------------
warranties, the Members shall not have any liability pursuant to Section
-------
9.1(a) hereof unless and until and only to the extent that the aggregate
------
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
-------------
Basic Purchase Consideration; provided, however, that this threshold shall
-------- -------
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.2 and 5.1.8 as it relates
-------------- ----- --- -----
to the representation and warranty of Seller and the Company set forth in
Section 4.16, and the Members shall indemnify the CenterPoint Indemnified
------------
Parties for any Losses accruing thereunder in accordance with this Article
-------
IX without regard to such threshold.
--
47
<PAGE>
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Member Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
----------
threshold.
9.7.3 Limitations on Claims Against the Members. The liability of all
-----------------------------------------
Members for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
-------------
Purchase Consideration in the aggregate; provided, however, that such
liability for a Member shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Member or
by Seller on behalf of such Member; provided further, however, that such
---------------- -------
limitations shall not apply to Losses arising out of breaches of
representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2, and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of Seller and the
-----
Company set forth in Section 4.16, and any Losses accruing thereunder shall
------------
not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the Members,
---------------------------------------------------------------------
Seller and the Company; Time Limits on Indemnification Obligations.
- ------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of
Seller, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Members, Seller and the Company contained in this Agreement or
in any certificate delivered pursuant to any of the foregoing. All such
representations, warranties, covenants and agreements of the Members, Seller and
the Company shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, (i) that the Members' obligations pursuant
-------- -------
to Section 9.1, other than those relating to covenants and agreements to be
-----------
performed by the Members after the Closing, shall expire one (1) year after the
Closing, except with respect to obligations arising under or relating to Section
-------
4.16 hereof as it relates to federal, state, local and foreign income taxation,
- ----
which shall survive until the earlier of (A) the expiration of the applicable
periods (including any extensions) of the respective statutes of limitation
applicable to the payment of the Taxes or (B) the completion of the final audit
and determinations by the applicable taxing authority and final disposition of
any deficiency resulting therefrom; and (ii) solely to the extent that
CenterPoint actually incurs liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.1(c)
---------------
48
<PAGE>
or (d) above shall survive until the expiration of any applicable statute of
- ------
limitations with respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
-------- -------
CenterPoint's obligations under Section 9.2, other than those relating to
-----------
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one year after Closing, except that, solely to the extent that the
Members actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.2(c) or (d) above shall survive until the
----------------------
expiration of any applicable statute of limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
----------
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Members and of the Member Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Members may satisfy their respective obligations, if any, under
this Article IX (i) by tendering to the CenterPoint Indemnified Parties cash or
----------
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE" shall
- ------------
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (i) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
9.13 Member Representative. Seller and each Member appoints Jeffrey D.
---------------------
Barsky (the "MEMBER REPRESENTATIVE") as its agent and representative with full
power and authority to agree, contest or settle any claim or dispute affecting
any Member made under Articles II or IX and to otherwise act on behalf of the
----------- --
Members in accordance with the terms of this Agreement, including, without
limitation, to direct the amount and manner of the payment of the aggregate
Basic Purchase Consideration; provided, that the Member Representative may be
-------- ----
removed and a successor to the Person originally serving as the Member
Representative may be designated in a writing signed by
49
<PAGE>
a majority-in-interest of the Members and delivered to CenterPoint in accordance
with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Acquisition. The
---------------------------------------------------------------
respective obligations of each party to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Acquisition or any
of the Other Acquisitions shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Acquisition or any of the Other Acquisitions or make
the consummation of the Acquisition or any of the Other Acquisitions
illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Acquisition or any of the
Other Acquisitions and the transactions contemplated hereby and by the
Other Agreements (including, without limitation, any consents listed on
Schedules 4.3.2 or 4.12) shall have been obtained and be in effect;
50
<PAGE>
(h) no action, suit or proceeding with respect to the Acquisition has
been filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) this Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Company's stockholders
in the manner required by any applicable Law and the Company's
Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
10.2 Conditions to Obligation of the Members, Seller and the Company to
------------------------------------------------------------------
Effect the Acquisition. Unless waived by Seller, the obligation of the Members,
- ----------------------
Seller and the Company to effect the Acquisition shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their respective agreements
contained in this Agreement and each Other Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of CenterPoint contained in this Agreement and each Other
Agreement shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date as if made at and as of
such date, and Seller and the Company shall have received a certificate of
the Chief Executive Officer or President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to Seller of the Acquisition;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to Seller, the Company and the Members;
(d) each of the Members shall have been afforded the opportunity to
enter into an incentive compensation agreement (the " INCENTIVE
COMPENSATION AGREEMENT") with CenterPoint substantially in the form
attached hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to Seller, the Company and the
Members a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State, showing
that CenterPoint is in good standing;
(f) each of the Members, the partners, members and stockholders of the
other Founding Companies who are to receive shares of CenterPoint Common
Stock pursuant to
51
<PAGE>
the Other Agreements, and the other stockholders of CenterPoint other than
those acquiring stock in the IPO shall have entered into an agreement (the
"STOCKHOLDERS AGREEMENT") substantially in the form attached hereto as
Exhibit 10.2(f);
---------------
(g) all conditions to the Acquisitions of the other Founding
Companies, on substantially the same terms as provided herein, shall have
been satisfied or waived by the applicable party and the Company;
(h) each of Seller and the Members shall have been afforded the
opportunity to review the executed employment agreement by and between
CenterPoint and Robert C. Basten; and
(i) the Company shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions, that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received in exchange for Company Stock in the Merger pursuant to
Section 351 of the Code, the final form of such opinion to be in form and
substance reasonably acceptable to the Company and the Members.
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition.
-----------------------------------------------------------------
Unless waived by CenterPoint, the obligation of CenterPoint and Mergersub to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing of the additional following conditions:
(a) Seller and the Company shall have performed in all material
respects their respective agreements contained in this Agreement required
to be performed on or prior to the Closing Date and the representations and
warranties of Seller and the Company contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of each of Seller and the Company to
that effect;
(b) the Members shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Members
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of each Member to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Long Alridge & Norman, counsel to Seller, the Company and the Members,
dated the Closing Date, in the form attached hereto as Exhibit 10.3(c), the
---------------
final form of such opinion to be in form and substance reasonably
acceptable to the Underwriters and CenterPoint;
(d) Seller and the Members shall have caused Seller and the Company,
as applicable, to have executed and delivered the Separate Practice
Agreement substantially
52
<PAGE>
in the form attached hereto as Exhibit 10.3(d)(A) and the Services
-----------------
Agreement substantially in the form attached hereto as Exhibit 10.3(d)(B);
------------------
(e) each Member shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached hereto as Exhibit
-------
10.2(d);
------
(f) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(g) Seller and the Company shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of Seller, the Company and each Company
Subsidiary and, unless waived by CenterPoint, in each state in which the
Company or any Company Subsidiary is authorized to do business, showing
Seller, the Company or Company Subsidiary (as applicable) is in good
standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Acquisition;
(i) the Members shall have executed the Stockholders Agreement;
(j) Seller and the Members shall have delivered to CenterPoint an
instrument in the form attached hereto as Exhibit 10.3(j), dated the
---------------
Closing Date, releasing the Company (and the Company Subsidiaries) from any
and all claims of Seller and the Members against the Company (and the
Company Subsidiaries) and obligations of the Company (and the Company
Subsidiaries) to Seller and the Members;
(k) the Company's interest in RF&S Realty, Inc. and all Excluded
Liabilities related thereto shall have been distributed, transferred,
assigned and novated, as applicable on terms and conditions in form and
substance satisfactory to CenterPoint;
(l) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.4 hereof
-------------
including, without limitation, that as of the Closing the amount of debt of
the Company and the Company Subsidiaries shall not exceed the amount
reflected on Schedule 2.1 as Debt Assumed By CenterPoint;
------------
(m) Seller, the Company and the Members, as applicable, shall have
terminated
53
<PAGE>
or have caused the termination of any voting trusts, proxies or other
agreements or understandings to which Seller, the Company or any Member is
a party or is bound with respect to any shares of capital stock or other
equity interests of the Company and the Company Subsidiaries and shall have
provided CenterPoint evidence of such termination that is acceptable to
CenterPoint's counsel;
(n) Seller, the Company and the Members shall have completed the
Conversion of the Company and have presented evidence of such conversion in
accordance with Section 7.5;
-----------
(o) Seller, the Company and the Members shall have delivered payoff
letters including a statement of per diem interest amounts and other
applicable release documents from all institutional lenders and creditors
of the Company and the Company Subsidiaries regarding the payment in full
of indebtedness at Closing, in each case in form and substance satisfactory
to CenterPoint (including, without limitation, applicable UCC-3 termination
statements);
(p) the secretary of the Company shall have delivered certified copies
of the resolutions of the board of directors and shareholders of the
Company and the Member Representative shall have delivered certified copies
of resolutions of the Members, approving execution and delivery of this
Agreement, the Conversion, the Merger and the other actions, agreements and
documents, necessary or desirable to complete the transactions contemplated
herein; and
(q) the Company Shareholders' Agreement shall not have been amended.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by Seller,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of Seller, the
Company or any Member or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of Seller,
the Company or any Member or any of their affiliates or associates;
54
<PAGE>
(iii) if CenterPoint (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within thirty (30) days after
written notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of CenterPoint
or any of its stockholders or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of
CenterPoint or any of its stockholders or any of their affiliates or
associates;
(iii) if Seller or the Company (A) fails to perform in any
material respect any of its material covenants in this Agreement and
(B) does not cure such default in all material respects within thirty
(30) days after written notice of such default is given to Seller or
the Company by CenterPoint;
(iv) if a Member (A) fails to perform in any material respect
any of such Member's material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30) days
after written notice of such default is given to the Member
Representative by CenterPoint; or
(d) by mutual consent of the Operating Committee of Seller and the
Board of Directors of CenterPoint.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or Seller, as provided in Section 11.1, this Agreement
------------
shall forthwith become void and there shall be no further obligation on the part
of Seller, the Company, the Members, CenterPoint, Mergersub or their respective
officers or directors (except the obligations set forth in this Section 11.2 and
------------
in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall survive the
------------ --- --- ----------
termination). Nothing in this Section 11.2 shall relieve any party from
------------
liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. CenterPoint
covenants and agrees that it shall not amend, modify or supplement the material
terms of any Other Agreement following the Closing without the prior written
consent of at least two thirds (2/3rds) of the members of CenterPoint's Board of
Directors; provided that no waiver of any restriction set forth in Article XII
-----------
shall be of any effect unless consented to by a majority of the members of
CenterPoint's Board of Directors who do not at the time of such proposed waiver
hold Restricted Shares within the meaning of this Agreement, any Other Agreement
or the Stockholders Agreement.
55
<PAGE>
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions. Except as provided in Section 12.2, for a
--------------------- ------------
period of forty two (42) months from the Closing, none of Seller nor any of the
Members shall (a) sell, assign, exchange, transfer, distribute or otherwise
dispose of, in whole or in part, (i) any shares of CenterPoint Common Stock
received by Seller in the Acquisition and/or subsequently distributed by Seller
to the Members (the "RESTRICTED SHARES"), or (ii) any interest (including,
without limitation, an option to buy or sell) in any Restricted Shares; or (b)
engage in any transaction, whether or not with respect to any Restricted Shares
or any interest therein, the intent or effect of which is to reduce the risk of
owning the Restricted Shares (including, without limitation, engaging in put,
call, short-sale, derivative, straddle or similar market transactions);
provided, however, for a period of one (1) year from the Closing, Seller shall
not distribute any Restricted Shares to any Member.
12.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing, and every six (6) months thereafter, until all Restricted Shares shall
have been released from such restrictions, twenty percent (20%) of the original
number of Restricted Shares of Seller and/or each Member shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed Restricted Shares for any purposes of this Agreement; provided, that, if
-------- ----
a Member's employment with CenterPoint or its subsidiary is terminated within 30
months of the Closing other than through death, disability, retirement or
circumstances approved by the Company's management and reasonably approved by
CenterPoint's chief executive officer, the Restricted Shares then held by such
Member or held by Seller for such Member shall remain subject to the
restrictions set forth in the Section 12.1. until the fifth anniversary of the
-------------
Closing Date. Notwithstanding the foregoing and Section 12.1, Seller or a Member
may (x) at any time pledge or encumber all or part of Seller's or such Member's
Restricted Shares, as applicable, provided that the pledgee or secured party
agrees in writing to be bound by the provisions contained in Article XII, (y) at
-----------
any time after the first anniversary of the Closing transfer all or part of such
Member's Restricted Shares to another Member or to an immediate family member
(or trust or other estate planning Person), provided, that any such Member,
-------- ----
family member or other Person agrees in writing to be bound by the provisions
contained in Article XII, and (z) transfer or cause to be transferred such
-----------
Member's Restricted Shares upon such Member's disability or death. As used in
this Section 12.2, the terms "disability" and "retirement" shall have the
------------
meaning ascribed to them in CenterPoint's Employee Incentive Compensation Plan.
No attempted transfer of any nature whatsoever that is in violation of this
Section shall be treated as effective for any purpose.
56
<PAGE>
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to Seller pursuant to this Agreement and/or subsequently distributed
by Seller to the Members shall bear a legend substantially in the form set forth
below and containing such other information as CenterPoint may deem necessary or
appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATED MARCH __, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from Seller or any Member (or a permitted transferee)
following the expiration of either all or a part of the restrictions on the
transfer of CenterPoint Common Stock set forth in this Article XII, CenterPoint
-----------
shall immediately notify its transfer agent that the applicable shares of
CenterPoint Common Stock are no longer restricted shares and shall direct the
transfer agent to reissue certificates of CenterPoint Common Stock which do not
contain a restrictive legend in place of the applicable restricted shares. In
the event Seller's or a Member's request to remove the restrictive legend
coincides with Seller's or such Member's request to sell the CenterPoint Common
Stock, CenterPoint shall take such actions as are required by its transfer agent
to allow the transfer agent to transfer the unrestricted CenterPoint Common
Stock free of any restrictive legend.
ARTICLE XII
NONCOMPETITION
13.1 Prohibited Activities. Each Member agrees severally, and not jointly,
---------------------
that such Member will not, for a period of three (3) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Seller or Member commences competition within a fifty (50) mile
radius of any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or
57
<PAGE>
that was known by the Member to have been actively being solicited by the
Company or any Company Subsidiary to become a customer at any time during
such period;
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for the
purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Member may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Member does not, directly or indirectly, provide such
services to another third party for hire.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Member from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Member does not consult with or is not employed
by such competitor and (b) owning equity interests in Seller.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Member agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Member, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Members in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Members that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Member who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with
58
<PAGE>
CenterPoint and/or any subsidiary thereof as set forth herein shall thereafter
cease to be employed thereunder, and such Member shall enter into a business or
pursue other activities not in competition with CenterPoint and/or any
subsidiary thereof, or similar activities or business in locations the
operations of which, under such circumstances, does not violate this Article
-------
XIII and in any event such new business, activities or location are not in
- ----
violation of this Article XIII or of such Member's obligations under this
------------
Article XIII, such Member shall not be chargeable with a violation of this
- ------------
Article XIII if CenterPoint and/or any subsidiary thereof shall thereafter enter
- ------------
the same, similar or a competitive (i) business, (ii) course of activities or
(iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII shall
--------------------
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Member made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Member is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and each of the Members hereby agree that
-----------
this covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of Seller, the Company and the Members represents and
-------
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee
59
<PAGE>
(except for any fee described in Schedule 15.1) or commission in connection with
-------------
the Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. CenterPoint represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1. If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
15.2.2. If to the Company, to:
Reznick Fedder & Silverman, Certified Public Accountants,
A Professional Corporation
4250 East West Highway
Suite 300
Bethesda, MD 20814-3319
Attn: Jonathan R. Rutenberg
Facsimile No: (301) 652-1848
60
<PAGE>
with a copy to:
Long Aldridge & Norman
1 Peachtree Center
303 Peachtree Street
Suite 5300
Atlanta, GA 30308
Attn: Jeff Haidet, Esq.
Facsimile No: (404) 527-4198
15.2.3 If to the Member Representative or the Members, as applicable,
addressed to the addresses set forth on Schedule 15.2.3, with copies to
---------------
such counsel as set forth with respect to each Member on such Schedule
--------
15.2.3, as applicable.
------
15.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and "HEREUNDER"
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
-------------------
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any individual who is a
partner, member or shareholder of such Person or who is otherwise serving, or
who has served, as a director, officer or trustee (or any capacity) of such
Person has, or at any time had, Knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with
61
<PAGE>
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise, except that CenterPoint may assign this Agreement to any
wholly-owned subsidiary of CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
62
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
By:/S/ Robert Basten
------------------------------------------
Name:________________________________________
Its:_________________________________________
REZNICK MERGERSUB INC.
By:/S/ Robert Basten
---------------------------------------------
Name:________________________________________
Its:_________________________________________
REZNICK FEDDER & SILVERMAN, C.P.A.S, L.L.C.
By:/S/ David Reznick
------------------------------------------
Name:________________________________________
Its:_________________________________________
63
<PAGE>
REZNICK FEDDER & SILVERMAN,
CERTIFIED PUBLIC ACCOUNTANTS,
A PROFESSIONAL CORPORATION
By:/S/ David Reznick
------------------------------------------
Name:________________________________________
Its:_________________________________________
MEMBERS
[See Attached Separate Pages]
64
<PAGE>
/S/ David Reznick
----------------------------------------
David Reznick
65
<PAGE>
/S/ Stuart M. Fedder
-----------------------------------------
Stuart M. Fedder
66
<PAGE>
/S/ Ivan B. Silverman
------------------------------------------
Ivan B. Silverman
67
<PAGE>
/S/ William T. Riley, Jr.
------------------------------------------
William T. Riley, Jr.
68
<PAGE>
/S/ Craig Birmingham
-------------------------------------------
Craig Birmingham
69
<PAGE>
/S/ Wallace L. Scruggs, Jr.
--------------------------------------------
Wallace L. Scruggs, Jr.
70
<PAGE>
/S/ Jeffrey D. Barsky
---------------------------------------------
Jeffrey D. Barsky
71
<PAGE>
/S/ Lester A. Kanis
-------------------------------------
Lester A. Kanis
72
<PAGE>
/S/ Ronald G. Vance
---------------------------------------------
Ronald G. Vance
<PAGE>
/S/ Renee G. Scruggs
----------------------------------------------
Renee G. Scruggs
<PAGE>
/S/ Lee Isaacson
----------------------------------------------
Lee Isaacson
<PAGE>
/S/ Gary Perlow
----------------------------------------------
Gary Perlow
<PAGE>
/S/ Gary C. Pokrant
----------------------------------------------------
Gary C. Pokrant
<PAGE>
/S/ Leslie A. Mostow
----------------------------------------------------
Leslie A. Mostow
<PAGE>
/S/ Kenneth J.Shapiro
----------------------------------------------------
Kenneth J. Shapiro
<PAGE>
/S/ Edward Ryan
------------------------------------------------------
Edward Ryan
<PAGE>
/S/ Mark J. Einstein
------------------------------------------------------
Mark J. Einstein
<PAGE>
/S/ Harry L. Silverman
-------------------------------------------------------
Harry L. Silverman
<PAGE>
/S/ Anthony V. Portal
-------------------------------------------------------
Anthony V. Portal
<PAGE>
/S/ Kenneth E. Baggett
--------------------------------------------------------
Kenneth E. Baggett
<PAGE>
/S/ Beth Mullen
------------------------------
Beth Mullen
<PAGE>
/S/ Leonard A. Sacks
------------------------------
Leonard A. Sacks
<PAGE>
/S/ Timothy McGibney
------------------------------
Timothy McGibney
<PAGE>
/S/ Patrick Trotta
------------------------------
Patrick Trotta
<PAGE>
/S/ Mark Koppelman
------------------------------
Mark Koppelman
<PAGE>
/S/ Jerry Herskovitz
------------------------------
Jerry Herskovitz
<PAGE>
/S/ Michael Beck
------------------------------
Michael Beck
<PAGE>
/S/ Robert Denmark
------------------------------
Robert Denmark
<PAGE>
/S/ Kirk T. Rogers
------------------------------
Kirk T. Rogers
<PAGE>
/S/ David Kessler
------------------------------
David Kessler
<PAGE>
/S/ Thomas Fassett
------------------------------
Thomas Fassett
<PAGE>
/S/ Timothy Kemper
------------------------------
Timothy Kemper
<PAGE>
EXHIBIT 2.3
__________________________
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
FRF HOLDING, LLC
FRC MERGERSUB INC.,
FOLLMER, RUDZEWICZ & CO., P.C.
and
GORDON R. FOLLMER, JOHN J. RUDZEWICZ,
ANTHONY P. FRABOTTA, MICHAEL SANTICCHIA,
TIMOTHY J. CAUGHLIN, PETER E. MEAGHER, III,
PATRICK J. GREGORY, DANIEL P. MARKEY,
JAMES J. BAUTERS, DENNIS J. LAPORTE,
GERALD J. GRADY, JR. AND DENNIS J. PETRI
being all of the Stockholders of
FOLLMER, RUDZEWICZ & CO., P.C.
March 31, 1999
__________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER............................................................ 2
1.1 Merger......................................................... 2
------
1.2 Effects of the Merger.......................................... 3
---------------------
1.3 Directors and Officers of the Surviving Corporation............ 3
---------------------------------------------------
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT................................... 3
2.1 Merger Consideration........................................... 3
--------------------
2.1.1 Basic Purchase Consideration............................. 3
----------------------------
2.1.2 Treasury Stock........................................... 3
--------------
2.1.3 Dissenters............................................... 3
----------
2.1.4 Conversion of Mergersub Stock............................ 4
-----------------------------
2.1.5 Exchange of Certificates....................................... 4
------------------------
2.2 Post-Closing Adjustments to Basic Purchase Consideration....... 4
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess..... 4
----------------------------------------------------
2.2.2 Preliminary Balance Sheet and Adjustment................. 4
----------------------------------------
2.2.3 Interim Adjustment....................................... 4
------------------
2.2.4 Final Adjustment......................................... 4
----------------
2.2.5 Disputes....................................................... 5
--------
2.2.6 Payment of Adjustments................................... 5
----------------------
2.3 Post-Closing Management of AR.................................. 6
-----------------------------
2.4 Assignment of Uncollected AR................................... 6
----------------------------
2.5 Definitions.................................................... 6
-----------
ARTICLE III
THE CLOSING AND CONSUMMATION DATE..................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 7
4.1 Organization and Qualification................................. 7
------------------------------
4.2 Company Subsidiaries........................................... 7
--------------------
4.3 Authority; Non-Contravention; Approvals........................ 8
---------------------------------------
4.4 Capitalization................................................. 9
--------------
4.5 Year 2000...................................................... 10
---------
4.6 Financial Statements........................................... 10
--------------------
4.7 Absence of Undisclosed Liabilities............................. 10
----------------------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.8 Unbilled Fees and Expenses.............................................................. 11
--------------------------
4.9 Absence of Certain Changes or Events.................................................... 11
------------------------------------
4.10 Litigation.............................................................................. 13
----------
4.11 Compliance with Applicable Laws......................................................... 14
-------------------------------
4.12 Licenses................................................................................ 14
--------
4.13 Material Contracts...................................................................... 15
------------------
4.14 Properties.............................................................................. 17
----------
4.15 Intellectual Property................................................................... 19
---------------------
4.16 Taxes................................................................................... 19
-----
4.17 Employee Benefit Plans; ERISA........................................................... 20
-----------------------------
4.18 Labor Matters........................................................................... 22
-------------
4.19 Environmental Matters................................................................... 22
---------------------
4.20 Insurance............................................................................... 23
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions............................. 23
-----------------------------------------------------------
4.22 Business Relationships.................................................................. 24
----------------------
4.23 Compensation............................................................................ 24
------------
4.24 Bank Accounts........................................................................... 24
-------------
4.25 Professional Credentials................................................................ 25
------------------------
4.26 Disclosure; No Misrepresentation........................................................ 25
--------------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS............................................. 25
5.1 Several Representations and Warranties.................................................. 25
5.1.1 Capitalization.................................................................... 25
--------------
5.1.2 Authority......................................................................... 25
---------
5.1.3 Non-Contravention................................................................. 26
-----------------
5.1.4 Approvals......................................................................... 26
---------
5.1.5 Litigation........................................................................ 26
----------
5.1.6 No Transfer....................................................................... 26
-----------
5.1.7 Disclosure........................................................................ 27
----------
5.1.8 Representations and Warranties of the Seller and the Company...................... 27
------------------------------------------------------------
5.2 Joint and Several Representations and Warranties........................................ 27
------------------------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT.................................................. 27
6.1 Organization And Qualification.......................................................... 27
------------------------------
6.2 Capitalization.......................................................................... 27
--------------
6.3 No Subsidiaries......................................................................... 28
---------------
6.4 Authority; Non-Contravention; Approvals................................................. 28
---------------------------------------
6.5 Absence of Undisclosed Liabilities...................................................... 30
----------------------------------
6.6 Litigation.............................................................................. 30
----------
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.7 Compliance with Applicable Laws......................................................... 30
-------------------------------
6.8 No Misrepresentation.................................................................... 30
--------------------
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS.............................................................. 30
7.1 Conduct of Business by the Company Prior to the Effective Time.......................... 30
--------------------------------------------------------------
7.2 No-Shop................................................................................. 33
-------
7.3 Schedules............................................................................... 34
---------
7.4 Company Stockholder Meeting............................................................. 34
---------------------------
7.5 Conversion.............................................................................. 35
----------
ARTICLE VIII
ADDITIONAL AGREEMENTS.......................................................................... 35
8.1 Access to Information................................................................... 35
---------------------
8.2 Registration Statements................................................................. 36
-----------------------
8.3 Expenses and Fees....................................................................... 37
-----------------
8.4 Agreement to Cooperate.................................................................. 37
----------------------
8.5 Public Statements....................................................................... 37
-----------------
8.6 Registration Rights..................................................................... 37
-------------------
8.7 CenterPoint Covenants................................................................... 40
---------------------
8.8 Release of Guarantees................................................................... 40
---------------------
8.9 Lock-Up Agreement....................................................................... 40
-----------------
8.10 Preparation and Filing of Tax Returns................................................... 40
-------------------------------------
8.11 Maintenance of Insurance................................................................ 40
------------------------
8.12 Administration.......................................................................... 41
--------------
ARTICLE IX
INDEMNIFICATION................................................................................ 41
9.1 Indemnification by the Members.......................................................... 41
------------------------------
9.2 Indemnification by CenterPoint.......................................................... 43
------------------------------
9.3 Indemnification Procedure for Third Party Claims........................................ 44
------------------------------------------------
9.4 Direct Claims........................................................................... 45
-------------
9.5 Failure to Give Timely Notice........................................................... 45
-----------------------------
9.6 Reduction of Loss....................................................................... 46
-----------------
9.7 Limitation on Indemnities............................................................... 46
-------------------------
9.7.1 Threshold for the Stockholders.................................................... 46
------------------------------
9.7.2 Threshold for CenterPoint......................................................... 46
-------------------------
9.7.3 Limitations on Claims Against the Stockholders.................................... 47
----------------------------------------------
9.7.4 Limitation on Claims Against CenterPoint.......................................... 47
----------------------------------------
9.8 Survival of Representations, Warranties and Covenants of the Stockholders and the
---------------------------------------------------------------------------------
Company; Time Limits on Indemnification Obligations..................................... 47
---------------------------------------------------
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time Limits
---------------------------------------------------------------------------------
on Indemnification Obligations................................................... 47
------------------------------
9.10 Defense of Claims; Control of Proceedings........................................ 48
-----------------------------------------
9.11 Fraud; Exclusive Remedy.......................................................... 48
-----------------------
9.12 Manner of Satisfying Indemnification Obligations................................. 48
------------------------------------------------
ARTICLE X
CLOSING CONDITIONS............................................................................. 48
10.1 Conditions to Each Party's Obligation to Effect the Merger....................... 48
----------------------------------------------------------
10.2 Conditions to Obligation of the Stockholders, the Company to Effect the Merger... 49
------------------------------------------------------------------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Merger..................... 51
------------------------------------------------------------
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER.............................................................. 53
11.1 Termination...................................................................... 53
-----------
11.2 Effect of Termination............................................................ 54
---------------------
11.3 Amendment........................................................................ 54
---------
11.4 Waiver........................................................................... 54
------
ARTICLE XII
TRANSFER RESTRICTIONS.......................................................................... 55
12.1 Transfer Restrictions Generally.................................................. 55
-------------------------------
12.2 Release of Restrictions.......................................................... 55
-----------------------
12.3 Legend........................................................................... 55
------
ARTICLE XIII
NONCOMPETITION................................................................................. 56
13.1 Prohibited Activities............................................................ 56
---------------------
13.2 Damages.......................................................................... 57
-------
13.3 Reasonable Restraint............................................................. 57
--------------------
13.4 Severability; Reformation........................................................ 58
-------------------------
13.5 Independent Covenant............................................................. 58
--------------------
13.6 Materiality...................................................................... 58
-----------
ARTICLE XIV
[RESERVED].................................................................................... 58
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE XV
GENERAL PROVISIONS......................................................................... 58
15.1 Brokers...................................................................... 58
-------
15.2 Notices...................................................................... 59
-------
15.3 Interpretation............................................................... 60
--------------
15.4 Certain Definitions.......................................................... 60
-------------------
15.5 Entire Agreement; Assignment................................................. 60
----------------------------
15.6 Applicable Law............................................................... 60
--------------
15.7 Counterparts................................................................. 60
------------
15.8 Parties in Interest.......................................................... 61
-------------------
</TABLE>
(v)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.5 Year 2000
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
(vi)
<PAGE>
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Other Liabilities
Schedule 7.1.4(i) Terminated Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Members' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Members and Their Counsel
(vii)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Members of the Company
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to the Seller, the Company
and the Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Members' Release
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(viii)
<PAGE>
DEFINED TERMS
-------------
Accounting Licenses...................................... Section 4.12
Actions.................................................. Section 4.10.1
Acquisition.............................................. Introduction
Acquisition Transaction.................................. Section 13.1
Affiliate................................................ Section 15.4
Affiliate Transactions................................... Section 4.21
Agreement................................................ Introduction
AR....................................................... Section 2.5(a)
Arbitrator............................................... Section 2.2.5
Attest Entity............................................ Section 7.1.2
Attestation Practice..................................... Introduction
Basic Purchase Consideration............................. Section 2.1.1
Business................................................. Introduction
Cash Consideration....................................... Section 2.1.1
CenterPoint.............................................. Introduction
CenterPoint Accountants.................................. Section 2.2.2
CenterPoint Common Stock................................. Section 2.1
CenterPoint Indemnified Party(ies)....................... Section 9.1
CenterPoint Material Adverse Effect...................... Section 6.4.3
CenterPoint Representatives.............................. Section 8.1.1
CenterPoint Required Statutory Approvals................. Section 6.4.3
Closing.................................................. Article III
Closing Balance Sheet.................................... Section 2.2.2
Closing Date............................................. Article III
Code..................................................... Introduction
Company.................................................. Introduction
Company Material Adverse Effect.......................... Section 4.3.3
Company Representatives.................................. Section 8.1.1
Company Stock............................................ Section 2.1
(ix)
<PAGE>
Company Subsidiaries..................................... Section 4.2
Contracts................................................ Section 4.13
Conversion............................................... Introduction
Copyrights............................................... Section 4.15
Defense Notice........................................... Section 9.3.1
Direct Claim............................................. Section 9.4
Disputed Item............................................ Section 2.2.5
Dissenting Shares........................................ Section 2.1.3
Effective Time........................................... Section 1.1
Employee Plan............................................ Section 4.17.5(a)
Environmental and Safety Requirements.................... Section 4.19
ERISA.................................................... Section 4.17.5(b)
Excluded Assets.......................................... Section 7.1.4
Excluded Liabilities..................................... Section 7.1.4
Final Adjustment......................................... Section 2.2.4
Financial Statements..................................... Section 4.6
First Person............................................. Section 4.17.5(c)
Form S-1................................................. Section 4.3.3
Form S-4................................................. Section 4.3.3
Founding Companies....................................... Introduction
GAAP..................................................... Section 4.6
general increase......................................... Section 4.23
Governmental Authority................................... Section 4.3.2
Hazardous Materials...................................... Section 4.19
HSR Act.................................................. Section 4.3.3
Incentive Compensation Agreement......................... Section 10.2(d)
Indemnified Party........................................ Section 9.3.1
Indemnifying Party....................................... Section 9.3.1
Intellectual Property.................................... Section 4.15
Intellectual Property Licenses........................... Section 4.15
Interim Adjustment....................................... Section 2.2.3
(x)
<PAGE>
IPO...................................................... Introduction
Knowledge................................................ Section 15.4
Latest Balance Sheet..................................... Section 4.6
Laws..................................................... Section 4.11
Leased Property.......................................... Section 4.14.1
Licenses................................................. Section 4.12
Liens.................................................... Section 4.3.2
Liquidated Damages Amount................................ Section 7.3
Losses................................................... Section 9.1
Market Price............................................. Section 9.12
Marks.................................................... Section 4.15
Material Contracts....................................... Section 4.13
Members.................................................. Introduction
Member Indemnified Party................................. Section 9.2
Member Representative.................................... Section 9.13
Merger................................................... Introduction
Merger Documents......................................... Section 1.1
Mergersub................................................ Introduction
Mergersub Stock.......................................... Section 6.2.1
MBCA..................................................... Section 1.1
Net Working Capital...................................... Section 2.5(b)
1933 Act................................................. Section 4.3.3
1934 Act................................................. Section 9.1(c)
Organizational Documents................................. Section 4.1
Other Agreements......................................... Introduction
Other Founding Companies................................. Section 9.1
Other Mergers............................................ Introduction
Owned Property........................................... Section 4.14.1
Patents.................................................. Section 4.15
Person................................................... Section 15.4
Plan Affiliate........................................... Section 4.17.5(c)
(xi)
<PAGE>
Real Property............................................ Section 4.14.1
Registration Statements.................................. Section 4.3.3
Resolution Period........................................ Section 2.2.5
Restricted Shares........................................ Section 12.1
Returns.................................................. Section 4.16.1
Schedules................................................ Section 7.3
SEC...................................................... Section 4.3.3
Securities Act........................................... Section 4.3.3
Seller................................................... Introduction
Special Bonus Plan....................................... Section 2.5(c)
Stock Consideration...................................... Section 2.1
Stockholders Agreement................................... Section 10.2(f)
Surviving Corporation.................................... Section 1.2
Target................................................... Section 2.5(d)
Tax Accrual.............................................. Section 2.5(e)
Taxes.................................................... Section 4.16.2
Territory................................................ Section 13.1(a)
Third Party Claim........................................ Section 9.3.1
Trade Secrets............................................ Section 4.15
Underwriters............................................. Section 8.1.1
Voting Agreement......................................... Introduction
(xii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of [MARCH __], 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
FRC Mergersub Inc., a Michigan corporation and wholly owned subsidiary of
CenterPoint ("MERGERSUB") FRF Holding, LLC (the "SELLER"), Follmer, Rudzewicz &
Co., P.C., a Michigan professional corporation (the "COMPANY"), and the members
of the Seller, who are also all of the stockholders of the Company identified on
Exhibit A to this Agreement (each such individual, in such individual's capacity
- ---------
as a member and stockholder, a "MEMBER" and, collectively, the "MEMBERS").
WITNESSETH:
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "ATTESTATION
PRACTICE") and (b) the Members, as stockholders of the Company, will cause the
conversion of the Company from a professional corporation to a business
corporation by (x) amending the Company's Organizational Documents (as defined
in Section 4.1) such that it converts to a business corporation, (y) adopting a
-----------
plan of liquidation and reincorporating as a business corporation or (z) merging
with a foreign professional corporation, with the surviving professional
corporation amending its Organizational Documents such that it converts to a
business corporation, as applicable (the actions described in the foregoing (a)
and (b), collectively, the "CONVERSION");
WHEREAS, upon completion of the Conversion, and prior to and in
anticipation of the transactions contemplated hereby, the Seller will acquire
all of the issued and outstanding capital stock of the Company from the Members,
as stockholders of the Company, in exchange for issuing the Members proportional
membership interests in the Seller;
WHEREAS, the Operating Committee of the Seller and the Boards of Directors
of the Company, CenterPoint and Mergersub deem it advisable and in the best
interests of their respective shareholders to approve and consummate the
business combination transaction provided for herein in which Mergersub would
merge with the Company, with the Company being the surviving corporation in the
merger (the "ACQUISITION" or "MERGER");
WHEREAS, certain Members, as stockholders of the Company, have entered into
a Voting Agreement dated the date hereof (the "VOTING AGREEMENT") pursuant to
which, among other things, such Members have agreed to vote the shares of
capital stock of the Company that
<PAGE>
such Members own or control, directly or indirectly, to approve the Merger and
the transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., Berry, Dunn, McNeil & Parker, Chartered, Urbach Kahn & Werlin PC, Self
Funded Benefits, Inc. d/b/a Insurance Design Administrators, Grace & Company,
P.C., Simione, Scillia, Larrow & Dowling LLC, Holthouse Carlin & Van Trigt LLP,
The Reppond Company, Inc., Reppond Administrators, LLC and Verasource Excess
Risk Ltd. (which companies together with the Company are collectively referred
to herein as the "FOUNDING COMPANIES"), which agreements provide for the
merger of a wholly owned subsidiary of CenterPoint with each such Founding
Company (the "OTHER MERGERS") simultaneously with the Merger; CenterPoint has
provided a side letter to each holder of equity interests of the Company to such
effect;
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1); and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, the result of which
will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of Michigan. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"MERGER DOCUMENTS"), with the Secretary of State of the State of Michigan, as
provided in the Michigan Business Corporation Act, as amended (the "MBCA"). The
Merger shall become effective (the "EFFECTIVE TIME") upon the filing of the
Merger Documents with the Secretary of State of the State of Michigan or at such
later time, contemporaneously with the closing of the IPO, as agreed by
CenterPoint and the Company and specified in the Merger Documents.
2
<PAGE>
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to CenterPoint and as specified in the
Merger Documents, (iii) the Merger shall have all the effects provided by
applicable law, and (iv) the Surviving Corporation shall be a wholly-owned
subsidiary of CenterPoint.
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holders thereof, the
outstanding shares of capital stock, consisting of 10,150 shares of Class A
common stock, par value $1.00 per share, and zero (0) shares of Class B common
stock, par value $1.00 per share, of the Company (collectively, the "COMPANY
STOCK") shall be converted into the right to receive: (a) that number of shares
of CenterPoint common stock, par value $.01 per share (the "CENTERPOINT COMMON
STOCK"), determined in accordance with the formula in Schedule 2.1 (the "STOCK
------------
CONSIDERATION") and (b) the amount of cash in Schedule 2.1 (the "CASH
------------
CONSIDERATION"). The sum of the Cash Consideration and the Stock Consideration
is herein referred to as "BASIC PURCHASE CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of the Company held
--------------
in treasury of the Company shall be canceled and retired and no payment shall be
made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of the
----------
Company the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "DISSENTING SHARES") shall not be converted into the right to receive
Basic Purchase Consideration, and the holder thereof shall be entitled only to
such rights as are granted by applicable law. The Company shall give
CenterPoint prompt notice upon receipt by the Company of any such written
demands for payment of fair value of shares of capital stock of the Company and
any other instruments provided pursuant to applicable law. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Corporation.
3
<PAGE>
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each share
-----------------------------
of Mergersub Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid and
non-assessable share of the Surviving Corporation. Such newly issued shares
shall thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
2.1.5 Exchange of Certificates. At the Closing, the Seller shall
------------------------
deliver to CenterPoint the original Company Stock certificates, duly endorsed in
blank by a duly authorized official of the Seller or accompanied by blank stock
powers, in exchange for the allocated share of (a) CenterPoint Common Stock
certificates representing the Stock Consideration and (b) payment of the Cash
Consideration by certified check, cashier's check or wire transfer of
immediately available funds to a bank account or bank accounts in the amounts
and manner specified by the Member Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date. The
shares represented by the Company Stock certificates so delivered shall be
canceled. Until surrendered as contemplated by this Section 2.1.5, each
-------------
certificate representing shares of Company Stock represents only the right to
receive Basic Purchase Consideration, as adjusted in accordance with this
Article II.
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The Basic
----------------------------------------------------
Purchase Consideration shall be (a) reduced dollar-for-dollar to the extent
Net Working Capital on the Closing Date is less than the Target or (b)
increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within ten (10) days of receipt of such calculation,
CenterPoint will deliver to the Member Representative a written report
indicating the amount and nature of any adjustment to the Basic Purchase
Consideration determined in accordance with Section 2.2.1 (the "INTERIM
-------------
ADJUSTMENT").
2.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within ten (10)
days of receipt of such calculation, CenterPoint will deliver to the Member
4
<PAGE>
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
2.2.5 Disputes.
--------
The parties hereto shall not object to the Interim Adjustment
which shall be binding on the parties hereto, and shall withhold all
objections until delivery of the Final Adjustment report. If the
Member Representative does not object (or otherwise respond) in
writing to the Final Adjustment report within 30 days after its
delivery, the Final Adjustment shall automatically become final,
binding and conclusive on all parties hereto. Any objection to the
Final Adjustment report shall be in writing and shall specify the
item or items in dispute (each a "DISPUTED ITEM").
If the Member Representative and CenterPoint are unable to
resolve any Disputed Item within 30 days after notice from the Member
Representative that a dispute exists (the "RESOLUTION PERIOD"), then
a representative from the office of a nationally recognized
accounting firm chosen by the Member Representative and CenterPoint
(the "ARBITRATOR") selected jointly by CenterPoint and the Member
Representative will arbitrate the dispute. The Member Representative
and CenterPoint shall, within 20 days after expiration of the
Resolution Period, present their respective positions with respect to
any Disputed Item to the Arbitrator together with such materials as
the Arbitrator deems appropriate. To the extent any Disputed Item is
similar to a disputed item under the Other Agreements, the Arbitrator
shall arbitrate the Disputed Item based on the submitted materials
and without regard to the disputed item under the Other Agreements.
The Arbitrator shall, after the submission of the materials, submit a
written decision on each Disputed Item to the Member Representative
and CenterPoint and such determination shall be final and binding on
the parties hereto. The arbitration shall be conducted in Chicago,
Illinois. The parties hereto agree that the cost of the Arbitrator
shall be borne by the non-prevailing party or as determined by the
Arbitrator.
2.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, the Seller and the Members shall pay the amount of
the shortfall to CenterPoint. In the event Net Working Capital is greater
than the Target, CenterPoint shall pay the amount of the excess to the
Seller. Any payment required to be made pursuant to this paragraph shall
be made, within ten days of delivery of the report indicating any
adjustment, by wire transfer of immediately available funds to an account
designated in writing by the party that is to receive payment of such
adjustment. In respect of the Final Adjustment, the party making a payment
required by such adjustment shall make such payment within ten days after
the Final Adjustment becomes final and shall receive credit for or return
of any amount previously paid in connection with the Interim Adjustment.
5
<PAGE>
2.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write-off affecting AR and fees and expenses
receivable and unbilled fees and expenses of the Company incurred after Closing
with respect to the same client engagement shall be allocated ratably to the
pre-Closing and post-Closing periods.
2.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to the Seller. Notwithstanding the foregoing, the Company will
retain the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.4.
-----------
2.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the Closing
Date, whenever calculated, equal to difference between: (i) the sum of any
AR, prepaid expenses and other current assets less (ii) the sum of accounts
----
payable, accrued current liabilities, the items listed on Schedule 2.5, the
-------------
Tax Accrual and the portion of employer-paid FICA attributable to Medicare,
payable in connection with deferred compensation and the Special Bonus
Plan. For purpose of this Section 2.5(b), the Special Bonus Plan accrual
--------------
shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan.
(d) "TARGET" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to Closing.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan and (ii) the sum of 34%
plus the effective state tax rate on the Company (net of any federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i). The Tax Accrual shall be reduced by 34%
-----------------
of the present value of the SLRP liability as calculated by Centerpoint's
accountants.
6
<PAGE>
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Katten Muchin
& Zavis, Chicago, Illinois, contemporaneously with the closing of the IPO, or at
such other time and date as the parties hereto may mutually agree (the "CLOSING
DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Seller and the Company hereby jointly and severally represent and
warrant to CenterPoint, as of the date hereof and, subject to Section 7.3, as of
-----------
the date on which CenterPoint and the lead Underwriter (as defined in Section
-------
8.1.1) execute and deliver the Underwriting Agreement related to the IPO and as
- -----
of the Closing Date, as follows:
4.1 Organization and Qualification. As of the date hereof and until
------------------------------
completion of the Conversion, the Company is a professional corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and, following the Conversion, the Company will be a business
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan. The Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
Michigan. Each Company Subsidiary (as defined in Section 4.2) is duly
-----------
organized, validly existing and in good standing under the laws of the state of
its organization set forth on Schedule 4.2. Each of the Seller, the Company and
------------
the Company Subsidiaries has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, and is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.
True, accurate and complete copies of the Seller's, the Company's and each
Company Subsidiary's Organizational Documents, in each case as in effect on the
date hereof, have heretofore been delivered to CenterPoint. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of any limited
partnership, (d) the operating or limited liability company agreement and
certificate of formation of any limited liability company, (e) any charter or
similar document adopted and filed in connection with the creation, formation,
organization or governance (as applicable) of any Person and (f) any amendment
to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing
7
<PAGE>
body, or otherwise having the power to direct the business and policies of such
Person (each a "COMPANY SUBSIDIARY" and collectively, the "COMPANY
SUBSIDIARIES"). Except as set forth on Schedule 4.2, the Company does not,
------------
directly or indirectly, own, of record or beneficially, or control any capital
stock, securities convertible into capital stock or any other equity interest in
any Person.
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 Each of the Seller and the Company has full right, power and
authority to enter into this Agreement and, subject to the approval of the
Merger and the transactions contemplated hereby by the Members, as
stockholders of the Company, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all necessary corporate action on the
part of the Company, subject to the approval of the Merger and the
transactions contemplated hereby by the Members. This Agreement has been
duly executed and delivered by the Seller and the Company, and, assuming
the due authorization, execution and delivery hereof by CenterPoint,
constitutes a valid and legally binding agreement of the Seller and the
Company, enforceable against the Seller and the Company in accordance with
its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
4.3.2 The execution and delivery of this Agreement by each of the
Seller and the Company does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any claim, lien, privilege, mortgage, charge, hypothecation,
assessment, security interest, pledge or other encumbrance, conditional
sales contract, equity charge, restriction, or adverse claim of interest of
any kind or nature whatsoever (each a "LIEN" and collectively, the
"LIENS"), upon any of the properties or assets of the Company or any
Company Subsidiary under, any of the terms, conditions or provisions of (i)
the Organizational Documents of the Seller, the Company or any Company
Subsidiary, (ii) following completion of the Conversion, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or federal, state, provincial, local or
foreign government, or any subdivision, agency or authority of any thereof
("GOVERNMENTAL AUTHORITY") applicable to the Seller, the Company, any
Company Subsidiary, or the Business, properties or assets of the Seller,
the Company or any Company Subsidiary, except for those items discussed in
(ii) above relating to regulating, licensing or permitting the practice of
public accountancy or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which any of the Seller,
the Company or any Company Subsidiary is a party or by which any of the
Seller, the Company, any Company Subsidiary or any of the properties or
assets of the Company or any Company Subsidiary may be bound or affected.
The consummation by the Seller and the Company of the transactions
contemplated hereby will not result in a violation,
8
<PAGE>
conflict, breach, right of termination, creation or acceleration of Liens
under the of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the immediately preceding sentence, subject in
the case of the terms, conditions or provisions of the items described in
clause (iii) above, to obtaining (prior to the Closing Date) such consents
required from third parties set forth on Schedule 4.3.2 and except for
--------------
those items described in (ii) and (iii) above relating to regulating,
licensing or permitting the practice of public accountancy.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
are collectively the "REGISTRATION STATEMENTS") with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT" or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by the Seller or the Company or the consummation
by the Seller or the Company of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
would not, individually or in the aggregate, have a "COMPANY MATERIAL
ADVERSE EFFECT," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the
Company or any Company Subsidiary.
4.4 Capitalization.
--------------
4.4.1 As of the date hereof, the authorized capital stock of the
Company consists of 50,000 shares of Class A Company Stock, of which 10,150
shares are issued and outstanding, and 50,000 shares of Class B Company
Stock, of which zero shares are issued and outstanding. The authorized
capital stock of each of the Company Subsidiaries, if any, and the number
of such shares issued and outstanding is completely and accurately set
forth in Schedule 4.4. All of such issued and outstanding shares are
------------
validly issued and are fully paid, nonassessable and free of preemptive
rights. The Members are all of the stockholders of the Company and own
beneficially and of record all of the issued and outstanding shares of the
Company Stock, which shares constitute all of the outstanding shares of
capital stock of the Company. Immediately prior to the Closing, the Seller
shall own all such shares of the Company. The Company owns all shares of
the Company's Subsidiaries as indicated on Schedule 4.4, in each case free
------------
and clear of all Liens, and the Company has good and marketable title to
such shares of the Company Subsidiaries. All of such issued and
outstanding shares are validly issued and are fully paid, nonassessable and
free of preemptive rights.
9
<PAGE>
4.4.2 Except as set forth on Schedule 4.4 or in connection with the
------------
Conversion, there are no outstanding subscriptions, options, calls,
contracts, commitments, undertakings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of the Seller, the Company or any Company Subsidiary or
obligating the Seller, the Company or any Company Subsidiary to grant,
extend or enter into any such agreement or commitment or obligating the
Seller, the Company or any Company Subsidiary to convey or transfer any
Company Stock or Company Subsidiary stock, as the case may be. As of the
Closing Date, there will be no voting trusts, proxies or other agreements
or understandings to which the Seller, the Company or any Company
Subsidiary is a party or is bound with respect to the voting of any shares
of capital stock or other equity interests of the Company or any Company
Subsidiary.
4.5 Year 2000. Except as set forth in Schedule 4.5, to the Knowledge of
---------
the Seller or the Company, all of the computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by the Company or any Company Subsidiary in the conduct of the
Business will not malfunction, will not cease to function, will not generate
incorrect data, and will not produce incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
(20/th/) and twenty-first (21/st/) centuries and (ii) date-related data in
connection with any valid date in the twentieth (20/th/) and twenty-first
(21/st/) centuries, except for any malfunctions or generations of incorrect data
or results that would not individually or in the aggregate have a 1 Company
Material Adverse Effect. Nothing in this Section 4.5 is intended or shall be
-----------
construed as a representation or warranty with respect to embedded systems.
4.6 Financial Statements. The Seller and the Company have previously
--------------------
furnished to CenterPoint copies of the audited consolidated balance sheets of
the Company as of May 31 in each of the years 1997 and 1998 and unaudited
consolidated balance sheet of the Company for the six month period ending
November 30, 1998 (the "LATEST BALANCE SHEET"), and the related audited
consolidated statements of income, stockholders' equity and cash flow for each
of the years in the three (3) year period ended May 31, 1998, including all
notes thereto, and related unaudited consolidated statements of income,
stockholders' equity and cash flow for the six month period ending November 30,
1998, including all notes thereto (collectively, the "FINANCIAL STATEMENTS").
Each of the Financial Statements is accurate and complete in all material
respects, is consistent with the books and records of the Company and the
Company Subsidiaries (which, in turn, are accurate and complete in all material
respects), and fairly presents in all material respects the financial condition,
assets and liabilities of the Company and the Company Subsidiaries as of its
date and the results of operations and cash flows for the periods related
thereto, in each case in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
- ---
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or
10
<PAGE>
unknown, absolute, contingent, accrued, direct, indirect, perfected, inchoate,
unliquidated or otherwise), except (i) to the extent clearly and accurately
reflected or accrued or fully reserved against in the Financial Statements or
(ii) liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business and consistent with past custom
and practices (none of which is a liability resulting from a breach of contract,
breach of warranty, tort, infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Company's and the Company
Subsidiary's past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably
11
<PAGE>
advanced for the benefit of, customers in the ordinary course of business
consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
-------
15.4) of the Company or any Company Subsidiary, except bonuses and
----
distributions to employees and stockholders of the Company disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company
12
<PAGE>
Subsidiary of any material obligation or liability, other than current
liabilities paid in the ordinary course of its business consistent with
past custom and practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Seller or the
Company has Knowledge, is reasonably expected to result in a Company
Material Adverse Effect.
4.1 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of the Seller or the Company, threatened
against the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any such
plan (or pending or, to the Knowledge of the Company, threatened against
any of the officers, directors, Stockholders, partners or employees of the
Company or any Company Subsidiary with respect to its business or proposed
business activities), or to which the Company or any Company Subsidiary is
otherwise a party, or that is reasonably expected to have a Company
Material Adverse Effect, before any court, or before any Governmental
Authority (each an "ACTION" and collectively, the "ACTIONS"); nor, to the
Knowledge of the Seller or the Company, is there any basis for any such
Action.
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental
13
<PAGE>
Authority. Neither the Company nor any Company Subsidiary, to the Knowledge
of the Company, is otherwise exposed, from a legal standpoint, to any
liability or disadvantage that is reasonably expected to result in a
Company Material Adverse Effect, and neither the Company nor any Company
Subsidiary is a party to any legal action to recover monies due it or for
damages sustained by it, other than collection of past due charges for
services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation matters
-------------
to which the Company or any Company Subsidiary was a party during the five
(5) year period preceding the Closing Date, the date such litigation was
commenced and concluded, and the nature of the resolution thereof
(including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, "LAWS") applicable to it or to the operation
of the Business, and neither the Seller, the Company nor any Company Subsidiary
has received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of the Seller or the Company, no event has occurred or circumstances
exist that (with or without notice or lapse of time) is reasonably expected to
constitute or result in a violation by the Company or any Company Subsidiary of
any Law that gives rise to any liability on the part of the Company or any
Company Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all licenses used by the Company and
-------- -------------
the Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accounting. Section B of Schedule 4.12 lists
all licenses, certificates, approvals, registrations and other similar documents
and authorizations, and applications therefor relating to the practice of public
accountancy (the "ACCOUNTING LICENSES") held by the Company or a Company
Subsidiary and issued by, or submitted by the Company or any Company Subsidiary
to any Governmental Authority or other Person. All such Licenses and Accounting
Licenses are valid, binding and in full force and effect. Except as described
on Schedule 4.12, the execution, delivery and performance of this Agreement and
-------------
the consummation of the transactions contemplated hereby will not adversely
affect any such Licenses. To the Knowledge of the Seller or the Company, the
Company and the Company Subsidiaries have taken all necessary action to maintain
such Licenses. No loss or expiration of any such License is pending or, to the
Seller's or the Company's Knowledge, threatened or reasonably foreseeable.
14
<PAGE>
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements that may be terminated by the Company or a Company Subsidiary on
not more than 30 days notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
15
<PAGE>
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in either case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
The Seller and the Company have provided CenterPoint with a true and
complete copy of each written Material Contract and a true and complete summary
of each oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on
16
<PAGE>
Schedule 4.13, each Material Contract is a valid and binding obligation of, and
- -------------
enforceable in accordance with its terms against, the Company or a Company
Subsidiary, as applicable, and, to the Knowledge of the Seller or the Company,
the other parties thereto, and is in full force and effect, subject only to
bankruptcy, reorganization, receivership and other laws affecting creditors'
rights generally and equitable principles. Except as set forth on Schedule 4.13,
-------------
the Company or one of the Company Subsidiaries, as applicable, has performed in
all material respects all obligations required to be performed by it as of the
date hereof and will have performed in all material respects all obligations
required to be performed by it as of the Closing Date under each Material
Contract and neither the Company or Company Subsidiary, as applicable, nor, to
the Knowledge of the Seller or the Company, any other party to any Material
Contract is in breach or default thereunder, and, to the Knowledge of the Seller
or the Company, there exists no condition which would, with or without the lapse
of time or the giving of notice, or both, constitute a breach or default
thereunder. Neither the Seller nor the Company has been notified that any party
to any Material Contract intends to cancel, terminate, not renew, or exercise an
option under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
4.14 Properties.
----------
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "REAL PROPERTY"), in each case free and clear of all Liens,
assessments or restrictions (including, without limitation, inchoate liens
arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) Liens for current taxes not yet due, (c)
(i) minor imperfections of title, including utility and access easements
depicted on subdivision plats for platted lots that do not impair the
intended use of the property, if any, none of which materially impairs the
current operations of the Company, any Company Subsidiary or the Business,
and (ii) zoning laws and other land use restrictions or restrictive
covenants that do not materially impair the present use of the property
subject thereto and (d) Liens, assessments and restrictions pursuant to and
by virtue of the terms of the lease of the Leased Property. The Real
Property constitutes all real properties reflected on the Financial
Statements or used or occupied by the Company or any Company Subsidiary in
connection with the Business or otherwise.
17
<PAGE>
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Seller or the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
-----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of the Seller or the Company, no easements, licenses or rights
are necessary to conduct the Business thereon in addition to those which
exist as of the date hereof; and
(ii) to the Knowledge of the Seller or the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the Leased
Property and there is no threatened condemnation or proceeding with respect
thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
---------------
Company or one of the Company Subsidiaries has good and marketable title
to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any 1 Liens (other than Liens
that are part of such leasehold or license), and each such asset is in
working order and has been maintained in a commercially reasonable manner
and does not contain, to the Knowledge of the Company, any material defect.
Except as set forth in Schedule 4.14.2, no personal property (including,
---------------
without limitation, software and databases maintained on off-premises
computers) used by the Company or any Company Subsidiary in connection with
the
18
<PAGE>
Business is held under any lease, security agreement, conditional sales
contract or other title retention or security arrangement or is located
other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "TRADE SECRETS") owned, used or licensed by the
Company or any Company Subsidiary (collectively, the "INTELLECTUAL PROPERTY")
are all those necessary to enable the Company and the Company Subsidiaries to
conduct and to continue to conduct the Business substantially as it is currently
conducted. Schedule 4.15 contains a complete and accurate list of all material
-------------
Patents, Marks and Copyrights and a brief description of all material Trade
Secrets owned, used by or directly licensed to the Company or any Company
Subsidiary, and a list of all material license agreements and arrangements with
respect to any of the Intellectual Property to which the Company or any Company
Subsidiary is a party, whether as licensee, licensor or otherwise (collectively,
the "INTELLECTUAL PROPERTY LICENSES"). Except as set forth on Schedule 4.15, (i)
-------------
all of the Intellectual Property is owned, or to the Knowledge of the Seller or
the Company used under a valid Intellectual Property License, by the Company or
one of the Company Subsidiaries, and is free and clear of all Liens and other
adverse claims; (ii) none of the Seller, the Company nor any Company Subsidiary
has received any written notice that it is or has infringed on, misappropriated
or otherwise conflicted with, or otherwise has Knowledge that it is infringing
on, misappropriating, or otherwise conflicting with the intellectual property
rights of any third parties; (iii) there is no claim pending or, to the
Knowledge of the Seller or the Company, threatened against the Company or any
Company Subsidiary with respect to the alleged infringement or misappropriation
by the Company or Company Subsidiary, or a conflict with, any intellectual
property rights of others; (iv) the operation of any aspect of the Business in
the manner in which it has heretofore been operated or is presently operated
does not give rise to any such infringement or misappropriation; and (v) there
is no infringement or misappropriation of the Intellectual Property by a third
party or claim, pending or, to the Knowledge of the Seller or the Company,
threatened, against any third party with respect to the alleged infringement or
misappropriation of the Intellectual Property.
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
-----------------
and the Company Subsidiaries has timely and accurately prepared and filed
or been included in or will timely and accurately prepare and file or be
included in all federal, state, local and foreign returns, declarations and
reports, information returns and statements (collectively, the "RETURNS")
for Taxes (as defined in Section 4.16.2) required to be filed by or with
--------------
respect to the Company or the Company Subsidiaries before the Closing Date,
and has paid or caused to be paid, or has made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which Returns are due on or prior to the
Closing Date, and will establish an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period, including portions
thereof, subsequent to the last of said periods required to be so accrued
or
19
<PAGE>
reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. The Seller and the Company have delivered to
CenterPoint true and complete copies of all Returns referred to in the
first sentence of this Section 4.16.1 (including any amendments thereof)
--------------
for the five (5) most recent taxable years. Neither the Company nor any
Company Subsidiary is delinquent in the payment of any Tax, and no material
deficiencies for any Tax, assessment or governmental charge have been
threatened, claimed, proposed or assessed. No waiver or extension of time
to assess any Taxes has been given or requested. No written claim, or any
other claim, by any taxing authority in any jurisdiction where the Company
or any Company Subsidiary does not file Tax returns is pending pursuant to
which the Company or Company Subsidiary, as applicable, is or may be
subject to taxation by that jurisdiction. The Company's and the Company
Subsidiaries' Returns were last audited by the Internal Revenue Service or
comparable state, local or foreign agencies on the dates set forth on
Schedule 4.16.1-2.
-----------------
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither the Company
---------------
nor any Company Subsidiary has or is reasonably expected to have any
liability (including contingent liability) whether direct or indirect (and
regardless of whether it would be derived from a current or former Plan
Affiliate, as defined in Section 4.17.5(c)) with respect to any of the
-----------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of "ERISA," including, but
not limited to, any medical plan, life insurance plan, short-term or long-
term disability plan or dental plan; (ii) any "employee pension benefit
plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat
----------
plan or deferred compensation plan or arrangement, nonqualified retirement
plan or arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program, arrangement
or agreement, including, but not limited to, any material fringe benefit
plan or program, personnel policy, bonus or incentive plan, stock option,
restricted stock, stock bonus, holiday pay, vacation pay, sick pay, bonus
program, service award, moving expense, reimbursement program, tool
allowance, safety equipment allowance, deferred bonus plan, salary
reduction agreement, change-of-control agreement, employment agreement or
consulting agreement.
20
<PAGE>
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "prohibited transaction," as such
terms are defined in ERISA or the Code; (ii) breached a fiduciary
obligation or (iii) any liability for any failure to act or comply in
connection with the administration or investment of the assets of such
plan; and no Employee Plan has any liability and there is no liability in
connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by the Company or one of the Company
Subsidiaries without incurring any such liability, or (iii) which is
adequately funded under a funding arrangement separate from the assets of
the Company, any Company Subsidiary or a Plan Affiliate (and only to the
extent of such funding). Any contribution made or accrued with respect to
any Employee Plan is fully deductible by the Company, a Company Subsidiary
or a Plan Affiliate.
4.17.4 Neither the Company nor any Company Subsidiary nor any Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multi employer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple employer
welfare
21
<PAGE>
arrangement" within the meaning of Section 3(40) of ERISA, (v) subject to
the funding requirements of Section 412 of the Code or to Title IV of
ERISA, or (vi) provides for post-retirement medical, life insurance or
other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
--------------
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term
"PLAN AFFILIATE" shall mean any other Person with whom the First
Person constitutes or has constituted all or part of a controlled
group, or which would be treated or have been treated with the First
Person as under common control or whose employees would be or have
been treated as employed by the First Person, under Section 414 of the
Code or Section 4001(b) of ERISA and any regulations, administrative
rulings and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of the
Seller or the Company, threatened against the Company or any Company Subsidiary,
or that is reasonably expected to affect the Company or any Company Subsidiary;
nor, to the Knowledge of the Seller or the Company, is there any basis for any
such allegation, charge, or complaint. There is no request for representation
pending and, to the Knowledge of the Seller or the Company, no question
concerning representation has been raised. There is no grievance pending that
is reasonably expected to result in a Company Material Adverse Effect nor any
arbitration proceeding arising out of a union agreement. To the Knowledge of
the Seller or the Company, no employee who is key to the Business and no group
of employees has announced or otherwise indicated any plans to terminate
employment with the Company or any Company Subsidiary. Each of the Company and
any Company Subsidiary has complied with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes. Neither the Company nor any Company Subsidiary is liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Operating Committee of the Seller and the Officers of the Company, without
any duty to inquire (notwithstanding the definition of "Knowledge" in Section
-------
22
<PAGE>
15.4), there are no Hazardous Materials (as defined later in this Section)
- ----
present at, on or under any real property currently or formerly owned, leased or
used by the Company or Company Subsidiary (other than those present in office
supplies and cleaning/maintenance materials) for which the Company or a Company
Subsidiary or is or is reasonably expected to be responsible, or otherwise have
any liability, for response costs under any Environmental and Safety
Requirements; (iii) each of the Company and the Company Subsidiaries has
disposed of all waste materials generated by the Company or such Company
Subsidiary at any real property currently or formerly owned, leased or used by
the Company or Company Subsidiary in compliance with applicable Environmental
and Safety Requirements; and (iv) there are and have been no facts, events,
occurrences or conditions at or related to any real property currently or
formerly owned, leased or used by the Company or Company Subsidiary that is
reasonably expected to cause or give rise to liabilities or response obligations
of the Company or any Company Subsidiary under any Environmental and Safety
Requirements. The term "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any
federal, state and local laws, statutes, regulations or other requirements
relating to the protection, preservation or conservation of the environment or
worker health and safety, all as amended or reauthorized. The term "HAZARDOUS
MATERIALS" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery
Act, 42 U.S.C. (S) 6901 et seq., asbestos in any form or condition,
polychlorinated biphenyls and any other material, substance or waste to which
liability or standards of conduct may be imposed under any Environmental and
Safety Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To the
Seller's and the Company's Knowledge, each of the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
-------------
correct list of all such insurance policies. Neither the Company nor any
Company Subsidiary has received any notice of cancellation or intent to cancel
or increase premiums with respect to such insurance policies. Schedule 4.20
-------------
also contains a list of all claims or asserted claims reported to insurers under
such policies relating to the ownership or interest in the Company's and the
Company Subsidiaries' assets, or operation of the Business, including all
professional malpractice claims and similar types of claims, actions or
proceedings asserted against the Company or any Company Subsidiary arising out
of the Business at any time within the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of the Seller, the Company, any Member, any Affiliate of a Member
nor Affiliate of the Seller, the Company or any Company Subsidiary (i)
possesses, directly or indirectly, any financial interest in, or is a director,
officer, employee or affiliate of, any Person that is a client, supplier,
customer, lessor, lessee or competitor of the Company or any Company Subsidiary,
(ii) owns, directly or indirectly, in whole or in part, or has any interest in
any tangible or intangible property used in the conduct of the
23
<PAGE>
Business, or (iii) is a party to an agreement or relationship, that involves the
receipt by such Person of compensation or property from the Company or any
Company Subsidiary other than through a customary employment relationship or
through distributions made with respect to the Company Stock or equity interests
in any Company Subsidiary (provided such distributions have been made consistent
with the Company's or any Company Subsidiary's, as the case may be, past custom
and practices). Schedule 4.21 sets forth the parties to and the date, nature and
-------------
amount of each transaction during the last five years involving the transfer of
any cash, property or rights to or from the Company or any Company Subsidiary
from, to or for the benefit of any Affiliates (other than customary employment
relationships, or distributions made with respect to the Company Stock)
("AFFILIATE TRANSACTIONS"), and any existing commitments of the Company or any
Company Subsidiary to engage in the future in any Affiliate Transactions. Except
as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenues for the twelve (12) months ended December
31, 1998. Except as set forth on Schedule 4.22, since December 31, 1998, none
-------------
of such clients has canceled or substantially reduced its business with the
Company or Company Subsidiary, as applicable, nor are any of such clients
threatening to do so. To the Knowledge of the Seller or the Company, no client
that accounts for one percent (1%) or more of the Company's consolidated net
revenue, or supplier of the Company or any Company Subsidiary, will cease to do
business with, or substantially reduce its business with, the Company or any
Company Subsidiary, as applicable, after the consummation of the transactions
contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiary's ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company or any Company Subsidiary. Schedule
--------
4.23 includes the date and amount of the last bonus or similar distribution or
- ----
increase in compensation for each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each
24
<PAGE>
such account or box, and the names of all Persons authorized to draw thereon or
to have access thereto.
4.25 Professional Credentials. Each Member is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Members by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Seller, the Company contained in this Agreement or in any of the
certification, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to CenterPoint as contemplated by any provision
hereof contains any untrue statement regarding a material fact or omits to state
a material fact necessary in order to make the statements made herein or therein
not misleading. To the Knowledge of the Seller or the Company, there is no fact
or circumstance that has not been disclosed to CenterPoint herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
5.1 Several Representations and Warranties. Each Member, severally and
--------------------------------------
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO,
and as of the Closing Date, as follows:
5.1.1 Capitalization. Except as set forth on Schedule 4.4,
-------------- ------------
immediately prior to the contribution thereof by such Member to the capital
of the Seller, such Member shall own beneficially and of record, and has
good and marketable title to, all of the issued and outstanding shares of
the Company Stock as set forth opposite the name of such Member in
Schedule 4.4, free and clear of all Liens. At the Closing as provided in
------------
this Agreement, CenterPoint will acquire good and valid title to such
Company Stock, free and clear of any Lien other than any Lien created by
CenterPoint.
5.1.2 Authority. Such Member has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by such Member, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Member, enforceable against such Member in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
25
<PAGE>
5.1.3 Non-Contravention. The execution and delivery of this
-----------------
Agreement by such Member does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Seller,
the Company or any Company Subsidiary under, any of the terms, conditions
or provisions of (i) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to such Member, except for those items
relating to regulating, licensing or permitting the practice of public
accountancy, or (ii) other than those licenses, franchises, permits,
concessions or instruments of any Governmental Authority, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which such Member is a party or by which such Member may be bound or
affected. The consummation by such Member of the transactions contemplated
hereby will not result in a violation, conflict, breach, right of
termination, creation or acceleration of Liens under the of the terms,
conditions or provisions of the items described in clauses (i) and (ii) of
the immediately preceding sentence subject to obtaining (prior to the
Closing Date) the consents set forth on Schedule 4.3.2, except for those
--------------
items described above relating to regulating, licensing or permitting the
practice of public accountancy.
5.1.4 Approvals. To the Knowledge of such Member, and except with
---------
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Member or the consummation by such
Member of the transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Member, threatened against such Member relating to
(i) the transactions contemplated by this Agreement, (ii) any action taken
by such Member or contemplated by such Member in connection with the
consummation by such Member of the transactions contemplated hereby, or
(iii) the practice of public accountancy by such Member.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Member or obligating such Member to grant, extend or enter into any
such agreement or commitment or obligating such Member to convey or
transfer any Company Stock. As of the Closing Date, there will be no
voting trusts,
26
<PAGE>
proxies or other agreements or understandings to which such Member is a
party or is bound with respect to the voting of any shares of capital stock
or other equity interests of the Company other than the Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Stockholder contained in this Agreement or any of the written
statements or certificates furnished at or prior to the Closing by or on
behalf of such Member to CenterPoint or its representatives in connection
herewith or pursuant hereto, contains any untrue statement of a material
fact, or omits or will omit to state any material fact required to make the
statements contained herein or therein not misleading.
5.1.8 Representations and Warranties of the Seller and the Company.
------------------------------------------------------------
To such Member's actual knowledge, the representations and warranties of
the Seller and the Company set forth in Article IV of this Agreement are
----------
true and correct.
5.2 Joint and Several Representations and Warranties. The Members jointly
------------------------------------------------
and severally represent and warrant to CenterPoint that the authorized capital
stock of the Company consists of 50,000 shares of Class A Company Stock, of
which 10,150 shares are issued and outstanding, and 50,000 shares of Class B
Company Stock, of which zero (0) shares are issued and outstanding, all of which
are validly issued and are fully paid, nonassessable and free of preemptive
rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to the Company and the Stockholders as
of the date hereof and, subject to Section 7.3, as of the date on which
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO, and as of the Closing Date, as follows:
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
27
<PAGE>
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in the Form S-1 will be issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be issued and outstanding. Other than (i) shares of CenterPoint
Common Stock issued pursuant to a split of the shares outstanding as of the
date of this Agreement, (ii) shares of CenterPoint Common Stock issued in
accordance with the Merger and the Other Mergers, and (iii) shares of
CenterPoint Common Stock that may be issued to new members of management in
lieu of shares previously issued to current members of management, but
which will not increase the number of shares of outstanding CenterPoint
Common Stock, no shares of CenterPoint Common Stock will be issued prior to
the consummation of the IPO. Mergersub's authorized capital stock consists
solely of 1,000 shares of common stock, par value $.01 per share (the
"MERGERSUB STOCK"), all of which are issued and outstanding, are owned free
and clear of any Liens by CenterPoint, and are fully paid, nonassessable
and free and clear of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Stockholders in the Merger will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation and
Mergersub (and similar entities created for similar purposes with respect to the
Other Agreements), CenterPoint has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by the
Seller, the Company
28
<PAGE>
and the Members, constitutes a valid and legally binding agreement of
CenterPoint and Mergersub, enforceable against each of them in accordance
with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and
(ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to CenterPoint or Mergersub or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CenterPoint or
Mergersub is now a party or by which CenterPoint, Mergersub or any of their
respective properties or assets, may be bound or affected, except those
items described in clause (ii) relating to regulating, licensing or
permitting the practice of public accountancy. The consummation by
CenterPoint and Mergersub of the transactions contemplated hereby will not
result in any violation, conflict, breach, right of termination or
acceleration or creation of Liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory
Approvals and except for those items described in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing which
may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy (the filings and approvals referred to in clauses (i) through
(iii) are collectively referred to as the "CENTERPOINT REQUIRED STATUTORY
APPROVALS") no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by CenterPoint or Mergersub or the consummation by CenterPoint or Mergersub
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be, are not reasonably
expected to, in the aggregate, have a material adverse effect on the
business operations, properties, assets, condition (financial or other),
results of
29
<PAGE>
operations or prospects of CenterPoint and its subsidiaries, taken as a
whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has not engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
the IPO or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to have a CenterPoint Material
Adverse Effect. CenterPoint is not subject to any unsatisfied or continuing
judgment, order or decree of any court or Governmental Authority. CenterPoint
is not a party to any legal action to recover monies due it or for damages
sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to the Seller, the Company or the Members as
contemplated by any provision hereof contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. To the Knowledge of CenterPoint,
there is no fact or circumstance that has not been disclosed to the Company
herein that has or is reasonably expected to have a Company Material Adverse
Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Prior to the Effective Time.
--------------------------------------------------------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint
30
<PAGE>
shall otherwise agree in writing, the Company shall, and shall cause each
Company Subsidiary to:
(a) in all material respects conduct the Business in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or
reclassify its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property
or otherwise except dividends or distributions which (A) are
consistent with past customs and practices, (B) do not result in a
Company Material Adverse Effect, and (C) as set forth on Schedule
7.1.4(ii);
---------
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated on Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive
31
<PAGE>
agreement or arrangement with, any of its employees, partners, members
or owners, except in the ordinary course of business in a manner
consistent with past customs and practices of the Company or any
Company Subsidiary, as applicable, (ii) pay or agree to pay any
additional pension, retirement allowance or other employee benefit
under any Employee Plan to any such Person, whether past or present,
(iii) enter into any new employment, severance, consulting, or other
compensation agreement with any of its existing employees, partners,
members or owners, (iv) amend or enter into a new Employee Plan
(except as required by Law) or amend or enter into a new collective
bargaining agreement, or (v) engage in any new Affiliate Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any businesses or any Person or
division thereof or otherwise acquire or agree to acquire any assets
in each case which are material to it other than in the ordinary
course of business in a manner consistent with past customs and
practices; and
(j) other than as set forth on Schedule 7.1.4 (ii), not sell,
------------------
lease, license, encumber or otherwise dispose of, or agree to sell,
lease, license, encumber or otherwise dispose of, any of its assets
other than in the ordinary course of business, consistent with past
customs and practices in all material respects;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual course
and consistent with past custom and practices.
7.1 Prior to the Closing, the Members shall have (a) formed a
separate Person ("ATTEST ENTITY") pursuant to Organizational Documents
reasonably acceptable in form and substance to CenterPoint and (b) used its
diligent efforts to have secured, or have caused the Attest Entity to have
secured, all licenses, permits, approvals and authorizations necessary to
conduct the Attestation Practice in accordance with applicable laws and
regulations.
7.1 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Members, the Seller or the
Company shall take, or permit any Company Subsidiary to take, any action
that would or is reasonably likely to result in any of the representations
or warranties of the Members, the Seller or the Company set forth in this
Agreement being untrue or in any of the conditions to the
32
<PAGE>
consummation of the transactions contemplated hereunder set forth in
Article X (other than Section 10.1(i)) not being satisfied.
7.1.4 Prior to the Closing, (i) the Company and/or the Members, as
applicable, shall terminate, without any liability to the Company or the
Company Subsidiaries, all agreements relating to the voting of the
Company's capital stock, and all agreements and obligations of the Company
and the Company Subsidiaries relating to borrowed money and/or involving
payments to or for the benefit of a current or former stockholder of the
Company, or an Affiliate or family member of a current or former
stockholder of the Company, including without limitation those set forth on
Schedule 7.1.4(i), but excluding (A) debt reflected on Schedule 2.1 as Debt
-----------------
Assumed By CenterPoint, (B) items reflected on Schedule 2.5, (C) to the
extent such agreements and obligations result in Indirect Costs under the
Incentive Compensation Agreement (D) the Supplemental Executive Retirement
Plan, and (E) items approved by CenterPoint in writing, and (ii)
notwithstanding anything contained in this Section 7.1 to the contrary, the
-----------
Company will transfer and distribute the assets listed on Schedule
--------
7.1.4(ii), including, without limitation, any fees and expenses receivable
---------
not necessary to meet the Target or otherwise satisfy the obligations of
the Company or the Members hereunder (the "EXCLUDED ASSETS") to the Persons
listed on Schedule 7.1.4(ii), subject to all liabilities and obligations of
------------------
any nature (whether known or unknown, accrued, absolute, contingent,
direct, indirect, perfected, unchoate, unliquidated or otherwise) relating
to the Excluded Assets (collectively, the "EXCLUDED LIABILITIES");
provided, however, that prior to the Closing, the Company and the Members
-------- -------
shall obtain novations or other releases or agreements discharging the
Company from all Excluded Liabilities (so that the respective Excluded
Liabilities will become direct liabilities and obligations of the
assignee), and provide copies thereof to CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, the Seller, the Company and the Members
shall (i) not, and each of the Seller and the Company shall use its
diligent efforts to cause the Company Subsidiaries and any officer,
director or employee of, or any attorney, accountant, investment banker,
financial advisor or other agent retained by the Seller, the Company or any
Company Subsidiary not to, initiate, solicit, negotiate, encourage, or
provide non-public or confidential information to facilitate, any proposal
or offer to acquire all or any substantial part of the business and
properties of the Company or any Company Subsidiary, or any capital stock
or other equity interest of the Seller, the Company or any Company
Subsidiary, whether by merger, purchase of assets or otherwise, whether for
cash, securities or any other consideration or combination thereof, or
enter into any joint venture or partnership or similar arrangement, and
(ii) promptly advise CenterPoint of the terms of any communications the
Seller, the Company or the Members may receive or become aware of relating
to any bid for part or all of the Company or any Company Subsidiary.
(b) The Seller, the Company and the Members (i) acknowledge that a
breach of any of their covenants contained in this Section 7.2 will result
-----------
in irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant
33
<PAGE>
shall be specifically enforceable and that specific performance and
injunctive relief shall be a remedy properly available to the other party
for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the " SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but the Seller, the Company and the Members do not, the
Company and a majority of the Members may terminate this Agreement at any time
prior to the Closing Date. In the event that (i) the Seller, the Company or the
Members seek to amend or supplement a Schedule pursuant to this Section 7.3,
-----------
(ii) such amendment or supplement constitutes or reflects a Company Material
Adverse Effect or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii)
------------ ------------ ------------
CenterPoint and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to the Seller's, the Company's or any Member's
breach of a representation or warranty as of the date of this Agreement in which
case the Company shall pay to CenterPoint, as CenterPoint's exclusive remedy
(notwithstanding anything to the contrary) and as liquidated damages, and not
as a penalty, an amount equal to $2,000,000 (the "LIQUIDATED DAMAGES AMOUNT").
The Company agrees that in the case of such termination CenterPoint and the
Founding Companies (excluding the Company) will sustain immediate and
irreparable economic harm and loss of goodwill and that actual losses suffered
by such parties will be difficult, if not impossible, to ascertain, but the
Liquidated Damages Amount set forth herein is reasonable and has been arrived at
after a good faith effort to estimate such losses. Payment of the Liquidated
Damages Amount shall be made in cash to CenterPoint within thirty (30) days of a
termination pursuant to this Section 7.3 in connection with an amendment of or
-----------
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement.
7.4 Company Stockholder Meeting. The Company shall take all action in
---------------------------
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of,
34
<PAGE>
convene and hold a meeting of the Stockholders to be held on the earliest
practicable date determined in consultation with CenterPoint to consider and
vote upon approval of the Merger, this Agreement and the transactions
contemplated hereby. The Company shall solicit the approval of the Merger, this
Agreement and the transactions contemplated hereby by the Members, the operating
committee of the Seller and the Company's Board of Directors shall recommend
approval of the Conversion, the Merger, this Agreement and the transactions
contemplated hereby by the Members.
7.5 Conversion. Prior to the Closing, but effective only if as and when
----------
the Closing occurs, the Seller and the Members shall cause the Company to
complete, and the Company shall complete, the Conversion, pursuant to applicable
law and present such evidence of the Conversion at the Closing, as CenterPoint
or its counsel may require.
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an "UNDERWRITER" and collectively,
the "UNDERWRITERS") and their counsel (collectively, the "CENTERPOINT
REPRESENTATIVES"), and to the other Founding Companies and their
accountants, counsel, financial advisors and other representatives, and
CenterPoint shall afford to the Members and the Company and their
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Members, the Seller, and the Company shall hold and shall use their
best efforts to cause the Company Representatives to hold, in strict
confidence all non-public information furnished to it in connection with
the transactions contemplated by this Agreement, except that each of
CenterPoint, the Members and the Company may disclose any information that
it is required by law or judicial or administrative order to disclose. In
addition, CenterPoint will cause each of the other Founding Companies and
their members and stockholders to enter into a provision similar to this
Section 8.1 requiring each such Founding Company to keep confidential any
-----------
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not
35
<PAGE>
retain any copies, extracts or other reproductions of such written
material. In the event of such termination, all documents, memoranda, notes
and other writings prepared by CenterPoint or the Company based on the
information in such material shall be destroyed (and CenterPoint and the
Company shall use their respective reasonable best efforts to cause their
advisors and representatives to similarly destroy such documents, memoranda
and notes), and such destruction (and reasonable best efforts) shall be
certified in writing by an authorized officer supervising such destruction.
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, the Seller, the Company and the Members shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with making such filings. All
information provided and to be provided by CenterPoint, the Seller, the
Members and the Company, respectively, for use in the Registration
Statements shall be true and correct in all material respects without
omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the
circumstances under which given or made. The Seller, the Company and the
Members agree promptly to advise CenterPoint if at any time during the
period in which a prospectus relating to the offering or the Merger is
required to be delivered under the Securities Act, any information
contained in the prospectus concerning the Company, the Company
Subsidiaries, the Seller or the Members becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
8.2.2 CenterPoint agrees that it will provide to the Seller and its
counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto) unless the
Seller and its counsel (x) have had at least two days to review the revised
information contained therein (which changes shall be highlighted by
computer generated marks indicating the additions and deletions made from
the prior draft reviewed by the Seller's counsel) and (y) have not objected
to the substance of the information contained therein. Any objections posed
by the Seller and the Company or their counsel shall be in writing and
state with specificity the material in question, the reason for the
objection, and the Seller's proposed alternative. If the objection is
founded upon a rule promulgated under the Securities Act, the objection
shall cite the rule. Notwithstanding the foregoing, during the five (5)
business days immediately preceding the date scheduled for the filing of
the Registration Statements and any amendment thereto, the Seller and its
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time
36
<PAGE>
the proposed changes (in the case of the initial filing of the Registration
Statements, from the last circulated draft of the Registration Statements;
and, in the case of any subsequent filing of the Registration Statements or
any amendment thereof, from the most recently filed Registration Statements
or amendment thereof) are transmitted to the Seller's counsel; provided,
--------
that, CenterPoint has provided to the Seller or its counsel reasonable
----
advance notice of such proposed changes; provided, further, that such
-------- -------
changes are highlighted by computer generated marks indicating the
additions and deletions made from the prior draft reviewed by the Seller's
counsel.
8.2.3 CenterPoint will advise such Member Representative of the
effectiveness of the Registration Statements, advise the Member
Representative of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written
request of any Member, CenterPoint will furnish to such Member a reasonable
number of copies of the final prospectus associated with the IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither the Seller, the Company nor the Members will be
liable for any portion of the above expenses in the event the IPO is not
completed. CenterPoint shall also pay the underwriting discounts and
commissions payable in connection with the sale of CenterPoint Common Stock in
the IPO. All other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint, the Seller and the Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the fourth
anniversary of the Closing Date, whenever CenterPoint proposes to register
any CenterPoint Common Stock for its own account or the account of others
under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give the Member Representative prompt written notice of
its intent to do so. Promptly after receipt of such notice, the Member
Representative shall provide written notice to CenterPoint of all Members
(and their respective current mailing address) that beneficially own shares
of CenterPoint Common Stock. Thereafter, upon the
37
<PAGE>
written request of any of the Members given within thirty (30) days after
receipt of such notice, CenterPoint will use its best efforts to cause to
be included in such registration all of the CenterPoint Common Stock which
any such Member requests, provided that CenterPoint shall have the right to
reduce the number of shares included in such registration, if CenterPoint
is advised in writing in good faith by any managing underwriter of the
securities being offered pursuant to any registration statement under this
Section 8.6 that the number of shares to be sold by Persons other than
-----------
CenterPoint is greater than the number of such shares which can be offered
without adversely affecting the offering; in such case, CenterPoint may
reduce the number of shares offered for the accounts of such Persons to a
number deemed satisfactory by such managing underwriter. Any such reduction
shall occur first by eliminating from such registration any shares held by
Persons other than Persons holding CenterPoint Common Stock directly or
indirectly immediately following the Closing and then reducing pro rata
(based upon the number of shares requested to be registered) the number of
shares offered for the account of such Person. CenterPoint shall not be
obligated to register any shares of CenterPoint Common Stock held by any
Member at any time when such shares are not then transferable in accordance
with Section 12.2 hereof. Registration Rights under this Section 8.6 may
------------ -----------
transferred in whole or in part in connection with the transfer of
CenterPoint Common Stock received pursuant to this Agreement other than to
a transferee of the kind described in clause (x) of Section 12.2 hereof.
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as soon
as reasonably practicable, a registration statement with respect to the
CenterPoint Common Stock (and such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Member whose CenterPoint Common
Stock is to be covered by any such registrations, furnish to such Member a
reasonable number of copies of the prospectus covering the offering and
sale by the Member of the shares to be covered thereby;
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
38
<PAGE>
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Member whose CenterPoint Common Stock is to be
covered by such registration of the effectiveness of such registration
statement, advise each such Member of the entry of any stop order
suspending the effectiveness of such registration statement or of the
initiation of any proceeding for that purpose, and, if such stop order
shall be entered, use its best efforts promptly to obtain the lifting or
removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Member whose CenterPoint Common Stock is to be covered by such
registration, of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated therein
by reference includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading and, at the request of such
Member, prepare and furnish to such Member a post-effective amendment or
supplement to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading.
8.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and
---
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
8.6.4 In consideration of the granting to the Members of the
registration rights under this Section 8.6, the Members agree, and agree to
-----------
enter into an agreement with the underwriters in connection with an
underwritten registration to the effect, that it/they will not sell,
transfer or otherwise dispose of, including, without limitation, through
put or short sale arrangements, shares of CenterPoint Common Stock in the
ten (10) days prior to the effectiveness of any registration of CenterPoint
Common Stock for sale to the public and for up to ninety (90) days
following the effectiveness of such registration, provided that all
directors, executive officers and holders of more than five percent (5%) of
the outstanding CenterPoint Common Stock agree to the same restrictions;
and further provided that, with respect to the first public offering of
shares of the CenterPoint Common Stock within three (3) years following the
IPO, the Stockholders shall have been afforded a meaningful opportunity to
include shares in such registration after any reduction by reason of
underwriters' written advice.
39
<PAGE>
8.7 CenterPoint Covenants. After the date hereof and prior to the
---------------------
Closing Date or earlier termination of this Agreement, in accordance with its
terms, CenterPoint shall comply in all material respects with all applicable
Laws. CenterPoint shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of CenterPoint set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Members released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Members' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
8.9 Lock-Up Agreement. Each Member agrees, and agrees to enter into an
-----------------
agreement with the Underwriter on or prior to the date on which preliminary
Prospectuses are delivered to the effect that, the Members will not offer, sell,
contract to sell or otherwise dispose of any shares of CenterPoint Common Stock,
or any securities convertible into or exercisable or exchangeable for
CenterPoint Common Stock, for a period of 180 days after the date of the final
Prospectus of the IPO without the prior written consent of the Underwriter
except for shares of CenterPoint Common Stock disposed of as bona fide gifts,
subject to any remaining portion of the 180-day period applying to any shares so
disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely filing
of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
-------- -------
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
8.10.2 Each of the Company, CenterPoint and the Stockholders shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that all
------------------------
insurance policies listed, or required to be listed, on Schedule 4.20 will be
-------------
maintained in full force and effect through the Closing Date.
40
<PAGE>
8.12 Administration. After the Closing, at the request of the Members,
--------------
CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule
--------
7.1.4(ii) using reasonable care and in accordance with the Company's policies in
- ---------
effect at Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Members. Subject to Sections 9.7 and 9.8, the
------------------------------ ------------ ---
Members jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Member or any action, demand
or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the
Stockholders to indemnify, defend and save harmless for any
misrepresentation or breach of representation or warranty made in Section
-------
5.1 hereof or in any certificate, schedule, document, exhibit or other
---
instrument delivered in respect thereof shall not be joint and several, but
such obligation shall be several only limited to the several Member(s)
making such misrepresentation or breach;
(b) any failure by the Seller, the Company or any Member to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing except that the obligation of the Members
to indemnify, defend and save harmless for any failure to observe or
perform any covenant or agreement shall not be joint and several, but such
obligation shall be several only and limited to the several Member(s)
failing to observe or perform such covenant or agreement, except that the
obligations of the Member(s) to indemnify, defend and save harmless for any
breach of a covenant or agreement by a Member shall not be joint and
several, but such obligation shall be several only and limited to the
several Members committing such breach;
(c) any liability under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 ACT") or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
the Seller or the Company contained in any preliminary prospectus relating
to the IPO, the Registration Statements or any proxy statement or
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission to state therein a
material fact relating to the Seller or the Company required to be stated
therein or necessary to make the statements
41
<PAGE>
therein not misleading, and not provided to CenterPoint or its counsel by
the Seller or the Company; provided, however, that such indemnity shall not
-------- -------
inure to the benefit of any CenterPoint Indemnified Party to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and
(i) the Seller or the Company provided, in writing, corrected information
to CenterPoint or its counsel for inclusion in the final prospectus prior
to distributing such prospectus, and such information was not so included,
or (ii) CenterPoint did not provide the Seller, the Company and their
counsel with the information required to be provided pursuant to Section
-------
8.2.2, and such information is the basis for the untrue statement or
-----
omission (or alleged untrue statement or omission) giving rise to the
liability under this Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Members, the
Seller or the Company in connection with the Merger or the transactions
contemplated by this Agreement with respect to brokerage, finders and other
fees or commissions (ii) disallowance of any tax deduction to CenterPoint
or the Company with respect to any item listed on Schedule 2.5 and
------------
considered in determining Net Working Capital, (iii) any Loss relating to,
resulting from, arising out of or otherwise by virtue of any matter which
is or should be listed on Schedule 4.10 or 7.1.4 hereto, (iv) the Excluded
------------- -----
Assets, the Excluded Liabilities and the transactions contemplated under
Section 7.1.4, and (v) any payment with respect to Dissenting Shares.
-------------
As used in this Agreement, the "CENTERPOINT INDEMNIFIED PARTIES" shall
mean CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other
than the Company (the "OTHER FOUNDING COMPANIES"), and their respective
officers, directors, employees, agents, employee plans and plan fiduciaries,
plan administrators or other Person dealing with any such plans; provided,
--------
however, that the Other Founding Companies, and each of their respective
- -------
officers, directors, employees, agents, employee plans and plan fiduciaries,
plan administrators or other Persons dealing with any such plans, shall cease to
be a "CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the
Closing, and thereafter such Persons shall have no further rights and remedies
under this Article IX (except to the extent a Person is an officer, director,
----------
employee or agent of CenterPoint as a result of the consummation of the
transactions contemplated under the Other Agreements); provided, further that
-------- -------
the Subsidiaries of CenterPoint shall include the Company, the Company
Subsidiaries and the other Founding Companies from and after the Closing.
Accordingly, for purposes of this Article IX and subject to the limitations set
----------
forth in this Article IX, the Other Founding Companies, and each of their
----------
respective officers, directors, employees, agents, employee plans and plan
fiduciaries, plan administrators or other Persons dealing with any such plans,
shall be deemed to be third party beneficiaries of this Agreement.
As used in this Agreement, " LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands,
42
<PAGE>
claims, suits, actions, or causes of action, assessments, losses, costs,
expenses, interests, fines, penalties, actual or punitive damages or costs or
expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Members and their respective Affiliates, and their
Affiliates' respective officers, directors, employees and agents (each, a "
MEMBER INDEMNIFIED PARTY") forever harmless from and against, and to promptly
pay to a Member Indemnified Party or reimburse a Member Indemnified Party for,
any and all Losses sustained or incurred by any Member Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Member Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to the Seller, the Company or the Members, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to the Seller, the Company or
the Members required to be stated therein or necessary to make the
statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and (i) the Seller, the Company or
the Members provided, in writing, corrected information to CenterPoint or
its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included, or (ii)
CenterPoint did not provide the Seller and its counsel with the information
required to be provided pursuant to Section
-------
43
<PAGE>
8.2.2, and such information is the basis for the untrue statement or
-----
omission (or alleged untrue statement or omission) giving rise to the
liability under this Section 9.2(d).
-------------
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "INDEMNIFIED PARTY") receives
notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a
"THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Members, may be granted by the Member
Representative (as defined in Section 9.13)), which consent shall not be
------------
unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be
44
<PAGE>
unreasonably withheld or delayed. Without the prior written consent of the
Indemnified Party, the Indemnifying Party will not enter into any
settlement of any Third Party Claim or cease to defend against such claim,
if pursuant to or as a result of such settlement or cessation, (i)
injunctive or other equitable relief would be imposed against the
Indemnified Party, or (ii) such settlement or cessation would lead to
liability or create any financial or other obligation on the part of the
Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder, or (iii) such settlement includes a written
admission of guilt. The Indemnifying Party shall not be entitled to
control, and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any claim (A) to the extent that claim
seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party or (B) in a proceeding to which the
Indemnifying Party is also a party and the Indemnified Party determines in
good faith that joint representation would be inappropriate (and in each
case the cost of such defense shall constitute an amount for which the
Indemnified Party is entitled to indemnification hereunder). If an offer is
made to settle a Third Party Claim which all parties to such Third Party
Claim (including the Indemnifying Party) are prepared to settle and which
offer the Indemnifying Party is permitted to settle under this Section
-------
9.3.3 only upon the prior written consent of the Indemnified Party, the
-----
Indemnifying Party will give prompt written notice to the Indemnified Party
to that effect. If the Indemnified Party fails to consent to such firm
offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
9.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "1 DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights
45
<PAGE>
obligations of any party hereunder except and only to the extent that, as a
result of such failure, any party entitled to receive such notice was deprived
of its right to recover any payment under any applicable insurance coverage, or
deprived of its right to assert any claim because of expiration of the
applicable statute of limitations, or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Stockholders. With respect to
------------------------------
representations and warranties, the Members shall not have any liability
pursuant to Section 9.1(a) hereof unless and until and only to the extent
--------------
that the aggregate amount of Losses accrued pursuant to Section 9.1(a)
--------------
exceeds 1% of aggregate Basic Purchase Consideration; provided, however,
-------- -------
that this threshold shall not apply to Losses arising out of breaches of
representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2 and
-------------- ----- ---
5.1.8 as it relates to the representations and warranties of the Seller and
-----
the Company set forth in Section 4.16, and the Members shall indemnify the
------------
CenterPoint Indemnified Parties for any Losses accruing thereunder in
accordance with this Article IX without regard to such threshold.
----------
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Member Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
----------
threshold.
46
<PAGE>
9.7.3 Limitations on Claims Against the Stockholders. The liability
----------------------------------------------
of all Members for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate
-------------
Basic Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Member shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Member;
provided further, however, that such limitations shall not apply to Losses
-------- ------- -------
arising out of breaches of representations or warranties contained in
Sections 5.1.1, 5.1.2, 5.2, and 5.1.8 as it relates to the representation
-------------- ----- --- -----
and warranty of the Company set forth in Section 4.16, and any Losses
------------
accruing thereunder shall not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the
------------------------------------------------------------
Stockholders and the Company; Time Limits on Indemnification Obligations.
- ------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of the
Seller, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Members, the Seller and the Company contained in this
Agreement or in any certificate delivered pursuant to any of the foregoing. All
such representations, warranties, covenants and agreements of the Members, the
Seller and the Company shall survive the execution and delivery of this
Agreement and the Closing hereunder; provided, however, (i) that the Members'
-------- -------
obligations pursuant to Section 9.1, other than those relating to covenants and
-----------
agreements to be performed by the Members after the Closing, shall expire one
(1) year after the Closing, except with respect to obligations arising under or
relating to Section 4.16 hereof as it relates to federal, state, local and
------------
foreign income taxation, which shall survive until the earlier of (A) the
expiration of the applicable periods (including any extensions) of the
respective statutes of limitation applicable to the payment of the Taxes or (B)
the completion of the final audit and determinations by the applicable taxing
authority and final disposition of any deficiency resulting therefrom; and (ii)
solely to the extent that CenterPoint actually incurs liability under the 1933
Act or the 1934 Act, the obligations under Sections 9.1(c) or (d) above shall
-------------- ---
survive until the expiration of any applicable statute of limitations with
respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
-------- -------
CenterPoint's obligations under Section 9.2, other than those relating to
-----------
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one year after Closing, except that, solely to the extent that the
Members actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.2(c) or (d) above shall survive until the
---------------------
expiration of any applicable statute of limitations with respect to such claims.
47
<PAGE>
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article
----------------------- -------
IX shall not apply to fraud by any party. In the absence of fraud and
- --
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Members and of the Member Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Stockholders may satisfy their respective obligations, if any,
under this Article IX by tendering to the CenterPoint Indemnified Parties cash
-----------
or shares of CenterPoint Common Stock that are then transferable in accordance
with Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE"
------------
shall mean the average closing (last) price for a share of CenterPoint Common
Stock (as reported on the exchange or market on which such shares are then
listed or traded) for the most recent twenty (20) days that such shares have
traded ending on the date two (2) days prior to the date tendered pursuant to
clause (i) of the preceding sentence, or, if such shares are not then listed or
traded on an exchange or other market, the fair market value of such shares as
determined by an appraiser reasonably agreed to by the parties.
9.13 Member Representative. The Seller and each Member appoints Anthony
---------------------
P. Frabotta (the "MEMBER REPRESENTATIVE") as its agent and representative with
full power and authority to agree, contest or settle any claim or dispute
affecting any Member made under Articles II or IX and to otherwise act on behalf
of the Members in accordance with the terms of this Agreement including, without
limitation, to direct the amount and manner of the payment of aggregate Basic
Purchase Consideration; provided, that the Member Representative may be removed
-------- ----
and a successor to the Person originally serving as the Member Representative
may be designated in a writing signed by a majority in interest of the Members
and delivered to CenterPoint in accordance with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
48
<PAGE>
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Merger or any of
the Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has
been filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Members in the manner
required by any applicable Law and the Company's Organizational Documents;
and
(j) CenterPoint shall have entered into one or more credit
facilities providing for aggregate commitments of not less than $75
million.
10.2 Conditions to Obligation of the Stockholders, the Company to Effect
-------------------------------------------------------------------
the Merger. Unless waived by the Company, the obligation of the Members, the
- ----------
Seller and the Company to
49
<PAGE>
effect the Merger shall be subject to the fulfillment at or prior to the Closing
of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Seller and the Company shall have received a certificate of the Chief
Executive Officer or President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to the Seller of the Merger;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Seller, the Company and the
Members;
(d) each of the Members shall have been afforded the opportunity to
enter into a incentive compensation agreement (the "INCENTIVE COMPENSATION
AGREEMENT") with CenterPoint substantially in the form attached hereto as
Exhibit 10.2(d);
--------------
(e) CenterPoint shall have delivered to the Company and the Members
a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State, showing that
CenterPoint is in good standing;
(f) each of the Members, the partners, members and stockholders of
the other Founding Companies who are to receive shares of CenterPoint
Common Stock pursuant to the Other Agreements, and the other stockholders
of CenterPoint other than those acquiring stock in the IPO shall have
entered into an agreement (the "STOCKHOLDERS AGREEMENT") substantially in
the form attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Other Mergers, on substantially the same
terms as provided herein, shall have been satisfied or waived by the
applicable party and the Company;
(h) each of the Seller and the Members shall have been afforded the
opportunity to review the executed employment agreement by and between
CenterPoint and Robert C. Basten; and
(i) the Company shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and
50
<PAGE>
assumptions that for federal income tax purposes there will be no gain or
loss recognized with respect to the CenterPoint Common Stock received for
their Company Stock in the Merger pursuant to Section 351 of the Code, the
final form of such opinion to be in form and substance reasonably
acceptable to the Company and the Stockholders.
10.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) the Seller and the Company shall have performed in all material
respects their respective agreements contained in this Agreement required
to be performed on or prior to the Closing Date and the representations and
warranties of the Seller and the Company contained in this Agreement shall
be true and correct in all material respects on and as of the date made and
on and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of the Company to that effect;
(b) the Members shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Members
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of each Member to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Young & Associates, counsel to the Seller, the Company, and the
Members, dated the Closing Date, in the form attached hereto as Exhibit
-------
10.3(c), the final form of such opinion to be in form and substance
-------
reasonably acceptable to the Underwriters and CenterPoint;
(d) the Company shall, and the Members shall have caused Attest
Entity to, execute and deliver the Separate Practice Agreement
substantially in the form attached hereto as Exhibit 10.3(d)(A) and the
------------------
Services Agreement substantially in the form attached hereto as Exhibit
-------
10.3(d)(B);
----------
(e) each Member shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached as Exhibit
-------
10.2(d);
-------
(f) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
51
<PAGE>
(g) Each of the Seller and the Company shall have delivered to
CenterPoint and the Underwriters a certificate, dated as of a date no later
than ten days prior to the Closing Date, duly issued by the appropriate
Governmental Authority in the state of organization of the Seller, the
Company and each Company Subsidiary and, unless waived by CenterPoint, in
each state in which the Company or any Company Subsidiary is authorized to
do business, showing each of the Seller, the Company and Company Subsidiary
(as applicable) is in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Merger;
(i) the Members shall have executed the Stockholders Agreement;
(j) the Seller and the Members shall have delivered to CenterPoint
an instrument in the form attached hereto as Exhibit 10.3(j), dated the
---------------
Closing Date, releasing the Company and the Company Subsidiaries from any
and all claims of the Seller and the Members against the Company and the
Company Subsidiaries and obligations of the Company and the Company
Subsidiaries to the Seller and the Members;
(k) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.4 hereof;
-------------
including, without limitation, that as of the Closing the amount of debt of
the Company and the Company Subsidiaries shall not exceed the amount
reflected on Schedule 2.1 as Debt Assumed by CenterPoint;
(l) the Seller, the Company and the Members, as applicable, shall
have terminated or have caused the termination of any voting trusts,
proxies or other agreements or understandings to which the Seller, the
Company or any Member is a party or is bound with respect to any shares of
capital stock or other equity interests of the Company and shall have
provided CenterPoint evidence of such termination that is acceptable to
CenterPoint's counsel;
(m) the Seller, the Company and the Stockholders shall have
completed the Conversion of the Company and have presented evidence of such
conversion in accordance with Section 7.5;
-----------
(n) a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all institutional
lenders or creditors regarding the payment in full of indebtedness at
Closing, in each case in form and substance satisfactory to CenterPoint
(including, without limitation, applicable UCC-3 termination statements);
(o) the Company shall have paid in full any indebtedness owed by the
Company to any current or former shareholders of the Company, and shall
have provided evidence of same reasonably satisfactory to CenterPoint;
52
<PAGE>
(p) the Company shall have caused all automobile leases to which the
Company is a party (together with all vehicle insurance policies and
maintenance agreements, if any) to be assigned in full to the individual
beneficiary of such lease or terminated, and shall have provided evidence
of same reasonably satisfactory to CenterPoint;
(q) the real property lease relating to the Southfield property
shall have been amended in form and substance satisfactory to CenterPoint;
(r) Dennis Petri and Gerald Grady shall have paid in full their
indebtedness to the Company and the Members shall have provided evidence
of same reasonably acceptable to CenterPoint; and
(s) the Secretary of each of the Company and the Seller shall have
delivered certified copies of the resolutions of the Board of Directors and
stockholders of the Company and consents of the managers and Members of the
Seller, respectively, approving execution and delivery of this Agreement,
the Conversion, the Merger, and the other actions, agreements and documents
necessary or desirable to complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by the Company,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of the Company or any
Member or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Seller,
the Company or any Member or any of their affiliates or associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint; or
53
<PAGE>
(c) by CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint
or any of its stockholders or any of their affiliates or associates;
(iii) if either the Seller or the Company (A) fails to perform
in any material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material respects
within thirty (30) days after written notice of such default is given
to or the Company by CenterPoint;
(iv) if a Member (A) fails to perform in any material respect
any of such Member's material covenants in this Agreement and (B) do
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to the Member
Representative by CenterPoint; or
(d) by mutual consent of the Operating Committee of the Seller and
the Boards of Directors of CenterPoint and the Company.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint, the Seller or the Company, as provided in Section 11.1,
------------
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Seller, the Company, the Members, CenterPoint,
Mergersub or their respective officers or directors (except the obligations set
forth in this Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of
------------ --- --- --- ----------
which shall survive the termination). Nothing in this Section 11.2 shall
------------
relieve any party from liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Operating Committee of the Seller and Boards of Directors of CenterPoint
and the Company or duly authorized committees thereof and then only by an
instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law. CenterPoint covenants and agrees that it shall
not amend, modify or supplement the material terms of any Other Agreement
following the Closing without the prior written consent of at least two thirds
(2/3rds) of the members of CenterPoint's Board of Directors; provided that no
waiver of any restriction set forth in Article XII shall be of any effect unless
-----------
consented to by a majority of the members of CenterPoint's Board of Directors
who do not at the time of such proposed waiver hold Restricted Shares within the
meaning of this Agreement, any Other Agreement or the Stockholders Agreement.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
54
<PAGE>
delivered pursuant thereto and (c) waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions Generally. Except as provided in Section 12.2,
-------------------------------
for a period of forty-two (42) months from the Closing, neither the Seller nor
any of the Members shall (a) sell, assign, exchange, transfer, distribute or
otherwise dispose of, in whole or in part, (i) any shares of CenterPoint Common
Stock received by the Seller in the Merger and/or subsequently distributed by
the Seller to the Members (the "RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning the Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
12.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing, and every six (6) months thereafter, until all Restricted Shares shall
have been released from such restrictions, twenty percent (20%) of the original
number of Restricted Shares then held by Holding for each Member shall no longer
be subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed "Restricted Shares" for any purposes of this Agreement; provided, that,
-------- ----
if a Member's employment with CenterPoint or its subsidiary is terminated within
thirty (30) months of the Closing other than through death, disability,
retirement or circumstances approved by the Company's management and reasonably
approved by CenterPoint's chief executive officer, the Restricted Shares held
by such Member shall remain subject to the restrictions set forth in Section
-------
12.1 until the fifth anniversary of the Closing Date. Notwithstanding the
- ----
foregoing and Section 12.1, the Seller or a Member may (x) at any time pledge or
------------
encumber all or part of the Seller's or such Member's Restricted Shares, as
applicable, provided that the pledgee or secured party agrees in writing to be
bound by the provisions contained in Article XII, (y) at any time transfer all
-----------
or part of such Member's Restricted Shares to another Member or to an immediate
family member (or trust or other estate planning Person), provided, that any
-------- ----
such Member, family member or other Person agrees in writing to be bound by the
provisions contained in Article XII, and (z) transfer or cause to be transferred
-----------
such Member's Restricted Shares upon such Member's disability or death. As used
in this Section 12.2, the terms "disability" and "retirement" shall have the
------------
meaning ascribed to them in CenterPoint's Employee Incentive Compensation Plan.
No attempted transfer of any nature whatsoever that is in violation of this
Section shall be treated as effective for any purpose.
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Seller pursuant to this Agreement and/or subsequently
distributed by the Seller to the Members shall bear a legend substantially in
the form set forth below and containing such other information as CenterPoint
may deem necessary or appropriate:
55
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATED MARCH __, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from any Member (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer restricted shares and shall direct the transfer agent
that the applicable shares of CenterPoint Common Stock are no longer restricted
shares and shall direct the transfer agent to reissue certificates of
CenterPoint Common Stock which do not contain a restrictive legend in place of
the applicable restricted shares. In the event a Member's request to remove the
restrictive legend coincides with his request to sell the CenterPoint Common
Stock, CenterPoint shall take such actions as are required by its transfer agent
to allow the transfer agent to transfer the unrestricted CenterPoint Common
Stock free of any restrictive legend.
ARTICLE XII
NONCOMPETITION
13.1 Prohibited Activities. Each Member agrees severally, and not
---------------------
jointly, that such Member will not, for a period of three (3) years following
the Closing Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Member commences competition within a fifty (50) mile radius of
any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by the Member to have been actively being solicited by the Company
or any Company Subsidiary to become a customer at any time during such
period;
56
<PAGE>
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Member may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or Person, so long as in connection
therewith the Member does not directly or indirectly provide such services to
another third party for hire.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Member from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Stockholder does not consult with or is not
employed by such competitor and (b) owning equity interests in the Seller or
Attest Entity.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Stockholder, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Members in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Member that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Member who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Stockholder shall enter into a business or pursue other activities not
in competition with CenterPoint and/or any subsidiary thereof, or similar
activities
57
<PAGE>
or business in locations the operations of which, under such circumstances, does
not violate this Article XIII and in any event such new business, activities or
------------
location are not in violation of this Article XIII or of such Member's
------------
obligations under this Article XIII, such Member shall not be chargeable with a
------------
violation of this Article XIII if CenterPoint and/or any subsidiary thereof
------------
shall thereafter enter the same, similar or a competitive (i) business, (ii)
course of activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Member made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Member is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and each of the Members hereby agree that
-----------
this covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of the Seller, the Company and the Members represents
-------
and warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on
58
<PAGE>
behalf of the Company. CenterPoint represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of CenterPoint or
its stockholders (other than underwriting discounts and commission to be paid in
connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
15.2.2 If to the Seller or the Company, to:
Follmer Rudzewicz & Co., P.C.
12900 Hall Road, Suite 500
Sterling Heights, Michigan 48313
Attn: Anthony P. Frabotta
Facsimile No.: (810) 254-1805
with a copy to:
Young & Associates
26200 American Drive, Suite 305
Southfield, Michigan 48034
Attn: Rodger Young
Facsimile No.: (248) 353-6559
59
<PAGE>
15.2.3 If to the Member Representative or the Members, as applicable,
addressed to the addresses set forth on Schedule 15.2.3, with copies to
---------------
such counsel as set forth with respect to each Stockholder on such Schedule
--------
15.2.3, as applicable.
------
15.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and "HEREUNDER" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
-------------------
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any individual who is a
shareholder of such Person or who is otherwise serving, or who has served, as a
director, officer, or trustee (or any capacity) of such Person has, or at any
time had, knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof and
(b) shall not be assigned by operation of law or otherwise, except that
CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
60
<PAGE>
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
[remainder of page intentionally left blank]
61
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
/S/ Robert Basten
------------------------------------------
Name: Robert Basten
-------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
FRC MERGERSUB INC.
/S/ Robert Basten
------------------------------------------
Name: Robert Basten
-------------------------------------
Its: President
--------------------------------------
FRF HOLDING, LLC
/S/ Timothy J. Caughlin
------------------------------------------
Name: Timothy J. Caughlin
-------------------------------------
Its: Member
--------------------------------------
FOLLMER RUDZEWICZ & CO., P.C.
/S/ Anthony P. Frabotta
------------------------------------------
Name: Anthony P. Frabotta
-------------------------------------
Its:______________________________________
62
<PAGE>
MEMBERS:
/S/ Gordon R. Follmer
----------------------------------------------------------
Gordon R. Follmer, Individually and as Trustee UTA 4/10/72
for Gordon R. Follmer
/S/ John J. Rudzewicz
----------------------------------------------------------
John J. Rudzewicz, Individually and as Trustee UTA 1/24/74
for John J. Rudzewicz
/S/ Anthony P. Frabotta
----------------------------------------------------------
Anthony P. Frabotta, Individually and as Trustee UTA
2/16/80 for Anthony P. Frabotta
/S/ Michael Santicchia
----------------------------------------------------------
Michael Santicchia, Individually and as Trustee of the
Michael Santicchia Trust
/S/ Timothy J. Caughlin
----------------------------------------------------------
Timothy J. Caughlin, Individually and as Trustee UTA
1/20/83 for Timothy J. Caughlin
/S/ Peter E. Meagher, III
----------------------------------------------------------
Peter E. Meagher, III, Individually and as Trustee UTA
11/15/80 for Peter E. Meagher, III
63
<PAGE>
/S/ Patrick J. Gregory
----------------------------------------------------------
Patrick J. Gregory, Individually and as Trustee UTA
11/28/85 for Patrick J. Gregory
/S/ Daniel P. Markey
--------------------
Daniel P. Markey, Individually and as Trustee UTA 4/16/86
for Daniel P. Markey
/S/ James J. Bauters
----------------------------------------------------------
James J. Bauters
/S/ Dennis J. LaPorte
----------------------------------------------------------
Dennis J. LaPorte, Individually and as Trustee UTA 7/30/90
for Dennis J. LaPorte
/S/ Gerald Grady, Jr.
----------------------------------------------------------
Gerald Grady, Jr., Individually and as Trustee of the
Gerald Grady, Jr. Amended and Restated Revocable Trust
dated 4/16/97
/S/ Dennis J. Petri
----------------------------------------------------------
Dennis J. Petri, Individually and as Trustee Under a
Certain Trust Agreement of Dennis J. Petri dated 2/5/88
64
<PAGE>
EXHIBIT 2.4
___________________________
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
MANN FRANKFORT STEIN & LIPP, P.C.,
MFSL MERGERSUB INC.
and
STEVE ALBERT, JEFFRI BOTKIN,
MILTON FRANKFORT, JERRY W. GUILLOTT,
BILL HICKL, JOHN LANDERS, BRUCE LAYER,
ARNOLD LIPP, PAUL MUELLER, GLEA RAMEY,
LAURA RICE, MICHAEL RICHTER, CRAIG SHENKMAN,
SAUL SOLOMON, GREGG STEFFEN,
RICHARD STEIN AND SUHRID THAKORE
all of the Stockholders of
MANN FRANKFORT STEIN & LIPP, P.C.
March 31, 1999
___________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER......................................................... 2
1.1 Merger...................................................... 2
------
1.2 Effects of the Merger....................................... 2
---------------------
1.3 Directors and Officers of the Surviving Corporation......... 3
---------------------------------------------------
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT................................ 3
2.1 Merger Consideration........................................ 3
--------------------
2.2 Post-Closing Adjustments to Basic Purchase Consideration.... 4
--------------------------------------------------------
2.3 Post-Closing Management of AR............................... 5
-----------------------------
2.4 Assignment of Uncollected AR................................ 6
----------------------------
2.5 Definitions................................................. 6
-----------
ARTICLE III
THE CLOSING........................................................ 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... 7
4.1 Organization and Qualification.............................. 7
------------------------------
4.2 Company Subsidiaries........................................ 7
--------------------
4.3 Authority; Non-Contravention; Approvals..................... 7
---------------------------------------
4.4 Capitalization.............................................. 9
--------------
4.5 Year 2000................................................... 10
---------
4.6 Financial Statements........................................ 10
--------------------
4.7 Absence of Undisclosed Liabilities.......................... 10
----------------------------------
4.8 Unbilled Fees and Expenses.................................. 10
--------------------------
4.9 Absence of Certain Changes or Events........................ 11
------------------------------------
4.10 Litigation.................................................. 13
----------
4.11 Compliance with Applicable Laws............................. 14
-------------------------------
4.12 Licenses.................................................... 14
--------
4.13 Material Contracts.......................................... 14
------------------
4.14 Properties ................................................. 17
----------
4.15 Intellectual Property....................................... 18
---------------------
4.16 Taxes....................................................... 19
-----
4.17 Employee Benefit Plans; ERISA............................... 20
-----------------------------
4.18 Labor Matters............................................... 22
-------------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.19 Environmental Matters....................................... 22
---------------------
4.20 Insurance................................................... 23
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions. 23
-----------------------------------------------------------
4.22 Business Relationships...................................... 24
----------------------
4.23 Compensation................................................ 24
------------
4.24 Bank Accounts............................................... 24
-------------
4.25 Professional Credentials.................................... 25
------------------------
4.26 Disclosure; No Misrepresentation............................ 25
--------------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS................. 25
5.1 Several Representations and Warranties...................... 25
--------------------------------------
5.1.1 Capitalization.............................................. 25
--------------
5.1.2 Authority................................................... 25
---------
5.1.3 Non-Contravention........................................... 26
-----------------
5.1.4 Approvals................................................... 26
---------
5.1.5 Litigation.................................................. 26
----------
5.1.6 No Transfer................................................. 26
-----------
5.1.7 Disclosure.................................................. 27
----------
5.1.8 Representations and Warranties of the Company.............. 27
----------------------------------------------
5.2 Joint and Several Representations and Warranties............ 27
------------------------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT...................... 27
6.1 Organization And Qualification.............................. 27
------------------------------
6.2 Capitalization.............................................. 27
--------------
6.3 No Subsidiaries............................................. 28
---------------
6.4 Authority; Non-Contravention; Approvals..................... 28
---------------------------------------
6.5 Absence of Undisclosed Liabilities.......................... 30
----------------------------------
6.6 Litigation.................................................. 30
----------
6.7 Compliance with Applicable Laws............................. 30
-------------------------------
6.8 No Misrepresentation........................................ 30
--------------------
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS.................................. 31
7.1 Conduct of Business by the Company Prior to the Effective
---------------------------------------------------------
Time....................................................... 31
----
7.2 No-Shop..................................................... 33
-------
7.3 Schedules................................................... 34
---------
7.4 Stockholders Meeting........................................ 35
--------------------
7.5 Conversion.................................................. 35
----------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
ADDITIONAL AGREEMENTS............................................. 35
8.1 Access to Information...................................... 35
---------------------
8.2 Registration Statements.................................... 36
-----------------------
8.3 Expenses and Fees.......................................... 37
-----------------
8.4 Agreement to Cooperate..................................... 37
----------------------
8.5 Public Statements.......................................... 37
-----------------
8.6 Registration Rights........................................ 38
-------------------
8.7 CenterPoint Covenants...................................... 40
---------------------
8.8 Release of Guarantees...................................... 40
---------------------
8.9 Lock-Up Agreement.......................................... 40
-----------------
8.10 Preparation and Filing of Tax Returns...................... 41
-------------------------------------
8.11 Maintenance of Insurance................................... 41
------------------------
8.12 Administration............................................. 41
--------------
ARTICLE IX
INDEMNIFICATION................................................... 41
9.1 Indemnification by the Stockholders........................ 41
-----------------------------------
9.2 Indemnification by CenterPoint............................. 43
------------------------------
9.3 Indemnification Procedure for Third Party Claims........... 44
------------------------------------------------
9.4 Direct Claims.............................................. 46
-------------
9.5 Failure to Give Timely Notice.............................. 46
-----------------------------
9.6 Reduction of Loss.......................................... 46
-----------------
9.7 Limitation on Indemnities.................................. 47
-------------------------
9.8 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
the Stockholders and the Company; Time Limits on
------------------------------------------------
Indemnification Obligations............................... 47
---------------------------
9.9 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
CenterPoint; Time Limits on Indemnification Obligations... 48
-------------------------------------------------------
9.10 Defense of Claims; Control of Proceedings.................. 48
-----------------------------------------
9.11 Fraud; Exclusive Remedy.................................... 48
-----------------------
9.12 Manner of Satisfying Indemnification Obligations........... 48
------------------------------------------------
9.13 Stockholder Representative................................. 49
--------------------------
ARTICLE X
CLOSING CONDITIONS................................................ 49
10.1 Conditions to Each Party's Obligation to Effect the Merger 49
----------------------------------------------------------
10.2 Conditions to Obligation of the Stockholders and the
----------------------------------------------------
Company to Effect the Merger.............................. 50
----------------------------
10.3 Conditions to Obligation of CenterPoint to Effect
-------------------------------------------------
the Merger................................................ 51
----------
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER................................... 53
11.1 Termination.................................................. 53
-----------
11.2 Effect of Termination........................................ 54
---------------------
11.3 Amendment.................................................... 55
---------
11.4 Waiver....................................................... 55
------
ARTICLE XII
TRANSFER RESTRICTIONS............................................... 55
12.1 Transfer Restrictions Generally.............................. 55
-------------------------------
12.2 Release of Restrictions...................................... 55
-----------------------
12.3 Legend....................................................... 56
------
ARTICLE XIII
NONCOMPETITION ...................................................... 56
13.1 Prohibited Activities......................................... 56
---------------------
13.2 Damages....................................................... 57
-------
13.3 Reasonable Restraint.......................................... 58
--------------------
13.4 Severability; Reformation..................................... 58
-------------------------
13.5 Independent Covenant.......................................... 58
--------------------
13.6 Materiality................................................... 59
-----------
ARTICLE XIV
[RESERVED]........................................................... 59
ARTICLE XV
GENERAL PROVISIONS................................................... 59
15.1 Brokers....................................................... 59
-------
15.2 Notices....................................................... 59
-------
15.3 Interpretation................................................ 60
--------------
15.4 Certain Definitions........................................... 60
-------------------
15.5 Entire Agreement; Assignment.................................. 61
----------------------------
15.6 Applicable Law................................................ 61
--------------
15.7 Counterparts.................................................. 61
------------
15.8 Parties in Interest........................................... 61
-------------------
</TABLE>
(iv)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
(v)
<PAGE>
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Stockholders' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Stockholders and Their Counsel
(vi)
<PAGE>
LIST OF EXHIBITS
Exhibit A Stockholders of the Company
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to the Company and the
Stockholders
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Stockholders' Release
Exhibit 10.3(m) Form of Conversion Merger Agreement
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(vii)
<PAGE>
DEFINED TERMS
-------------
Accounting Licenses................................. Section 4.12
Actions........................................... Section 4.10.1
Acquisition Transaction............................. Section 13.1
Affiliate........................................... Section 15.4
Affiliate Transactions.............................. Section 4.21
Agreement........................................... Introduction
AR................................................ Section 2.5(a)
Arbitrator......................................... Section 2.2.5
Attest Entity...................................... Section 7.1.2
Attestation Practice................................ Introduction
Basic Purchase Consideration....................... Section 2.1.1
Business............................................ Introduction
Cash Consideration................................. Section 2.1.1
CenterPoint......................................... Introduction
CenterPoint Accountants............................ Section 2.2.2
CenterPoint Common Stock........................... Section 2.1.1
CenterPoint Indemnified Party(ies)................... Section 9.1
CenterPoint Material Adverse Effect.................Section 6.4.3
CenterPoint Representatives........................ Section 8.1.1
CenterPoint Required Statutory Approvals........... Section 6.4.3
Closing.............................................. Article III
Closing Balance Sheet.............................. Section 2.2.2
Closing Date......................................... Article III
Code................................................ Introduction
(viii)
<PAGE>
Company............................................. Introduction
Company Material Adverse Effect.................... Section 4.3.3
Company Representatives............................ Section 8.1.1
Company Stock...................................... Section 2.1.1
Company Subsidiaries................................. Section 4.2
Consummation Date.................................... Article III
Contracts........................................... Section 4.13
Conversion.......................................... Introduction
Copyrights.......................................... Section 4.15
Defense Notice..................................... Section 9.3.1
DGCL................................................. Section 1.1
Direct Claim......................................... Section 9.4
Disputed Item...................................... Section 2.2.5
Dissenting Shares.................................. Section 2.1.3
Effective Time....................................... Section 1.1
Employee Plan.................................. Section 4.17.5(a)
Environmental and Safety Requirements............... Section 4.19
ERISA.......................................... Section 4.17.5(b)
Excluded Assets.................................... Section 7.1.4
Excluded Liabilities............................... Section 7.1.4
Final Adjustment................................... Section 2.2.4
Financial Statements................................. Section 4.6
First Person................................... Section 4.17.5(c)
Form S-1........................................... Section 4.3.3
Form S-4........................................... Section 4.3.3
(ix)
<PAGE>
Founding Companies.................................. Introduction
GAAP................................................. Section 4.6
general increase.................................... Section 4.23
Governmental Authority............................. Section 4.3.2
Hazardous Materials................................. Section 4.19
HSR Act............................................ Section 4.3.3
Incentive Compensation Agreement................. Section 10.2(d)
Indemnified Party.................................. Section 9.3.1
Indemnifying Party................................. Section 9.3.1
Intellectual Property............................... Section 4.15
Intellectual Property Licenses...................... Section 4.15
Interim Adjustment................................. Section 2.2.3
IPO................................................. Introduction
Knowledge........................................... Section 15.4
Latest Balance Sheet................................. Section 4.6
Laws................................................ Section 4.11
Leased Property................................... Section 4.14.1
Licenses............................................ Section 4.12
Liens.............................................. Section 4.3.2
Liquidated Damages Amount............................ Section 7.3
Losses............................................... Section 9.1
Market Price........................................ Section 9.12
Marks............................................... Section 4.15
Material Contracts.................................. Section 4.13
Merger.............................................. Introduction
(x)
<PAGE>
Mergersub........................................... Introduction
Mergersub Stock.................................... Section 2.1.4
Merger Documents..................................... Section 1.1
Net Working Capital............................... Section 2.5(b)
1933 Act........................................... Section 4.3.3
1934 Act.......................................... Section 8.7(b)
Organizational Documents............................. Section 4.1
Other Agreements.................................... Introduction
Other Founding Companies............................. Section 9.1
Other Mergers....................................... Introduction
Owned Property.................................... Section 4.14.1
Patents............................................. Section 4.15
Person.............................................. Section 15.4
Plan Affiliate................................. Section 4.17.5(c)
Qui Tam Claims....................................... Section 4.6
Real Property..................................... Section 4.14.1
Registration Statements............................ Section 4.3.3
Resolution Period.................................. Section 2.2.5
Restricted Shares................................... Section 12.1
Returns........................................... Section 4.16.1
Schedules............................................ Section 7.3
SEC................................................ Section 4.3.3
Securities Act..................................... Section 4.3.3
Special Bonus Plan................................ Section 2.5(d)
Stock Consideration................................ Section 2.1.1
(xi)
<PAGE>
Stockholder......................................... Introduction
Stockholder Indemnified Party........................ Section 9.2
Stockholder Representative.......................... Section 9.13
Stockholders Agreement........................... Section 10.2(f)
Surviving Corporation................................ Section 1.2
Target............................................ Section 2.5(d)
Tax Accrual....................................... Section 2.5(e)
Taxes............................................. Section 4.16.2
TBCA................................................. Section 1.1
Territory........................................ Section 13.1(a)
Third Party Claim.................................. Section 9.3.1
Trade Secrets....................................... Section 4.15
Underwriters....................................... Section 8.1.1
Voting Agreement.................................... Introduction
(xii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Mann Frankfort Stein & Lipp, P.C., a Texas professional corporation (together
with its permitted successors and assigns, the "COMPANY"), MFSL Mergersub
Inc., a Delaware corporation and wholly-owned subsidiary of CenterPoint
("MERGERSUB") and the stockholders of the Company identified on Exhibit A to
---------
this Agreement (each a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS").
WITNESSETH:
WHEREAS, the Stockholders are the sole owners and holders of record of all
of the outstanding shares of capital stock of the Company;
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "ATTESTATION
PRACTICE") and (b) the Stockholders will cause the conversion of the Company
from a professional corporation to a business corporation by adopting a plan of
conversion and amending the Company's Organizational Documents (as defined in
Section 4.1) such that it converts to a business corporation (the "CONVERSION");
- -----------
WHEREAS, the Boards of Directors of the Company, CenterPoint and Mergersub
deem it advisable and in the best interests of their respective shareholders to
approve and consummate the business combination transaction provided for herein
in which Mergersub would merge with and into the Company, with the Company being
the surviving corporation in the merger (the "MERGER");
WHEREAS, certain Stockholders have entered into a Voting Agreement dated
the date hereof (the "VOTING AGREEMENT") pursuant to which, among other things,
such Stockholders have agreed to vote the shares of capital stock of the Company
that such Stockholders own or control, directly or indirectly, to approve the
Merger and the transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Berry, Dunn, McNeil & Parker,
Chartered, Urbach, Kahn & Werlin, P.C., Self Funded Benefits, Inc. d/b/a
Insurance Design Administrators, Grace & Company, P.C., Simione, Scillia, Larrow
& Dowling LLC, Follmer Rudzewicz & Co., P.C., Holthouse, Carlin & Van Trigt, The
Reppond Company, Inc., Reppond Administrators, LLC, and Verasource Excess Risk
Ltd. (which companies together with the Company are collectively
<PAGE>
referred to herein as the "FOUNDING COMPANIES"), which agreements provide for
the merger of a wholly-owned subsidiary of CenterPoint with each such Founding
Company (the "OTHER MERGERS") simultaneously with the Merger. CenterPoint has
provided a side letter to each holder of equity interests of the Company to such
effect;
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1.1); and
-------------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock by
the Stockholders pursuant to the terms hereof to be tax-free under the
provisions of Section 351 of the Internal Revenue Code of 1986, as amended (the
"CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, causing the
separate corporate existence of Mergersub to cease and the Company to continue
under the laws of the State of Texas. As promptly as possible on the Closing
Date, the parties shall cause the Merger to be completed by filing articles of
merger and a certificate of merger, as applicable (the "MERGER DOCUMENTS"), with
the Secretary of State of Texas, as provided in the Texas Business Corporation
Act, as amended (the "TBCA"), and with the Secretary of State of the State of
Delaware, as provided in the Delaware General Corporation Law (the "DGCL"). The
Merger shall become effective (the "EFFECTIVE TIME") upon the filing of the
Merger Documents with the Secretary of State of Texas and the Secretary of State
of Delaware or at such later time, contemporaneously with the closing of the
IPO, as agreed by CenterPoint and the Company and specified in the Merger
Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to CenterPoint and as specified in the
Merger Documents, (iii) the Merger shall have all effects provided by applicable
law and (iv) the Surviving Corporation shall be a wholly-owned subsidiary of
CenterPoint.
2
<PAGE>
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of
----------------------------
the Merger and without any action on the part of the holders thereof, the
outstanding shares of capital stock, consisting of 1,574.2869 shares of common
stock, par value $1.00 per share of the Company (the "COMPANY STOCK") shall be
converted into the right to receive: (a) that number of shares of CenterPoint
common stock, par value $.01 per share (the "CENTERPOINT COMMON STOCK")
determined in accordance with the formula in Schedule 2.1 (the "STOCK
------------
CONSIDERATION") and (b) the amount of cash in Schedule 2.1 (the "CASH
------------
CONSIDERATION"). The sum of the Cash Consideration and the Stock Consideration
is herein referred to as "BASIC PURCHASE CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of the Company
--------------
held in treasury of the Company shall be canceled and retired and no payment
shall be made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of the
----------
Company held by a Person that has perfected the right to dissent under
applicable law and has not effectively withdrawn or lost such right as of the
Effective Time (the "DISSENTING SHARES"), shall not be converted into the right
to receive any Basic Purchase Consideration, and the holder thereof shall be
entitled only to such rights as are granted by applicable law. The Company
shall give CenterPoint prompt notice upon receipt by the Company of any such
written demands for payment of fair value of shares of Company Stock and any
other instruments provided pursuant to applicable law. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of the capital stock of Mergersub (the "MERGERSUB STOCK") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of the
Surviving Corporation. Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the Surviving Corporation.
2.1.5 Exchange of Certificates. At the Closing, the Stockholders
------------------------
shall deliver to CenterPoint the original Company Stock certificates, duly
endorsed in blank by the Stockholders or accompanied by blank stock powers, in
exchange for the allocated share of (a) CenterPoint
3
<PAGE>
Common Stock certificates representing the Stock Consideration and (b) payment
of the Cash Consideration by certified check, cashier's check or wire transfer
of immediately available funds to a bank account or bank accounts in the amounts
and manner specified by the Stockholder Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date. The
shares represented by certificates for Company Stock so delivered shall be
canceled. Until surrendered as contemplated by this Section 2.1.5, each
-------------
certificate representing shares of Company Stock represents only the right to
receive Basic Purchase Consideration, as adjusted in accordance with this
Article II.
- ----------
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Basic Purchase Consideration shall be (a) reduced dollar-for-dollar to the
extent Net Working Capital on the Closing Date is less than the Target or
(b) increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Stockholder Representative a written report indicating
the amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "INTERIM ADJUSTMENT").
-------------
2.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days of
receipt of such calculation, CenterPoint will deliver to the Stockholder
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
2.2.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Stockholder Representative does not object (or otherwise respond) in
writing to the Final Adjustment report within 30 days after its delivery,
the Final Adjustment shall automatically become final, binding and
conclusive
4
<PAGE>
on all parties hereto. Any objection to the Final Adjustment report shall
be in writing and shall specify the item or items in dispute (each a
"DISPUTED ITEM").
If the Stockholder Representative and CenterPoint are unable to
resolve any Disputed Item within 30 days after notice from the Stockholder
Representative that a dispute exists (the "RESOLUTION PERIOD"), then a
representative from the office of a nationally recognized accounting firm
chosen by the Stockholder Representative and CenterPoint (the "ARBITRATOR")
will arbitrate the dispute. The Stockholder Representative and CenterPoint
shall, within 20 days after expiration of the Resolution Period, present
their respective positions with respect to any Disputed Item to the
Arbitrator together with such materials as the Arbitrator deems
appropriate. To the extent any Disputed Item is similar to a disputed item
under the Other Agreements, the Arbitrator shall arbitrate the Disputed
Item based on the submitted materials and without regard to the disputed
item under the Other Agreements. The Arbitrator shall, after the
submission of the materials, submit a written decision on each Disputed
Item to the Stockholder Representative and CenterPoint and such
determination shall be final and binding on the parties hereto. The
arbitration shall be conducted in Chicago, Illinois. The parties hereto
agree that the cost of the Arbitrator shall be borne by the non-prevailing
party or as determined by the Arbitrator.
2.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, the Stockholders shall pay the amount of the
shortfall to CenterPoint. In the event Net Working Capital is greater than
the Target, CenterPoint shall pay the amount of the excess to the
Stockholder. Any payment required to be made pursuant to this paragraph
shall be made, within ten days of delivery of the report indicating any
adjustment, by wire transfer of immediately available funds to an account
designated in writing by the party that is to receive payment of such
adjustment. In respect of the Final Adjustment, the party making a payment
required by such adjustment shall make such payment within ten days after
the Final Adjustment becomes final and shall receive credit for or return
of any amount previously paid in connection with the Interim Adjustment.
2.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write-off affecting AR and fees and expenses
receivable and unbilled fees and expenses of the Company incurred after Closing
with respect to the same client engagement shall be allocated ratably to the
pre-Closing and post-Closing periods.
5
<PAGE>
2.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to the Stockholders. Notwithstanding the foregoing, the Company
will retain the sole right to service, administer and collect the uncollected AR
in accordance with Section 2.3.
-----------
2.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the Closing
Date, whenever calculated, equal to the difference between: (i) the sum of
any AR, prepaid expenses and other current assets less (ii) the sum of
----
accounts payable, accrued current liabilities, the items listed on Schedule
--------
2.5, the Tax Accrual and the portion of employer-paid FICA attributable to
---
Medicare, payable in connection with deferred compensation and the Special
Bonus Plan. For purposes of this Section 2.5(b), the Special Bonus Plan
--------------
accrual shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan, dated
March 31, 1999.
(d) "TARGET" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to the Closing.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan and (ii) the sum of 34%
plus the effective state tax rate on the Company (net of any federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i).
-----------------
ARTICLE III
THE CLOSING
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Katten Muchin
& Zavis, Chicago, Illinois, contemporaneously with the closing of the IPO, or at
such other time and date as the parties hereto may mutually agree (the "CLOSING
DATE").
6
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to CenterPoint, as of the date
hereof and, subject to Section 7.3, as of the date on which CenterPoint and the
-----------
lead Underwriter (as defined in Section 8.1.1) execute and deliver the
-------------
Underwriting Agreement related to the IPO and as of the Closing Date, as
follows:
4.1 Organization and Qualification. The Company is a professional
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and, following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the State of Texas. Each Company Subsidiary (as defined in Section
-------
4.2) is duly organized, validly existing and in good standing under the laws of
- ---
the state of its organization set forth on Schedule 4.2. Each of the Company
------------
and the Company Subsidiaries has the requisite power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted, and is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.
True, accurate and complete copies of the Company's and each Company
Subsidiary's Organizational Documents, in each case as in effect on the date
hereof, have heretofore been delivered to CenterPoint. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of any limited
partnership, (d) the operating or limited liability company agreement and
certificate of formation of any limited liability company, (e) any charter or
similar document adopted and filed in connection with the creation, formation,
organization or governance (as applicable) of any Person and (f) any amendment
to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "COMPANY SUBSIDIARY" and collectively, the "COMPANY SUBSIDIARIES").
Except as set forth on Schedule 4.2, the Company does not, directly or
------------
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 The Company has full right, power and authority to enter into
this Agreement and, subject to the approval of the Merger and the
transactions contemplated hereby by the Company's stockholders, to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by the Company has
7
<PAGE>
been duly authorized by all necessary corporate action on the part of the
Company, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's stockholders. This Agreement has been
duly executed and delivered by the Company, and, assuming the due
authorization, execution and delivery hereof by CenterPoint, constitutes a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by the Company
does not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any claim,
lien, privilege, mortgage, charge, hypothecation, assessment, security
interest, pledge or other encumbrance, conditional sales contract, equity
charge, restriction, or adverse claim of interest of any kind or nature
whatsoever (each a "LIEN" and collectively, the "LIENS"), upon any of the
properties or assets of the Company or any Company Subsidiary under, any of
the terms, conditions or provisions of (i) the Organizational Documents of
the Company or any Company Subsidiary, (ii) following completion of the
Conversion, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or federal,
state, provincial, local or foreign government, or any subdivision, agency
or authority of any thereof ("GOVERNMENTAL AUTHORITY") applicable to the
Company, any Company Subsidiary or the Business, properties or assets of
the Company or any Company Subsidiary, except for those items discussed in
(ii) above relating to regulating, licensing or permitting the practice of
public accountancy, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any
Company Subsidiary is a party or by which the Company, any Company
Subsidiary or any of the properties or assets of the Company or any Company
Subsidiary may be bound or affected. The consummation by the Company of the
transactions contemplated hereby will not result in a violation, conflict,
breach, right of termination, creation or acceleration of Liens under the
terms, conditions or provisions of the items described in clauses (i)
through (iii) of the immediately preceding sentence, subject in the case of
the terms, conditions or provisions of the items described in clause (iii)
above, to obtaining (prior to the Closing Date) such consents required from
third parties set forth on Schedule 4.3.2 and except for those items
--------------
described in (ii) above relating to regulating, licensing or permitting the
practice of public accountancy and any filing which may be required under
the HSR Act.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
sometimes collectively, the "REGISTRATION STATEMENTS") with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933,
as amended (the "SECURITIES ACT" or the "1933 ACT"), the
8
<PAGE>
declaration of the effectiveness thereof by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "HSR ACT"), and (iii) any filing
which may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy, no declaration, filing or registration with, notice to, or
authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, individually or in the aggregate, have a
"COMPANY MATERIAL ADVERSE EFFECT," which, for purposes of this Agreement
means a material adverse effect on the operations, assets, condition
(financial or other), operating results, employee or client relations, or
prospects of the Company or any Company Subsidiary.
4.4 Capitalization.
--------------
4.4.1 The authorized capital stock of the Company consists of
10,000,000 shares of Company Stock, of which 1,574.2869 shares are issued
and outstanding. The authorized capital stock of each of the Company
Subsidiaries, if any, and the number of such shares issued and outstanding
is completely and accurately set forth in Schedule 4.4. The Stockholders
------------
are all of the stockholders of the Company and own beneficially and of
record all of the issued and outstanding shares of the Company Stock, which
shares constitute all of the outstanding shares of capital stock of the
Company. The Company owns all shares of the Company's Subsidiaries as
indicated on Schedule 4.4, in each case free and clear of all Liens, and
------------
the Company has good and marketable title to such shares of the Company
Subsidiaries. All of the issued and outstanding shares described in this
Section 4.4.1 are, or will be prior to the Closing, validly issued, fully
-------------
paid, nonassessable and free of preemptive rights.
4.4.2 Except as set forth on Schedule 4.4 or in connection with the
------------
Conversion, there are no outstanding subscriptions, options, calls,
contracts, commitments, undertakings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to grant, extend or enter into any such
agreement or commitment or obligating the Company or any Company Subsidiary
to convey or transfer any Company Stock or Company Subsidiary stock, as the
case may be. As of the Closing Date, there will be no voting trusts,
proxies or other agreements or understandings to which the Company or any
Company Subsidiary is a party or is bound with respect to the voting of any
shares of capital stock or other equity interests of the Company or any
Company Subsidiary.
9
<PAGE>
4.5 Year 2000. To the Knowledge of the Company, all of the computer
---------
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Company or any Company
Subsidiary in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20/th/) and twenty-first (21/st/) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20/th/)
and twenty-first (21/st/) centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a 1 Company Material Adverse Effect. Nothing in this Section 4.5 is
-----------
intended or shall be construed as a representation or warranty with respect to
embedded systems.
4.6 Financial Statements. The Company has previously furnished to
--------------------
CenterPoint copies of the audited consolidated balance sheet of the Company as
of December 31 in each of the years 1997 and 1998 (the "LATEST BALANCE SHEET"),
and the related audited consolidated statements of income, stockholders' equity
and cash flow for each of the years in the three (3) year period ended December
31, 1998, including all notes thereto (collectively, the "FINANCIAL
STATEMENTS"). Each of the Financial Statements is accurate and complete in all
material respects, is consistent with the books and records of the Company and
the Company Subsidiaries (which, in turn, are accurate and complete in all
material respects), and fairly presents in all material respects the financial
condition, assets and liabilities of the Company and the Company Subsidiaries as
of its date and the results of operations and cash flows for the periods related
thereto, in each case in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP"), except that the accounts
receivable of the Company include approximately $486,600.00 owed by the
Partnership for Fraud Analysis in connection with the Marks Federal Cases
matter, which under an agreement between the Company and the Partnership for
Fraud Analysis will be paid only if, as and when and to the extent the
Partnership for Fraud Analysis recovers against defendants in lawsuits regarding
Medicare fraud and related claims (the "QUI TAM CLAIMS").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
- ---
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. Except for unbilled fees and expenses
--------------------------
relating to the Partnership for Fraud Analysis with respect to the Qui Tam
Claims related to the Marks Federal Cases, at the Closing, all unbilled fees and
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business, and will be
billable in the ordinary course of business, using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon
10
<PAGE>
such billing any such amounts will be collectible in the ordinary course of
business using normal collection practices and policies employed by the Company
and each Company Subsidiary (net of any allowance for doubtful accounts
determined in accordance with the Company's and the Company Subsidiaries' past
practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
-------
15.4) of the Company
----
11
<PAGE>
or any Company Subsidiary, except bonuses and distributions to employees
and stockholders of the Company disclosed to CenterPoint in writing that
are consistent with the Company's past custom and practices or as otherwise
contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary of any material obligation or liability, other than
current liabilities paid in the ordinary course of its business consistent
with past custom and practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant
12
<PAGE>
or other representative of the Company that has agreed to maintain the
confidentiality of any such proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material Adverse
Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of the Company, threatened against the
Company or any Company Subsidiary, or with respect to the Merger, or with
respect to any Employee Plan, or any fiduciary of any such plan (or pending
or, to the Knowledge of the Company, threatened against any of the
officers, directors, stockholders, partners, members or employees of the
Company or any Company Subsidiary with respect to its business or proposed
business activities), or to which the Company or any Company Subsidiary is
otherwise a party, or that is reasonably expected to have a Company
Material Adverse Effect, before any court, or before any Governmental
Authority (each an "ACTION" and collectively, the "ACTIONS"); nor, to the
Knowledge of the Company, is there any basis for any such Action.
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither the Company nor any Company Subsidiary, to
the Knowledge of the Company, is otherwise exposed, from a legal
standpoint, to any liability or disadvantage that is reasonably expected to
result in a Company Material Adverse Effect, and neither the Company nor
any Company Subsidiary is a party to any legal action to recover monies due
it or for damages sustained by it, other than collection of past due
charges for services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
13
<PAGE>
4.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company or any Company Subsidiary was a party during
the five (5) year period preceding the Closing Date, the date such
litigation was commenced and concluded, and the nature of the resolution
thereof (including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "LAWS") applicable to it or to the
operation of the Business, and neither the Company nor any Company Subsidiary
has received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of the Company, no event has occurred or circumstances exist that
(with or without notice or lapse of time) is reasonably expected to constitute
or result in a violation by the Company or any Company Subsidiary of any Law
that gives rise to any liability on the part of the Company or any Company
Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and the
-------- -------------
Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12
-------------
lists all licenses, certificates, approvals, registrations and other similar
documents and authorizations, and applications therefor relating to the practice
of public accountancy (the "ACCOUNTING LICENSES") held by the Company or a
Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person. All such Licenses and
Accounting Licenses are valid, binding and in full force and effect. Except as
described on Schedule 4.12, the execution, delivery and performance of this
-------------
Agreement and the consummation of the transactions contemplated hereby will not
adversely affect any such Licenses. To the Knowledge of the Company, the
Company and the Company Subsidiaries have taken all necessary action to maintain
such Licenses. No loss or expiration of any such License is pending or, to the
Company's Knowledge, threatened or reasonably foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
14
<PAGE>
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements that may be terminated by the Company or a Company Subsidiary on
not more than 30 days notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option, first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the
15
<PAGE>
right to receive a royalty, license fee or similar payment, in any case
which provides for payments over the life of such Contract in excess of
$25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
The Company has provided CenterPoint with a true and complete copy of each
written Material Contract and a true and complete summary of each oral Material
Contract, in each case including all amendments or other modifications thereto.
Except as set forth on Schedule 4.13, each Material Contract is a valid and
-------------
binding obligation of, and enforceable in accordance with its terms against, the
Company or a Company Subsidiary, as applicable, and, to the Knowledge of the
Company, the other parties thereto, and is in full force and effect, subject
only to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and equitable principles. Except as set forth on
Schedule 4.13, the Company or one of the Company Subsidiaries, as applicable,
- -------------
has performed in all material respects all obligations required to be performed
by it as of the date hereof and will have performed in all material respects all
16
<PAGE>
obligations required to be performed by it as of the Closing Date under each
Material Contract and neither the Company nor any Company Subsidiary, as
applicable, nor, to the Knowledge of the Company, any other party to any
Material Contract is in breach or default thereunder, and, to the Knowledge of
the Company, there exists no condition which would, with or without the lapse of
time or the giving of notice, or both, constitute a breach or default
thereunder. The Company has not been notified that any party to any Material
Contract intends to cancel, terminate, not renew, or exercise an option under
any Material Contract, whether in connection with the transactions contemplated
hereby or otherwise.
4.14 Properties.
----------
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "REAL PROPERTY"), in each case free and clear of all Liens,
assessments or restrictions (including, without limitation, inchoate liens
arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) Liens for current taxes not yet due, (c)
(i) minor imperfections of title, including utility and access easements
depicted on subdivision plats for platted lots that do not impair the
intended use of the property, if any, none of which materially impairs the
current operations of the Company, any Company Subsidiary or the Business,
and (ii) zoning laws and other land use restrictions or restrictive
covenants that do not materially impair the present use of the property
subject thereto and (d) Liens, assessments and restrictions pursuant to and
by virtue of the terms of the lease of the Leased Property. The Real
Property constitutes all real properties reflected on the Financial
Statements or used or occupied by the Company or any Company Subsidiary in
connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
17
<PAGE>
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Company, there
is no threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
- -----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of the Company, no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof; and
(ii) to the Knowledge of the Company, no portion thereof is
subject to any pending condemnation proceeding or proceeding by any public
or quasi-public authority materially adverse to the Leased Property and
there is no threatened condemnation or proceeding with respect thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
---------------
Company or one of the Company Subsidiaries has good and marketable title
to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any 1 Liens (other than Liens
that are part of such leasehold or license), and each such asset is in
working order and has been maintained in a commercially reasonable manner
and does not contain, to the Knowledge of the Company, any material defect.
Except as set forth in Schedule 4.14.2, no personal property (including,
---------------
without limitation, software and databases maintained on off-premises
computers) used by the Company or any Company Subsidiary in connection with
the Business is held under any lease, security agreement, conditional sales
contract or other title retention or security arrangement or is located
other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered
18
<PAGE>
trademarks, trade names, company names, assumed business names and service marks
(collectively, the "MARKS"), (iii) copyrights (the "COPYRIGHTS"), and (iv) know
how, trade secrets, confidential information, client lists, software, technical
information, data, process technology, plans and drawings (collectively, the
"TRADE SECRETS") owned, used or licensed by the Company or any Company
Subsidiary (collectively, the "INTELLECTUAL PROPERTY") are all those necessary
to enable the Company and the Company Subsidiaries to conduct and to continue to
conduct the Business substantially as it is currently conducted. Schedule 4.15
-------------
contains a complete and accurate list of all material Patents, Marks and
Copyrights and a brief description of all material Trade Secrets owned, used by
or directly licensed to the Company or any Company Subsidiary, and a list of all
material license agreements and arrangements with respect to any of the
Intellectual Property to which the Company or any Company Subsidiary is a party,
whether as licensee, licensor or otherwise (collectively, the "INTELLECTUAL
PROPERTY LICENSES"). Except as set forth on Schedule 4.15, (i) all of the
-------------
Intellectual Property is owned, or, to the Knowledge of the Company, used under
a valid Intellectual Property License, by the Company or one of the Company
Subsidiaries, and is free and clear of all Liens and other adverse claims; (ii)
neither the Company nor any Company Subsidiary has received any written notice
that it is or has infringed on, misappropriated or otherwise conflicted with, or
otherwise has Knowledge that it is infringing on, misappropriating, or otherwise
conflicting with the intellectual property rights of any third parties; (iii)
there is no claim pending or, to the Knowledge of the Company, threatened
against the Company or any Company Subsidiary with respect to the alleged
infringement or misappropriation by the Company or any Company Subsidiary, or a
conflict with, any intellectual property rights of others; (iv) the operation of
any aspect of the Business in the manner in which it has heretofore been
operated or is presently operated does not give rise to any such infringement or
misappropriation; and (v) there is no infringement or misappropriation of the
Intellectual Property by a third party or claim, pending or, to the Knowledge of
the Company, threatened, against any third party with respect to the alleged
infringement or misappropriation of the Intellectual Property.
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
-----------------
and the Company Subsidiaries has timely and accurately prepared and filed
or been included in or will timely and accurately prepare and file or be
included in all federal, state, local and foreign returns, declarations and
reports, information returns and statements (collectively, the "RETURNS")
for Taxes (as defined in Section 4.16.2) required to be filed by or with
--------------
respect to the Company or the Company Subsidiaries before the Closing Date,
and has paid or caused to be paid, or has made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which Returns are due on or prior to the
Closing Date, and will establish an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period, including portions
thereof, subsequent to the last of said periods required to be so accrued
or reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. The Company has delivered to CenterPoint true and
complete copies of all Returns referred to in the first sentence of this
Section 4.16.1 (including any amendments thereof) for the five (5) most
--------------
19
<PAGE>
recent taxable years. Neither the Company nor any Company Subsidiary is
delinquent in the payment of any Tax, and no material deficiencies for any
Tax, assessment or governmental charge have been threatened, claimed,
proposed or assessed, in each case in writing. No waiver or extension of
time to assess any Taxes has been given or requested. No written claim nor
any other claim, by any taxing authority in any jurisdiction where the
Company or any Company Subsidiary does not file Tax returns is pending
pursuant to which the Company or Company Subsidiary, as applicable, is or
may be subject to taxation by that jurisdiction. The Company's and the
Company Subsidiaries' Returns were last audited by the Internal Revenue
Service or comparable state, local or foreign agencies on the dates set
forth on Schedule 4.16.1-2.
-----------------
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither the Company
---------------
nor any Company Subsidiary has or is reasonably expected to have any
liability (including contingent liability) whether direct or indirect (and
regardless of whether it would be derived from a current or former Plan
Affiliate, as defined in Section 4.17.5(c)) with respect to any of the
-----------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of 1 ERISA (as defined in
Section 4.17.5(b)), including, but not limited to, any medical plan, life
-----------------
insurance plan, short-term or long-term disability plan or dental plan;
(ii) any "employee pension benefit plan," as defined in Section 3(2) of
ERISA, including, but not limited to, any excess benefit plan, top hat plan
or deferred compensation plan or arrangement, nonqualified retirement plan
or arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program, arrangement
or agreement, including, but not limited to, any material fringe benefit
plan or program, personnel policy, bonus or incentive plan, stock option,
restricted stock, stock bonus, holiday pay, vacation pay, sick pay, bonus
program, service award, moving expense, reimbursement program, tool
allowance, safety equipment allowance, deferred bonus plan, salary
reduction agreement, change-of-control agreement, employment agreement or
consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings
20
<PAGE>
or notices issued by a Governmental Authority with respect to such plan; a
copy of the Form 5500 Annual Report for the three (3) most recent plan
years; and a copy of each and any general explanation or communication
which was required to be distributed or otherwise provided to participants
in such plan and which describes all or any relevant aspect of each plan,
including summary plan descriptions and/or summary of material
modifications, have been delivered to CenterPoint. A description of each
unwritten Employee Plan, including a description of eligibility,
participation, benefits, funding arrangements and assets or other relevant
aspects of the obligation, is set forth in Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to, the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "prohibited transaction," as such
terms are defined in ERISA or the Code; (ii) breached a fiduciary
obligation or (iii) any liability for any failure to act or comply in
connection with the administration or investment of the assets of such
plan; and no Employee Plan has any liability and there is no liability in
connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by the Company or one of the Company
Subsidiaries without incurring any such liability, or (iii) which is
adequately funded under a funding arrangement separate from the assets of
the Company, any Company Subsidiary or a Plan Affiliate (and only to the
extent of such funding). Any contribution made or accrued with respect to
any Employee Plan is fully deductible by the Company, a Company Subsidiary
or a Plan Affiliate.
4.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multi employer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple employer
welfare arrangement" within the meaning of Section 3(40) of ERISA, (v)
subject to the funding requirements of Section 412 of the Code or to Title
IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits.
21
<PAGE>
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether or
--------------
not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term "PLAN
AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or which
would be treated or have been treated with the First Person as under common
control or whose employees would be or have been treated as employed by the
First Person, under Section 414 of the Code or Section 4001(b) of ERISA and
any regulations, administrative rulings and case law interpreting the
foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of the
Company, threatened against the Company or any Company Subsidiary, or that is
reasonably expected to affect the Company or any Company Subsidiary; nor, to the
Knowledge of the Company, is there any basis for any such allegation, charge, or
complaint. There is no request for representation pending and, to the Knowledge
of the Company, no question concerning representation has been raised. There is
no grievance pending that is reasonably expected to result in a Company Material
Adverse Effect nor any arbitration proceeding arising out of a union agreement.
To the Knowledge of the Company, no employee who is key to the Business and no
group of employees has announced or otherwise indicated any plans to terminate
employment with the Company or any Company Subsidiary. Each of the Company and
any Company Subsidiary has complied with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes. Neither the Company nor any Company Subsidiary is liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Officers of the Company, without any duty to inquire (notwithstanding the
definition of "Knowledge" in Section 15.4), there are no Hazardous Materials (as
------------
defined later in this Section) present at, on or under any real property
currently or formerly owned, leased or used by the Company or Company Subsidiary
(other than those present in office supplies and cleaning/maintenance materials)
for which the Company or a Company
22
<PAGE>
Subsidiary is or is reasonably expected to be responsible, or otherwise have any
liability, for response costs under any Environmental and Safety Requirements;
(iii) each of the Company and the Company Subsidiaries has disposed of all waste
materials generated by the Company or such Company Subsidiary at any real
property currently or formerly owned, leased or used by the Company or Company
Subsidiary in compliance with applicable Environmental and Safety Requirements;
and (iv) there are and have been no facts, events, occurrences or conditions at
or related to any real property currently or formerly owned, leased or used by
the Company or Company Subsidiary that is reasonably expected to cause or give
rise to liabilities or response obligations of the Company or any Company
Subsidiary under any Environmental and Safety Requirements. The term
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any federal, state and local laws,
statutes, regulations or other requirements relating to the protection,
preservation or conservation of the environment or worker health and safety, all
as amended or reauthorized. The term "HAZARDOUS MATERIALS" means "hazardous
substances," as defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., "hazardous wastes,"
as defined by the Resource Conservation Recovery Act, 42 U.S.C. (S) 6901 et
seq., asbestos in any form or condition, polychlorinated biphenyls and any other
material, substance or waste to which liability or standards of conduct may be
imposed under any Environmental and Safety Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and the Company Subsidiaries' ownership or interest in, and
operation of, its assets against the types of liabilities, including
professional malpractice, customarily insured against in connection with
operations similar to the Business, and all premiums due on such policies have
been paid. To the Company's Knowledge, each of the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
-------------
correct list of all such insurance policies. Neither the Company nor any
Company Subsidiary has received any notice of cancellation or intent to cancel
or increase premiums with respect to such insurance policies. Schedule 4.20
-------------
also contains a list of all claims or asserted claims reported to insurers under
such policies relating to the ownership or interest in the Company's and the
Company Subsidiaries' assets, or operation of the Business, including all
professional malpractice claims and similar types of claims, actions or
proceedings asserted against the Company or any Company Subsidiary arising out
of the Business at any time within the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of the Company, any Stockholder, any Affiliate of a Stockholder or
any Affiliate of the Company or any Company Subsidiary (i) possesses, directly
or indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any Person that is a client, supplier, customer, lessor, lessee or
competitor of the Company or any Company Subsidiary, (ii) owns, directly or
indirectly, in whole or in part, or has any interest in any tangible or
intangible property used in the conduct of the Business, or (iii) is a party to
an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Company or any Company Subsidiary other than
23
<PAGE>
through a customary employment relationship or through distributions made with
respect to the Company Stock or equity interests in any Company Subsidiary
(provided such distributions have been made consistent with the Company's or any
Company Subsidiary's, as the case may be, past custom and practices). Schedule
--------
4.21 sets forth the parties to and the date, nature and amount of each
- ----
transaction during the last five years involving the transfer of any cash,
property or rights to or from the Company or any Company Subsidiary from, to or
for the benefit of any Affiliates (other than customary employment relationships
or distributions made with respect to the Company Stock) ("AFFILIATE
TRANSACTIONS"), and any existing commitments of the Company or any Company
Subsidiary to engage in the future in any Affiliate Transactions. Except as
disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenues for the twelve (12) months ended December
31, 1998. Except as set forth on Schedule 4.22, since December 31, 1998, none
-------------
of such clients has canceled or substantially reduced its business with the
Company or Company Subsidiary, as applicable, nor are any of such clients
threatening to do so. To the Knowledge of the Company, no client that accounts
for one percent (1%) or more of the Company's consolidated net revenue, or
supplier of the Company or any Company Subsidiary, will cease to do business
with, or substantially reduce its business with, the Company or any Company
Subsidiary, as applicable, after the consummation of the transactions
contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiaries' ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company or any Company Subsidiary. Schedule
--------
4.23 includes the date and amount of the last bonus or similar distribution or
- ----
increase in compensation for each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each
24
<PAGE>
such account or box, and the names of all Persons authorized to draw thereon or
to have access thereto.
4.25 Professional Credentials. Each Stockholder is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Stockholders by any Governmental Authority or
self-regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to CenterPoint as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to CenterPoint herein that has or is reasonably expected to have
a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
5.1 Several Representations and Warranties. Each Stockholder, severally
--------------------------------------
and not jointly, hereby represents and warrants to CenterPoint as of the date
hereof and, subject to Section 7.3, as of the date on which CenterPoint and the
-----------
lead Underwriter execute and deliver the Underwriting Agreement related to the
IPO and as of the Closing Date as follows:
5.1.1 Capitalization. Such Stockholder owns beneficially and of
--------------
record, and has good and marketable title to, all of the issued and
outstanding shares of the Company Stock as set forth opposite the name of
such Stockholder in Schedule 4.4, free and clear of all Liens. At the
------------
Closing, as provided in this Agreement, CenterPoint will acquire good and
valid title to such stock, free and clear of any Lien other than any Lien
created by CenterPoint.
5.1.2 Authority. Such Stockholder has full right, capacity, power
---------
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder, and, assuming the due authorization,
execution and delivery hereof by CenterPoint, constitutes a valid and
legally binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except that such enforcement may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors'
rights generally and (ii) general equitable principles.
25
<PAGE>
5.1.3 Non-Contravention. The execution and delivery of this
-----------------
Agreement by such Stockholder does not violate, conflict with or result in
a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary under, any of the terms, conditions or provisions
of (i) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to such Stockholder, except for those items relating to
regulating, licensing or permitting the practice of public accountancy or
(ii) other than those licenses, franchises, permits, concessions or
instruments of any Governmental Authority, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
such Stockholder is a party or by which such Stockholder may be bound or
affected. The consummation by such Stockholder of the transactions
contemplated hereby will not result in a violation, conflict, breach, right
of termination, creation or acceleration of Liens under the terms,
conditions or provisions of the items described in clauses (i) and (ii) of
the immediately preceding sentence, subject to obtaining (prior to the
Closing Date) the consents set forth on Schedule 4.3.2, except for those
--------------
items described in (i) above relating to regulating, licensing or
permitting the practice of public accountancy and any filing which may be
required under the HSR Act.
5.1.4 Approvals. To the Knowledge of such Stockholder, and except
---------
with respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Stockholder or the consummation by such
Stockholder of the transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Stockholder, threatened against such Stockholder
relating to (i) the transactions contemplated by this Agreement, (ii) any
action taken by such Stockholder or contemplated by such Stockholder in
connection with the consummation by such Stockholder of the transactions
contemplated hereby, or (iii) the practice of public accountancy by such
Stockholder.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Stockholder or obligating such Stockholder to grant,
26
<PAGE>
extend or enter into any such agreement or commitment or obligating such
Stockholder to convey or transfer any Company Stock. As of the Closing
Date, there will be no voting trusts, proxies or other agreements or
understandings to which such Stockholder is a party or is bound with
respect to the voting of any shares of capital stock or other equity
interests of the Company other than the Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Stockholder contained in this Agreement or any of the written
statements or certificates furnished at or prior to the Closing by or on
behalf of such Stockholder to CenterPoint or its representatives in
connection herewith or pursuant hereto, contains any untrue statement of a
material fact, or omits or will omit to state any material fact required to
make the statements contained herein or therein not misleading.
5.1.8 Representations and Warranties of the Company. To such
----------------------------------------------
Stockholder's actual knowledge, the representations and warranties of the
Company set forth in Article IV of this Agreement are true and correct.
----------
5.2 Joint and Several Representations and Warranties. The Stockholders
------------------------------------------------
jointly and severally represent and warrant to CenterPoint that the authorized
capital stock of the Company consists of 10,000,000 shares of Company Stock, of
which 1,574.2869 shares are issued and outstanding, all of which are, or will be
prior to the Closing, validly issued, fully paid, nonassessable and free of
preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to the Company and the Stockholders as
of the date hereof and, subject to Section 7.3, as of the date on which
-----------
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof.
27
<PAGE>
All of the issued and outstanding shares of CenterPoint Common Stock are
validly issued and are fully paid, nonassessable and free of preemptive
rights. Immediately prior to the Closing Date, the authorized capital stock
of CenterPoint will consist of 50,000,000 shares of CenterPoint Common
Stock, of which the number of shares set forth in the Form S-1 will be
issued and outstanding, and 10,000,000 shares of Preferred Stock, par value
$0.01 per share, none of which will be issued and outstanding. Other than
(i) shares of CenterPoint Common Stock issued pursuant to a split of the
shares outstanding as of the date of this Agreement, (ii) shares of
CenterPoint Common Stock issued in accordance with the Merger and the Other
Mergers, and (iii) shares of CenterPoint Common Stock that may be issued to
new members of management in lieu of shares previously issued to current
members of management, but which will not increase the number of shares of
outstanding CenterPoint Common Stock, no shares of CenterPoint Common Stock
will be issued prior to the consummation of the IPO. Mergersub's authorized
capital stock consists solely of 100 shares of common stock, par value $.01
per share, all of which are issued and outstanding, are owned free and
clear of any Liens by CenterPoint, and are fully paid, nonassessable and
free of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to the Stockholders pursuant to this
Agreement will at the Closing Date be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and issued
pursuant to a registration statement as required by the 1933 Act or an
exemption therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of each of Professional Service Group, Inc., a Delaware
corporation, and Mergersub (and similar entities created for similar purposes
with respect to the Other Agreements), CenterPoint has no subsidiaries and it
does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby.
28
<PAGE>
This Agreement has been duly executed and delivered by CenterPoint and
Mergersub and, assuming the due authorization, execution and delivery
hereof by the Company and the Stockholders, constitutes a valid and legally
binding agreement of CenterPoint and Mergersub, enforceable against each of
them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to CenterPoint, Mergersub or any of their respective properties or assets,
or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which CenterPoint or Mergersub is
now a party or by which CenterPoint, Mergersub or any of their respective
properties or assets, may be bound or affected, except those items
described in clause (ii) relating to regulating, licensing or permitting
the practice of public accountancy. The consummation by CenterPoint and
Mergersub of the transactions contemplated hereby will not result in any
violation, conflict, breach, right of termination or acceleration or
creation of Liens under any of the terms, conditions or provisions of the
items described in clauses (i) through (iii) of the immediately preceding
sentence, subject, in the case of the terms, conditions or provisions of
the items described in clause (ii) above, to obtaining (prior to the
Closing Date) CenterPoint Required Statutory Approvals and except for those
items described in (ii) above relating to regulating, licensing or
permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing which
may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy (the filings and approvals referred to in clauses (i) through
(iii) are collectively referred to as the "CENTERPOINT REQUIRED STATUTORY
APPROVALS") no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by CenterPoint or Mergersub or the consummation by CenterPoint or Mergersub
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be,
29
<PAGE>
are not reasonably expected to, in the aggregate, have a material adverse
effect on the business operations, properties, assets, condition (financial
or other), results of operations or prospects of CenterPoint and its
subsidiaries, taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
the IPO or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to have a CenterPoint Material
Adverse Effect. CenterPoint is not subject to any unsatisfied or continuing
judgment, order or decree of any court or Governmental Authority. CenterPoint
is not a party to any legal action to recover monies due it or for damages
sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to the Company or the Stockholders as contemplated
by any provision hereof contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to the Company herein that has or is
reasonably expected to have a Company Material Adverse Effect.
30
<PAGE>
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Prior to the Effective Time.
--------------------------------------------------------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects conduct the Business in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or
reclassify its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property
or otherwise except dividends or distributions which (A) are
consistent with past customs and practices, (B) do not result in a
Company Material Adverse Effect and (C) as set forth on Schedule
--------
7.1.4(ii);
---------
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any
31
<PAGE>
action, directly or indirectly, with the intent to adversely impact
the transactions contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated on Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of the
Company or any Company Subsidiary, as applicable, (ii) pay or agree to
pay any additional pension, retirement allowance or other employee
benefit under any Employee Plan to any such Person, whether past or
present, (iii) enter into any new employment, severance, consulting,
or other compensation agreement with any of its existing employees,
partners, members or owners, (iv) amend or enter into a new Employee
Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any businesses or any Person or
division thereof or otherwise acquire or agree to acquire any assets
in each case which are material to it other than in the ordinary
course of business in a manner consistent with past customs and
practices;
(j) other than as set forth on Schedule 7.1.4(ii), not sell,
------------------
lease, license, encumber or otherwise dispose of, or agree to sell,
lease, license, encumber or otherwise dispose of, any of its assets
other than in the ordinary course of business, consistent with past
customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual course
and consistent with past custom and practices.
7.1.2 Prior to the Closing, the Stockholders shall have (a) formed a
separate Person ("ATTEST ENTITY") pursuant to Organizational Documents
reasonably acceptable in form and substance to CenterPoint and (b) used its
diligent efforts to have secured, or have caused the Attest
32
<PAGE>
Entity to have secured, all licenses, permits, approvals and authorizations
necessary to conduct the Attestation Practice in accordance with applicable laws
and regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Stockholders or the Company
shall take, or permit any Company Subsidiary to take, any action that would or
is reasonably likely to result in any of the representations or warranties of
the Stockholders and the Company set forth in this Agreement being untrue or in
any of the conditions to the consummation of the transactions contemplated
hereunder set forth in Article X (other than Section 10.1(i)) not being
--------- ---------------
satisfied.
7.1.4 Prior to the Closing, (i) the Company and/or the Stockholders, as
applicable, shall terminate without any liability to the Company or the Company
Subsidiaries, all agreements relating to the voting of the Company's capital
stock, and all agreements and obligations of the Company and the Company
Subsidiaries relating to borrowed money and/or involving payments to or for the
benefit of a Stockholder or former stockholder of the Company, or an Affiliate
or family member of a Stockholder or former stockholder of the Company,
including, without limitation, those set forth on Schedule 7.1.4(i), but
-----------------
excluding (A) debt reflected on Schedule 2.1 as Debt Assumed by CenterPoint, (B)
------------
items reflected on Schedule 2.5, (C) to the extent such agreements and
------------
obligations result in Indirect Costs under the Incentive Compensation Agreement,
and (D) items approved by CenterPoint in writing, and (ii) notwithstanding
anything contained in this Section 7.1 to the contrary, the Company will
-----------
transfer and distribute the assets listed on Schedule 7.1.4(ii) including,
------------------
without limitation, any AR not necessary to meet the Target or otherwise satisfy
the obligations of the Company or the Stockholders hereunder (the "EXCLUDED
ASSETS") to the Persons listed on Schedule 7.1.4(ii), subject to all liabilities
------------------
and obligations of any nature (whether known or unknown, accrued, absolute,
contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise)
relating to the Excluded Assets (collectively, the "EXCLUDED LIABILITIES");
provided, however, that prior to the Closing, the Company and the Stockholders
- -------- -------
shall obtain novations or other releases or agreements discharging the Company
from all Excluded Liabilities (so that the respective Excluded Liabilities will
become direct liabilities and obligations of the assignee), and provide copies
thereof to CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or
earlier termination of this Agreement, the Company and the Stockholders
shall (i) not, and the Company shall use its diligent efforts to cause the
Company Subsidiaries and any officer, director or employee of, or any
attorney, accountant, investment banker, financial advisor or other agent
retained by the Company or any Company Subsidiary not to, initiate,
solicit, negotiate, encourage, or provide non-public or confidential
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business and properties of the Company or any
Company Subsidiary, or any capital stock or other equity interest of the
Company or any Company Subsidiary, whether by merger, purchase of assets or
otherwise, whether for cash, securities or any other consideration or
combination thereof, or enter into any joint venture or partnership or
similar arrangement, and (ii) promptly advise CenterPoint of the terms of
any communications the Company or the Stockholders
33
<PAGE>
may receive or become aware of relating to any bid for part or all of the
Company or any Company Subsidiary.
(b) The Company and the Stockholders (i) acknowledge that a breach of
any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the Other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but the Company and the Stockholders do not, the
Company and a majority of the Stockholders may terminate this Agreement at any
time prior to the Closing Date. In the event that (i) the Company or the
Stockholders seek to amend or supplement a Schedule pursuant to this Section
-------
7.3, (ii) such amendment or supplement constitutes or reflects a Company
- ---
Material Adverse Effect or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies do not consent to
such amendment or supplement, this Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to the Company's or any Stockholder's breach
of a representation or warranty as of the date of this Agreement in which case
the Company shall pay to CenterPoint, as CenterPoint's exclusive remedy
(notwithstanding anything to the contrary) and as liquidated damages, and not as
a penalty, an amount equal to $2,000,000 (the "LIQUIDATED DAMAGES AMOUNT"). The
Company agrees that in the case of such termination CenterPoint and the Founding
Companies (excluding the Company) will sustain immediate and irreparable
economic harm and loss of goodwill and that actual losses suffered by such
parties will be difficult, if not impossible, to ascertain, but the Liquidated
Damages Amount set forth herein is reasonable and has been arrived at after a
good faith effort to estimate such
34
<PAGE>
losses. Payment of the Liquidated Damages Amount shall be made in cash to
CenterPoint within thirty (30) days of a termination pursuant to this Section
-------
7.3 in connection with an amendment of or supplement to a Schedule relating to a
- ---
breach of a representation or warranty as of the date of this Agreement.
7.4 Stockholders Meeting. The Company shall take all action in
--------------------
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Stockholders to be
held on the earliest practicable date, following the date the Form S-4 is deemed
effective by the SEC, determined in consultation with CenterPoint to consider
and vote upon approval of the Conversion, the Merger, this Agreement and the
transactions contemplated hereby or execute a written consent of the
Stockholders in lieu thereof. The Company shall solicit the approval of the
Conversion, the Merger, this Agreement and the transactions contemplated hereby
by the Stockholders, and the Company's Board of Directors shall recommend
approval of the Conversion, the Merger, this Agreement and the transactions
contemplated hereby by the Stockholders.
7.5 Conversion. Prior to the Closing but effective only if, as and when
----------
the Closing occurs, the Stockholders shall cause the Company to complete, and
the Company shall complete, the Conversion, pursuant to applicable law and
present such evidence of the Conversion at the Closing, as CenterPoint or its
counsel may require.
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an "UNDERWRITER" and collectively,
the "UNDERWRITERS") and their counsel (collectively, the "CENTERPOINT
REPRESENTATIVES"), and to the other Founding Companies and their
accountants, counsel, financial advisors and other representatives, and
CenterPoint shall afford to the Stockholders and the Company and their
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Stockholders and the Company shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence
all non-public information furnished to it in connection with the
transactions contemplated by this Agreement, except that each of
CenterPoint, the Stockholders and
35
<PAGE>
the Company may disclose any information that it is required by law or
judicial or administrative order to disclose. In addition, CenterPoint will
cause each of the other Founding Companies and their members and
stockholders to enter into a provision similar to this Section 8.1
-----------
requiring each such Founding Company to keep confidential any information
obtained by such Founding Company in connection with the transactions
contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Company based on the information in such material shall
be destroyed (and CenterPoint and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy such documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by
an authorized officer supervising such destruction.
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, the Company and the Stockholders shall promptly furnish
to each other all information, and take such other actions, as may
reasonably be requested in connection with making such filings. All
information provided and to be provided by CenterPoint, the Stockholders
and the Company, respectively, for use in the Registration Statements shall
be true and correct in all material respects without omission of any
material fact which is required to make such information not false or
misleading as of the date thereof and in light of the circumstances under
which given or made. The Company and the Stockholders agree promptly to
advise CenterPoint if at any time during the period in which a prospectus
relating to the offering or the Merger is required to be delivered under
the Securities Act, any information contained in the prospectus concerning
the Company, the Company Subsidiaries or the Stockholders becomes incorrect
or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy or remedy such incompletion.
8.2.2 CenterPoint agrees that it will provide to the Company and its
counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto)
36
<PAGE>
unless the Company and its counsel (x) have had at least two days to review
the revised information contained therein (which changes shall be
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Company's counsel) and
(y) have not objected to the substance of the information contained
therein. Any objections posed by the Company or its counsel shall be in
writing and state with specificity the material in question, the reason for
the objection, and the Company's proposed alternative. If the objection is
founded upon a rule promulgated under the Securities Act, the objection
shall cite the rule. Notwithstanding the foregoing, during the five (5)
business days immediately preceding the date scheduled for the filing of
the Registration Statements and any amendment thereto, the Company and its
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed changes
(in the case of the initial filing of the Registration Statements, from the
last circulated draft of the Registration Statements; and, in the case of
any subsequent filing of the Registration Statements or any amendment
thereof, from the most recently filed Registration Statements or amendment
thereof) are transmitted to the Company's counsel; provided, that,
-------- ----
CenterPoint has provided to the Company or its counsel reasonable advance
notice of such proposed changes; provided, further, that such changes are
-------- -------
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Company's counsel.
8.2.3 CenterPoint will advise the Stockholder Representative of the
effectiveness of the Registration Statements, advise the Stockholder
Representative of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written
request of the Company, CenterPoint will furnish to the Company a
reasonable number of copies of the final prospectus associated with the
IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither the Company nor the Stockholders will be liable for
any portion of the above expenses in the event the IPO is not completed.
CenterPoint shall also pay the underwriting discounts and commissions payable in
connection with the sale of CenterPoint Common Stock in the IPO. All other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with
37
<PAGE>
respect to this Agreement or the transactions contemplated by this Agreement or
the Other Agreements without the prior written consent of CenterPoint and the
Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give the Stockholder Representative prompt written notice
of its intent to do so. Promptly after receipt of such notice, the
Stockholder Representative shall provide written notice to CenterPoint of
all Stockholders (and their respective current mailing address) that
beneficially own shares of CenterPoint Common Stock. Thereafter, upon the
written request of any of the Stockholders given within thirty (30) days
after receipt of such notice, CenterPoint will use its best efforts to
cause to be included in such registration all of the CenterPoint Common
Stock which any such Stockholder requests, provided that CenterPoint shall
have the right to reduce the number of shares included in such
registration, if CenterPoint is advised in writing in good faith by any
managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
-----------
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Persons. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by any Stockholder at any time when such
shares are not then transferable in accordance with Section 12.2 hereof.
------------
Registration rights under this Section 8.6 may be transferred in whole or
-----------
in part in connection with the transfer of any shares of CenterPoint Common
Stock received pursuant to this Agreement other than the transferee of the
kind described in clause (x) of Section 12.2 hereof.
------------
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect
to the CenterPoint Common Stock (and such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be required by applicable law) and use its best
efforts to cause such registration to promptly become and remain
effective for a period of at least one hundred twenty (120) days
38
<PAGE>
(or such shorter period during which holders shall have sold all
CenterPoint Common Stock which they requested to be registered);
(b) upon the written request of a Stockholder whose
CenterPoint Common Stock is to be covered by any such registrations,
furnish to such Stockholder a reasonable number of copies of the
prospectus covering the offering and sale by the Stockholder of the
shares to be covered thereby;
(c) use its best efforts to register and qualify the
CenterPoint Common Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably
request for the distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary
to comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Stockholder whose CenterPoint Common Stock is
to be covered by such registration of the effectiveness of such
registration statement, advise each such Stockholder of the entry of
any stop order suspending the effectiveness of such registration
statement or of the initiation of any proceeding for that purpose,
and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify
each Stockholder whose CenterPoint Common Stock is to be covered by
such registration, of the happening of any event as a result of which
the registration statement, the prospectus or any document
incorporated therein by reference includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading and, at the request of such Stockholder, prepare and
furnish to such Stockholder a post-effective amendment or supplement
to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading.
8.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and
---
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
39
<PAGE>
8.6.4 In consideration of the granting to the Stockholders of the
registration rights under this Section 8.6, the Stockholders agree, and
-----------
agree to enter into an agreement with the underwriters in connection with
an underwritten registration to the effect, that it/they will not sell,
transfer or otherwise dispose of, including, without limitation, through
put or short sale arrangements, shares of CenterPoint Common Stock in the
ten (10) days prior to the effectiveness of any registration of CenterPoint
Common Stock for sale to the public and for up to ninety (90) days
following the effectiveness of such registration, provided that all
directors, executive officers and holders of more than five percent (5%) of
the outstanding CenterPoint Common Stock agree to the same restrictions;
and further provided that, with respect to the first public offering of
shares of the CenterPoint Common Stock within three (3) years following the
IPO, the Stockholders shall have been afforded a meaningful opportunity to
include shares in such registration after any reduction by reason of
underwriters' written advice.
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
---------------------
Date or earlier termination of this Agreement in accordance with its terms,
CenterPoint shall comply in all material respects with all applicable Laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint as set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Stockholders released from any and
all guarantees on any indebtedness and leases that they personally guaranteed
for the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Stockholders' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
8.9 Lock-Up Agreement. Each Stockholder agrees, and agrees to enter into
-----------------
an agreement with the Underwriter on or prior to the date on which preliminary
Prospectuses are delivered to the effect that the Stockholders will not offer,
sell, contract to sell or otherwise dispose of any shares of CenterPoint Common
Stock, or any securities convertible into or exercisable or exchangeable for
CenterPoint Common Stock, for a period of 180 days after the date of the final
prospectus of the IPO without the prior written consent of the Underwriter
except for shares of CenterPoint Common Stock disposed of as bona fide gifts,
subject to any remaining portion of the 180-day period applying to any shares so
disposed of.
40
<PAGE>
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
-------- -------
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
8.10.2 Each of the Company, CenterPoint and the Stockholders shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that all
------------------------
insurance policies listed, or required to be listed, on Schedule 4.20 will be
-------------
maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of the
--------------
Stockholders, CenterPoint shall, directly or through one or more of its
subsidiaries, administer and manage the collection of amounts referred to on
Schedule 7.1.4(ii) using reasonable care and in accordance with the Company's
- ------------------
policies in effect at Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Stockholders. Subject to Sections 9.7 and
----------------------------------- ------------
9.8, the Stockholders jointly and severally agree to indemnify, defend and save
- ---
the CenterPoint Indemnified Parties (hereinafter defined), forever harmless from
and against, and to promptly pay to a CenterPoint Indemnified Party or reimburse
a CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party, resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty made
in Article V herein or in any certificate, schedule, document, exhibit or
---------
other instrument delivered hereunder by any Stockholder or any action,
demand or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the
Stockholders to indemnify, defend and save harmless for any
misrepresentation or breach of representation or warranty made in Section
--------
5.1 hereof or in any certificate, schedule, document, exhibit or other
---
instrument delivered in respect thereof shall not be joint and
41
<PAGE>
several, but such obligation shall be several only and limited to the
several Stockholder(s) making such misrepresentation or breach;
(b) any failure by the Company or any Stockholder to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing, except that the obligation of the
Stockholders to indemnify, defend and save harmless for any
misrepresentation or breach of representation or warranty made in Section
-------
5.1 hereof shall not be joint and several, but such obligation shall be
---
several only and limited to the several Stockholder(s) making such
misrepresentation or breach;
(c) any liability under the 1933 Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, arising out
of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the Company, contained in any preliminary
prospectus relating to the IPO, the Registration Statements or any proxy
statement or prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact relating to the Company required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to CenterPoint or its counsel by the Company; provided, however,
-------- -------
that such indemnity shall not inure to the benefit of any CenterPoint
Indemnified Party to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) the Company provided, in writing,
corrected information to CenterPoint or its counsel for inclusion in the
final prospectus prior to distributing such prospectus, and such
information was not so included, or (ii) CenterPoint did not provide the
Company and its counsel with the information required to be provided
pursuant to Section 8.2.2, and such information is the basis for the untrue
-------------
statement or omission (or alleged untrue statement or omission) giving rise
to the liability under this Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Stockholders or
the Company in connection with the Merger or the transactions contemplated
by this Agreement with respect to brokerage, finders and other fees or
commissions, (ii) disallowance of any tax deduction to CenterPoint or the
Company with respect to any item listed on Schedule 2.5 and considered in
------------
determining Net Working Capital, (iii) any Losses relating to, resulting
from, arising out of or otherwise by virtue of any matter which is or
should be listed on Schedules 4.10 or 7.1.4(i) hereto, (iv) the Excluded
-------------- --------
Assets, the Excluded Liabilities and the transactions contemplated under
Section 7.1.4, and (v) any payment with respect to Dissenting Shares.
-------------
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other
42
<PAGE>
Persons dealing with any such plans, shall cease to be a "CENTERPOINT
INDEMNIFIED PARTY" for all purposes hereunder as of the Closing, and thereafter
such Persons shall have no further rights and remedies under this Article IX
----------
(except to the extent a Person is an officer, director, employee or agent of
CenterPoint as a result of the consummation of the transactions contemplated
under the Other Agreements); provided, further, that the Subsidiaries of
-------- -------
CenterPoint shall include the Company, the Company Subsidiaries and the other
Founding Companies from and after the Closing. Accordingly, for purposes of this
Article IX and subject to the limitations set forth in this Article IX, the
- ----------
Other Founding Companies, and each of their respective officers, directors,
employees, agents, employee plans and plan fiduciaries, plan administrators or
other Persons dealing with any such plans, shall be deemed to be third party
beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Stockholders and their respective Affiliates, and
their Affiliates' respective officers, directors, employees and agents (each, a
"STOCKHOLDER INDEMNIFIED PARTY") forever harmless from and against, and to
promptly pay to a Stockholder Indemnified Party or reimburse a Stockholder
Indemnified Party for, any and all Losses sustained or incurred by any
Stockholder Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or
warranty made herein or in any document or other instrument delivered
hereunder by CenterPoint or any action, demand or claim by any third party
against or affecting any Stockholder Indemnified Party which, if
successful, would give rise to a breach of any such representation or
warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out
of or based upon any untrue statement or alleged untrue statement of a
material fact relating to CenterPoint or any of the Other Founding
Companies contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or
43
<PAGE>
any of the Other Founding Companies required to be stated therein or
necessary to make the statements therein not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to the Company or the Stockholders, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to the Company or the
Stockholders required to be stated therein or necessary to make the
statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and (i) the Company or Stockholders
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide the Stockholder Representative and its counsel with the
information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
-------------
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "INDEMNIFIED PARTY") receives
notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a
"THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
44
<PAGE>
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Stockholders, may be granted by the
Stockholder Representative (as defined in Section 9.13)), which consent
------------
shall not be unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
45
<PAGE>
9.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
46
<PAGE>
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Stockholders. With respect to representations
------------------------------
and warranties, the Stockholders shall not have any liability pursuant to
Section 9.1(a) hereof unless and until and only to the extent that the
--------------
aggregate amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of breaches of
representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2 and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of the Company set
-----
forth in Section 4.16, and the Stockholders shall indemnify the CenterPoint
------------
Indemnified Parties for any Losses accruing thereunder in accordance with
this Article IX without regard to such threshold.
----------
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Stockholder Indemnified Parties from any Losses
occurring thereunder in accordance with this Article IX without regard to
----------
such threshold.
9.7.3 Limitations on Claims Against the Stockholders. The liability
----------------------------------------------
of all Stockholders for misrepresentations and breaches of representations
and warranties under Section 9.1(a) shall be limited to 100% of aggregate
-------------
Basic Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Stockholder shall be limited to three times the aggregate
Basic Purchase Consideration received, directly or indirectly, by such
Stockholder; provided, further, that such limitations shall not apply to
-------- -------
Losses arising out of breaches of representations or warranties contained
in Sections 5.1.1, 5.1.2, 5.2, and 5.1.8 as it relates to the
-------------- ----- --- -----
representation and warranty of the Company set forth in Section 4.16, and
------------
any Losses accruing thereunder shall not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the
------------------------------------------------------------
Stockholders and the Company; Time Limits on Indemnification Obligations.
- -------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of the
Company, the Company Subsidiaries and the Business, and notwithstanding any
Knowledge of facts determined or determinable by CenterPoint pursuant to such
investigation or right of investigation, CenterPoint has the right to rely fully
upon the representations, warranties, covenants and agreements of the
Stockholders and the Company contained in this Agreement or in any certificate
delivered pursuant to any of the foregoing. All such representations,
warranties, covenants and agreements of the Stockholders and the Company
47
<PAGE>
shall survive the execution and delivery of this Agreement and the Closing
hereunder; provided, however, (i) that the Stockholders' obligations pursuant to
-------- -------
Section 9.1, other than those relating to covenants and agreements to be
- -----------
performed by the Stockholders after the Closing, shall expire one (1) year after
the Closing, except with respect to obligations arising under or relating to
Section 4.16 hereof as it relates to federal, state, local and foreign income
- ------------
taxation, which shall survive until the earlier of (A) the expiration of the
applicable periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the Taxes or (B) the completion of the
final audit and determinations by the applicable taxing authority and final
disposition of any deficiency resulting therefrom; and (ii) solely to the extent
that CenterPoint actually incurs liability under the 1933 Act or the 1934 Act,
the obligations under Sections 9.1(c) or (d) above shall survive until the
--------------- -
expiration of any applicable statute of limitations with respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
-------- -------
CenterPoint's obligations under Section 9.2, other than those relating to
-----------
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one year after Closing, except that, solely to the extent that the
Stockholders actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.2(c) or (d) above shall survive until the
-------------- ---
expiration of any applicable statute of limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
----------
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Stockholders and of the Stockholder
Indemnified Parties following the Closing against CenterPoint and its affiliates
with respect to any claim for relief resulting from, arising out of or otherwise
by virtue of this Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Stockholders may satisfy their respective obligations, if any,
under this Article IX by tendering to the CenterPoint Indemnified Parties cash
----------
or shares of CenterPoint Common Stock that are then transferable in accordance
with Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE"
------------
shall mean the average closing (last) price for a share of CenterPoint Common
Stock (as reported on the exchange or market on which such shares are then
listed or traded) for the most recent twenty (20) days that such shares have
traded ending on the date two (2) days prior to the date tendered pursuant to
clause (i) of the preceding sentence, or, if such shares are
48
<PAGE>
not then listed or traded on an exchange or other market, the fair market value
of such shares as determined by an appraiser reasonably agreed to by the
parties.
9.13 Stockholder Representative. Each Stockholder appoints Richard H.
--------------------------
Stein (the "STOCKHOLDER REPRESENTATIVE") as its agent and representative with
full power and authority to agree, contest or settle any claim or dispute
affecting any Stockholder made under Articles II or IX and to otherwise act on
----------- --
behalf of the Stockholders in accordance with the terms of this Agreement
including, without limitation, to direct the amount and manner of the payment of
aggregate Basic Purchase Consideration; provided, that, the Stockholder
-------- ----
Representative may be removed and a successor to the Person originally serving
as the Stockholder Representative may be designated in a writing signed by a
majority in interest of the Stockholders and delivered to CenterPoint in
accordance with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Merger or any of
the Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United
49
<PAGE>
States which would prevent the consummation of the Merger or any of the
Other Mergers or make the consummation of the Merger or any of the Other
Mergers illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Stockholders in the
manner required by any applicable Law and the Company's Organizational
Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
10.2 Conditions to Obligation of the Stockholders and the Company to Effect
----------------------------------------------------------------------
the Merger. Unless waived by the Company, the obligation of the Stockholders
- ----------
and the Company to effect the Merger shall be subject to the fulfillment at or
prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of the Chief Executive Officer or
President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to the Stockholders of the Merger;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Company and the Stockholders;
50
<PAGE>
(d) each of the Stockholders shall have been afforded the opportunity
to enter into an incentive compensation agreement (the "INCENTIVE
COMPENSATION AGREEMENT") with CenterPoint substantially in the form
attached hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Company and the
Stockholders a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the Delaware Secretary of State,
showing that CenterPoint is in good standing;
(f) each of the Stockholders, partners, members and stockholders of
the other Founding Companies who are to receive shares of CenterPoint
Common Stock pursuant to the Other Agreements, and the other stockholders
of CenterPoint other than those acquiring stock in the IPO shall have
entered into an agreement (the "STOCKHOLDERS AGREEMENT") substantially in
the form attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Other Mergers on substantially the same
terms as provided herein, shall have been satisfied or waived by the
applicable party and the Company;
(h) each of the Stockholders shall have been afforded the opportunity
to review the executed employment agreement by and between CenterPoint and
Robert C. Basten; and
(i) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date and based on certain factual
representations and assumptions, that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Stock in the Merger pursuant to Section
351 of the Code, the final form of such opinion to be in form and substance
reasonably acceptable to the Company and the Stockholders.
10.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of the Chief Executive Officer or President of
the Company to that effect;
(b) the Stockholders shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct in all
material respects on and as of the date made and
51
<PAGE>
on and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of each
Stockholder to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Hirsch & Westheimer, P.C., counsel to the Company and the
Stockholders, dated the Closing Date, in the form attached hereto as
Exhibit 10.3(c), the final form of such opinion to be in form and substance
---------------
reasonably acceptable to the Underwriters and CenterPoint;
(d) the Company shall, and the Stockholders shall have caused Attest
Entity to, execute and deliver the Separate Practice Agreement
substantially in the form attached hereto as Exhibit 10.3(d)(A) and the
------------------
Services Agreement substantially in the form attached hereto as Exhibit
-------
10.3(d)(B);
----------
(e) each Stockholder shall have executed and delivered the Incentive
Compensation Agreement substantially in the form of attached as Exhibit
-------
10.2(d);
------
(f) CenterPoint and the Underwriters shall have received "1 Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(g) the Company shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of the Company and each Company Subsidiary
and, unless waived by CenterPoint, in each state in which the Company or
any Company Subsidiary is authorized to do business, showing the Company
and Company Subsidiary (as applicable) is in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Merger;
(i) the Stockholders shall have executed the Stockholders Agreement;
(j) the Stockholders shall have delivered to CenterPoint an instrument
in the form attached hereto as Exhibit 10.3(j), dated the Closing Date,
---------------
releasing the Company and the Company Subsidiaries from any and all claims
of the Stockholders against the Company and the Company Subsidiaries and
obligations of the Company and the Company Subsidiaries to the
Stockholders;
52
<PAGE>
(k) Company shall have presented evidence satisfactory to CenterPoint
of its compliance with the provisions of Section 7.1.4 hereof including,
-------------
without limitation, that as of the Closing, the amount of debt of the
Company and the Company Subsidiaries shall not exceed the amount reflected
on Schedule 2.1 as Debt Assumed by CenterPoint;
------------
(l) the Company and the Stockholders, as applicable, shall have
terminated or have caused the termination of any voting trusts, proxies or
other agreements or understandings to which the Company or any Stockholder
is a party or is bound with respect to any shares of capital stock or other
equity interests of the Company and shall have provided CenterPoint
evidence of such termination that is acceptable to CenterPoint's counsel;
(m) the Company shall have completed the Conversion pursuant to the
Conversion Agreement attached as Exhibit 10.3(m) and shall have presented
---------------
evidence of such conversion in accordance with Section 7.5;
-----------
(n) the Stockholders and/or the Company shall have delivered to
CenterPoint a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all such lenders or
creditors regarding the payment in full of such indebtedness at Closing, in
each case in form and substance satisfactory to CenterPoint (including,
without limitation, applicable UCC-3 termination statements);
(o) the Company shall have paid in full any indebtedness owed by the
Company to any Stockholder or former stockholders of the Company, and shall
have provided evidence of same that is acceptable to CenterPoint's counsel;
(p) the Company shall have merged the Company's existing 401(k) plans
into a single 401(k) plan, and shall have provided evidence of such merger
that is acceptable to CenterPoint's counsel; and
(q) the secretary of the Company shall have delivered certified copies
of the resolutions of the board of directors and the shareholders of the
Company approving execution and delivery of this Agreement, the Conversion,
the Merger and the other actions, agreements, and documents necessary or
desirable to complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
53
<PAGE>
(b) by the Company,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of the Company or any
Stockholder or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company or
any Stockholder or any of their affiliates or associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30) days
after written notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint or
any of its stockholders or any of their affiliates or associates;
(iii) if the Company (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30) days
after written notice of such default is given to the Company by
CenterPoint;
(iv) if a Stockholder (A) fails to perform in any material
respect any of such Stockholder's material covenants in this Agreement
and (B) do not cure such default in all material respects within
thirty (30) days after written notice of such default is given to the
Stockholder Representative by CenterPoint; or
(d) by mutual consent of the Boards of Directors of CenterPoint and
the Company.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or the Company, as provided in Section 11.1, this
------------
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, the Stockholders, CenterPoint, Mergersub or their
respective officers or directors (except the obligations set forth in this
Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall
- ------------ ------------ --- --- ----------
survive the termination). Nothing in this Section 11.2 shall relieve any party
------------
from liability for any breach of this Agreement.
54
<PAGE>
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. CenterPoint
covenants and agrees that it shall not amend, modify or supplement the material
terms of any Other Agreement following the Closing without the prior written
consent of at least two thirds (2/3rds) of the members of CenterPoint's Board of
Directors; provided, that, no waiver of any restriction set forth in Article XII
-------- ---- -----------
shall be of any effect unless consented to by a majority of the members of
CenterPoint's Board of Directors who do not at the time of such proposed waiver
hold Restricted Shares within the meaning of this Agreement, any Other Agreement
or the Stockholders Agreement.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions Generally. Except as provided in Section 12.2,
------------------------------- ------------
for a period of forty-two (42) months from the Closing, the Stockholders shall
not (a) sell, assign, exchange, transfer, distribute or otherwise dispose of, in
whole or in part, (i) any shares of CenterPoint Common Stock received by the
Stockholders in the Merger (the "RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning the Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
12.2 Release of Restrictions. Effective eighteen (18) months following
-----------------------
the Closing, and every six (6) months thereafter, until all Restricted Shares
shall have been released from such restrictions, twenty percent (20%) of the
original number of Restricted Shares of each Stockholder shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed Restricted Shares for any purposes of this Agreement; provided, that, if
-------- ----
a Stockholder's employment with CenterPoint or its subsidiaries is terminated
within thirty (30) months of the Closing other than through death, disability,
retirement or circumstances approved by the Company's management or reasonably
approved by CenterPoint's chief executive officer, the Restricted Shares held by
such Stockholder shall remain subject to the restrictions set forth in Section
-------
12.1 until the fifth anniversary of the Closing Date. Notwithstanding the
- ----
foregoing and Section 12.1, a Stockholder may (x) at any time pledge or encumber
------------
all or part of such Stockholder's Restricted Shares, provided that the pledgee
or secured party agrees in writing to
55
<PAGE>
be bound by the provisions contained in Article XII, (y) at any time transfer
-----------
all or part of such Stockholder's Restricted Shares to another Stockholder or to
an immediate family member (or trust or other estate planning Person), provided,
---------
that, any such Stockholder, family member or other Person agrees in writing to
- -----
be bound by the provisions contained in Article XII, and (z) transfer or cause
-----------
to be transferred such Stockholder's Restricted Shares upon such Stockholder's
disability or death. As used in this Section 12.2, the terms "disability" and
------------
"retirement" shall have the meaning ascribed to them in CenterPoint's Employee
Incentive Compensation Plan. No attempted transfer of any nature whatsoever that
is in violation of this Section shall be treated as effective for any purpose.
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Stockholders pursuant to this Agreement shall bear a legend
substantially in the form set forth below and containing such other information
as CenterPoint may deem necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A
MERGER AGREEMENT DATED MARCH 31, 1999. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION AND MAY BE INSPECTED BY THE REGISTERED
OWNER OF THIS CERTIFICATE OR A DULY AUTHORIZED
REPRESENTATIVE OF SUCH OWNER UPON REQUEST DURING
NORMAL BUSINESS HOURS.
Upon request from any Stockholder (or permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer Restricted Shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable Restricted Shares. In the event a
Stockholder's request to remove the restrictive legend coincides with his
request to sell the CenterPoint Common Stock, CenterPoint shall take such
actions as are required by its transfer agent to allow the transfer agent to
transfer the unrestricted CenterPoint Common Stock free of any restrictive
legend.
ARTICLE XII
NONCOMPETITION
13.1 Prohibited Activities. Each Stockholder agrees severally, and not
---------------------
jointly, that such Stockholder will not, for a period of three (3) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other Person:
56
<PAGE>
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Stockholder commences competition within a fifty (50) mile radius
of any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by the Stockholder to have been actively being solicited by the
Company or any Company Subsidiary to become a customer at any time during
such period;
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Stockholder may be employed by a customer
of the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Stockholder does not directly or indirectly provide
such services to another third party for hire. For purposes of this Agreement,
an "ACQUISITION TRANSACTION" means a merger, consolidation, purchase of
material assets, purchase of a material equity interest, tender offer,
recapitalization, accumulation of shares, proxy solicitation or other business
combination. Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit any Stockholder from (a) acquiring as an investment not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange or over-the-counter so long as the
Stockholder does not consult with or is not employed by such competitor and (b)
owning equity interests in Attest Entity.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy,
57
<PAGE>
each Stockholder agrees that the foregoing covenant may be enforced by
CenterPoint in the event of breach by such Stockholder, by injunctions and
restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Stockholders in light of the activities and business of CenterPoint (including
the subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Stockholder who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Stockholder shall enter into a business or pursue other activities not
in competition with CenterPoint and/or any subsidiary thereof, or similar
activities or business in locations the operations of which, under such
circumstances, does not violate this Article XIII and in any event such new
------------
business, activities or location are not in violation of this Article XIII or of
------------
such Stockholder's obligations under this Article XIII, such Stockholder shall
------------
not be chargeable with a violation of this Article XIII if CenterPoint and/or
------------
any subsidiary thereof shall thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Stockholder made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Stockholder is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
58
<PAGE>
13.6 Materiality. The Company and each of the Stockholders hereby agree
-----------
that this covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of the Company and the Stockholders represents and
-------
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
CenterPoint represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
59
<PAGE>
15.2.2 If to the Company, to:
Mann Frankfort Stein & Lipp, P.C.
12 Greenway Plaza, Eighth Floor
Houston, TX 77046
Attn: Richard H. Stein
Facsimile No.: (713) 960-9549
with a copy to:
Hirsch & Westheimer, P.C.
700 Louisiana
Suite 2550
Houston, TX 77002
Attn: Michael Wilk
Facsimile No.: (713) 223-9319
15.2.3 If to the Stockholder Representative or the Stockholders, as
applicable, addressed to the addresses set forth on Schedule 15.2.3, with copies
---------------
to such counsel as set forth with respect to each Stockholder on such Schedule
--------
15.2.3, as applicable.
- ------
15.3 Interpretation. The table of contents and headings contained
--------------
in this shall Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. In this
Agreement, unless a contrary intention appears, (i) the words "HEREIN,"
"HEREOF" and "HEREUNDER" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision and (ii) reference to any Article or Section means such Article or
Section hereof. No provision of this Agreement shall be interpreted or construed
against any party hereto solely because such party or its legal representative
drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
-------------------
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the Stockholders of such Affiliate's immediate family or their
spouses or children and any trust the beneficiaries of which are such
individuals or relatives, and (iii) an individual will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if: (a) such individual is
actually aware of such fact or matter, or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter and a prudent individual would conduct
such investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any Person who is a
partner, member or shareholder of such Person or who is otherwise serving, or
who has
60
<PAGE>
served, as a director, officer, partner, member or trustee (or any capacity) of
such Person has, or at any time had, knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the
----------------------------
documents in this shall and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise, except that CenterPoint may assign this Agreement to any wholly-owned
subsidiary of CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
61
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.:
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
--------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
MFSL MERGERSUB INC.:
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
--------------------------------------
Its: President
---------------------------------------
MANN FRANKFORT STEIN & LIPP, P.C.:
By: /s/ Milton Frankfort
----------------------------------------
Name: Milton Frankfort
--------------------------------------
Its: President
---------------------------------------
STOCKHOLDERS:
/s/ Steve Albert
-------------------------------------------
STEVE ALBERT
/s/ Jeffri Botkin
-------------------------------------------
JEFFRI BOTKIN
/s/ Milton Frankfort
-------------------------------------------
MILTON FRANKFORT
<PAGE>
/s/ Jerry Guillott
-----------------------------------------
JERRY GUILLOTT
/s/ Bill Hickl
-----------------------------------------
BILL HICKL
/s/ John Landers
-----------------------------------------
JOHN LANDERS
/s/ Bruce Layer
-----------------------------------------
BRUCE LAYER
/s/ Arnold Lipp
-----------------------------------------
ARNOLD LIPP
/s/ Paul Mueller
-----------------------------------------
PAUL MUELLER
/s/ Glea Ramey
-----------------------------------------
GLEA RAMEY
/s/ Laura Rice
-----------------------------------------
LAURA RICE
/s/ Michael Richter
-----------------------------------------
MICHAEL RICHTER
/s/ Craig Shenkman
-----------------------------------------
CRAIG SHENKMAN
/s/ Saul Solomon
-----------------------------------------
SAUL SOLOMON
/s/ Gregg Steffen
-----------------------------------------
GREGG STEFFEN
/s/ Richard Stein
-----------------------------------------
RICHARD STEIN
/s/ Suhrid Thakore
-----------------------------------------
SUHRID THAKORE
<PAGE>
----------------------------------------
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
BERRY DUNN MERGERSUB INC.,
BERRY, DUNN, McNEIL & PARKER, CHARTERED,
BDM&P HOLDINGS, LLC
and certain
MEMBERS OF BDM&P HOLDINGS, LLC
March 31, 1999
-----------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER............................................................. 2
1.1 Merger.......................................................... 2
1.2 Effects of the Merger........................................... 2
1.3 Directors and Officers of the Surviving Corporation............. 3
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT.................................... 3
2.1 Merger Consideration............................................. 3
2.1.1 Basic Purchase Consideration............................. 3
2.1.2 Treasury Stock........................................... 3
2.1.3 Dissenters............................................... 3
2.1.4 Conversion of Mergersub Stock............................ 3
2.1.5 Exchange of Certificates................................. 4
2.2 Post-Closing Adjustments to Basic Purchase Consideration......... 4
2.2.1 Adjustments for Net Working Capital Shortfall/Excess..... 4
2.2.2 Preliminary Balance Sheet and Adjustment................. 4
2.2.3 Interim Adjustment....................................... 4
2.2.4 Final Adjustment......................................... 4
2.2.5 Disputes................................................. 5
2.2.6 Payment of Adjustments................................... 5
2.3 Post-Closing Management of AR.................................... 5
2.4 Assignment of Uncollected AR..................................... 6
2.5 Definitions...................................................... 6
ARTICLE III
THE CLOSING AND CONSUMMATION DATE...................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY............... 7
4.1 Organization and Qualification................................... 7
4.2 Company Subsidiaries............................................. 8
4.3 Authority; Non-Contravention; Approvals.......................... 8
4.4 Capitalization................................................... 9
4.5 Year 2000........................................................10
4.6 Financial Statements.............................................10
<PAGE>
4.7 Absence of Undisclosed Liabilities............................ 11
4.8 Unbilled Fees and Expenses.................................... 11
4.9 Absence of Certain Changes or Events.......................... 11
4.10 Litigation.................................................... 14
4.11 Compliance with Applicable Laws............................... 14
4.12 Licenses...................................................... 15
4.13 Material Contracts............................................ 15
4.14 Properties.................................................... 17
4.15 Intellectual Property......................................... 19
4.16 Taxes......................................................... 20
4.17 Employee Benefit Plans; ERISA................................. 21
4.18 Labor Matters................................................. 23
4.19 Environmental Matters......................................... 23
4.20 Insurance..................................................... 24
4.21 Interest in Customers and Suppliers; Affiliate Transactions... 24
4.22 Business Relationships........................................ 25
4.23 Compensation.................................................. 25
4.24 Bank Accounts................................................. 25
4.25 Professional Credentials...................................... 25
4.26 Disclosure; No Misrepresentation.............................. 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS........................ 26
5.1 Several Representations and Warranties........................ 26
5.1.1 Capitalization......................................... 26
5.1.2 Authority.............................................. 26
5.1.3 Non-Contravention...................................... 26
5.1.4 Approvals.............................................. 27
5.1.5 Litigation............................................. 27
5.1.6 No Transfer............................................ 27
5.1.7 Disclosure............................................. 28
5.1.8 Representations and Warranties of Seller
and the Company........................................ 28
5.2 Joint and Several Representations and Warranties.............. 28
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT........................ 28
6.1 Organization And Qualification................................ 28
6.2 Capitalization................................................ 28
6.3 No Subsidiaries............................................... 29
6.4 Authority; Non-Contravention; Approvals....................... 29
<PAGE>
6.5 Absence of Undisclosed Liabilities............................. 31
6.6 Litigation..................................................... 31
6.7 Compliance with Applicable Laws................................ 31
6.8 No Misrepresentation........................................... 31
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS.................................... 32
7.1 Conduct of Business by the Company Pending the Acquisition..... 32
7.2 No-Shop........................................................ 35
7.3 Schedules...................................................... 35
7.4 Company Stockholders Meeting................................... 36
7.5 Conversion..................................................... 36
ARTICLE VIII
ADDITIONAL AGREEMENTS................................................ 36
8.1 Access to Information.......................................... 36
8.2 Registration Statements........................................ 37
8.3 Expenses and Fees.............................................. 39
8.4 Agreement to Cooperate......................................... 39
8.5 Public Statements.............................................. 39
8.6 Registration Rights............................................ 39
8.7 CenterPoint Covenants.......................................... 41
8.8 Release of Guarantees.......................................... 41
8.9 Lock-Up Agreement.............................................. 42
8.10 Preparation and Filing of Tax Returns.......................... 42
8.11 Maintenance of Insurance....................................... 42
8.12 Administration................................................. 42
ARTICLE IX
INDEMNIFICATION...................................................... 43
9.1 Indemnification by the Members................................. 43
9.2 Indemnification by CenterPoint................................. 44
9.3 Indemnification Procedure for Third Party Claims............... 45
9.4 Direct Claims.................................................. 47
9.5 Failure to Give Timely Notice.................................. 47
9.6 Reduction of Loss.............................................. 48
9.7 Limitation on Indemnities...................................... 48
9.8 Survival of Representations, Warranties and Covenants
of the Members, Seller and the Company; Time Limits
on Indemnification Obligations................................. 49
<PAGE>
9.9 Survival of Representations, Warranties and
Covenants of CenterPoint; Time Limits on
Indemnification Obligations................................... 49
9.10 Defense of Claims; Control of Proceedings...................... 50
9.11 Fraud; Exclusive Remedy........................................ 50
9.12 Manner of Satisfying Indemnification Obligations............... 50
9.13 Member Representative.......................................... 50
ARTICLE X
CLOSING CONDITIONS.................................................... 51
10.1 Conditions to Each Party's Obligation to Effect
the Acquisition............................................... 52
10.2 Conditions to Obligation of the Members, Seller
and the Company to Effect the Acquisition..................... 53
10.3 Conditions to Obligation of CenterPoint to Effect
the Acquisition................................................ 54
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER..................................... 56
11.1 Termination.................................................... 56
11.2 Effect of Termination.......................................... 57
11.3 Amendment...................................................... 57
11.4 Waiver......................................................... 57
ARTICLE XII
SECURITIES ACT REPRESENTATIONS AND TRANSFER RESTRICTIONS.............. 58
12.1 Transfer Restrictions Generally................................ 58
12.2 Release of Restrictions........................................ 58
12.3 Legend......................................................... 59
ARTICLE XIII
NONCOMPETITION........................................................ 59
13.1 Prohibited Activities.......................................... 59
13.2 Damages........................................................ 60
13.3 Reasonable Restraint........................................... 60
13.4 Severability; Reformation...................................... 61
13.5 Independent Covenant........................................... 61
13.6 Materiality.................................................... 61
ARTICLE XIV
[Reserved]............................................................ 61
<PAGE>
ARTICLE XV
GENERAL PROVISIONS.................................................... 62
15.1 Brokers........................................................ 62
15.2 Notices........................................................ 62
15.3 Interpretation................................................. 63
15.4 Certain Definitions............................................ 63
15.5 Entire Agreement; Assignment................................... 63
15.6 Applicable Law................................................. 64
15.7 Counterparts................................................... 64
15.8 Parties in Interest............................................ 64
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
(vi)
<PAGE>
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 5.1.5 Litigation
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Members' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Members and Their Counsel
(vii)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Members of Seller
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Seller, the
Company and Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of General Release and Covenant Not to Sue
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(viii)
<PAGE>
DEFINED TERMS
-------------
Accounting Licenses............................................. Section 4.12
Acquisition..................................................... Introduction
Acquisition Transaction......................................... Section 13.1
Actions......................................................... Section 4.10.1
Affiliate....................................................... Section 15.4
Affiliate Transactions.......................................... Section 4.21
Agreement....................................................... Introduction
AR.............................................................. Section 2.5
Arbitrator...................................................... Section 2.2.5
Attest Entity................................................... Section 7.1.2
Attestation Practice............................................ Introduction
Basic Purchase Consideration.................................... Section 2.1.1
Business........................................................ Introduction
Cash Consideration.............................................. Section 2.1
CenterPoint..................................................... Introduction
CenterPoint Accountants......................................... Section 2.2.2
CenterPoint Common Stock........................................ Section 2.1
CenterPoint Indemnified Party(ies).............................. Section 9.1
CenterPoint Material Adverse Effect............................. Section 6.4.3
CenterPoint Representatives..................................... Section 8.1.1
CenterPoint Required Statutory Approvals........................ Section 6.4.3
Closing......................................................... Article III
Closing Balance Sheet........................................... Section 2.2.2
Closing Date.................................................... Article III
(ix)
<PAGE>
Code........................................................ Introduction
Company..................................................... Introduction
Company Material Adverse Effect............................. Section 4.3.3
Company Representatives..................................... Section 8.1.1
Company Stock............................................... Section 2.1
Company Subsidiary(ies)..................................... Section 4.2
Contracts................................................... Section 4.13
Conversion.................................................. Introduction
Copyrights.................................................. Section 4.15
Defense Notice.............................................. Section 9.3.1
DGCL........................................................ Section 1.1
Direct Claim................................................ Section 9.4
Disputed Item............................................... Section 2.2.5
Dissenting Shares........................................... Section 2.1.3
Effective Time.............................................. Section 1.1
Employee Plan............................................... Section 4.17.5(a)
Environmental and Safety Requirements....................... Section 4.19
ERISA....................................................... Section 4.17.5(b)
Excluded Assets............................................. Section 7.1.4
Excluded Liabilities........................................ Section 7.1.4
Final Adjustment............................................ Section 2.2.4
Financial Statements........................................ Section 4.6
First Person................................................ Section 4.17.5(c)
Form S-1.................................................... Section 4.3.3
Form S-4.................................................... Section 4.3.3
(x)
<PAGE>
Founding Companies........................................... Introduction
GAAP......................................................... Section 4.6
general increase............................................. Section 4.23
Governmental Authority....................................... Section 4.3.2
Hazardous Materials.......................................... Section 4.19
herein....................................................... Section 15.3
hereof....................................................... Section 15.3
hereunder.................................................... Section 15.3
HSR Act...................................................... Section 4.3.3
Incentive Compensation Agreement............................. Section 10.2(d)
Indemnified Party............................................ Section 9.3.1
Indemnifying Party........................................... Section 9.3.1
Intellectual Property........................................ Section 4.15
Intellectual Property Licenses............................... Section 4.15
Interim Adjustment........................................... Section 2.2.3
IPO.......................................................... Introduction
Knowledge.................................................... Section 15.4
Latest Balance Sheet......................................... Section 4.6
Laws......................................................... Section 4.11
Leased Property.............................................. Section 4.14.1
Licenses..................................................... Section 4.12
Liens........................................................ Section 4.3.2
Liquidated Damages Amount.................................... Section 7.3
Losses....................................................... Section 9.1
Market Price................................................. Section 9.12
(xi)
<PAGE>
Marks........................................................ Section 4.15
Material Contracts........................................... Section 4.13
Member(s).................................................... Introduction
Member Indemnified Party..................................... Section 9.2
Member Representative........................................ Section 9.13
Merger....................................................... Introduction
Mergersub.................................................... Introduction
Mergersub Stock.............................................. Section 6.2.1
Merger Documents............................................. Section 1.1
Net Working Capital.......................................... Section 2.5
1933 Act..................................................... Section 4.3.3
1934 Act..................................................... Section 9.1(c)
Organizational Documents..................................... Section 4.1
Other Agreements............................................. Introduction
Other Acquisitions........................................... Introduction
Other Founding Companies..................................... Section 9.1
Owned Property............................................... Section 4.14.1
Patents...................................................... Section 4.15
Person....................................................... Section 15.4
Plan Affiliate............................................... Section 4.17.5(c)
Real Property................................................ Section 4.14.1
Registration Statements...................................... Section 4.3.3
Resolution Period............................................ Section 2.2.5
Restricted Shares............................................ Section 12.1
Returns...................................................... Section 4.16.1
(xii)
<PAGE>
Schedules.................................................... Section 7.3
SEC.......................................................... Section 4.3.3
Securities Act............................................... Section 4.3.3
Seller....................................................... Introduction
Special Bonus Plan........................................... Section 2.5(c)
Stock Consideration.......................................... Section 2.1.1
Stockholders Agreement....................................... Section 10.2(f)
Surviving Corporation........................................ Section 1.2
Target....................................................... Section 2.5(d)
Tax Accrual.................................................. Section 2.5(e)
Taxes........................................................ Section 4.16.2
Territory.................................................... Section 13.1(a)
Third Party Claim............................................ Section 9.3.1
Trade Secrets................................................ Section 4.15
Underwriters................................................. Section 8.1.1
Voting Agreement............................................. Introduction
(xiii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CenterPoint"),
Berry Dunn Mergersub Inc., a Delaware corporation and wholly owned subsidiary of
CenterPoint ("Mergersub"), BDM&P Holdings, LLC, a Maine limited liability
company (the "Seller"), Berry, Dunn, McNeil & Parker, Chartered, a Maine
professional corporation (the "Company"), and the members of Seller identified
on Exhibit A to this Agreement (each a "Member" and, collectively, the
"Members").
WITNESSETH:
WHEREAS, the Members are owners and holders of record of more than eighty-
five percent of the outstanding shares of capital stock of the Company;
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the "
Business");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "Attestation
Practice") and (b) the Members will cause the conversion of the Company from a
professional corporation to a business corporation by amending the Company's
Organizational Documents (as defined in Section 4.1) such that it converts to a
business corporation, and (c) the Members will contribute all of the outstanding
shares of the Company to Seller (the actions described in the foregoing (a), (b)
and (c), the "Conversion");
WHEREAS, the Boards of Directors of the Company, CenterPoint and Mergersub
deem it advisable and in the best interests of their respective shareholders to
approve and consummate the business combination transaction provided for herein
in which Mergersub would merge with the Company, with the Company being the
surviving corporation in the merger (the "Acquisition" or "Merger");
WHEREAS, certain Members have entered into a Voting Agreement dated the
date hereof (the "Voting Agreement") pursuant to which among other things such
Members have agreed to vote the shares of capital stock of the Company that such
Members own or control, directly or indirectly, to approve the Merger and the
transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "Other
Agreements") substantially similar to this Agreement with each of Robert F.
Driver Company, Inc., Mann Frankfort Stein & Lipp, P.C., The Reppond Company,
Inc., Reppond Administrators, LLC,
<PAGE>
Verasource Excess Risk Ltd., Reznick Fedder & Silverman, P.C., Urbach Kahn &
Werlin PC, Self Funded Benefits, Inc. d/b/a Insurance Design Administrators,
Grace & Company, P.C., Simione, Scillia, Larrow & Dowling LLC, Follmer Rudzewicz
& Co., P.C., and Holthouse, Carlin & Van Trigt (which companies together with
the Company are collectively referred to herein as the "Founding Companies"),
which agreements provide for the merger of a wholly owned subsidiary of
CenterPoint with each such Founding Company (the " Other Acquisitions")
simultaneously with the Acquisition; CenterPoint has provided a side letter to
each holder of equity interests of the Company to such effect;
WHEREAS, simultaneously with the consummation of the Acquisition,
CenterPoint will close an initial public offering (the IPO") of CenterPoint
Common Stock (as defined in Section 2.1); and
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in this
Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, the result of which
will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of Maine. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"Merger Documents"), with the Secretary of State of the State of Maine, as
provided in the Maine Business Corporation Act, as amended (the "MBCA"), and
with the Secretary of State of the State of Delaware, as provided in the General
Corporation Law of the State of Delaware (the "DGCL"). The Merger shall become
effective (the "Effective Time") upon the filing of the Merger Documents with
the Secretary of State of the State of Maine and the Secretary of State of the
State of Delaware or at such later time, contemporaneously with the closing of
the IPO, as agreed by CenterPoint and the Company and specified in the Merger
Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate existence
of Mergersub shall cease and Mergersub shall be merged with and into the
Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "Surviving Corporation"), (ii)
the Articles of Incorporation and By-laws of the
2
<PAGE>
Surviving Corporation shall be amended in form and substance acceptable to
CenterPoint and as specified in the Merger Documents, (iii) the Merger shall
have all the effects provided by applicable law, and (iv) the Company shall be a
wholly-owned subsidiary of CenterPoint if the stockholders of the Company
approve the Merger.
1.3 Directors and Officers of the Surviving Corporation. From and after the
Effective Time, the directors and officers of Mergersub shall be the directors
and officers of the Surviving Corporation until their successors are duly
elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
Merger and without any action on the part of the holders thereof, the
outstanding shares of capital stock, consisting of the number of shares of
common stock, no par value per share (the "Company Stock"), set forth on
Schedule 4.4, shall be converted into the right to receive: (a) that number of
shares of CenterPoint common stock, par value $.01 per share (the "CenterPoint
Common Stock") determined in accordance with the formula in Schedule 2.1 (the
"Stock Consideration") and (b) the amount of cash in Schedule 2.1 (the "Cash
Consideration"). The sum of the Cash Consideration and the Stock Consideration
is herein referred to as "Basic Purchase Consideration."
2.1.2 Treasury Stock. Each share of capital stock of the Company held
in treasury of the Company shall be canceled and retired and no payment shall be
made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of the
Company the holder of which has perfected his right to dissent under applicable
law and has not effectively withdrawn or lost such right as of the Effective
Time (the "Dissenting Shares") shall not be converted into the right to receive
Basic Purchase Consideration, and the holder thereof shall be entitled only to
such rights as are granted by applicable law. The Company shall give CenterPoint
prompt notice upon receipt by the Company of any such written demands for
payment of fair value of shares of capital stock of the Company and any other
instruments provided pursuant to applicable law. Any payments made in respect of
Dissenting Shares shall be made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each share
of Mergersub Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid and
non-assessable share of the Surviving Corporation. Such newly issued shares
shall thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
3
<PAGE>
2.1.5 Exchange of Certificates. Prior to the Closing, each Member
shall contribute all of such Member's shares of Company Stock to the Seller, and
shall deliver to Seller all certificates representing such Company Stock, duly
endorsed in blank by such Member or accompanied by blank stock powers. At the
Closing, Seller shall deliver to CenterPoint the original Company Stock
certificates, duly endorsed in blank by Seller or accompanied by blank stock
powers, in exchange for the allocated share of (a) CenterPoint Common Stock
certificates representing the Stock Consideration and (b) payment of the Cash
Consideration by certified check, cashier's check or wire transfer of
immediately available funds to a bank account or bank accounts in the amounts
and manner specified by the Member Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date. The
shares represented by the Company Stock certificates so delivered to CenterPoint
shall be canceled. Until surrendered as contemplated by this Section 2.1.5, each
certificate representing shares of Company Stock represents only the right to
receive Basic Purchase Consideration, as adjusted in accordance with this
Article II .
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The Basic
Purchase Consideration shall be (a) reduced dollar-for-dollar to the extent
Net Working Capital on the Closing Date is less than the Target or (b)
increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CenterPoint Accountants") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "Closing Balance Sheet") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.2.3 Interim Adjustment. As soon as practicable, the Company will
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Member Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "Interim Adjustment").
2.2.4 Final Adjustment. As soon as practicable, the Company will
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days of
receipt of such calculation, CenterPoint will deliver to the Member
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "Final Adjustment").
4
<PAGE>
2.2.5 Disputes. The parties hereto shall not object to the Interim
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the Member
Representative does not object (or otherwise respond) in writing to the
Final Adjustment report within 30 days after its delivery, the Final
Adjustment shall automatically become final, binding and conclusive on all
parties hereto. Any objection to the Final Adjustment report shall be in
writing and shall specify the item or items in dispute (each a "Disputed
Item").
If the Member Representative and CenterPoint are unable to resolve any
Disputed Item within 30 days after notice from the Member Representative
that a dispute exists (the "Resolution Period"), then a representative from
the office of a nationally recognized accounting firm (the "Arbitrator")
selected jointly by CenterPoint and the Member Representative will
arbitrate the dispute. The Member Representative and CenterPoint shall,
within 20 days after expiration of the Resolution Period, present their
respective positions with respect to any Disputed Item to the Arbitrator
together with such materials as the Arbitrator deems appropriate. To the
extent any Disputed Item is similar to a disputed item under the Other
Agreements, the Arbitrator shall arbitrate the Disputed Item based on the
submitted materials and without regard to the disputed item under the Other
Agreements. The Arbitrator shall, after the submission of the materials,
submit a written decision on each Disputed Item to the Member
Representative and CenterPoint and such determination shall be final and
binding on the parties hereto. The arbitration shall be conducted in
Chicago, Illinois. The parties hereto agree that the cost of the Arbitrator
shall be borne by the non-prevailing party or as determined by the
Arbitrator.
2.2.6 Payment of Adjustments. In the event Net Working Capital is less
than the Target, Seller and the Members shall pay the amount of the
shortfall to CenterPoint. In the event Net Working Capital is greater than
the Target, CenterPoint shall pay the amount of the excess to Seller. Any
payment required to be made pursuant to this paragraph shall be made,
within ten days of delivery of the report indicating any adjustment, by
wire transfer of immediately available funds to an account designated in
writing by the party that is to receive payment of such adjustment. In
respect of the Final Adjustment, the party making a payment required by
such adjustment shall make such payment within ten days after the Final
Adjustment becomes final and shall receive credit for or return of any
amount previously paid in connection with the Interim Adjustment.
2.3 Post-Closing Management of AR. Following the Closing, the billing,
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other
5
<PAGE>
case, the payment will be applied to satisfy AR relating to such obligor in the
order that such AR arose. Any adjustment, modification or write-off affecting AR
and fees and expenses receivable and unbilled fees and expenses of the Company
incurred after Closing with respect to the same client engagement shall be
allocated ratably to the pre-Closing and post-Closing periods.
2.4 Assignment of Uncollected AR. If any AR remain uncollected by the
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to Seller. Notwithstanding the foregoing, the Company will retain
the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.3.
2.5 Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "Net Working Capital" means an amount determined as of the Closing
Date, whenever calculated, equal to difference between: (i) the sum of any
AR, prepaid expenses and other current assets less (ii) the sum of accounts
payable, accrued current liabilities, the items listed on Schedule 2.5, the
Tax Accrual and the portion of employer-paid FICA attributable to Medicare,
payable in connection with deferred compensation. For purposes of this
Section 2.5(b), the Special Bonus Plan accrual shall not constitute a
current liability.
(c) [Reserved]
(d) "Target" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to Closing.
(e) "Tax Accrual" means an amount equal to (A) the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan times (ii) the sum of 34%
plus the effective state tax rate on the Company (net of any federal tax
benefit) less (B) an amount equal to discounted value (calculated by using
a discount rate of 5.17%), as of the Closing Date, of the tax benefit that
the Company is expected to realize with respect to capitalized goodwill
reflected in the Company's books as of the Closing Date. A negative Tax
Accrual shall be treated as a current asset for purposes of Section
2.5(b)(i).
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Katten
Muchin & Zavis, Chicago,
6
<PAGE>
Illinois, contemporaneously with the closing of the IPO, or at such other time
and date as the parties hereto may mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
Seller and the Company hereby jointly and severally represent and warrant
to CenterPoint, as of the date hereof and, subject to Section 7.3, as of the
date on which CenterPoint and the lead Underwriter (as defined in Section 8.1.1)
execute and deliver the Underwriting Agreement related to the IPO and as of the
Closing Date, as follows:
4.1 Organization and Qualification. The Company is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Maine and, following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the State of Maine. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of Maine. Each
Company Subsidiary (as defined in Section 4.2) is duly organized, validly
existing and in good standing under the laws of the state of its organization
set forth on Schedule 4.2. Each of Seller, the Company and the Company
Subsidiaries has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted,
and is qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. True, accurate and
complete copies of Seller's, the Company's and each Company Subsidiary's
Organizational Documents, in each case as in effect on the date hereof, have
heretofore been delivered to CenterPoint. "Organizational Documents" means (a)
the articles or certificate of incorporation and the bylaws of a corporation
(professional or otherwise), (b) the partnership agreement and any statement of
partnership of a general partnership, (c) the limited partnership agreement and
the certificate of limited partnership of any limited partnership, (d) the
operating or limited liability company agreement and certificate of formation of
any limited liability company, (e) any charter or similar document adopted and
filed in connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "Company Subsidiary" and collectively, the "Company Subsidiaries").
Except as set forth on Schedule 4.2, the Company does not, directly or
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
7
<PAGE>
4.3 Authority; Non-Contravention; Approvals.
4.3.1 Each of Seller and the Company has full right, power and
authority to enter into this Agreement and, subject to the approval of the
Merger and the transactions contemplated hereby by the Company's
stockholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller and the
Company have been duly authorized by all necessary corporate and limited
liability company action on the part of the Company and Seller, subject to
the approval of the Merger and the transactions contemplated hereby by the
Company's stockholders. This Agreement has been duly executed and delivered
by Seller and the Company, and, assuming the due authorization, execution
and delivery hereof by CenterPoint, constitutes a valid and legally binding
agreement of Seller and the Company, enforceable against Seller and the
Company in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by each of Seller
and the Company does not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of
any claim, lien, privilege, mortgage, charge, hypothecation, assessment,
security interest, pledge or other encumbrance, conditional sales contract,
equity charge, restriction, or adverse claim of interest of any kind or
nature whatsoever (each a "Lien" and collectively, the "Liens"), upon any
of the properties or assets of the Company or any Company Subsidiary under,
any of the terms, conditions or provisions of (i) the Organizational
Documents of Seller, the Company or any Company Subsidiary, (ii) following
completion of the Conversion, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any court or federal, state, provincial, local or foreign government, or
any subdivision, agency or authority of any thereof ("Governmental
Authority") applicable to Seller, the Company, any Company Subsidiary, or
the Business, properties or assets of Seller, the Company or any Company
Subsidiary, except for those items discussed in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy, or
(iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which any of Seller, the Company or
any Company Subsidiary is a party or by which any of Seller, the Company,
any Company Subsidiary or any of the properties or assets of Seller, the
Company or any Company Subsidiary may be bound or affected. The
consummation by Seller and the Company of the transactions contemplated
hereby will not result in a violation, conflict, breach, right of
termination, creation or acceleration of Liens under the terms, conditions
or provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject in the case of the terms,
conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) such consents required from third
8
<PAGE>
parties set forth on Schedule 4.3.2 and except for those items described in
(ii) and (iii) above relating to regulating, licensing or permitting the
practice of public accountancy and any filing which may be required under
the HSR Act.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "Form S-1") and the filing of a
registration statement on Form S-4 (the "Form S-4") (Form S-1 and Form S-4
are collectively the "Registration Statements") with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"or the "1933 Act"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR Act"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Seller or the Company or the consummation by
Seller or the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
would not, individually or in the aggregate, have a "Company Material
Adverse Effect," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the
Company or any Company Subsidiary.
4.4 Capitalization.
4.4.1 The authorized capital stock of the Company consists of 10,000
shares of Company Stock, of which the number of shares set forth on
Schedule 4.4 are issued and outstanding. The authorized capital stock of
each of the Company Subsidiaries, if any, and the number of such shares
issued and outstanding is completely and accurately set forth in Schedule
4.4. All of such issued and outstanding shares are validly issued and are
fully paid, nonassessable and free of preemptive rights. Seller owns
beneficially and of record all of the issued and outstanding shares of the
Company Stock, which shares constitute all of the outstanding shares of
capital stock of the Company. The Members and the additional Persons set
forth on Schedule 4.4 are all of the stockholders of the Company. The
Members own beneficially and of record, and upon contribution thereof to
Seller, Seller will own beneficially and of record, the issued and
outstanding shares of the Company Stock as set forth on Schedule 4.4, which
shares, together with the shares held by the additional Persons set forth
on Schedule 4.4, constitute all of the outstanding shares of capital stock
of the Company. The Company owns such shares or other equity interests of
the Company's Subsidiaries as indicated on Schedule 4.4, in each case free
and clear of all Liens, and the Company has good and marketable title to
such shares of the Company Subsidiaries. All of such issued and outstanding
shares are validly issued and are fully paid, nonassessable and free of
preemptive rights.
9
<PAGE>
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such agreement or commitment or obligating Seller
or the Company or any Company Subsidiary to convey or transfer any Company
Stock or Company Subsidiary stock, as the case may be. As of the Closing
Date, there will be no voting trusts, proxies or other agreements or
understandings to which the Company or any Company Subsidiary is a party or
is bound with respect to the voting of any shares of capital stock or other
equity interests of the Company or any Company Subsidiary.
4.5 Year 2000. To the Knowledge of Seller or the Company, all of the
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company or any
Company Subsidiary in the conduct of the Business will not malfunction, will not
cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth (20/th/) and twenty-first (21/st/) centuries
and (ii) date-related data in connection with any valid date in the twentieth
(20/th/) and twenty-first (21/st/) centuries, except for any malfunctions or
generations of incorrect data or results that would not individually or in the
aggregate have a Company Material Adverse Effect. Nothing in this Section 4.5
is intended or shall be construed as a representation or warranty with respect
to embedded systems.
4.6 Financial Statements. Seller and the Company have previously furnished
to CenterPoint copies of the audited consolidated balance sheets of the Company
as of June 30 in each of the years 1997 and 1998 and unaudited consolidated
balance sheet of the Company for the six month period ending December 31, 1998
(the "Latest Balance Sheet"), and the related audited consolidated statements of
income, stockholders' equity and cash flow for each of the years in the three
(3) year period ended June 30, 1998, including all notes thereto, and related
unaudited consolidated statements of income, stockholders' equity and cash flow
for the six month period ending December 31, 1998, including all notes thereto
(collectively, the "Financial Statements"). Each of the Financial Statements is
accurate and complete in all material respects, is consistent with the books and
records of the Company and the Company Subsidiaries (which, in turn, are
accurate and complete in all material respects), and fairly presents in all
material respects the financial condition, assets and liabilities of the Company
and the Company Subsidiaries as of its date and the results of operations and
cash flows for the periods related thereto, in each case in accordance with
generally accepted accounting principles, applied on a consistent basis
("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the
10
<PAGE>
Financial Statements or (ii) liabilities and obligations which have arisen after
the date of the Latest Balance Sheet in the ordinary course of business and
consistent with past custom and practices (none of which is a liability
resulting from a breach of contract, breach of warranty, tort, infringement
claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Company's and the Company
Subsidiaries' past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
4.9, since the date of the Latest Balance Sheet, each of the Company and the
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim, or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
11
<PAGE>
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
15.4) of the Company or any Company Subsidiary, except bonuses and
distributions to employees and stockholders of the Company disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary of any material obligation or liability, other than
current liabilities paid in the ordinary course of its business consistent
with past custom and practices;
12
<PAGE>
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
4.14.1);
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which Seller or the Company
has Knowledge, is reasonably expected to result in a Company Material
Adverse Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall disclose
the parties to, nature of and relief sought for each matter to be disclosed on
Schedule 4.10):
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of Seller or the Company, threatened
against the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any such
plan (or pending or, to the Knowledge of Seller or the Company, threatened
against any of the officers, directors, members, partners or employees of
the Company or any Company Subsidiary with respect to its business or
proposed business activities), or to which the Company or any Company
Subsidiary is otherwise a party, or that is reasonably expected to have a
Company Material Adverse Effect, before any court, or before any
Governmental Authority (each an "Action" and collectively, the "Actions");
nor, to the Knowledge of Seller or the Company, is there any basis for any
such Action.
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither the Company nor any Company Subsidiary, to
the Knowledge of Seller or the Company, is otherwise exposed, from a legal
standpoint, to any liability or
13
<PAGE>
disadvantage that is reasonably expected to result in a Company Material
Adverse Effect, and neither the Company nor any Company Subsidiary is a
party to any legal action to recover monies due it or for damages sustained
by it, other than collection of past due charges for services rendered or
expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation matters
to which the Company or any Company Subsidiary was a party during the five
(5) year period preceding the Closing Date, the date such litigation was
commenced and concluded, and the nature of the resolution thereof
(including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules 4.11
and 4.19, each of the Company and the Company Subsidiaries has complied in all
material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "Laws") applicable to it or to the
operation of the Business, and neither Seller, the Company nor any Company
Subsidiary has received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of Seller or the Company, no event has occurred or
circumstances exist that (with or without notice or lapse of time) is reasonably
expected to constitute or result in a violation by the Company or any Company
Subsidiary of any Law that gives rise to any liability on the part of the
Company or any Company Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and the
Company Subsidiaries that are material to the conduct of the Business.
"Licenses" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12 lists
all licenses, certificates, approvals, registrations and other similar documents
and authorizations, and applications therefor, relating to the practice of
public accountancy (the "Accounting Licenses") held by the Company or a Company
Subsidiary and issued by, or submitted by the Company or any Company Subsidiary
to any Governmental Authority or other Person. All such Licenses and Accounting
Licenses are valid, binding and in full force and effect. Except as described on
Schedule 4.12, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
any such Licenses. To the Knowledge of Seller or the Company, the Company and
the Company Subsidiaries have taken all necessary action to maintain such
Licenses. No loss or expiration of any such License is pending or, to Seller's
or the Company's Knowledge, threatened or reasonably foreseeable.
14
<PAGE>
4.13 Material Contracts. Except as listed or described on Schedule 4.13
(such contracts, or those which should have been listed on Schedule 4.13, are
herein referred to as the "Material Contracts"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"Contract" and collectively, the "Contracts") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services, (other than
consulting agreements that may be terminated by the Company or a Company
Subsidiary on not more than 30 days notice without penalty), employment
agreement, change-in-control agreement, or collective bargaining
arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
15
<PAGE>
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in either case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
Seller and the Company have provided CenterPoint with a true and complete
copy of each written Material Contract and a true and complete summary of each
oral Material Contract, in each
16
<PAGE>
case including all amendments or other modifications thereto. Except as set
forth on Schedule 4.13, each Material Contract is a valid and binding obligation
of, and enforceable in accordance with its terms against, the Company or a
Company Subsidiary, as applicable, and, to the Knowledge of Seller or the
Company, the other parties thereto, and is in full force and effect, subject
only to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and equitable principles. Except as set forth on
Schedule 4.13, the Company or one of the Company Subsidiaries, as applicable,
has performed in all material respects all obligations required to be performed
by it as of the date hereof and will have performed in all material respects all
obligations required to be performed by it as of the Closing Date under each
Material Contract and neither the Company or Company Subsidiary, as applicable,
nor, to the Knowledge of Seller or the Company, any other party to any Material
Contract is in breach or default thereunder, and, to the Knowledge of Seller or
the Company, there exists no condition which would, with or without the lapse of
time or the giving of notice, or both, constitute a breach or default
thereunder. Neither Seller nor the Company has been notified that any party to
any Material Contract intends to cancel, terminate, not renew, or exercise an
option under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
4.14 Properties.
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "Owned Property") and all real
property leased by the Company (the "Leased Property"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "Real Property"), in each case free and clear of all Liens, assessments
or restrictions (including, without limitation, inchoate liens arising out
of the provision of labor, services or materials to any such real estate)
other than (a) mortgages shown on the Financial Statements as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of
the property, if any, none of which materially impairs the current
operations of the Company, any Company Subsidiary or the Business, and (ii)
zoning laws and other land use restrictions or restrictive covenants that
do not materially impair the present use of the property subject thereto,
and (d) Liens, assessments, and restrictions pursuant to and by virtue of
the terms of the lease of the Leased Property. The Real Property
constitutes all real properties reflected on the Financial
17
<PAGE>
Statements or used or occupied by the Company or any Company Subsidiary in
connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
4.14.1-2(a):
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of Seller or the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
4.14.1-2(b):
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of Seller or the Company, no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof; and
(ii) to the Knowledge of Seller or the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the Leased
Property and there is no threatened condemnation or proceeding with respect
thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
Company or one of the Company Subsidiaries has good and marketable title
to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any Liens (other than Liens that
are part of such leasehold or license), and each such asset is in working
order and has been maintained in a commercially reasonable
18
<PAGE>
manner and does not contain, to the Knowledge of Seller or the Company, any
material defect. Except as set forth in Schedule 4.14.2, no personal
property (including, without limitation, software and databases maintained
on off-premises computers) used by the Company or any Company Subsidiary in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement
or is located other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
inventions and discoveries that may be patentable (collectively, the "Patents"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "Marks"), (iii) copyrights
(the "Copyrights"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "Trade Secrets") owned, used or licensed by the
Company or any Company Subsidiary (collectively, the "Intellectual Property")
are all those necessary to enable the Company and the Company Subsidiaries to
conduct and to continue to conduct the Business substantially as it is currently
conducted. Schedule 4.15 contains a complete and accurate list of all material
Patents, Marks and Copyrights and a brief description of all material Trade
Secrets owned, used by or directly licensed to the Company or any Company
Subsidiary, and a list of all material license agreements and arrangements with
respect to any of the Intellectual Property to which the Company or any Company
Subsidiary is a party, whether as licensee, licensor or otherwise (collectively,
the "Intellectual Property Licenses"). Except as set forth on Schedule 4.15, (i)
all of the Intellectual Property is owned or, to the Knowledge of Seller or the
Company, used under a valid Intellectual Property License, by the Company or one
of the Company Subsidiaries, and is free and clear of all Liens and other
adverse claims; (ii) none of Seller, the Company nor any Company Subsidiary has
received any written notice that it is or has infringed on, misappropriated or
otherwise conflicted with, or otherwise has Knowledge that it is infringing on,
misappropriating, or otherwise conflicting with the intellectual property rights
of any third parties; (iii) there is no claim pending or, to the Knowledge of
Seller or the Company, threatened against the Company or any Company Subsidiary
with respect to the alleged infringement or misappropriation by the Company or
Company Subsidiary, or a conflict with, any intellectual property rights of
others; (iv) the operation of any aspect of the Business in the manner in which
it has heretofore been operated or is presently operated does not give rise to
any such infringement or misappropriation; and (v) there is no infringement or
misappropriation of the Intellectual Property by a third party or claim, pending
or, to the Knowledge of Seller or the Company, threatened, against any third
party with respect to the alleged infringement or misappropriation of the
Intellectual Property.
4.16 Taxes.
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
and the Company Subsidiaries has timely and accurately prepared and filed
or been included in or will timely and accurately prepare and file or be
included in all federal, state, local and foreign returns, declarations and
reports, information returns and statements (collectively, the "Returns")
for Taxes (as defined in Section 4.16.2) required to be filed by or with
respect to the Company or the Company Subsidiaries before the Closing Date,
and has paid
19
<PAGE>
or caused to be paid, or has made adequate provision or set up an adequate
accrual or reserve for the payment of, all Taxes required to be paid in
respect of the periods for which Returns are due on or prior to the Closing
Date, and will establish an adequate accrual or reserve for the payment of
all Taxes payable in respect of the period, including portions thereof,
subsequent to the last of said periods required to be so accrued or
reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. Seller and the Company have delivered to CenterPoint
true and complete copies of all Returns referred to in the first sentence
of this Section 4.16.1 (including any amendments thereof) for the five (5)
most recent taxable years. Neither the Company nor any Company Subsidiary
is delinquent in the payment of any Tax, and no material deficiencies for
any Tax, assessment or governmental charge have been threatened, claimed,
proposed or assessed. No waiver or extension of time to assess any Taxes
has been given or requested. No written claim, or any other claim, by any
taxing authority in any jurisdiction where the Company or any Company
Subsidiary does not file Tax returns is pending pursuant to which the
Company or Company Subsidiary, as applicable, is or may be subject to
taxation by that jurisdiction. The Company's and the Company Subsidiaries'
Returns were last audited by the Internal Revenue Service or comparable
state, local or foreign agencies on the dates set forth on Schedule 4.16.1-
2.
4.16.2 For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, withholdings, fees, levies, penalties, additions, interest
or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
4.17.1 Except as described in Schedule 4.17.1, neither the Company nor
any Company Subsidiary has or is reasonably expected to have any liability
(including contingent liability) whether direct or indirect (and regardless
of whether it would be derived from a current or former Plan Affiliate, as
defined in Section 4.17.5(c)) with respect to any of the following (whether
written, unwritten or terminated): (i) any employee welfare benefit plan,
as defined in Section 3(1) of "ERISA," including, but not limited to, any
medical plan, life insurance plan, short-term or long-term disability plan
or dental plan; (ii) any "employee pension benefit plan," as defined in
Section 3(2) of ERISA (as defined in Section 4.17.5(b)), including, but not
limited to, any excess benefit plan, top hat plan or deferred compensation
plan or arrangement, nonqualified retirement plan or arrangement, qualified
defined contribution or defined benefit arrangement; or (iii) any other
benefit plan, policy, program, arrangement or agreement, including, but not
limited to, any material fringe benefit plan or program, personnel policy,
bonus or incentive plan, stock option, restricted stock, stock bonus,
holiday pay, vacation pay, sick pay, bonus program, service
20
<PAGE>
award, moving expense, reimbursement program, tool allowance, safety
equipment allowance, deferred bonus plan, salary reduction agreement,
change-of-control agreement, employment agreement or consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "prohibited transaction," as such terms
are defined in ERISA or the Code; (ii) breached a fiduciary obligation or
(iii) any liability for any failure to act or comply in connection with the
administration or investment of the assets of such plan; and no Employee
Plan has any liability and there is no liability in connection with any
Employee Plan, other than a liability (i) which is expressly and adequately
reflected in the Latest Balance Sheets, (ii) which is discretionary or
terminable at will by the Company or one of the Company Subsidiaries
without incurring any such liability, or (iii) which is adequately funded
under a funding arrangement separate from the assets of the Company, any
Company Subsidiary or a Plan Affiliate (and only to the extent of such
funding). Any contribution made or accrued with respect to any Employee
Plan is fully deductible by the Company, a Company Subsidiary or a Plan
Affiliate.
21
<PAGE>
4.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple employer
welfare arrangement" within the meaning of Section 3(40) of ERISA, (v)
subject to the funding requirements of Section 412 of the Code or to Title
IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "Employee Plan" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("First Person"), the term "Plan
Affiliate" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or
which would be treated or have been treated with the First Person as
under common control or whose employees would be or have been treated
as employed by the First Person, under Section 414 of the Code or
Section 4001(b) of ERISA and any regulations, administrative rulings
and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no,
and within the last three (3) years neither the Company nor any Company
Subsidiary has experienced any, strike, picketing, boycott, work stoppage or
slowdown or other similar labor dispute, union organizational activity,
allegation, charge or complaint of unfair labor practice, employment
discrimination or other matters relating to the employment of labor pending or,
to the Knowledge of Seller or the Company, threatened against the Company or any
Company Subsidiary, or that is reasonably expected to affect the Company or any
Company Subsidiary; nor, to the Knowledge of Seller or the Company, is there any
basis for any such allegation, charge, or complaint. There is no request for
representation pending and, to the Knowledge of Seller or the Company, no
question concerning representation has been raised. There is no grievance
pending that is reasonably expected to result in a Company Material Adverse
Effect nor any arbitration proceeding arising out of a union agreement. To the
Knowledge of Seller or the Company, no employee who is key to the Business and
no group of employees has announced or otherwise indicated any plans to
terminate employment with the Company or any Company Subsidiary. Each of the
Company and any Company Subsidiary has complied with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. Neither the Company nor any
22
<PAGE>
Company Subsidiary is liable for any arrears of wages or any taxes or penalties
for failure to comply with any such laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Operating Committee of Seller and the Board of Directors of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company or Company Subsidiary (other than those present in
office supplies and cleaning/maintenance materials) for which the Company or a
Company Subsidiary is or is reasonably expected to be responsible, or otherwise
have any liability, for response costs under any Environmental and Safety
Requirements; (iii) each of the Company and the Company Subsidiaries has
disposed of all waste materials generated by the Company or such Company
Subsidiary at any real property currently or formerly owned, leased or used by
the Company or Company Subsidiary in compliance with applicable Environmental
and Safety Requirements; and (iv) there are and have been no facts, events,
occurrences or conditions at or related to any real property currently or
formerly owned, leased or used by the Company or Company Subsidiary that is
reasonably expected to cause or give rise to liabilities or response obligations
of the Company or any Company Subsidiary under any Environmental and Safety
Requirements. The term "Environmental and Safety Requirements" means any
federal, state and local laws, statutes, regulations or other requirements
relating to the protection, preservation or conservation of the environment or
worker health and safety, all as amended or reauthorized. The term "Hazardous
Materials" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery Act,
42 U.S.C. (S) 6901 et seq., asbestos in any form or condition, polychlorinated
biphenyls and any other material, substance or waste to which liability or
standards of conduct may be imposed under any Environmental and Safety
Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To
Seller's or the Company's Knowledge, each of the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
correct list of all such insurance policies. None of Seller, the Company nor
any Company Subsidiary has received any notice of cancellation or intent to
cancel or increase premiums with respect to such insurance policies. Schedule
4.20 also contains a list of all claims or asserted claims reported to insurers
under such policies relating to the ownership or interest in the Company's and
the Company Subsidiaries' assets, or operation of the Business, including all
professional malpractice claims and similar types of claims, actions or
proceedings asserted against the Company or any Company Subsidiary arising out
of the Business at any time within the past three (3) years.
23
<PAGE>
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
as described on Schedule 4.21 and except for ownership as an investment of not
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of Seller, the Company, any Member, any Affiliate of a Member nor
any Affiliate of Seller, the Company or any Company Subsidiary (i) possesses,
directly or indirectly, any financial interest in, or is a director, officer,
employee or affiliate of, any Person that is a client, supplier, customer,
lessor, lessee or competitor of the Company or any Company Subsidiary, (ii)
owns, directly or indirectly, in whole or in part, or has any interest in any
tangible or intangible property used in the conduct of the Business, or (iii) is
a party to an agreement or relationship, that involves the receipt by such
Person of compensation or property from the Company or any Company Subsidiary
other than through a customary employment relationship or through distributions
made with respect to the Company Stock or equity interests in any Company
Subsidiary (provided such distributions have been made consistent with the
Company's or any Company Subsidiary's, as the case may be, past custom and
practices). Schedule 4.21 sets forth the parties to and the date, nature and
amount of each transaction during the last five years involving the transfer of
any cash, property or rights to or from the Company or any Company Subsidiary
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Stock)
("Affiliate Transactions"), and any existing commitments of the Company or any
Company Subsidiary to engage in the future in any Affiliate Transactions.
Except as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenue for the twelve (12) months ended December 31,
1998. Except as set forth on Schedule 4.22, since December 31, 1998, none of
such clients has canceled or substantially reduced its business with the Company
or Company Subsidiary, as applicable, nor are any of such clients threatening to
do so. To the Knowledge of Seller or the Company, no client that accounts for
one percent (1%) or more of the Company's consolidated net revenue, or supplier
of the Company or any Company Subsidiary, will cease to do business with, or
substantially reduce its business with, the Company or any Company Subsidiary,
as applicable, after the consummation of the transactions contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiaries' ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
and Company
24
<PAGE>
Subsidiaries' ordinary course of business, consistent with past custom and
practices. The term "general increase" as used herein means any increase
generally applicable to a class or group, but does not include increases granted
to individuals for merit, length of service or change in position or
responsibility made on the basis of the custom and past practices of the Company
or any Company Subsidiary. Schedule 4.23 includes the date and amount of the
last bonus or similar distribution or increase in compensation for each listed
individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each
bank in which the Company or any Company Subsidiary has an account or safe
deposit box, the number of each such account or box, and the names of all
Persons authorized to draw thereon or to have access thereto.
4.25 Professional Credentials. Each Member is a Certified Public
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Members by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
Seller or the Company contained in this Agreement or in any of the
certification, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to CenterPoint as contemplated by any provision
hereof contains any untrue statement regarding a material fact or omits to state
a material fact necessary in order to make the statements made herein or therein
not misleading. To the Knowledge of Seller or the Company, there is no fact or
circumstance that has not been disclosed to CenterPoint herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
5.1 Several Representations and Warranties. Each Member, severally and
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
5.1.1 Capitalization. Except as set forth on Schedule 4.4, such
Member owns, and immediately prior to the contribution thereof by such
Member to the capital of Seller, such Member will own beneficially and of
record, and has and will have good and marketable title to, all of the
issued and outstanding shares of the Company Stock as set forth opposite
the name of such Member in Schedule 4.4, free and clear of all Liens. Upon
contribution of such Company Stock to the capital of Seller, Seller will
acquire, and at the Closing as
25
<PAGE>
provided in this Agreement, CenterPoint will acquire, good and valid title
to such Company Stock, free and clear of any Lien other than any Lien
created by CenterPoint.
5.1.2 Authority. Such Member has full right, capacity, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by such Member, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Member, enforceable against such Member in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
5.1.3 Non-Contravention. The execution and delivery of this
Agreement by such Member does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of Seller, the
Company or any Company Subsidiary under, any of the terms, conditions or
provisions of (i) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to such Member, except for those items relating to
regulating, licensing or permitting the practice of public accountancy or
(ii) other than those licenses, franchises, permits, concessions or
instruments of any Governmental Authority, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
such Member is a party or by which such Member may be bound or affected.
The consummation by such Member of the transactions contemplated hereby
will not result in a violation, conflict, breach, right of termination,
creation or acceleration of Liens under the of the terms, conditions or
provisions of the items described in clauses (i) and (ii) of the
immediately preceding sentence, subject to obtaining (prior to the Closing
Date) the consents set forth on Schedule 4.3.2 and except for those items
described above relating to regulating, licensing or permitting the
practice of public accountancy and any filing which may be required under
the HSR Act.
5.1.4 Approvals. To the Knowledge of such Member, and except with
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Member or the consummation by such
Member of the transactions contemplated hereby.
26
<PAGE>
5.1.5 Litigation. Except as set forth on Schedule 5.1.5, there is no
action, claim, suit, proceeding (disciplinary or otherwise), arbitration or
investigation pending, or to the Knowledge of such Member, threatened
against such Member relating to (i) the transactions contemplated by this
Agreement, (ii) any action taken by such Member or contemplated by such
Member in connection with the consummation by such Member of the
transactions contemplated hereby or (iii) the practice of public
accountancy by such Member.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Member or obligating such Member to grant, extend or enter into any
such agreement or commitment or obligating such Member to convey or
transfer any Company Stock. As of the Closing Date, there will be no
voting trusts, proxies or other agreements or understandings to which such
Member is a party or is bound with respect to the voting of any shares of
capital stock or other equity interests of the Company other than the
Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
such Member contained in this Agreement or any of the written statements or
certificates furnished at or prior to the Closing by or on behalf of such
Member to CenterPoint or its representatives in connection herewith or
pursuant hereto, contains any untrue statement of a material fact, or omits
or will omit to state any material fact required to make the statements
contained herein or therein not misleading.
5.1.8 Representations and Warranties of Seller and the Company. To
such Member's actual knowledge, the representations and warranties of
Seller and the Company set forth in Article IV of this Agreement are true
and correct.
5.2 Joint and Several Representations and Warranties. The Members jointly
and severally represent and warrant to CenterPoint that the authorized capital
stock of the Company consists of 10,000 shares of Company Stock, of which the
number of shares set forth on Schedule 4.4 are issued and outstanding, all of
which are validly issued and are fully paid, nonassessable and free of
preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to Seller, the Company and the Members
as of the date hereof and, subject to Section 7.3, as of the date on which
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
27
<PAGE>
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Seller and the Company.
6.2 Capitalization.
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in the Form S-1 will be issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be issued and outstanding. Other than (i) shares of CenterPoint
Common Stock issued pursuant to a split of the shares outstanding as of the
date of this Agreement, (ii) shares of CenterPoint Common Stock issued in
accordance with the Acquisition and the Other Acquisitions, and (iii)
shares of CenterPoint Common Stock that may be issued to new members of
management in lieu of shares previously issued to current members of
management, but which will not increase the number of shares of outstanding
CenterPoint Common Stock, no shares of CenterPoint Common Stock will be
issued prior to the consummation of the IPO. Mergersub's authorized capital
stock consists solely of 1,000 shares of common stock, par value $.01 per
share (the "Mergersub Stock"), all of which are issued and outstanding, are
owned free and clear of any Liens by CenterPoint, and are fully paid,
nonassessable and free of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Seller in the Acquisition will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
capital stock of Professional Service Group, Inc., a Delaware corporation, and
Mergersub (and similar entities created for similar purposes with respect to the
Other Agreements) CenterPoint has no subsidiaries
28
<PAGE>
and it does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Boards of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by
Seller, the Company and the Members, constitutes a valid and legally
binding agreement of CenterPoint and Mergersub, enforceable against each of
them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to CenterPoint or Mergersub or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CenterPoint or
Mergersub is now a party or by which CenterPoint, Mergersub or any of their
respective properties or assets, may be bound or affected, except those
items described in clause (ii) relating to regulating, licensing or
permitting the practice of public accountancy. The consummation by
CenterPoint and Mergersub of the transactions contemplated hereby will not
result in any violation, conflict, breach, right of termination or
acceleration or creation of Liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory
Approvals and except for those items described in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration
29
<PAGE>
Statements by the SEC and filings, if required, with various state
securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy (the filings and
approvals referred to in clauses (i) through (iii) are collectively
referred to as the "CenterPoint Required Statutory Approvals") no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by CenterPoint
or Mergersub or the consummation by CenterPoint or Mergersub of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
made or obtained, as the case may be, are not reasonably expected to, in
the aggregate, have a material adverse effect on the business operations,
properties, assets, condition (financial or other), results of operations
or prospects of CenterPoint and its subsidiaries, taken as a whole (a
"CenterPoint Material Adverse Effect").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the
Acquisition or the IPO or which could reasonably be expected, either alone or in
the aggregate with all such claims, actions or proceedings, to have a
CenterPoint Material Adverse Effect. CenterPoint is not subject to any
unsatisfied or continuing judgment, order or decree of any court or Governmental
Authority. CenterPoint is not a party to any legal action to recover monies due
it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to Seller, the Company or the Members as
contemplated by any provision hereof contains any untrue statement of a material
fact or omits
30
<PAGE>
to state a material fact necessary to make the statements contained herein or
therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to the Company herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Pending the Acquisition.
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects conduct the Business in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or
reclassify its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property
or otherwise except dividends or distributions which (A) are
consistent with past customs and practices and (B) do not result in a
Company Material Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
31
<PAGE>
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated on Schedule 4.9, not (i) increase in
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of the
Company or any Company Subsidiary, as applicable, (ii) pay or agree to
pay any additional pension, retirement allowance or other employee
benefit under any Employee Plan to any such Person, whether past or
present, (iii) enter into any new employment, severance, consulting,
or other compensation agreement with any of its existing employees,
partners, members or owners, (iv) amend or enter into a new Employee
Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any businesses or any Person or
division thereof or otherwise acquire or agree to acquire any assets
in each case which are material to it other than in the ordinary
course of business in a manner consistent with past customs and
practices;
(j) not sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of,
any of its assets other than in the ordinary course of business,
consistent with past customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual course
and consistent with past custom and practices.
32
<PAGE>
7.1.2 Prior to the Closing, the Members shall have (a) formed a
separate Person ("Attest Entity") pursuant to Organizational Documents
reasonably acceptable in form and substance to CenterPoint and (b) used
their diligent efforts to have secured, or have caused the Attest Entity to
have secured, all licenses, permits, approvals and authorizations necessary
to conduct the Attestation Practice in accordance with applicable laws and
regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Members, Seller or the
Company shall take, or permit any Company Subsidiary to take, any action
that would or is reasonably likely to result in any of the representations
or warranties of the Members, Seller and the Company set forth in this
Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X (other than
Section 10.1(i)) not being satisfied.
7.1.4 Prior to the Closing, (i) the Company and/or the Members, as
applicable, shall terminate, without any liability to the Company or the
Company Subsidiaries, all agreements relating to the voting of the
Company's capital stock, and all agreements and obligations of the Company
and the Company Subsidiaries relating to borrowed money and/or involving
payments to or for the benefit of a Member or present or former stockholder
of the Company, or an Affiliate or family member of a Member or present or
former stockholder of the Company, including without limitation those set
forth on Schedule 7.1.4(i), but excluding (A) debt reflected on Schedule
2.1 as Debt Assumed By CenterPoint, (B) items reflected on Schedule 2.5,
(C) to the extent such agreements and obligations result in Indirect Costs
under the Incentive Compensation Agreement, (D) that certain lease
agreement dated July 11, 1996, by and between the Company and BDM&P,
Limited Liability Company, and (E) items approved by CenterPoint in
writing; and (ii) notwithstanding anything contained in this Section 7.1 to
the contrary, the Company will sell, transfer and distribute the assets
listed on Schedule 7.1.4(ii) (the "Excluded Assets"), including, without
limitation, any fees and expenses receivable not necessary to meet the
Target or otherwise satisfy the obligations of the Company or the Members
hereunder, to the Persons listed on Schedule 7.1.4(ii), subject to all
liabilities and obligations of any nature (whether known or unknown,
accrued, absolute, contingent, direct, indirect, perfected, inchoate,
unliquidated or otherwise) relating to the Excluded Assets (collectively,
the "Excluded Liabilities"); provided, however, that prior to the Closing,
the Company and the Members shall obtain novations or other releases or
agreements discharging the Company from all Excluded Liabilities (so that
the respective Excluded Liabilities will become direct liabilities and
obligations of the assignee), and provide copies thereof to CenterPoint.
7.1.5 From and after the date hereof, the Company shall use its best
efforts to acquire, effective on or before the Closing, all of the
outstanding interests in BDM&P Decision Development, LLC which are not
owned by the Company, on terms and conditions satisfactory to CenterPoint.
33
<PAGE>
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, Seller, the Company and the Members shall
(i) not, and each of Seller and the Company shall use its diligent efforts
to cause the Company Subsidiaries and any officer, director or employee of,
or any attorney, accountant, investment banker, financial advisor or other
agent retained by Seller, the Company or any Company Subsidiary not to,
initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of the Company
or any Company Subsidiary, or any capital stock or other equity interest of
Seller, the Company or any Company Subsidiary, whether by merger, purchase
of assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture or
partnership or similar arrangement, and (ii) promptly advise CenterPoint of
the terms of any communications Seller, the Company or the Members may
receive or become aware of relating to any bid for part or all of Seller,
the Company or any Company Subsidiary.
(b) Seller, the Company and the Members (i) acknowledge that a breach
of any of their covenants contained in this Section 7.2 will result in
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "Schedules") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
however, that no amendment or supplement to a Schedule that constitutes or
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
Companies consent to such amendment or supplement. No amendment of or supplement
to a Schedule shall be made later than three (3) business days prior to the
anticipated effectiveness of the Form S-1. For all purposes of this Agreement,
including, without limitation, for purposes of determining whether the
conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but Seller, the Company and a majority of the Members
do not, Seller, the Company and a majority of the Members may terminate this
Agreement at any time prior to the Closing Date. In the event that (i) Seller,
the Company or the Members seek to amend or supplement a Schedule pursuant to
this Section 7.3, (ii) such amendment or supplement constitutes or reflects a
Company Material Adverse Effect or affects
34
<PAGE>
Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority
of the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to Seller's, the Company's or any Member's
breach of a representation or warranty as of the date of this Agreement in which
case the Company shall pay to CenterPoint, as CenterPoint's exclusive remedy
(notwithstanding anything to the contrary) and as liquidated damages, and not as
a penalty, an amount equal to $2,000,000 (the "Liquidated Damages Amount"). The
Company agrees that in the case of such termination CenterPoint and the Founding
Companies (excluding the Company) will sustain immediate and irreparable
economic harm and loss of goodwill and that actual losses suffered by such
parties will be difficult, if not impossible, to ascertain, but the Liquidated
Damages Amount set forth herein is reasonable and has been arrived at after a
good faith effort to estimate such losses. Payment of the Liquidated Damages
Amount shall be made in cash to CenterPoint within thirty (30) days of a
termination pursuant to this Section 7.3 in connection with an amendment of or
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement.
7.4 Company Stockholders Meeting. The Company shall take all action in
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Company's
stockholders to be held on the earliest practicable date determined in
consultation with CenterPoint to consider and vote upon approval of the Merger,
this Agreement and the transactions contemplated hereby. The Company shall
solicit the approval of the Merger, this Agreement and the transactions
contemplated hereby by the Company's stockholders, and the Company's Board of
Directors shall recommend approval of the Merger, this Agreement and the
transactions contemplated hereby by the Company's stockholders.
7.5 Conversion. Prior to the Closing, Seller and the Members shall
complete, and shall cause the Company to complete, and the Company shall
complete, the Conversion, pursuant to applicable law and present such evidence
of the Conversion at the Closing, as CenterPoint or its counsel may require.
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an
35
<PAGE>
"Underwriter" and collectively, the "Underwriters") and their counsel
(collectively, the "CenterPoint Representatives"), and to the other
Founding Companies and their accountants, counsel, financial advisors and
other representatives, and CenterPoint shall afford to the Members, Seller
and the Company and their accountants, counsel, financial advisors and
other representatives (the "Company Representatives"), upon reasonable
notice, full access during normal business hours throughout the period
prior to the Closing Date to all of its respective properties, books,
contracts, commitments and records (including, but not limited to,
financial statements and Tax Returns) and, during such period, shall
furnish promptly to one another all due diligence information requested by
the other party. CenterPoint shall hold and shall use its best efforts to
cause the CenterPoint Representatives to hold, and the Members, Seller and
the Company shall hold and shall use their best efforts to cause the
Company Representatives to hold, in strict confidence all non-public
information furnished to it in connection with the transactions
contemplated by this Agreement, except that each of CenterPoint, the
Members and the Company may disclose any information that it is required by
law or judicial or administrative order to disclose. In addition,
CenterPoint will cause each of the other Founding Companies and their
members and stockholders to enter into a provision similar to this Section
8.1 requiring each such Founding Company to keep confidential any
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Company based on the information in such material shall
be destroyed (and CenterPoint and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy such documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by
an authorized officer supervising such destruction.
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, Seller, the Company and the Members shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with making such filings. All
information provided and to be provided by CenterPoint Seller, the Members
and the Company, respectively, for use in the Registration Statements shall
be true and correct in all material respects without
36
<PAGE>
omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the
circumstances under which given or made. Seller, the Company and the
Members agree promptly to advise CenterPoint if at any time during the
period in which a prospectus relating to the offering or the Merger is
required to be delivered under the Securities Act, any information
contained in the prospectus concerning the Company, the Company
Subsidiaries, Seller or the Members becomes incorrect or incomplete in any
material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
8.2.2 CenterPoint agrees that it will provide to Seller and its
counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto) unless Seller
and its counsel (x) have had at least two days to review the revised
information contained therein (which changes shall be highlighted by
computer generated marks indicating the additions and deletions made from
the prior draft reviewed by Seller's counsel) and (y) have not objected to
the substance of the information contained therein. Any objections posed by
Seller or its counsel shall be in writing and state with specificity the
material in question, the reason for the objection, and Seller's proposed
alternative. If the objection is founded upon a rule promulgated under the
Securities Act, the objection shall cite the rule. Notwithstanding the
foregoing, during the five (5) business days immediately preceding the date
scheduled for the filing of the Registration Statements and any amendment
thereto, Seller and its counsel shall be obligated to respond to proposed
changes electronically transmitted to them within two (2) hours from the
time the proposed changes (in the case of the initial filing of the
Registration Statements, from the last circulated draft of the Registration
Statements; and, in the case of any subsequent filing of the Registration
Statements or any amendment thereof, from the most recently filed
Registration Statements or amendment thereof) are transmitted to Seller's
counsel; provided, that, CenterPoint has provided to Seller or its counsel
reasonable advance notice of such proposed changes; provided, further, that
such changes are highlighted by computer generated marks indicating the
additions and deletions made from the prior draft reviewed by Seller's
counsel.
8.2.3 CenterPoint will advise the Member Representative of the
effectiveness of the Registration Statements, advise the Member
Representative of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written request
of Seller, CenterPoint will furnish to Seller a reasonable number of copies
of the final prospectus associated with the IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither Seller, the Company nor the Members will be liable for
any portion of the above expenses in
37
<PAGE>
the event the IPO is not completed. CenterPoint shall also pay the underwriting
discounts and commissions payable in connection with the sale of CenterPoint
Common Stock in the IPO. All other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint, Seller and the Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the fourth
anniversary of the Closing Date, whenever CenterPoint proposes to register
any CenterPoint Common Stock for its own account or the account of others
under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give Seller and the Member Representative prompt written
notice of its intent to do so. Promptly after receipt of such notice,
Seller and the Member Representative shall provide written notice to
CenterPoint of all Members (and their respective current mailing address)
that beneficially own shares of CenterPoint Common Stock. Thereafter, upon
the written request of Seller or any of the Members given within thirty
(30) days after receipt of such notice, CenterPoint will use its best
efforts to cause to be included in such registration all of the CenterPoint
Common Stock which Seller or any such Member requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by Seller or any Member at any time when such
shares are not then transferable in accordance with Section 12.2 hereof.
Registration rights under this Section 8.6 may be transferred in whole or
in part in
38
<PAGE>
connection with the transfer of any shares of CenterPoint Common Stock
received pursuant to this Agreement other than the transferee of the kind
described in clause (x) of Section 12.2 hereof.
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect
to the CenterPoint Common Stock (and such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be required by applicable law) and use its best
efforts to cause such registration to promptly become and remain
effective for a period of at least one hundred twenty (120) days (or
such shorter period during which holders shall have sold all
CenterPoint Common Stock which they requested to be registered);
(b) upon the written request of a Member whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to
such Member a reasonable number of copies of the prospectus covering
the offering and sale by the Member of the shares to be covered
thereby;
(c) use its best efforts to register and qualify the
CenterPoint Common Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably
request for the distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise Seller and each Member whose CenterPoint Common
Stock is to be covered by such registration of the effectiveness of
such registration statement, advise Seller and each such Member of the
entry of any stop order suspending the effectiveness of such
registration statement or of the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best
efforts promptly to obtain the lifting or removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify
Seller and each Member whose CenterPoint Common Stock is to be covered
by such registration, of the happening of any event as a result of
which the registration statement, the prospectus or any document
incorporated therein by reference includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading and, at the
39
<PAGE>
request of Seller or such Member, prepare and furnish to Seller or
such Member a post-effective amendment or supplement to the
registration statement or the related prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading.
8.6.3 In connection with each registration pursuant to this Section
8.6 covering an underwritten registration public offering, CenterPoint and
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
8.6.4 In consideration of the granting to Seller and the Members of
the registration rights under this Section 8.6, Seller and the Members
agree, and agree to enter into an agreement with the underwriters in
connection with an underwritten registration to the effect, that it/they
will not sell, transfer or otherwise dispose of, including, without
limitation, through put or short sale arrangements, shares of CenterPoint
Common Stock in the ten (10) days prior to the effectiveness of any
registration of CenterPoint Common Stock for sale to the public and for up
to ninety (90) days following the effectiveness of such registration,
provided that all directors, executive officers and holders of more than
five percent (5%) of the outstanding CenterPoint Common Stock agree to the
same restrictions; and further provided that, with respect to the first
public offering of shares of the CenterPoint Common Stock within three (3)
years following the IPO, Seller and the Members shall have been afforded a
meaningful opportunity to include shares in such registration after any
reduction by reason of underwriters' written advice.
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
Date or earlier termination of this Agreement in accordance with its terms,
CenterPoint shall comply in all material respects with all applicable Laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X not being
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
reasonable efforts and good faith to have the Members released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Members' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to
40
<PAGE>
indemnify, defend and hold harmless the Members against any and all claims made
by lenders or landlords under such guarantees.
8.9 Lock-Up Agreement. Seller and each Member agree, and agree to enter
into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, Seller and the
Members will not offer, sell, contract to sell or otherwise dispose of any
shares of CenterPoint Common Stock, or any securities convertible into or
exercisable or exchangeable for CenterPoint Common Stock, for a period of 180
days after the date of the final Prospectus of the IPO without the prior written
consent of the Underwriter except for shares of CenterPoint Common Stock
disposed of as bona fide gifts, subject to any remaining portion of the 180-day
period applying to any shares so disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely filing
of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
8.10.2 Each of Seller, the Company, CenterPoint and the Members shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that all
insurance policies listed, or required to be listed, on Schedule 4.20 will be
maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of Seller,
CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule
7.1.4(ii) using reasonable care and in accordance with the Company's policies in
effect at Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Members. Subject to Sections 9.7 and 9.8, the
Members jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint
41
<PAGE>
Indemnified Party or reimburse a CenterPoint Indemnified Party for, any and all
Losses (hereinafter defined) sustained or incurred by any CenterPoint
Indemnified Party resulting from, arising out of, in connection with or
otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
or other instrument delivered hereunder by any Member or any action, demand
or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the Members
to indemnify, defend and save harmless for any misrepresentation or breach
of representation or warranty made in Section 5.1 hereof or in any
certificate, schedule, document, exhibit or other instrument delivered in
respect thereof shall not be joint and several, but such obligation shall
be several only and limited to the several Member(s) making such
misrepresentation or breach;
(b) any failure by Seller, the Company or any Member to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing, except that the obligation of the Members
to indemnify, defend and save harmless for any breach of a covenant or
agreement by a Member shall not be joint and several, but such obligation
shall be several only and limited to the several Member(s) committing such
breach;
(c) any liability under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
the Company contained in any preliminary prospectus relating to the IPO,
the Registration Statements or any proxy statement or prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising
out of or based upon any omission to state therein a material fact relating
to the Company required to be stated therein or necessary to make the
statements therein not misleading, and not provided to CenterPoint or its
counsel by the Company; provided, however, that such indemnity shall not
inure to the benefit of any CenterPoint Indemnified Party to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and
(i) the Company provided, in writing, corrected information to CenterPoint
or its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included, or (ii)
CenterPoint did not provide the Company and its counsel with the
information required to be provided pursuant to Section 8.2.2, and such
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.1(c); or
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Members, Seller
or the Company in connection with the Acquisition or the transactions
contemplated by this Agreement with respect to brokerage, finders and other
fees or commissions, (ii) disallowance of any tax
42
<PAGE>
deduction to CenterPoint or the Company with respect to any item listed on
Schedule 2.5 and considered in determining Net Working Capital, or with
respect to goodwill and deducted in determining the Tax Accrual and, (iii)
any matter which is or should be listed on Schedule 4.10 or which is listed
on Schedule 7.1.4 hereto, (iv) the Excluded Assets, the Excluded
Liabilities, and the transactions contemplated under Section 7.1.4 and (v)
any payment with respect to Dissenting Shares.
As used herein, the "CenterPoint Indemnified Parties" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "Other Founding Companies"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CenterPoint Indemnified Party" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided, further that the
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
Article IX, the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall be deemed to
be third party beneficiaries of this Agreement.
As used in this Agreement, "Losses" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
defend and save each of the Members and their respective Affiliates, and their
Affiliates' respective officers, directors, employees and agents (each, a
"Member Indemnified Party") forever harmless from and against, and to promptly
pay to a Member Indemnified Party or reimburse a Member Indemnified Party for,
any and all Losses sustained or incurred by any Member Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
43
<PAGE>
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Member Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder; or
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Seller, the Company or the Members, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to Seller, the Company or the
Members required to be stated therein or necessary to make the statements
therein not misleading, to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) Seller, the Company or Members
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Seller, the Member Representative and their counsel with
the information required to be provided pursuant to Section 8.2.2, and such
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "Indemnified Party") receives
notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority
44
<PAGE>
(a "Third Party Claim"), against such Indemnified Party, against which a
party to this Agreement is required to provide indemnification under this
Agreement (an "Indemnifying Party"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "Defense Notice") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Members, may be granted by the Member
Representative (as defined in Section 9.13)), which consent shall not be
unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over,
45
<PAGE>
the defense or settlement of any claim (A) to the extent that claim seeks
an order, injunction or other equitable relief against the Indemnified
Party which, if successful, could materially interfere with the business,
operations, assets, condition (financial or otherwise) or prospects of the
Indemnified Party or (B) in a proceeding to which the Indemnifying Party is
also a party and the Indemnified Party determines in good faith that joint
representation would be inappropriate (and in each case the cost of such
defense shall constitute an amount for which the Indemnified Party is
entitled to indemnification hereunder). If an offer is made to settle a
Third Party Claim which all parties to such Third Party Claim (including
the Indemnifying Party) are prepared to settle and which offer the
Indemnifying Party is permitted to settle under this Section 9.3.3 only
upon the prior written consent of the Indemnified Party, the Indemnifying
Party will give prompt written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent to such firm offer within
(30) calendar days after its receipt of such notice, the Indemnified Party
may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer, plus costs
and expenses paid or incurred by the Indemnified Party through the end of
such (30) day period.
9.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all
direct claims by an Indemnified Party against a party hereto not arising out of
Third Party Claims shall be subject to and benefit from the terms of this
Article IX. Any claim under this Article IX by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim, (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, together with a statement of any available
information regarding such claim, and the Indemnifying Party will have a period
of thirty (30) calendar days within which to satisfy such Direct Claim. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnified Party will be free to pursue such remedies as may be
available to the Indemnified Party under this Article IX.
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
46
<PAGE>
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Members. With respect to representations and
warranties, the Members shall not have any liability pursuant to Section
9.1(a) hereof unless and until and only to the extent that the aggregate
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
Basic Purchase Consideration; provided, however, that this threshold shall
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.2 and 5.1.8 as it relates
to the representation and warranty of Seller and the Company set forth in
Section 4.16, and the Members shall indemnify the CenterPoint Indemnified
Parties for any Losses accruing thereunder in accordance with this Article
IX without regard to such threshold.
9.7.2 Threshold for CenterPoint. With respect to representations and
warranties, CenterPoint shall not have any liability pursuant to Section
9.2(a) hereof unless and until and only to the extent that the aggregate
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
aggregate Basic Purchase Consideration; provided, however, that this
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
shall indemnify the Member Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
threshold.
9.7.3 Limitations on Claims Against the Members. The liability of
all Members for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
Purchase Consideration in the aggregate; provided, however, that such
liability for a Member shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by
47
<PAGE>
such Member or by Seller on behalf of such Member; provided further,
however, that such limitations shall not apply to Losses arising out of
breaches of representations or warranties contained in Sections 5.1.1,
5.1.2, 5.2, and 5.1.8 as it relates to the representation and warranty of
Seller and the Company set forth in Section 4.16, and any Losses accruing
thereunder shall not count towards such limitation.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
Basic Purchase Consideration in the aggregate; provided, however, that this
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the Members,
Seller and the Company; Time Limits on Indemnification Obligations.
Notwithstanding any right of CenterPoint to fully investigate the affairs of
Seller, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Members, Seller and the Company contained in this Agreement or
in any certificate delivered pursuant to any of the foregoing. All such
representations, warranties, covenants and agreements of the Members, Seller and
the Company shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, (i) that the Members' obligations pursuant
to Section 9.1, other than those relating to covenants and agreements to be
performed by the Members after the Closing, shall expire one (1) year after the
Closing, except with respect to obligations arising under or relating to Section
4.16 hereof as it relates to federal, state, local and foreign income taxation,
which shall survive until the earlier of (A) the expiration of the applicable
periods (including any extensions) of the respective statutes of limitation
applicable to the payment of the Taxes or (B) the completion of the final audit
and determinations by the applicable taxing authority and final disposition of
any deficiency resulting therefrom; and (ii) solely to the extent that
CenterPoint actually incurs liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.1(c) or (d)) above shall survive until the
expiration of any applicable statute of limitations with respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
Time Limits on Indemnification Obligations. All representations, warranties,
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
CenterPoint's obligations under Section 9.2, other than those relating to
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one year after Closing, except that, solely to the extent that the
Members actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.2(c) or (d) above shall survive until the
expiration of any applicable statute of limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would
48
<PAGE>
exceed the Indemnifying Party's indemnity obligations under this Agreement, the
Indemnified Party shall be entitled to control the defense of such claim or
management of such proceeding with respect to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article
IX shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Members and of the Member Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
Closing, the Members may satisfy their respective obligations, if any, under
this Article IX (i) by tendering to the CenterPoint Indemnified Parties cash or
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "Market Price" shall
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (i) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
9.13 Member Representative. Each of the Members and Seller appoints
Charles H. Roscoe (the "Member Representative") as its agent and representative
with full power and authority to agree, contest or settle any claim or dispute
affecting any Member made under Articles II or IX and to otherwise act on behalf
of the Members in accordance with the terms of this Agreement, including,
without limitation, to direct the amount and manner of the payment of the
aggregate Basic Purchase Consideration; provided, that the Member Representative
may be removed and a successor to the Person originally serving as the Member
Representative may be designated in a writing signed by a majority-in-interest
of the Members and delivered to CenterPoint in accordance with Section 15.2.
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Acquisition.
The respective obligations of each party to effect the Acquisition shall be
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
49
<PAGE>
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Acquisition or any
of the Other Acquisitions shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Acquisition or any of the Other Acquisitions or make
the consummation of the Acquisition or any of the Other Acquisitions
illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Acquisition or any of the
Other Acquisitions and the transactions contemplated hereby and by the
Other Agreements (including, without limitation, any consents listed on
Schedules 4.3.2 or 4.12) shall have been obtained and be in effect;
(h) no action, suit or proceeding with respect to the Acquisition has
been filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) this Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Company's stockholders
in the manner required by any applicable Law and the Company's
Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
10.2 Conditions to Obligation of the Members, Seller and the Company to
Effect the Acquisition. Unless waived by Seller, the obligation of the Members,
Seller and the Company to effect the Acquisition shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
50
<PAGE>
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their respective agreements
contained in this Agreement and each Other Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of CenterPoint contained in this Agreement and each Other
Agreement shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date as if made at and as of
such date, and Seller and the Company shall have received a certificate of
the Chief Executive Officer or President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to Seller of the Acquisition;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
and substance reasonably acceptable to Seller, the Company and the Members;
(d) each of the Members shall have been afforded the opportunity to
enter into an incentive compensation agreement (the "Incentive Compensation
Agreement") with CenterPoint substantially in the form attached hereto as
Exhibit 10.2(d);
(e) CenterPoint shall have delivered to Seller, the Company and the
Members a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State, showing
that CenterPoint is in good standing;
(f) each of the Members, the partners, members and stockholders of the
other Founding Companies who are to receive shares of CenterPoint Common
Stock pursuant to the Other Agreements, and the other stockholders of
CenterPoint other than those acquiring stock in the IPO shall have entered
into an agreement (the "Stockholders Agreement") substantially in the form
attached hereto as Exhibit 10.2(f);
(g) all conditions to the Acquisitions of the other Founding
Companies, on substantially the same terms as provided herein, shall have
been satisfied or waived by the applicable party and the Company;
(h) each of Seller and the Members shall have been afforded the
opportunity to review the executed employment agreement by and between
CenterPoint and Robert C. Basten; and
(i) the Company shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions, that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received in exchange for Company Stock
51
<PAGE>
in the Merger pursuant to Section 351 of the Code, the final form of such
opinion to be in form and substance reasonably acceptable to the Company
and the Members.
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition.
Unless waived by CenterPoint, the obligation of CenterPoint and Mergersub to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing of the additional following conditions:
(a) Seller and the Company shall have performed in all material
respects their respective agreements contained in this Agreement required
to be performed on or prior to the Closing Date and the representations and
warranties of Seller and the Company contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of each of Seller and the Company to
that effect;
(b) the Members shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Members
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of each Member to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Jensen Baird Gardner & Henry, counsel to Seller, the Company and the
Members, dated the Closing Date, in the form attached hereto as Exhibit
10.3(c), the final form of such opinion to be in form and substance
reasonably acceptable to the Underwriters and CenterPoint;
(d) Seller and the Members shall have caused the Attest Entity and the
Company, as applicable, to have executed and delivered a Separate Practice
Agreement substantially in the form attached hereto as Exhibit 10.3(d)(A)
and a Services Agreement substantially in the form attached hereto as
Exhibit 10.3(d)(B);
(e) each Member shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached hereto as Exhibit
10.2(d);
(f) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
52
<PAGE>
(g) Seller and the Company shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of Seller, the Company and each Company
Subsidiary and, unless waived by CenterPoint, in each state in which the
Company or any Company Subsidiary is authorized to do business, showing
Seller, the Company or Company Subsidiary (as applicable) is in good
standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Acquisition;
(i) the Members shall have executed the Stockholders Agreement;
(j) Seller and the Members shall have delivered to CenterPoint an
instrument in the form attached hereto as Exhibit 10.3(j), dated the
Closing Date, releasing the Company and the Company Subsidiaries from any
and all claims of Seller and the Members against the Company and the
Company Subsidiaries and obligations of the Company and the Company
Subsidiaries to Seller and the Members;
(k) all documents relating to the sale, distribution, transfer,
assignment and novation of Excluded Assets and Excluded Liabilities shall
be in form and substance satisfactory to CenterPoint;
(l) Company shall have presented evidence satisfactory to CenterPoint
of its compliance with the provisions of Section 7.1.4 hereof, including,
without limitation, that as of the Closing the amount of debt of the
Company and the Company Subsidiaries shall not exceed the amount reflected
on Schedule 2.1 as Debt Assumed By CenterPoint;
(m) Seller, the Company and the Members, as applicable, shall have
terminated or have caused the termination of any voting trusts, proxies or
other agreements or understandings to which Seller, the Company or any
Member is a party or is bound with respect to any shares of capital stock
or other equity interests of the Company and the Company Subsidiaries and
shall have provided CenterPoint evidence of such termination that is
acceptable to CenterPoint's counsel;
(n) Seller, the Company and the Members shall have completed the
Conversion of the Company and have presented evidence of such conversion in
accordance with Section 7.5;
(o) the Company shall have become the sole member of BDM&P Decision
Development LLC on terms and conditions acceptable to CenterPoint;
53
<PAGE>
(p) Seller, the Members and the Company shall have delivered payoff
letters including a statement of per diem interest amounts and other
applicable release documents from all institutional lenders and creditors
of the Company and the Company Subsidiaries regarding the payment in full
of indebtedness at Closing, in each case in form and substance satisfactory
to CenterPoint (including, without limitation, applicable UCC-3 termination
statements); and
(q) the secretary of the Company shall have delivered certified copies
of the resolutions of the board of directors and shareholders of the
Company approving execution and delivery of this Agreement, the Conversion,
the Merger and the other actions, agreements and documents, necessary or
desirable to complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) pursuant to Section 7.3;
(b) by Seller,
(i) if the Acquisition is not completed by August 31, 1999 other
than on account of delay or default on the part of Seller, the Company
or any Member or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of Seller,
the Company or any Member or any of their affiliates or associates;
(iii) if CenterPoint (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure
such default in all material respects within thirty (30) days after
written notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Acquisition is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
54
<PAGE>
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of
CenterPoint or any of its stockholders or any of their affiliates or
associates;
(iii) if Seller or the Company (A) fails to perform in any
material respect any of its material covenants in this Agreement and
(B) does not cure such default in all material respects within thirty
(30) days after written notice of such default is given to Seller or
the Company by CenterPoint;
(iv) if a Member (A) fails to perform in any material respect any
of such Member's material covenants in this Agreement and (B) does not
cure such default in all material respects within thirty (30) days
after written notice of such default is given to the Member
Representative by CenterPoint; or
(d) by mutual consent of the Operating Committee of Seller and the
Board of Directors of CenterPoint.
11.2 Effect of Termination. In the event of termination of this Agreement
by either CenterPoint or Seller, as provided in Section 11.1, this Agreement
shall forthwith become void and there shall be no further obligation on the part
of Seller, the Company, the Members, CenterPoint, Mergersub or their respective
officers or directors (except the obligations set forth in this Section 11.2 and
in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall survive the
termination). Nothing in this Section 11.2 shall relieve any party from
liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. CenterPoint
covenants and agrees that it shall not amend, modify or supplement the material
terms of any Other Agreement following the Closing without the prior written
consent of at least two thirds (2/3rds) of the members of CenterPoint's Board of
Directors; provided that no waiver of any restriction set forth in Article XII
shall be of any effect unless consented to by a majority of the members of
CenterPoint's Board of Directors who do not at the time of such proposed waiver
hold Restricted Shares within the meaning of this Agreement, any Other Agreement
or the Stockholders Agreement.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
55
<PAGE>
ARTICLE XII
SECURITIES ACT REPRESENTATIONS AND TRANSFER RESTRICTIONS
12.1 Transfer Restrictions. Except as provided in Section 12.2, for a
period of forty-two (42) months from the Closing, none of Seller nor any of the
Members shall (a) sell, assign, exchange, transfer, distribute or otherwise
dispose of, in whole or in part, (i) any shares of CenterPoint Common Stock
received by Seller in the Acquisition and/or subsequently distributed by Seller
to the Members (the "Restricted Shares"), or (ii) any interest (including,
without limitation, an option to buy or sell) in any Restricted Shares; or (b)
engage in any transaction, whether or not with respect to any Restricted Shares
or any interest therein, the intent or effect of which is to reduce the risk of
owning the Restricted Shares (including, without limitation, engaging in put,
call, short-sale, derivative, straddle or similar market transactions);
provided, however, for a period of one (1) year from the Closing, Seller shall
not distribute any Restricted Shares to any Member.
12.2 Release of Restrictions. Effective eighteen (18) months following
the Closing and every six (6) months thereafter, until all Restricted Shares
shall have been released from such restrictions, twenty percent (20%) of the
original number of Restricted Shares of Seller and/or each Member shall no
longer be subject to the restrictions set forth in Section 12.1 and shall no
longer be deemed Restricted Shares for any purposes of this Agreement; provided,
that, if a Member's employment with CenterPoint or its subsidiary is terminated
within 30 months of the Closing other than through death, disability, retirement
or circumstances approved by the Company's management and reasonably approved by
CenterPoint's chief executive officer, the Restricted Shares then held by such
Member (or held by Seller for such Member) shall remain subject to the
restrictions set forth in Section 12.1 until the fifth anniversary of the
Closing Date. Notwithstanding the foregoing and Section 12.1, Seller or a Member
may (x) at any time pledge or encumber all or part of Seller's or such Member's
Restricted Shares, as applicable, provided that the pledgee or secured party
agrees in writing to be bound by the provisions contained in Article XII, (y) at
any time after the first anniversary of the Closing transfer all or part of such
Member's Restricted Shares to another Member or to an immediate family member
(or trust or other estate planning Person), provided, that any such Member,
family member or other Person agrees in writing to be bound by the provisions
contained in Article XII, and (z) transfer or cause to be transferred such
Member's Restricted Shares upon such Member's disability or death. As used in
this Section 12.2, the terms "disability" and "retirement" shall have the
meaning ascribed to them in CenterPoint's Employee Incentive Compensation Plan.
No attempted transfer of any nature whatsoever that is in violation of this
Section shall be treated as effective for any purpose.
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
delivered to Seller pursuant to this Agreement and/or subsequently distributed
by Seller to the Members shall bear a legend substantially in the form set forth
below and containing such other information as CenterPoint may deem necessary or
appropriate:
56
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE DISPOSITION
THEREOF ARE SUBJECT TO THE TERMS OF A MERGER AGREEMENT DATED MARCH __,
1999. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND MAY BE INSPECTED BY THE REGISTERED OWNER OF THIS
CERTIFICATE OR A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON
REQUEST DURING NORMAL BUSINESS HOURS.
Upon request from Seller or any Member (or a permitted transferee)
following the expiration of either all or a part of the restrictions on the
transfer of CenterPoint Common Stock set forth in this Article XII, CenterPoint
shall immediately notify its transfer agent that the applicable shares of
CenterPoint Common Stock are no longer restricted shares and shall direct the
transfer agent to reissue certificates of CenterPoint Common Stock which do not
contain a restrictive legend in place of the applicable restricted shares. In
the event Seller's or a Member's request to remove the restrictive legend
coincides with Seller's or such Member's request to sell the CenterPoint Common
Stock, CenterPoint shall take such actions as are required by its transfer agent
to allow the transfer agent to transfer the unrestricted CenterPoint Common
Stock free of any restrictive legend.
ARTICLE XIII
NONCOMPETITION
13.1 Prohibited Activities. Each Member agrees severally, and not
jointly, that such Member will not for a period of three (3) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Seller or Member commences competition within a fifty (50) mile
radius of any office location of the Company or any Company Subsidiary (the
"Territory");
(b) sell or provide any accounting, tax consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by the Member to have been actively being solicited by the Company or
any Company Subsidiary to become a customer at any time during such period;
57
<PAGE>
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for the
purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Member may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Member does not, directly or indirectly, provide such
services to another third party for hire.
For purposes of this Agreement, an "Acquisition Transaction" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Member from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Member does not consult with or is not employed
by such competitor and (b) owning equity interests in Seller or Attest Entity.
13.2 Damages. Because of the difficulty of measuring economic losses to
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Member agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Member, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Article XIII impose a reasonable restraint on the
Members in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Members that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Member who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Member shall enter into a business or pursue other activities not in
competition with CenterPoint and/or any subsidiary thereof, or similar
activities
58
<PAGE>
or business in locations the operations of which, under such circumstances, does
not violate this Article XIII and in any event such new business, activities or
location are not in violation of this Article XIII or of such Member's
obligations under this Article XIII, such Member shall not be chargeable with a
violation of this Article XIII if CenterPoint and/or any subsidiary thereof
shall thereafter enter the same, similar or a competitive (i) business, (ii)
course of activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
agreements and covenants of each Member made in this Article XIII shall be
effective, shall be computed by excluding from such computation any time during
which such Member is in violation of any provision of this Article XIII;
provided, however, in all events CenterPoint shall initiate proceedings to
enforce this Article XIII within four (4) years of the Closing Date. The
covenants contained in this Article XIII shall not be affected by any breach of
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and each of the Members hereby agree that
this covenant is a material and substantial part of this transaction.
ARTICLE XIV
[Reserved]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of Seller, the Company and the Members represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
or commission in connection with the
59
<PAGE>
Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. CenterPoint represents and
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Acquisition or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
60
<PAGE>
15.2.2 If to the Company or Seller, to:
c/o Berry, Dunn, McNeil & Parker
100 Middle Street
Portland, Maine 04104
Attn: Charles Roscoe
Facsimile No.: (207) 774-2375
with a copy to:
Jensen Baird Gardner & Henry
10 Free Street
P.O. Box 4510
Portland, Maine 04112
Attn: Frank Frye
Facsimile No.: (207) 775-7935
15.2.3 If to the Member Representative or the Members, as
applicable, addressed to the addresses set forth on Schedule 15.2.3, with
copies to such counsel as set forth with respect to each Member on such
Schedule 15.2.3, as applicable.
15.3 Interpretation. The table of contents and headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4. Certain Definitions. As used in this Agreement, (i) the term
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "Affiliate" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"Knowledge" of a particular fact or other matter if any
61
<PAGE>
individual who is a partner, member or shareholder of such Person or who is
otherwise serving, or who has served, as a director, officer, or trustee (or any
capacity) of such Person has, or at any time had, Knowledge of such fact or
other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise,
except that CenterPoint may assign this Agreement to any wholly-owned subsidiary
of CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
[remainder of page intentionally left blank]
62
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
By: /s/ Robert Basten
------------------------------------------
Name: Robert Basten
----------------------------------------
Its: President and Chief Executive Officer
-----------------------------------------
BERRY DUNN MERGERSUB INC.
By: /s/ Robert Basten
------------------------------------------
Name: Robert Basten
----------------------------------------
Its: President
-----------------------------------------
BDM&P HOLDINGS, LLC
By: /s/ Charles H. Roscoe
------------------------------------------
Name: Charles H. Roscoe
----------------------------------------
Its: President
-----------------------------------------
BERRY, DUNN, McNEIL & PARKER, CHARTERED
By: /s/ Charles H. Roscoe
------------------------------------------
Name: Charles H. Roscoe
----------------------------------------
Its: President
-----------------------------------------
<PAGE>
MEMBERS
/S/ Clifford C. Abbott, Jr.
-----------------------------------------------
Clifford C. Abbott, Jr.
/S/ Edward G. Asherman, Jr.
-----------------------------------------------
Edward G. Asherman, Jr.
/S/ J. Maurice L. Bisson
-----------------------------------------------
J. Maurice L. Bisson
/S/ John M. Chandler
-----------------------------------------------
John M. Chandler
/S/ Richard A. Charpentier
-----------------------------------------------
Richard A. Charpentier
/S/ Lee J. Chick
-----------------------------------------------
Lee J. Chick
/S/ Raymond L. Cunliffe
-----------------------------------------------
Raymond L. Cunliffe
/S/ Richard R. Gosselin
-----------------------------------------------
Richard R. Gosselin
/S/ John T. Gurley
-----------------------------------------------
John T. Gurley
/S/ Tracy W. Harding
-----------------------------------------------
Tracy W. Harding
/S/ Rodney F. Irish
-----------------------------------------------
Rodney F. Irish
/S/ John H. Jackson, Jr.
-----------------------------------------------
John H. Jackson, Jr.
/S/ Francis P. Johnson
-----------------------------------------------
Francis P. Johnson
/S/ Kenneth S. Jones
-----------------------------------------------
Kenneth S. Jones
/S/ Janice D. Latulippe
-----------------------------------------------
Janice D. Latulippe
/S/ Elliot D. Lerner
-----------------------------------------------
Elliot D. Lerner
/S/ James R. Maynard
-----------------------------------------------
James R. Maynard
<PAGE>
/S/ Michael T. McNeil
-----------------------------------------------
Michael T. McNeil
/S/ Harry E. Meyer
-----------------------------------------------
Harry E. Meyer
/S/ Lawrence E. Parker, Jr.
-----------------------------------------------
Lawrence E. Parker, Jr.
/S/ Ralph A. Pascale, Jr.
-----------------------------------------------
Ralph A. Pascale, Jr.
/S/ Stephanie Rice
-----------------------------------------------
Stephanie Rice
/S/ Kenneth L. Roberts
-----------------------------------------------
Kenneth L. Roberts
/S/ Charles H. Roscoe
-----------------------------------------------
Charles H. Roscoe
/S/ Drew E. Swenson
-----------------------------------------------
Drew E. Swenson
/S/ Christopher T. Tyson
-----------------------------------------------
Christopher T. Tyson
/S/ Jeffrey D. Walla
-----------------------------------------------
Jeffrey D. Walla
/S/ Erick L. Worden
-----------------------------------------------
Erick L. Worden
<PAGE>
EXHIBIT 2.6
_______________________
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
(A DELAWARE CORPORATION)
URBACH, KAHN & WERLIN, P.C.,
(A NEW YORK PROFESSIONAL CORPORATION)
URBACH, KAHN & WERLIN, P.C.,
(A MASSACHUSETTS PROFESSIONAL CORPORATION)
UKW MERGERSUB INC.,
(A DELAWARE CORPORATION)
UKW MANAGEMENT LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
and
WILLIAM F. CHANDLER, JAMES DANIELS,
MARIANNE DEMARIO, DAVID L. EVANS,
STEVEN N. FISCHER, ROBERT E. FLEMING,
HOWARD S. FOOTE, JOHN S. GIJANTO,
PAUL, GOETZ, ARTHUR L. HEISMAN,
JEFFREY S. HERSHOW, LLOYD F. JONES,
WILLIAM M. KAHN, RICHARD G. KOTLOW,
RICHARD M. LIPMAN, MICHAEL MAHONEY,
HAROLD D. MANDEL, MICHAEL MCCARTHY,
DONALD J. NEUBECKER, KEVIN O'DONOGHUE,
MARILYN A. PENDERGAST, JOSEPH PETERSON,
JEFFREY M. ROSENBAUM, ALAN A. SCHACHTER
AND JOHN E. WOLFGANG
the Members of
UKW MANAGEMENT LLC
March 31, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER......................................................................... 2
1.1 Merger...................................................................... 2
------
1.2 Effects of the Merger....................................................... 3
--------------------
1.3 Directors and Officers of the Surviving Corporation......................... 3
---------------------------------------------------
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT............................................... 3
2.1 Merger Consideration........................................................ 3
--------------------
2.2 Post-Closing Adjustments to Basic Purchase Consideration.................... 4
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess............... 4
----------------------------------------------------
2.2.2 Preliminary Balance Sheet and Adjustment........................... 4
----------------------------------------
2.2.3 Interim Adjustment................................................. 4
------------------
2.2.4 Final Adjustment................................................... 5
----------------
2.2.5 Disputes........................................................... 5
--------
2.2.6 Payment of Adjustments............................................. 5
----------------------
2.3 Post-Closing Management of AR............................................... 6
-----------------------------
2.4 Assignment of Uncollected AR................................................ 6
----------------------------
2.5 Definitions................................................................. 6
-----------
ARTICLE III THE CLOSING...................................................................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MANAGEMENT, MASS PC AND THE COMPANY............ 7
4.1 Organization and Qualification.............................................. 7
------------------------------
4.2 Company Subsidiaries........................................................ 8
--------------------
4.3 Authority; Non-Contravention; Approvals..................................... 8
---------------------------------------
4.4 Capitalization.............................................................. 9
--------------
4.5 Year 2000................................................................... 10
---------
4.6 Financial Statements........................................................ 10
--------------------
4.7 Absence of Undisclosed Liabilities.......................................... 11
----------------------------------
4.8 Unbilled Fees and Expenses.................................................. 11
--------------------------
4.9 Absence of Certain Changes or Events........................................ 11
------------------------------------
4.10 Litigation.................................................................. 14
----------
4.11 Compliance with Applicable Laws............................................. 14
-------------------------------
4.12 Licenses.................................................................... 15
--------
4.13 Material Contracts.......................................................... 15
------------------
4.14 Properties.................................................................. 17
----------
4.15 Intellectual Property....................................................... 19
---------------------
4.16 Taxes....................................................................... 20
-----
4.17 Employee Benefit Plans; ERISA............................................... 21
-----------------------------
4.18 Labor Matters............................................................... 23
-------------
4.19 Environmental Matters....................................................... 23
---------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.20 Insurance................................................................... 24
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions................. 24
-----------------------------------------------------------
4.22 Business Relationships...................................................... 24
----------------------
4.23 Compensation................................................................ 25
------------
4.24 Bank Accounts............................................................... 25
-------------
4.25 Professional Credentials.................................................... 25
------------------------
4.26 Disclosure; No Misrepresentation............................................ 25
--------------------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE MEMBERS...................................... 26
5.1 Several Representations and Warranties...................................... 26
--------------------------------------
5.1.1 Capitalization..................................................... 26
--------------
5.1.2 Authority.......................................................... 26
---------
5.1.3 Non-Contravention.................................................. 26
-----------------
5.1.4 Approvals.......................................................... 27
---------
5.1.5 Litigation......................................................... 27
----------
5.1.6 No Transfer........................................................ 27
-----------
5.1.7 Disclosure......................................................... 27
----------
5.1.8 Representations and Warranties of Management, Mass PC and the
-------------------------------------------------------------
Company............................................................ 28
-------
5.2 Joint and Several Representations and Warranties............................ 28
------------------------------------------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CENTERPOINT..................................... 28
6.1 Organization And Qualification.............................................. 28
------------------------------
6.2 Capitalization.............................................................. 28
--------------
6.3 No Subsidiaries............................................................. 29
---------------
6.4 Authority; Non-Contravention; Approvals..................................... 29
---------------------------------------
6.5 Absence of Undisclosed Liabilities.......................................... 30
----------------------------------
6.6 Litigation.................................................................. 31
----------
6.7 Compliance with Applicable Laws............................................. 31
-------------------------------
6.8 No Misrepresentation........................................................ 31
--------------------
ARTICLE VII CERTAIN COVENANTS AND OTHER TERMS................................................ 31
7.1 Conduct of Business by the Company Prior to the Effective Time.............. 31
--------------------------------------------------------------
7.2 No-Shop..................................................................... 34
-------
7.3 Schedules................................................................... 34
---------
7.4 Members Meeting............................................................. 35
---------------
7.5 Conversion.................................................................. 36
----------
ARTICLE VIII ADDITIONAL AGREEMENTS........................................................... 36
8.1 Access to Information....................................................... 36
---------------------
8.2 Registration Statements..................................................... 37
-----------------------
8.3 Expenses and Fees........................................................... 38
-----------------
8.4 Agreement to Cooperate...................................................... 38
----------------------
8.5 Public Statements........................................................... 38
-----------------
8.6 Registration Rights......................................................... 38
-------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
8.7 CenterPoint Covenants....................................................... 41
---------------------
8.8 Release of Guarantees....................................................... 41
---------------------
8.9 Lock-Up Agreement........................................................... 41
-----------------
8.10 Preparation and Filing of Tax Returns....................................... 41
-------------------------------------
8.11 Maintenance of Insurance.................................................... 41
------------------------
8.12 Administration.............................................................. 42
--------------
ARTICLE IX INDEMNIFICATION................................................................... 42
9.1 Indemnification by the Members.............................................. 42
------------------------------
9.2 Indemnification by CenterPoint.............................................. 44
------------------------------
9.3 Indemnification Procedure for Third Party Claims............................ 45
------------------------------------------------
9.4 Direct Claims............................................................... 46
-------------
9.5 Failure to Give Timely Notice............................................... 46
-----------------------------
9.6 Reduction of Loss........................................................... 47
-----------------
9.7 Limitation on Indemnities................................................... 47
-------------------------
9.7.1 Threshold for the Members.......................................... 47
-------------------------
9.7.2 Threshold for CenterPoint.......................................... 47
-------------------------
9.7.3 Limitations on Claims Against the Members.......................... 47
-----------------------------------------
9.7.4 Limitation on Claims Against CenterPoint........................... 48
9.8 Survival of Representations, Warranties and Covenants of the Members,
---------------------------------------------------------------------
Management, Mass PC and the Company; Time Limits on Indemnification
-------------------------------------------------------------------
Obligations................................................................. 48
-----------
9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time
--------------------------------------------------------------------------
Limits on Indemnification Obligations....................................... 48
-------------------------------------
9.10 Defense of Claims; Control of Proceedings................................... 48
-----------------------------------------
9.11 Fraud; Exclusive Remedy..................................................... 49
-----------------------
9.12 Manner of Satisfying Indemnification Obligations............................ 49
------------------------------------------------
9.13 Member Representative....................................................... 49
---------------------
ARTICLE X CLOSING CONDITIONS................................................................. 49
10.1 Conditions to Each Party's Obligation to Effect the Merger...................... 49
----------------------------------------------------------
10.2 Conditions to Obligation of Mass PC, the Members, Management and the
--------------------------------------------------------------------
Company to Effect the Merger.................................................... 50
----------------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Merger.................... 52
------------------------------------------------------------
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER........................................ 54
11.1 Termination................................................................. 54
-----------
11.2 Effect of Termination....................................................... 55
---------------------
11.3 Amendment................................................................... 55
---------
11.4 Waiver...................................................................... 55
------
ARTICLE XII TRANSFER RESTRICTIONS............................................................ 56
12.1 Transfer Restrictions Generally............................................. 56
-------------------------------
12.2 Release of Restrictions..................................................... 56
-----------------------
12.3 Legend...................................................................... 56
------
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XIII NONCOMPETITION.................................................................. 57
13.1 Prohibited Activities....................................................... 57
13.2 Damages..................................................................... 58
-------
13.3 Reasonable Restraint........................................................ 58
--------------------
13.4 Severability; Reformation................................................... 59
-------------------------
13.5 Independent Covenant........................................................ 59
--------------------
13.6 Materiality................................................................. 59
-----------
ARTICLE XIV [RESERVED]....................................................................... 59
ARTICLE XV GENERAL PROVISIONS................................................................ 59
15.1 Brokers..................................................................... 59
-------
15.2 Notices..................................................................... 60
-------
15.3 Interpretation.............................................................. 61
--------------
15.4 Certain Definitions......................................................... 61
-------------------
15.5 Entire Agreement; Assignment................................................ 61
----------------------------
15.6 Applicable Law.............................................................. 61
--------------
15.7 Counterparts................................................................ 61
------------
15.8 Parties in Interest......................................................... 62
-------------------
</TABLE>
(iv)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
(v)
<PAGE>
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Agreements
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Members' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Members and Their Counsel
(vi)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Members of Management
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Management, Mass PC,
the Company and the Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Members' Release
Exhibit 10.3(k)(1) Form of LSAG Purchase Agreement
Exhibit 10.3(k)(2) Form of Word Purchase Agreement
Exhibit 10.3(m) Form of Conversion Merger Agreement
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(vii)
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<S> <C>
Accounting Licenses............................................................ Section 4.12
Actions........................................................................ Section 4.10.1
Acquisition Transaction........................................................ Section 13.1
Affiliate...................................................................... Section 15.4
Affiliate Transactions......................................................... Section 4.21
Agreement...................................................................... Introduction
AR............................................................................. Section 2.5(a)
Arbitrator..................................................................... Section 2.2.5
Attest Entity.................................................................. Section 7.1.2
Attestation Practice........................................................... Introduction
Basic Purchase Consideration................................................... Section 2.1.1
Business....................................................................... Introduction
Cash Consideration............................................................. Section 2.1.1
CenterPoint.................................................................... Introduction
CenterPoint Accountants........................................................ Section 2.2.2
CenterPoint Common Stock....................................................... Section 2.1.1
CenterPoint Indemnified Party(ies)............................................. Section 9.1
CenterPoint Material Adverse Effect............................................ Section 6.4.3
CenterPoint Representatives.................................................... Section 8.1.1
CenterPoint Required Statutory Approvals....................................... Section 6.4.3
Closing........................................................................ Article III
Closing Balance Sheet.......................................................... Section 2.2.2
Closing Date................................................................... Article III
Code........................................................................... Introduction
</TABLE>
(viii)
<PAGE>
<TABLE>
<S> <C>
Company...................................................................... Introduction
Company Material Adverse Effect.............................................. Section 4.3.3
Company Representatives...................................................... Section 8.1.1
Company Stock................................................................ Section 2.1.1
Company Subsidiaries......................................................... Section 4.2
Consummation Date............................................................ Article III
Contracts.................................................................... Section 4.13
Conversion................................................................... Introduction
Copyrights................................................................... Section 4.15
Defense Notice............................................................... Section 9.3.1
DGCL......................................................................... Section 1.1
Direct Claim................................................................. Section 9.4
Disputed Item................................................................ Section 2.2.5
Dissenting Shares............................................................ Section 2.1.3
Effective Time............................................................... Section 1.1
Employee Plan................................................................ Section 4.17.5(a)
Environmental and Safety Requirements........................................ Section 4.19
ERISA........................................................................ Section 4.17.5(b)
Excluded Assets.............................................................. Section 7.1.4
Excluded Liabilities......................................................... Section 7.1.4
Final Adjustment............................................................. Section 2.2.4
Financial Statements......................................................... Section 4.6
First Person................................................................. Section 4.17.5(c)
Form S-1..................................................................... Section 4.3.3
Form S-4..................................................................... Section 4.3.3
</TABLE>
(ix)
<PAGE>
<TABLE>
<S> <C>
Founding Companies............................................................. Introduction
GAAP........................................................................... Section 4.6
general increase............................................................... Section 4.23
Governmental Authority......................................................... Section 4.3.2
Hazardous Materials............................................................ Section 4.19
HSR Act........................................................................ Section 4.3.3
Incentive Compensation Agreement............................................... Section 10.2(d)
Indemnified Party.............................................................. Section 9.3.1
Indemnifying Party............................................................. Section 9.3.1
Intellectual Property.......................................................... Section 4.15
Intellectual Property Licenses................................................. Section 4.15
Interim Adjustment............................................................. Section 2.2.3
IPO Introduction Knowledge..................................................... Section 15.4
Latest Balance Sheet........................................................... Section 4.6
Laws........................................................................... Section 4.11
Leased Property................................................................ Section 4.14.1
Licenses....................................................................... Section 4.12
Liens.......................................................................... Section 4.3.2
Liquidated Damages Amount...................................................... Section 7.3
Losses......................................................................... Section 9.1
LSAG........................................................................... Introduction
Market Price................................................................... Section 9.12
Marks.......................................................................... Section 4.15
Mass PC........................................................................ Introduction
</TABLE>
(x)
<PAGE>
<TABLE>
<S> <C>
Material Contracts............................................................ Section 4.13
MBCL.......................................................................... Section 1.1
Member........................................................................ Introduction
Member Indemnified Party...................................................... Section 9.2
Member Representative......................................................... Section 9.13
Merger........................................................................ Introduction
Mergersub..................................................................... Introduction
Mergersub Stock............................................................... Section 2.1.4
Merger Documents.............................................................. Section 1.1
Net Working Capital........................................................... Section 2.5(b)
1933 Act...................................................................... Section 4.3.3
1934 Act...................................................................... Section 8.7(b)
Organizational Documents...................................................... Section 4.1
Other Agreements.............................................................. Introduction
Other Founding Companies...................................................... Section 9.1
Other Mergers................................................................. Introduction
Owned Property................................................................ Section 4.14.1
Patents....................................................................... Section 4.15
Person........................................................................ Section 15.4
Plan Affiliate................................................................ Section 4.17.5(c)
Real Property................................................................. Section 4.14.1
Registration Statements....................................................... Section 4.3.3
Resolution Period............................................................. Section 2.2.5
Restricted Shares............................................................. Section 12.1
Returns....................................................................... Section 4.16.1
</TABLE>
(xi)
<PAGE>
<TABLE>
<S> <C>
Schedules.................................................................... Section 7.3
SEC.......................................................................... Section 4.3.3
Securities Act............................................................... Section 4.3.3
Special Bonus Plan........................................................... Section 2.5(c)
Stock Consideration.......................................................... Section 2.1.1
Stockholders Agreement....................................................... Section 10.2(f)
Surviving Corporation........................................................ Section 1.2
Target....................................................................... Section 2.5(d)
Tax Accrual.................................................................. Section 2.5(e)
Taxes........................................................................ Section 4.16.2
Territory.................................................................... Section 13.1(a)
Third Party Claim............................................................ Section 9.3.1
Trade Secrets................................................................ Section 4.15
Underwriters................................................................. Section 8.1.1
Voting Agreement............................................................. Introduction
Word......................................................................... Introduction
</TABLE>
(xii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Urbach, Kahn & Werlin, P.C., a New York professional corporation (together with
its permitted successors and assigns, the "COMPANY"), Urbach, Kahn & Werlin,
P.C., a Massachusetts professional corporation ("MASS PC"), UKW Mergersub Inc.,
a Delaware corporation and wholly-owned subsidiary of CenterPoint ("MERGERSUB"),
UKW Management LLC, a Delaware limited liability company ("MANAGEMENT") and the
members of Management, who are also all of the stockholders of the Company
identified on Exhibit A to this Agreement (each such individual, in such
---------
individual's capacity as a member and stockholder, a "MEMBER" and, collectively,
the "MEMBERS").
WITNESSETH:
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "ATTESTATION
PRACTICE") and (b) the Members, as stockholders of the Company, will cause the
conversion of the Company from a professional corporation to a business
corporation by merging with Mass PC, with Mass PC surviving and amending its
Organizational Documents (as defined in Section 4.1) such that it converts to a
-----------
business corporation (the "CONVERSION");
WHEREAS, upon completion of the Conversion and prior to, and in
anticipation of the transactions contemplated hereby, Management will acquire
all of the issued and outstanding capital stock of the Company from the Members,
as stockholders of the Company, in exchange for issuing the Members proportional
membership interests in Management;
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby, Management will receive a contribution of all of the
outstanding stock of Legal and Scientific Analysis Group, Inc. ("LSAG") from the
stockholders of LSAG and all of the outstanding equity interests of Word
Computer Support, LLC ("WORD") from the members of Word in exchange for issuing
such stockholders and members the membership interests in Management, such that
each of LSAG and Word is a wholly-owned subsidiary of the Company;
WHEREAS, the Operating Committee of Management and the Boards of Directors
of the Company, CenterPoint and Mergersub deem it advisable and in the best
interests of their respective equity holders to approve and consummate the
business combination transactions
<PAGE>
provided herein in which Mergersub would merge with and into the Company, with
the Company being the surviving corporation in the merger (the "MERGER");
WHEREAS, certain Members, as stockholders of the Company, have entered into
a Voting Agreement dated the date hereof (the "VOTING AGREEMENT") pursuant to
which, among other things, such Members have agreed to vote the shares of
capital stock of the Company that such Members own or control, directly or
indirectly, to approve the Merger and the transactions contemplated by this
Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., Berry, Dunn, McNeil & Parker, Chartered, Self Funded Benefits, Inc. d/b/a
Insurance Design Administrators, Grace & Company, P.C., Simione, Scillia, Larrow
& Dowling LLC, Follmer Rudzewicz & Co., P.C., Holthouse, Carlin & Van Trigt, The
Reppond Company, Inc., Reppond Administrators, LLC, and Verasource Excess Risk
Ltd. (which companies together with the Company are collectively referred to
herein as the "FOUNDING COMPANIES"), which agreements provide for the merger of
a wholly-owned subsidiary of CenterPoint with each such Founding Company (the
"OTHER MERGERS") simultaneously with the Merger and CenterPoint has provided a
side letter to each holder of equity interests of the Company to such effect;
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1.1); and
-------------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock by
the Members pursuant to the terms hereof to be tax-free under the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
2
<PAGE>
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, causing the
separate corporate existence of Mergersub to cease and the Company to continue
under the laws of the Commonwealth of Massachusetts. As promptly as possible on
the Closing Date, the parties shall cause the Merger to be completed by filing
articles of merger and a certificate of merger, as applicable (the "MERGER
DOCUMENTS"), with the Secretary of the Commonwealth of Massachusetts, as
provided in the Massachusetts Business Corporation Law, as amended (the "MBCL"),
and with the Secretary of State of Delaware, as provided in the Delaware General
Corporation Law (the "DGCL"). The Merger shall become effective (the "EFFECTIVE
TIME") upon the filing of the Merger Documents with the Secretary of the
Commonwealth of Massachusetts and the Secretary of State of Delaware or at such
later time, contemporaneously with the closing of the IPO, as agreed by
CenterPoint and the Company and specified in the Merger Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to CenterPoint and as specified in the
Merger Documents, (iii) the Merger shall have all effects provided by applicable
law, and (iv) the Surviving Corporation shall be a wholly-owned subsidiary of
CenterPoint.
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of
----------------------------
the Merger and without any action on the part of the holders thereof, the
outstanding shares of capital stock, consisting of 18,830 shares of common
stock, par value $0.01 per share, of the Company (the "COMPANY STOCK") shall be
converted into the right to receive: (a) that number of shares of CenterPoint
common stock, par value $.01 per share (the "CENTERPOINT COMMON STOCK")
determined in accordance with the formula in Schedule 2.1 (the "STOCK
------------
CONSIDERATION") and (b) the amount of cash in Schedule 2.1 (the "CASH
------------
CONSIDERATION"). The sum of the Cash Consideration and the Stock Consideration
is herein referred to as "BASIC PURCHASE CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of the Company
--------------
held in treasury of the Company shall be canceled and retired and no payment
shall be made in respect thereof.
3
<PAGE>
2.1.3 Dissenters. Each outstanding share of capital stock of the
----------
Company held by a Person that has perfected the right to dissent under
applicable law and has not effectively withdrawn or lost such right as of the
Effective Time (the "DISSENTING SHARES") shall not be converted into the right
to receive any Basic Purchase Consideration and the holder thereof shall be
entitled only to such rights as are granted by applicable law. The Company
shall give CenterPoint prompt notice upon receipt by the Company of any such
written demands for payment of fair value of shares of Company Stock and any
other instruments provided pursuant to applicable law. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of the capital stock of Mergersub (the "MERGERSUB STOCK") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of the
Surviving Corporation. Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the Surviving Corporation.
2.1.5 Exchange of Certificates. At the Closing, Management shall
------------------------
deliver to CenterPoint the original Company Stock certificates, duly endorsed in
blank by a duly authorized official of Management or accompanied by blank stock
powers, in exchange for the allocated share of (a) CenterPoint Common Stock
certificates representing the Stock Consideration and (b) payment of the Cash
Consideration by certified check, cashier's check or wire transfer of
immediately available funds to a bank account or bank accounts in the amounts
and manner specified by the Member Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date. The
shares represented by certificates for Company Stock so delivered shall be
canceled. Until surrendered as contemplated by this Section 2.1.5, each
-------------
certificate representing shares of Company Stock represents only the right to
receive Basic Purchase Consideration, as adjusted in accordance with this
Article II.
- ----------
II.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
II.2.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Basic Purchase Consideration shall be (a) reduced dollar-for-dollar to the
extent Net Working Capital on the Closing Date is less than the Target or
(b) increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
II.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
4
<PAGE>
II.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Member Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "INTERIM ADJUSTMENT").
-------------
II.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days of
receipt of such calculation, CenterPoint will deliver to the Member
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
II.2.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Member Representative does not object (or otherwise respond) in writing to
the Final Adjustment report within 30 days after its delivery, the Final
Adjustment shall automatically become final, binding and conclusive on all
parties hereto. Any objection to the Final Adjustment report shall be in
writing and shall specify the item or items in dispute (each a "DISPUTED
ITEM").
If the Member Representative and CenterPoint are unable to resolve any
Disputed Item within 30 days after notice from the Member Representative
that a dispute exists (the "RESOLUTION PERIOD"), then a representative from
the office of a nationally recognized accounting firm chosen by the Member
Representative and CenterPoint (the "ARBITRATOR") will arbitrate the
dispute. The Member Representative and CenterPoint shall, within 20 days
after expiration of the Resolution Period, present their respective
positions with respect to any Disputed Item to the Arbitrator together with
such materials as the Arbitrator deems appropriate. To the extent any
Disputed Item is similar to a disputed item under the Other Agreements, the
Arbitrator shall arbitrate the Disputed Item based on the submitted
materials and without regard to the disputed item under the Other
Agreements. The Arbitrator shall, after the submission of the materials,
submit a written decision on each Disputed Item to the Member
Representative and CenterPoint and such determination shall be final and
binding on the parties hereto. The arbitration shall be conducted in
Chicago, Illinois. The parties hereto agree that the cost of the
Arbitrator shall be borne by the non-prevailing party or as determined by
the Arbitrator.
II.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, Management and the Members shall pay the amount of
the shortfall to CenterPoint. In the event Net Working Capital is greater
than the Target, CenterPoint shall pay the amount of the excess to
Management. Any payment required to be made pursuant to this paragraph
shall be made, within ten days of delivery of the report indicating any
adjustment, by wire transfer of immediately available funds to an account
designated in
5
<PAGE>
writing by the party that is to receive payment of such adjustment. In
respect of the Final Adjustment, the party making a payment required by
such adjustment shall make such payment within ten days after the Final
Adjustment becomes final and shall receive credit for or return of any
amount previously paid in connection with the Interim Adjustment.
II.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write-off affecting AR and fees and expenses
receivable and unbilled fees and expenses of the Company incurred after the
Closing with respect to the same client engagement shall be allocated ratably to
the pre-Closing and post-Closing periods.
II.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to Management. Notwithstanding the foregoing, the Company will
retain the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.3.
-----------
II.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the Closing
Date, whenever calculated, equal to the difference between: (i) the sum of
any AR, prepaid expenses and other current assets less (ii) the sum of
----
accounts payable, accrued current liabilities, the items listed on Schedule
--------
2.5, the Tax Accrual and the portion of employer-paid FICA attributable to
---
Medicare, payable in connection with deferred compensation and the Special
Bonus Plan. For purposes of this Section 2.5(b), the Special Bonus Plan
--------------
accrual shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan, dated
March 1, 1999.
(d) "TARGET" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to Closing.
6
<PAGE>
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan and (ii) the sum of 34%
plus the effective state tax rate on the Company (net of any federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i).
-----------------
ARTICLE III
THE CLOSING
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Katten Muchin
& Zavis, Chicago, Illinois, contemporaneously with the closing of the IPO, or at
such other time and date as the parties hereto may mutually agree (the "CLOSING
DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MANAGEMENT, MASS PC AND THE COMPANY
Management, Mass PC and the Company hereby jointly and severally represent
and warrant to CenterPoint, as of the date hereof and, subject to Section 7.3,
-----------
as of the date on which CenterPoint and the lead Underwriter (as defined in
Section 8.1.1) execute and deliver the Underwriting Agreement related to the IPO
- -------------
and as of the Closing Date, as follows:
IV.1 Organization and Qualification. As of the date hereof and until
------------------------------
completion of the Conversion, the Company is and shall be a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. Following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts. Management is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Mass PC is a professional corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. Each Company Subsidiary (as defined in Section
-------
4.2) is duly organized, validly existing and in good standing under the laws of
- ---
the state of its organization set forth on Schedule 4.2. Each of Management,
------------
the Company and the Company Subsidiaries has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted, and is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary. True, accurate and complete copies of Management's, Mass PC's, the
Company's and each Company Subsidiary's Organizational Documents, in each case
as in effect on the date hereof, have heretofore been delivered to CenterPoint.
"ORGANIZATIONAL DOCUMENTS" means (a) the
7
<PAGE>
articles or certificate of incorporation and the bylaws of a corporation
(professional or otherwise), (b) the partnership agreement and any statement of
partnership of a general partnership, (c) the limited partnership agreement and
the certificate of limited partnership of any limited partnership, (d) the
operating or limited liability company agreement and certificate of formation of
any limited liability company, (e) any charter or similar document adopted and
filed in connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
IV.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "COMPANY SUBSIDIARY" and collectively, the "COMPANY SUBSIDIARIES").
Except as set forth on Schedule 4.2, the Company does not, directly or
------------
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
IV.3 Authority; Non-Contravention; Approvals.
---------------------------------------
IV.3.1 Each of Management, Mass PC and the Company has full right,
power and authority to enter into this Agreement and, subject to the
approval of the Merger and the transactions contemplated hereby by the
Members, as stockholders of the Company, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger and the transactions contemplated hereby by the Members. This
Agreement has been duly executed and delivered by Management, Mass PC and
the Company, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
Management, Mass PC and the Company, enforceable against Management, Mass
PC and the Company in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
IV.3.2 The execution and delivery of this Agreement by each of
Management, Mass PC and the Company does not violate, conflict with or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any claim, lien,
privilege, mortgage, charge, hypothecation, assessment, security interest,
pledge or other encumbrance, conditional sales contract, equity charge,
restriction, or adverse claim of interest of any kind or nature whatsoever
(each a "LIEN" and collectively, the "LIENS") upon any of the properties or
assets of the Company or any Company Subsidiary under, any of the terms,
conditions or provisions of (i) the
8
<PAGE>
Organizational Documents of Management, Mass PC, the Company or any Company
Subsidiary, (ii) following completion of the Conversion, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or federal, state, provincial, local or
foreign government, or any subdivision, agency or authority of any thereof
("GOVERNMENTAL AUTHORITY") applicable to Management, Mass PC, the
Company, any Company Subsidiary or the Business, properties or assets of
Management, the Company or any Company Subsidiary, except for those items
discussed in (ii) above relating to regulating, licensing or permitting the
practice of public accountancy, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
Management, Mass PC, the Company or any Company Subsidiary is a party or by
which Management, Mass PC, the Company, any Company Subsidiary or any of
the properties or assets of the Company or any Company Subsidiary may be
bound or affected. The consummation by Management, Mass PC and the Company
of the transactions contemplated hereby will not result in a violation,
conflict, breach, right of termination, creation or acceleration of Liens
under the terms, conditions or provisions of the items described in clauses
(i) through (iii) of the immediately preceding sentence, subject in the
case of the terms, conditions or provisions of the items described in
clause (iii) above, to obtaining (prior to the Closing Date) such consents
required from third parties set forth on Schedule 4.3.2 and except for
--------------
those items described in (ii) above relating to regulating, licensing or
permitting the practice of public accountancy.
IV.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 ("FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
sometimes collectively, the "REGISTRATION STATEMENTS") with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933,
as amended (the "SECURITIES ACT" or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "1 blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Management, Mass PC or the Company or the
consummation by Management, Mass PC or the Company of the transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or
obtained, as the case may be, would not, individually or in the aggregate,
have a "COMPANY MATERIAL ADVERSE EFFECT," which, for purposes of this
Agreement means a material adverse effect on the operations, assets,
condition (financial or other), operating results, employee or client
relations, or prospects of the Company or any Company Subsidiary.
IV.4 Capitalization.
--------------
9
<PAGE>
IV.4.1 As of the date hereof, the authorized capital stock of the
Company consists of 101,000 shares of common stock, par value $0.01 per
share, of which 18,830 shares are issued and outstanding. The authorized
capital stock of Mass PC consists of 18,830 shares of common stock, par
value $0.01 per share, of which 18,830 shares are issued and outstanding.
After the Conversion, the authorized capital stock of the Company shall
consist of 20,000 shares of common stock, par value $0.01 per share, of
which 18,830 shares shall be issued and outstanding. The authorized
capital stock of each of the Company Subsidiaries, if any, and the number
of such shares issued and outstanding is completely and accurately set
forth in Schedule 4.4. The Members own beneficially and of record all of
------------
the issued and outstanding shares of Company Stock and the stock of Mass
PC, which shares constitute all of the outstanding shares of capital stock
of the Company and Mass PC. Immediately prior to the Closing, Management
shall own all such shares of the Company. The Company owns all shares of
the Company's Subsidiaries as indicated on Schedule 4.4, in each case free
------------
and clear of all Liens, and the Company has good and marketable title to
such shares of the Company Subsidiaries. All of the issued and outstanding
shares described in this Section 4.4.1 are, or will be prior to the
-------------
Closing, validly issued, fully paid, nonassessable and free of preemptive
rights.
IV.4.2 Except as set forth on Schedule 4.4 or in connection with the
------------
Conversion, there are no outstanding subscriptions, options, calls,
contracts, commitments, undertakings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of Mass PC, the Company or any Company Subsidiary or
obligating Management, Mass PC, the Company or any Company Subsidiary to
grant, extend or enter into any such agreement or commitment or obligating
Management, Mass PC, the Company or any Company Subsidiary to convey or
transfer any Mass PC stock, Company Stock or Company Subsidiary stock, as
the case may be. As of the Closing Date, there will be no voting trusts,
proxies or other agreements or understandings to which Management, Mass PC,
the Company or any Company Subsidiary is a party or is bound with respect
to the voting of any shares of capital stock or other equity interests of
Mass PC, the Company or any Company Subsidiary.
IV.5 Year 2000. To the Knowledge of Management or the Company, all of the
---------
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company or any
Company Subsidiary in the conduct of the Business will not malfunction, will not
cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth (20/th/) and twenty-first (21/st/) centuries
and (ii) date-related data in connection with any valid date in the twentieth
(20/th/) and twenty-first (21/st/) centuries, except for any malfunctions or
generations of incorrect data or results that would not individually or in the
aggregate have a 1 Company Material Adverse Effect. Nothing in this Section 4.5
-----------
is intended or shall be construed as a representation or warranty with respect
to embedded systems.
10
<PAGE>
IV.6 Financial Statements. Management and the Company have previously
--------------------
furnished to CenterPoint copies of the audited consolidated balance sheet of the
Company as of October 31 in each of the years 1997 and 1998 and unaudited
consolidated balance sheet of the Company for the three (3) month period ending
January 31, 1999 (the "LATEST BALANCE SHEET"), and the related audited
consolidated statements of income, stockholders' equity and cash flow for each
of the years in the three (3) year period ended October 31, 1998, including all
notes thereto and related unaudited consolidated statements of income,
stockholders' equity and cash flow for the three (3) month period ending January
31, 1999, including all notes thereto (collectively, the "FINANCIAL
STATEMENTS"). Each of the Financial Statements is accurate and complete in all
material respects, is consistent with the books and records of the Company and
the Company Subsidiaries (which, in turn, are accurate and complete in all
material respects), and fairly presents in all material respects the financial
condition, assets and liabilities of the Company and the Company Subsidiaries as
of its date and the results of operations and cash flows for the periods related
thereto, in each case in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP").
IV.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, none of Mass PC, the Company nor any Company Subsidiary had, as of the date
- ---
of the Latest Balance Sheet, nor has it incurred since that date, any
liabilities or obligations of any nature (whether known or unknown, absolute,
contingent, accrued, direct, indirect, perfected, inchoate, unliquidated or
otherwise), except (i) to the extent clearly and accurately reflected or accrued
or fully reserved against in the Financial Statements or (ii) liabilities and
obligations which have arisen after the date of the Latest Balance Sheet in the
ordinary course of business and consistent with past custom and practices (none
of which is a liability resulting from a breach of contract, breach of warranty,
tort, infringement claim, legal violation or lawsuit).
IV.8 Unbilled Fees and Expenses. At the Closing, all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business, and will be
billable in the ordinary course of business, using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Company's and the Company
Subsidiaries' past practice and custom).
IV.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
11
<PAGE>
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
-------
15.4) of the Company or any Company Subsidiary, except bonuses and
----
distributions to employees and stockholders of the Company disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
12
<PAGE>
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary of any material obligation or liability, other than
current liabilities paid in the ordinary course of its business consistent
with past custom and practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
13
<PAGE>
(r) an occurrence or event not included in clauses (a) through
(q) that has resulted or, based on information of which the Management or
Company has Knowledge, is reasonably expected to result in a Company
Material Adverse Effect.
IV.10.1 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
IV.10.1 There is no suit, action, proceeding, investigation, claim
or order pending or, to the Knowledge of Management or the Company,
threatened against the Company or any Company Subsidiary, or with respect
to the Merger, or with respect to any Employee Plan, or any fiduciary of
any such plan (or pending or, to the Knowledge of the Company, threatened
against any of the officers, directors, stockholders, members, partners or
employees of the Company or any Company Subsidiary with respect to its
business or proposed business activities), or to which the Company or any
Company Subsidiary is otherwise a party, or that is reasonably expected to
have a Company Material Adverse Effect, before any court, or before any
Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of Management or the Company, is there any basis for
any such Action.
IV.10.2 Neither the Company nor any Company Subsidiary is
subject to any unsatisfied or continuing judgment, order or decree of any
court or Governmental Authority. Neither the Company nor any Company
Subsidiary, to the Knowledge of Management or the Company, is otherwise
exposed, from a legal standpoint, to any liability or disadvantage that is
reasonably expected to result in a Company Material Adverse Effect, and
neither the Company nor any Company Subsidiary is a party to any legal
action to recover monies due it or for damages sustained by it, other than
collection of past due charges for services rendered or expenses incurred
by the Company.
IV.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
IV.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company or any Company Subsidiary was a party during
the five (5) year period preceding the Closing Date, the date such
litigation was commenced and concluded, and the nature of the resolution
thereof (including amounts paid in settlement or judgment).
IV.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "LAWS") applicable to it or to the
operation of the Business, and neither Management, the Company nor any Company
Subsidiary has received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of Management or the Company, no event has occurred or
circumstances exist that (with or without notice or lapse of
14
<PAGE>
time) is reasonably expected to constitute or result in a violation by the
Company or any Company Subsidiary of any Law that gives rise to any liability on
the part of the Company or any Company Subsidiary under any Law.
IV.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and
-------- -------------
the Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12
-------------
lists all licenses, certificates, approvals, registrations and other similar
documents and authorizations, and applications therefor relating to the practice
of public accountancy (the "ACCOUNTING LICENSES") held by the Company or a
Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person. All such Licenses
and Accounting Licenses are valid, binding and in full force and effect. Except
as described on Schedule 4.12, the execution, delivery and performance of this
-------------
Agreement and the consummation of the transactions contemplated hereby will not
adversely affect any such Licenses. To the Knowledge of Management or the
Company, the Company and the Company Subsidiaries have taken all necessary
action to maintain such Licenses. No loss or expiration of any such License is
pending or, to Management's or the Company's Knowledge, threatened or reasonably
foreseeable.
IV.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements that may be terminated by the Company or a Company Subsidiary on
not more than 30 days notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
15
<PAGE>
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option, first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in any case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
16
<PAGE>
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
Management and the Company have provided CenterPoint with a true and
complete copy of each written Material Contract and a true and complete summary
of each oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
-------------
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against, the Company or a Company Subsidiary, as applicable, and,
to the Knowledge of Management or the Company, the other parties thereto, and is
in full force and effect, subject only to bankruptcy, reorganization,
receivership and other laws affecting creditors' rights generally and equitable
principles. Except as set forth on Schedule 4.13, the Company or one of the
-------------
Company Subsidiaries, as applicable, has performed in all material respects all
obligations required to be performed by it as of the date hereof and will have
performed in all material respects all obligations required to be performed by
it as of the Closing Date under each Material Contract and neither the Company
nor any Company Subsidiary, as applicable, nor, to the Knowledge of Management
or the Company, any other party to any Material Contract is in breach or default
thereunder, and, to the Knowledge of Management or the Company, there exists no
condition which would, with or without the lapse of time or the giving of
notice, or both, constitute a breach or default thereunder. Neither Management
nor the Company has been notified that any party to any Material Contract
intends to cancel, terminate, not renew, or exercise an option under any
Material Contract, whether in connection with the transactions contemplated
hereby or otherwise.
4.1 Properties.
----------
17
<PAGE>
IV.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "REAL PROPERTY"), in each case free and clear of all Liens, assessments
or restrictions (including, without limitation, inchoate liens arising out
of the provision of labor, services or materials to any such real estate)
other than (a) mortgages shown on the Financial Statements as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of
the property, if any, none of which materially impairs the current
operations of the Company, any Company Subsidiary or the Business, and (ii)
zoning laws and other land use restrictions or restrictive covenants that
do not materially impair the present use of the property subject thereto,
and (d) Liens, assessments and restrictions pursuant to and by virtue of
the terms of the lease of the Leased Property. The Real Property
constitutes all real properties reflected on the Financial Statements or
used or occupied by the Company or any Company Subsidiary in connection
with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of Management or the
Company, there is no threatened condemnation or proceeding with respect
thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
18
<PAGE>
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
-----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of Management or the Company, no easements, licenses or rights
are necessary to conduct the Business thereon in addition to those which
exist as of the date hereof; and
(ii) to the Knowledge of Management or the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the Leased
Property and there is no threatened condemnation or proceeding with respect
thereto.
IV.14.1 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
---------------
Company or one of the Company Subsidiaries has good and marketable title
to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any 1 Liens (other than Liens
that are part of such leasehold or license), and each such asset is in
working order and has been maintained in a commercially reasonable manner
and does not contain, to the Knowledge of Management or the Company, any
material defect. Except as set forth in Schedule 4.14.2, no personal
---------------
property (including, without limitation, software and databases maintained
on off-premises computers) used by the Company or any Company Subsidiary in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement
or is located other than on the Real Property.
IV.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "TRADE SECRETS") owned, used or licensed by the
Company or any Company Subsidiary (collectively, the "INTELLECTUAL PROPERTY")
are all those necessary to enable the Company and the Company Subsidiaries to
conduct and to continue to conduct the Business substantially as it is currently
conducted. Schedule 4.15 contains a complete and accurate list of all material
-------------
Patents, Marks and Copyrights and a brief description of all material Trade
Secrets owned, used by or directly licensed to the Company or any Company
Subsidiary, and a list of all material license agreements and arrangements with
respect to any of
19
<PAGE>
the Intellectual Property to which the Company or any Company Subsidiary is a
party, whether as licensee, licensor or otherwise (collectively, the
"INTELLECTUAL PROPERTY LICENSES"). Except as set forth on Schedule 4.15,
-------------
(i) all of the Intellectual Property is owned, or to the Knowledge of the
Company, used under a valid Intellectual Property License, by the Company or one
of the Company Subsidiaries, and is free and clear of all Liens and other
adverse claims; (ii) none of Management, the Company nor any Company Subsidiary
has received any written notice that it is or has infringed on, misappropriated
or otherwise conflicted with, or otherwise has Knowledge that it is infringing
on, misappropriating, or otherwise conflicting with the intellectual property
rights of any third parties; (iii) there is no claim pending or, to the
Knowledge of Management or the Company, threatened against the Company or any
Company Subsidiary with respect to the alleged infringement or misappropriation
by the Company or any Company Subsidiary, or a conflict with, any intellectual
property rights of others; (iv) the operation of any aspect of the Business in
the manner in which it has heretofore been operated or is presently operated
does not give rise to any such infringement or misappropriation; and (v) there
is no infringement or misappropriation of the Intellectual Property by a third
party or claim, pending or, to the Knowledge of Management or the Company,
threatened, against any third party with respect to the alleged infringement or
misappropriation of the Intellectual Property.
IV.16.1 Taxes.
-----
IV.16.1 Except as set forth on Schedule 4.16.1-1, each of the
-----------------
Company and the Company Subsidiaries has timely and accurately prepared and
filed or been included in or will timely and accurately prepare and file or
be included in all federal, state, local and foreign returns, declarations
and reports, information returns and statements (collectively, the
"RETURNS") for Taxes (as defined in Section 4.16.2) required to be filed by
--------------
or with respect to the Company or the Company Subsidiaries before the
Closing Date, and has paid or caused to be paid, or has made adequate
provision or set up an adequate accrual or reserve for the payment of, all
Taxes required to be paid in respect of the periods for which Returns are
due on or prior to the Closing Date, and will establish an adequate accrual
or reserve for the payment of all Taxes payable in respect of the period,
including portions thereof, subsequent to the last of said periods required
to be so accrued or reserved, in each case in accordance with GAAP up to
and including the Closing Date. All such Returns are or will be true and
correct in all material respects. Management and the Company have delivered
to CenterPoint true and complete copies of all Returns referred to in the
first sentence of this Section 4.16.1 (including any amendments thereof)
--------------
for the five (5) most recent taxable years. Neither the Company nor any
Company Subsidiary is delinquent in the payment of any Tax, and no material
deficiencies for any Tax, assessment or governmental charge have been
threatened, claimed, proposed or assessed, in each case in writing. No
waiver or extension of time to assess any Taxes has been given or
requested. No written claim nor any other claim, by any taxing authority
in any jurisdiction where the Company or any Company Subsidiary does not
file Tax returns is pending pursuant to which the Company or Company
Subsidiary, as applicable, is or may be subject to taxation by that
jurisdiction. The Company's and the Company Subsidiaries' Returns were
last audited by the Internal Revenue Service or comparable state, local or
foreign agencies on the dates set forth on Schedule 4.16.1-2.
-----------------
20
<PAGE>
IV.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
IV.17 Employee Benefit Plans; ERISA.
-----------------------------
IV.17.1 Except as described in Schedule 4.17.1, neither the Company
---------------
nor any Company Subsidiary has or is reasonably expected to have any
liability (including contingent liability) whether direct or indirect (and
regardless of whether it would be derived from a current or former Plan
Affiliate, as defined in Section 4.17.5(c)) with respect to any of the
------------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of 1 ERISA (as defined in
Section 4.17.5(b)), including, but not limited to, any medical plan, life
-----------------
insurance plan, short-term or long-term disability plan or dental plan;
(ii) any "employee pension benefit plan," as defined in Section 3(2) of
ERISA, including, but not limited to, any excess benefit plan, top hat plan
or deferred compensation plan or arrangement, nonqualified retirement plan
or arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program, arrangement
or agreement, including, but not limited to, any material fringe benefit
plan or program, personnel policy, bonus or incentive plan, stock option,
restricted stock, stock bonus, holiday pay, vacation pay, sick pay, bonus
program, service award, moving expense, reimbursement program, tool
allowance, safety equipment allowance, deferred bonus plan, salary
reduction agreement, change-of-control agreement, employment agreement or
consulting agreement.
IV.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
---------------
21
<PAGE>
IV.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to, the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "1 prohibited transaction," as such
terms are defined in ERISA or the Code; (ii) breached a fiduciary
obligation or (iii) any liability for any failure to act or comply in
connection with the administration or investment of the assets of such
plan; and no Employee Plan has any liability and there is no liability in
connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by the Company or one of the Company
Subsidiaries without incurring any such liability, or (iii) which is
adequately funded under a funding arrangement separate from the assets of
the Company, any Company Subsidiary or a Plan Affiliate (and only to the
extent of such funding). Any contribution made or accrued with respect to
any Employee Plan is fully deductible by the Company, a Company Subsidiary
or a Plan Affiliate.
IV.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multi employer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple employer
welfare arrangement" within the meaning of Section 3(40) of ERISA, (v)
subject to the funding requirements of Section 412 of the Code or to Title
IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits.
IV.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
--------------
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
22
<PAGE>
(c) with respect to any Person ("FIRST PERSON"), the term "PLAN
AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or
which would be treated or have been treated with the First Person as
under common control or whose employees would be or have been treated
as employed by the First Person, under Section 414 of the Code or
Section 4001(b) of ERISA and any regulations, administrative rulings
and case law interpreting the foregoing.
IV.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of
Management or the Company, threatened against the Company or any Company
Subsidiary, or that is reasonably expected to affect the Company or any Company
Subsidiary; nor, to the Knowledge of Management or the Company, is there any
basis for any such allegation, charge, or complaint. There is no request for
representation pending and, to the Knowledge of Management or the Company, no
question concerning representation has been raised. There is no grievance
pending that is reasonably expected to result in a Company Material Adverse
Effect nor any arbitration proceeding arising out of a union agreement. To the
Knowledge of Management or the Company, no employee who is key to the Business
and no group of employees has announced or otherwise indicated any plans to
terminate employment with the Company or any Company Subsidiary. Each of the
Company and any Company Subsidiary has complied with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. Neither the Company nor any Company Subsidiary is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any such laws, ordinances or regulations.
IV.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Operating Committee of Management and the Officers of the Company, there are
no Hazardous Materials (as defined later in this Section) present at, on or
under any real property currently or formerly owned, leased or used by the
Company or Company Subsidiary (other than those present in office supplies and
cleaning/maintenance materials) for which the Company or a Company Subsidiary is
or is reasonably expected to be responsible, or otherwise have any liability,
for response costs under any Environmental and Safety Requirements; (iii) each
of the Company and the Company Subsidiaries has disposed of all waste materials
generated by the Company or such Company Subsidiary at any real property
currently or formerly owned, leased or used by the Company or Company Subsidiary
in compliance with applicable Environmental and Safety Requirements; and (iv)
there are and have been no facts, events, occurrences or conditions at or
related to any real property currently or formerly owned, leased or used by the
Company or Company Subsidiary that is reasonably expected to cause or give rise
to liabilities or response obligations of the Company or any Company Subsidiary
under any Environmental and Safety Requirements. The term "ENVIRONMENTAL AND
SAFETY REQUIREMENTS"
23
<PAGE>
means any federal, state and local laws, statutes, regulations or other
requirements relating to the protection, preservation or conservation of the
environment or worker health and safety, all as amended or reauthorized. The
term "HAZARDOUS MATERIALS" means "hazardous substances," as defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq., "hazardous wastes," as defined by the Resource Conservation
Recovery Act, 42 U.S.C. (S) 6901 et seq., asbestos in any form or condition,
polychlorinated biphenyls and any other material, substance or waste to which
liability or standards of conduct may be imposed under any Environmental and
Safety Requirement.
IV.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and the Company Subsidiaries' ownership or interest in, and
operation of, its assets against the types of liabilities, including
professional malpractice, customarily insured against in connection with
operations similar to the Business, and all premiums due on such policies have
been paid. To Management's or the Company's Knowledge, each of the Company and
the Company Subsidiaries has complied with the provisions of all such policies
and is not in default under any of such policies. Schedule 4.20 contains a
-------------
complete and correct list of all such insurance policies. None of Management,
the Company nor any Company Subsidiary has received any notice of cancellation
or intent to cancel or increase premiums with respect to such insurance
policies. Schedule 4.20 also contains a list of all claims or asserted claims
-------------
reported to insurers under such policies relating to the ownership or interest
in the Company's and the Company Subsidiaries' assets, or operation of the
Business, including all professional malpractice claims and similar types of
claims, actions or proceedings asserted against the Company or any Company
Subsidiary arising out of the Business at any time within the past three (3)
years.
IV.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of Management, Company, any Member, any Affiliate of a Member nor
any Affiliate of Management, the Company or any Company Subsidiary (i)
possesses, directly or indirectly, any financial interest in, or is a director,
officer, employee or affiliate of, any Person that is a client, supplier,
customer, lessor, lessee or competitor of the Company or any Company Subsidiary,
(ii) owns, directly or indirectly, in whole or in part, or has any interest in
any tangible or intangible property used in the conduct of the Business, or
(iii) is a party to an agreement or relationship, that involves the receipt by
such Person of compensation or property from the Company or any Company
Subsidiary other than through a customary employment relationship or through
distributions made with respect to the Company Stock or equity interests in any
Company Subsidiary (provided such distributions have been made consistent with
the Company's or any Company Subsidiary's, as the case may be, past custom and
practices). Schedule 4.21 sets forth the parties to and the date, nature and
-------------
amount of each transaction during the last five years involving the transfer of
any cash, property or rights to or from the Company or any Company Subsidiary
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Stock)
("AFFILIATE TRANSACTIONS"), and any existing commitments of the Company or any
Company Subsidiary to engage in the future in any Affiliate Transactions.
Except as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company
24
<PAGE>
or any Company Subsidiary was effected on terms equivalent to those that would
have been established in an arm's-length transaction.
IV.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenues for the twelve (12) months ended December
31, 1998. Except as set forth on Schedule 4.22, since December 31, 1998, none
-------------
of such clients has canceled or substantially reduced its business with the
Company or Company Subsidiary, as applicable, nor are any of such clients
threatening to do so. To the Knowledge of Management or the Company, no client
that accounts for one percent (1%) or more of the Company's consolidated net
revenue, or supplier of the Company or any Company Subsidiary, will cease to do
business with, or substantially reduce its business with, the Company or any
Company Subsidiary, as applicable, after the consummation of the transactions
contemplated hereby.
IV.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiaries' ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company or any Company Subsidiary. Schedule
--------
4.23 includes the date and amount of the last bonus or similar distribution or
- ----
increase in compensation for each listed individual.
IV.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each such account or box, and the names of all Persons
authorized to draw thereon or to have access thereto.
IV.25 Professional Credentials. Each Member is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Members by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy.
25
<PAGE>
IV.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
Management, Mass PC or the Company contained in this Agreement or in any of the
certification, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to CenterPoint as contemplated by any provision
hereof contains any untrue statement regarding a material fact or omits to state
a material fact necessary in order to make the statements made herein or therein
not misleading. To the Knowledge of Management, Mass PC or the Company, there
is no fact or circumstance that has not been disclosed to CenterPoint herein
that has or is reasonably expected to have a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
V.1 Several Representations and Warranties. Each Member, severally and
--------------------------------------
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
5.1.1 Capitalization. Except as set forth on Schedule 4.4,
-------------- ------------
immediately prior to the contribution thereof by such Member to the capital
of Management, such Member shall own beneficially and of record, and has
good and marketable title to, all of the issued and outstanding shares of
Company Stock as set forth opposite the name of such Member in Schedule
--------
4.4, free and clear of all Liens. At the Closing, as provided in this
Agreement, CenterPoint will acquire, good and valid title to such stock,
free and clear of any Lien other than any Lien created by CenterPoint.
5.1.2 Authority. Such Member has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by such Member, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Member, enforceable against such Member in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
5.1.3 Non-Contravention. The execution and delivery of this
-----------------
Agreement by such Member does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of Management,
Mass PC, the Company or any Company Subsidiary under, any of the terms,
conditions or provisions of (i) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction,
26
<PAGE>
writ, permit or license of any Governmental Authority applicable to such
Member, except for those items relating to regulating, licensing or
permitting the practice of public accountancy or (ii) other than those
licenses, franchises, permits, concessions or instruments of any
Governmental Authority, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which such Member is a
party or by which such Member may be bound or affected. The consummation by
such Member of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, creation or acceleration
of Liens under the terms, conditions or provisions of the items described
in clauses (i) and (ii) of the immediately preceding sentence, subject to
obtaining (prior to the Closing Date) the consents set forth on Schedule
--------
4.3.2, except for those items described in (i) above relating to
-----
regulating, licensing or permitting the practice of public accountancy.
5.1.4 Approvals. To the Knowledge of such Member, and except with
---------
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "1 blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Member or the consummation by such
Member of the transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Member, threatened against such Member relating to
(i) the transactions contemplated by this Agreement, (ii) any action taken
by such Member or contemplated by such Member in connection with the
consummation by such Member of the transactions contemplated hereby or
(iii) the practice of public accountancy by such Member.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Member or obligating such Member to grant, extend or enter into any
such agreement or commitment or obligating such Member to convey or
transfer any Company Stock. As of the Closing Date, there will be no
voting trusts, proxies or other agreements or understandings to which such
Member is a party or is bound with respect to the voting of any shares of
capital stock or other equity interests of the Company other than the
Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Member contained in this Agreement or any of the written statements or
certificates furnished at or
27
<PAGE>
prior to the Closing by or on behalf of such Member to CenterPoint or its
representatives in connection herewith or pursuant hereto, contains any
untrue statement of a material fact, or omits or will omit to state any
material fact required to make the statements contained herein or therein
not misleading.
5.1.8 Representations and Warranties of Management, Mass PC and the
-------------------------------------------------------------
Company. To such Member's actual knowledge, the representations and
-------
warranties of Management, Mass PC and the Company set forth in Article IV
----------
of this Agreement are true and correct.
V.2 Joint and Several Representations and Warranties. The Members jointly
------------------------------------------------
and severally represent and warrant to CenterPoint that: (a) as of the date
hereof, the authorized capital stock of the Company consists of 101,000 shares
of common stock, par value $0.01 per share, of which 18,830 shares are issued
and outstanding, (b) the authorized capital stock of Mass PC consists of 18,830
shares of common stock, par value $0.01 per share, of which 18,830 shares are
issued and outstanding, (c) after the Conversion, the authorized capital stock
of the Company shall consist of 20,000 shares of common stock, par value $0.01
per share, of which 18,830 shares shall be issued and outstanding, and (d) all
of the issued and outstanding shares described in this Section 5.2 are, or will
-----------
be prior to the Closing, validly issued, fully paid, nonassessable and free of
preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to Management, Mass PC, the Company and
the Members as of the date hereof and, subject to Section 7.3, as of the date on
-----------
which CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
VI.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Management and the Company.
VI.2 Capitalization.
--------------
VI.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares
28
<PAGE>
of CenterPoint Common Stock, of which the number of shares set forth in the
Form S-1 will be issued and outstanding, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share, none of which will be issued and
outstanding. Other than (i) shares of CenterPoint Common Stock issued
pursuant to a split of the shares outstanding as of the date of this
Agreement, (ii) shares of CenterPoint Common Stock issued in accordance
with the Merger and the Other Mergers, and (iii) shares of CenterPoint
Common Stock that may be issued to new members of management in lieu of
shares previously issued to current members of management, but which will
not increase the number of shares of outstanding CenterPoint Common Stock,
no shares of CenterPoint Common Stock will be issued prior to the
consummation of the IPO. Mergersub's authorized capital stock consists
solely of 100 shares of common stock, par value $.01 per share, all of
which are issued and outstanding, are owned free and clear of any Liens by
CenterPoint, and are fully paid, nonassessable and free of preemptive
rights.
VI.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Management pursuant to this Agreement
will at the Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
VI.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of each of Professional Service Group, Inc., a Delaware
corporation, and Mergersub (and similar entities created for similar purposes
with respect to the Other Agreements), CenterPoint has no subsidiaries and it
does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any Person.
29
<PAGE>
VI.4 Authority; Non-Contravention; Approvals.
---------------------------------------
VI.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by
Management, the Company and the Members, constitutes a valid and legally
binding agreement of CenterPoint and Mergersub, enforceable against each of
them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
VI.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to CenterPoint, Mergersub or any of their respective properties or assets,
or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which CenterPoint or Mergersub is
now a party or by which CenterPoint, Mergersub or any of their respective
properties or assets, may be bound or affected, except those items
described in clause (ii) relating to regulating, licensing or permitting
the practice of public accountancy. The consummation by CenterPoint and
Mergersub of the transactions contemplated hereby will not result in any
violation, conflict, breach, right of termination or acceleration or
creation of Liens under any of the terms, conditions or provisions of the
items described in clauses (i) through (iii) of the immediately preceding
sentence, subject, in the case of the terms, conditions or provisions of
the items described in clause (ii) above, to obtaining (prior to the
Closing Date) CenterPoint Required Statutory Approvals and except for those
items described in (ii) above relating to regulating, licensing or
permitting the practice of public accountancy.
VI.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing which
may be required by any Governmental Authority or self-regulatory
organization regulating,
30
<PAGE>
licensing or permitting the practice of public accountancy (the filings
and approvals referred to in clauses (i) through (iii) are collectively
referred to as the "CENTERPOINT REQUIRED STATUTORY APPROVALS") no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority
is necessary for the execution and delivery of this Agreement by
CenterPoint or Mergersub or the consummation by CenterPoint or Mergersub
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be, are not reasonably
expected to, in the aggregate, have a material adverse effect on the
business operations, properties, assets, condition (financial or other),
results of operations or prospects of CenterPoint and its subsidiaries,
taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
VI.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth in Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
VI.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
the IPO or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to have a CenterPoint Material
Adverse Effect. CenterPoint is not subject to any unsatisfied or continuing
judgement, order or decree of any court or Governmental Authority. CenterPoint
is not a party to any legal action to recover monies due it or for damages
sustained by it.
VI.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
VI.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to Management, the Company or the Members as
contemplated by any provision hereof contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. To the Knowledge of CenterPoint,
there is no fact or circumstance that has not been disclosed to the Company
herein that has or is reasonably expected to have a Company Material Adverse
Effect.
31
<PAGE>
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
VII.I Conduct of Business by the Company Prior to the Effective Time.
--------------------------------------------------------------
VII.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects, conduct the Business in the
ordinary and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or reclassify
its outstanding capital stock or (iii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise
except dividends or distributions which (A) are consistent with past
customs and practices, (B) do not result in a Company Material Adverse
Effect and (C) as set forth on Schedule 7.1.4(ii);
------------------
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, its capital
stock or equity interests of any class, (ii) any debt with voting rights
or (iii) any debt or equity securities convertible into or exchangeable
for, or any rights, warrants, calls, subscriptions, or options to
acquire, any such capital stock, debt with voting rights or convertible
securities;
(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs and
practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or equity interests
or any options, warrants or rights to acquire any of its capital stock or
equity interests or any security convertible into or exchangeable for its
capital stock or equity interests, (iii) sell, pledge, dispose of or
encumber any assets or businesses other than dispositions in the ordinary
course of business in a manner consistent with past customs and practices
(iv) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the services
of its present officers and key employees, and (iii) preserve the
goodwill and business relationships with
32
<PAGE>
clients and others having business relationships with it and not
engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated on Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of business
in a manner consistent with past customs and practices of the Company
or any Company Subsidiary, as applicable, (ii) pay or agree to pay any
additional pension, retirement allowance or other employee benefit
under any Employee Plan to any such Person, whether past or present,
(iii) enter into any new employment, severance, consulting, or other
compensation agreement with any of its existing employees, partners,
members or owners, (iv) amend or enter into a new Employee Plan
(except as required by Law) or amend or enter into a new collective
bargaining agreement, or (v) engage in any new Affiliate Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any businesses or any Person or
division thereof or otherwise acquire or agree to acquire any assets
in each case which are material to it other than in the ordinary
course of business in a manner consistent with past customs and
practices;
(j) other than as set forth on Schedule 7.1.4(ii), not sell,
------------------
lease, license, encumber or otherwise dispose of, or agree to sell,
lease, license, encumber or otherwise dispose of, any of its assets
other than in the ordinary course of business, consistent with past
customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual course
and consistent with past custom and practices.
7.1.2 Prior to the Closing, the Members shall have (a) formed a separate
Person ("ATTEST ENTITY") pursuant to Organizational Documents reasonably
acceptable in form and substance to
33
<PAGE>
CenterPoint and (b) used its diligent efforts to have secured, or have caused
the Attest Entity to have secured, all licenses, permits, approvals and
authorizations necessary to conduct the Attestation Practice in accordance with
applicable laws and regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Members, Management or the
Company shall take, or permit any Company Subsidiary to take, any action that
would or is reasonably likely to result in any of the representations or
warranties of the Members, Management, Mass PC or the Company set forth in this
Agreement being untrue or in any of the conditions to the consummation of the
transactions contemplated hereunder set forth in Article X (other than Section
--------- -------
10.1(i)) not being satisfied.
- -------
7.1.4 Prior to the Closing, (i) the Company and/or the Members, as
applicable, shall terminate, without any liability to the Company or the Company
Subsidiaries, all agreements relating to the voting of the Company's capital
stock, and all agreements and obligations of the Company and the Company
Subsidiaries relating to borrowed money and/or involving payments to or for the
benefit of a current or former stockholder of the Company, or an Affiliate or
family member of a current or former stockholder of the Company, including,
without limitation, those set forth on Schedule 7.1.4(i), but excluding (A) debt
-----------------
reflected on Schedule 2.1 as Debt Assumed By CenterPoint, (B) items reflected on
------------
Schedule 2.5, (C) to the extent such agreements and obligations result in
- ------------
Indirect Costs under the Incentive Compensation Agreement, and (D) items
approved by CenterPoint in writing, and (ii) notwithstanding anything contained
in this Section 7.1 to the contrary, the Company will transfer and distribute
-----------
the assets listed on Schedule 7.1.4(ii) including, without limitation, any AR
------------------
not necessary to meet the Target or otherwise satisfy the obligations of the
Company or the Members hereunder (the "EXCLUDED ASSETS") to the Persons listed
on Schedule 7.1.4(ii), subject to all liabilities and obligations of any nature
------------------
(whether known or unknown, accrued, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) relating to the Excluded Assets
(collectively, the "EXCLUDED LIABILITIES"); provided, however, that prior to the
-------- -------
Closing, the Company and the Members shall obtain novations or other releases or
agreements discharging the Company from all Excluded Liabilities (so that the
respective Excluded Liabilities will become direct liabilities and obligations
of the assignee), and provide copies thereof to CenterPoint.
VII.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or
earlier termination of this Agreement, Management, Mass PC, the Company and
the Members shall (i) not and each of Management, Mass PC and the Company
shall use its diligent efforts to cause the Company Subsidiaries and any
officer, director or employee of, or any attorney, accountant, investment
banker, financial advisor or other agent retained by Management, the
Company or any Company Subsidiary not to, initiate, solicit, negotiate,
encourage, or provide non-public or confidential information to facilitate,
any proposal or offer to acquire all or any substantial part of the
business and properties of the Company or any Company Subsidiary, or any
capital stock or other equity interest of Management, Mass PC, the Company
or any Company Subsidiary, whether by merger, purchase of assets or
otherwise, whether for cash, securities or any other consideration or
combination thereof, or enter into any joint venture
34
<PAGE>
or partnership or similar arrangement, and (ii) promptly advise CenterPoint
of the terms of any communications Management, the Company or the Members
may receive or become aware of relating to any bid for part or all of
Management, Mass PC, the Company or any Company Subsidiary.
(b) Management, Mass PC, the Company and the Members (i)
acknowledge that a breach of any of their covenants contained in this
Section 7.2 will result in irreparable harm to CenterPoint which will not
-----------
be compensable in money damages; and (ii) agree that such covenant shall be
specifically enforceable and that specific performance and injunctive
relief shall be a remedy properly available to the other party for a breach
of such covenant.
VII.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the Other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but Mass PC, the Company and the Members do not,
Management, Mass PC, the Company and a majority of the Members may terminate
this Agreement at any time prior to the Closing Date. In the event that (i)
Management, Mass PC, the Company or the Members seek to amend or supplement a
Schedule pursuant to this Section 7.3, (ii) such amendment or supplement
-----------
constitutes or reflects a Company Material Adverse Effect or affects Schedule
--------
4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority of the
- --- ------------ ------------
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to Management's, Mass PC's, the Company's or
any Member's breach of a representation or warranty as of the date of this
Agreement in which case the Company shall pay to CenterPoint, as CenterPoint's
exclusive remedy (notwithstanding anything to the contrary) and as liquidated
damages, and not as a penalty, an amount equal to $2,000,000 (the "LIQUIDATED
DAMAGES AMOUNT"). The Company agrees that in the case of such termination
CenterPoint and the Founding Companies (excluding the Company) will sustain
immediate and irreparable economic harm and loss of goodwill and that actual
losses suffered
35
<PAGE>
by such parties will be difficult, if not impossible, to ascertain, but the
Liquidated Damages Amount set forth herein is reasonable and has been arrived at
after a good faith effort to estimate such losses. Payment of the Liquidated
Damages Amount shall be made in cash to CenterPoint within thirty (30) days of a
termination pursuant to this Section 7.3 in connection with an amendment of or
-----------
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement.
VII.4 Members Meeting. The Company shall take all action in accordance
---------------
with applicable Laws and its Organizational Documents necessary to duly call,
give notice of, convene and hold a meeting of the Members to be held on the
earliest practicable date, following the date the Form S-4 is deemed effective
by the SEC, determined in consultation with CenterPoint to consider and vote
upon approval of the Conversion, the Merger, this Agreement and the transactions
contemplated hereby. The Company shall solicit the approval of the Conversion,
the Merger, this Agreement and the transactions contemplated hereby by the
Members, and the Operating Committee of Management and the Board of Directors of
the Company shall recommend approval of the Conversion, the Merger, this
Agreement and the transactions contemplated hereby by the Members.
VII.5 Conversion. Prior to the Closing but effective only if, as and
----------
when the Closing occurs, Management, Mass PC and the Members shall cause Mass PC
and the Company to complete, and Mass PC and the Company shall complete, the
Conversion pursuant to applicable law and present such evidence of the
Conversion at the Closing, as CenterPoint or its counsel may require.
36
<PAGE>
ARTICLE VIII
ADDITIONAL AGREEMENTS
VIII. 1 Access to Information.
---------------------
VIII.1.1 The Company shall and shall cause the Company
Subsidiaries to afford to CenterPoint and its accountants, counsel,
financial advisors and other representatives, including without limitation
the underwriters engaged in connection with the IPO (each an "UNDERWRITER"
and collectively, the "UNDERWRITERS") and their counsel (collectively, the
"CENTERPOINT REPRESENTATIVES"), and to the other Founding Companies and
their accountants, counsel, financial advisors and other representatives,
and CenterPoint shall afford to the Members and the Company and their
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Members, Management and the Company shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence
all non-public information furnished to it in connection with the
transactions contemplated by this Agreement, except that each of
CenterPoint, the Members and the Company may disclose any information that
it is required by law or judicial or administrative order to disclose. In
addition, CenterPoint will cause each of the other Founding Companies and
their members and stockholders to enter into a provision similar to this
Section 8.1 requiring each such Founding Company to keep confidential any
-----------
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
VIII.1.2 In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly return to the
disclosing party all non-public written material provided pursuant to this
Section 8.1 or pursuant to the Other Agreements and shall not retain any
-----------
copies, extracts or other reproductions of such written material. In the
event of such termination, all documents, memoranda, notes and other
writings prepared by CenterPoint or the Company based on the information in
such material shall be destroyed (and CenterPoint and the Company shall use
their respective reasonable best efforts to cause their advisors and
representatives to similarly destroy such documents, memoranda and notes),
and such destruction (and reasonable best efforts) shall be certified in
writing by an authorized officer supervising such destruction.
37
<PAGE>
VIII.2 Registration Statements.
-----------------------
VIII.2.1 Subject to the reasonable discretion of CenterPoint as
advised by the lead Underwriter, CenterPoint shall file with the SEC as
soon as is reasonably practicable after the date hereof the Registration
Statements and shall use all reasonable efforts to have the Registration
Statements declared effective by the SEC as promptly as practicable.
CenterPoint shall also take any action required to be taken under
applicable state "blue sky" or securities laws in connection with the
issuance of CenterPoint Common Stock. CenterPoint, Management, the Company
and the Members shall promptly furnish to each other all information, and
take such other actions, as may reasonably be requested in connection with
making such filings. All information provided and to be provided by
CenterPoint, Management, the Members and the Company, respectively, for use
in the Registration Statements shall be true and correct in all material
respects without omission of any material fact which is required to make
such information not false or misleading as of the date thereof and in
light of the circumstances under which given or made. Management, the
Company and the Members agree promptly to advise CenterPoint if at any time
during the period in which a prospectus relating to the offering or the
Merger is required to be delivered under the Securities Act, any
information contained in the prospectus concerning the Company, the Company
Subsidiaries, Management or the Members becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
VIII.2.2 CenterPoint agrees that it will provide to Management
and its counsel copies of drafts of the Registration Statements (and any
amendments thereto) containing material changes to the information therein
as they are prepared and will not (i) file with the SEC, (ii) request the
acceleration of the effectiveness of or (iii) circulate any prospectus
forming a part of, the Registration Statements (or any amendment thereto)
unless Management and its counsel (x) have had at least two days to review
the revised information contained therein (which changes shall be
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by Management's counsel) and
(y) have not objected to the substance of the information contained
therein. Any objections posed by Management and the Company or their
counsel shall be in writing and state with specificity the material in
question, the reason for the objection, and Management's proposed
alternative. If the objection is founded upon a rule promulgated under the
Securities Act, the objection shall cite the rule. Notwithstanding the
foregoing, during the five (5) business days immediately preceding the date
scheduled for the filing of the Registration Statements and any amendment
thereto, Management and its counsel shall be obligated to respond to
proposed changes electronically transmitted to them within two (2) hours
from the time the proposed changes (in the case of the initial filing of
the Registration Statements, from the last circulated draft of the
Registration Statements; and, in the case of any subsequent filing of the
Registration Statements or any amendment thereof, from the most recently
filed Registration Statements or amendment thereof) are transmitted to
Management's counsel; provided, that, CenterPoint has provided to
-------- ----
Management or its counsel reasonable advance notice of such proposed
changes; provided, further, that such
-------- -------
38
<PAGE>
changes are highlighted by computer generated marks indicating the
additions and deletions made from the prior draft reviewed by Management's
counsel.
VIII.2.3 CenterPoint will advise such Member Representative of the
effectiveness of the Registration Statements, advise the Member
Representative of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written request
of any Member, CenterPoint will furnish to such Member a reasonable number
of copies of the final prospectus associated with the IPO.
VIII.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of
-----------------
the independent public accountants and legal counsel to CenterPoint and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. Neither Management, the Company nor the Members will
be liable for any portion of the above expenses in the event the IPO is not
completed. CenterPoint shall also pay the underwriting discounts and commissions
payable in connection with the sale of CenterPoint Common Stock in the IPO. All
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
VIII.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
VIII.5 Public Statements. Except as may be required by law, no party
-----------------
hereto nor any Affiliate of any party hereto shall issue any press release or
any written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint, Management and the Company.
VIII.6 Registration Rights.
-------------------
39
<PAGE>
VIII.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give the Member Representative prompt written notice of
its intent to do so. Promptly after receipt of such notice, the Member
Representative shall provide written notice to CenterPoint of all Members
(and their respective current mailing address) that beneficially own shares
of CenterPoint Common Stock. Thereafter, upon the written request of any of
the Members given within thirty (30) days after receipt of such notice,
CenterPoint will use its best efforts to cause to be included in such
registration all of the CenterPoint Common Stock which any such Member
requests, provided that CenterPoint shall have the right to reduce the
number of shares included in such registration, if CenterPoint is advised
in writing in good faith by any managing underwriter of the securities
being offered pursuant to any registration statement under this Section 8.6
-----------
that the number of shares to be sold by Persons other than CenterPoint is
greater than the number of such shares which can be offered without
adversely affecting the offering; in such case, CenterPoint may reduce the
number of shares offered for the accounts of such Persons to a number
deemed satisfactory by such managing underwriter. Any such reduction shall
occur first by eliminating from such registration any shares held by
Persons other than Persons holding CenterPoint Common Stock directly or
indirectly immediately following the Closing and then reducing pro rata
(based upon the number of shares requested to be registered) the number of
shares offered for the account of such Persons. CenterPoint shall not be
obligated to register any shares of CenterPoint Common Stock held by any
Member at any time when such shares are not then transferable in accordance
with Section 12.2 hereof. Registration rights under this Section 8.6 may be
------------ -----------
transferred in whole or in part in connection with the transfer of any
shares of CenterPoint Common Stock received pursuant to this Agreement
other than the transferee of the kind described in clause (x) of Section
-------
12.2 hereof.
----
VIII.6.2 Except for underwriting commissions and discounts, all
expenses incurred in connection with the registrations under this Section
-------
8.6 (including all registration, filing, qualification, legal, printer and
---
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as soon
as reasonably practicable, a registration statement with respect to
the CenterPoint Common Stock (and such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be required by applicable law) and use its best
efforts to cause such registration to promptly become and remain
effective for a period of at least one hundred twenty (120) days (or
such shorter period during which holders shall have sold all
CenterPoint Common Stock which they requested to be registered);
(b) upon the written request of a Member whose CenterPoint Common
Stock is to be covered by any such registrations, furnish to such
Member a
40
<PAGE>
reasonable number of copies of the prospectus covering the offering and
sale by the Member of the shares to be covered thereby;
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Member whose CenterPoint Common Stock is to be
covered by such registration of the effectiveness of such registration
statement, advise each such Member of the entry of any stop order
suspending the effectiveness of such registration statement or of the
initiation of any proceeding for that purpose, and, if such stop order
shall be entered, use its best efforts promptly to obtain the lifting or
removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Member whose CenterPoint Common Stock is to be covered by such
registration, of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated therein
by reference includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading and, at the request of such
Member, prepare and furnish to such Member a post-effective amendment or
supplement to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading.
VIII.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and each
- ---
participating holder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of CenterPoint's size and investment stature, including
indemnification.
VIII.6.4 In consideration of the granting to the Members of the
registration rights under this Section 8.6, the Members agree, and agree to
-----------
enter into an agreement with the underwriters in connection with an underwritten
registration to the effect, that it/they will not sell, transfer or otherwise
dispose of, including, without limitation, through put or short sale
arrangements, shares of CenterPoint Common Stock in the ten (10) days prior to
the effectiveness of any registration of CenterPoint Common Stock for sale to
the public and for up to ninety (90) days following the effectiveness of such
registration, provided that all
41
<PAGE>
directors, executive officers and holders of more than five percent (5%) of
the outstanding CenterPoint Common Stock agree to the same restrictions;
and further provided that, with respect to the first public offering of
shares of the CenterPoint Common Stock within three (3) years following the
IPO, the Members shall have been afforded a meaningful opportunity to
include shares in such registration after any reduction by reason of
underwriters' written advice.
VIII.7 CenterPoint Covenants. After the date hereof and prior to the
---------------------
Closing Date or earlier termination of this Agreement in accordance with its
terms, CenterPoint shall comply in all material respects with all applicable
Laws. CenterPoint shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of CenterPoint set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
VIII.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Members released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Members' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Members against any and all claims made by lenders or
landlords under such guarantees.
VIII.9 Lock-Up Agreement. Each Member agrees, and agrees to enter into
-----------------
an agreement with the Underwriter on or prior to the date on which preliminary
Prospectuses are delivered to the effect that the Members will not offer, sell,
contract to sell or otherwise dispose of any shares of CenterPoint Common Stock,
or any securities convertible into or exercisable or exchangeable for
CenterPoint Common Stock, for a period of 180 days after the date of the final
prospectus of the IPO without the prior written consent of the Underwriter
except for shares of CenterPoint Common Stock disposed of as bona fide gifts,
subject to any remaining portion of the 180-day period applying to any shares so
disposed of.
VIII.10 Preparation and Filing of Tax Returns.
-------------------------------------
VIII.10 The Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
42
<PAGE>
VIII.10.2 Each of the Company, CenterPoint and the Members shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
VIII.11 Maintenance of Insurance. The Company covenants and agrees that
------------------------
all insurance policies listed, or required to be listed, on Schedule 4.20 will
-------------
be maintained in full force and effect through the Closing Date.
VIII.12 Administration. After the Closing, at the request of the
--------------
Members, CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule
--------
7.1.4(ii) using reasonable care and in accordance with the Company's policies in
- ---------
effect at Closing.
ARTICLE IX
INDEMNIFICATION
IX.1 Indemnification by the Members. Subject to Sections 9.7 and 9.8, the
------------------------------ ------------ ---
Members jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party, resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Member or any action, demand
or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the Members
to indemnify, defend and save harmless for any misrepresentation or breach
of representation or warranty made in Section 5.1 hereof or in any
-----------
certificate, schedule, document, exhibit or other instrument delivered in
respect thereof shall not be joint and several, but such obligation shall
be several only and limited to the several Member(s) making such
misrepresentation or breach;
(b) any failure by Management, the Company or any Member to observe
or perform any of their covenants and agreements set forth herein related
to the period prior to the Closing, except that the obligation of the
Members to indemnify, defend and save harmless for any misrepresentation or
breach of representation or warranty made in Section 5.1 hereof shall not
-----------
be joint and several, but such obligation shall be several only and limited
to the several Member(s) making such misrepresentation or breach;
43
<PAGE>
(c) any liability under the 1933 Act, the 1934 Act or other federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Management or the Company, contained in any preliminary
prospectus relating to the IPO, the Registration Statements or any proxy
statement or prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact relating to Management or the Company required to
be stated therein or necessary to make the statements therein not
misleading, and not provided to CenterPoint or its counsel by Management or
the Company; provided, however, that such indemnity shall not inure to the
-------- -------
benefit of any CenterPoint Indemnified Party to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and (i)
Management or the Company provided, in writing, corrected information to
CenterPoint or its counsel for inclusion in the final prospectus prior to
distributing such prospectus, and such information was not so included, or
(ii) CenterPoint did not provide Management, the Company and their counsel
with the information required to be provided pursuant to Section 8.2.2, and
-------------
such information is the basis for the untrue statement or omission (or
alleged untrue statement or omission) giving rise to the liability under
this Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Members,
Management or the Company in connection with the Merger or the transactions
contemplated by this Agreement with respect to brokerage, finders and other
fees or commissions, (ii) disallowance of any tax deduction to CenterPoint
or the Company with respect to any item listed on Schedule 2.5 and
------------
considered in determining Net Working Capital, (iii) any Losses relating
to, resulting from, arising out of or otherwise by virtue of any matter
which is or should be listed on Schedules 4.10 or 7.1.4(i) hereto, (iv) the
-------------- --------
Excluded Assets, the Excluded Liabilities and the transactions contemplated
under Section 7.1.4, and (v) any payment with respect to Dissenting Shares.
-------------
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided, further, that the
-------- -------
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
----------
Article IX, the Other Founding Companies, and each of their respective officers,
- ----------
directors, employees, agents, employee plans and plan
44
<PAGE>
fiduciaries, plan administrators or other Persons dealing with any such plans,
shall be deemed to be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
IX.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Members and their respective Affiliates, and their
Affiliates' respective officers, directors, employees and agents (each, a
"MEMBER INDEMNIFIED PARTY") forever harmless from and against, and to promptly
pay to a Member Indemnified Party or reimburse a Member Indemnified Party for,
any and all Losses sustained or incurred by any Member Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Member Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to CenterPoint or any of the Other Founding
Companies required to be stated therein or necessary to make the
statements therein not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Management, the Company or the Members, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to Management, the Company or the
Members required
45
<PAGE>
to be stated therein or necessary to make the statements therein not
misleading, to the extent such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and (i) Management, the Company or the Members
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Management and its counsel with the information required to
be provided pursuant to Section 8.2.2, and such information is the basis
-------------
for the untrue statement or omission (or alleged untrue statement or
omission) giving rise to the liability under this Section 9.2(d).
--------------
IX.3 Indemnification Procedure for Third Party Claims.
-------------------------------------------------
IX.3.1 In the event that subsequent to the Closing any Person
entitled to indemnification under this Agreement (an "INDEMNIFIED PARTY")
receives notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a "
THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
IX.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Members, may be granted by the Member
Representative (as defined in Section 9.13)), which consent shall not be
------------
unreasonably withheld or delayed.
46
<PAGE>
IX.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
IX.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
IX.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
47
<PAGE>
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
IX.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
IX.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment),(ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
IX.7 Limitation on Indemnities.
-------------------------
IX.7.1 Threshold for the Members. With respect to representations and
-------------------------
warranties, the Members shall not have any liability pursuant to Section
-------
9.1(a) hereof unless and until and only to the extent that the aggregate
------
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
-------------
Basic Purchase Consideration; provided, however, that this threshold shall
-------- -------
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.2 and 5.1.8 as it relates
-------------- ----- --- -----
to the representations and warranties of Management, Mass PC and the
Company set forth in Section 4.16, and the Members shall indemnify the
------------
CenterPoint Indemnified Parties for any Losses accruing thereunder in
accordance with this Article IX without regard to such threshold.
----------
IX.7.2. Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
-----
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
48
<PAGE>
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Member Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
----------
threshold.
IX.7.3 Limitations on Claims Against the Members. The liability of all
-----------------------------------------
Members for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
-------------
Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Member shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Member;
provided, further, that such limitations shall not apply to Losses arising
-------- -------
out of breaches of representations or warranties contained in Sections
--------
5.1.1, 5.1.2, 5.2, and 5.1.8 as it relates to the representation and
----- ----- --- -----
warranty of the Company set forth in Section 4.16, and any Losses accruing
------------
thereunder shall not count towards such limitations.
IX.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
IX.8 Survival of Representations, Warranties and Covenants of the Members,
---------------------------------------------------------------------
Management, Mass PC and the Company; Time Limits on Indemnification Obligations.
- -------------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of
Management, Mass PC, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of Mass PC, the Members, Management and the Company contained in this
Agreement or in any certificate delivered pursuant to any of the foregoing. All
such representations, warranties, covenants and agreements of Mass PC, the
Members, Management and the Company shall survive the execution and delivery of
this Agreement and the Closing hereunder; provided, however, (i) that the
-------- -------
Members' obligations pursuant to Section 9.1, other than those relating to
-----------
covenants and agreements to be performed by the Members after the Closing, shall
expire one (1) year after the Closing, except with respect to obligations
arising under or relating to Section 4.16 hereof as it relates to federal,
------------
state, local and foreign income taxation, which shall survive until the earlier
of (A) the expiration of the applicable periods (including any extensions) of
the respective statutes of limitation applicable to the payment of the Taxes or
(B) the completion of the final audit and determinations by the applicable
taxing authority and final disposition of any deficiency resulting therefrom;
and (ii) solely to the extent that CenterPoint actually incurs liability under
the 1933 Act or the 1934 Act, the obligations under Sections 9.1(c) or (d) above
--------------- ---
shall survive until the expiration of any applicable statute of limitations with
respect to such claims.
IX.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder;
49
<PAGE>
provided, however, that CenterPoint's obligations under Section 9.2, other than
- -------- ------- -----------
those relating to covenants and agreements to be performed by CenterPoint after
the Closing, shall expire one year after Closing, except that, solely to the
extent that the Members actually incur liability under the 1933 Act or the 1934
Act, the obligations under Sections 9.2(c) or (d) above shall survive until the
--------------- ---
expiration of any applicable statute of limitations with respect to such claims.
IX.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
IX.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Members and of the Member Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
IX.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Members may satisfy their respective obligations, if any, under
this Article IX by tendering to the CenterPoint Indemnified Parties cash or
----------
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE" shall
- ------------
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (i) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
9.13 Member Representative. Each Member appoints the Management
---------------------
Committee established by a Management Committee Agreement, of even date herewith
(such committee, the "MEMBER REPRESENTATIVE") as its agent and representative
with full power and authority to agree, contest or settle any claim or dispute
affecting any Member made under Article II or IX and to otherwise act on behalf
---------- --
of the Members in accordance with the terms of this Agreement including, without
limitation, to direct the amount and manner of the payment of aggregate Basic
Purchase Consideration; provided, that, the Member Representative may be removed
-------- ----
and a successor to the Person originally serving as the Member Representative
may be designated in a writing delivered to CenterPoint in accordance with
Section 15.2 and the Management Committee Agreement.
- ------------
50
<PAGE>
ARTICLE X
CLOSING CONDITIONS
X.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Merger or any of
the Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
51
<PAGE>
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Members, as stockholders
of the Company, in the manner required by any applicable Law and the
Company's Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
X.2 Conditions to Obligation of Mass PC, the Members, Management and the
--------------------------------------------------------------------
Company to Effect the Merger. Unless waived by the Company, the obligation of
- ----------------------------
Mass PC, the Members, Management and the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
Management and the Company shall have received a certificate of the Chief
Executive Officer or President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to Management of the Merger;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to Management, the Company and the
Members;
(d) each of the Members shall have been afforded the opportunity to
enter into an incentive compensation agreement (the "INCENTIVE COMPENSATION
AGREEMENT") with CenterPoint substantially in the form attached hereto as
Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Company and the Members a
certificate, dated as of a date no later than ten days prior to the Closing
Date, duly issued by the Delaware Secretary of State, showing that
CenterPoint is in good standing;
(f) each of the Members, partners, members and stockholders of the
other Founding Companies who are to receive shares of CenterPoint Common
Stock pursuant to the Other Agreements, and the other stockholders of
CenterPoint other than those acquiring stock in the IPO shall have entered
into an agreement (the "STOCKHOLDERS AGREEMENT") substantially in the
form attached hereto as Exhibit 10.2(f);
---------------
52
<PAGE>
(g) all conditions to the Other Mergers, on substantially the same
terms as provided herein, shall have been satisfied or waived by the
applicable party and the Company;
(h) each of Management and the Members shall have been afforded the
opportunity to review the executed employment agreement by and between
CenterPoint and Robert C. Basten; and
(i) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date and based on certain factual
representations and assumptions, that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Stock in the Merger pursuant to Section
351 of the Code, the final form of such opinion to be in form and substance
reasonably acceptable to the Company and the Members.
X.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) Management, Mass PC and the Company shall have performed in all
material respects their respective agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of Management, Mass PC and the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of the Chief Executive Officer or President of
each of Management, Mass PC and the Company to that effect;
(b) the Members shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Members
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of each Member to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Cooper, Erving, Savage, Nolan & Heller, LLP, counsel to Management,
Mass PC, the Company and the Members, dated the Closing Date, in the form
attached hereto as Exhibit 10.3(c), the final form of such opinion to be in
---------------
form and substance reasonably acceptable to the Underwriters and
CenterPoint;
(d) the Company shall, and the Members shall have caused Attest Entity
to, execute and deliver the Separate Practice Agreement substantially in
the form attached hereto as Exhibit 10.3(d)(A) and the Services Agreement
------------------
substantially in the form attached hereto as Exhibit 10.3(d)(B);
------------------
53
<PAGE>
(e) each Member shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached as Exhibit
-------
10.2(d);
-------
(f) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(g) Each of Management, Mass PC and the Company shall have delivered
to CenterPoint and the Underwriters a certificate, dated as of a date no
later than ten days prior to the Closing Date, duly issued by the
appropriate Governmental Authority in the state of organization of
Management, Mass PC, the Company and each Company Subsidiary and, unless
waived by CenterPoint, in each state in which the Company or any Company
Subsidiary is authorized to do business, showing each of Management, Mass
PC, the Company and Company Subsidiary (as applicable) is in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Merger;
(i) the Members shall have executed the Stockholders Agreement;
(j) Management and the Members shall have delivered to CenterPoint an
instrument in the form attached hereto as Exhibit 10.3(j), dated the
---------------
Closing Date, releasing the Company and the Company Subsidiaries from any
and all claims of Management and the Members against the Company and the
Company Subsidiaries and obligations of the Company and the Company
Subsidiaries to Management and the Members;
(k) The Company shall have aquired all of the issued and outstanding
capital stock or other equity interests, as applicable, of LSAG and Word
pursuant to acquisition agreements by and between the Company and each of
LSAG and Word in substantially the forms attached as Exhibits 10.3(k)(1)
-------------------
and 10.3(k)(2);
----------
(l) Management, Mass PC, the Company and the Members, as applicable,
shall have terminated or have caused the termination of any voting trusts,
proxies or other agreements or understandings to which Management, Mass PC,
the Company or any Member is a party or is bound with respect to any shares
of capital stock or other equity interests of the Company and the Company
Subsidiaries and shall have provided CenterPoint evidence of such
termination that is acceptable to CenterPoint's counsel;
54
<PAGE>
(m) Management, Mass PC, the Company and the Members shall have
completed the Conversion pursuant to the Conversion Agreement attached as
Exhibit 10.3(m) and have presented evidence of such conversion in
---------------
accordance with Section 7.5;
-----------
(n) the Company shall have delivered to CenterPoint a payoff letter,
including a statement of per diem interest amounts and other applicable
release documents from all such lenders or creditors regarding the payment
in full of such indebtedness at Closing, in each case in form and substance
satisfactory to CenterPoint (including, without limitation, applicable UCC-
3 termination statements);
(o) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.4 hereof,
-------------
including, without limitation, that as of the Closing, the amount of debt
of the Company and the Company Subsidiaries shall not exceed the amount
reflected on Schedule 2.1 as Debt Assumed by CenterPoint;
------------
(p) the Company shall have paid in full any indebtedness owed by the
Company to any current or former stockholder of the Company except as
relates to the deferred compensation liabilities to those individuals
listed on Schedule 2.5, and shall have provided to CenterPoint evidence of
------------
same that is acceptable to CenterPoint's counsel;
(q) the secretary of Management shall have delivered certified copies
of the resolutions of the Operating Committee and the Members of Management
approving execution and deliver of this Agreement, the Conversion, the
Merger and the other actions, agreements and documents necessary or
desirable to complete the transactions contemplated herein; and
(r) the Company shall have liquidated and distributed to the
stockholders the Company's investment with each of First Union and ALAC and
shall have provided CenterPoint evidence of such liquidation and
distribution that is acceptable to CenterPoint's counsel.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
XI.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by Management,
55
<PAGE>
(i) if the Merger is not completed by August 31, 1999 other than on
account of delay or default on the part of Management, Mass PC, the Company
or any Member or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of Management, Mass PC, the
Company or any Member or any of their affiliates or associates;
(iii) if CenterPoint (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure such
default in all material respects within thirty (30) days after written
notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other than on
account of delay or default on the part of CenterPoint or any of its
stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court order
not entered at the request or with the support of CenterPoint or any of its
stockholders or any of their affiliates or associates;
(iii) if any of Management, Mass PC or the Company (A) fails to
perform in any material respect any of its material covenants in this
Agreement and (B) does not cure such default in all material respects
within thirty (30) days after written notice of such default is given to
the Company by CenterPoint;
(iv) if a Member (A) fails to perform in any material respect any
of such Member's material covenants in this Agreement and (B) do not cure
such default in all material respects within thirty (30) days after written
notice of such default is given to the Member Representative by
CenterPoint; or
(d) by mutual consent of the Operating Committee of Management and the
Boards of Directors of CenterPoint and the Company.
XI.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint, Management or the Company, as provided in Section 11.1,
------------
this Agreement shall forthwith become void and there shall be no further
obligation on the part of Management, Mass PC, the Company, the Members,
CenterPoint, Mergersub or their respective officers or directors (except the
obligations set forth in this Section 11.2 and in Sections 8.1, 8.3, 8.5 and
------------ ------------ --- ---
Article IX, all of which shall survive the termination). Nothing in this
- ----------
Section 11.2 shall relieve any party from liability for any breach of this
- ------------
Agreement.
56
<PAGE>
XI.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Operating Committee of Management and the Boards of Directors of Mass PC,
the Company or CenterPoint or duly authorized committees thereof and then only
by an instrument in writing signed on behalf of each of the parties hereto and
in compliance with applicable law. CenterPoint covenants and agrees that it
shall not amend, modify or supplement the material terms of any Other Agreement
following the Closing without the prior written consent of at least two thirds
(2/3rds) of the members of CenterPoint's Board of Directors; provided, that, no
-------- ----
waiver of any restriction set forth in Article XII shall be of any effect unless
-----------
consented to by a majority of the members of CenterPoint's Board of Directors
who do not at the time of such proposed waiver hold Restricted Shares within the
meaning of this Agreement, any Other Agreement or the Stockholders Agreement.
XI.4 Waiver. At any time prior to the Closing Date, the parties hereto may
------
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
XII.1 Transfer Restrictions Generally. Except as provided in Section 12.2,
------------------------------- ------------
for a period of forty-two (42) months from the Closing, none of Management nor
any of the Members shall (a) sell, assign, exchange, transfer, distribute or
otherwise dispose of, in whole or in part, (i) any shares of CenterPoint Common
Stock received by Management in the Merger and/or subsequently distributed by
Management to the Members (the "RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning the Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
XII.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing, and every six (6) months thereafter, until all Restricted Shares shall
have been released from such restrictions, twenty percent (20%) of the original
number of Restricted Shares then held by Management for each Member shall no
longer be subject to the restrictions set forth in Section 12.1 and shall no
------------
longer be deemed Restricted Shares for any purposes of this Agreement; provided,
--------
that, if a Member's employment with CenterPoint or its subsidiaries is
- ----
terminated within thirty (30) months of the Closing other than through death,
disability, retirement or circumstances approved by the Company's management and
reasonably approved by CenterPoint's chief executive officer, the Restricted
Shares held by such Member shall remain subject to the restrictions set forth in
Section 12.1 until the fifth anniversary of the Closing Date. Notwithstanding
- ------------
the foregoing and Section 12.1, Management or a Member may (x) at any time
------------
pledge or encumber all or part of Management's or such Member's Restricted
Shares, as applicable, provided that the pledgee or
57
<PAGE>
secured party agrees in writing to be bound by the provisions contained in
Article XII (y) at any time transfer all or part of such Member's Restricted
- -----------
Shares to another Member or to an immediate family member (or trust or other
estate planning Person), provided, that, any such Member, family member or other
-------- ----
Person agrees in writing to be bound by the provisions contained in Article XII,
-----------
and (z) transfer or cause to be transferred such Member's Restricted Shares upon
such Member's disability or death. As used in this Section 12.2, the terms
------------
"disability" and "retirement" shall have the meaning ascribed to them in
CenterPoint's Employee Incentive Compensation Plan. No attempted transfer of any
nature whatsoever that is in violation of this Section shall be treated as
effective for any purpose.
XII.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to Management pursuant to this Agreement and/or subsequently
distributed by Management to the Members shall bear a legend substantially in
the form set forth below and containing such other information as CenterPoint
may deem necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATE MARCH 31, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from any Member (or permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer Restricted Shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable Restricted Shares. In the event a
Member's request to remove the restrictive legend coincides with his request to
sell the CenterPoint Common Stock, CenterPoint shall take such actions as are
required by its transfer agent to allow the transfer agent to transfer the
unrestricted CenterPoint Common Stock free of any restrictive legend.
ARTICLE XII
NONCOMPETITION
XIII.1 Prohibited Activities. Each Member agrees severally, and not
---------------------
jointly, that such Member will not, for a period of three (3) years following
the Closing Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or
58
<PAGE>
advisor, or as a sales representative, in any business selling or providing
accounting, tax, consulting or other related services of a type or nature
similar to those sold or provided by the Company at or within one year
prior to the date that such Member commences competition within a fifty
(50) mile radius of any office location of the Company or any Company
Subsidiary (the "TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by the Member to have been actively being solicited by the Company or
any Company Subsidiary to become a customer at any time during such period;
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for the
purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Member may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Member does not directly or indirectly provide such
services to another third party for hire.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Member from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Member does not consult with or is not employed
by such competitor and (b) owning equity interests in Management or Attest
Entity.
XIII.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Member agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Member, by injunctions and restraining orders.
59
<PAGE>
XIII.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Members in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Members that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Member who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Member shall enter into a business or pursue other activities not in
competition with CenterPoint and/or any subsidiary thereof, or similar
activities or business in locations the operations of which, under such
circumstances, does not violate this Article XIII and in any event such new
------------
business, activities or location are not in violation of this Article XIII or of
------------
such Member's obligations under this Article XIII, such Member shall not be
------------
chargeable with a violation of this Article XIII if CenterPoint and/or any
------------
subsidiary thereof shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
XIII.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
XIII.5 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Member made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Member is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
XIII.6 Materiality. The Company and each of the Members hereby agree that
-----------
this covenant is a material and substantial part of this transaction.
60
<PAGE>
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
XV.1 Brokers. Each of Management, Mass PC, the Company and the Members
-------
represents and warrants that no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee (except for any fee described in
Schedule 15.1) or commission in connection with the Merger or the transactions
- -------------
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. CenterPoint represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of CenterPoint or
its stockholders (other than underwriting discounts and commission to be paid in
connection with the IPO).
XV.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
XV.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
XV.2.2 If to Management, Mass PC or the Company, to:
c/o Urbach, Kahn & Werlin, P.C.
61
<PAGE>
66 State Street
Albany, NY 12207
Attn: Steve Fischer
Facsimile No.: (518) 449-5832
with a copy to:
Cooper, Erving, Savage, Nolan & Heller
39 North Pearl St.
Albany, NY 12207
Attn: Mark Heller
Facsimile No.: (518) 432-3100
XV.2.3 If to the Member Representative or the Members, as applicable,
addressed to the addresses set forth on Schedule 15.2.3, with copies to such
---------------
counsel as set forth with respect to each Member on such Schedule 15.2.3, as
---------------
applicable.
XV.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and "HEREUNDER" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
XV.4 Certain Definitions. As used in this Agreement, (i) the term "PERSON"
-------------------
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated association, corporation, entity, firm, association,
organization or other business in any form whatsoever or government (whether
Federal, state, county, city or otherwise, including, without limitation, any
instrumentality, division, agency or department thereof), (ii) the term
"AFFILIATE" shall have the meaning given for that term in Rule 405 under the
Securities Act, and shall include each past and present Affiliate of a Person
and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such an
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any Person who is a partner,
member or shareholder of such Person or who is otherwise serving, or who has
served, as a director, officer, partner, member or trustee (or any capacity) of
such Person has, or at any time had, knowledge of such fact or other matter.
62
<PAGE>
XV.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof and
(b) shall not be assigned by operation of law or otherwise, except that
CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
XV.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
XV.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
XV.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
63
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
"CENTERPOINT":
CENTERPOINT ADVISORS, INC.,
A DELAWARE CORPORATION
By: /s/ Robert C. Basten
--------------------------------------------
Name: Robert C. Basten
-----------------------------------------
Its: President and Chief Executive Officer
-------------------------------------------
"MERGERSUB":
UKW MERGERSUB INC.,
A DELAWARE CORPORATION
By: /s/ Robert C. Basten
--------------------------------------------
Name: Robert C. Basten
------------------------------------------
Its: President
-------------------------------------------
"MASS PC":
URBACH, KAHN & WERLIN, P.C.,
A MASSACHUSETTS PROFESSIONAL CORPORATION
By: /s/ Steven Fischer
--------------------------------------------
Name: Steven Fischer
------------------------------------------
Its: President
-------------------------------------------
<PAGE>
"COMPANY":
URBACH, KAHN & WERLIN, P.C.,
A NEW YORK PROFESSIONAL CORPORATION
By: /s/ Steven Fischer
-------------------------------------------
Name: Steven Fischer
-----------------------------------------
Its: President
------------------------------------------
"MANAGEMENT":
UKW MANAGEMENT LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: /s/ Steven Fischer
-------------------------------------------
Name: Steven Fischer
-----------------------------------------
Its: Manager
------------------------------------------
"MEMBERS": Each of the undersigned is executing this
Agreement as a member of UKW LLC and as a stockholder
of Urbach, Kahn & Werlin, P.C.
/s/ Steven N. Fischer
----------------------------------------------
STEVEN N. FISCHER
/s/ David L. Evans
----------------------------------------------
DAVID L. EVANS
/s/ Robert E. Fleming
----------------------------------------------
ROBERT E. FLEMING
/s/ Howard S. Foote
----------------------------------------------
HOWARD S. FOOTE
<PAGE>
/s/ John S. Gijanto
------------------------------------------
JOHN S. GIJANTO
/s/ Lloyd F. Jones
-------------------------------------------
LLOYD F. JONES
/s/ William M. Kahn
-------------------------------------------
WILLIAM M. KAHN
/s/ Richard G. Kotlow
-------------------------------------------
RICHARD G. KOTLOW
/s/ Richard M. Lipman
-------------------------------------------
RICHARD M. LIPMAN
/s/ Harold D. Mandel
-------------------------------------------
HAROLD D. MANDEL
/s/ Marilyn A. Pendergast
-------------------------------------------
MARILYN A. PENDERGAST
/s/ Jeffrey M. Rosenbaum
-------------------------------------------
JEFFREY M. ROSENBAUM
/s/ Paul Goetz
-------------------------------------------
PAUL GOETZ
/s/ James Daniels
-------------------------------------------
JAMES DANIELS
/s/ Donald J. Neubecker
-------------------------------------------
DONALD J. NEUBECKER
/s/ Michael McCarthy
-------------------------------------------
MICHAEL MCCARTHY
<PAGE>
/s/ William F. Chandler
-------------------------------------------
WILLIAM F. CHANDLER
/s/ Michael Mahoney
------------------------------------------
MICHAEL MAHONEY
/s/ Alan A. Schachter
------------------------------------------
ALAN A. SCHACHTER
/s/ John E. Wolfgang
------------------------------------------
JOHN E.WOLFGANG
/s/ Marianne DeMario
------------------------------------------
MARIANNE DEMARIO
/s/ Kevin O'Donoghue
------------------------------------------
KEVIN O'DONOGHUE
<PAGE>
/s/ Arthur L. Heisman
------------------------------------------
ARTHUR L. HEISMAN
/s/ Jeffrey S. Hershow
------------------------------------------
JEFFREY S. HERSHOW
<PAGE>
/s/ Joseph Peterson
----------------------------------------
JOSEPH PETERSON
<PAGE>
EXHIBIT 2.7
-------------------------------------
MERGER AGREEMENT
BY AND AMONG
CENTERPOINT ADVISORS, INC.,
IDA MERGERSUB INC.
SELF FUNDED BENEFITS, INC., D/B/A/
INSURANCE DESIGN ADMINISTRATORS
AND
ROBERT F. GALLO AND RUSSELL P. MINETTI,
ALL OF THE STOCKHOLDERS OF
SELF FUNDED BENEFITS, INC., D/B/A/
INSURANCE DESIGN ADMINISTRATORS
MARCH 31, 1999
-------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
PURCHASE AND SALE OF STOCK........................................................ 2
1.1 Merger.................................................................... 2
------
1.2 Effects of the Merger..................................................... 2
---------------------
1.3 Directors and Officers of the Surviving Corporation....................... 2
---------------------------------------------------
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT............................................... 3
2.1 Merger Consideration...................................................... 3
--------------------
2.1.1 Basic Purchase Consideration....................................... 3
----------------------------
2.1.2 Cancellation of Company Stock...................................... 3
-----------------------------
2.1.3 Dissenting Shares.................................................. 3
-----------------
2.1.4 Conversion of Mergersub Stock...................................... 3
-----------------------------
2.1.5 Exchange of Certificates for Consideration......................... 4
------------------------------------------
2.2 Post-Closing Adjustments to Basic Purchase Consideration.................. 4
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess............... 4
----------------------------------------------------
2.2.2 Preliminary Balance Sheet and Adjustment........................... 4
----------------------------------------
2.2.3 Final Adjustment................................................... 4
----------------
2.2.4 Disputes........................................................... 4
--------
2.2.5 Payment of Adjustments............................................. 5
----------------------
2.3 Contingent Payment Procedures............................................. 5
-----------------------------
2.3.1 Contingent Payment................................................. 5
------------------
2.3.2 Financial Statements and Contingent Payment Report................. 5
--------------------------------------------------
2.3.3 Dispute Notice..................................................... 6
--------------
2.3.4 Dispute Resolution................................................. 6
------------------
2.3.5 Definitions........................................................ 6
-----------
2.4 Post-Closing Management of AR............................................. 7
-----------------------------
2.5 Assignment of Uncollected AR.............................................. 7
----------------------------
2.6 Definitions............................................................... 7
-----------
ARTICLE III
THE CLOSING....................................................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................... 8
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.1 Organization and Qualification............................................ 8
------------------------------
4.2 Company Subsidiaries...................................................... 9
--------------------
4.3 Authority; Non-Contravention; Approvals................................... 9
---------------------------------------
4.4 Capitalization............................................................ 11
--------------
4.5 Year 2000................................................................. 12
---------
4.6 Financial Statements...................................................... 12
--------------------
4.7 Absence of Undisclosed Liabilities........................................ 13
----------------------------------
4.8 Accounts and Notes Receivable............................................. 13
-----------------------------
4.9 Absence of Certain Changes or Events...................................... 13
------------------------------------
4.10 Litigation................................................................ 16
----------
4.11 Compliance with Applicable Laws........................................... 17
-------------------------------
4.12 Licenses.................................................................. 17
--------
4.13 Material Contracts........................................................ 17
------------------
4.14 Properties................................................................ 20
----------
4.15 Intellectual Property..................................................... 22
---------------------
4.16 Taxes..................................................................... 22
-----
4.17 Employee Benefit Plans; ERISA............................................. 23
-----------------------------
4.18 Labor Matters............................................................. 25
-------------
4.19 Environmental Matters..................................................... 26
---------------------
4.20 Insurance................................................................. 26
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions............... 27
-----------------------------------------------------------
4.22 Business Relationships.................................................... 27
----------------------
4.23 Compensation.............................................................. 27
------------
4.24 Bank Accounts............................................................. 28
-------------
4.25 Disclosure; No Misrepresentation.......................................... 28
--------------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS............................................................... 28
5.1 Several Representations and Warranties.................................... 28
--------------------------------------
5.1.1 Capitalization................................................ 28
--------------
5.1.2 Authority..................................................... 29
---------
5.1.3 Non-Contravention............................................. 29
-----------------
5.1.4 Approvals..................................................... 29
---------
5.1.5 Litigation.................................................... 29
----------
5.1.6 No Transfer................................................... 30
-----------
5.1.7 Disclosure.................................................... 30
----------
5.1.8 Representations and Warranties of the Company................. 30
---------------------------------------------
5.2 Joint and Several Representations and Warranties.......................... 30
------------------------------------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT..................................... 30
6.1 Organization And Qualification............................................ 31
------------------------------
6.2 Capitalization............................................................ 31
--------------
6.3 No Subsidiaries........................................................... 32
---------------
6.4 Authority; Non-Contravention; Approvals................................... 32
---------------------------------------
6.5 Absence of Undisclosed Liabilities........................................ 33
----------------------------------
6.6 Litigation................................................................ 33
----------
6.7 Compliance with Applicable Laws........................................... 33
-------------------------------
6.8 No Misrepresentation...................................................... 34
--------------------
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS................................................. 34
7.1 Conduct of Business by the Company Prior to the Effective Time............ 34
--------------------------------------------------------------
7.2 No-Shop................................................................... 36
-------
7.3 Schedules................................................................. 37
---------
7.4 Company Stockholder Meeting............................................... 38
---------------------------
ARTICLE VIII
ADDITIONAL AGREEMENTS............................................................. 38
8.1 Access to Information..................................................... 38
---------------------
8.2 Registration Statements................................................... 39
-----------------------
8.3 Expenses and Fees......................................................... 40
-----------------
8.4 Agreement to Cooperate.................................................... 40
----------------------
8.5 Public Statements......................................................... 41
-----------------
8.6 Registration Rights....................................................... 41
-------------------
8.7 CenterPoint Covenants..................................................... 43
---------------------
8.8 Release of Guarantees..................................................... 43
---------------------
8.9 Lock-Up Agreement......................................................... 43
-----------------
8.10 Preparation and Filing of Tax Returns..................................... 44
-------------------------------------
8.11 Maintenance of Insurance.................................................. 44
------------------------
8.12 Administration............................................................ 44
--------------
ARTICLE IX
INDEMNIFICATION................................................................... 44
9.1 Indemnification by the Stockholders....................................... 44
-----------------------------------
9.2 Indemnification by CenterPoint............................................ 46
------------------------------
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.3 Indemnification Procedure for Third Party Claims.......................... 47
------------------------------------------------
9.4 Direct Claims............................................................. 49
-------------
9.5 Failure to Give Timely Notice............................................. 49
-----------------------------
9.6 Reduction of Loss......................................................... 49
-----------------
9.7 Limitation on Indemnities................................................. 50
-------------------------
9.7.1 Threshold for the Stockholders..................................... 50
------------------------------
9.7.2 Threshold for CenterPoint.......................................... 50
-------------------------
9.7.3 Limitations on Claims Against the Stockholders..................... 50
----------------------------------------------
9.7.4 Limitation on Claims Against CenterPoint........................... 51
----------------------------------------
9.8 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
the Stockholders and the Company; Time Limits on
------------------------------------------------
Indemnification Obligations............................................... 51
---------------------------
9.9 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
CenterPoint; Time Limits on Indemnification Obligations................... 51
-------------------------------------------------------
9.10 Defense of Claims; Control of Proceedings................................. 51
-----------------------------------------
9.11 Fraud; Exclusive Remedy................................................... 52
-----------------------
9.12 Manner of Satisfying Indemnification Obligations.......................... 52
------------------------------------------------
9.13 Stockholder Representative................................................ 52
--------------------------
ARTICLE X
CLOSING CONDITIONS................................................................ 52
10.1 Conditions to Each Party's Obligation to Effect the Merger................ 52
----------------------------------------------------------
10.2 Conditions to Obligation of the Stockholders and the Company
------------------------------------------------------------
to Effect the Merger...................................................... 53
--------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Merger.............. 55
------------------------------------------------------------
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER................................................. 57
11.1 Termination............................................................... 57
-----------
11.2 Effect of Termination..................................................... 58
---------------------
11.3 Amendment................................................................. 58
---------
11.4 Waiver.................................................................... 58
------
ARTICLE XII
TRANSFER RESTRICTIONS............................................................. 58
12.1 Transfer Restrictions Generally........................................... 58
-------------------------------
12.2 Release of Restrictions................................................... 59
-----------------------
12.3 Legend.................................................................... 59
------
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIII
NONCOMPETITION.................................................................... 60
13.1 Prohibited Activities..................................................... 60
---------------------
13.2 Damages................................................................... 61
-------
13.3 Reasonable Restraint...................................................... 61
--------------------
13.4 Severability; Reformation................................................. 61
-------------------------
13.5 Independent Covenant...................................................... 61
--------------------
13.6 Materiality............................................................... 62
-----------
ARTICLE XIV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................................... 62
14.1 Stockholders' Covenant.................................................... 62
----------------------
14.2 Damages................................................................... 63
-------
14.3 Survival.................................................................. 63
--------
ARTICLE XV
GENERAL PROVISIONS................................................................ 63
15.1 Brokers................................................................... 63
-------
15.2 Notices................................................................... 63
-------
15.3 Interpretation............................................................ 64
--------------
15.4 Certain Definitions....................................................... 65
-------------------
15.5 Entire Agreement; Assignment.............................................. 65
----------------------------
15.6 Applicable Law............................................................ 65
--------------
15.7 Counterparts.............................................................. 65
------------
15.8 Parties in Interest....................................................... 65
-------------------
</TABLE>
(v)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.1(a) Apportionment
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
(vi)
<PAGE>
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.3(i) Terminated Agreements
Schedule 7.1.3(ii) Excluded Assets
Schedule 8.8 Stockholders' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Stockholders and Their Counsel
(vii)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A List of Stockholders of the Company
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Employment Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Company and Stockholders
Exhibit 10.3(i) Form of Stockholders' Release
Exhibit 10.3(l) Form of Voting Agreement
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(viii)
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<S> <C>
Actions...................................................... Section 4.10.1
Acquisition Transaction...................................... Section 13.1
Affiliate.................................................... Section 15.4
Affiliate Transactions....................................... Section 4.21
Agreement.................................................... Introduction
Aggregate Basic Cash Consideration........................... Section 2.1
Aggregate Basic Purchase Consideration....................... Section 2.1
AR........................................................... Section 2.5(a)
Arbitrator................................................... Section 2.2.5
Arbitrator Report............................................ Section 2.3.4
Business..................................................... Introduction
CenterPoint.................................................. Introduction
CenterPoint Common Stock..................................... Section 2.1
CenterPoint Indemnified Party(ies)........................... Section 9.1
CenterPoint Material Adverse Effect.......................... Section 6.4.3
CenterPoint Representatives.................................. Section 8.1.1
CenterPoint Required Statutory Approvals..................... Section 6.4.3
CenterPoint Accountants...................................... Section 2.2.2
Closing...................................................... Article III
Closing Balance Sheet........................................ Section 2.2.2
Closing Date................................................. Article III
</TABLE>
(ix)
<PAGE>
<TABLE>
<S> <C>
Code......................................................... Introduction
Company...................................................... Introduction
Company Material Adverse Effect.............................. Section 4.3.3
Company Representatives...................................... Section 8.1.1
Company Stock................................................ Section 2.1
Company Subsidiaries......................................... Section 4.2
Consummation Date............................................ Article III
Contingent Payment........................................... Section 2.3.1
Contingent Payment Report.................................... Section 2.3.2
Contracts.................................................... Section 4.13
Consummation Date............................................ Article III
Copyrights................................................... Section 4.15
Defense Notice............................................... Section 9.3.1
DGCL......................................................... Section 1.1
Direct Claim................................................. Section 9.4
Dispute Notice............................................... Section 2.3.3
Disputed Item................................................ Section 2.2.5
Dissenting Shares............................................ Section 2.1.3
Effective Time............................................... Section 1.1
Employee Plan................................................ Section 4.17.5(a)
Environmental and Safety Requirements........................ Section 4.19
ERISA........................................................ Section 4.17.5(b)
</TABLE>
(x)
<PAGE>
<TABLE>
<S> <C>
Excluded Assets.............................................. Section 7.1.4
Excluded Liabilities......................................... Section 7.1.4
Final Adjustment............................................. Section 2.2.4
Financial Statements......................................... Section 4.6
First Person................................................. Section 4.17.5(c)
Form S-1..................................................... Section 4.3.3
Form S-4..................................................... Section 4.3.3
Founding Companies........................................... Introduction
GAAP......................................................... Section 4.6.1
general increase............................................. Section 4.23
Governmental Authority....................................... Section 4.3.2
Hazardous Materials.......................................... Section 4.19
HSR Act...................................................... Section 4.3.3
Indemnified Party............................................ Section 9.3.1
Indemnifying Party........................................... Section 9.3.1
Intellectual Property........................................ Section 4.15
Intellectual Property Licenses............................... Section 4.15
Interim Adjustment........................................... Section 2.2.3
IPO.......................................................... Introduction
Knowledge.................................................... Section 15.4
Latest Balance Sheet......................................... Section 4.6
Laws......................................................... Section 4.11
</TABLE>
(xi)
<PAGE>
<TABLE>
<S> <C>
Leased Property.............................................. Section 4.14.1
Licenses..................................................... Section 4.12
Liens........................................................ Section 4.3.2
Liquidated Damages Amount.................................... Section 7.3
Losses....................................................... Section 9.1
Market Price................................................. Section 9.12
Marks........................................................ Section 4.15
Material Contracts........................................... Section 4.13
Merger....................................................... Introduction
Merger Documents............................................. Section 1.1
Mergersub.................................................... Introduction
Mergersub Stock.............................................. Section 6.2.1
Net Working Capital.......................................... Section 2.5(b)
1933 Act..................................................... Section 4.3.3
1934 Act..................................................... Section 8.7
Organizational Documents..................................... Section 4.1
Other Agreements............................................. Introduction
Other Mergers................................................ Introduction
Other Founding Companies..................................... Section 9.1
Owned Property............................................... Section 4.14.1
Patents...................................................... Section 4.15
Person....................................................... Section 15.4
</TABLE>
(xii)
<PAGE>
<TABLE>
<S> <C>
Plan Affiliate............................................... Section 4.17.5(c)
Preliminary Report........................................... Section 2.2.2
Real Property................................................ Section 4.14.1
Registration Statements...................................... Section 4.3.3
Restricted Shares............................................ Section 12.3
Resolution Period............................................ Section 2.2.5
Returns...................................................... Section 4.16.1
Review Period................................................ Section 2.3.3
Schedules.................................................... Section 7.3
SEC.......................................................... Section 4.3.3
Securities Act............................................... Section 4.3.3
Stockholder Indemnified Party................................ Section 9.2
Stockholder Representative................................... Section 9.13
Stockholders................................................. Introduction
Stockholders Agreement....................................... Section 10.2(f)
Stockholder's Percentage Interest............................ Section 2.2
Surviving Corporation........................................ Section 1.2
Target....................................................... Section 2.6(d)
Tax Accrual.................................................. Section 2.6(e)
Taxes........................................................ Section 4.16.2
Territory.................................................... Section 13.1(a)
Third Party Claim............................................ Section 9.3.1
</TABLE>
(xiii)
<PAGE>
<TABLE>
<S> <C>
Trade Secrets................................................ Section 4.15
Underwriters................................................. Section 8.1.1
Voting Agreement............................................. Introduction
</TABLE>
(xiv)
<PAGE>
MERGER AGREEMENT
----------------
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
IDA Mergersub, Inc., a Delaware corporation and wholly-owned subsidiary of
CenterPoint ("MERGERSUB"), Self Funded Benefits, Inc., d/b/a/ Insurance Design
Administrators, a New Jersey corporation (the "COMPANY"), and the stockholders
of the Company identified on Exhibit A to this Agreement (each a "STOCKHOLDER"
---------
and, collectively, the "STOCKHOLDERS").
WITNESSETH:
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, if any, in the business of providing third party administration
and management of health care benefit services to companies and governments
(such business provided by the Company is referred to as the "BUSINESS");
WHEREAS, the Boards of Directors of the Company, CenterPoint and Mergersub
deem it advisable and in the best interests of their respective shareholders to
approve and consummate the business combination transaction provided for herein
in which Mergersub would merge with the Company, with the Company being the
surviving corporation in the merger (the "MERGER");
WHEREAS, certain Stockholders have entered into a Voting Agreement dated
the date hereof (the "VOTING AGREEMENT") pursuant to which among other things
such Stockholders have agreed to vote the shares of capital stock of the Company
that such Stockholders own or control, directly or indirectly, to approve the
Merger and the transactions contemplated by this Agreement.
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., The Reppond Company, Inc., Reppond Administrators, LLC, Verasource Excess
Risk Ltd., Berry, Dunn, McNeil & Parker, Chartered, Urbach Kahn & Werlin PC,
Grace & Company, P.C., Simione, Scillia, Larrow & Dowling LLC, Follmer Rudzewicz
& Co., P.C., and Holthouse, Carlin & Van Trigt (which companies together with
the Company are collectively referred to herein as the "FOUNDING COMPANIES"),
which agreements provide for the merger of a wholly-owned subsidiary of
CenterPoint with each such Founding Company (the "OTHER MERGERS") simultaneously
with the Merger, which Other Agreements together with all schedules and exhibits
shall be made available to the Company prior to the execution of this Agreement;
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1(a)); and
---------------
<PAGE>
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof be tax-free under the provisions of Section 351 of
the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, the result of which
will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of New Jersey. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"MERGER DOCUMENTS"), with the Secretary of State of the State of New Jersey as
required by the corporate law of New Jersey, and with the Secretary of State of
the State of Delaware, as provided in the General Corporation Law of the State
of Delaware, as amended (the "DGCL"). The Merger shall become effective (the
"EFFECTIVE TIME") upon the filing of the Merger Documents with the Secretary
of State of the State of New Jersey and the Secretary of State of Delaware or at
such later time, contemporaneously with the closing of the IPO as agreed by
CenterPoint and the Company and specified in the Merger Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Certificates of Incorporation and By-Laws of the Surviving Corporation shall
be amended in form and substance acceptable to CenterPoint and as specified in
the Merger Documents, (iii) the Merger shall have all the effects provided by
applicable law, and (iv) the Company shall be a wholly-owned subsidiary of
CenterPoint.
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of the Company shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
2
<PAGE>
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holders thereof, the
outstanding shares of capital stock, consisting of 149 shares, no par
value, Class A Voting common stock and 14,660 shares, no par value, Class B
Non-Voting common stock of the Company (collectively, the "COMPANY STOCK")
shall be converted into the right to receive (a) that number of shares of
common stock, par value $.01 per share, of CenterPoint ("CENTERPOINT COMMON
STOCK") determined in accordance with the formula set forth in Schedule
--------
2.1 and (b) the amount of cash set forth Schedule 2.1 (the aggregate amount
--- ------------
of such cash to be paid in respect of all of the Company Stock is herein
referred to as the "AGGREGATE BASIC CASH CONSIDERATION"). The sum of (a)
the Aggregate Basic Cash Consideration and (b) the value (determined as set
forth on Schedule 2.1 of all shares of CenterPoint Common Stock to be
------------
issued to the Stockholders is herein referred to as "AGGREGATE BASIC
PURCHASE CONSIDERATION." The Aggregate Purchase Price shall be apportioned
among the Stockholders as set forth on Schedule 2.1(a).
---------------
2.1.2 Cancellation of Company Stock. Each share of capital stock of
-----------------------------
the Company held in treasury of the Company shall be canceled and retired
and no payment shall be made in respect thereof.
2.1.3 Dissenting Shares. Each outstanding shares of capital stock of
-----------------
the Company the holder of which has perfected his right to dissent under
applicable law and has not effectively withdrawn or lost such right as of
the Effective Time (the "DISSENTING SHARES") shall not be converted into
the right to receive Basic Purchase Consideration, and the holder thereof
shall be entitled only to such rights as are granted by applicable law.
The Company shall give CenterPoint prompt notice upon receipt by the
Company of any such written demands for payment of fair value of shares of
capital stock of the Company and any other instruments provided pursuant to
applicable law. Any payments made in respect of Dissenting Shares shall be
made by the Surviving Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become one validly
issued, fully paid and non-assessable share of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
3
<PAGE>
2.1.5 Exchange of Certificates for Consideration. At the Closing,
------------------------------------------
the Stockholders shall deliver to CenterPoint the original certificates
representing the Company Stock, duly endorsed in blank by the Stockholders
or accompanied by blank stock powers, in exchange for (a) issuance and
delivery by CenterPoint to the Stockholders of certificates representing
the number of shares of CenterPoint Common Stock determined in accordance
with Section 2.1, which shares shall be registered pursuant to a
-----------
registration statement on Form S-4 (as defined in Section 4.3.3), and (b)
-------------
payment by CenterPoint of the Aggregate Basic Cash Consideration by
certified check, cashier's check or wire transfer of immediately available
funds to a bank account or bank accounts in the amounts and manner
specified by the Stockholder Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date.
The shares represented by the Company stock certificates so delivered shall
be canceled.
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Aggregate Basic Purchase Consideration shall be (a) reduced dollar-for-
dollar to the extent Net Working Capital on the Closing Date is less than
the Target or (b) increased dollar-for-dollar to the extent Net Working
Capital on the Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will prepare a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET")
along with a preliminary calculation of any excess or shortfall of Net
Working Capital as compared to the Target (the "PRELIMINARY REPORT").
2.2.3 Final Adjustment. As soon as practicable, but in no event
----------------
later than 180 days after the Closing, the Company will prepare and deliver
to CenterPoint a final calculation of Net Working Capital revised to
reflect all collections of AR up to the date 150 days from the Closing
Date. Within ten (10) days of receipt of such calculation, CenterPoint will
deliver to the Stockholder Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
2.2.4 Disputes. If the Stockholder Representative does not object
--------
(or otherwise respond) in writing to the Final Adjustment report within
thirty (30) days after its delivery, the Final Adjustment shall
automatically become final, binding and conclusive on all parties hereto.
The Stockholder Representative shall be provided with full access to the
Company's workpapers and reasonable access to the Company's accounting
personnel in connection with such review. Any objection to the Final
Adjustment report shall be in writing and shall specify the item or items
in dispute (each a "DISPUTED ITEM").
4
<PAGE>
If the Stockholder Representative and CenterPoint are unable to
resolve any Disputed Item within thirty (30) days after notice from the
Stockholder Representative that a dispute exists (the "RESOLUTION PERIOD"),
then a representative from the office of a nationally recognized accounting
firm selected by CenterPoint and the Stockholder Representative (the
"ARBITRATOR") will arbitrate the dispute. The Stockholder Representative
and CenterPoint shall, within twenty (20) days after expiration of the
Resolution Period, present their respective positions with respect to any
Disputed Item to the Arbitrator together with such materials as the
Arbitrator reasonably deems appropriate. To the extent any Disputed Item is
similar to a disputed item under the Other Agreements, the Arbitrator shall
arbitrate the Disputed Item based on the submitted materials and without
regard to the disputed item under the Other Agreements. The Arbitrator
shall, after the submission of the materials, submit a written decision on
each Disputed Item to the Stockholder Representative and CenterPoint and
such determination shall be final and binding on the parties hereto. The
arbitration shall be conducted in Chicago, Illinois. The parties hereto
agree that the cost of the Arbitrator shall be borne by the non-prevailing
party or as determined by the Arbitrator.
2.2.5 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, the Stockholders shall pay the amount of the
shortfall to CenterPoint. In the event Net Working Capital is greater than
the Target, CenterPoint shall pay the amount of the excess to the
Stockholders. Any payment required to be made pursuant to this paragraph
shall be made, within ten (10) days of delivery of the report including,
without limitation, the Preliminary Report, indicating any adjustment, by
wire transfer of immediately available funds to an account designated in
writing by the party that is to receive payment of such adjustment;
provided, however, if the Stockholder Representative objects to the
-------- -------
Preliminary Report, no payments with respect to such objections shall be
made until the Final Adjustment has been provided and agreed upon as
provided herein. Payments with respect to the agreed upon portion of the
Preliminary Report shall be made within such 10 day period. In respect of
the Final Adjustment, the party making a payment required by such
adjustment shall make such payment within ten days after the Final
Adjustment becomes final.
2.3 Contingent Payment Procedures.
-----------------------------
2.3.1 Contingent Payment. CenterPoint agrees to pay to the
------------------
Stockholders in the aggregate (each, a "CONTINGENT PAYMENT") as additional
cash consideration for the exchange of the Company Stock an amount equal to
the lesser of (i) 6.75 times Adjusted EBITDA or (ii) $3,415,500. If
Adjusted EBITDA is a negative number, then CenterPoint shall not be
required to make any Contingent Payment and the Stockholders shall have no
obligation to refund to CenterPoint the amount of such negative calculation
expressed as a positive number. The Contingent Payment, if any, shall be
paid to each Stockholder in proportion to their interests as set forth on
SCHEDULE 2.1(A) no later than five business days after the earliest to
occur of: (1) the determination of the final Contingent Payment Report;
5
<PAGE>
or (2) the delivery of the Arbitrator Report. Such payment may be made by
check or wire transfer of immediately available funds to accounts
designated in writing by the party that is to receive such payment.
2.3.2 Financial Statements and Contingent Payment Report. As
--------------------------------------------------
promptly as practicable, but no later than March 31, 2001, the Company
shall prepare and deliver to the Stockholder Representative (as defined in
Section 9.13), as representative for the former holders of the Company
------------
Stock, and CenterPoint (i) a copy of the Company's income statement for the
twelve month period ending December 31, 2000, and (ii) a report calculating
Adjusted EBITDA and the amount of any Contingent Payment (the "CONTINGENT
PAYMENT REPORT").
2.3.3 Dispute Notice. The Stockholder Representative shall have 30
--------------
days from the date on which the Contingent Payment Report is delivered to
it to review such documents (the "REVIEW PERIOD"). The Stockholder
Representative shall be provided with full access to the Company's work
papers and reasonable access to the Company's accounting personnel in
connection with such review. If the Stockholder Representative shall have
any objections to the Contingent Payment Report, on or prior to the last
day of the Review Period, it will deliver a written notice to CenterPoint
describing in reasonable detail its objections and the basis for such
objections (the "DISPUTE NOTICE"). The Stockholders' Representative may
deliver to CenterPoint at any time a written notice accepting the
Contingent Payment Report without objection.
2.3.4 Dispute Resolution. The Stockholder Representative and
------------------
CenterPoint shall attempt to resolve any objections contained in the
Dispute Notice and upon such resolution will cause the Contingent Payment
Report to be revised to reflect such resolution. Such revised Contingent
Payment Report (or the Contingent Payment Report prepared by CenterPoint,
if the Stockholders' Representative does not object thereto) shall
constitute the final Contingent Payment Report and shall be final and
binding upon CenterPoint, the Company and the Stockholders. If the
Stockholders' Representative and CenterPoint are unable to resolve any
objection raised in the Dispute Notice within 30 days after CenterPoint has
received the Dispute Notice, then a representative from the office of a
nationally recognized accounting firm selected jointly by the Stockholders'
Representative and CenterPoint will arbitrate the dispute in Chicago,
Illinois. The Stockholder Representative and CenterPoint will present their
respective positions with respect to any unresolved objection identified in
the Dispute Notice to the Arbitrator together with such materials as the
Arbitrator deems appropriate. The Arbitrator shall, after the submission of
the materials, submit a written decision on each unresolved objection to
the Stockholder Representative and CenterPoint and such determination shall
be final and binding on the parties hereto (the "ARBITRATOR REPORT"). The
parties agree that the cost of the Arbitrator shall be borne by the non-
prevailing party or as determined by the Arbitrator.
6
<PAGE>
2.3.5 Definitions. For purposes of this Section, the following
-----------
terms shall have the following meanings:
(a) "ADJUSTED EBITDA" means EBITDA less any EBITDA
----
attributable to any entity or portion of such entity acquired by or
merged with or into the Company after the Closing less $3,290,000.
----
(b) "DEBT" means (a) all indebtedness for borrowed money,
whether or not evidenced by an instrument, (b) notes payable and
drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money, (c) any obligation owed
for all or part of the deferred purchase price of property or services
(excluding accounts payable arising in the ordinary course of
business) and (d) any guaranty of a Person with respect to liabilities
of a type described in immediately preceding clauses (a) through (c).
(c) "EBITDA" means for the twelve month period ending December
31, 2000 the sum of: (a) the net income (or loss) of the Company
excluding extraordinary items, (b) provisions for taxes based on
income, (c) total interest expense of the Company with respect to
Debt, (d) to the extent net income for the Company has been reduced
thereby, depreciation expense, and (e) to the extent net income for
the Company has been reduced thereby, amortization expense less non-
----
cash items increasing net income, all as determined in accordance with
GAAP.
(d) "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board (or any successor authority),
consistently applied.
2.4 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing.
Unless otherwise required by contract or law, payments by an obligor in
respect of services rendered or expenses advanced by the Company shall be
applied as follows: in the event any such payment specifically references the
invoice being paid or clearly relates to an outstanding invoice, the payment
will be applied to the corresponding invoice, and, in any other case, the
payment will be applied to satisfy AR relating to such obligor in the order that
such AR arose. Any adjustment, modification or write-off affecting AR and fees
and expenses receivable and
7
<PAGE>
unbilled fees and expenses of the Company incurred after Closing with respect to
the same client shall be allocated ratably to the pre-Closing and post-Closing
periods.
2.5 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of one hundred fifty (150) days after the Closing Date, the Company
will assign the uncollected AR to the Stockholders. Notwithstanding the
preceding sentence, the Company and not the Stockholders will retain the sole
right to service, administer and collect the uncollected AR. Any such
collection of assigned AR shall be remitted to the Stockholders.
2.6 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any administration fees and commissions receivable
excluding prebilled unearned administration fees and prebilled unearned
commissions, of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the
Closing Date, whenever calculated, equal to difference between: (i) the sum
of any AR, prepaid expenses and other current assets less (ii) the sum of
----
accounts payable, accrued current liabilities, the Tax Accrual and the
portion of employer-paid FICA attributable to Medicare, payable in
connection with deferred compensation and the Special Bonus Plan. For
purposes of this Section 2.6(b), the Special Bonus Plan accrual shall not
--------------
constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan
dated March 1, 1999.
(d) "TARGET" means an amount equal to $75,000.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual and only to
the extent it will result in taxable income to CenterPoint) less an amount
equal to any tax deductions realized by CenterPoint as a result of any
payments pursuant to the Special Bonus Plan and (ii) the sum of 34% plus
the effective state tax rate on the Company (net of federal tax benefit).
A negative Tax Accrual shall be treated as a current asset for purposes of
Section 2.6(b)(i).
-----------------
ARTICLE III
THE CLOSING
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING"") shall take place at the offices of Katten Muchin
& Zavis, Chicago,
8
<PAGE>
Illinois, contemporaneously with the closing of the IPO, or at such other time
and date as the parties hereto may mutually agree (the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to CenterPoint, as of the date
hereof and, subject to Section 7.3, as of the date on which CenterPoint and the
-----------
lead Underwriter (as defined in Section 8.1.1) execute and deliver the
-------------
Underwriting Agreement related to the IPO and as of the Closing Date, as
follows:
4.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
New Jersey. Each Company Subsidiary (as defined in Section 4.2) is duly
-----------
organized, validly existing and in good standing under the laws of the state of
its organization set forth on Schedule 4.2. Each of the Company and the Company
------------
Subsidiaries has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted,
and is qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. True, accurate and
complete copies of the Company's and each Company Subsidiary's Organizational
Documents, in each case as in effect on the date hereof, have heretofore been
delivered to CenterPoint. "ORGANIZATIONAL DOCUMENTS" means (a) the articles
or certificate of incorporation and the bylaws of a corporation (professional or
otherwise), (b) the partnership agreement and any statement of partnership of a
general partnership, (c) the limited partnership agreement and the certificate
of limited partnership of any limited partnership, (d) the operating or limited
liability company agreement and certificate of formation of any limited
liability company, (e) any charter or similar document adopted and filed in
connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "COMPANY SUBSIDIARY"). Except as set forth on Schedule 4.2, the
------------
Company does not, directly or indirectly, own, of record or beneficially, or
control any capital stock, securities convertible into capital stock or any
other equity interest in any Person.
9
<PAGE>
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 The Company has full right, power and authority to enter into
this Agreement, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's stockholders, to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company, and, assuming the due authorization,
execution and delivery hereof by CenterPoint, constitutes a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms, except that such enforcement may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by the Company
does not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any claim,
lien, privilege, mortgage, charge, hypothecation, assessment, security
interest, pledge or other encumbrance, conditional sales contract, equity
charge, restriction, or adverse claim of interest of any kind or nature
whatsoever (each a "LIEN" and collectively, the "LIENS") upon any of the
properties or assets of the Company or any Company Subsidiary under, any of
the terms, conditions or provisions of (i) the Organizational Documents of
the Company or any Company Subsidiary, (ii) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or
license of any court or federal, state, provincial, local or foreign
government, or any subdivision, agency or authority of any thereof
("GOVERNMENTAL AUTHORITY") applicable to any Stockholder, the Company, any
Company Subsidiary, or the Business, properties or assets of the Company or
any Company Subsidiary, or (iii) any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company, or
any Company Subsidiary is a party or by which the Company, any Company
Subsidiary or any of the properties or assets of the Company or any Company
Subsidiary may be bound or affected. The consummation by the Company of
the transactions contemplated hereby will not result in a violation,
conflict, breach, right of termination, creation or acceleration of Liens
under the of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the immediately preceding sentence, subject,
in the case of the terms, conditions or provisions of the items described
in clause (iii) above, to obtaining (prior to the Closing Date) such
consents required from third parties set forth on Schedule 4.3.2.
--------------
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form
10
<PAGE>
S-4 (the "FORM S-4") (Form S-1 and Form S-4 are collectively the
"REGISTRATION STATEMENTS") with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Act of 1933, as amended (the "SECURITIES
ACT" or the "1933 ACT"), the declaration of the effectiveness thereof by
the SEC and filings, if required, with various state securities or "blue
sky" authorities, (ii) any filing which may be required under the Hart-
Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR ACT"),
and (iii) the necessary filings with the New Jersey Department of Banking
and Insurance, no declaration, filing or registration with, or notice to,
or authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, individually or in the aggregate, have a
"COMPANY MATERIAL ADVERSE EFFECT," which, for purposes of this Agreement
means a material adverse effect on the operations, assets, condition
(financial or other), operating results, employee or client relations, or
prospects of the Company or any Company Subsidiary.
4.4 Capitalization.
--------------
4.4.1 The authorized capital stock of the Company consists of Fifteen
Thousand (15,000) shares of Company Stock, of which One Hundred Forty Nine
(149) shares of Class A Voting Common Stock and Fourteen Thousand Six
Hundred Sixty (14,660) shares of Class B Non-Voting Common Stock are issued
and outstanding. The authorized capital stock of each of the Company
Subsidiaries, if any, and the number of such shares issued and outstanding
is completely and accurately set forth in Schedule 4.4. All of such issued
------------
and outstanding shares are validly issued and are fully paid, nonassessable
and free of preemptive rights. The Stockholders are all of the
stockholders of the Company and own beneficially and of record all of the
issued and outstanding shares of the Company Stock as set forth in Schedule
--------
4.4, which shares constitute all of the outstanding shares of capital stock
---
of the Company. The Company owns all shares of the Company's Subsidiaries
as indicated on Schedule 4.4, in each case free and clear of all Liens, and
------------
the Company has good and marketable title to such shares of the Company
Subsidiaries. All of such issued and outstanding shares are validly issued
and are fully paid, nonassessable and free of preemptive rights.
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such agreement or commitment or obligating the
Company or any Company Subsidiary to convey or transfer any Company Stock
or Company Subsidiary stock, as the case may
11
<PAGE>
be. As of the Closing Date, there will be no voting trusts, proxies or
other agreements or understandings to which the Company or any Company
Subsidiary is a party or is bound with respect to the voting of any shares
of capital stock or other equity interests of the Company or any Company
Subsidiary.
4.5 Year 2000. To the Knowledge of the Company, all of the computer
---------
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Company or any Company
Subsidiary in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20/th/) and twenty-first (21/st/) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20/th/)
and twenty-first (21/st/) centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a Company Material Adverse Effect. Nothing in this Section 4.5 is intended
-----------
or shall be construed as a representation or warranty with respect to embedded
systems.
4.6 Financial Statements. The Company has previously furnished to
--------------------
CenterPoint copies of the audited consolidated balance sheet of the Company as
of December 31 in each of the years 1997 and 1998 (the "LATEST BALANCE SHEET"),
and the related unaudited consolidated statements of income, stockholders'
equity and cash flow for the one (1) year period ended December 31, 1996 and the
related audited consolidated statements of income, stockholders' equity and cash
flow for each of the years in the two (2) year period ended December 31, 1998,
including all notes thereto, including all notes thereto (collectively, the "1
FINANCIAL STATEMENTS"). Each of the Financial Statements is accurate and
complete in all material respects, is consistent with the books and records of
the Company and the Company Subsidiaries (which, in turn, are accurate and
complete in all material respects), and fairly presents in all material respects
the financial condition, assets and liabilities of the Company and the Company
Subsidiaries as of its date and the results of operations and cash flows for the
periods related thereto, in each case in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
- ---
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit). Such liabilities include, but
are not limited to, any claim or potential claim against the Company or any
Company Subsidiary by any employee benefit plan, client or government agency
(including, but not limited to, the IRS or Department of Labor) related to the
Company or any Company Subsidiary's alleged failure to
12
<PAGE>
properly administer or advise any employee benefit plan or related to the sale
or brokerage of any products or services relating to any employee benefit plans
of current or former clients of the Company or any Company Subsidiary.
4.8 Accounts and Notes Receivable. All of the accounts receivable of the
-----------------------------
Company and each Company Subsidiary reflected in the Latest Balance Sheet or
arising from the date thereof until the Closing Date have arisen or will arise
in the ordinary course of business, are not and will not be subject to any
defense, counterclaim or setoff and have been collected or are and will be
collectible in the ordinary course of business using normal collection practices
and policies employed by the Company and each Company Subsidiary as of the date
of this Agreement, in each case subject to any allowance for doubtful accounts
determined in accordance with the Company's past custom and practices.
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee, or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim, debt, except
the collection of accounts in the ordinary course of business consistent
with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
13
<PAGE>
(f) notice received (formal or otherwise) of any liability, potential
liability or claimed liability relating to environmental matters;
(g) except for cash distributions which do not reduce the Company's
Net Working Capital below the Target, declaration, setting aside, or
payment of any dividend or other distribution in respect of the Company's
capital stock or other equity interests or any direct or indirect
redemption, purchase, or other acquisition of the Company's or any Company
Subsidiary's capital stock or other equity interests, or the payment of
principal or interest on any note, bond, debt instrument or debt to any
Affiliate (as defined in Section 15.4) of the Company or any Company
------------
Subsidiary, except bonuses and year-end distributions to employees and
Stockholders disclosed to CenterPoint in writing that are consistent with
the Company's past custom and practices or as otherwise contemplated by
this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
(k) loss or, to the best of knowledge, threatened loss of, or any
material reduction or threatened material reduction in revenues from, any
client of the Company or any Company Subsidiary that accounted for revenues
during the last twelve months in excess of one percent (1%) of the
consolidated net revenues of the Company and the Company Subsidiaries, or
change in the relationship of the Company or any Company Subsidiary with
any client or Governmental Authority that is reasonably expected to
adversely affect the Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
14
<PAGE>
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary of any material obligation or liability, other than
current liabilities paid in the ordinary course of its business consistent
with past custom and practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed in writing to maintain the confidentiality of
any such proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
------------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material Adverse
Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of the Company, threatened against the
Company or any Company Subsidiary, or with respect to the Merger, or with
respect to any Employee Plan, or any fiduciary of any such plan (or pending
or, to the Knowledge of the Company, threatened against any of the
officers, directors, members, partners or employees of the Company or any
Company Subsidiary with respect to its business or proposed business
activities), or to which the Company or any Company Subsidiary is otherwise
a party, or that is reasonably expected to have a Company Material Adverse
Effect, before any court, or
15
<PAGE>
before any Governmental Authority (each an "ACTION" and collectively, the
"ACTIONS"); nor, to the Knowledge of the Company, is there any basis for
any such Action.
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither the Company nor any Company Subsidiary, to
the Knowledge of the Company, is otherwise exposed, from a legal
standpoint, to any liability or disadvantage that is reasonably expected to
result in a Company Material Adverse Effect, and neither the Company nor
any Company Subsidiary is a party to any legal action to recover monies due
it or for damages sustained by it, other than collection of past due
charges for services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company or any Company Subsidiary was a party during
the five (5) year period preceding the Closing Date, the date such
litigation was commenced and concluded, and the nature of the resolution
thereof (including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, "LAWS") applicable to it or to the
operation of the Business, and has not received any notice of any alleged claim
or threatened claim, violation of or liability or potential responsibility under
any such Law which has not heretofore been cured and for which there is no
remaining liability and, to the Knowledge of the Company, no event has occurred
or circumstances exist that (with or without notice or lapse of time) is
reasonably expected to constitute or result in a violation by the Company or any
Company Subsidiary of any Law or that gives rise to any liability on the part of
the Company or any Company Subsidiary under any Law. Without limiting the
foregoing, all financial arrangements whereby service provider discounts are not
passed on to plan participants have been fully disclosed both to those plan
participants and the employers.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and
-------- -------------
the Company Subsidiaries that are material to the conduct of Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person. All such Licenses
are valid, binding and in full force and effect. Except as described on Schedule
--------
4.12, the execution, delivery and performance of this Agreement and the
- ----
consummation of the transactions contemplated hereby will not
16
<PAGE>
adversely affect any such Licenses. To the Knowledge of the Company, the Company
and the Company Subsidiaries have taken all necessary action to maintain such
Licenses. No loss or expiration of any such License is pending or, to the
Company's Knowledge, threatened or reasonably foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services, employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000;
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
17
<PAGE>
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in either case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect;
18
<PAGE>
(r) any Contract under which the Company or any Company Subsidiary
would be considered an employee benefit plan "administrator" as such term
is defined in Section 3(16) of ERISA or a "fiduciary" as such term is
defined in Section 3(21) of ERISA; or
(s) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
The Company has provided CenterPoint with a true and complete copy of each
written Material Contract and a true and complete summary of each oral Material
Contract, in each case including all amendments or other modifications thereto.
Except as set forth on Schedule 4.13, each Material Contract is a valid and
-------------
binding obligation of, and enforceable in accordance with its terms against, the
Company or a Company Subsidiary, as applicable, and, to the Knowledge of the
Company, the other parties thereto, and is in full force and effect, subject
only to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and equitable principles. Except as set forth on
Schedule 4.13, the Company or one of the Company Subsidiaries, as applicable,
- -------------
has performed in all material respects all obligations required to be performed
by it as of the date hereof and will have performed in all material respects all
obligations required to be performed by it as of the Closing Date under each
Material Contract and neither the Company or Company Subsidiary, as applicable,
nor, to the Knowledge of the Company, any other party to any Material Contract
is in breach or default thereunder, and, to the Knowledge of the Company, there
exists no condition which would, with or without the lapse of time or the giving
of notice, or both, constitute a breach or default thereunder. The Company has
not been notified that any party to any Material Contract intends to cancel,
terminate, not renew, or exercise an option under any Material Contract, whether
in connection with the transactions contemplated hereby or otherwise.
4.14 Properties.
----------
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one of the Company Subsidiaries has good and marketable
fee simple title to the Owned Property and, assuming good title in the
Landlord, a valid leasehold interest in the Leased Property (the Owned
Property and the Leased Property being sometimes referred to herein as
"REAL PROPERTY"), in each case free and clear of all Liens, assessments or
restrictions (including, without limitation, inchoate liens arising out
19
<PAGE>
of the provision of labor, services or materials to any such real estate)
other than (a) mortgages shown on the Financial Statements as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of
the property, if any, none of which materially impairs the current
operations of the Company or the Business, and (ii) zoning laws and other
land use restrictions or restrictive covenants that do not materially
impair the present use of the property subject thereto, and (d) Liens,
assessments, and restrictions pursuant to and by virtue of the terms of the
lease of the Leased Property. The Real Property constitutes all real
properties reflected on the Financial Statements or used or occupied by the
Company or any Company Subsidiary in connection with the Business or
otherwise.
With respect to the Owned Property, if any, except as reflected on
Schedule 4.14.1-2(a):
--------------------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Company, there
is no threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
-----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of the Company, no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof; and
20
<PAGE>
(ii) to the Knowledge of the Company, no portion thereof is
subject to any pending condemnation proceeding or proceeding by any public
or quasi-public authority materially adverse to the Leased Property and
there is no threatened condemnation or proceeding with respect thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the ordinary
course of business. Except as set forth on Schedule 4.14.2, the Company or one
---------------
of the Company Subsidiaries has good and marketable title to, or a valid
leasehold interest in, or valid license of, such personal property (including,
without limitation, machinery, equipment and computers), in each case free and
clear of any 1 Liens (other than Liens that are part of such leasehold or
license), and each such asset is in working order and has been maintained in a
commercially reasonable manner and does not contain, to the Knowledge of the
Company, any material defect. Except as set forth in Schedule 4.14.2, no
---------------
personal property (including, without limitation, software and databases
maintained on off-premises computers) used by the Company or any Company
Subsidiary in connection with the Business is held under any lease, security
agreement, conditional sales contract or other title retention or security
arrangement or is located other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "TRADE SECRETS") owned, used or licensed by the
Company or any Company Subsidiary (collectively, the "INTELLECTUAL PROPERTY")
are all those necessary to enable the Company and the Company Subsidiaries to
conduct and to continue to conduct the Business substantially as it is currently
conducted. Schedule 4.15 contains a complete and accurate list of all material
-------------
Patents, Marks and Copyrights and a brief description of all material Trade
Secrets owned, used by or directly licensed to the Company or any Company
Subsidiary, and a list of all material license agreements and arrangements with
respect to any of the Intellectual Property to which the Company or any Company
Subsidiary is a party, whether as licensee, licensor or otherwise (collectively,
the "INTELLECTUAL PROPERTY LICENSES"). Except as set forth on Schedule 4.15,
-------------
(i) all of the Intellectual Property is owned, or to the Knowledge of the
Company used under a valid Intellectual Property License, by the Company or one
of the Company Subsidiaries, and is free and clear of all Liens and other
adverse claims; (ii) neither the Company nor any Company Subsidiary has received
any written notice that it is or has infringed on, misappropriated or otherwise
conflicted with, or otherwise has Knowledge that it is infringing on,
misappropriating, or otherwise conflicting with the intellectual property rights
of any third parties; (iii) there is no claim pending or, to the Knowledge of
the Company, threatened against the Company or any Company Subsidiary with
respect to the alleged infringement or misappropriation by the Company or
Company Subsidiary, or a conflict with, any intellectual property rights of
others; (iv) the operation of any aspect of the Business in the manner in which
21
<PAGE>
it has heretofore been operated or is presently operated does not give rise to
any such infringement or misappropriation; and (v) there is no infringement or
misappropriation of the Intellectual Property by a third party or claim, pending
or, to the Knowledge of the Company, threatened, against any third party with
respect to the alleged infringement or misappropriation of the Intellectual
Property.
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
-----------------
and the Company Subsidiaries has timely and accurately prepared and filed
or will timely and accurately prepare and file all federal, state, local
and foreign returns, declarations and reports, information returns and
statements (collectively, the "RETURNS") for Taxes (as defined in Section
-------
4.16.2) required to be filed by or with respect to the Company or the
------
Company Subsidiaries before the Closing Date, and has paid or caused to be
paid, or has made adequate provision or set up an adequate accrual or
reserve for the payment of, all Taxes required to be paid in respect of the
periods for which Returns are due on or prior to the Closing Date, and will
establish an adequate accrual or reserve for the payment of all Taxes
payable in respect of the period, including portions thereof, subsequent to
the last of said periods required to be so accrued or reserved, in each
case in accordance with GAAP up to and including the Closing Date. All such
Returns are or will be true and correct in all material respects. The
Company has delivered to CenterPoint true and complete copies of all
Returns referred to in the first sentence of this Section 4.16.1 (including
--------------
any amendments thereof) for the five (5) most recent taxable years.
Neither the Company nor any Company Subsidiary is delinquent in the payment
of any Tax, and no material deficiencies for any Tax, assessment or
governmental charge have been threatened, claimed, proposed or assessed.
No waiver or extension of time to assess any Taxes has been given or
requested. No written claim, or any other claim, by any taxing authority
in any jurisdiction where the Company or any Company Subsidiary does not
file Tax returns is pending pursuant to which the Company or Company
Subsidiary, as applicable, is or may be subject to taxation by that
jurisdiction. The Company's and the Company Subsidiaries' Returns were
last audited by the Internal Revenue Service or comparable state, local or
foreign agencies on the dates set forth on Schedule 4.16.1-2.
-----------------
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
22
<PAGE>
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither the Company
---------------
nor any Company Subsidiary has or is reasonably expected to have any
liability (including contingent liability) whether direct or indirect (and
regardless of whether it would be derived from a current or former Plan
Affiliate as defined in Section 4.17.5(c)) with respect to any of the
-----------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of "ERISA," including, but
not limited to, any medical plan, life insurance plan, short-term or long-
term disability plan or dental plan; (ii) any "employee pension benefit
plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat
---------
plan or deferred compensation plan or arrangement, nonqualified retirement
plan or arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program, arrangement
or agreement, including, but not limited to, any material fringe benefit
plan or program, personnel policy, bonus or incentive plan, stock option,
restricted stock, stock bonus, holiday pay, vacation pay, sick pay, bonus
program, service award, moving expense, reimbursement program, tool
allowance, safety equipment allowance, deferred bonus plan, salary
reduction agreement, change-of-control agreement, employment agreement or
consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the two (2) most recent plan years and
unaudited financial statements for the plan year 1996; a copy of each trust
agreement or other funding vehicle with respect to each such plan; a copy
of any and all determination letters, rulings or notices issued by a
Governmental Authority with respect to such plan; a copy of the Form 5500
Annual Report for the three (3) most recent plan years; and a copy of each
and any general explanation or communication which was required to be
distributed or otherwise provided to participants in such plan and which
describes all or any relevant aspect of each plan, including summary plan
descriptions and/or summary of material modifications, have been delivered
to CenterPoint. A description of each unwritten Employee Plan, including a
description of eligibility, participation, benefits, funding arrangements
and assets or other relevant aspects of the obligation, is set forth in
Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan
23
<PAGE>
may currently rely; (iv) has been and currently complies in form and in
operation in all respects with all applicable requirements of ERISA and the
Code and any applicable reporting and disclosure requirements of Federal
and state laws, including but not limited to the requirement of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the Code. With respect
to each Employee Plan, no Person has: (i) entered into any nonexempt "
prohibited transaction," as such terms are defined in ERISA or the Code;
(ii) breached a fiduciary obligation or (iii) any liability for any failure
to act or comply in connection with the administration or investment of the
assets of such plan; and no Employee Plan has any liability and there is no
liability in connection with any Employee Plan, other than a liability (i)
which is expressly and adequately reflected in the Latest Balance Sheets,
(ii) which is discretionary or terminable at will by the Company or one of
the Company Subsidiaries without incurring any such liability, or (iii)
which is adequately funded under a funding arrangement separate from the
assets of the Company, any Company Subsidiary or a Plan Affiliate (and only
to the extent of such funding). Any contribution made or accrued with
respect to any Employee Plan is fully deductible by the Company, a Company
Subsidiary or a Plan Affiliate.
4.17.4 Neither the Company nor any Company Subsidiary or Plan
Affiliate has ever sponsored, maintained, contributed to or been required
to contribute to, or has any liability, whether direct or indirect, with
respect to any Employee Plan which is or has ever been (i) a "multiemployer
plan" as defined in Section 4001 of ERISA, (ii) a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, (iii) a "multiple employer
plan" within the meaning of Code Section 413(c), (iv) a "multiple employer
welfare arrangement" within the meaning of Section 3(40) of ERISA, (v)
subject to the funding requirements of Section 412 of the Code or to Title
IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
-------------
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term
"PLAN AFFILIATE" shall mean any other Person with whom the First
Person constitutes or has constituted all or part of a controlled
group, or which would be treated or have been treated with the First
Person as under common control or whose employees would be or have
been treated as employed by the First Person, under Section 414 of the
Code or Section 4001(b) of ERISA and any regulations, administrative
rulings and case law interpreting the foregoing.
24
<PAGE>
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of the
Company, threatened against the Company or any Company Subsidiary, or which
might affect the Company or any Company Subsidiary; nor, to the Knowledge of the
Company, is there any basis for any such allegation, charge, or complaint.
There is no request for representation pending and, to the Knowledge of the
Company, no question concerning representation has been raised. There is no
grievance pending that is reasonably expected to result in a Company Material
Adverse Effect nor any arbitration proceeding arising out of a union agreement.
To the Knowledge of the Company, no key employee and no group of employees has
announced or otherwise indicated any plans to terminate employment with the
Company or any Company Subsidiary. Each of the Company and any Company
Subsidiary has complied with all applicable laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes.
Neither the Company nor any Company Subsidiary is liable for any arrears of
wages or any taxes or penalties for failure to comply with any such laws,
ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the officers of the Company, without any duty to inquire (notwithstanding the
definition of "Knowledge" in Section 15.4), there are no Hazardous Materials (as
------------
defined later in this Section) present at, on or under any real property
currently or formerly owned, leased or used by the Company or Company Subsidiary
(other than those present in office supplies and cleaning/maintenance materials)
for which the Company or a Company Subsidiary is reasonably expected to be
responsible or otherwise have any liability, for response costs under any
Environmental and Safety Requirements; (iii) each of the Company and the Company
Subsidiaries has disposed of all waste materials generated by the Company or
such Company Subsidiary at any real property currently or formerly owned, leased
or used by the Company or Company Subsidiary in compliance with applicable
Environmental and Safety Requirements; and (iv) there are and have been no
facts, events, occurrences or conditions at or related to any real property
currently or formerly owned, leased or used by the Company or Company Subsidiary
that is reasonably expected to cause or give rise to liabilities or response
obligations of the Company or any Company Subsidiary under any Environmental and
Safety Requirements. The term "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any
federal, state and local laws, statutes, regulations or other requirements
relating to the protection, preservation or conservation of the environment or
worker health and safety, all as amended or reauthorized. The term "HAZARDOUS
MATERIALS" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery Act,
42 U.S.C. (S) 6901 et seq., asbestos in any form or condition, polychlorinated
biphenyls and any other material, substance or waste to which
25
<PAGE>
liability or standards of conduct may be imposed under any Environmental and
Safety Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To the
Company's Knowledge, each of the Company and the Company Subsidiaries has
complied with the provisions of all such policies and is not in default under
any of such policies. Schedule 4.20 contains a complete and correct list of all
-------------
such insurance policies. Neither the Company nor any Company Subsidiary has
received any notice of cancellation or intent to cancel or increase premiums
with respect to such insurance policies. Schedule 4.20 also contains a list of
-------------
all claims or asserted claims reported to insurers under such policies relating
to the ownership or interest in the Company's and the Company Subsidiaries'
assets, or operation of the Business, including all professional malpractice
claims and similar types of claims, actions or proceedings asserted against the
Company or any Company Subsidiary arising out of the Business at any time within
the past three (3) years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, no Stockholder, any Affiliate of a Stockholder or Affiliate of the
Company or any Company Subsidiary (i) possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or affiliate of any
Person that is a client, supplier, customer, lessor, lessee or competitor of the
Company or any Company Subsidiary, (ii) owns, directly or indirectly, in whole
or in part, or has any interest in any tangible or intangible property used in
the conduct of the Business, or (iii) is a party to an agreement or
relationship, that involves the receipt by such Person of compensation or
property from the Company or any Company Subsidiary other than through a
customary employment relationship or through distributions made with respect to
the Company Stock or equity interests in any Company Subsidiary (provided such
distributions have been made consistent with the Company's or any Company
Subsidiary's, as the case may be, past custom and practices). Schedule 4.21
-------------
sets forth the parties to and the date, nature and amount of each transaction
during the last five (5) years involving the transfer of any cash, property or
rights to or from the Company or any Company Subsidiary from, to or for the
benefit of any Affiliates (other than customary employment relationships or
distributions made with respect to the Company Stock) ("AFFILIATE
TRANSACTIONS"), and any existing commitments of the Company or any Company
Subsidiary to engage in the future in any Affiliate Transactions. Except as
disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
26
<PAGE>
4.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of the
Company's revenues for the twelve (12) months ended December 31, 1998. Except
as set forth on Schedule 4.22, since December 31, 1998, none of such clients has
-------------
canceled or substantially reduced its business with the Company or Company
Subsidiary, as applicable, nor to the best of Knowledge, are any of such clients
threatening to do so. To the Knowledge of the Company, no client that accounts
for one percent (1%) or more of the Company's consolidated net revenue or
supplier of the Company or any Company Subsidiary, will cease to do business
with, or substantially reduce its business with, the Company or Company
Subsidiary, as applicable, after the consummation of the transactions
contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Company or any Company Subsidiary since the date of the Latest
Balance Sheet, other than in the Company's and Company Subsidiaries' ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company or any Company Subsidiary.
Schedule 4.23 includes the date and amount of the last bonus or similar
- -------------
distribution or increase in compensation for each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each such account or box, and the names of all Persons
authorized to draw thereon or to have access thereto.
4.25 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to CenterPoint as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to CenterPoint herein that has or is reasonably expected to have
a Company Material Adverse Effect.
27
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
5.1 Several Representations and Warranties. Each Stockholder, severally
--------------------------------------
and not jointly, hereby represents and warrants to CenterPoint as of the date
hereof and, subject to Section 7.3, as of the date on which CenterPoint and the
-----------
lead Underwriter execute and deliver the Underwriting Agreement related to the
IPO and as of the Closing Date as follows:
5.1.1 Capitalization. Such Stockholder owns beneficially and of
--------------
record all of the issued and outstanding shares of the Company Stock as set
forth opposite the name of such Stockholder in Schedule 4.4. Such Company
------------
Stock is free and clear of all Liens, and such Stockholder has good and
marketable title to such Company Stock. At the Closing as provided in this
Agreement, CenterPoint will acquire good and valid title to such Company
Stock, free and clear of any Lien other than any Lien created by
CenterPoint.
5.1.2 Authority. Such Stockholder has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
such Stockholder, and, assuming the due authorization, execution and
delivery hereof by CenterPoint, constitutes a valid and legally binding
agreement of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except that such enforcement may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles.
5.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by such Stockholder does not violate, conflict with or result in a breach
of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any Company Subsidiary under, any of the terms, conditions or provisions of
(i) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority
applicable to such Stockholder or (ii) other than those licenses,
franchises, permits, concessions or instruments of any Governmental
Authority, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which such Stockholder is a party or
by which such Stockholder may be bound or affected. The consummation by
such Stockholder of the transactions contemplated hereby will not result in
a violation, conflict, breach, right of termination, creation or
acceleration of Liens under the of the terms, conditions or provisions of
the items described in clauses (i) and
28
<PAGE>
(ii) of the immediately preceding sentence subject to obtaining (prior to
the Closing Date) the consents set forth on Schedule 4.3.2.
--------------
5.1.4 Approvals. To the Knowledge of such Stockholder, and except
---------
with respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities and (ii) any filing which may be
required under the HSR Act, no declaration, filing, or registration with,
or notice to, or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement by
such Stockholder or the consummation by such Stockholder of the
transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Stockholder, threatened against such Stockholder
relating to (i) the transactions contemplated by this Agreement, or (ii)
any action taken by such Stockholder or contemplated by such Stockholder in
connection with the consummation by such Stockholder of the transactions
contemplated hereby.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock owned by such
Stockholder or obligating such Stockholder to grant, extend or enter into
any such agreement or commitment or obligating such Stockholder to convey
or transfer any Company Stock. As of the Closing Date, there will be no
voting trusts, proxies or other agreements or understandings to which such
Stockholder is a party or is bound with respect to the voting of any shares
of capital stock or other equity interests of the Company other than the
Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Stockholder contained in this Agreement or any of the written
statements or certificates furnished at or prior to the Closing by or on
behalf of such Stockholder to CenterPoint or its representatives in
connection herewith or pursuant hereto, contains any untrue statement of a
material fact, or omits or will omit to state any material fact required to
make the statements contained herein or therein not misleading.
5.1.8 Representations and Warranties of the Company. To such
---------------------------------------------
Stockholder's actual knowledge, the representations and warranties of the
Company set forth in Article IV of this Agreement are true and correct.
5.2 Joint and Several Representations and Warranties. The Stockholders
------------------------------------------------
jointly and severally represent and warrant to CenterPoint that the authorized
capital stock of the Company
29
<PAGE>
consists of Fifteen Thousand (15,000) shares of Company Stock, of which Fourteen
Thousand Eight Hundred Nine (14,809) shares are issued and outstanding all of
which are validly issued and are fully paid, nonassessable and free of
preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to the Company and the Stockholders as
of the date hereof and, subject to Section 7.3, as of the date on which
-----------
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000 shares of CenterPoint Common Stock, of which the number of shares
set forth in the Form S-1 will be issued and outstanding, and 10,000 shares
of Preferred Stock, par value $0.01 per share, none of which will be issued
and outstanding. Other than (i) shares of CenterPoint Common Stock issued
pursuant to a split of the shares outstanding as of the date of this
Agreement, (ii) shares of CenterPoint Common Stock issued in accordance
with the Merger and the Other Mergers, and (iii) shares of CenterPoint
Common Stock that may be issued to new members of management in lieu of
shares previously issued to current members of management, but which will
not increase the number of shares of outstanding CenterPoint Common Stock,
no shares of CenterPoint Common Stock will be issued prior to the
consummation of the IPO. Mergersub's authorized capital stock consists
solely of 100 shares of common stock, par value $.01 per share (the
"MERGERSUB STOCK"), all of which are issued and outstanding, are owned free
and clear of any Liens by CenterPoint, and are fully paid, nonassessable
and free of pre-emptive rights.
30
<PAGE>
6.2 Except as set forth on Schedule 6.2, as of the date hereof, there
------------
are no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including
any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating CenterPoint to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the
capital stock of CenterPoint or obligating CenterPoint to grant, extend or
enter into any such agreement or commitment. There are no voting trusts,
proxies or other agreements or understandings to which CenterPoint is a
party or is bound with respect to the voting of any shares of capital stock
of CenterPoint. The shares of CenterPoint Common Stock issued to
stockholders of the Company in the Merger will at the Closing Date be duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and issued pursuant to a registration statement as
required by the 1933 Act or an exemption thereof.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation and
Mergersub (and similar entities created for similar purposes with respect to
Other Agreements), CenterPoint has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of CenterPoint, and no other corporate proceedings on
the part of CenterPoint or Mergersub are necessary to authorize the
execution and delivery of this Agreement or the consummation by CenterPoint
and Mergersub of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by CenterPoint and Mergersub and, assuming
the due authorization, execution and delivery hereof by the Company and the
Stockholders, constitutes a valid and legally binding agreement of
CenterPoint and Mergersub, enforceable against each of them in accordance
with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and
(ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint
does not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien
upon any of the properties or assets of CenterPoint or Mergersub under any
of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub,
31
<PAGE>
(ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or Governmental
Authority applicable to CenterPoint or Mergersub or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CenterPoint or
Mergersub is now a party or by which CenterPoint, Mergersub or any of their
respective properties or assets, may be bound or affected. The consummation
by CenterPoint and Mergersub of the transactions contemplated hereby will
not result in any violation, conflict, breach, right of termination or
acceleration or creation of Liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory
Approvals (as defined in Section 6.4.3) and, in the case of the terms,
-------------
conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) consents required from commercial
lenders, lessors or other third parties.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, and (ii)
any filing which may be required under the HSR Act (the filings and
approvals referred to in clauses (i) through (ii) are collectively referred
to as the "CENTERPOINT REQUIRED STATUTORY APPROVALS") no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any governmental or regulatory body or authority is necessary
for the execution and delivery of this Agreement by CenterPoint or
Mergersub or the consummation by CenterPoint or Mergersub of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
made or obtained, as the case may be, are not reasonably expected to, in
the aggregate, have a material adverse effect on the business operations,
properties, assets, condition (financial or other), results of operations
or prospects of CenterPoint and its subsidiaries, taken as a whole (a
"CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth in Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the
32
<PAGE>
consummation of the Merger or the IPO or which could reasonably be expected,
either alone or in the aggregate with all such claims, actions or proceedings,
to have a CenterPoint Material Adverse Effect. CenterPoint is not subject to any
unsatisfied or continuing judgment, order or decree of any court or Governmental
Authority. CenterPoint is not a party to any legal action to recover monies due
it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to the Stockholders or the Company as contemplated
by any provision hereof contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to the Company herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Prior to the Effective Time.
--------------------------------------------------------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects, conduct the Business in the
ordinary and usual course and consistent with past customs and
practices;
(b) not (i) amend its Organizational Documents, (ii) split,
combine or reclassify its outstanding capital stock or (iii) declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise except dividends or distributions which (A) are
consistent with past customs and practices, (B) do not
33
<PAGE>
result in a Company Material Adverse Effect, and (C) as set forth on
Schedule 7.1.3(ii);
------------------
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices or (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) not (i) increase in any manner the base compensation of, or
enter into any new bonus or incentive agreement or arrangement with,
any of its employees, partners, members or owners, except in the
ordinary course of business in a manner consistent with past customs
and practices of the Company or any Company Subsidiary, as applicable,
(ii) pay or agree to pay any additional pension, retirement allowance
or other employee benefit under any Employee Plan to any such Person,
whether past or present, (iii) enter into any new employment,
severance, consulting, or other compensation agreement with any of its
existing employees, partners, members or owners (iv) amend or enter
into a new Employee
34
<PAGE>
Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any businesses or any Person or
division thereof or otherwise acquire or agree to acquire any assets
in each case which are material to it other than in the ordinary
course of business in a manner consistent with past customs and
practices;
(j) other than as set forth on Schedule 7.1.4(ii), not sell,
------------------
lease, license, encumber or otherwise dispose of, or agree to sell,
lease, license, encumber or otherwise dispose of, any of its assets
other than in the ordinary course of business consistent with past
customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual course
and consistent with past custom and practices.
7.1.2 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Stockholders or the Company
shall take, or permit any Company Subsidiary to take, any action that would
or is reasonably likely to result in any of the representations or
warranties of the Stockholders and the Company set forth in this Agreement
being untrue or in any of the conditions to the consummation of the
transactions contemplated hereunder set forth in Article X (other than
---------
Section 10.1(i)) not being satisfied.
--------------- ---
7.1.3 Prior to the Closing, (i) the Company and/or the Stockholders,
as applicable, shall terminate, without any liability to the Company or the
Company Subsidiaries, all agreements relating to the voting of the
Company's capital stock, and all agreements and obligations of the Company
and the Company Subsidiaries relating to borrowed money and/or involving
payments to or for the benefit of a Stockholder or former stockholder of
the Company, or an Affiliate or family member of a Stockholder or former
stockholder of the Company, including without limitation those set forth on
Schedule 7.1.3(i), but excluding (A) agreements as set forth on Schedule
----------------- --------
7.1.3(i)(A) and (B) items approved by CenterPoint in writing; and (ii)
-----------
notwithstanding anything contained in this Section 7.1 to the contrary, the
-----------
Company may, at its sole option, transfer and
35
<PAGE>
distribute the assets listed on Schedule 7.1.3(ii) including, without
------------------
limitation, any cash or AR not necessary to meet the Target or otherwise
satisfy the obligations of the Company or the Stockholders hereunder (the
"EXCLUDED ASSETS") to the Persons listed on Schedule 7.1.3(ii), subject to
------------------
all liabilities and obligations of any nature (whether known or unknown,
accrued, absolute, contingent, direct, indirect, perfected, inchoate,
unliquidated or otherwise) relating to the Excluded Assets (collectively,
the "EXCLUDED LIABILITIES"); provided, however, that prior to the Closing,
-------- -------
the Company and the Stockholders shall obtain novations or other releases
or agreements discharging the Company from all Excluded Liabilities (so
that the respective Excluded Liabilities will become direct liabilities and
obligations of the assignee), and provide copies thereof to CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, the Company and the Stockholders shall (i)
not, and the Company shall use its diligent efforts to cause the Company
Subsidiaries and any officer, director or employee of, or any attorney,
accountant, investment banker, financial advisor or other agent retained by
the Company or any Company Subsidiary not to, initiate, solicit, negotiate,
encourage, or provide non-public or confidential information to facilitate,
any proposal or offer to acquire all or any substantial part of the
business and properties of the Company or any Company Subsidiary, or any
capital stock of the Company or any Company Subsidiary, whether by merger,
purchase of assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture or
partnership or similar arrangement, and (ii) promptly advise CenterPoint of
the terms of any communications the Company or the Stockholders may receive
or become aware of relating to any bid for part or all of the Company or
any Company Subsidiary.
(b) The Company and the Stockholders (i) acknowledge that a breach of
any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment or supplement to
a Schedule shall be made later than three (3) business days prior to the
anticipated effectiveness of the Form S-1. For all purposes of this Agreement,
including, without
36
<PAGE>
limitation, for purposes of determining whether the conditions set forth in
Sections 10.2 and 10.3 have been fulfilled, the
- ------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but the Company and the Stockholders do not, the
Company and the Stockholders may terminate this Agreement at any time prior to
the Closing Date. In the event that (i) the Company seeks to amend or
supplement a Schedule pursuant to this Section 7.3, (ii) such amendment or
-----------
supplement constitutes or reflects a Company Material Adverse Effect or affects
Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority
- ------------ ------------ ----
of the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement in which case the Company shall pay to
CenterPoint's exclusive remedy (notwithstanding anything to the contrary) and as
liquidated damages, and not as a penalty, an amount equal to $2,000,000 (the
"LIQUIDATED DAMAGES AMOUNT"). The Company agrees that in the case of such
termination, CenterPoint and the Founding Companies (excluding the Company) will
sustain immediate and irreparable economic harm and loss of goodwill and that
actual losses suffered by such parties will be difficult, if not impossible, to
ascertain, but the Liquidated Damages Amount set forth herein is reasonable and
has been arrived at after a good faith effort to estimate such losses. Payment
of the Liquidated Damages Amount shall be made in cash to CenterPoint within
thirty (30) days of a termination pursuant to this Section 7.3 in connection
-----------
with an amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
7.4 Company Stockholder Meeting. The Company shall take all action in
---------------------------
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Stockholders to be
held on the earliest practicable date determined in consultation with
CenterPoint to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby by the Stockholders, and the Company's
Board of Directors shall recommend approval of the Merger, this Agreement and
the transactions contemplated hereby by the Stockholders.
37
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an "UNDERWRITER" and collectively,
the "UNDERWRITERS") and their counsel (collectively, the "CENTERPOINT
REPRESENTATIVES"), and to the other Founding Companies and their
accountants, counsel, financial advisors and other representatives, and
CenterPoint shall afford to the Stockholders and the Company and their
accountants, counsel, financial advisors and other representatives (the
"COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Stockholders and the Company shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence
all non-public information furnished to it in connection with the
transactions contemplated by this Agreement, except that each of
CenterPoint, the Stockholders and the Company may disclose any information
that it is required by law or judicial or administrative order to disclose.
In addition, CenterPoint will cause each of the other Founding Companies
and their members and stockholders to enter into a provision similar to
this Section 8.1 requiring each such Founding Company to keep confidential
-----------
any information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Company based on the information in such material shall
be destroyed (and CenterPoint and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy such documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by
an authorized officer supervising such destruction.
38
<PAGE>
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, the Company and the Stockholders shall promptly furnish
to each other all information, and take such other actions, as may
reasonably be requested in connection with making such filings. All
information provided and to be provided by CenterPoint and the Company,
respectively, for use in the Registration Statements shall be true and
correct in all material respects without omission of any material fact
which is required to make such information not false or misleading as of
the date thereof and in light of the circumstances under which given or
made. The Company and the Stockholders agree promptly to advise CenterPoint
if at any time during the period in which a prospectus relating to the
offering of the Merger is required to be delivered under the Securities
Act, any information contained in the prospectus concerning the Company,
the Company Subsidiaries or the Stockholders becomes incorrect or
incomplete in any material respect, and to provide the information needed
to correct such inaccuracy or remedy such incompletion."
8.2.2 CenterPoint agrees that it will provide to the Company and its
counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto) unless the
Company and its counsel (x) have had at least two days to review the
revised information contained therein (which changes shall be highlighted
by computer generated marks indicating the additions and deletions made
from the prior draft reviewed by the Company's counsel) and (y) have not
objected to the substance of the information contained therein. Any
objections posed by the Company or its counsel shall be in writing and
state with specificity the material in question, the reason for the
objection, and the Company's proposed alternative. If the objection is
founded upon a rule promulgated under the Securities Act, the objection
shall cite the rule. Notwithstanding the foregoing, during the five (5)
business days immediately preceding the date scheduled for the filing of
the Registration Statements and any amendment thereto, the Company and its
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed changes
(in the case of the initial filing of the Registration Statements, from the
last circulated draft of the Registration Statements; and, in the case of
any subsequent filing of the Registration Statements or any amendment
thereof, from the most recently filed Registration Statements or amendment
thereof) are transmitted to the Company's counsel; provided, that,
CenterPoint has provided to the
39
<PAGE>
Company or its counsel reasonable advance notice of such proposed changes;
provided, further, that such changes are highlighted by computer generated
marks indicating the additions and deletions made from the prior draft
reviewed by the Company's counsel. CenterPoint will advise each Stockholder
Representative of the effectiveness of the Registration Statements, advise
each Stockholder Representative of the entry of any stop order suspending
the effectiveness of the Registration Statements or the initiation of any
proceeding for that purpose, and, if such stop order shall be entered, use
its best efforts promptly to obtain the lifting or removal thereof. Upon
the written request of any Stockholder, CenterPoint will furnish to such
Stockholder a reasonable number of copies of the final prospectus
associated with the IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither the Company nor the Stockholders will be liable for
any portion of the above expenses in the event the IPO is not completed.
CenterPoint shall also pay the underwriting discounts and commissions payable in
connection with the sale of CenterPoint Common Stock in the IPO. All other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint and the Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give each of the Stockholders prompt written notice of its
intent to do so. Upon the written request of any of the Stockholders given
within thirty (30) days after receipt of such notice, CenterPoint will use
its best efforts to cause to be included in such registration all of the
CenterPoint Common Stock which any such Stockholder requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration
40
<PAGE>
statement under this Section 8.6 that the number of shares to be sold by
-----------
Persons other than CenterPoint is greater than the number of such shares
which can be offered without adversely affecting the offering; in such
case, CenterPoint may reduce the number of shares offered for the accounts
of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by any Stockholder at any time when such
shares are not then transferable in accordance with Section 12.2 hereof.
------------
Registration rights under this Section 8.6 may be transferred in whole or
-----------
in part in connection with the transfer of any shares of CenterPoint Common
Stock received pursuant to this Agreement other than the transfer of the
kind described in clause (x) of Section 12.2 hereof.
------------
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as soon
as reasonably practicable, a registration statement with respect to the
CenterPoint Common Stock (and such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Stockholder whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to such
Stockholder a reasonable number of copies of the prospectus covering the
offering and sale by the Stockholder of the shares to be covered thereby;
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
41
<PAGE>
(e) advise each Stockholder whose CenterPoint Common Stock is to
be covered by such registration of the effectiveness of such
registration statement, advise each such Stockholder of the entry of
any stop order suspending the effectiveness of such registration
statement or of the initiation of any proceeding for that purpose,
and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify
each Stockholder whose CenterPoint Common Stock is to be covered by
such registration of the happening of any event as a result of which
the registration statement, the prospectus or any document
incorporated therein by reference includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading and, at the request of such Stockholder, prepare and
furnish to such Stockholder a post-effective amendment or supplement
to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein not
misleading.
8.6 In connection with each registration pursuant to this Section 8.6
-----------
covering an underwritten registration public offering, CenterPoint and each
participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
8.6 In consideration of the granting to the Stockholders of the
registration rights under this Section 8.6, the Stockholders agree, and
-----------
agree to enter into an agreement with the underwriters in connection with
an underwritten registration to the effect, that it/they will not sell,
transfer or otherwise dispose of, including, without limitation, through
put or short sale arrangements, shares of CenterPoint Common Stock in the
ten (10) days prior to the effectiveness of any registration of CenterPoint
Common Stock for sale to the public and for up to ninety (90) days
following the effectiveness of such registration, provided that all
directors, executive officers and holders of more than five percent (5%) of
the outstanding CenterPoint Common Stock agree to the same restrictions;
and further provided that, with respect to the first public offering of
shares of the CenterPoint Common Stock within three (3) years following the
IPO, the Stockholders shall have been afforded a meaningful opportunity to
include shares in such registration after any reduction by reason of
underwriters' written advice.
42
<PAGE>
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
---------------------
Date or earlier termination of this Agreement, in accordance with its terms,
CenterPoint shall comply in all material requests with all applicable laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Stockholders released from any and
all guarantees on any indebtedness and leases that they personally guaranteed
for the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Stockholders' guarantees thereafter shall have no
further force and effect, then CenterPoint shall not be obligated to use any
efforts to obtain release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
8.9 Lock-Up Agreement. Each Stockholder agrees, and agrees to enter into
-----------------
an agreement with the Underwriter on or prior to the date on which preliminary
Prospectuses are delivered to the effect that, the Stockholder will not offer,
sell, contract to sell or otherwise dispose of any shares of CenterPoint Common
Stock, or any securities convertible into or exercisable or exchangeable for
CenterPoint Common Stock, for a period of 180 days after the date of the final
Prospectus for the IPO without the prior written consent of the Underwriter
except for shares of CenterPoint Common Stock disposed of as bona fide gifts,
subject to any remaining portion of the 180-day period applying to any shares so
disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely filing
of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear costs of filing such returns.
8.10.2 Each of the Company, CenterPoint and the Stockholders shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
43
<PAGE>
8.11 Maintenance of Insurance. The Company covenants and agrees that all
------------------------
insurance policies listed, or required to be listed, on Schedule 4.20 will be
-------------
maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of the
--------------
Stockholders, CenterPoint shall, directly or through one or more of its
subsidiaries, administer and manage the collection of amounts referred to on
Schedule 7.1.3(ii) using reasonable care and in accordance with the Company's
- ------------------
policies in effect at Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Stockholders. Subject to Sections 9.7 and 9.8,
----------------------------------- ------------ ---
the Stockholders jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Stockholder or any action,
demand or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the
Stockholders to indemnify, defend and save harmless for any
misrepresentation or breach of representation or warranty made in Section
-------
5.1 hereof or in any certificate, schedule, document, exhibit or other
---
instrument delivered in respect thereof shall not be joint and several, but
such obligation shall be several only and limited to the several
Stockholder(s) making such misrepresentation or breach;
(b) any failure by the Company or any Stockholder to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing except that the obligation of the
Stockholders to indemnify, defend and save harmless for any failure to
observe or perform any covenant or agreement shall not be joint and
several, but such obligation shall be several only and limited to the
several Stockholder(s) failing to observe or perform such covenant or
agreement;
(c) any liability under the 1933 Act, the 1934 Act or other federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to the Company, contained in any preliminary prospectus
relating to the IPO, the Registration Statements or any proxy
44
<PAGE>
statement or prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact relating to the Company required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to CenterPoint or its counsel by the Company; provided, however,
that such indemnity shall not inure to the benefit of any CenterPoint
Indemnified Party to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) the Company provided, in writing,
corrected information to CenterPoint or its counsel for inclusion in the
final prospectus prior to distributing such prospectus, and such
information was not so included, or (ii) CenterPoint did not provide the
Company and its counsel with the information required to be provided
pursuant to Section 8.2.2, and such information is the basis for the untrue
-------------
statement or omission (or alleged untrue statement or omission) giving rise
to the liability under this Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Stockholder or
the Company in connection with the Merger or the transactions contemplated
by this Agreement with respect to brokerage, finders and other fees or
commissions, (ii) any Loss relating to, resulting from, arising out of or
otherwise by virtue of any matter which is or should be listed on Schedule
--------
4.10 or Schedule 7.1.3 hereto and (iii) any payment with respect to
---- --------------
Dissenting Shares.
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided further, that the
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
----------
Article IX, the Other Founding Companies, and each of their respective officers,
- ----------
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall be deemed to
be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent,
45
<PAGE>
fixed or unfixed, liquidated or unliquidated, or otherwise), obligations,
deficiencies, demands, claims, suits, actions, or causes of action, assessments,
losses, costs, expenses, interests, fines, penalties, actual or punitive damages
or costs or expenses of any and all investigations, proceedings, judgments,
orders, environmental analyses, remediations, settlements and compromises
(including reasonable fees and expenses of the attorneys, accountants and other
experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Stockholders and their respective Affiliates, and
their Affiliates' respective officers, directors, employees and agents (each, a
"STOCKHOLDER INDEMNIFIED PARTY") forever harmless from and against, and to
promptly pay to a Stockholder Indemnified Party or reimburse a Stockholder
Indemnified Party for, any and all Losses sustained or incurred by any
Stockholder Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Stockholder Indemnified Party which, if successful, would
give rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to the Company or the Stockholders, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to the Company or the
Stockholders required to be stated therein or necessary to make the
statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and (i) the Company or the
Stockholders
46
<PAGE>
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide the Company and its counsel with the information required
to be provided pursuant to Section 8.2.2, and such information is the basis
-------------
for the untrue statement or omission (or alleged untrue statement or
omission) giving rise to the liability under this Section 9.2(d).
--------------
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person
entitled to indemnification under this Agreement (an "INDEMNIFIED PARTY")
receives notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a "
THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Stockholders, may be granted by the
Stockholder Representative (as defined in Section 9.13)), which consent
------------
shall not be unreasonably withheld or delayed.
47
<PAGE>
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
9.3.4 Any judgment entered, order issued or settlement agreed upon
in the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT
48
<PAGE>
CLAIM") will be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, together with a statement of any available information
regarding such claim, and the Indemnifying Party will have a period of thirty
(30) calendar days within which to satisfy such Direct Claim. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnified Party will be free to pursue such remedies as may be
available to the Indemnified Party under this Article IX.
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Stockholders. With respect to representations
------------------------------
and warranties, the Stockholders shall not have any liability pursuant to
Section 9.1(a) hereof unless and until and only to the extent that the
--------------
aggregate amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of
--------------
Aggregate Basic Purchase Consideration; provided, however, that this
threshold shall not apply to Losses arising out of breaches of
representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2, and
--------------------------
5.1.8 as it relates to the representation and warranty of the Company set
-----
forth in Section 4.16, and
------------
49
<PAGE>
the Stockholders shall indemnify the CenterPoint Indemnified Parties for
any Losses accruing thereunder in accordance with this Article IX without
----------
regard to such threshold.
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
--------------
Aggregate Basic Purchase Consideration; provided, however, that this
-------- --------
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Stockholder Indemnified Parties from any Losses
occurring thereunder in accordance with this Article IX without regard to
----------
such threshold.
9.7.3 Limitations on Claims Against the Stockholders. The liability
----------------------------------------------
of all Stockholders for misrepresentations and breaches of representations
and warranties under Section 9.1(a) shall be limited to 100% of the sum of
--------------
the Aggregate Basic Purchase Consideration in the aggregate; provided,
--------
however, that such liability for a Stockholder shall be limited to 1.5
-------
times the sum of (i) the Aggregate Basic Purchase Consideration and (ii)
the Contingent Payment received, if any, by such Stockholder; provided
--------
further, however, that such limitation shall not apply to Losses arising
------- -------
out of breaches of representations or warranties contained in Sections
--------
5.1.1, 5.1.2, 5.2, and 5.1.8 as it relates to the representation and
----------------- -----
warranty of the Company set forth in Section 4.16, and any Losses accruing
------------
thereunder shall not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of Aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however that this
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the
------------------------------------------------------------
Stockholders and the Company; Time Limits on Indemnification Obligations.
- ------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of the
Stockholders, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Stockholders and the Company contained in this Agreement or in
any certificate delivered pursuant to any of the foregoing. All such
representations, warranties, covenants and agreements of the Stockholders and
the Company shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, (i) that the Stockholders' obligations
pursuant to Section 9.1, other than those relating to covenants and agreements
-----------
to be performed by the Stockholders after the Closing, shall expire one (1) year
after the Closing, except with respect to obligations arising under or relating
to Section 4.16 hereof as it relates to federal, state, local and foreign income
------------
taxation, which shall survive until the earlier of (A) the expiration of the
applicable periods
50
<PAGE>
(including any extensions) of the respective statutes of limitation applicable
to the payment of the Taxes or (B) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom; and (ii) solely to the extent that CenterPoint
actually incurs liability under the 1933 Act or the 1934 Act, the obligations
under Sections 9.1(c) or (d) above shall survive until the expiration of any
--------------- ---
applicable statute of limitations with respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
-------- -------
CenterPoint' obligations under Section 9.2, other than those relating to
-----------
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one year after Closing, except that, solely to the extent that the
Stockholders actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Sections 9.2(c) or (d) above shall survive until the
--------------- ---
expiration of any applicable statute of limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Stockholders and of the Stockholder
Indemnified Parties following the Closing against CenterPoint and its affiliates
with respect to any claim for relief resulting from, arising out of or otherwise
by virtue of this Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Stockholders may satisfy their respective obligations, if any,
under this Article IX (i) with cash, (ii) by tendering to the CenterPoint
--------------
Indemnified Parties cash or shares of CenterPoint Common Stock that are
transferable in accordance with Section 12.2, such shares to be valued at the
Market Price. "MARKET PRICE" shall mean the average closing (last) price for a
share of CenterPoint Common Stock (as reported on the exchange or market on
which such shares are then listed or traded) for the most recent twenty (20)
days that such shares have traded ending on the date two (2) days prior to the
date tendered pursuant to clause (i) of the preceding sentence, or, if such
shares are not then listed or traded on an exchange or other market, the fair
market value of such shares as determined by an appraiser reasonably agreed to
by the parties.
51
<PAGE>
9.13 Stockholder Representative. Each Stockholder appoints Robert Gallo
--------------------------
and Russell Minetti (collectively, the "STOCKHOLDER REPRESENTATIVE") as its
agent and representative with full power and authority to agree, contest or
settle any claim or dispute affecting any Stockholder made under Articles II or
-----------
IX and to otherwise act on behalf of the Stockholders in accordance with the
- --
terms of this Agreement, including, without limitation, to direct the amount and
manner of the payment of Aggregate Basic Purchase Consideration; provided, that
-------- ----
the Stockholder Representative may be removed and a successor to the Person
originally serving as the Stockholder Representative may be designated in a
writing signed by a majority in interest of the Stockholders and delivered to
CenterPoint in accordance with Section 15.2
------------
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending or issued by any federal or state court which seeks to
prevent or prevents the consummation of the IPO, the Merger or any of the
Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied.
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United
52
<PAGE>
States which would prevent the consummation of the Merger or any of the
Other Mergers or make the consummation of the Merger or any of the Other
Mergers illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Stockholders in the
manner required by any applicable Law and the Company's Organizational
Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
10.2 Conditions to Obligation of the Stockholders and the Company to
---------------------------------------------------------------
Effect the Merger. Unless waived by the Company, the obligation of the
- -----------------
Stockholders and the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of the Chief Executive Officer or
President of CenterPoint to that effect;
(b) no Governmental Authority shall have promulgated or formally
proposed any statute, rule or regulation which, when taken together with
all such promulgations, would materially impair the value to the
Stockholders of the Merger;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Company and Stockholders;
53
<PAGE>
(d) Each of the Stockholders shall have been afforded the opportunity
to enter into an employment agreement (the "EMPLOYMENT AGREEMENT") with
the Company substantially in the form attached hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Company and the
Stockholders a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the Delaware Secretary of State,
showing that CenterPoint is in good standing;
(f) each of the Stockholders, the partners, the members and
stockholders of the other Founding Companies who are to receive shares of
CenterPoint Common Stock pursuant to the Other Agreements, and the other
stockholders of CenterPoint other than those acquiring stock in the IPO
shall have entered into an agreement (the "STOCKHOLDERS AGREEMENT")
substantially in the form attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Other Mergers of the other Founding
Companies, on substantially the same terms as provided herein, shall have
been satisfied or waived by the applicable party and the Company;
(h) the Company shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Stock in the Merger pursuant to Section
351 of the Code, the final form of such opinion to be in form and substance
reasonably acceptable to the Company and the Stockholders; and
(i) a written bonus plan satisfactory to the Stockholders shall have
been agreed to in writing by CenterPoint and the Stockholders.
10.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of the Chief Executive Officer or President of
the Company to that effect;
(b) the Stockholders shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Stockholders contained in this
54
<PAGE>
Agreement shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date as if made at and as of
such date, and CenterPoint and the Underwriters shall have received a
Certificate of each Stockholder to that effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Cole, Schotz, Meisel, Forman & Leonard, P.A., counsel to the Company,
dated the Closing Date, in the form attached hereto as Exhibit 10.3(c), the
---------------
final form of such opinion to be in form and substance reasonably
acceptable to the Underwriters and CenterPoint;
(d) each of the Stockholders shall have executed and delivered the
Employment Agreement referred to in Section 10.2(d);
---------------
(e) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(f) the Company shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of the Company and each Company Subsidiary
and, unless waived by CenterPoint, in each state in which the Company or
any Company Subsidiary is authorized to do business, showing the Company or
Company Subsidiary (as applicable) is in good standing;
(g) no Governmental Authority shall have promulgated or formally
proposed any statute, rule or regulation which, when taken together with
all such promulgations, would materially impair the value to CenterPoint of
the Merger;
(h) the Stockholders shall have executed the Stockholders Agreement;
(i) the Stockholders shall have delivered to CenterPoint an instrument
in the form attached hereto as Exhibit 10.3(i), dated the Closing Date,
---------------
releasing the Company and the Company Subsidiaries from any and all claims
of the Stockholders against the Company and the Company Subsidiaries and
obligations of the Company and the Company Subsidiaries to the
Stockholders;
(j) Reserved;
(k) the Company and the Stockholders, as applicable, shall have
terminated or have caused the termination of any voting trusts, proxies or
other agreements or
55
<PAGE>
understandings to which the Company or any Stockholder is a party or is
bound with respect to any shares of capital stock or other equity interests
of the Company and the Company Subsidiaries shall have provided CenterPoint
evidence of such termination that is acceptable to CenterPoint's counsel;
(l) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.3 hereof;
-------------
(m) the Stockholders and/or the Company shall have delivered to
CenterPoint a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all such lenders or
creditors regarding the payment in full of such indebtedness at Closing, in
each case in form and substance satisfactory to CenterPoint (including,
without limitation, applicable UCC-3 termination statements); and
(n) the secretary of the Company shall have delivered certified
copies of the resolutions of the board of directors and shareholders of the
Company approving execution and delivery of this Agreement, the Merger and
the other actions, agreements and documents necessary or desirable to
complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by the Company,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of the Company or the
Stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company
or any of the Stockholders or any of their affiliates or associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint; or
56
<PAGE>
(c) by CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint
or any of its stockholders or any of their affiliates or associates;
(iii) if the Company (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to the Company by
CenterPoint;
(iv) if the Stockholders (A) fail to perform in any material
respect any of their material covenants in this Agreement and (B) do
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to the Stockholder
Representative by CenterPoint; or
(d) by mutual consent of the Boards of Directors of the Company and
CenterPoint.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or the Company, as provided in Section 11.1, this
------------
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, the Stockholders, CenterPoint, Mergersub or their
respective officers or directors (except the obligations set forth in this
Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall
- ------------ ---------------------- ----------
survive the termination). Nothing in this Section 11.2 shall relieve any party
------------
from liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the parties' respective Boards of Directors of CenterPoint and the Company or
duly authorized committees thereof and then only by an instrument in writing
signed on behalf of each of the parties hereto and in compliance with applicable
law. CenterPoint covenants and agrees that it shall not amend, modify or
supplement the material terms of any Other Agreement following the Closing
without the prior written consent of at least two thirds (2/3rds) of the members
of CenterPoint's Board of Directors; provided that no waiver of any restriction
set forth in Article XII shall be of any effect unless consented to by a
-----------
majority of the members of CenterPoint's Board of Directors who do not at the
time of such proposed waiver hold Restricted Shares within the meaning of this
Agreement, any Other Agreement or the Stockholders Agreement.
57
<PAGE>
11.4 Waiver. At any time prior to the Closing Date, the parties hereto may
------
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions Generally. Except as provided in Section 12.2,
------------------------------- ------------
for a period of forty-two (42) months from the Closing, the Stockholders shall
not (a) sell, assign, exchange, transfer, distribute or otherwise dispose of, in
whole or in part (i) any shares of CenterPoint Common Stock received by the
Stockholders in the Merger (the "1 RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning the Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
12.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing and every six (6) months thereafter, until all of such Stockholder's
Restricted Shares shall have been released from such restrictions, 20% of the
original number of Restricted Shares of each Stockholder shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed Restricted Shares for any purposes of this Agreement provided, that, if a
-------- ----
Stockholder's employment with CenterPoint or its subsidiaries is terminated
within thirty (30) months of the Closing other than through death, disability,
retirement, without Cause (as defined in such Stockholder's employment agreement
with the Company of even date) or due to circumstances approved by the Company's
management or reasonably approved by CenterPoint's Chief Executive Officer, the
Restricted Shares held by such Stockholder shall remain subject to the
restrictions set forth in Section 12.1 until the fifth anniversary of the
------------
Closing Date. Notwithstanding the foregoing and Section 12.1, a Stockholder may
------------
(x) at any time pledge or encumber all or part of such Stockholder's Restricted
Shares, provided that the pledgee or secured party agrees in writing to be bound
by the provisions contained in Article XII, (y) at any time transfer all or part
-----------
of such Stockholder's Restricted Shares to another Stockholder or to an
immediate family member (or trust or other estate planning Person), provided,
--------
that, any such Stockholder, family member or other Person agrees in writing to
- ----
be bound by the provisions contained in Article XII, and (z) transfer or cause
-----------
to be transferred such Stockholder's Restricted Shares upon such Stockholder's
disability or death. As used in this Section 12.2, the terms "disability" and
------------
"retirement" shall have the meaning ascribed to them in CenterPoint's Employee
Incentive Compensation Plan. No attempted transfer of any nature whatsoever that
is in violation of this Section shall be treated as effective for any purpose.
58
<PAGE>
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Stockholders pursuant to Article II of this Agreement shall
----------
bear a legend substantially in the form set forth below and containing such
other information as CenterPoint may deem necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
AND THE DISPOSITION THEREOF ARE SUBJECT TO THE
TERMS OF A MERGER AGREEMENT DATED MARCH 31, 1999.
A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION AND MAY BE
INSPECTED BY THE REGISTERED OWNER OF THIS
CERTIFICATE OR A DULY AUTHORIZED REPRESENTATIVE
OF SUCH OWNER UPON REQUEST DURING NORMAL BUSINESS
HOURS.
Upon request from any Stockholder (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer restricted shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable restricted shares. In the event a
Stockholder's request to remove the restrictive legend coincides with his
request to sell the CenterPoint Common Stock, CenterPoint shall take such
actions as are required by its transfer agent to allow the transfer agent to
transfer the unrestricted CenterPoint Common Stock free of any restrictive
legend.
ARTICLE XIII
NONCOMPETITION
13.1 Prohibited Activities. Each Stockholder agrees severally, and not
---------------------
jointly, that such Stockholder will not, for a period of three (3) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing any products or
services of a type or nature similar to those sold or provided by the
Company of a type or nature similar to those provided by the Company at or
within one year time prior to the date that such Stockholder commences
competition within a fifty (50) mile radius of any office location of the
Company or any Company Subsidiary (the "TERRITORY");
59
<PAGE>
(b) sell or provide any competitive products or services to, or
solicit for the purpose of selling or providing any competitive products or
services to, any Person or Person that was a customer of the Company or any
Company Subsidiary at any time during the preceding one-year period or that
was known by Stockholder to have been actively being solicited by the
Company or any Company Subsidiary to become a customer at any time during
such period;
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Stockholder from
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is traded on a national securities exchange
or over-the-counter so long as the Stockholder does not consult with or is not
employed by such competitor.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Stockholder, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Stockholders in light of the activities and business of CenterPoint (including
the subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Stockholder who has entered into an employment agreement, incentive compensation
agreement or other similar
60
<PAGE>
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Stockholder shall enter into a business or pursue other activities not
in competition with CenterPoint and/or any subsidiary thereof, or similar
activities or business in locations the operations of which, under such
circumstances, does not violate this Article XIII and in any event such new
------------
business, activities or location are not in violation of this Article XIII or of
------------
such Stockholder's obligations under this Article XIII, such Stockholder shall
------------
not be chargeable with a violation of this Article XIII if CenterPoint and/or
------------
any subsidiary thereof shall thereafter enter the same, similar or a competitive
(i) business, (ii) course of activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Stockholder made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Stockholder is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
covenants contained in Article XIII shall not be affected by any breach of any
------------
other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and the Stockholders hereby agree that
-----------
this covenant is a material and substantial part of this transaction.
ARTICLE XIV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 Stockholders' Covenant. The Stockholders recognize and acknowledge
----------------------
that they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the other Founding
Companies, the Company Subsidiaries and/or CenterPoint, such as strategic plans,
systems, operational policies, marketing plans, and pricing and cost policies
that are valuable, special and unique assets of the Company's, the other
61
<PAGE>
Founding Companies', the Company Subsidiaries' and/or CenterPoint's respective
businesses. The Stockholders agree that they will not disclose such
confidential information to any Person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except
(a) to authorized representatives of CenterPoint,
(b) following the Closing, such information may be disclosed by the
Stockholders as is required in the course of performing their duties to
CenterPoint, and
(c) to counsel and other advisers, provided that such advisers (other
than counsel) agree to the confidentiality provisions of this Section 14.1,
------------
unless
(i) such information becomes known to the public generally
through no fault of the Stockholders,
(ii) disclosure is required by law or the order of any
governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), the
Stockholder shall, if possible, give prior written notice thereof to
CenterPoint and provide CenterPoint with the opportunity to contest
such disclosure, or
(iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit
against the disclosing party.
In the event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section 14.1, CenterPoint shall be entitled to an injunction
------------
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
CenterPoint from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.2 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of the foregoing covenants in Section 14.1, and because of
------------
the immediate and irreparable damage that would be caused for which they would
have no other adequate remedy, the parties hereto agree that, in the event of a
breach by any of them of the foregoing covenants, the covenant may be enforced
against the other parties by injunction and restraining orders.
14.3 Survival. The obligations of the parties under this Article XIV shall
-------- -----------
survive the termination of this Agreement.
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of the Company and the Stockholders represents and
-------
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for the fee described in Schedule 15.1)
-------------
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
CenterPoint represents and warrants that no broker, finder or investment banker
62
<PAGE>
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
15.2.2 If to the Company, to:
Insurance Design Administrators
169 Ramapo Road
P.O. Box 875
Oakland, New Jersey 07436
Attn: Robert F. Gallo
Facsimile No.: (201) 337-1391
63
<PAGE>
with a copy to:
Cole, Schotz, Meisel, Forman & Leonard, P.A.
25 Main Street
P.O. Box 800
Hackensack, New Jersey 07602
Attn: Henry R. Matri, Esq.
Facsimile No.: (201) 489-1536
15.2.3 If to the Stockholder Representative or the Stockholders, as
applicable, addressed to the addresses set forth on Schedule 15.2.3, with
---------------
copies to such counsel as is set forth with respect to each Stockholder on
such Schedule 15.2.3, as applicable.
---------------
15.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "1 herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
-------------------
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof) and
(ii) the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE of a particular fact or other matter if any individual who is a
shareholder of such Person or who is otherwise serving, or who has served, as a
director, officer, partner, member or trustee (or any capacity) of such Person
has, or at any time had, knowledge of such fact or other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with
64
<PAGE>
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise, except that CenterPoint may assign this Agreement to any
wholly-owned subsidiary of CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
---------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
65
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
--------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
IDA MERGERSUB INC.
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
--------------------------------------
Its: President
---------------------------------------
SELF FUNDED BENEFITS, INC., D/B/A/ INSURANCE DESIGN
ADMINISTRATORS
By: /s/ Robert F. Gallo
----------------------------------------
Name: Robert F. Gallo
--------------------------------------
Its: President
---------------------------------------
STOCKHOLDERS
/s/ Robert F. Gallo
-------------------------------------------
Robert F. Gallo
/s/ Russell P. Minetti
-------------------------------------------
Russell P. Minetti
66
<PAGE>
EXHIBIT 2.8
___________________________
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
CERTAIN MERGER SUBSIDIARIES OF CENTERPOINT,
HOLTHOUSE CARLIN & VAN TRIGT LLP,
all of the Partners of HOLTHOUSE CARLIN & VAN TRIGT LLP,
the Member of the LLC Partner,
and
all of the Stockholders of the Corporate Partners
March 31, 1999
___________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER.................................................. 3
1.1 Merger...................................................... 3
1.2 Effects of the Merger....................................... 3
1.3 Directors and Officers of the Surviving Corporations........ 4
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT......................... 4
2.1 Merger Consideration........................................ 4
2.1.1 Basic Purchase Consideration......................... 4
2.1.2 Treasury Stock....................................... 4
2.1.3 Intentionally Omitted................................. 4
2.1.4 Conversion of Mergersub Stock........................ 4
2.1.5 Exchange of Certificates............................. 5
2.2 Post-Closing Adjustments to Basic Purchase Consideration.... 5
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. 5
2.2.2 Preliminary Balance Sheet and Adjustment............. 5
2.2.3 Interim Adjustment................................... 5
2.2.4 Final Adjustment..................................... 6
2.2.5 Disputes.............................................. 6
2.2.6 Payment of Adjustments............................... 6
2.3 Post-Closing Management of AR/.............................. 7
2.4 Assignment of Uncollected AR................................ 7
2.5 Definitions................................................. 7
ARTICLE III THE CLOSING AND CONSUMMATION DATE........................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HCVT...................... 8
4.1 Organization and Qualification.............................. 8
4.2 Company Subsidiaries........................................ 9
4.3 Authority; Non-Contravention; Approvals..................... 9
4.4 Capitalization.............................................. 10
4.5 Year 2000................................................... 11
4.6 Financial Statements........................................ 12
4.7 Absence of Undisclosed Liabilities.......................... 12
4.8 Unbilled Fees and Expenses.................................. 12
4.9 Absence of Certain Changes or Events........................ 12
4.10 Litigation.................................................. 15
4.11 Compliance with Applicable Laws............................. 16
4.12 Licenses.................................................... 16
4.13 Material Contracts.......................................... 16
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.14 Properties.................................................................. 19
4.15 Intellectual Property....................................................... 20
4.16 Taxes....................................................................... 21
4.17 Employee Benefit Plans; ERISA............................................... 22
4.18 Labor Matters............................................................... 24
4.19 Environmental Matters....................................................... 25
4.20 Insurance................................................................... 25
4.21 Interest in Customers and Suppliers; Affiliate Transactions................. 26
4.22 Business Relationships...................................................... 26
4.23 Compensation................................................................ 26
4.24 Bank Accounts............................................................... 27
4.25 Professional Credentials.................................................... 27
4.26 Disclosure; No Misrepresentation............................................ 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS............................... 27
5.1 Several Representations and Warranties...................................... 27
5.1.1 Capitalization....................................................... 28
5.1.2 Authority............................................................ 28
5.1.3 Non-Contravention.................................................... 28
5.1.4 Approvals............................................................ 29
5.1.5 Litigation........................................................... 29
5.1.6 No Transfer.......................................................... 29
5.1.7 Disclosure........................................................... 29
5.1.8 HCVT Representations and Warranties.................................. 30
5.1.9 Partner Assets and Liabilities....................................... 30
5.2 Joint and Several Representations and Warranties............................ 30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CENTERPOINT............................... 30
6.1 Organization And Qualification.............................................. 31
6.2 Capitalization.............................................................. 31
6.3 No Subsidiaries............................................................. 32
6.4 Authority; Non-Contravention; Approvals..................................... 32
6.5 Absence of Undisclosed Liabilities.......................................... 33
6.6 Litigation.................................................................. 33
6.7 Compliance with Applicable Laws............................................. 34
6.8 No Misrepresentation........................................................ 34
ARTICLE VII CERTAIN COVENANTS AND OTHER TERMS........................................... 34
7.1 Conduct of Business by HCVT, the Company and Partners Prior to the Effective
Time........................................................................ 34
7.2 No-Shop..................................................................... 37
7.3 Schedules................................................................... 37
7.4 Corporate Partner Stockholder Meeting; LLC Partner Member Meeting........... 38
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
7.5 Pre-Closing Transactions........................................................ 39
7.5.1 Conversion to Business Corporation; LLC Partner Capitalization........... 39
7.5.2 Asset Transfer........................................................... 39
7.5.3 Retained Assets........................................................... 39
ARTICLE VIII ADDITIONAL AGREEMENTS........................................................... 39
8.1 Access to Information........................................................... 39
8.2 Registration Statement.......................................................... 40
8.3 Expenses and Fees............................................................... 41
8.4 Agreement to Cooperate.......................................................... 42
8.5 Public Statements............................................................... 42
8.6 Registration Rights............................................................. 42
8.7 CenterPoint Covenants........................................................... 44
8.8 Release of Guarantees........................................................... 44
8.9 Lock-Up Agreement............................................................... 45
8.10 Preparation and Filing of Tax Returns........................................... 45
8.11 Maintenance of Insurance........................................................ 45
8.12 Administration.................................................................. 45
ARTICLE IX INDEMNIFICATION................................................................. 45
9.1 Indemnification by the Sellers.................................................. 46
9.2 Indemnification by CenterPoint.................................................. 48
9.3 Indemnification Procedure for Third Party Claims................................ 49
9.4 Direct Claims................................................................... 50
9.5 Failure to Give Timely Notice................................................... 51
9.6 Reduction of Loss............................................................... 51
9.7 Limitation on Indemnities....................................................... 51
9.7.1 Threshold for the Sellers................................................ 51
9.7.2 Threshold for CenterPoint................................................ 51
9.7.3 Limitations on Claims Against the Sellers................................ 52
9.7.4 Limitation on Claims Against CenterPoint................................. 52
9.8 Survival of Representations, Warranties and Covenants of the Partners,
the Sellers and the Company; Time Limits on Indemnification Obligations......... 52
9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time
Limits on Indemnification Obligations........................................... 53
9.10 Defense of Claims; Control of Proceedings....................................... 53
9.11 Fraud; Exclusive Remedy......................................................... 53
9.12 Manner of Satisfying Indemnification Obligations................................ 53
9.13 Sellers' Representative......................................................... 53
ARTICLE X CLOSING CONDITIONS.............................................................. 54
10.1 Conditions to Each Party's Obligation to Effect the Merger...................... 54
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
10.2 Conditions to Obligation of the Partners, the Sellers and the Company to
Effect the Merger.............................................................. 55
10.3 Conditions to Obligation of CenterPoint to Effect the Merger................... 56
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.............................................. 59
11.1 Termination.................................................................... 59
11.2 Effect of Termination.......................................................... 60
11.3 Amendment...................................................................... 60
11.4 Waiver......................................................................... 60
ARTICLE XII TRANSFER RESTRICTIONS.......................................................... 60
12.1 Transfer Restrictions Generally................................................ 60
12.2 Release of Restrictions........................................................ 61
12.3 Legend......................................................................... 61
ARTICLE XIII NONCOMPETITION................................................................. 62
13.1 Prohibited Activities.......................................................... 62
13.2 Damages........................................................................ 63
13.3 Reasonable Restraint........................................................... 63
13.4 Severability; Reformation...................................................... 63
13.5 Independent Covenant........................................................... 64
13.6 Materiality.................................................................... 64
ARTICLE XIV [Reserved]..................................................................... 64
ARTICLE XV GENERAL PROVISIONS............................................................. 64
15.1 Brokers........................................................................ 64
15.2 Notices........................................................................ 64
15.3 Interpretation................................................................. 65
15.4 Certain Definitions............................................................ 66
15.5 Entire Agreement; Assignment................................................... 66
15.6 Applicable Law................................................................. 66
15.7 Counterparts................................................................... 66
15.8 Parties in Interest............................................................ 67
</TABLE>
(iv)
<PAGE>
LIST OF SCHEDULES
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
(v)
<PAGE>
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance Policies
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 5.1.9 Partner Assets and Liabilities
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Other Liabilities
Schedule 7.1.4 Terminated Agreements
Schedule 7.5.3 Retained Assets
Schedule 8.8 Sellers' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Sellers and Their Counsel
(vi)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Partners and Sellers
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Seller and Partners
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Sellers' Release
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(vii)
<PAGE>
DEFINED TERMS
-------------
AR......................................................... Section 2.5(a)
Accounting Licenses........................................ Section 4.12
Actions.................................................... Section 4.10.1
Acquisition Transaction.................................... Section 13.1
Affiliate.................................................. Section 15.4
Affiliate Transactions..................................... Section 4.21
Agreement.................................................. Introduction
applicable Corporate Partner............................... Introduction
Arbitrator................................................. Section 2.2.5
Asset Transfer............................................. Introduction
Attest Entity.............................................. Section 7.1.2
Attestation Practice....................................... Introduction
Basic Purchase Consideration............................... Section 2.1.1
Business................................................... Introduction
Carlin Mergersub........................................... Introduction
Cash Consideration......................................... Section 2.1.1
CCC........................................................ Section 1.1
CenterPoint................................................ Introduction
CenterPoint Accountants.................................... Section 2.2.2
CenterPoint Common Stock................................... Section 2.1.1
CenterPoint Indemnified Party(ies)......................... Section 9.1
CenterPoint Material Adverse Effect........................ Section 6.4.3
CenterPoint Representatives................................ Section 8.1.1
CenterPoint Required Statutory Approvals................... Section 6.4.3
Christian Mergersub........................................ Introduction
Closing.................................................... Article III
Closing Balance Sheet...................................... Section 2.2.2
(viii)
<PAGE>
Closing Date................................................ Article III
Code........................................................ Introduction
Company..................................................... Introduction
Company Interests........................................... Introduction
Company Material Adverse Effect............................. Section 4.3.3
Company Representatives..................................... Section 8.1.1
Company Subsidiary.......................................... Section 4.2
Conversion.................................................. Introduction
Contracts................................................... Section 4.13
Copyrights.................................................. Section 4.15
Corporate Partner........................................... Introduction
Corporate Partner Stock..................................... Section 2.1.1
Defense Notice.............................................. Section 9.3.1
DGCL........................................................ Section 1.1
Direct Claim................................................ Section 9.4
Disputed Item............................................... Section 2.2.5
Effective Time.............................................. Section 1.1
Employee Plan................................................ Section 4.17.5(a)
Environmental and Safety Requirements........................ Section 4.19
ERISA........................................................ Section 4.17.5(b)
Final Adjustment............................................. Section 2.2.4
Financial Statements......................................... Section 4.6
First Person................................................. Section 4.17.5(c)
Form S-1..................................................... Section 4.3.3
Form S-4..................................................... Section 4.3.3
Founding Companies........................................... Introduction
GAAP......................................................... Section 4.6
general increase............................................. Section 4.23
Governmental Authority....................................... Section 4.3.2
(ix)
<PAGE>
Hazardous Materials......................................... Section 4.19
HCVT........................................................ Introduction
HCVT Interests.............................................. Introduction
Holthouse Mergersub......................................... Introduction
HSR Act..................................................... Section 4.3.3
Hutchins Mergersub.......................................... Introduction
Incentive Compensation Agreement............................ Section 10.2(d)
Indemnified Party........................................... Section 9.3.1
Indemnifying Party.......................................... Section 9.3.1
Intellectual Property....................................... Section 4.15
Intellectual Property Licenses.............................. Section 4.15
Interests................................................... Introduction
Interim Adjustment.......................................... Section 2.2.3
IPO......................................................... Introduction
Knowledge................................................... Section 15.4
Latest Balance Sheet........................................ Section 4.6
Laws........................................................ Section 4.11
Leased Property............................................. Section 4.14.1
Licenses.................................................... Section 4.12
Liens....................................................... Section 4.3.2
Liquidated Damages Amount................................... Section 7.3
LLC Partner................................................. Introduction
LLC Partner Capitalization.................................. Introduction
LLC Partner Interests....................................... Section 2.1.1
Losses...................................................... Section 9.1
Market Price................................................ Section 9.12
Marks....................................................... Section 4.15
Material Contracts.......................................... Section 4.13
Member...................................................... Introduction
(x)
<PAGE>
Merger................................................. Introduction
Merger Documents....................................... Section 1.1
Mergersub Stock........................................ Section 6.2.1
Mergersubs............................................. Introduction
Net Working Capital.................................... Section 2.5(b)
Newco.................................................. Introduction
1933 Act............................................... Section 4.3.3
1934 Act............................................... Section 9.1(c)
Organizational Documents............................... Section 4.1
Other Agreements....................................... Introduction
Other Founding Companies............................... Section 9.1
Other Mergers.......................................... Introduction
Owned Property......................................... Section 4.14.1
Partners............................................... Introduction
Pass Mergersub......................................... Introduction
Patents................................................ Section 4.15
Person................................................. Section 15.4
Plan Affiliate......................................... Section 4.17.5(c)
Real Property.......................................... Section 4.14.1
Registration Statements................................ Section 4.3.3
Resolution Period...................................... Section 2.2.5
Restricted Shares...................................... Section 12.1
Retained Assets........................................ Section 7.1.4
Retained Liabilities................................... Section 7.1.4
Returns................................................ Section 4.16.1
Schedules.............................................. Section 7.3
SEC.................................................... Section 4.3.3
Securities Act......................................... Section 4.3.3
Seller Indemnified Party............................... Section 9.2
(xi)
<PAGE>
Sellers......................................................... Section 1.1
Sellers' Representative......................................... Section 9.13
Shuman Mergersub................................................ Introduction
Special Bonus Plan.............................................. Section 2.5(c)
Stock Consideration............................................. Section 2.1.1
Stockholders.................................................... Introduction
Stockholders Agreement......................................... Section 10.2(f)
Surviving Corporations......................................... Section 1.2
Target.......................................................... Section 2.5(d)
Tax Accrual..................................................... Section 2.5(e)
Taxes........................................................... Section 4.16.2
Territory....................................................... Section 13.1(a)
Third Party Claim............................................... Section 9.3.1
Trade Secrets................................................... Section 4.15
Underwriters.................................................... Section 8.1.1
Van Trigt Mergersub............................................. Introduction
Voting Agreement................................................ Introduction
Warburton Mergersub............................................. Introduction
(xii)
<PAGE>
MERGER AGREEMENT
----------------
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March __, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Pass Megersub LLC, a Delaware limited liability company and wholly owned
subsidiary of CenterPoint ("PASS MERGERSUB"), Holthouse Mergersub Inc., a
Delaware corporation and wholly owned subsidiary of CenterPoint ("HOLTHOUSE
MERGERSUB"), Carlin Mergersub Inc., a Delaware corporation and wholly owned
subsidiary of CenterPoint ("CARLIN MERGERSUB"), Van Trigt Mergersub Inc., a
Delaware corporation and wholly owned subsidiary of CenterPoint ("VAN TRIGT
MERGERSUB"), Christian Mergersub Inc., a Delaware corporation and wholly owned
subsidiary of CenterPoint ("CHRISTIAN MERGERSUB"), Hutchins Mergersub Inc., a
Delaware corporation and wholly owned subsidiary of CenterPoint ("HUTCHINS
MERGERSUB"), Shuman Mergersub Inc., a Delaware corporation and wholly owned
subsidiary of CenterPoint ("SHUMAN MERGERSUB"), Warburton Mergersub Inc., a
Delaware corporation and wholly owned subsidiary of CenterPoint ("WARBURTON
MERGERSUB"),(each of Holthouse Mergersub, Carlin Mergersub, Van Trigt Mergersub,
Christian Mergersub, Hutchins Mergersub, Shuman Mergersub and Warburton
Mergersub a "MERGERSUB" and, collectively, the "MERGERSUBS"), Holthouse Carlin &
Van Trigt LLP, a California limited liability partnership ("HCVT"), J. Pass LLC,
a Delaware limited liability company (the "LLC PARTNER"), the partners of HCVT
which are corporations (each a "CORPORATE PARTNER" and, collectively, the
"CORPORATE PARTNERS" and, together with Janet L. Pass (prior to the LLC Partner
Capitalization) and the LLC Partner (after the LLC Partner Capitalization), the
"PARTNERS"), the member of the LLC Partner (the "MEMBER") and the stockholders
of each of the Corporate Partners (each a "STOCKHOLDER" and, collectively, the
"STOCKHOLDERS"), in each case as such Partner, Member and Stockholder is
identified on Exhibit A to this Agreement.
---------
WITNESSETH:
WHEREAS, the Partners are the sole partners, beneficially and of record, of
HCVT;
WHEREAS, the Stockholders are the sole owners and holders of record of all
of the outstanding shares of capital stock of each of their respective Corporate
Partners, and the Member is the sole owner and holder of record of all of the
membership interests of the LLC Partner;
WHEREAS, HCVT engages directly, and indirectly through the Company
Subsidiaries in the business of providing accounting, tax and other related
services (such business provided by HCVT is referred to as the "BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) HCVT will form, transfer, assign and convey to a wholly
owned Delaware limited liability company ("NEWCO" or the "COMPANY") all of
HCVT's right, title and interest in and to
<PAGE>
all of its assets and liabilities (including without limitation of HCVT's
rights, duties and obligations under this Agreement) (the "ASSET TRANSFER"), (b)
the Partners will dissolve HCVT and, in exchange for each of their partnership
interests in HCVT (the "HCVT INTERESTS"), will receive allocated membership
interests in Newco (the " COMPANY INTERESTS" and, together with the HCVT
Interests, the "INTERESTS"), (c) the Company will cease to provide services
related to the practice of accounting that, pursuant to applicable laws and
regulations, may only be conducted by certified public accountants (the
"ATTESTATION PRACTICE"), (d) the Stockholders will cause the conversion of each
of their respective Corporate Partners from a professional corporation to a
business corporation by amending each of such Corporate Partner's Organizational
Documents (as defined in Section 4.1) such that it converts to a business
corporation (the "CONVERSION"), and (e) the Member shall transfer all of her
right, title and interest in and to the Interests to the LLC Partner (the "LLC
PARTNER CAPITALIZATION");
WHEREAS, the Boards of Directors of each of the Mergersubs, CenterPoint and
the Corporate Partners, and the Managing Partner of the LLC Partner, deems it
advisable and in the best interests of the shareholder and member to approve and
consummate the business combination transaction provided for herein in which (i)
each Mergersub would merge with the applicable Corporate Partner, with such
Corporate Partner being the surviving corporation in each such merger, and (ii)
the LLC Partner would merge with Pass Mergersub, with the LLC Partner being the
surviving limited liability company in such merger (collectively, the "MERGER").
For purposes of this Agreement, the term "APPLICABLE CORPORATE PARTNER" shall
mean the Corporate Partner the sole shareholder of which is the individual who
bears the same last name as is contained in the corporate name of a given
Mergersub;
WHEREAS, certain Stockholders and the Member have entered into a Voting
Agreement dated the date hereof (the "VOTING AGREEMENT") pursuant to which,
among other things, such Stockholders and the Member have agreed to vote the
shares of capital stock or membership interests, as applicable, of the Company
that such Stockholders and Member own or control, directly or indirectly, to
approve the Merger and the transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., The Reppond Company, Inc., Reppond Administrators, LLC, Verasource Excess
Risk Ltd., Berry, Dunn, McNeil & Parker, Chartered, Urbach Kahn & Werlin PC,
Self Funded Benefits, Inc. d/b/a Insurance Design Administrators, Grace &
Company, P.C., Simione, Scillia, Larrow & Dowling LLC, and Follmer Rudzewicz &
Co., P.C. (which companies, together with the Company, are collectively referred
to herein as the "FOUNDING COMPANIES"), which agreements provide for the merger
of a wholly owned subsidiary of CenterPoint with each such Founding Company (the
"OTHER MERGERS") simultaneously with the Merger; CenterPoint has provided a side
letter to each holder of equity interests of the Company to such effect;
2
<PAGE>
WHEREAS, simultaneously with the consummation of the Acquisition,
CenterPoint will close an initial public offering (the "IPO") of CenterPoint
Common Stock (as defined in Section 2.1); and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, (i) each Mergersub shall be merged with and into the applicable
Corporate Partner, the result of which will cause the separate corporate
existence of each such Mergersub to cease and the applicable Corporate Partner
to continue under the laws of the State of California, and (ii) the LLC Partner
shall be merged with and into Pass Mergersub, the result of which will cause the
separate existence of Pass Mergersub to cease and such LLC Partner to continue
under the laws of the State of Delaware. As promptly as possible on the Closing
Date, the parties shall cause the Merger to be completed by filing articles of
merger and certificates of merger, as applicable (the "MERGER DOCUMENTS"), with
the Secretary of State of the State of California, as provided in the California
Corporations Code, as amended (the "CCC"), and with the Secretary of State of
the State of Delaware, as provided in the General Corporation Law of the State
of Delaware (the "DGCL"). The Merger shall become effective (the "EFFECTIVE
TIME") upon the filing of the Merger Documents with the Secretary of State of
the State of California and the Secretary of State of the State of Delaware or
at such later time, contemporaneously with the closing of the IPO, as agreed by
the Stockholders and the Member (collectively, the "SELLERS") and CenterPoint
and specified in the Merger Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of each Mergersub shall cease and each Mergersub shall be merged with
and into the applicable Corporate Partner, with such Corporate Partner being the
surviving corporation in the Merger, (ii) the separate existence of the Pass
Mergersub shall cease and Pass Mergersub shall be merged with and into the LLC
Partner, with the LLC Partner being the surviving company in the Merger (the
Corporate Partners and the LLC Partner are sometimes collectively referred to
herein as the
3
<PAGE>
"SURVIVING CORPORATIONS"), (iii) the Articles of Incorporation and By-laws of
the Corporate Partners and the organizational documents of the LLC Partner shall
be amended in form and substance acceptable to CenterPoint and as specified in
the Merger Documents, (iv) the Merger shall have all the effects provided by
applicable law, and (v) each of the Partners shall be a wholly-owned subsidiary
of CenterPoint.
1.3 Directors and Officers of the Surviving Corporations. From and after
----------------------------------------------------
the Effective Time, the directors and officers of each Mergersub shall be the
directors and officers of the applicable Corporate Partner, and the manager of
Pass Mergersub shall remain the manager of Pass Mergersub, in each case until
their successors are duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holders thereof, (i) the
outstanding shares of capital stock of each Corporate Partner, consisting of
such number of shares of common stock, and at such par value per share, as is
set forth next to the name of each such Corporate Partner on Schedule 4.4 hereto
------------
(the "CORPORATE PARTNER STOCK"), and (ii) the membership interests of the LLC
Partner, consisting of such equity ownership as is set forth next to the name of
the LLC Partner on Schedule 4.4 hereto (the "LLC PARTNER INTERESTS"), shall be
------------
converted into the right to receive: (a) that number of shares of CenterPoint
common stock, par value $.01 per share (the "CENTERPOINT COMMON STOCK"),
determined in accordance with the formula in Schedule 2.1 (the "STOCK
------------
CONSIDERATION") and (b) the amount of cash in Schedule 2.1 (the "CASH
------------
CONSIDERATION"). The sum of the Cash Consideration and the Stock Consideration
is herein referred to as "BASIC PURCHASE CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of each Corporate
--------------
Partner held in treasury of such Corporate Partner shall be canceled and retired
and no payment shall be made in respect thereof.
2.1.3 Intentionally Omitted.
---------------------
2.1.4 Conversion of Mergersub Stock. At the Effective Time, (i) each
-----------------------------
share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of the applicable Corporate Partner, and (ii) each
one percent (1%) membership interest in an Pass Mergersub outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become a one percent (1%) membership
4
<PAGE>
interest of the LLC Partner. Such newly issued shares and membership interests
shall thereafter constitute all of the issued and outstanding capital stock and
membership interests of the Surviving Corporations.
2.1.5 Exchange of Certificates. At the Closing, the Stockholders
------------------------
shall deliver to CenterPoint the original Corporate Partner Stock certificates,
duly endorsed in blank by the Stockholders or accompanied by blank stock powers,
and the Member shall deliver to CenterPoint the original LLC Partner Interest
certificates, duly endorsed in blank by the Member or accompanied by blank
assignments separate from certificate or other conveyance documents in form and
substance acceptable to CenterPoint, in exchange for the allocated share of (a)
CenterPoint Common Stock certificates representing the Stock Consideration and
(b) payment of the Cash Consideration by certified check, cashier's check or
wire transfer of immediately available funds to a bank account or bank accounts
in the amounts and manner specified by the Seller Representative in a writing
delivered to CenterPoint at least three (3) business days prior to the Closing
Date. The shares represented by the Corporate Partner stock certificates so
delivered, and the membership interests represented by the LLC Partner Interest
conveyance documents so delivered, shall be canceled. Until surrendered as
contemplated by this Section 2.1.5, each certificate representing shares of
Corporate Partner Stock, and each document of conveyance representing LLC
Partner Interests, represents only the right to receive Basic Purchase
Consideration, as adjusted in accordance with this Article II.
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Basic Purchase Consideration shall be (a) reduced dollar-for-dollar to the
extent Net Working Capital on the Closing Date is less than the Target or
(b) increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will review a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within ten (10) days of receipt of such calculation,
CenterPoint will deliver to the Sellers' Representative a written report
indicating the amount and nature of any adjustment to the Basic Purchase
Consideration determined in accordance with Section 2.2.1 (the "INTERIM
-------------
ADJUSTMENT").
5
<PAGE>
2.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint, a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date one hundred
eighty (180) days from the Closing Date. CenterPoint will review such
calculation and any records, workpapers and other documents related
thereto. Within ten (10) days of receipt of such calculation, CenterPoint
will deliver to the Sellers' Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
2.2.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Sellers' Representative does not object (or otherwise respond) in writing
to the Final Adjustment report within thirty (30) days after its delivery,
the Final Adjustment shall automatically become final, binding and
conclusive on all parties hereto. Any objection to the Final Adjustment
report shall be in writing and shall specify the item or items in dispute
(each a "DISPUTED ITEM").
If the Sellers' Representative and CenterPoint are unable to resolve
any Disputed Item within thirty (30) days after notice from the Sellers'
Representative that a dispute exists (the "RESOLUTION PERIOD") then a
representative from the office of a nationally recognized accounting firm
(the "ARBITRATOR") selected jointly by CenterPoint and the Sellers'
Representative will arbitrate the dispute. The Sellers' Representative and
CenterPoint shall, within twenty (20) days after expiration of the
Resolution Period, present their respective positions with respect to any
Disputed Item to the Arbitrator together with such materials as the
Arbitrator deems appropriate. To the extent any Disputed Item is similar
to a disputed item under the Other Agreements, the Arbitrator shall
arbitrate the Disputed Item based on the submitted materials and without
regard to the disputed item under the Other Agreements. The Arbitrator
shall, after the submission of the materials, submit a written decision on
each Disputed Item to the Sellers' Representative and CenterPoint and such
determination shall be final and binding on the parties hereto. The
arbitration shall be conducted in Chicago, Illinois. The parties hereto
agree that the cost of the Arbitrator shall be borne by the non-prevailing
party or as determined by the Arbitrator.
2.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, the Sellers shall pay the amount of the shortfall to
CenterPoint. In the event Net Working Capital is greater than the Target,
CenterPoint shall pay the amount of the excess to the Sellers. Any payment
required to be made pursuant to this paragraph shall be made, within ten
(10) days of delivery of the report indicating any adjustment, by wire
transfer of immediately available funds to an account designated in writing
by the party that is to receive payment of such adjustment. In respect of
the Final Adjustment, the party making a payment required by such
adjustment shall make such payment within ten days after the
6
<PAGE>
Final Adjustment becomes final and shall receive credit for or return of
any amount previously paid in connection with the Interim Adjustment.
2.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write-off affecting AR and fees and expenses
receivable and unbilled fees and expenses of the Company incurred after Closing
with respect to the same client engagement shall be allocated ratably to the
pre-Closing and post-Closing periods.
2.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of one hundred eighty (180) days after the Closing Date, the Company
will assign the uncollected AR to the Sellers. Notwithstanding the foregoing,
the Company will retain the sole right to service, administer and collect the
uncollected AR in accordance with Section 2.4.
-----------
2.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees
and expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the
Closing Date, whenever calculated, equal to difference between: (i) the sum
of any AR, prepaid expenses and other current assets less (ii) the sum of
----
accounts payable, accrued current liabilities, the items listed on Schedule
--------
2.5, the Tax Accrual and the portion of employer-paid FICA attributable to
---
Medicare, payable in connection with deferred compensation and the Special
Bonus Plan. For purposes of this Section 2.5(b), the Special Bonus Plan
--------------
accrual shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan.
(d) "TARGET" means an amount equal to one percent (1%) of the
Company's net revenues for the four quarter period ending on the last day
of the calendar quarter prior to Closing.
7
<PAGE>
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan and (ii) the sum of 34%
plus the effective state tax rate on the Company (net of federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i).
-----------------
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Katten
Muchin & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
("CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HCVT
HCVT hereby represents and warrants to CenterPoint, as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter (as defined in Section 8.1.1) execute and deliver the Underwriting
-------------
Agreement related to the IPO and as of the Closing Date, as follows (provided,
--------
however, that all representations and warranties with respect to the Company
- -------
shall be as of the Closing Date):
4.1 Organization and Qualification. As of the date hereof, HCVT is a
------------------------------
limited liability partnership duly organized, validly existing and in good
standing under the laws of the State of California. As of the Closing,
following the transactions contemplated in Section 7.5 hereof, the Company will
-----------
be a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each Company Subsidiary (if
any) is duly organized, validly existing and in good standing under the laws of
the state of its organization set forth on Schedule 4.2. Each of HCVT, the
------------
Company and the Company Subsidiaries has the requisite power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted, and is qualified to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary. True, accurate and complete copies of HCVT's, the Company's and each
Company Subsidiary's Organizational Documents, in each case as in effect on the
date hereof, have heretofore been delivered to CenterPoint. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a
8
<PAGE>
general partnership, (c) the limited partnership agreement and the certificate
of limited partnership of any limited partnership, (d) the operating or limited
liability company agreement and certificate of formation of any limited
liability company, (e) the limited liability partnership agreement and the
certificate of limited liability partnership for any limited liability
partnership, (f) any charter or similar document adopted and filed in connection
with the creation, formation, organization or governance (as applicable) of any
Person and (g) any amendment to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which HCVT owns, directly or
indirectly, securities or other interests having the power to elect a majority
of such Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of such Person (each a
"COMPANY SUBSIDIARY" and, collectively, the "COMPANY SUBSIDIARIES"). Except as
set forth on Schedule 4.2, HCVT does not, directly or indirectly, own, of record
------------
or beneficially, or control any capital stock, securities convertible into
capital stock or any other equity interest in any Person.
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 HCVT has full right, power and authority to enter into this
Agreement and, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's Stockholders and Member, to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company has been duly authorized by
all necessary corporate action on the part of the Company, subject to the
approval of the Merger and the transactions contemplated hereby by the
Company's Partners. This Agreement has been duly executed and delivered by
HCVT, and, assuming the due authorization, execution and delivery hereof by
CenterPoint, constitutes a valid and legally binding agreement of HCVT,
enforceable against HCVT in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by HCVT does not
violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any claim,
lien, privilege, mortgage, charge, hypothecation, assessment, security
interest, pledge or other encumbrance, conditional sales contract, equity
charge, restriction or adverse claim of interest of any kind or nature
whatsoever (each a "LIEN" and, collectively, the "LIENS"), upon any of
the properties or assets of HCVT, the Company or any Company Subsidiary
under, any of the terms, conditions or provisions of (i) the Organizational
Documents of HCVT, the Company or any Company Subsidiary, (ii) following
completion of the actions contemplated by Section 7.5 hereof, any statute,
-----------
law, ordinance, rule, regulation,
9
<PAGE>
judgment, decree, order, injunction, writ, permit or license of any court
or federal, state, provincial, local or foreign government, or any
subdivision, agency or authority of any thereof ("GOVERNMENTAL AUTHORITY")
applicable to HCVT, the Company, any Company Subsidiary, or the Business,
properties or assets of HCVT, the Company or any Company Subsidiary, except
for those items discussed in (ii) above relating to regulating, licensing
or permitting the practice of public accountancy, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which HCVT, the Company or any Company Subsidiary is a party or by which
HCVT, the Company, any Company Subsidiary or any of the properties or
assets of HCVT, the Company or any Company Subsidiary may be bound or
affected. The consummation by HCVT and the Company of the transactions
contemplated hereby will not result in a violation, conflict, breach, right
of termination, creation or acceleration of Liens under the terms,
conditions or provisions of the items described in clauses (i) through
(iii) of the immediately preceding sentence, subject in the case of the
terms, conditions or provisions of the items described in clause (iii)
above, to obtaining (prior to the Closing Date) such consents required from
third parties set forth on Schedule 4.3.2 and except for those items
--------------
discussed in (ii) and (iii) above, relating to regulating, licensing or
permitting the practice of public accounting.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
are collectively, the "REGISTRATION STATEMENTS") with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by HCVT or the consummation by HCVT and the
Company of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not,
individually or in the aggregate, have a "COMPANY MATERIAL ADVERSE EFFECT,"
which, for purposes of this Agreement means a material adverse effect on
the operations, assets, condition (financial or other), operating results,
employee or client relations, or prospects of HCVT, the Company or any
Company Subsidiary.
4.4 Capitalization.
--------------
4.4.1 Each Partner's percentage ownership of HCVT and the Company is
truly and accurately set forth beside such Partner's name on Schedule 4.4.
------------
The authorized
10
<PAGE>
capital stock or other equity ownership interests of each of the Company
Subsidiaries, if any, and the number of such shares (or other equity
ownership interests) issued and outstanding is completely and accurately
set forth in Schedule 4.4. All of such issued and outstanding shares or
------------
other equity ownership interests of HCVT, the Company and each Company
Subsidiary are validly issued and are fully paid, nonassessable, free of
preemptive rights, and free and clear of all Liens. The Partners are all of
the partners of HCVT and own beneficially and of record all of the HCVT
Interests as set forth in Schedule 4.4, which Interests constitute all of
------------
the equity ownership interests in HCVT. As of the Closing Date, the
Partners will be all of the members of the Company and will own,
beneficially and of record, all of the Company Interests as set forth on
Schedule 4.4, which Interests will constitute all of the outstanding
------------
membership interests in the Company, free and clear of all Liens. HCVT or
the Company, as applicable, owns all shares (or other equity ownership
interests) of the Company's Subsidiaries as indicated on Schedule 4.4, in
------------
each case free and clear of all Liens, and HCVT or the Company, as
applicable, has good and marketable title to such shares (or other equity
ownership interests) of the Company Subsidiaries. All of such issued and
outstanding shares (or other equity ownership interests) are validly issued
and are fully paid, nonassessable and free of preemptive rights.
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or
sold, additional partnership interests (or other equity ownership
interests) in HCVT, the Company or any Company Subsidiary or obligating
HCVT, the Company or any Company Subsidiary to grant, extend or enter into
any such agreement or commitment or obligating HCVT, the Company or any
Company Subsidiary to convey or transfer any ownership interests in HCVT,
the Company or in any Company Subsidiary, as the case may be. As of the
Closing Date, there will be no voting trusts, proxies or other agreements
or understandings to which HCVT, the Company or any Company Subsidiary is a
party or is bound with respect to the voting of any equity interests of
HCVT, the Company or any Company Subsidiary.
4.5 Year 2000. To the Knowledge of HCVT, all of the computer software,
---------
computer firmware, computer hardware (whether general or special purpose), and
other similar or related items of automated, computerized, and/or software
system(s) that are used or relied on by HCVT, the Company or any Company
Subsidiary in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20/th/) and twenty-first (21/st/) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20/th/)
and twenty-first (21/st/) centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a Company Material
11
<PAGE>
Adverse Effect. Nothing in this Section 4.5 is intended or shall be construed as
-----------
a representation or warranty with respect to embedded systems.
4.6 Financial Statements. HCVT has previously furnished to CenterPoint
--------------------
copies of the audited consolidated balance sheets of HCVT as of December 31 in
each of the years 1997 and 1998 (the "LATEST BALANCE SHEET"), and the related
audited consolidated statements of income, Partners' equity and cash flow for
each of the years in the three (3)-year period ended December 31, 1998,
including all notes thereto (collectively, the "FINANCIAL STATEMENTS"). Each
of the Financial Statements is accurate and complete in all material respects,
is consistent with the books and records of HCVT and the Company Subsidiaries
(which, in turn, are accurate and complete in all material respects), and fairly
presents in all material respects the financial condition, assets and
liabilities of HCVT and the Company Subsidiaries as of its date and the results
of operations and cash flows for the periods related thereto, in each case in
accordance with generally accepted accounting principles, applied on a
consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither HCVT, the Company nor any Company Subsidiary had, as of the date of
- ---
the Latest Balance Sheet, nor has it incurred since that date, any liabilities
or obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing, any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by HCVT (net of any allowance for doubtful accounts determined in
accordance with HCVT's and any Company Subsidiaries' past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of HCVT, the Company and
- ---
the Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial
or otherwise), operating results, assets, liabilities, employee or client
relations or prospects of HCVT, the Company or any Company Subsidiary;
12
<PAGE>
(b) damage, destruction or loss of any property owned by HCVT, the
Company or any Company Subsidiary, or used in the operation of the
Business, whether or not covered by insurance, having a replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet, in the
aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandon ment, waiver, release or other disposition of any kind by HCVT, the
Company or any Company Subsidiary of any right, power, claim or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect HCVT, the Company, a Company Subsidiary or the Business;
(e) loan or advance by HCVT, the Company or any Company Subsidiary to
any Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of HCVT's or the Company's capital stock or other
equity interests or any direct or indirect redemption, purchase, or other
acquisition of HCVT's or the Company's or any Company Subsidiary's capital
stock or other equity interests, or the payment of principal or interest on
any note, bond, debt instrument or debt to any Affiliate (as defined in
Section 15.4) of HCVT, the Company or any Company Subsidiary, except
------------
bonuses and distributions to employees and Partners disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
13
<PAGE>
(i) issuance by HCVT, the Company or any Company Subsidiary of any
notes, bonds, or other debt securities or any equity securities or
securities convertible into or exchangeable for any equity securities;
(j) entry by HCVT, the Company or any Company Subsidiary into, or
amendment or termination of, any material commitment, contract, agreement,
or transaction, other than in the ordinary course of business and other
than expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of HCVT, the
Company or any Company Subsidiary that accounted for revenues during the
last twelve (12) months in excess of one percent (1%) of the consolidated
net revenues of HCVT, the Company and the Company Subsidiaries, or change
in the relationship of HCVT, the Company or any Company Subsidiary with any
client or Governmental Authority that is reasonably expected to adversely
affect HCVT, the Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by HCVT, the Company or any Company Subsidiary;
(m) discharge or satisfaction by HCVT, the Company or any Company
Subsidiary of any material liability or encumbrance or payment by HCVT, the
Company or any Company Subsidiary of any material obligation or liability,
other than current liabilities paid in the ordinary course of its business
consistent with past custom and practices;
(n) sale, lease or other disposition by HCVT, the Company or any
Company Subsidiary of any tangible assets (having an aggregate replacement
cost or fair market value in excess of five percent (5%) of the amount of
net property, plant and equipment shown on the Latest Balance Sheet) other
than in the ordinary course of business, or the sale, assignment or
transfer by HCVT, the Company or any Company Subsidiary of any trademarks,
service marks, trade names, corporate names, copyright registrations, trade
secrets or other intangible assets, or disclosure of any proprietary
confidential information of HCVT, the Company or any Company Subsidiary to
any Person other than an employee, agent, attorney, accountant or other
representative of HCVT or the Company that has agreed to maintain the
confidentiality of any such proprietary confidential information;
(o) capital expenditures or commitments therefor by HCVT, the Company
or any Company Subsidiary in excess of $50,000 individually or $100,000 in
the aggregate;
14
<PAGE>
(p) mortgage, pledge or other encumbrance of any asset of HCVT, the
Company or any Company Subsidiary or creation of any easements, Liens or
other interests against or on any of the Real Property (as defined in
Section 4.14.1);
--------------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which HCVT or the Company has
Knowledge, is reasonably expected to result in a Company Material Adverse
Effect.
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of HCVT, threatened against HCVT, the
Company or any Company Subsidiary, or with respect to the Merger, or with
respect to any Employee Plan, or any fiduciary of any such plan (or pending
or, to the Knowledge of HCVT, threatened against any of the officers,
directors, members, partners or employees of HCVT, the Company or any
Company Subsidiary with respect to its business or proposed business
activities), or to which HCVT, the Company or any Company Subsidiary is
otherwise a party, or that is reasonably expected to have a Company
Material Adverse Effect, before any court, or before any Governmental
Authority (each an "ACTION" and collectively, the "ACTIONS"); nor, to
the Knowledge of HCVT, is there any basis for any such Action.
4.10.2 Neither HCVT, the Company nor any Company Subsidiary is subject
to any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither HCVT, the Company nor any Company
Subsidiary, to HCVT's Knowledge, is otherwise exposed, from a legal
standpoint, to any liability or disadvantage that is reasonably expected to
result in a Company Material Adverse Effect, and neither HCVT, the Company
nor any Company Subsidiary is a party to any legal action to recover monies
due it or for damages sustained by it, other than collection of past due
charges for services rendered or expenses incurred by HCVT or the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation matters
-------------
to which HCVT, the Company or any Company Subsidiary was a party during the
five (5)-year period preceding the Closing Date, the date such litigation
was commenced and concluded,
15
<PAGE>
and the nature of the resolution thereof (including amounts paid in
settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules 4.11
------------------------------- ----
and 4.19, each of HCVT, the Company subsidiaries has complied in all material
----
respects with all laws, rules, regulations, writs, injunctions, decrees, and
orders (collectively, "LAWS") applicable to it or to the operation of the
Business, and has not received any notice of any alleged claim or threatened
claim, violation of or liability or potential responsibility under any such Law
which has not heretofore been cured and for which there is no remaining
liability and, to the Knowledge of HCVT, no event has occurred or circumstances
exist that (with or without notice or lapse of time) is reasonably expected to
constitute or result in a violation by HCVT, the Company or any Company
Subsidiary of any Law that gives rise to any liability on the part of HCVT, the
Company or any Company Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all licenses used by HCVT, the Company
-------- -------------
and the Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor, held by HCVT, the
Company or any Company Subsidiary and issued by, or submitted by HCVT, the
Company or any Company Subsidiary to, any Governmental Authority or other
Person, other than those relating to the practice of public accounting. Section
B of Schedule 4.12 lists all licenses, certificates, approvals, registrations
-------------
and other similar documents and authorizations, and applications therefor
relating to the practice of public accountancy (the "ACCOUNTING LICENSES") held
by the Company or a Company Subsidiary and issued by, or submitted by the
Company or any Company Subsidiary to any Governmental Authority or other Person.
All such Licenses and Accounting Licenses are valid, binding and in full force
and effect. Except as described on Schedule 4.12, the execution, delivery and
-------------
performance of this Agreement and the consummation of the transactions
contemplated hereby will not adversely affect any such Licenses. To the
Knowledge of HCVT, HCVT, the Company and the Company Subsidiaries have taken all
necessary action to maintain such Licenses. No loss or expiration of any such
License is pending or, to HCVT's Knowledge, threatened or reasonably
foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13,
-------------
are herein referred to as the "MATERIAL CONTRACTS"), as of or on the date
hereof, neither HCVT, the Company nor any Company Subsidiary is a party to or
bound by, any written or oral leases, agreements or other contracts or legally
binding contractual rights or contractual obligations or contractual commitments
(each a "CONTRACT" and collectively, the "CONTRACTS") relating to or in any
way affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which HCVT, the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements
16
<PAGE>
that may be terminated by HCVT, the Company or a Company Subsidiary on not
more than thirty (30) days' notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of HCVT, the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of HCVT, the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by HCVT, the Company or a Company Subsidiary upon ninety
(90) calendar days or less notice without penalty;
(i) any Contract under which HCVT, the Company or any Company
Subsidiary is (A) a lessee or sublessee of any machinery, equipment,
vehicle or other tangible personal property, or (B) a lessor of any
tangible personal property owned by HCVT, the Company or any Company
Subsidiary, in either case having an original purchase price or requiring
aggregate lease payments in excess of $50,000;
(j) any Contract under which HCVT, the Company or any Company
Subsidiary has granted or received a license or sublicense or under which
it is obligated to pay or has
17
<PAGE>
the right to receive a royalty, license fee or similar payment, in either
case which provides for payments over the life of such Contract in excess
of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by HCVT, the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the Real Property (including, without
limitation, brokerage or management services) involving aggregate future
payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting HCVT, the
Company or any Company Subsidiary from conducting business anywhere in the
United States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of HCVT, the Company or
any Company Subsidiary, which, if amended, modified or terminated as a
result of, relating to or in connection with a failure to provide prior
notice, or gain such consent or approval, would result in a Company
Material Adverse Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by HCVT, the Company or any
Company Subsidiary in excess of $25,000.
HCVT has provided CenterPoint with a true and complete copy of each written
Material Contract and a true and complete summary of each oral Material
Contract, in each case including all amendments or other modifications thereto.
Except as set forth on Schedule 4.13, each Material Contract is a valid and
-------------
binding obligation of, and enforceable in accordance with its terms against,
HCVT, the Company or a Company Subsidiary, as applicable, and, to the Knowledge
of HCVT, the other parties thereto, and is in full force and effect, subject
only to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and equitable principles. Except as set forth on
Schedule 4.13, HCVT, the Company or one of the
- -------------
18
<PAGE>
Company Subsidiaries, as applicable, has performed in all material respects all
obligations required to be performed by it as of the date hereof and will have
performed in all material respects all obligations required to be performed by
it as of the Closing Date under each Material Contract and neither HCVT, the
Company or Company Subsidiary, as applicable, nor, to the Knowledge of HCVT, any
other party to any Material Contract is in breach or default thereunder, and, to
the Knowledge of HCVT, there exists no condition which would, with or without
the lapse of time or the giving of notice, or both, constitute a breach or
default thereunder. HCVT has not been notified that any party to any Material
Contract intends to cancel, terminate, not renew, or exercise an option under
any Material Contract, whether in connection with the transactions contemplated
hereby or otherwise.
4.14 Properties.
----------
4.14 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which HCVT, the Company or any of the
Company Subsidiaries has an ownership interest (the "OWNED PROPERTY") and
all real property leased by HCVT and the Company (the "LEASED PROPERTY").
Except as lessee of Leased Property, neither HCVT, the Company nor any
Company Subsidiary is a lessee under or otherwise a party to any lease,
sublease, license, concession or other agreement, whether written or oral,
pursuant to which another Person has granted to HCVT, the Company or any
Company Subsidiary the right to use or occupy all or any portion of any
real property.
HCVT, the Company or one or more of the Company Subsidiaries has good
and marketable fee simple title to the Owned Property and, assuming good
title in the landlord, a valid leasehold interest in the Leased Property
(the Owned Property and the Leased Property being sometimes referred to
herein as "REAL PROPERTY"), in each case free and clear of all Liens,
assessments or restrictions (including, without limitation, inchoate liens
arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) Liens for current taxes not yet due, (c)
(i) minor imperfections of title, including utility and access easements
depicted on subdivision plats for platted lots that do not impair the
intended use of the property, if any, none of which materially impairs the
current operations of HCVT, the Company, any Company Subsidiary or the
Business, and (ii) zoning laws and other land use restrictions or
restrictive covenants that do not materially impair the present use of the
property subject thereto and (d) Liens, assessments and restrictions
pursuant to and by virtue of the terms of the lease of the Leased Property.
The Real Property constitutes all real properties reflected on the
Financial Statements or used or occupied by HCVT, the Company or any
Company Subsidiary in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
19
<PAGE>
(a) HCVT, the Company or one of the Company Subsidiaries is in
exclusive possession thereof and no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of HCVT, there is no
threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
-----------
(i) HCVT, the Company and/or one of the Company Subsidiaries is
in exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of HCVT, no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof; and
(ii) to the Knowledge of HCVT, no portion thereof is subject to
any pending condemnation proceeding or proceeding by any public or quasi-
public authority materially adverse to the Leased Property and there is no
threatened condemnation or proceeding with respect thereto.
4.12 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by HCVT or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, HCVT,
---------------
the Company or one of the Company Subsidiaries has good and marketable
title to, or a valid leasehold interest in, or valid license of, such
personal property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any 1 Liens (other than Liens
that are part of such leasehold or license), and each such asset is in
working order and has been maintained in a commercially reasonable manner
and does not contain, to the Knowledge of HCVT, any material defect.
Except as set forth in Schedule 4.14.2, no personal property (including,
---------------
without limitation, software and databases maintained on off-premises
computers) used by
20
<PAGE>
HCVT, the Company or any Company Subsidiary in connection with the
Business is held under any lease, security agreement, conditional sales
contract or other title retention or security arrangement or is located
other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discov eries that may be patentable (collectively, the
"PATENTS"), (ii) registered and unregistered trademarks, trade names, company
names, assumed business names and service marks (collectively, the "MARKS"),
(iii) copyrights (the "COPYRIGHTS"), and (iv) know how, trade secrets,
confidential information, client lists, software, technical information, data,
process technology, plans and drawings (collectively, the "TRADE SECRETS")
owned, used or licensed by HCVT, the Company or any Company Subsidiary
(collectively, the "INTELLECTUAL PROPERTY") are all those necessary to enable
HCVT, the Company and the Company Subsidiaries to conduct and to continue to
conduct the Business substantially as it is currently conducted. Schedule 4.15
-------------
contains a complete and accurate list of all material Patents, Marks and
Copyrights and a brief description of all material Trade Secrets owned, used by
or directly licensed to HCVT, the Company or any Company Subsidiary, and a list
of all material license agreements and arrangements with respect to any of the
Intellectual Property to which HCVT, the Company or any Company Subsidiary is a
party, whether as licensee, licensor or otherwise (collectively, the
"INTELLECTUAL PROPERTY LICENSES"). Except as set forth on Schedule 4.15, (i) all
-------------
of the Intellectual Property is owned, or to the Knowledge of HCVT used under a
valid Intellectual Property License, by HCVT, the Company or one of the Company
Subsidiaries, and is free and clear of all Liens and other adverse claims; (ii)
neither HCVT, the Company nor any Company Subsidiary has received any written
notice that it is or has infringed on, misappropriated or otherwise conflicted
with, or otherwise has Knowledge that it is infringing on, misappropriating, or
otherwise conflicting with the intellectual property rights of any third
parties; (iii) there is no claim pending or, to the Knowledge of HCVT,
threatened against HCVT or any Company Subsidiary with respect to the alleged
infringement or misappropriation by HCVT, the Company or Company Subsidiary, or
a conflict with, any intellectual property rights of others; (iv) the operation
of any aspect of the Business in the manner in which it has heretofore been
operated or is presently operated does not give rise to any such infringement or
misappropriation; and (v) there is no infringement or misappropriation of the
Intellectual Property by a third party or claim, pending or, to the Knowledge of
HCVT, threatened, against any third party with respect to the alleged
infringement or misappropriation of the Intellectual Property.
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of HCVT, the
-----------------
Company and the Company Subsidiaries has timely and accurately prepared and
filed or been included in or will timely and accurately prepare and file or
be included in all federal, state, local and foreign returns, declarations
and reports, information returns and statements (collectively, the
"RETURNS") for Taxes (as defined in Section 4.16.2) required to be filed by
--------------
or with respect to HCVT, the Company or the Company Subsidiaries before the
Closing Date, and has paid or caused to be paid, or has made adequate
provision or
21
<PAGE>
set up an adequate accrual or reserve for the payment of, all Taxes
required to be paid in respect of the periods for which Returns are due on
or prior to the Closing Date, and will establish an adequate accrual or
reserve for the payment of all Taxes payable in respect of the period,
including portions thereof, subsequent to the last of said periods required
to be so accrued or reserved, in each case in accordance with GAAP up to
and including the Closing Date. All such Returns are or will be true and
correct in all material respects. HCVT and the Company have delivered to
CenterPoint true and complete copies of all Returns referred to in the
first sentence of this Section 4.16.1 (including any amendments thereof)
--------------
for the five (5) most recent taxable years. Neither HCVT, the Company nor
any Company Subsidiary is delinquent in the payment of any Tax, and no
material deficiencies for any Tax, assessment or governmental charge have
been threatened, claimed, proposed or assessed. No waiver or extension of
time to assess any Taxes has been given or requested. No written claim, or
any other claim, by any taxing authority in any jurisdiction where HCVT,
the Company or any Company Subsidiary does not file Tax returns is pending
pursuant to which HCVT, the Company or Company Subsidiary, as applicable,
is or may be subject to taxation by that jurisdiction. HCVT's, the
Company's and the Company Subsidiaries' Returns were last audited by the
Internal Revenue Service or comparable state, local or foreign agencies on
the dates set forth on Schedule 4.16.1-2.
-----------------
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean all
taxes, charges, withholdings, fees, levies, penalties, additions, interest
or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither HCVT, the
---------------
Company nor any Company Subsidiary has or is reasonably expected to have
any liability (including contingent liability) whether direct or indirect
(and regardless of whether it would be derived from a current or former
Plan Affiliate, as defined in Section 4.17.5(c)) with respect to any of the
-----------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of "1 ERISA," including,
but not limited to, any medical plan, life insurance plan, short-term or
long-term disability plan or dental plan; (ii) any "employee pension
benefit plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat
---------
plan or deferred compensation plan or arrangement, nonqualified retirement
plan or arrangement, qualified defined contribution or defined benefit
arrangement; or
22
<PAGE>
(iii) any other benefit plan, policy, program, arrangement or agreement,
including, but not limited to, any material fringe benefit plan or program,
personnel policy, bonus or incentive plan, stock option, restricted stock,
stock bonus, holiday pay, vacation pay, sick pay, bonus program, service
award, moving expense, reimbursement program, tool allowance, safety
equipment allowance, deferred bonus plan, salary reduction agreement,
change-of-control agreement, employment agreement or consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
HCVT, the Company or any Company Subsidiary, each Employee Plan (i) has
been and is operated and administered in compliance with its terms; (ii)
has been and is operated, administered, maintained and funded in compliance
with the applicable requirements of the Code in such a manner as to
qualify, where appropriate and intended, for both Federal and state
purposes, for income tax exclusions, tax-exempt status, and the allowance
of deductions and credits with respect to contributions thereto; (iii)
where appropriate, has received a favorable determination letter from the
Internal Revenue Service upon which the sponsor of the plan may currently
rely; (iv) has been and currently complies in form and in operation in all
respects with all applicable requirements of ERISA and the Code and any
applicable reporting and disclosure requirements of Federal and state laws,
including but not limited to the requirement of Part 6 of subtitle B of
Title I of ERISA and Section 4980B of the Code. With respect to each
Employee Plan, no Person has: (i) entered into any nonexempt "prohibited
transaction," as such terms are defined in ERISA or the Code; (ii) breached
a fiduciary obligation or (iii) any liability for any failure to act or
comply in connection with the administration or investment of the assets of
such plan; and no Employee Plan has any liability and there is no liability
in connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by HCVT, the Company or one of the
Company Subsidiaries without incurring any such liability, or (iii) which
is adequately funded under a funding arrangement separate from the assets
of HCVT, the
23
<PAGE>
Company, any Company Subsidiary or a Plan Affiliate (and only
to the extent of such funding). Any contribution made or accrued with
respect to any Employee Plan is fully deductible by HCVT, the Company, a
Company Subsidiary or a Plan Affiliate.
4.17.4 Neither HCVT, the Company nor any Company Subsidiary or any
Plan Affiliate has ever sponsored, maintained, contributed to or been
required to contribute to, or has any liability, whether direct or
indirect, with respect to any Employee Plan which is or has ever been (i) a
"multiemployer plan" as defined in Section 4001 of ERISA, (ii) a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, (iii) a
"multiple employer plan" within the meaning of Code Section 413(c), (iv)
a "multiple employer welfare arrangement" within the meaning of Section
3(40) of ERISA, (v) subject to the funding requirements of Section 412 of
the Code or to Title IV of ERISA, or (vi) provides for post-retirement
medical, life insurance or other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1,
--------------
whether or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term
"PLAN AFFILIATE" shall mean any other Person with whom the First
Person constitutes or has constituted all or part of a controlled
group, or which would be treated or have been treated with the First
Person as under common control or whose employees would be or have
been treated as employed by the First Person, under Section 414 of
the Code or Section 4001(b) of ERISA and any regulations,
administrative rulings and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no,
------------- -------------
and within the last three (3) years neither HCVT, the Company nor any Company
Subsidiary has experienced any, strike, picketing, boycott, work stoppage or
slowdown or other similar labor dispute, union organizational activity,
allegation, charge or complaint of unfair labor practice, employment
discrimination or other matters relating to the employment of labor pending or,
to the Knowledge of HCVT, threatened against HCVT, the Company or any Company
Subsidiary, or that is reasonably expected to affect HCVT, the Company or any
Company Subsidiary; nor, to the Knowledge of HCVT, is there any basis for any
such allegation, charge, or complaint. There is no request for representation
pending and, to the Knowledge of HCVT, no question concerning representation has
been raised. There is no grievance pending that is reasonably expected to
result in a Company Material Adverse Effect nor any arbitration proceeding
arising out of a union agreement. To the Knowledge of HCVT, no employee who is
key to the Business and no group
24
<PAGE>
of employees has announced or otherwise indicated any plans to terminate
employment with HCVT, the Company or any Company Subsidiary. Each of HCVT, the
Company and any Company Subsidiary has complied with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. Neither HCVT, the Company nor any Company Subsidiary
is liable for any arrears of wages or any taxes or penalties for failure to
comply with any such laws, ordinances or regulations.
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of HCVT, the Company and the Company Subsidiaries is operating and has
operated its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
HCVT, without any duty to inquire (notwithstanding the definition of "Knowledge"
in Section 15.4), there are no Hazardous Materials (as defined later in this
------------
Section) present at, on or under any real property currently or formerly owned,
leased or used by HCVT, the Company or Company Subsidiary (other than those
present in office supplies and cleaning/maintenance materials) for which HCVT,
the Company or a Company Subsidiary is or is reasonably expected to be
responsible, or otherwise have any liability, for response costs under any
Environmental and Safety Requirements; (iii) each of HCVT, the Company and the
Company Subsidiaries has disposed of all waste materials generated by HCVT, the
Company or such Company Subsidiary at any real property currently or formerly
owned, leased or used by HCVT, the Company or Company Subsidiary in compliance
with applicable Environmental and Safety Requirements; and (iv) there are and
have been no facts, events, occurrences or conditions at or related to any real
property currently or formerly owned, leased or used by HCVT, the Company or
Company Subsidiary that is reasonably expected to cause or give rise to
liabilities or response obligations of HCVT, the Company or any Company
Subsidiary under any Environmental and Safety Requirements. The term "1
ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any federal, state and local laws,
statutes, regulations or other requirements relating to the protection,
preservation or conservation of the environment or worker health and safety, all
as amended or reauthorized. The term "HAZARDOUS MATERIALS" means "1 hazardous
substances," as defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., "1 hazardous
wastes," as defined by the Resource Conservation Recovery Act, 42 U.S.C. (S)
6901 et seq., asbestos in any form or condition, polychlorinated biphenyls and
any other material, substance or waste to which liability or standards of
conduct may be imposed under any Environmental and Safety Requirement.
4.20 Insurance. Each of HCVT, the Company and the Company Subsidiaries has
---------
in full force and effect commercially reasonable amounts of insurance to protect
HCVT's, the Company's and Company Subsidiaries' ownership or interest in, and
operation of, its assets against the types of liabilities, including
professional malpractice, customarily insured against in connection with
operations similar to the Business, and all premiums due on such policies have
been paid. To HCVT's Knowledge, each of HCVT, the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
-------------
correct list of all such insurance policies. Neither HCVT,
25
<PAGE>
the Company nor any Company Subsidiary has received any notice of cancellation
or intent to cancel or increase premiums with respect to such insurance
policies. Schedule 4.20 also contains a list of all claims or asserted claims
-------------
reported to insurers under such policies relating to the ownership or interest
in HCVT's, the Company's and the Company Subsidiaries' assets, or operation of
the Business, including all professional malpractice claims and similar types of
claims, actions or proceedings asserted against HCVT, the Company or any Company
Subsidiary arising out of the Business at any time within the past three (3)
years.
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, no Partner, Seller, Affiliate of a Partner or Seller or Affiliate of
HCVT, the Company or any Company Subsidiary (i) possesses, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any Person that is a client, supplier, customer, lessor, lessee or
competitor of HCVT, the Company or any Company Subsidiary, (ii) owns, directly
or indirectly, in whole or in part, or has any interest in any tangible or
intangible property used in the conduct of the Business, or (iii) is a party to
an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Company or any Company Subsidiary other than
through a customary employment relationship or through distributions made with
respect to the HCVT Interests or equity interests in any Company Subsidiary
(provided such distributions have been made consistent with HCVT's the Company's
or any Company Subsidiary's, as the case may be, past custom and practices).
Schedule 4.21 sets forth the parties to and the date, nature and amount of each
- -------------
transaction during the last five years involving the transfer of any cash,
property or rights to or from HCVT, the Company or any Company Subsidiary from,
to or for the benefit of any Affiliates (other than customary employment
relationships, or distributions made with respect to the HCVT Interests)
("AFFILIATE TRANSACTIONS") and any existing commitments of HCVT, the Company or
any Company Subsidiary to engage in the future in any Affiliate Transactions.
Except as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of HCVT, the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of HCVT, the
---------------------- -------------
Company and each Company Subsidiary representing one percent (1%) or more of
HCVT's consolidated net revenues for the twelve (12) months ended December 31,
1998. Except as set forth on Schedule 4.22, since December 31, 1998, none of
-------------
such clients has canceled or substantially reduced its business with HCVT, the
Company or Company Subsidiary, as applicable, nor are any of such clients
threatening to do so. To the Knowledge of HCVT, no client that accounts for one
percent (1%) or more of HCVT's or the Company's consolidated net revenue or
supplier of HCVT, the Company or any Company Subsidiary, will cease to do
business with, HCVT, or substantially reduce its business with, HCVT, the
Company or Company Subsidiary, as applicable, after the consummation of the
transactions contemplated hereby.
26
<PAGE>
4.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set
forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of HCVT, the Company or any Company Subsidiary since the date of the
Latest Balance Sheet, other than in HCVT's or the Company's ordinary course of
business, consistent with past custom and practices, nor since that date has
there been any oral or written promise to employees, partners, members or owners
of any bonus or increase in compensation, other than in HCVT's or the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of HCVT, the Company or any Company Subsidiary.
Schedule 4.23 includes the date and amount of the last bonus or similar
- -------------
distribution or increase in compensation for each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which HCVT, the Company or any Company Subsidiary has an account or safe
deposit box, the number of each such account or box, and the names of all
Persons authorized to draw thereon or to have access thereto.
4.25 Professional Credentials. Each Seller is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which HCVT, the Company or any Company Subsidiary maintains an office, and there
are no disciplinary proceedings pending or threatened against HCVT, the Company,
any Company Subsidiary, any of the Sellers or any of the Partners by any
Governmental Authority or self-regulatory organization regulating, licensing or
permitting the practice of public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
HCVT, contained in this Agreement or in any of the certification, schedules,
lists, documents, exhibits, or other instruments delivered or to be delivered to
CenterPoint as contemplated by any provision hereof contains any untrue
statement regarding a material fact or omits to state a material fact necessary
in order to make the statements made herein or therein not misleading. To the
Knowledge of HCVT, there is no fact or circumstance that has not been disclosed
to CenterPoint herein that has or is reasonably expected to have a Company
Material Adverse Effect.
27
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
5.1 Several Representations and Warranties. Each Seller (including each
--------------------------------------
Stockholder with respect to any representation or warranty regarding the
applicable Corporate Partner, and the Member with respect to any representation
or warranty regarding her LLC Partner), severally and not jointly, hereby
represents and warrants to CenterPoint as of the date hereof and, subject to
Section 7.3, as of the date on which CenterPoint and the lead Underwriter
- -----------
execute and deliver the Underwriting Agreement related to the IPO, and as of the
Closing Date, as follows (provided, however, that all representations and
-------- -------
warranties with respect to the Company shall be as of the Closing Date):
5.1.1 Capitalization. Each Partner owns beneficially and of record,
--------------
and has good and marketable title to, all of the Interests as set forth
opposite the name of such Partner in Schedule 4.4. Each Stockholder owns
------------
beneficially and of record, and has good and marketable title to, all of
the issued and outstanding shares of the Corporate Partner Stock as set
forth opposite the name of such Stockholder in Schedule 4.4. Each Member
------------
owns beneficially and of record, and has good and marketable title to all
of the LLC Partner Interests as set forth opposite the name of such Member
in Schedule 4.4. Such Interests, Corporate Partner Stock, and LLC Partner
------------
Interests are free and clear of all Liens. Each Partner, Stockholder and
Member has good and marketable title to such Interests, Corporate Partner
Stock, and LLC Partner Interests, respectively. At the Closing as provided
in this Agreement, CenterPoint will acquire good and valid title to the
Interests, Corporate Partner Stock, and LLC Partner Interests,
respectively, free and clear of any Lien other than any Lien created by
CenterPoint.
5.1.2 Authority. Each Partner and Seller has full right, capacity,
---------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by such Partner and Seller, and, assuming the due
authorization, execution and delivery hereof by CenterPoint, constitutes a
valid and legally binding agreement of such Partner and Seller, enforceable
against such Partner and Seller in accordance with its terms, except that
such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
5.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by each Partner and Seller does not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
28
<PAGE>
creation of any Lien upon any of the properties or assets of HCVT, the
Company, any Partner, any LLC Partner or any Company Subsidiary under, any
of the terms, conditions or provisions of (i) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or
license of any Governmental Authority applicable to such Partner or Seller,
except for those items relating to regulating, licensing or permitting the
practice of public accountancy or (ii) other than those licenses,
franchises, permits, concessions or instruments of any Governmental
Authority, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which such Partner or Seller is a
party or by which such Partner or Seller may be bound or affected. The
consummation by each Partner or Seller of the transactions contemplated
hereby will not result in a violation, conflict, breach, right of
termination, creation or acceleration of Liens under the terms, conditions
or provisions of the items described in clauses (i) and (ii) of the
immediately preceding sentence subject to obtaining (prior to the Closing
Date) the consents set forth on Schedule 4.3.2, except for those items
--------------
described above relating to regulating, licensing or permitting the
practice of public accountancy.
5.1.4 Approvals. To the Knowledge of the Partners and the Sellers,
---------
and except with respect to (i) the filing of the Registration Statements
with the SEC pursuant to the 1933 Act, the declaration of the effectiveness
of the Registration Statements by the SEC and filings, if required, with
various state securities or "1 blue sky" authorities, (ii) any filing
which may be required under the HSR Act, (iii) any filing which may be
required by any Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy, no
declaration, filing, or registration with, or notice to, or authorization,
consent or approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement by such Partner or Seller or the
consummation by such Partner or Seller of the transactions contemplated
hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Partner or Seller, threatened against such Partner or
Seller or relating to (i) the transactions contemplated by this Agreement,
(ii) any action taken by such Partner or Seller or contemplated by such
Partner or Seller in connection with the consummation by such Partner or
Seller of the transactions contemplated hereby or (iii) practice of public
accounting by such Partner or Seller.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Corporate Partner Stock owned by
such Stockholder, Interests owned by such Partner, or LLC Partner Interests
owned by such Member, or obligating such Stockholder, Partner or Member to
grant, extend or enter into any such agreement or commitment or obligating
29
<PAGE>
such Stockholder, Partner or Member to convey or transfer any Corporate
Partner Stock, Interest or LLC Partner Interest. As of the Closing Date,
there will be no voting trusts, proxies or other agreements or
understandings to which any Seller or Partner is a party or is bound with
respect to the voting of any shares of capital stock or other equity
interests of any Partner or Interests of HCVT or the Company other than the
Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Seller or Partner contained in this Agreement or any of the written
statements or certificates furnished at or prior to the Closing by or on
behalf of such Seller or Partner to CenterPoint or its representatives in
connection herewith or pursuant hereto, contains any untrue statement of a
material fact, or omits or will omit to state any material fact required to
make the statements contained herein or therein not misleading.
5.1.8 HCVT Representations and Warranties. To such Partner's or
-----------------------------------
Seller's actual knowledge, the representations and warranties of HCVT set
forth in Article IV of this Agreement are true and correct.
----------
5.1.9 Partner Assets and Liabilities. Except as set forth on
------------------------------
Schedule 5.1.9, each Partner (i) does not own, occupy, lease or use, and
--------------
never has owned, occupied, leased or used, any assets or property other
than its respective Interest in HCVT and the Company identified on Schedule
--------
4.4; (ii) is not, and never has been, a party to or bound by, nor do there
---
exist, any written or oral leases, agreements or other contracts or legally
binding contractual rights or contractual obligations or contractual
commitments relating to or in any way affecting such Partner; (iii) has no,
and never has had any, debts, liabilities or obligations of any nature
(whether known or unknown, accrued, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise); (iv) does not, and never
has, engaged in any transaction or activity other than acquiring and
holding its respective Interest in the Company identified on Schedule 4.4;
------------
and (v) does not have, and has never had, any employees other than the
owners of the Corporate Partner.
5.2 Joint and Several Representations and Warranties. The Sellers and the
------------------------------------------------
Partners jointly and severally represent and warrant to CenterPoint that (i) the
HCVT Interests (as of the date hereof) and the Company Interests (as of the
Closing Date) are truly and accurately set forth on Schedule 4.4 attached
------------
hereto, and such Interests are or will be validly issued and fully paid,
nonassessable and free of preemptive rights, (ii) the authorized capital stock
of each Corporate Partner consists of such number of shares as are set forth on
Schedule 4.4 attached hereto, including such number of shares as are issued and
- ------------
outstanding, all of which are validly issued and are fully paid, nonassessable
and free of preemptive rights, and (iii) the membership interests of each LLC
Partner consists of such equity ownership as is set forth on Schedule 4.4
------------
attached hereto, all of which interests are validly issued and fully paid, non-
assessable and free of preemptive rights.
30
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to HCVT, the Partners and the Sellers
as of the date hereof and, subject to Section 7.3, as of the date on which
-----------
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO, and as of the Closing Date, as follows:
6.1 Organization And Qualification. Each of CenterPoint and each
------------------------------
Mergersub is a corporation, and Pass Mergersub is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted. True, accurate and complete copies of each of CenterPoint's
and Mergersubs' Certificate of Incorporation and By-laws, as in effect on the
date hereof, including all amendments thereto, have heretofore been delivered to
the Sellers and HCVT.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in Form S-1 will be issued and outstanding, and 10,000,000
shares of Preferred Stock, par value $0.01 per share, none of which will be
issued and outstanding. Other than (i) shares of CenterPoint Common Stock
issued pursuant to a split of the shares outstanding as of the date of this
Agreement, (ii) shares of CenterPoint Common Stock issued in accordance
with the Acquisition and the Other Acquisitions, and (iii) shares of
CenterPoint Common Stock that may be issued to new members of management in
lieu of shares previously issued to current members of management, but
which will not increase the number of shares of outstanding CenterPoint
Common Stock, no shares of CenterPoint Common Stock will be issued prior to
the consummation of the IPO. Each Mergersub's authorized capital stock
consists solely of 1,000 shares of common stock, par value $.01 per share
(collectively, the "MERGERSUB STOCK"), all of which are issued and
outstanding, are owned free and clear of any Liens by CenterPoint, and are
fully paid, nonassessable and free of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating
31
<PAGE>
CenterPoint to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Sellers in the Acquisition will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of the capital
---------------
stock of Professional Service Group, Inc., a Delaware corporation, and the
Mergersubs and Pass Mergersub (and similar entities created for similar purposes
with respect to the Other Agreements), CenterPoint has no subsidiaries and it
does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint, Pass Mergersub and each Mergersub has all
requisite right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been
approved by the Board of Directors of CenterPoint, Pass Mergersub and each
Mergersub , and no other corporate proceedings on the part of CenterPoint,
Pass Mergersub or any Mergersub are necessary to authorize the execution
and delivery of this Agreement or the consummation by CenterPoint, Pass
Mergersub and each Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint, Pass
Mergersub and each Mergersub and, assuming the due authorization, execution
and delivery hereof by the Company, the Sellers and the Partners,
constitutes a valid and legally binding agreement of CenterPoint, Pass
Mergersub and each Mergersub, enforceable against CenterPoint, Pass
Mergersub and each Mergersub in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint,
Pass Mergersub and each Mergersub does not violate, conflict with or result
in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any Lien upon any of the properties or assets of
CenterPoint, Pass Mergersub or any Mergersub under any of the terms,
conditions or provisions of (i) the Certificate of Incorporation or By-laws
of CenterPoint, any Mergersub or with the Certificate of Formation or
operating agreement of Pass Mergersub, (ii) any statute, law,
32
<PAGE>
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or Governmental Authority applicable to
CenterPoint, Pass Mergersub or any Mergersub or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CenterPoint, Pass
Mergersub or any Mergersub is now a party or by which CenterPoint, Pass
Mergersub or any Mergersub or any of their respective properties or assets,
may be bound or affected, except those items described in clause (ii)
relating to regulating, licensing or permitting the practice of public
accountancy. The consummation by CenterPoint, Pass Mergersub and each
Mergersub of the transactions contemplated hereby will not result in any
violation, conflict, breach, right of termination or acceleration or
creation of Liens under any of the terms, conditions or provisions of the
items described in clauses (i) through (iii) of the immediately preceding
sentence, subject, in the case of the terms, conditions or provisions of
the items described in clause (ii) above, to obtaining (prior to the
Closing Date) CenterPoint Required Statutory Approvals and except for those
items described in (ii) above relating to regulating, licensing or
permitting the practice of public accounting.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "1 blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing which
may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy (the filings and approvals referred to in clauses (i) through
(iii) are collectively referred to as the "1 CENTERPOINT REQUIRED STATUTORY
APPROVALS") no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by CenterPoint, Pass Mergersub or any Mergersub or the consummation by
CenterPoint, Pass Mergersub or any Mergersub of the transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or
obtained, as the case may be, are not reasonably expected to, in the
aggregate, have a material adverse effect on the business operations,
properties, assets, condition (financial or other), results of operations
or prospects of CenterPoint and its subsidiaries, taken as a whole (a "
CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint, Pass Mergersub nor any Mergersub has incurred any
- ---
liabilities or obligations (whether known or unknown, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated or otherwise) of any nature.
Except as set forth on Schedule 6.5, neither CenterPoint, Pass Mergersub nor any
------------
Mergersub has engaged in any business activities of any type or kind whatsoever,
nor entered into any agreements nor is it bound by any obligation or
undertaking.
33
<PAGE>
6.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint, Pass Mergersub or any Mergersub, before any court,
Governmental Authority or any arbitrator that seek to restrain or enjoin the
consummation of the Acquisition or the IPO or which could reasonably be
expected, either alone or in the aggregate with all such claims, actions or
proceedings, to have a CenterPoint Material Adverse Effect. CenterPoint is not
subject to any unsatisfied or continuing judgment, order or decree of any court
or Governmental Authority. CenterPoint is not a party to any legal action to
recover monies due it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint Pass Mergersub
-------------------------------
and each Mergersub has complied in all material respects with all Laws
applicable to it, and has not received any notice of any alleged claim or
threatened claim, violation of or liability or potential responsibility under
any such Law which has not heretofore been cured and for which there is no
remaining liability and, to the Knowledge of CenterPoint, Pass Mergersub or any
Mergersub, no event has occurred or circumstances exist that (with or without
notice or lapse of time) may constitute or result in a violation by CenterPoint,
Pass Mergersub or any Mergersub of any Law or may give rise to any liability on
the part of CenterPoint, Pass Mergersub or any Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint, Pass Mergersub or any Mergersub set forth in this Agreement or in
any of the certificates, schedules, lists, documents, exhibits, or other
instruments delivered or to be delivered to the Sellers or HCVT as contemplated
by any provision hereof contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to HCVT herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by HCVT, the Company and Partners Prior to the
------------------------------------------------------------------
Effective Time.
- --------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, HCVT and
each Partner shall, and shall cause the Company and each Company Subsidiary
to:
34
<PAGE>
(a) in all material respects conduct the Business in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents except as
contemplated by Section 7.5 hereof, (ii) split, combine or reclassify
-----------
its equity ownership or outstanding capital stock or (iii) declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise except dividends or distributions which (A) are
consistent with past customs and practices, (B) do not result in a
Company Material Adverse Effect and (C) as set forth on Schedule
--------
7.5.3;
-----
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
35
<PAGE>
(g) except as contemplated by Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of
HCVT, the Company or any Company Subsidiary, as applicable, (ii) pay
or agree to pay any additional pension, retirement allowance or other
employee benefit under any Employee Plan to any such Person, whether
past or present, (iii) enter into any new employment, severance,
consulting, or other compensation agreement with any of its existing
employees, partners, members or owners, (iv) amend or enter into a new
Employee Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or
indirectly, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial
portion of the assets of, or by any other manner, any businesses or
any Person or division thereof or otherwise acquire or agree to
acquire any assets in each case which are material to it other than in
the ordinary course of business in a manner consistent with past
customs and practices;
(j) other than as set forth on Schedule 7.5.3, not sell, lease,
--------------
license, encumber or otherwise dispose of, or agree to sell, lease,
license, encumber or otherwise dispose of, any of its assets other
than in the ordinary course of business, consistent with past customs
and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual
course and consistent with past custom and practices.
7.1.2 Prior to the Closing the Sellers shall have (a) formed a
separate Person ("ATTEST ENTITY") pursuant to Organizational Documents
satisfactory to HCVT and CenterPoint and (b) used its diligent efforts to
have secured, or have caused the Attest Entity to have secured, all
licenses, permits, approvals and authorizations necessary to conduct the
Attestation Practice in accordance with applicable laws and regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Partners, the Sellers, nor
HCVT shall take, or permit
36
<PAGE>
the Company or any Company Subsidiary to take, any action that would or is
reasonably likely to result in any of the representations or warranties of
the Partners, the Sellers and HCVT set forth in this Agreement being untrue
or in any of the conditions to the consummation of the transactions
contemplated hereunder set forth in Article X (other than (Section
---------
10(i))not being satisfied.
7.1.4 Prior to the Closing, (i) the Company, the Partners and/or the
Sellers, as applicable, shall terminate, without any liability to the
Company or the Company Subsidiaries, all agreements relating to the voting
of the Company's Interests, and all agreements and obligations of the
Company and the Company Subsidiaries relating to borrowed money and/or
involving payments to or for the benefit of a Partner or Seller or former
Partner or Seller of the Company, or an Affiliate or family member of a
Partner or Seller or former Partner or Seller of the Company, including
without limitation those set forth on Schedule 7.1.4, but excluding (A)
--------------
debt reflected on Schedule 2.1 as Debt Assumed By CenterPoint, (B) items
------------
reflected on Schedule 2.5, (C) to the extent such agreements and
------------
obligations result in Indirect Costs under the Incentive Compensation
Agreement, and (D) items approved by CenterPoint in writing, and (ii)
notwithstanding anything contained in this Section 7.1 to the contrary, the
-----------
Company will transfer and distribute the Retained Assets listed on Schedule
--------
7.5.3 the ("RETAINED ASSETS") to the Persons listed on Schedule 7.5.3,
----- --------------
subject to all liabilities and obligations of any nature (whether known or
unknown, accrued, absolute, contingent, direct, indirect, perfected,
inchoate, unliquidated or otherwise) relating to the Retained Assets
(collectively, the "RETAINED LIABILITIES"); provided, however, that prior
-------- -------
to the Closing, the Company and the Sellers shall obtain novations or other
releases or agreements discharging the Company from all Retained
Liabilities (so that the respective Retained Liabilities will become direct
liabilities and obligations of the assignee), and provide copies thereof to
CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, HCVT, the Company, the Sellers and the
Partners shall (i) not, and HCVT and the Company shall use its diligent
efforts to cause the Company Subsidiaries and any officer, director or
employee of, or any attorney, accountant, investment banker, financial
advisor or other agent retained by HCVT, the Company or any Company
Subsidiary not to, initiate, solicit, negotiate, encourage, or provide non-
public or confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business and properties of HCVT,
the Company or any Company Subsidiary, or any capital stock or other equity
interest of HCVT, the Company or any Company Subsidiary, whether by merger,
purchase of assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture or
partnership or similar arrangement, and (ii) promptly advise CenterPoint of
the terms of any communications HCVT, the Company, the Sellers or the
Partners may receive or
37
<PAGE>
become aware of relating to any bid for part or all of HCVT, the Company,
the Partners or any Company Subsidiary.
(b) The Company, HCVT, the Sellers and the Partners (i) acknowledge
that a breach of any of their covenants contained in this Section 7.2 will
-----------
result in irreparable harm to CenterPoint which will not be compensable in
money damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to Section 7.3. In the event that (i) one of the other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but HCVT, the Company, the Sellers and the Partners do
not, the Company, HCVT or a majority of the Sellers may terminate this Agreement
at any time prior to the Closing Date. In the event that (i) HCVT, the Company,
the Sellers or the Partners seeks to amend or supplement a Schedule pursuant to
this Section 7.3, (ii) such amendment or supplement constitutes or reflects a
-----------
Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4 or
------------ ------------
Schedule 8.8, and (iii) CenterPoint and a majority of the Founding Companies do
- ------------
not consent to such amendment or supplement, this Agreement shall be deemed
terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to HCVT's, the Company's or any Partner's
breach of a representation or warranty as of the date of this Agreement in which
case HCVT or the Company shall pay to CenterPoint, as CenterPoint's exclusive
remedy (notwithstanding anything to the contrary) and as liquidated damages, and
not as a penalty, an amount equal to $2,000,000 (the "LIQUIDATED DAMAGES
AMOUNT"). HCVT agrees that in the case of such termination CenterPoint and the
Founding Companies (excluding
38
<PAGE>
the Company) will sustain immediate and irreparable economic harm and loss of
goodwill and that actual losses suffered by such parties will be difficult, if
not impossible, to ascertain, but the Liquidated Damages Amount set forth herein
is reasonable and has been arrived at after a good faith effort to estimate such
losses. Payment of the Liquidated Damages Amount shall be made in cash to
CenterPoint within thirty (30) days of a termination pursuant to this Section
-------
7.3 in connection with an amendment of or supplement to a Schedule relating to a
- ---
breach of a representation or warranty as of the date of this Agreement.
7.4 Corporate Partner Stockholder Meeting; LLC Partner Member Meeting.
-----------------------------------------------------------------
Each Partner shall take all action in accordance with applicable Laws and its
Organizational Documents necessary to duly call, give notice of, convene and
hold a meeting of the Partner's stockholders or member, as applicable, to be
held on the earliest practicable date determined in consultation with
CenterPoint to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby. Each Partner shall solicit the approval
of the Merger, this Agreement and the transactions contemplated hereby by the
Partner's stockholders or member, and each Partner's governing body shall
recommend approval of the Merger, this Agreement and the transactions
contemplated hereby by such Partner's stockholders or member, as applicable.
7.5 Pre-Closing Transactions.
------------------------
7.5.1 Conversion to Business Corporation; LLC Partner Capitalization.
--------------------------------------------------------------
Prior to the Closing but effective only if, as and when the Closing occurs,
(i) each Stockholder shall cause each applicable Corporate Partner to
complete the Conversion, and (ii) the Member shall cause the LLC Partner
Capitalization to occur, in each case pursuant to applicable law and
present such evidence of the Conversion and LLC Partner Capitalization at
the Closing, as CenterPoint may require.
7.5.2 Asset Transfer. Prior to the Closing, in addition to those
--------------
actions specified to be taken in Section 7.1.2 and 7.5.1, the Partners and
------------- -----
the Sellers shall (i) cause HCVT to form the Company pursuant to
Organizational Documents acceptable to CenterPoint and HCVT, (ii) cause
HCVT to complete the Asset Transfer to the Company (including, without
limitation, obtaining any necessary third party consents to such Asset
Transfer), and (iii) dissolve HCVT.
7.5.3 Retained Assets. Notwithstanding the foregoing, all of the
---------------
Retained Assets set forth on Schedule 7.5.3 shall be transferred by HCVT,
--------------
the Company or a Corporate Partner, as applicable, to a Seller (or a
designee of the Sellers' Representative) prior to Closing, in each case as
such asset, transferor and transferee is identified on Schedule 7.5.3.
--------------
39
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1.1 The Sellers shall and shall cause HCVT, the Company and the
Company Subsidiaries to afford to CenterPoint and its accountants, counsel,
financial advisors and other representatives, including without limitation
the underwriters engaged in connection with the IPO (each an " UNDERWRITER"
and collectively, the "UNDERWRITERS") and their counsel (collectively, the
"CENTERPOINT REPRESENTATIVES"), and to the other Founding Companies and
their accountants, counsel, financial advisors and other representatives,
and CenterPoint shall afford to the Partners, the Sellers, HCVT and the
Company and their accountants, counsel, financial advisors and other
representatives (the "COMPANY REPRESENTATIVES"), upon reasonable notice,
full access during normal business hours throughout the period prior to the
Closing Date to all of its respective properties, books, contracts,
commitments and records (including, but not limited to, financial
statements and Tax Returns) and, during such period, shall furnish promptly
to one another all due diligence information requested by the other party.
CenterPoint shall hold and shall use its best efforts to cause the
CenterPoint Representatives to hold, and the Partners, the Sellers, HCVT
and the Company shall hold and shall use their best efforts to cause the
Company Representatives to hold, in strict confidence all non-public
information furnished to it in connection with the transactions
contemplated by this Agreement, except that each of CenterPoint, the
Partners, the Sellers, HCVT and the Company may disclose any information
that it is required by law or judicial or administrative order to disclose.
In addition, CenterPoint will cause each of the other Founding Companies
and their members and stockholders to enter into a provision similar to
this Section 8.1 requiring each such Founding Company to keep confidential
-----------
any information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or HCVT based on the information in such material shall be
destroyed (and CenterPoint and HCVT shall use their respective reasonable
best efforts to cause their advisors and representatives to similarly
destroy such documents, memoranda and notes), and such destruction (and
reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction.
40
<PAGE>
8.2 Registration Statement.
----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, HCVT, the Company, the Sellers and the Partners shall
promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with making such
filings. All information provided and to be provided by CenterPoint and the
Sellers, Partners, HCVT, and the Company, respectively, for use in the
Registration Statements shall be true and correct in all material respects
without omission of any material fact which is required to make such
information not false or misleading as of the date thereof and in light of
the circumstances under which given or made. HCVT, the Partners, and the
Sellers agree promptly to advise CenterPoint if at any time during the
period in which a prospectus relating to the offering or the Merger is
required to be delivered under the Securities Act, any information
contained in the prospectus concerning the Company, HCVT, the Company
Subsidiaries, the Sellers or the Partners becomes incorrect or incomplete
in any material respect, and to provide the information needed to correct
such inaccuracy or remedy such incompletion.
8.2.2 CenterPoint agrees that it will provide to the Sellers' counsel
copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration
of the effectiveness of or (iii) circulate any prospectus forming a part
of, the Registration Statements (or any amendment thereto) unless Sellers'
counsel (x) have had at least two (2) days to review the revised
information contained therein (which changes shall be highlighted by
computer generated marks indicating the additions and deletions made from
the prior draft reviewed by Sellers' counsel) and (y) have not objected to
the substance of the information contained therein. Any objections posed
by the Sellers or their counsel shall be in writing and state with
specificity the material in question, the reason for the objection, and the
Sellers' proposed alternative. If the objection is founded upon a rule
promulgated under the Securities Act, the objection shall cite the rule.
Notwithstanding the foregoing, during the five (5) business days
immediately preceding the date scheduled for the filing of the Registration
Statements and any amendment thereto, the Sellers' counsel shall be
obligated to respond to proposed changes electronically transmitted to them
within two (2) hours from the time the proposed changes (in the case of the
initial filing of the Registration Statements, from the last circulated
draft of the Registration Statements; and, in the case of any subsequent
filing of the Registration Statements or any amendment thereof, from the
most recently filed Registration Statement or amendment thereof) are
transmitted to the Sellers' counsel; provided, that, CenterPoint has
-------- ----
provided to the Sellers or their counsel reasonable advance
41
<PAGE>
notice of such proposed changes; provided, further, that such changes are
-------- -------
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Sellers' counsel.
8.2.3 CenterPoint will advise each Sellers' Representative of the
effectiveness of the Registration Statements, advise each Sellers'
Representatives of the entry of any stop order suspending the effectiveness
of the Registration Statements or the imitation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written
request of any Seller, CenterPoint will furnish to such Seller a reasonable
number of copies of the final prospectus associated with the IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither HCVT, the Sellers nor the Partners will be liable for
any portion of the above expenses in the event the IPO is not completed.
CenterPoint shall also pay the underwriting discounts and commissions payable in
connection with the sale of CenterPoint Common Stock in the IPO. All other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint and HCVT.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give the Sellers' Representative prompt written notice of
its intent to do so. Promptly after receipt of such notice, the Sellers'
Representative shall provide written notice to CenterPoint of all Sellers
(and their respective current mailing address) that beneficially own shares
of CenterPoint Common Stock. Thereafter, upon the written request of any
Seller given within thirty (30) days after receipt of such notice,
CenterPoint will use its best efforts to cause to be included in such
registration all of the
42
<PAGE>
CenterPoint Common Stock which the Seller requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
-----------
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by any Seller at any time when such shares
are not then transferable in accordance with Section 12.2 hereof.
------------
Registration Rights under this Section 8.6 may be transferred in whole or
-----------
in part in connection with the transfer of any shares of CenterPoint Common
Stock received pursuant to this Agreement other than to a transferee of the
kind described in clause (x) of Section 12.2 hereof.
------------
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect to
the CenterPoint Common Stock (and such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Seller whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to such
Seller a reasonable number of copies of the prospectus covering the
offering and sale by the Seller of the shares to be covered thereby;
(c) use its best efforts to register and qualify the
CenterPoint Common Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably request
for the distribution for the CenterPoint Common Stock;
43
<PAGE>
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Seller whose CenterPoint Common Stock is to be
covered by such registration of the effectiveness of such registration
statement, advise each such Seller of the entry of any stop order
suspending the effectiveness of such registration statement or of the
initiation of any proceeding for that purpose, and, if such stop order
shall be entered, use its best efforts promptly to obtain the lifting or
removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Seller whose CenterPoint Common Stock is to be covered by such
registration, of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated therein
by reference includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading and, at the request of such
Seller, prepare and furnish to such Seller a post-effective amendment or
supplement to the registration statement or the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading.
8.6.3 In connection with each registration pursuant to this Section 8.6
-----------
covering an underwritten registration public offering, CenterPoint and each
participating holder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of CenterPoint's size and investment stature, including
indemnification.
8.6.4 In consideration of the granting to the Sellers of the
registration rights under this Section 8.6, the Sellers agree, and agree to
-----------
enter into an agreement with the underwriters in connection with an underwritten
registration to the effect, that they will not sell, transfer or otherwise
dispose of, including, without limitation, through put or short sale
arrangements, shares of CenterPoint Common Stock in the ten (10) days prior to
the effectiveness of any registration of CenterPoint Common Stock for sale to
the public and for up to ninety (90) days following the effectiveness of such
registration, provided that all directors, executive officers and holders of
more than five percent (5%) of the outstanding CenterPoint Common Stock agree to
the same restrictions; and further provided that, with respect to the first
public offering of shares of the CenterPoint Common Stock within three (3) years
following the IPO, the Sellers shall have been
44
<PAGE>
afforded a meaningful opportunity to include shares in such registration
after any reduction by reason of underwriters' written advice.
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
---------------------
Date or earlier termination of this Agreement in accordance with its terms,
CenterPoint shall comply in all material respects with all applicable Laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Sellers released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Sellers' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Sellers against any and all claims made by lenders or
landlords under such guarantees.
8.9 Lock-Up Agreement. Each Seller agrees, and agrees to enter into an
-----------------
agreement with the Underwriter on or prior to the date on which preliminary
Prospectuses are delivered to the effect that, the Seller will not offer, sell,
contract to sell or otherwise dispose of any shares of CenterPoint Common Stock,
or any securities convertible into or exercisable or exchangeable for
CenterPoint Common Stock, for a period of one hundred eighty (180) days after
the date of the final Prospectus of the IPO without the prior written consent of
the Underwriter except for shares of CenterPoint Common Stock disposed of as
bona fide gifts, subject to any remaining portion of the one hundred eighty
(180)-day period applying to any shares so disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely filing
of the final pre-Closing Returns for the Company, HCVT, the Partners and
the Company Subsidiaries; provided however, that CenterPoint and its
advisors shall have the right to review and approve such returns prior to
filing, which approval shall not be unreasonably withheld. CenterPoint
shall, and shall cause its Affiliates to, provide to the Company such
cooperation and information reasonably requested in filing any return,
amended return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. The Company shall bear all costs of filing such returns.
45
<PAGE>
8.10.2 Each of HCVT, CenterPoint, the Sellers and the Partners shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. HCVT covenants and agrees that all insurance
------------------------
policies listed, or required to be listed, on Schedule 4.20 will be maintained
-------------
in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of the Sellers'
--------------
Representative, CenterPoint shall, directly or through one or more of its
subsidiaries, administer and manage the collection of amounts referred to on
Schedule 7.5.3 using reasonable care and in accordance with the Company's
- --------------
policies in effect at Closing.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Sellers. Subject to Sections 9.7 and 9.8, the
------------------------------ ------------ ---
Sellers jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Partner or Seller or any
action, demand or claim by any third party against or affecting any
CenterPoint Indemnified Party which, if successful, would give rise to a
breach of any such representation or warranty, except that the obligation
of the Sellers to indemnify, defend and save harmless for any
misrepresentation or breach of representation or warranty made in Section
-------
5.1 hereof or in any certificate, schedule, document, exhibit or other
---
instrument delivered in respect thereof shall not be joint and several, but
such obligation shall be several only and limited to the several Seller(s)
making such misrepresentation or breach;
(b) any failure by HCVT, any Seller or any Partner to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing except that the obligation of the Sellers
to indemnify, defend and save harmless for any failure to observe or
perform any covenant or agreement shall not be joint and several, but such
obligation shall be several only and limited to the several Seller(s)
failing to observe or perform such covenant or agreement, except that the
obligations of the Seller(s) to
46
<PAGE>
indemnify, defend and save harmless for any breach of a covenant or
agreement by a Seller or Partner shall not be joint and several, but such
obligation shall be several only and limited to the several Seller(s)
committing such breach;
(c) any liability under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 ACT") or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
HCVT or the Company contained in any preliminary prospectus relating to the
IPO, the Registration Statements or any proxy statement or prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission to state therein a material fact
relating to HCVT or the Company required to be stated therein or necessary
to make the statements therein not misleading, and not provided to
CenterPoint or its counsel by HCVT or the Company; provided, however, that
-------- -------
such indemnity shall not inure to the benefit of any CenterPoint
Indemnified Party to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) HCVT or the Company provided, in
writing, corrected information to CenterPoint or its counsel for inclusion
in the final prospectus prior to distributing such prospectus, and such
information was not so included, or (ii) CenterPoint did not provide HCVT
and its counsel with the information required to be provided pursuant to
Section 8.2.2, and such information is the basis for the untrue statement
-------------
or omission (or alleged untrue statement or omission) giving rise to the
liability under this Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Sellers, the
Partners, HCVT, or the Company in connection with the Merger or the
transactions contemplated by this Agreement with respect to brokerage,
finders and other fees or commissions, (ii) disallowance of any tax
deduction to CenterPoint, any Partner or the Company with respect to any
item listed on Schedule 2.5 and considered in determining Net Working
------------
Capital, and (iii) any Loss relating to, resulting from, arising out of or
otherwise by virtue of any matter which is or should be listed on Schedule
--------
4.10, 5.1.9 or 7.1.4 hereto.
---- ----- -----
As used in this Agreement, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements);provided, further that the Subsidiaries
-------- -------
of CenterPoint
47
<PAGE>
shall include the Company, the Company Subsidiaries and the other Founding
Companies from and after the Closing. Accordingly, for purposes of this Article
-------
IX and subject to the limitations set forth in this Article IX, the Other
- -- ----------
Founding Companies, and each of their respective officers, directors, employees,
agents, employee plans and plan fiduciaries, plan administrators or other
Persons dealing with any such plans, shall be deemed to be third party
beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Sellers and their respective Affiliates, and their
Affiliates respective officers, directors, employees and agents (each, a "
SELLER INDEMNIFIED PARTY") forever harmless from and against, and to promptly
pay to a Seller Indemnified Party or reimburse a Seller Indemnified Party for,
any and all Losses sustained or incurred by any Seller Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Seller Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder; or
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
48
<PAGE>
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to HCVT, the Company, the Sellers or the Partners, contained
in any preliminary prospectus relating to the IPO, the Registration
Statements or any proxy statement or prospectus forming a part thereof, or
any amendment thereof or supplement thereto, or arising out of or based
upon any omission to state therein a material fact relating to HCVT, the
Company, the Sellers or the Partners required to be stated therein or
necessary to make the statements therein not misleading, to the extent such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and (i) HCVT, the
Company, the Sellers or the Partners provided, in writing, corrected
information to CenterPoint or its counsel for inclusion in the final
prospectus prior to distributing such prospectus, and such information was
not so included, or (ii) CenterPoint did not provide HCVT and its counsel
with the information required to be provided pursuant to Section 8.2.2, and
-------------
such information is the basis for the untrue statement or omission (or
alleged untrue statement or omission) giving rise to the liability under
this Section 9.2(d).
-------------
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person or
entity entitled to indemnification under this Agreement (an "INDEMNIFIED
PARTY") receives notice of the assertion of any claim, issuance of any
order or the commencement of any action or proceeding by any Person who is
not a party to this Agreement or an Affiliate of a party, including,
without limitation, any domestic or foreign court or Governmental Authority
(a "THIRD PARTY CLAIM"), against such Indemnified Party, against which a
party to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten (10) days after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
49
<PAGE>
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Sellers, may be granted by the Sellers'
Representative (as defined in Section 9.13)), which consent shall not be
------------
unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within thirty (30) calendar days after its receipt of such
notice, the Indemnified Party may continue to contest or defend such Third
Party Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed
50
<PAGE>
the amount of such settlement offer, plus costs and expenses paid or
incurred by the Indemnified Party through the end of such thirty (30)-day
period.
9.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the
51
<PAGE>
extent of amounts theretofore paid by the Indemnifying Party on account of such
Loss) shall be promptly paid over to the Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Sellers. With respect to representations and
-------------------------
warranties, the Sellers shall not have any liability pursuant to Section
-------
9.1(a) hereof unless and until and only to the extent that the aggregate
------
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
-------------
Basic Purchase Consideration; provided, however, that this threshold shall
-------- -------
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.1.9, 5.2 and 5.1.8 as it
-------------- ----- ----- --- -----
relates to the representation and warranty of HCVT set forth in Section
-------
4.16, and the Sellers shall indemnify the CenterPoint Indemnified Parties
----
for any Losses accruing thereunder in accordance with this Article IX
----------
without regard to such threshold.
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Sections 6.2 and CenterPoint
------------
shall indemnify the Seller Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
----------
threshold.
9.7.3 Limitations on Claims Against the Sellers. The liability of all
-----------------------------------------
Sellers for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
-------------
Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Seller shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Seller;
provided further, however, that limitations shall not apply to Losses
-------- ------- -------
arising out of breaches of representations or warranties contained in
Sections 5.1.1, 5.1.2, 5.1.9, 5.2 and 5.1.8 as it relates to the
-------------- ----- ----- --- -----
representation and warranty of HCVT set forth in Section 4.16, and any
------------
Losses accruing thereunder shall not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the Partners,
----------------------------------------------------------------------
the Sellers and the Company; Time Limits on Indemnification Obligations.
- -----------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of
HCVT, the Partners, the Sellers, the Company and
52
<PAGE>
the Business, and notwithstanding any Knowledge of facts determined or
determinable by CenterPoint pursuant to such investigation or right of
investigation, CenterPoint has the right to rely fully upon the representations,
warranties, covenants and agreements of the Partners, the Sellers and HCVT
contained in this Agreement or in any certificate delivered pursuant to any of
the foregoing. All such representations, warranties, covenants and agreements of
the Partners, the Sellers and HCVT shall survive the execution and delivery of
this Agreement and the Closing hereunder; provided, however, (i) that the
-------- -------
Sellers' obligations pursuant to Section 9.1, other than those relating to
-----------
covenants and agreements to be performed by the Sellers after the Closing, shall
expire one (1) year after the Closing, except with respect to obligations
arising under or relating to Section 4.16 hereof as it relates to federal,
------------
state, local and foreign income taxation, which shall survive until the earlier
of (A) the expiration of the applicable periods (including any extensions) of
the respective statutes of limitation applicable to the payment of the Taxes or
(B) the completion of the final audit and determinations by the applicable
taxing authority and final disposition of any deficiency resulting therefrom;
and (ii) solely to the extent that CenterPoint actually incurs liability under
the 1933 Act or the 1934 Act, the obligations under Sections 9.1(c) or (d) above
shall survive until the expiration of any applicable statute of limitations with
respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of CenterPoint shall survive the execution and delivery
of this Agreement and the Closing hereunder; provided, however, that
-------- -------
CenterPoint's obligations under Section 9.2, other than those relating to
-----------
covenants and agreements to be performed by CenterPoint after the Closing, shall
expire one (1) year after Closing, except that, solely to the extent that the
Sellers actually incur liability under the 1933 Act or the 1934 Act, the
obligations under Section 9.2(c) or (d) above shall survive until the expiration
------------- ---
of any applicable statute of limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Sellers and of the Seller Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Sellers may satisfy their respective obligations, if any, under
this Article IX (i) by tendering to
53
<PAGE>
the CenterPoint Indemnified Parties cash or shares of CenterPoint Common Stock
that are transferable in accordance with Section 12.2, such shares to be valued
at the Market Price. "MARKET PRICE" shall mean the average closing (last) price
for a share of CenterPoint Common Stock (as reported on the exchange or market
on which such shares are then listed or traded) for the most recent twenty (20)
days that such shares have traded ending on the date two (2) days prior to the
date tendered pursuant to clause (i) of the preceding sentence, or, if such
shares are not then listed or traded on an exchange or other market, the fair
market value of such shares as determined by an appraiser reasonably agreed to
by the parties.
9.13 Sellers' Representative. Each Seller appoints [__________] (the
-----------------------
"SELLERS' REPRESENTATIVE") as its agent and representative with full power and
authority to agree, contest or settle any claim or dispute affecting any Seller
or Partner made under Articles II or IX and to otherwise act on behalf of the
Sellers in accordance with the terms of this Agreement including, without
limitation, to direct the amount and manner of the payment of aggregate Basic
Purchase Consideration; provided, that the Sellers' Representative may be
--------
removed and a successor to the Person originally serving as the Sellers'
Representative may be designated in a writing signed by a majority in interest
of the Sellers and delivered to CenterPoint in accordance with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents
54
<PAGE>
the consummation of the IPO, the Merger or any of the Other Mergers shall
have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved by the Sellers in the manner required by
any applicable Law and the Partners' Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing
for aggregate commitments of not less than $75 million.
10.2 Conditions to Obligation of the Partners, the Sellers and the Company
---------------------------------------------------------------------
to Effect the Merger. Unless waived by HCVT or the Company, the obligation of
- --------------------
HCVT, the Partners, the Sellers and the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions:
(a) CenterPoint, Pass Mergersub, each Mergersub and each of the Other
Founding Companies shall have performed in all material respects their
agreements contained in this Agreement and each Other Agreement required to
be performed on or prior to the Closing Date and the representations and
warranties of CenterPoint contained in this Agreement and each Other
Agreement shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date as if made at and as of
such date, and the Sellers shall have received a certificate of the Chief
Executive Officer or President of CenterPoint to that effect;
55
<PAGE>
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice public accounting shall
have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to the Sellers of the Merger;
(c) the Sellers shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to HCVT and the Sellers;
(d) each of the Sellers shall have been afforded the opportunity to
enter into an incentive compensation agreement (the "INCENTIVE
COMPENSATION AGREEMENT") with CenterPoint substantially in the form
attached hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Company and the Sellers a
certificate, dated as of a date no later than ten (10) days prior to the
Closing Date, duly issued by the Delaware Secretary of State, showing that
CenterPoint is in good standing;
(f) each of the Sellers, the stockholders or members of the other
Founding Companies who are to receive shares of CenterPoint Common Stock
pursuant to the Other Agreements, and the other stockholders of CenterPoint
other than those acquiring stock in the IPO shall have entered into an
agreement (the "STOCKHOLDERS AGREEMENT") substantially in the form
attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Mergers of the other Founding Companies, on
substantially the same terms as provided herein, shall have been satisfied
or waived by the applicable party and HCVT and/or the Company;
(h) each of the Sellers shall have been afforded the opportunity to
review the executed employment agreement by and between CenterPoint and
Robert C. Basten; and
(i) the Sellers shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date and based on certain factual
assumptions that for federal income tax purposes there will be no gain or
loss recognized with respect to the CenterPoint Common Stock received for
their Company Interests in the Merger pursuant to Section 351 of the Code,
the final form of such opinion to be in form and substance reasonably
acceptable to the Company and the Sellers.
10.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint, Pass Mergersub and each
Mergersub to effect the Merger shall be subject to the fulfillment at or prior
to the Closing of the additional following conditions:
56
<PAGE>
(a) HCVT and the Company shall have performed in all material respects
its agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of HCVT
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of the Chief Executive Officer or President of
HCVT to that effect;
(b) the Partners and the Sellers shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of the Sellers contained in this Agreement shall be true and
correct in all material respects on and as of the date made and on and as
of the Closing Date as if made at and as of such date, and CenterPoint and
the Underwriters shall have received a Certificate of each Seller to that
effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Christensen Miller Fink Jacobs Glaser Weil and Shapiro, counsel to
HCVT, the Sellers and the Company, dated the Closing Date, in the form
attached hereto as Exhibit 10.3(c), the final form of such opinion to be in
---------------
form and substance reasonably acceptable to the Underwriters and
CenterPoint;
(d) the Company shall, and the Sellers shall have caused Attest Entity
to, execute and deliver the Separate Practice Agreement substantially in
the form attached hereto as Exhibit 10.3(d)(A) and the Services Agreement
------------------
substantially in the form attached hereto as Exhibit 10.3(d)(B);
------------------
(e) each Seller shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached as Exhibit
-------
10.2(d);
-------
(f) CenterPoint and the Underwriters shall have received "1 Comfort"
letters in customary form from HCVT's independent public accountants, dated
the effective date of the Form S-1 and the Closing Date (or such other date
reasonably acceptable to CenterPoint), with respect to certain financial
statements and other financial information included in the Form S-1 and any
subsequent changes in specified balance sheet and income statement items,
including total assets, working capital, total Partners' equity, total
revenues and the total and per share amounts of net income;
(g) HCVT shall have delivered to CenterPoint and the Underwriters a
certifi cate, dated as of a date no later than ten (10) days prior to the
Closing Date, duly issued by the appropriate Governmental Authority in the
state of organization of HCVT and the Company and each Company Subsidiary
and, unless waived by CenterPoint, in each state in which HCVT and the
Company or any Company Subsidiary is authorized to do
57
<PAGE>
business, showing HCVT, the Company or Company Subsidiary (as applicable)
is in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Merger;
(i) the Sellers shall have executed the Stockholders Agreement;
(j) the Sellers shall have delivered to CenterPoint an instrument in
the form attached hereto as Exhibit 10.3(j), dated the Closing Date,
---------------
releasing HCVT, the Company (including its subsidiaries) and the Partners
from any and all claims of the Sellers against HCVT, the Company (including
its subsidiaries) and the Partners and obligations of HCVT, the Company
(including its subsidiaries) and the Partners to the Sellers;
(k) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.4 hereof
-------------
including, without limitation that as of the closing the amount of debt of
the Company and the Company Subsidiaries shall not exceed the amount
reflected on Schedule 2.1 as Debt Assumed by CenterPoint;
------------
(l) HCVT, the Company, the Sellers and the Partners, as applicable,
shall have terminated or have caused the termination of any voting trusts,
proxies or other agreements or understandings to which HCVT, the Company,
the Sellers or any Partner is a party or is bound with respect to any
shares of capital stock or other equity interests of HCVT, the Company or
the Partners and shall have provided CenterPoint evidence of such
termination that is acceptable to CenterPoint's counsel;
(m) HCVT and the Sellers shall have caused to be completed (i) the
Conversion of the Corporate Partners, (ii) the formation of the Company and
consummation of the Asset Transfer, and (iii) the LLC Partner
Capitalization and other actions specified in Section 7.5, and shall have
-----------
presented evidence of completion of such actions in accordance with Section
-------
7.5;
---
(n) a payoff letter including a statement of per diem interest amounts
and other applicable release documents from all institutional lenders or
creditors regarding the payment in full of indebtedness at Closing, in each
case in form and substance satisfactory to CenterPoint (including, without
limitation, applicable UCC-3 termination statements);
(o) HCVT and/or the Company shall have paid in full any indebtedness
owed by HCVT and/or the Company to the Partners, and shall have provided
evidence of same reasonably satisfactory to CenterPoint;
58
<PAGE>
(p) HCVT or Company shall have caused all automobile leases to which
HCVT or the Company is a party (together with all vehicle insurance
policies and maintenance agreements, if any) to be assigned in full to the
individual beneficiary of such lease or terminated, and shall have provided
evidence of same reasonably satisfactory to CenterPoint; and
(q) The secretary of the Company shall have delivered certified
copies of the resolutions of the Operating Committee, the Partners and the
Sellers approving execution and delivery of this Agreement, the Conversion,
the Merger and the other actions agreements and documents necessary or
desirable to complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by HCVT,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of HCVT, the Company,
the Sellers or the Partners or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of HCVT, the
Company or any of the Sellers or Partners or any of their affiliates
or associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
59
<PAGE>
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint
or any of its stockholders or any of their affiliates or associates;
(iii) if HCVT (A) fails to perform in any material respect any
of its material covenants in this Agreement and (B) does not cure
such default in all material respects within thirty (30) days after
written notice of such default is given to HCVT by CenterPoint;
(iv) if any of the Partners or the Sellers (A) fail to perform
in any material respect any of their material covenants in this
Agreement and (B) do not cure such default in all material respects
within thirty (30) days after written notice of such default is given
to the Sellers' Representative by CenterPoint; or
(d) by mutual consent of the Boards of Directors (or other applicable
governing body) of HCVT and CenterPoint.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or HCVT, as provided in Section 11.1, this Agreement shall
------------
forthwith become void and there shall be no further obligation on the part of
HCVT, the Company, the Partners, the Sellers, CenterPoint, Pass Mergersub, any
Mergersub, or their respective officers or directors (except the obligations set
forth in this Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of
------------ ------------ --- --- ----------
which shall survive the termination). Nothing in this Section 11.2 shall
------------
relieve any party from liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the parties' Boards of Directors of CenterPoint and the Company or duly
authorized committees thereof and then only by an instrument in writing signed
on behalf of each of the parties hereto and in compliance with applicable law.
CenterPoint covenants and agrees that it shall not amend, modify or supplement
the material terms of any Other Agreement following the Closing without the
prior written consent of at least two thirds (2/3/rds/) of the members of
CenterPoint's Board of Directors; provided that no waiver of any restriction set
forth in Article XII shall be of any effect unless consented to by a majority of
-----------
the members of CenterPoint's Board of Directors who do not at the time of such
proposed waiver hold Restricted Shares within the meaning of this Agreement, any
Other Agreement or the Stockholders Agreement.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto may
------
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
60
<PAGE>
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions Generally. Except as provided in Section 12.2,
------------------------------- ------------
for a period of forty-two (42) months from the Closing, the Sellers shall not
(a) sell, assign, exchange, transfer, distribute or otherwise dispose of, in
whole or in part, (i) any shares of CenterPoint Common Stock received by the
Sellers in the Merger (the "1 RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning the Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
12.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing and every six (6) months thereafter, until all Restricted Shares shall
have been released from such restrictions, twenty percent (20%) of the original
number of Restricted Shares of each Seller shall no longer be subject to the
restrictions set forth in Section 12.1 and shall no longer be deemed Restricted
------------
Shares for any purposes of this Agreement; provided, that, if a Seller's
-------- ----
employment with CenterPoint or its subsidiary is terminated within thirty (30)
months of the Closing other than through death, disability, retirement or
circumstances approved by the Company's management and reasonably approved by
CenterPoint's chief executive officer, the Restricted Shares held by such Seller
shall remain subject to the restrictions set forth in Section 12.1 until the
------------
fifth anniversary of the Closing Date. Notwithstanding the foregoing and
Section 12.1, a Seller may (x) at any time pledge or encumber all or part of
- ------------
such Seller's Restricted Shares, as applicable, provided that the pledgee or
secured party agrees in writing to be bound by the provisions contained in
Article XII (y) at any time transfer all or part of such Seller's Restricted
- -----------
Shares to another Seller or to an immediate family member (or trust or other
estate planning Person), provided, that any such Seller, family member or other
-------- ----
Person agrees to in writing to be bound by the provisions contained in Article
-------
XII and (z) transfer or cause to be transferred such Seller's Restricted Shares
- ---
upon such Seller's disability or death. As used in this Section 12.2, the terms
------------
"disability" and "retirement" shall have the meaning ascribed to them in
CenterPoint's Employee Incentive Compensation Plan. No attempted transfer of
any nature whatsoever that is in violation of this Section shall be treated as
effective for any purpose.
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Sellers pursuant to Article II of this Agreement shall bear a
----------
legend substantially in the form set forth below and containing such other
information as CenterPoint may deem necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
AND THE DISPOSITION THEREOF ARE SUBJECT TO THE
61
<PAGE>
TERMS OF A MERGER AGREEMENT DATED MARCH __, 1999.
A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION AND MAY BE
INSPECTED BY THE REGISTERED OWNER OF THIS
CERTIFICATE OR A DULY AUTHORIZED REPRESENTATIVE
OF SUCH OWNER UPON REQUEST DURING NORMAL BUSINESS
HOURS.
Upon request from any Seller (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer Restricted Shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable Restricted Shares. In the event a
Seller's request to remove the restrictive legend coincides with his request to
sell the CenterPoint Common Stock, CenterPoint shall take such actions as
required by its transfer agent to allow the transfer agent to transfer the
unrestricted CenterPoint Common Stock free of any restrictive legend.
ARTICLE XII
NONCOMPETITION
13.1 Prohibited Activities. Each Seller agrees severally, and not jointly,
---------------------
that such Seller will not, for a period of three (3) years following the Closing
Date, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Seller commences competition within a fifty (50) mile radius of
any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by HCVT, the
Company or any Company subsidiary to, or solicit for the purpose of selling
or providing such services to, any Person that was a customer of HCVT, the
Company or any Company Subsidiary at any time during the preceding one (1)-
year period or that was known by the Sellers to have been actively being
solicited by the Company or any Company Subsidiary to become a customer at
any time during such period;
62
<PAGE>
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one (1)-year period.
Notwithstanding the foregoing, a Seller may be employed by a customer of the
Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Seller does not directly or indirectly provide such
services to another third party for hire.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Seller from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Seller does not consult with or is not employed
by such competitor and (b) owning equity interests in the Company or Attest
Entity.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Seller agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Sellers, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Sellers in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Sellers that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Seller who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with
63
<PAGE>
CenterPoint and/or any subsidiary thereof as set forth herein shall thereafter
cease to be employed thereunder, and such Seller shall enter into a business or
pursue other activities not in competition with CenterPoint and/or any
subsidiary thereof, or similar activities or business in locations the
operations of which, under such circumstances, does not violate this Article
-------
XIII and in any event such new such Seller's obligations under this Article
- ---- -------
XIII, such Seller shall not be business, activities or location are not in
- ----
violation of this Article XIII or of chargeable with a violation of this Article
------------ -------
XIII if CenterPoint and/or any subsidiary thereof shall thereafter enter the
- ----
same, similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII shall
-------------------- ------------
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Seller
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Seller made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Seller is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and the Sellers hereby agree that this
-----------
covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
64
<PAGE>
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of HCVT, the Sellers and the Partners represents and
-------
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Acquisition or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. CenterPoint represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Acquisition or the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of CenterPoint or
its stockholders (other than underwriting discounts and commission to be paid in
connection with the IPO).
152. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint, Pass Mergersub or any Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street, 16/th/ Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
15.2.2 If to the Company, to:
Holthouse Carlin & Van Trigt LLP
11845 West Olympic Boulevard, #1177
Los Angeles, California 90064
Attn: Philip Holthouse
Facsimile No.: (310) 477-2633
65
<PAGE>
with a copy to:
Christensen, Miller, Fink, Jacobs, Glaser,
Weil and Shapiro
2121 Avenue of the Stars, 18/th/ Floor
Los Angeles, California 90067
Attn: Gary Jacobs
Facsimile No.: (310) 556-2920
15.2.3 If to the Sellers' Representative, any Partner or the Sellers,
as applicable, addressed to the addresses set forth on Schedule 15.2.3,
---------------
with copies to such counsel as set forth with respect to each Seller on
such Schedule 15.2.3, as applicable.
---------------
15.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and " HEREUNDER"
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term
-------------------
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any individual who is a
partner, member or shareholder of such Person or who is otherwise serving, or
who has served, as a director, officer, partner, member or trustee (or any
capacity) of such Person has, or at any time had, knowledge of such fact or
other matter.
15.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior
66
<PAGE>
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise, except that (i) CenterPoint may assign this
Agreement to any wholly-owned subsidiary of CenterPoint, and (ii) HCVT may
assign this Agreement to the Company as contemplated herein.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
67
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
/s/ Robert Basten
---------------------------------------------------
Name: Robert Basten
---------------------------------------------
Its: President and Chief Executive Officer
----------------------------------------------
PASS MERGERSUB LLC
By: Centerpoint Advisors, Inc., its sole Managing Member
/s/ Robert Basten
-------------------------------------------
By: Robert Basten
----------------------------------------
Its: President
---------------------------------------
MERGERSUBS:
HOLTHOUSE MERGERSUB INC.
/s/ Robert Basten
--------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
CARLIN MERGERSUB INC.
/s/ Robert Basten
--------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
<PAGE>
VAN TRIGT MERGERSUB INC.
/s/ Robert Basten
-------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
CHRISTIAN MERGERSUB INC.
/s/ Robert Basten
-------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
HUTCHINS MERGERSUB INC.
/s/ Robert Basten
-------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
SHUMAN MERGERSUB INC.
/s/ Robert Basten
-------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
<PAGE>
WARBURTON MERGERSUB INC.
/s/ Robert Basten
-------------------------------------------------------
Name: Robert Basten
--------------------------------------------------
Its: President
---------------------------------------------------
HOLTHOUSE CARLIN & VAN TRIGT LLP
/s/ James S. Carlin
-------------------------------------------------------
Name: James S. Carlin
--------------------------------------------------
Its: President of Corporate Managing Operations
---------------------------------------------------
CORPORATE PARTNERS:
JAMES S. CARLIN,
AN ACCOUNTANCY CORPORATION
/s/ James S. Carlin
-------------------------------------------------------
James S. Carlin, President
BLAKE E. CHRISTIAN,
AN ACCOUNTANCY CORPORATION
/s/ Blake E. Christian
-------------------------------------------------------
Blake E. Christian, President
PHILIP J. HOLTHOUSE,
AN ACCOUNTANCY CORPORATION
/s/ Philip J. Holthouse
-------------------------------------------------------
Philip J. Holthouse, President
<PAGE>
GREGGORY J. HUTCHINS,
AN ACCOUNTANCY CORPORATION
/s/ Greggory J. Hutchins
---------------------------------
Greggory J. Hutchins, President
ZACHARY G. SHUMAN,
AN ACCOUNTANCY CORPORATION
/s/ Zachary G. Shuman
---------------------------------
Zachary G. Shuman, President
JOHN E. VAN TRIGT,
AN ACCOUNTANCY CORPORATION
/s/ John E. Van Trigt
---------------------------------
John E. Van Trigt, President
WILLIAM WARBURTON,
AN ACCOUNTANCY CORPORATION
/s/ William Warburton
---------------------------------
William Warburton, President
LLC PARTNER:
J. PASS LLC
/s/ Janet L. Pass
---------------------------------
Janet L. Pass, Managing Member
71
<PAGE>
MEMBER:
/s/ Janet L. Pass
-------------------------------
Janet L. Pass
STOCKHOLDERS:
/s/ James S. Carlin
-------------------------------
James S. Carlin
/s/ Blake E. Christian
-------------------------------
Blake E. Christian
/s/ Philip J. Holthouse
-------------------------------
Philip J. Holthouse
/s/ Greggory J. Hutchins
-------------------------------
Greggory J. Hutchins
/s/ Zachary G. Shuman
-------------------------------
Zachary G. Shuman
/s/ John E. Van Trigt
-------------------------------
John E. Van Trigt
/s/ William Warburton
-------------------------------
William Warburton
72
<PAGE>
EXHIBIT 2.9
-------------------------------
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
GRACE MERGERSUB INC.,
GRACE & COMPANY, P.C., GRACE CAPITAL, LLP
and
THE PARTNERS OF
GRACE CAPITAL, LLP
March 31, 1999
-------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER.......................................................... 2
1.1 Merger....................................................... 2
------
1.2 Effects of the Merger........................................ 3
---------------------
1.3 Directors and Officers of the Surviving Corporation.......... 3
---------------------------------------------------
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT................................. 3
2.1 Merger Consideration......................................... 3
--------------------
2.1.1 Basic Purchase Consideration.......................... 3
----------------------------
2.1.2 Treasury Stock........................................ 3
--------------
2.1.3 Dissenters............................................ 3
----------
2.1.4 Conversion of Mergersub Stock......................... 4
-----------------------------
2.1.5 Exchange of Certificates.............................. 4
------------------------
2.2 Post-Closing Adjustments to Basic Purchase Consideration..... 4
--------------------------------------------------------
2.3 Post-Closing Management of AR................................ 6
-----------------------------
2.4 Assignment of Uncollected AR................................. 6
----------------------------
2.5 Definitions.................................................. 6
-----------
ARTICLE III
THE CLOSING AND CONSUMMATION DATE................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY............ 7
4.1 Organization and Qualification............................... 7
-------------------------------
4.2 Company Subsidiaries......................................... 8
--------------------
4.3 Authority; Non-Contravention; Approvals...................... 8
---------------------------------------
4.4 Capitalization............................................... 10
--------------
4.5 Year 2000.................................................... 10
---------
4.6 Financial Statements......................................... 10
--------------------
4.7 Absence of Undisclosed Liabilities........................... 11
----------------------------------
4.8 Unbilled Fees and Expenses................................... 11
--------------------------
4.9 Absence of Certain Changes or Events......................... 11
------------------------------------
4.10 Litigation................................................... 14
----------
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.11 Compliance with Applicable Laws...................................... 14
-------------------------------
4.12 Licenses............................................................. 15
--------
4.13 Material Contracts................................................... 15
------------------
4.14 Properties........................................................... 18
----------
4.15 Intellectual Property................................................ 19
---------------------
4.16 Taxes................................................................ 20
-----
4.17 Employee Benefit Plans; ERISA........................................ 21
-----------------------------
4.18 Labor Matters........................................................ 23
-------------
4.19 Environmental Matters................................................ 24
---------------------
4.20 Insurance............................................................ 24
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions.......... 25
-----------------------------------------------------------
4.22 Business Relationships............................................... 25
----------------------
4.23 Compensation......................................................... 25
------------
4.24 Bank Accounts........................................................ 26
-------------
4.25 Professional Credentials............................................. 26
------------------------
4.26 Disclosure; No Misrepresentation..................................... 26
--------------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARTNERS............................................................. 26
5.1 Several Representations and Warranties............................... 26
--------------------------------------
5.1.1 Capitalization................................................ 26
--------------
5.1.2 Authority..................................................... 27
---------
5.1.3 Non-Contravention............................................. 27
-----------------
5.1.4 Approvals..................................................... 27
---------
5.1.5 Litigation.................................................... 28
----------
5.1.6 No Transfer................................................... 28
-----------
5.1.7 Disclosure.................................................... 28
----------
5.1.8 Representations and Warranties of Seller and the Company...... 28
--------------------------------------------------------
5.2 Joint and Several Representations and Warranties..................... 28
------------------------------------------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT............................... 29
6.1 Organization And Qualification....................................... 29
------------------------------
6.2 Capitalization....................................................... 29
--------------
6.3 No Subsidiaries...................................................... 30
---------------
6.4 Authority; Non-Contravention; Approvals.............................. 30
---------------------------------------
6.5 Absence of Undisclosed Liabilities................................... 31
----------------------------------
6.6 Litigation........................................................... 31
----------
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.7 Compliance with Applicable Laws.............................. 32
-------------------------------
6.8 No Misrepresentation......................................... 32
--------------------
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS................................... 32
7.1 Conduct of Business by the Company Pending the Acquisition... 32
----------------------------------------------------------
7.2 No-Shop...................................................... 35
-------
7.3 Schedules.................................................... 36
---------
7.4 Company Stockholders Meeting................................. 37
----------------------------
7.5 Conversion................................................... 37
----------
ARTICLE VIII
ADDITIONAL AGREEMENTS............................................... 37
8.1 Access to Information........................................ 37
---------------------
8.2 Registration Statements...................................... 38
-----------------------
8.3 Expenses and Fees............................................ 39
-----------------
8.4 Agreement to Cooperate....................................... 39
----------------------
8.5 Public Statements............................................ 39
-----------------
8.6 Registration Rights.......................................... 40
-------------------
8.7 CenterPoint Covenants........................................ 42
---------------------
8.8 Release of Guarantees........................................ 42
---------------------
8.9 Lock-Up Agreement............................................ 42
-----------------
8.10 Preparation and Filing of Tax Returns........................ 43
-------------------------------------
8.11 Maintenance of Insurance..................................... 43
------------------------
8.12 Administration............................................... 43
--------------
ARTICLE IX
INDEMNIFICATION..................................................... 43
9.1 Indemnification by the Partners.............................. 43
-------------------------------
9.2 Indemnification by CenterPoint............................... 45
------------------------------
9.3 Indemnification Procedure for Third Party Claims............. 46
------------------------------------------------
9.4 Direct Claims................................................ 48
-------------
9.5 Failure to Give Timely Notice................................ 48
-----------------------------
9.6 Reduction of Loss............................................ 48
-----------------
9.7 Limitation on Indemnities.................................... 49
-------------------------
9.7.1 Threshold for the Partners............................ 49
--------------------------
9.7.2 Threshold for CenterPoint............................. 49
-------------------------
9.7.3 Limitations on Claims Against the Partners............ 49
------------------------------------------
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
9.7.4 Limitation on Claims Against CenterPoint......................... 50
----------------------------------------
9.8 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
the Partners, Seller and the Company; Time Limits on Obligations....... 50
-----------------------------------------------------------------
9.9 Survival of Representations, Warranties and Covenants of
--------------------------------------------------------
CenterPoint; Time Limits on Indemnification Obligations................. 50
-------------------------------------------------------
9.10 Defense of Claims; Control of Proceedings............................... 50
-----------------------------------------
9.11 Fraud; Exclusive Remedy................................................. 51
-----------------------
9.12 Manner of Satisfying Indemnification Obligations........................ 51
------------------------------------------------
9.13 Partners' Representative................................................ 51
------------------------
ARTICLE X
CLOSING CONDITIONS............................................................. 51
10.1 Conditions to Each Party's Obligation to Effect the Acquisition......... 51
---------------------------------------------------------------
10.2 Conditions to Obligation of the Partners, Seller and the Company
----------------------------------------------------------------
to Effect the Acquisition............................................... 52
-------------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition....... 54
-----------
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER.............................................. 56
11.1 Termination............................................................. 56
-----------
11.2 Effect of Termination................................................... 57
---------------------
11.3 Amendment............................................................... 57
---------
11.4 Waiver.................................................................. 58
------
ARTICLE XII
TRANSFER RESTRICTIONS.......................................................... 58
12.1 Transfer Restrictions................................................... 58
---------------------
12.2 Release of Restrictions................................................. 58
-----------------------
12.3 Legend.................................................................. 59
------
ARTICLE XIII
NONCOMPETITION................................................................. 59
13.1 Prohibited Activities................................................... 59
---------------------
13.2 Damages................................................................. 60
-------
13.3 Reasonable Restraint.................................................... 61
--------------------
13.4 Severability; Reformation............................................... 61
-------------------------
13.5 Independent Covenant.................................................... 61
--------------------
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
13.6 Materiality................................................... 61
-----------
ARTICLE XIV
[RESERVED].......................................................... 62
ARTICLE XV
GENERAL PROVISIONS.................................................. 62
15.1 Brokers....................................................... 62
-------
15.2 Notices....................................................... 62
-------
15.3 Interpretation................................................ 63
--------------
15.4 Certain Definitions........................................... 63
-------------------
15.5 Entire Agreement; Assignment.................................. 64
----------------------------
15.6 Applicable Law................................................ 64
--------------
15.7 Counterparts.................................................. 64
------------
15.8 Parties in Interest........................................... 64
-------------------
</TABLE>
(v)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
(vi)
<PAGE>
Schedule 4.17.4 Multiple Employer Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1.4(i) Terminated Agreements
Schedule 7.1.4(i)-D Agreements Not To Be Terminated
Schedule 7.1.4(ii) Excluded Assets
Schedule 8.8 Partners' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Partners and Their Counsel
(vii)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Partners of Seller
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Seller, the Company and
Partners
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Partners' General Release and Covenant Not to
Sue
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(viii)
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<S> <C>
Acquisition................................................... Introduction
Acquisition Transaction....................................... Section 13.1
Actions....................................................... Section 4.10.1
Affiliate..................................................... Section 15.4
Affiliate Transactions........................................ Section 4.21
Agreement..................................................... Introduction
AR............................................................ Section 2.5
Arbitrator.................................................... Section 2.2.5
Attest Entity................................................. Section 7.1.2
Attestation Practice.......................................... Introduction
Basic Purchase Consideration.................................. Section 2.1.1
BBM........................................................... Section 7.1.4
BBM Agreement................................................. Section 7.1.4
Business...................................................... Introduction
Cash Consideration............................................ Section 2.1.1
CenterPoint................................................... Introduction
CenterPoint Accountants....................................... Section 2.2.2
CenterPoint Common Stock...................................... Section 2.1.1
CenterPoint Indemnified Party(ies)............................ Section 9.1
CenterPoint Material Adverse Effect........................... Section 6.4.3
CenterPoint Representatives................................... Section 8.1.1
CenterPoint Required Statutory Approvals...................... Section 6.4.3
Closing....................................................... Article III
</TABLE>
(ix)
<PAGE>
<TABLE>
<S> <C>
Closing Balance Sheet......................................... Section 2.2.2
Closing Date.................................................. Article III
Code.......................................................... Introduction
Company....................................................... Introduction
Company Material Adverse Effect............................... Section 4.3.3
Company Representatives....................................... Section 8.1.1
Company Stock................................................. Section 2.1.1
Company Subsidiary(ies)....................................... Section 4.2
Consummation Date............................................. Article III
Contracts..................................................... Section 4.13
Conversion.................................................... Introduction
Copyrights.................................................... Section 4.15
Defense Notice................................................ Section 9.3.1
DGCL.......................................................... Section 1.1
Direct Claim.................................................. Section 9.4
Disputed Item................................................. Section 2.2.5
Dissenting Shares............................................. Section 2.1.3
Effective Time................................................ Section 1.1
Employee Plan................................................. Section 4.17.5(a)
Environmental and Safety Requirements......................... Section 4.19
ERISA......................................................... Section 4.17.5(b)
Excluded Assets............................................... Section 7.1.4
Excluded Liabilities.......................................... Section 7.1.4
Final Adjustment.............................................. Section 2.2.4
</TABLE>
(x)
<PAGE>
<TABLE>
<S> <C>
Financial Statements.......................................... Section 4.6
First Person.................................................. Section 4.17.5(c)
Form S-1...................................................... Section 4.3.3
Form S-4...................................................... Section 4.3.3
Founding Companies............................................ Introduction
GAAP.......................................................... Section 4.6
GBCLM......................................................... Section 1.1
general increase.............................................. Section 4.23
Governmental Authority........................................ Section 4.3.2
Hazardous Materials........................................... Section 4.19
herein........................................................ Section 15.3
hereof........................................................ Section 15.3
hereunder..................................................... Section 15.3
HSR Act....................................................... Section 4.3.3
Incentive Compensation Agreement.............................. Section 10.2(d)
Indemnified Party............................................. Section 9.3.1
Indemnifying Party............................................ Section 9.3.1
Intellectual Property......................................... Section 4.15
Intellectual Property Licenses................................ Section 4.15
Interim Adjustment............................................ Section 2.2.3
IPO........................................................... Introduction
Knowledge..................................................... Section 15.4
Latest Balance Sheet.......................................... Section 4.6
Laws.......................................................... Section 4.11
</TABLE>
(xi)
<PAGE>
<TABLE>
<S> <C>
Leased Property............................................... Section 4.14.1
Licenses...................................................... Section 4.12
Lien(s)....................................................... Section 4.3.2
Liquidated Damages Amount..................................... Section 7.3
Losses........................................................ Section 9.1
Market Price.................................................. Section 9.12
Marks......................................................... Section 4.15
Material Contracts............................................ Section 4.13
Merger........................................................ Introduction
Merger Documents.............................................. Section 1.1
Mergersub..................................................... Introduction
Mergersub Stock............................................... Section 6.2.1
Net Working Capital........................................... Section 2.5
1933 Act...................................................... Section 4.3.3
1934 Act...................................................... Section 9.1(c)
Organizational Documents...................................... Section 4.1
Other Agreements.............................................. Introduction
Other Acquisitions............................................ Introduction
Other Founding Companies...................................... Section 9.1
Owned Property................................................ Section 4.14.1
Partner(s).................................................... Introduction
Partner Indemnified Party..................................... Section 9.2
Partner Representative........................................ Section 9.13
Patents....................................................... Section 4.15
</TABLE>
(xii)
<PAGE>
<TABLE>
<S> <C>
Person........................................................ Section 15.4
Plan Affiliate................................................ Section 4.17.5(c)
Real Property................................................. Section 4.14.1
Registration Statements....................................... Section 4.3.3
Resolution Period............................................. Section 2.2.5
Restricted Shares............................................. Section 12.1
Returns....................................................... Section 4.16.1
Schedules..................................................... Section 7.3
SEC........................................................... Section 4.3.3
Securities Act................................................ Section 4.3.3
Seller........................................................ Introduction
Special Bonus................................................. Section 2.5(b)
Stock Consideration........................................... Section 2.1.1
Stockholders Agreement........................................ Section 10.2(f)
Surviving Corporation......................................... Section 1.2
Target........................................................ Section 2.5
Tax Accrual................................................... Section 2.5
Taxes......................................................... Section 4.16.2
Territory..................................................... Section 13.1(a)
Third Party Claim............................................. Section 9.3.1
Trade Secrets................................................. Section 4.15
Underwriters.................................................. Section 8.1.1
Voting Agreement.............................................. Introduction
</TABLE>
(xiii)
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Grace Capital, LLP, a Missouri limited liability partnership (the "SELLER"),
Grace Mergersub, Inc. a Delaware corporation and wholly owned subsidiary of
CenterPoint ("MERGERSUB"), Grace & Company, P.C., a Missouri professional
corporation (the "COMPANY"), and the partners of Seller identified on Exhibit A
---------
to this Agreement (each a "PARTNER" and, collectively, the "PARTNERS").
WITNESSETH:
WHEREAS, Seller is the sole owner and holder of record of all of the
outstanding shares of capital stock of the Company;
WHEREAS, the Company engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Company is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Company will cease to provide services related to
the practice of accounting that, pursuant to applicable laws and regulations,
may only be conducted by certified public accountants (the "ATTESTATION
PRACTICE") and (b) the Partners will cause the conversion of the Company from a
professional corporation to a business corporation by (x) amending the Company's
Organizational Documents (as defined in Section 4.1) such that it converts to a
business corporation, (y) or adopting a plan of liquidation and reincorporating
as a business corporation, or (z) merging with a foreign professional
corporation, with the surviving professional corporation amending its
Organizational Documents such that it converts to a business corporation, as
applicable (the actions described in the foregoing (a) and (b), collectively,
the "CONVERSION");
WHEREAS, the Boards of Directors of the Company, CenterPoint and Mergersub
deem it advisable and in the best interests of their respective shareholders to
approve and consummate the business combination transaction provided for herein
in which Mergersub would merge with the Company, with the Company being the
surviving corporation in the merger (the "ACQUISITION" or "MERGER");
WHEREAS, certain Partners have entered into a Voting Agreement dated the
date hereof (the "VOTING AGREEMENT") pursuant to which among other things such
Partners have agreed to vote the shares of capital stock of the Company that
such Partners own or control, directly or indirectly, to approve the Merger and
the transactions contemplated by this Agreement.
<PAGE>
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., The Reppond Company, Inc., Reppond Administrators, LLC, Verasource Excess
Risk Ltd., Berry, Dunn, McNeil & Parker, Chartered, Urbach Kahn & Werlin PC,
Self Funded Benefits, Inc. d/b/a Insurance Design Administrators, Simione,
Scillia, Larrow & Dowling LLC, Follmer Rudzewicz & Co., P.C., and Holthouse,
Carlin & Van Trigt (which companies together with the Company are collectively
referred to herein as the "FOUNDING COMPANIES"), which agreements provide for
the merger of a wholly owned subsidiary of CenterPoint with each such Founding
Company (the "OTHER ACQUISITIONS") simultaneously with the Acquisition;
CenterPoint has provided a side letter to each holder of equity interests of the
Company to such effect;
WHEREAS, simultaneously with the consummation of the Acquisition,
CenterPoint will close an initial public offering (the "IPO") of CenterPoint
Common Stock (as defined in Section 2.1; and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, Mergersub shall be merged with and into the Company, the result of which
will cause the separate corporate existence of Mergersub to cease and the
Company to continue under the laws of the State of Missouri. As promptly as
possible on the Closing Date, the parties shall cause the Merger to be completed
by filing articles of merger and a certificate of merger, as applicable (the
"MERGER DOCUMENTS"), with the Secretary of State of the State of Missouri, as
provided in the General and Business Corporation Law of Missouri, as amended
(the "GBCLM"), and with the Secretary of State of the State of Delaware, as
provided in the General Corporation Law of the State of Delaware (the "DGCL").
The Merger shall become effective (the "EFFECTIVE TIME") upon the filing of the
Merger Documents with the Secretary of State of the State of Missouri and the
Secretary of State of the State of Delaware or at such later time,
contemporaneously with the
2
<PAGE>
closing of the IPO, as agreed by CenterPoint and the Company and specified in
the Merger Documents.
1.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of Mergersub shall cease and Mergersub shall be merged with and into
the Company, with the Company being the surviving corporation in the Merger (the
Company is sometimes referred to herein as the "SURVIVING CORPORATION"), (ii)
the Articles of Incorporation and By-laws of the Surviving Corporation shall be
amended in form and substance acceptable to CenterPoint and as specified in the
Merger Documents, (iii) the Merger shall have all the effects provided by
applicable law, and (iv) the Company shall be a wholly-owned subsidiary of
CenterPoint.
1.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Merger Consideration.
--------------------
2.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holder thereof, the
outstanding shares of capital stock, consisting of 15,000 shares of common
stock of the Company, no par value per share (the "COMPANY STOCK"), shall
be converted into the right to receive: (a) that number of shares of
CenterPoint common stock, par value $.01 per share (the "CENTERPOINT
COMMON STOCK") determined in accordance with the formula in Schedule 2.1
------------
(the "STOCK CONSIDERATION") and (b) the amount of cash in Schedule 2.1 (the
------------
"CASH CONSIDERATION"). The sum of the Cash Consideration and the Stock
Consideration is herein referred to as "BASIC PURCHASE CONSIDERATION."
2.1.2 Treasury Stock. Each share of capital stock of the Company held
--------------
in treasury of the Company shall be canceled and retired and no payment
shall be made in respect thereof.
2.1.3 Dissenters. Each outstanding share of capital stock of the
----------
Company the holder of which has perfected his right to dissent under
applicable law and has not effectively withdrawn or lost such right as of
the Effective Time (the "DISSENTING SHARES") shall not be converted into
the right to receive Basic Purchase Consideration, and the holder thereof
shall be entitled only to such rights as are granted by applicable law. The
Company shall give CenterPoint prompt notice upon receipt by the Company of
any such written demands for payment of fair value of shares of capital
stock of the Company and
3
<PAGE>
any other instruments provided pursuant to applicable law. Any payments
made in respect of Dissenting Shares shall be made by the Surviving
Corporation.
2.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become one validly
issued, fully paid and non-assessable share of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
2.1.5 Exchange of Certificates. At the Closing, Seller shall deliver
------------------------
to CenterPoint the original Company Stock certificates, duly endorsed in
blank by the Seller or accompanied by blank stock powers, in exchange for
the allocated share of (a) CenterPoint Common Stock certificates
representing the Stock Consideration and (b) payment of the Cash
Consideration by certified check, cashier's check or wire transfer of
immediately available funds to a bank account or bank accounts in the
amounts and manner specified by Seller in a writing delivered to
CenterPoint at least three (3) business days prior to the Closing Date. The
shares represented by the Company Stock certificates so delivered to
CenterPoint shall be canceled. Until surrendered as contemplated by this
Section 2.1.5, each certificate representing shares of Company Stock
-------------
represents only the right to receive Basic Purchase Consideration, as
adjusted in accordance with this Article II.
2.2 Post-Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
2.2.1 Adjustments for Net Working Capital Shortfall/Excess. The Basic
----------------------------------------------------
Purchase Consideration shall be (a) reduced dollar-for-dollar to the extent
Net Working Capital on the Closing Date is less than the Target or (b)
increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
2.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the firm PricewaterhouseCoopers LLP
(the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
2.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Partner Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "INTERIM ADJUSTMENT").
-------------
4
<PAGE>
2.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days of
receipt of such calculation, CenterPoint will deliver to the Partner
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
2.2.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Partner Representative does not object (or otherwise respond) in writing to
the Final Adjustment report within 30 days after its delivery, the Final
Adjustment shall automatically become final, binding and conclusive on all
parties hereto. Any objection to the Final Adjustment report shall be in
writing and shall specify the item or items in dispute (each a "DISPUTED
ITEM").
If the Partner Representative and CenterPoint are unable to resolve
any Disputed Item within 30 days after notice from the Partner
Representative that a dispute exists (the "RESOLUTION PERIOD"), then a
representative from the office of a nationally recognized accounting firm
(the "ARBITRATOR") selected jointly by CenterPoint and the Partner
Representative will arbitrate the dispute. The Partner Representative and
CenterPoint shall, within 20 days after expiration of the Resolution
Period, present their respective positions with respect to any Disputed
Item to the Arbitrator together with such materials as the Arbitrator deems
appropriate. To the extent any Disputed Item is similar to a disputed item
under the Other Agreements, the Arbitrator shall arbitrate the Disputed
Item based on the submitted materials and without regard to the disputed
item under the Other Agreements. The Arbitrator shall, after the submission
of the materials, submit a written decision on each Disputed Item to the
Partner Representative and CenterPoint and such determination shall be
final and binding on the parties hereto. The arbitration shall be conducted
in Chicago, Illinois. The parties hereto agree that the cost of the
Arbitrator shall be borne by the non-prevailing party or as determined by
the Arbitrator.
2.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, Seller and the Partners shall pay the amount of the
shortfall to CenterPoint. In the event Net Working Capital is greater than
the Target, CenterPoint shall pay the amount of the excess to Seller. Any
payment required to be made pursuant to this paragraph shall be made,
within ten days of delivery of the report indicating any adjustment, by
wire transfer of immediately available funds to an account designated in
writing by the party that is to receive payment of such adjustment. In
respect of the Final Adjustment, the party making a payment required by
such adjustment shall make such payment within ten days after the
5
<PAGE>
Final Adjustment becomes final and shall receive credit for or return of
any amount previously paid in connection with the Interim Adjustment.
2.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write-off affecting AR and fees and expenses
receivable and unbilled fees and expenses of the Company incurred after Closing
with respect to the same client engagement shall be allocated ratably to the
pre-Closing and post-Closing periods.
2.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to Seller. Notwithstanding the foregoing, the Company will retain
the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.3.
-----------
2.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the
Closing Date, whenever calculated, equal to difference between: (i) the sum
of any AR, prepaid expenses and other current assets less (ii) the sum of
----
accounts payable, accrued current liabilities, the items listed on Schedule
--------
2.5, the Tax Accrual, the Special Bonus (as defined in Section 7.1.4(iii))
---
and the employer-paid FICA payable in connection with deferred compensation
and the Special Bonus.
(c) [RESERVED]
(d) "TARGET" means an amount equal to 1% of the Company's net
revenues for the four quarter period ending on the last day of the calendar
quarter prior to Closing.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax
6
<PAGE>
deductions realized by CenterPoint as a result of any payments pursuant to
the Special Bonus Plan times (ii) the sum of 34% plus the effective state
tax rate on the Company (net of any federal tax benefit). A negative Tax
Accrual shall be treated as a current asset for purposes of Section
-------
2.5(b)(i).
---------
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Katten
Muchin & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
Seller and the Company hereby jointly and severally represent and warrant
to CenterPoint, as of the date hereof and, subject to Section 7.3, as of the
-----------
date on which CenterPoint and the lead Underwriter (as defined in Section 8.1.1)
-------------
execute and deliver the Underwriting Agreement related to the IPO and as of the
Closing Date, as follows:
4.1 Organization and Qualification. The Company is a professional
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Missouri, and, following the Conversion, the Company will be a
business corporation duly organized, validly existing and in good standing under
the laws of the State of Missouri. Seller is a limited liability partnership
duly organized, validly existing and in good standing under the laws of
Missouri. Each Company Subsidiary (as defined in Section 4.2) is duly
-----------
organized, validly existing and in good standing under the laws of the state of
its organization set forth on Schedule 4.2. Each of Seller, the Company and the
------------
Company Subsidiaries has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, and is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary. The
Company has not qualified to do business in the states listed on Schedule 4.2.
------------
True, accurate and complete copies of Seller's, the Company's and each Company
Subsidiary's Organizational Documents, in each case as in effect on the date
hereof, have heretofore been delivered to CenterPoint. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of any limited
partnership, (d) the operating or limited liability company agreement and
certificate of formation of any limited liability company, (e) any charter or
similar document adopted and filed in connection with the
7
<PAGE>
creation, formation, organization or governance (as applicable) of any Person
and (f) any amendment to any of the foregoing.
4.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
--------------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Company owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "COMPANY SUBSIDIARY" and collectively, the "COMPANY SUBSIDIARIES").
Except as set forth on Schedule 4.2, the Company does not, directly or
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
4.3 Authority; Non-Contravention; Approvals.
---------------------------------------
4.3.1 Each of Seller and the Company has full right, power and
authority to enter into this Agreement and, subject to the approval of the
Merger and the transactions contemplated hereby by the Company's
stockholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller and the
Company have been duly authorized by all necessary partnership and
corporate action on the part of Seller and the Company, subject to the
approval of the Merger and the transactions contemplated hereby by the
Company's stockholders. This Agreement has been duly executed and delivered
by Seller and the Company, and, assuming the due authorization, execution
and delivery hereof by CenterPoint, constitutes a valid and legally binding
agreement of Seller and the Company, enforceable against Seller and the
Company in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
4.3.2 The execution and delivery of this Agreement by each of Seller
and the Company does not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of
any claim, lien, privilege, mortgage, charge, hypothecation, assessment,
security interest, pledge or other encumbrance, conditional sales contract,
equity charge, restriction, or adverse claim of interest of any kind or
nature whatsoever (each a "LIEN" and collectively, the "LIENS"), upon any
of the properties or assets of the Company or any Company Subsidiary under,
any of the terms, conditions or provisions of (i) the Organizational
Documents of Seller, the Company or any Company Subsidiary, (ii) following
completion of the Conversion, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any court or federal, state,
8
<PAGE>
provincial, local or foreign government, or any subdivision, agency or
authority of any thereof ("GOVERNMENTAL AUTHORITY") applicable to Seller,
the Company, any Company Subsidiary, or the Business, properties or assets
of Seller, the Company or any Company Subsidiary, except for those items
discussed in (ii) above relating to regulating, licensing or permitting the
practice of public accountancy, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which any
of Seller, the Company or any Company Subsidiary is a party or by which any
of Seller, the Company, any Company Subsidiary or any of the properties or
assets of Seller, the Company or any Company Subsidiary may be bound or
affected. The consummation by Seller and the Company of the transactions
contemplated hereby will not result in a violation, conflict, breach, right
of termination, creation or acceleration of Liens under the terms,
conditions or provisions of the items described in clauses (i) through
(iii) of the immediately preceding sentence, subject in the case of the
terms, conditions or provisions of the items described in clause (iii)
above, to obtaining (prior to the Closing Date) such consents required from
third parties set forth on Schedule 4.3.2 and except for those items
--------------
described in (ii) and (iii) above relating to regulating, licensing or
permitting the practice of public accountancy and any filing which may be
required under the HSR Act.
4.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
are collectively the "REGISTRATION STATEMENTS") with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Seller or the Company or the consummation by
Seller or the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
would not, individually or in the aggregate, have a "COMPANY MATERIAL
ADVERSE EFFECT," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the
Company or any Company Subsidiary.
9
<PAGE>
4.4 Capitalization.
--------------
4.4.1 The authorized capital stock of the Company consists of 30,000
shares of Company Stock, of which 15,000 shares are issued and outstanding.
The Company has 1,500 shares in its treasury. The authorized capital stock
of each of the Company Subsidiaries, if any, and the number of such shares
issued and outstanding is completely and accurately set forth in Schedule
--------
4.4. All of such issued and outstanding shares are validly issued and are
---
fully paid, nonassessable and free of preemptive rights. Seller owns
beneficially and of record all of the issued and outstanding shares of the
Company Stock, which shares constitute all of the outstanding shares of
capital stock of the Company. The Company owns all shares of the Company's
Subsidiaries as indicated on Schedule 4.4, in each case free and clear of
------------
all Liens, and the Company has good and marketable title to such shares of
the Company Subsidiaries. All of such issued and outstanding shares are
validly issued and are fully paid, nonassessable and free of preemptive
rights.
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend or enter into any such agreement or commitment or obligating Seller
or the Company or any Company Subsidiary to convey or transfer any Company
Stock or Company Subsidiary stock, as the case may be. As of the Closing
Date, there will be no voting trusts, proxies or other agreements or
understandings to which the Company or any Company Subsidiary is a party or
is bound with respect to the voting of any shares of capital stock or other
equity interests of the Company or any Company Subsidiary.
4.5 Year 2000. To the Knowledge of Seller or the Company, all of the
---------
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company or any
Company Subsidiary in the conduct of the Business will not malfunction, will not
cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth (20/th/) and twenty-first (21/st/) centuries
and (ii) date-related data in connection with any valid date in the twentieth
(20/th/) and twenty-first (21/st/) centuries, except for any malfunctions or
generations of incorrect data or results that would not individually or in the
aggregate have a 1 Company Material Adverse Effect. Nothing in this Section 4.5
is intended or shall be construed as a representation or warranty with respect
to embedded systems.
4.6 Financial Statements. Seller and the Company have previously furnished
--------------------
to CenterPoint copies of the audited consolidated balance sheet of the Company
as of December 31, 1998 (the "LATEST BALANCE SHEET"), and the related audited
consolidated statement of income,
10
<PAGE>
stockholders' equity and cash flow for the one (1) year period ended December
31, 1998, including all notes thereto, (collectively, the "FINANCIAL
STATEMENTS"). Each of the Financial Statements is accurate and complete in all
material respects, is consistent with the books and records of the Company and
the Company Subsidiaries (which, in turn, are accurate and complete in all
material respects), and fairly presents in all material respects the financial
condition, assets and liabilities of the Company and the Company Subsidiaries as
of its date and the results of operations and cash flows for the periods related
thereto, in each case in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP").
4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
---------------------------------- --------
4.7, neither the Company nor any Company Subsidiary had, as of the date of the
- ---
Latest Balance Sheet, nor has it incurred since that date, any liabilities or
obligations of any nature (whether known or unknown, absolute, contingent,
accrued, direct, indirect, perfected, inchoate, unliquidated or otherwise),
except (i) to the extent clearly and accurately reflected or accrued or fully
reserved against in the Financial Statements or (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business and consistent with past custom and practices (none of which
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim, legal violation or lawsuit).
4.8 Unbilled Fees and Expenses. At the Closing all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Company's and the Company
Subsidiaries' past practice and custom).
4.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Company and the
- ---
Company Subsidiaries has conducted its business only in the ordinary course
consistent with past custom and practices. Except as set forth on Schedule 4.9,
------------
since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Company or any Company Subsidiary;
(b) damage, destruction or loss of any property owned by the Company
or any Company Subsidiary, or used in the operation of the Business,
whether or not covered by insurance, having a replacement cost or fair
market value in excess of five percent (5%) of the amount of net property,
plant and equipment shown on the Latest Balance Sheet, in the aggregate;
11
<PAGE>
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company or any Company Subsidiary of any right, power, claim or debt,
except the collection of accounts and billing of work-in-process, each in
the ordinary course of business consistent with past custom and practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company, a Company Subsidiary or the Business;
(e) loan or advance by the Company or any Company Subsidiary to any
Person, other than as a result of services performed for, or expenses
properly and reasonably advanced for the benefit of, customers in the
ordinary course of business consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's or any Company Subsidiary's capital stock or
other equity interests, or the payment of principal or interest on any
note, bond, debt instrument or debt to any Affiliate (as defined in Section
-------
15.4) of the Company or any Company Subsidiary, except bonuses and
----
distributions to employees and stockholders of the Company disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company or any Company Subsidiary of debts,
liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
(i) issuance by the Company or any Company Subsidiary of any notes,
bonds, or other debt securities or any equity securities or securities
convertible into or exchangeable for any equity securities;
(j) entry by the Company or any Company Subsidiary into, or amendment
or termination of, any material commitment, contract, agreement, or
transaction, other than in the ordinary course of business and other than
expiration of contracts in accordance with their terms;
12
<PAGE>
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
or any Company Subsidiary that accounted for revenues during the last
twelve months in excess of one percent (1%) of the consolidated net
revenues of the Company and the Company Subsidiaries, or change in the
relationship of the Company or any Company Subsidiary with any client or
Governmental Authority that is reasonably expected to adversely affect the
Company, any Company Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Company or any Company Subsidiary
of any material liability or encumbrance or payment by the Company or any
Company Subsidiary of any material obligation or liability, other than
current liabilities paid in the ordinary course of its business consistent
with past custom and practices;
(n) sale, lease or other disposition by the Company or any Company
Subsidiary of any tangible assets (having an aggregate replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet) other than
in the ordinary course of business, or the sale, assignment or transfer by
the Company or any Company Subsidiary of any trademarks, service marks,
trade names, corporate names, copyright registrations, trade secrets or
other intangible assets, or disclosure of any proprietary confidential
information of the Company or any Company Subsidiary to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed to maintain the confidentiality of any such
proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company or any
Company Subsidiary in excess of $50,000 individually or $100,000 in the
aggregate;
(p) mortgage, pledge or other encumbrance of any asset of the Company
or any Company Subsidiary or creation of any easements, Liens or other
interests against or on any of the Real Property (as defined in Section
-------
4.14.1);
------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which Seller or the Company
has Knowledge, is reasonably expected to result in a Company Material
Adverse Effect.
13
<PAGE>
4.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
4.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of Seller or the Company, threatened
against the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any such
plan (or pending or, to the Knowledge of Seller or the Company, threatened
against any of the officers, directors, members, stockholders, partners or
employees of the Company or any Company Subsidiary with respect to its
business or proposed business activities), or to which the Company or any
Company Subsidiary is otherwise a party, or that is reasonably expected to
have a Company Material Adverse Effect, before any court, or before any
Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of Seller or the Company, is there any basis for any
such Action.
4.10.2 Neither the Company nor any Company Subsidiary is subject to
any unsatisfied or continuing judgment, order or decree of any court or
Governmental Authority. Neither the Company nor any Company Subsidiary, to
the Knowledge of Seller or the Company, is otherwise exposed, from a legal
standpoint, to any liability or disadvantage that is reasonably expected to
result in a Company Material Adverse Effect, and neither the Company nor
any Company Subsidiary is a party to any legal action to recover monies due
it or for damages sustained by it, other than collection of past due
charges for services rendered or expenses incurred by the Company.
4.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
4.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company or any Company Subsidiary was a party during
the five (5) year period preceding the Closing Date, the date such
litigation was commenced and concluded, and the nature of the resolution
thereof (including amounts paid in settlement or judgment).
4.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Company and the Company Subsidiaries has complied in
- ---- ----
all material respects with all laws, rules, regulations, writs, injunctions,
decrees, and orders (collectively, the "LAWS") applicable to it or to the
operation of the Business, and neither Seller, the Company nor any Company
Subsidiary has received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of Seller or the Company, no event has occurred or
circumstances exist that (with or without notice or lapse of time) is reasonably
expected to constitute or result in a violation by the Company or any Company
14
<PAGE>
Subsidiary of any Law that gives rise to any liability on the part of the
Company or any Company Subsidiary under any Law.
4.12 Licenses. Schedule 4.12 lists all Licenses used by the Company and
-------- -------------
the Company Subsidiaries that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor held by the Company or
any Company Subsidiary and issued by, or submitted by the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12 lists
all licenses, certificates, approvals, registrations and other similar documents
and authorizations, and applications therefor relating to the practice of public
accountancy (the "ACCOUNTING LICENSES") held by the Company or a Company
Subsidiary and issued by, or submitted by the Company or any Company Subsidiary
to, any Governmental Authority or other Person. All such Licenses and Accounting
Licenses are valid, binding and in full force and effect. Except as described on
Schedule 4.12, the execution, delivery and performance of this Agreement and the
- -------------
consummation of the transactions contemplated hereby will not adversely affect
any such Licenses. To the Knowledge of Seller or the Company, the Company and
the Company Subsidiaries have taken all necessary action to maintain such
Licenses. No loss or expiration of any such License is pending or, to Seller's
or the Company's Knowledge, threatened or reasonably foreseeable.
4.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Company nor any Company Subsidiary is a party to or bound by, any
written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments (each a
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company or a
Company Subsidiary is to receive consulting services (other than consulting
agreements that may be terminated by the Company or a Company Subsidiary on
not more than 30 days notice without penalty), employment agreement,
change-in-control agreement, or collective bargaining arrangement with any
labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
15
<PAGE>
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company or a Company Subsidiary upon ninety (90)
calendar days or less notice without penalty;
(i) any Contract under which the Company or any Company Subsidiary is
(A) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Company or any Company Subsidiary, in either case
having an original purchase price or requiring aggregate lease payments in
excess of $50,000;
(j) any Contract under which the Company or any Company Subsidiary has
granted or received a license or sublicense or under which it is obligated
to pay or has the right to receive a royalty, license fee or similar
payment, in either case which provides for payments over the life of such
Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company or any
Company Subsidiary of any real property on which the Company or any Company
Subsidiary conducts any aspect of the Business, (B) granting any options to
lease or purchase all or any portion of the Real Property, or (C) providing
for labor, services or materials to the
16
<PAGE>
Real Property (including, without limitation, brokerage or management
services) involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company or
any Company Subsidiary from conducting business anywhere in the United
States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company or any
Company Subsidiary, which, if amended, modified or terminated as a result
of, relating to or in connection with a failure to provide prior notice, or
gain such consent or approval, would result in a Company Material Adverse
Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company or any Company
Subsidiary in excess of $25,000.
Seller and the Company have provided CenterPoint with a true and complete
copy of each written Material Contract and a true and complete summary of each
oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
-------------
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against, the Company or a Company Subsidiary, as applicable, and,
to the Knowledge of Seller or the Company, the other parties thereto, and is in
full force and effect, subject only to bankruptcy, reorganization, receivership
and other laws affecting creditors' rights generally and equitable principles.
Except as set forth on Schedule 4.13, the Company or one of the Company
-------------
Subsidiaries, as applicable, has performed in all material respects all
obligations required to be performed by it as of the date hereof and will have
performed in all material respects all obligations required to be performed by
it as of the Closing Date under each Material Contract and neither the Company
or Company Subsidiary, as applicable, nor, to the Knowledge of Seller or the
Company, any other party to any Material Contract is in breach or default
thereunder, and, to the Knowledge of Seller or the Company, there exists no
condition which would, with or without the lapse of time or the giving of
notice, or both, constitute a breach or default thereunder. Neither Seller nor
the Company has been notified that any party to any Material Contract intends to
cancel, terminate, not renew, or exercise an option under any Material Contract,
whether in connection with the transactions contemplated hereby or otherwise.
17
<PAGE>
4.14 Properties.
----------
4.14.1 Schedule 4.14.1-1 is a correct and complete list, and a brief
-----------------
description of, all real estate in which the Company or any of the Company
Subsidiaries has an ownership interest (the "OWNED PROPERTY") and all real
property leased by the Company (the "LEASED PROPERTY"). Except as lessee of
Leased Property, neither the Company nor any Company Subsidiary is a lessee
under or otherwise a party to any lease, sublease, license, concession or
other agreement, whether written or oral, pursuant to which another Person
has granted to the Company or any Company Subsidiary the right to use or
occupy all or any portion of any real property.
The Company or one or more of the Company Subsidiaries has good and
marketable fee simple title to the Owned Property and, assuming good title
in the landlord, a valid leasehold interest in the Leased Property (the
Owned Property and the Leased Property being sometimes referred to herein
as "REAL PROPERTY"), in each case free and clear of all Liens, assessments
or restrictions (including, without limitation, inchoate liens arising out
of the provision of labor, services or materials to any such real estate)
other than (a) mortgages shown on the Financial Statements as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of
the property, if any, none of which materially impairs the current
operations of the Company, any Company Subsidiary or the Business, and (ii)
zoning laws and other land use restrictions or restrictive covenants that
do not materially impair the present use of the property subject thereto,
and (d) Liens, assessments, and restrictions pursuant to and by virtue of
the terms of the lease of the Leased Property. The Real Property
constitutes all real properties reflected on the Financial Statements or
used or occupied by the Company or any Company Subsidiary in connection
with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Company or one of the Company Subsidiaries is in exclusive
possession thereof and no easements, licenses or rights are necessary to
conduct the Business thereon in addition to those which exist as of the
date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of Seller or the
Company, there is no threatened condemnation or proceeding with respect
thereto;
18
<PAGE>
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
- -----------
(i) the Company and/or one of the Company Subsidiaries is in
exclusive, peaceful and undisturbed possession thereof and, to the
Knowledge of Seller or the Company, no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof; and
(ii) to the Knowledge of Seller or the Company, no portion
thereof is subject to any pending condemnation proceeding or proceeding by
any public or quasi-public authority materially adverse to the Leased
Property and there is no threatened condemnation or proceeding with respect
thereto.
4.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Company or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
---------------
Company or one of the Company Subsidiaries has good and marketable title
to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and
computers), in each case free and clear of any Liens (other than Liens
that are part of such leasehold or license), and each such asset is in
working order and has been maintained in a commercially reasonable manner
and does not contain, to the Knowledge of Seller or the Company, any
material defect. Except as set forth in Schedule 4.14.2, no personal
---------------
property (including, without limitation, software and databases maintained
on off-premises computers) used by the Company or any Company Subsidiary in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement
or is located other than on the Real Property.
4.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology,
19
<PAGE>
plans and drawings (collectively, the "TRADE SECRETS") owned, used or licensed
by the Company or any Company Subsidiary (collectively, the "INTELLECTUAL
PROPERTY") are all those necessary to enable the Company and the Company
Subsidiaries to conduct and to continue to conduct the Business substantially as
it is currently conducted. Schedule 4.15 contains a complete and accurate list
-------------
of all material Patents, Marks and Copyrights and a brief description of all
material Trade Secrets owned, used by or directly licensed to the Company or any
Company Subsidiary, and a list of all material license agreements and
arrangements with respect to any of the Intellectual Property to which the
Company or any Company Subsidiary is a party, whether as licensee, licensor or
otherwise (collectively, the "INTELLECTUAL PROPERTY LICENSES"). Except as set
forth on Schedule 4.15, (i) all of the Intellectual Property is owned or, to the
-------------
Knowledge of Seller or the Company, used under a valid Intellectual Property
License, by the Company or one of the Company Subsidiaries, and is free and
clear of all Liens and other adverse claims; (ii) none of Seller, the Company
nor any Company Subsidiary has received any written notice that it is or has
infringed on, misappropriated or otherwise conflicted with, or otherwise has
Knowledge that it is infringing on, misappropriating, or otherwise conflicting
with the intellectual property rights of any third parties; (iii) there is no
claim pending or, to the Knowledge of Seller or the Company, threatened against
the Company or any Company Subsidiary with respect to the alleged infringement
or misappropriation by the Company or Company Subsidiary, or a conflict with,
any intellectual property rights of others; (iv) the operation of any aspect of
the Business in the manner in which it has heretofore been operated or is
presently operated does not give rise to any such infringement or
misappropriation; and (v) there is no infringement or misappropriation of the
Intellectual Property by a third party or claim, pending or, to the Knowledge of
Seller or the Company, threatened, against any third party with respect to the
alleged infringement or misappropriation of the Intellectual Property.
4.16 Taxes.
-----
4.16.1 Except as set forth on Schedule 4.16.1-1, each of the Company
-----------------
and the Company Subsidiaries has timely and accurately prepared and filed
or been included in or will timely and accurately prepare and file or be
included in all federal, state, local and foreign returns, declarations and
reports, information returns and statements (collectively, the "RETURNS")
for Taxes (as defined in Section 4.16.2) required to be filed by or with
--------------
respect to the Company or the Company Subsidiaries before the Closing Date,
and has paid or caused to be paid, or has made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which Returns are due on or prior to the
Closing Date, and will establish an adequate accrual or reserve for the
payment of all Taxes payable in respect of the period, including portions
thereof, subsequent to the last of said periods required to be so accrued
or reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. Seller and the Company have delivered to CenterPoint
true and complete copies of all Returns referred to in the first sentence
of this Section 4.16.1 (including any amendments thereof) for the five (5)
--------------
most recent taxable years. Neither the Company nor any Company Subsidiary
is
20
<PAGE>
delinquent in the payment of any Tax, and no material deficiencies for any
Tax, assessment or governmental charge have been threatened, claimed,
proposed or assessed. No waiver or extension of time to assess any Taxes
has been given or requested. No written claim, or any other claim, by any
taxing authority in any jurisdiction where the Company or any Company
Subsidiary does not file Tax returns is pending pursuant to which the
Company or Company Subsidiary, as applicable, is or may be subject to
taxation by that jurisdiction. The Company's and the Company Subsidiaries'
Returns were last audited by the Internal Revenue Service or comparable
state, local or foreign agencies on the dates set forth on Schedule 4.16.1-
----------------
2.
-
4.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
4.17 Employee Benefit Plans; ERISA.
-----------------------------
4.17.1 Except as described in Schedule 4.17.1, neither the Company
---------------
nor any Company Subsidiary has or is reasonably expected to have any
liability (including contingent liability) whether direct or indirect (and
regardless of whether it would be derived from a current or former Plan
Affiliate, as defined in Section 4.17.5(c)) with respect to any of the
-----------------
following (whether written, unwritten or terminated): (i) any employee
welfare benefit plan, as defined in Section 3(1) of "ERISA," including,
but not limited to, any medical plan, life insurance plan, short-term or
long-term disability plan or dental plan; (ii) any "employee pension
benefit plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat
----------
plan or deferred compensation plan or arrangement, nonqualified retirement
plan or arrangement, qualified defined contribution or defined benefit
arrangement; or (iii) any other benefit plan, policy, program, arrangement
or agreement, including, but not limited to, any material fringe benefit
plan or program, personnel policy, bonus or incentive plan, stock option,
restricted stock, stock bonus, holiday pay, vacation pay, sick pay, bonus
program, service award, moving expense, reimbursement program, tool
allowance, safety equipment allowance, deferred bonus plan, salary
reduction agreement, change-of-control agreement, employment agreement or
consulting agreement.
4.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding
21
<PAGE>
vehicle with respect to each such plan; a copy of any and all determination
letters, rulings or notices issued by a Governmental Authority with respect
to such plan; a copy of the Form 5500 Annual Report for the three (3) most
recent plan years; and a copy of each and any general explanation or
communication which was required to be distributed or otherwise provided to
participants in such plan and which describes all or any relevant aspect of
each plan, including summary plan descriptions and/or summary of material
modifications, have been delivered to CenterPoint. A description of each
unwritten Employee Plan, including a description of eligibility,
participation, benefits, funding arrangements and assets or other relevant
aspects of the obligation, is set forth in Schedule 4.17.2.
---------------
4.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Company or any Company Subsidiary, each Employee Plan (i) has been and
is operated and administered in compliance with its terms; (ii) has been
and is operated, administered, maintained and funded in compliance with the
applicable requirements of the Code in such a manner as to qualify, where
appropriate and intended, for both Federal and state purposes, for income
tax exclusions, tax-exempt status, and the allowance of deductions and
credits with respect to contributions thereto; (iii) where appropriate, has
received a favorable determination letter from the Internal Revenue Service
upon which the sponsor of the plan may currently rely; (iv) has been and
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Code and any applicable reporting
and disclosure requirements of Federal and state laws, including but not
limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person
has: (i) entered into any nonexempt "prohibited transaction," as such
terms are defined in ERISA or the Code; (ii) breached a fiduciary
obligation or (iii) any liability for any failure to act or comply in
connection with the administration or investment of the assets of such
plan; and no Employee Plan has any liability and there is no liability in
connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by the Company or one of the Company
Subsidiaries without incurring any such liability, or (iii) which is
adequately funded under a funding arrangement separate from the assets of
the Company, any Company Subsidiary or a Plan Affiliate (and only to the
extent of such funding). Any contribution made or accrued with respect to
any Employee Plan is fully deductible by the Company, a Company Subsidiary
or a Plan Affiliate.
4.17.4 Except as set forth on Schedule 4.17.4, neither the Company
---------------
nor any Company Subsidiary or Plan Affiliate has ever sponsored,
maintained, contributed to or been required to contribute to, or has any
liability, whether direct or indirect, with respect to any Employee Plan
which is or has ever been (i) a "multiemployer plan" as defined in Section
4001 of ERISA, (ii) a "multiemployer plan" within the meaning of Section
3(37) of ERISA, (iii) a "multiple employer plan" within the meaning of Code
Section 413(c), (iv)
22
<PAGE>
a "multiple employer welfare arrangement" within the meaning of Section
3(40) of ERISA, (v) subject to the funding requirements of Section 412 of
the Code or to Title IV of ERISA, or (vi) provides for post-retirement
medical, life insurance or other welfare-type benefits.
4.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether
--------------
or not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term
"PLAN AFFILIATE" shall mean any other Person with whom the First
Person constitutes or has constituted all or part of a controlled
group, or which would be treated or have been treated with the First
Person as under common control or whose employees would be or have
been treated as employed by the First Person, under Section 414 of the
Code or Section 4001(b) of ERISA and any regulations, administrative
rulings and case law interpreting the foregoing.
4.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Company nor any Company Subsidiary
has experienced any, strike, picketing, boycott, work stoppage or slowdown or
other similar labor dispute, union organizational activity, allegation, charge
or complaint of unfair labor practice, employment discrimination or other
matters relating to the employment of labor pending or, to the Knowledge of
Seller or the Company, threatened against the Company or any Company Subsidiary,
or that is reasonably expected to affect the Company or any Company Subsidiary;
nor, to the Knowledge of Seller or the Company, is there any basis for any such
allegation, charge, or complaint. There is no request for representation pending
and, to the Knowledge of Seller or the Company, no question concerning
representation has been raised. There is no grievance pending that is reasonably
expected to result in a Company Material Adverse Effect nor any arbitration
proceeding arising out of a union agreement. To the Knowledge of Seller or the
Company, no employee who is key to the Business and no group of employees has
announced or otherwise indicated any plans to terminate employment with the
Company or any Company Subsidiary. Each of the Company and any Company
Subsidiary has complied with all applicable laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes.
Neither the Company nor any Company Subsidiary is liable for any arrears of
wages or any taxes or penalties for failure to comply with any such laws,
ordinances or regulations.
23
<PAGE>
4.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Company and the Company Subsidiaries is operating and has operated
its business in compliance with all applicable Environmental and Safety
Requirements (as defined later in this Section); (ii) to the actual knowledge of
the Operating Committee of Seller and the Board of Directors of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company or Company Subsidiary (other than those present in
office supplies and cleaning/maintenance materials) for which the Company or a
Company Subsidiary or is or is reasonably expected to be responsible, or
otherwise have any liability, for response costs under any Environmental and
Safety Requirements; (iii) each of the Company and the Company Subsidiaries has
disposed of all waste materials generated by the Company or such Company
Subsidiary at any real property currently or formerly owned, leased or used by
the Company or Company Subsidiary in compliance with applicable Environmental
and Safety Requirements; and (iv) there are and have been no facts, events,
occurrences or conditions at or related to any real property currently or
formerly owned, leased or used by the Company or Company Subsidiary that is
reasonably expected to cause or give rise to liabilities or response obligations
of the Company or any Company Subsidiary under any Environmental and Safety
Requirements. The term "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any
federal, state and local laws, statutes, regulations or other requirements
relating to the protection, preservation or conservation of the environment or
worker health and safety, all as amended or reauthorized. The term "HAZARDOUS
MATERIALS" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery Act,
42 U.S.C. (S) 6901 et seq., asbestos in any form or condition, polychlorinated
biphenyls and any other material, substance or waste to which liability or
standards of conduct may be imposed under any Environmental and Safety
Requirement.
4.20 Insurance. Each of the Company and the Company Subsidiaries has in
---------
full force and effect commercially reasonable amounts of insurance to protect
the Company's and Company Subsidiaries' ownership or interest in, and operation
of, its assets against the types of liabilities, including professional
malpractice, customarily insured against in connection with operations similar
to the Business, and all premiums due on such policies have been paid. To
Seller's or the Company's Knowledge, each of the Company and the Company
Subsidiaries has complied with the provisions of all such policies and is not in
default under any of such policies. Schedule 4.20 contains a complete and
-------------
correct list of all such insurance policies. None of Seller, the Company nor any
Company Subsidiary has received any notice of cancellation or intent to cancel
or increase premiums with respect to such insurance policies. Schedule 4.20 also
-------------
contains a list of all claims or asserted claims reported to insurers under such
policies relating to the ownership or interest in the Company's and the Company
Subsidiaries' assets, or operation of the Business, including all professional
malpractice claims and similar types of claims, actions or proceedings asserted
against the Company or any Company Subsidiary arising out of the Business at any
time within the past three (3) years.
24
<PAGE>
4.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, none of Seller, the Company, any Partner, any Affiliate of a Partner
nor any Affiliate of Seller, the Company or any Company Subsidiary (i)
possesses, directly or indirectly, any financial interest in, or is a director,
officer, employee or affiliate of, any Person that is a client, supplier,
customer, lessor, lessee or competitor of the Company or any Company Subsidiary,
(ii) owns, directly or indirectly, in whole or in part, or has any interest in
any tangible or intangible property used in the conduct of the Business, or
(iii) is a party to an agreement or relationship, that involves the receipt by
such Person of compensation or property from the Company or any Company
Subsidiary other than through a customary employment relationship or through
distributions made with respect to the Company Stock or equity interests in any
Company Subsidiary (provided such distributions have been made consistent with
the Company's or any Company Subsidiary's, as the case may be, past custom and
practices). Schedule 4.21 sets forth the parties to and the date, nature and
-------------
amount of each transaction during the last five years involving the transfer of
any cash, property or rights to or from the Company or any Company Subsidiary
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Stock)
("AFFILIATE TRANSACTIONS"), and any existing commitments of the Company or any
Company Subsidiary to engage in the future in any Affiliate Transactions. Except
as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Company or any Company Subsidiary was effected on terms
equivalent to those that would have been established in an arm's-length
transaction.
4.22 Business Relationships. Schedule 4.22 lists all clients of the Company
---------------------- -------------
and each Company Subsidiary representing one percent (1%) or more of the
Company's consolidated net revenue for the twelve (12) months ended December 31,
1998. Except as set forth on Schedule 4.22, since December 31, 1998, none of
-------------
such clients has canceled or substantially reduced its business with the Company
or Company Subsidiary, as applicable, nor are any of such clients threatening to
do so. To the Knowledge of Seller or the Company, except as set forth on
Schedule 4.22 no client that accounts for one percent (1%) or more of the
- -------------
Company's consolidated net revenue, or supplier of the Company or any Company
Subsidiary, will cease to do business with, or substantially reduce its business
with, the Company or any Company Subsidiary, as applicable, after the
consummation of the transactions contemplated hereby.
4.23 Compensation. Schedule 4.23 is a complete list setting forth the names
------------ -------------
and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Company or a Company
Subsidiary in 1998 total compensation in excess of $100,000. Except as set forth
in Schedule 4.23, no Person listed thereon has received any bonus or increase in
-------------
compensation and there has been no "general increase" in the compensation or
rate of compensation payable to any employees, partners, members or owners of
the Company or any Company Subsidiary since the date of the Latest Balance
Sheet, other than in the Company's and Company Subsidiaries' ordinary course of
business, consistent with past custom and practices, nor
25
<PAGE>
since that date has there been any oral or written promise to employees,
partners, members or owners of any bonus or increase in compensation, other than
in the Company's and Company Subsidiaries' ordinary course of business,
consistent with past custom and practices. The term "GENERAL INCREASE" as used
herein means any increase generally applicable to a class or group, but does not
include increases granted to individuals for merit, length of service or change
in position or responsibility made on the basis of the custom and past practices
of the Company or any Company Subsidiary. Schedule 4.23 includes the date and
-------------
amount of the last bonus or similar distribution or increase in compensation for
each listed individual.
4.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company or any Company Subsidiary has an account or safe deposit
box, the number of each such account or box, and the names of all Persons
authorized to draw thereon or to have access thereto.
4.25 Professional Credentials. Each Partner is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Company or any Company Subsidiary maintains an office, and there are
no disciplinary proceedings pending or threatened against the Company, any
Company Subsidiary or any of the Partners by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy.
4.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
Seller or the Company contained in this Agreement or in any of the
certification, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to CenterPoint as contemplated by any provision
hereof contains any untrue statement regarding a material fact or omits to state
a material fact necessary in order to make the statements made herein or therein
not misleading. To the Knowledge of Seller or the Company, there is no fact or
circumstance that has not been disclosed to CenterPoint herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARTNERS
5.1 Several Representations and Warranties. Each Partner, severally and
--------------------------------------
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
5.1.1 Capitalization. Except as set forth on Schedule 4.4,
-------------- ------------
immediately prior to the contribution thereof by such Partner to the
capital of Seller, such Partner owned beneficially and of record, and had
good and marketable title to, all of the issued and
26
<PAGE>
outstanding shares of the Company Stock as set forth opposite the name of
such Partner in Schedule 4.4, free and clear of all Liens. Upon
------------
contribution of such Company Stock to the capital of Seller, Seller
acquired, and at the Closing as provided in this Agreement, CenterPoint
will acquire, good and valid title to such Company Stock, free and clear of
any Lien other than any Lien created by CenterPoint.
5.1.2 Authority. Such Partner has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
such Partner, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Partner, enforceable against such Partner in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
5.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by such Partner does not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of Seller, the Company or any
Company Subsidiary under, any of the terms, conditions or provisions of (i)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority
applicable to such Partner, except for those items relating to regulating,
licensing or permitting the practice of public accountancy or (ii) other
than those licenses, franchises, permits, concessions or instruments of any
Governmental Authority, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which such Partner is a
party or by which such Partner may be bound or affected. The consummation
by such Partner of the transactions contemplated hereby will not result in
a violation, conflict, breach, right of termination, creation or
acceleration of Liens under the of the terms, conditions or provisions of
the items described in clauses (i) and (ii) of the immediately preceding
sentence, subject to obtaining (prior to the Closing Date) the consents set
forth on Schedule 4.3.2 and except for those items described above relating
--------------
to regulating, licensing or permitting the practice of public accountancy
and any filing which may be required under the HSR Act.
5.1.4 Approvals. To the Knowledge of such Partner, and except with
---------
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting
27
<PAGE>
the practice of public accountancy, no declaration, filing, or registration
with, or notice to, or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by such Partner or the consummation by such Partner of the
transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Partner, threatened against such Partner relating to
(i) the transactions contemplated by this Agreement, (ii) any action taken
by such Partner or contemplated by such Partner in connection with the
consummation by such Partner of the transactions contemplated hereby or
(iii) the practice of public accountancy by such Partner.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, shares of Company Stock previously owned by
such Partner or obligating such Partner to grant, extend or enter into any
such agreement or commitment or obligating such Partner to convey or
transfer any Company Stock. As of the Closing Date, there will be no voting
trusts, proxies or other agreements or understandings to which such Partner
is a party or is bound with respect to the voting of any shares of capital
stock or other equity interests of the Company other than the Voting
Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Partner contained in this Agreement or any of the written statements
or certificates furnished at or prior to the Closing by or on behalf of
such Partner to CenterPoint or its representatives in connection herewith
or pursuant hereto, contains any untrue statement of a material fact, or
omits or will omit to state any material fact required to make the
statements contained herein or therein not misleading.
5.1.8 Representations and Warranties of Seller and the Company. To
--------------------------------------------------------
such Partner's actual knowledge, the representations and warranties of
Seller and the Company set forth in Article IV of this Agreement are true
----------
and correct.
5.2 Joint and Several Representations and Warranties. The Partners jointly
------------------------------------------------
and severally represent and warrant to CenterPoint that the authorized capital
stock of the Company consists of 30,000 shares of Company Stock, of which 15,000
shares are issued and outstanding and 1,500 shares are held in the Company's
treasury, all of which are validly issued and are fully paid, nonassessable and
free of preemptive rights.
28
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to Seller, the Company and the Partners
as of the date hereof and, subject to Section 7.3, as of the date on which
-----------
CenterPoint and the lead Underwriter execute and deliver the Underwriting
Agreement related to the IPO and as of the Closing Date as follows:
6.1 Organization And Qualification. Each of CenterPoint and Mergersub is
------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Seller and the Company.
6.2 Capitalization.
--------------
6.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares are outstanding
as of the date hereof. All of the issued and outstanding shares of
CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in the Form S-1 will be issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be issued and outstanding. Other than (i) shares of CenterPoint
Common Stock issued pursuant to a split of the shares outstanding as of the
date of this Agreement, (ii) shares of CenterPoint Common Stock issued in
accordance with the Acquisition and the Other Acquisitions, and (iii)
shares of CenterPoint Common Stock that may be issued to new members of
management in lieu of shares previously issued to current members of
management, but which will not increase the number of shares of outstanding
CenterPoint Common Stock, no shares of CenterPoint Common Stock will be
issued prior to the consummation of the IPO. Mergersub's authorized capital
stock consists solely of 1000 shares of common stock, par value $.01 per
share (the "MERGERSUB STOCK"), all of which are issued and outstanding, are
owned free and clear of any Liens by CenterPoint, and are fully paid,
nonassessable and free of preemptive rights.
6.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or
29
<PAGE>
exchange under any outstanding security, instrument or other agreement
obligating CenterPoint to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of CenterPoint or
obligating CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Seller in the Acquisition will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
6.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation, and
Mergersub (and similar entities created for similar purposes with respect to the
Other Agreements) CenterPoint has no subsidiaries and it does not own any
capital stock of any corporation or any equity or other interest of any nature
whatsoever in any Person.
6.4 Authority; Non-Contravention; Approvals.
---------------------------------------
6.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Boards of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by
Seller, the Company and the Partners, constitutes a valid and legally
binding agreement of CenterPoint and Mergersub, enforceable against each of
them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
6.4.2 The execution and delivery of this Agreement by CenterPoint and
Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint or Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint or Mergersub, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or Governmental Authority applicable
to CenterPoint or Mergersub or any of their respective properties or
30
<PAGE>
assets, or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which CenterPoint or
Mergersub is now a party or by which CenterPoint, Mergersub or any of their
respective properties or assets, may be bound or affected, except those
items described in clause (ii) relating to regulating, licensing or
permitting the practice of public accountancy. The consummation by
CenterPoint and Mergersub of the transactions contemplated hereby will not
result in any violation, conflict, breach, right of termination or
acceleration or creation of Liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the
immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory
Approvals and except for those items described in (ii) above relating to
regulating, licensing or permitting the practice of public accountancy.
6.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements by the SEC and filings, if
required, with various state securities or "blue sky" authorities, (ii)
any filing which may be required under the HSR Act, (iii) any filing which
may be required by any Governmental Authority or self-regulatory
organization regulating, licensing or permitting the practice of public
accountancy (the filings and approvals referred to in clauses (i) through
(iii) are collectively referred to as the "CENTERPOINT REQUIRED STATUTORY
APPROVALS") no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body
or authority is necessary for the execution and delivery of this Agreement
by CenterPoint or Mergersub or the consummation by CenterPoint or Mergersub
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be, are not reasonably
expected to, in the aggregate, have a material adverse effect on the
business operations, properties, assets, condition (financial or other),
results of operations or prospects of CenterPoint and its subsidiaries,
taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
6.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is either bound by any obligation or undertaking.
6.6 Litigation. There are no claims, suits, actions or proceedings pending
----------
or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the
Acquisition or the IPO or which could reasonably be expected, either alone
31
<PAGE>
or in the aggregate with all such claims, actions or proceedings, to have a
CenterPoint Material Adverse Effect. CenterPoint is not subject to any
unsatisfied or continuing judgment, order or decree of any court or Governmental
Authority. CenterPoint is not a party to any legal action to recover monies due
it or for damages sustained by it.
6.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or Mergersub under any Law.
6.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to Seller, the Company or the Partners as
contemplated by any provision hereof contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. To the Knowledge of CenterPoint,
there is no fact or circumstance that has not been disclosed to the Company
herein that has or is reasonably expected to have a Company Material Adverse
Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
7.1 Conduct of Business by the Company Pending the Acquisition.
----------------------------------------------------------
7.1.1 Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless CenterPoint shall otherwise agree in writing, the Company
shall, and shall cause each Company Subsidiary to:
(a) in all material respects conduct the Business in the
ordinary and usual course and consistent with past customs and
practices;
(b) not (i) amend its Organizational Documents except as
necessary to complete the Conversion, (ii) split, combine or
reclassify its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property
or otherwise except dividends or distributions which (A) are
32
<PAGE>
consistent with past customs and practices and (B) do not result in a
Company Material Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of, its
capital stock or equity interests of any class, (ii) any debt with
voting rights or (iii) any debt or equity securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions, or
options to acquire, any such capital stock, debt with voting rights or
convertible securities;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated on Schedule 4.9, not (i) increase in
------------
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of business
in a manner consistent with past customs and practices of the Company
or any Company Subsidiary, as applicable, (ii) pay or agree to pay any
additional pension, retirement allowance or other employee benefit
under any Employee Plan to any such Person, whether past or present,
(iii) enter into any new employment, severance, consulting, or other
compensation agreement with any of its existing employees, partners,
members or
33
<PAGE>
owners, (iv) amend or enter into a new Employee Plan (except as
required by Law) or amend or enter into a new collective bargaining
agreement, or (v) engage in any new Affiliate Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or
indirectly, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial
portion of the assets of, or by any other manner, any businesses or
any Person or division thereof or otherwise acquire or agree to
acquire any assets in each case which are material to it other than in
the ordinary course of business in a manner consistent with past
customs and practices;
(j) not sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of,
any of its assets other than in the ordinary course of business,
consistent with past customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual
course and consistent with past custom and practices.
7.1.2 Prior to the Closing, the Partners shall have (a) formed a
separate Person ("ATTEST ENTITY") pursuant to Organizational Documents
reasonably acceptable in form and substance to CenterPoint and (b) used
their diligent efforts to have secured, or have caused the Attest Entity to
have secured, all licenses, permits, approvals and authorizations necessary
to conduct the Attestation Practice in accordance with applicable laws and
regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Partners, Seller or the
Company shall take, or permit any Company Subsidiary to take, any action
that would or is reasonably likely to result in any of the representations
or warranties of the Partners, Seller and the Company set forth in this
Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X (other than
---------
Section 10.1(i)) not being satisfied.
---------------
7.1.4 Prior to the Closing, (i) the Company and/or the Partners, as
applicable, shall terminate, without any liability to the Company or the
Company Subsidiaries, all agreements relating to the voting of the
Company's capital stock, and all agreements and
34
<PAGE>
obligations of the Company and the Company Subsidiaries relating to
borrowed money and/or involving payments to or for the benefit of a Partner
or former stockholder of the Company, or an Affiliate or family member of a
Partner or former stockholder of the Company, including without limitation
those set forth on Schedule 7.1.4(i), but excluding (A) debt reflected on
-----------------
Schedule 2.1 as Debt Assumed By CenterPoint, (B) items reflected on
------------
Schedule 2.5, (C) to the extent such agreements and obligations result in
------------
Indirect Costs under the Incentive Compensation Agreement, (D) the
agreements set forth on Schedule 7.1.4(i)-D and (E) items approved by
-------------------
CenterPoint in writing, (ii) the Company shall transfer or distribute to
the Persons set forth on Schedule 7.1.4(ii), and such Persons shall assume,
------------------
(A) all assets identified on Schedule 7.1.4(ii) (collectively, the
------------------
"Excluded Assets") and (B) any and all liabilities and obligations of any
nature (whether known or unknown, accrued, absolute, contingent, direct,
indirect, perfected, inchoate, unliquidated or otherwise) relating to the
Excluded Assets and the Company's interest in Better Business Methods,
L.L.C., a Missouri limited liability company ("BBM"), which was transferred
by the Company to Seller effective as of January 1, 1999 (collectively, the
"EXCLUDED LIABILITIES"), and (iii) the Company may declare a special bonus
(the "Special Bonus") in an amount (after adding all Taxes payable by the
Company with respect thereto) not in excess of that portion of the AR that
is not necessary to meet the Target or otherwise satisfy the obligations of
the Company or the Partners hereunder. Prior to the Closing, the Company
and the Partners shall obtain novations or other releases or agreements
discharging the Company from all Excluded Liabilities (so that the
respective Excluded Liabilities will become direct liabilities and
obligations of the assignee), including without limitation the obligation
to make loans to BBM, contained in Section 2.d.i. of that certain Operating
Agreement dated August 3, 1998, by and among the Company, Richard F.
Schmidt and Keith S. Morris (the "BBM AGREEMENT"), and the restriction on
competition, contained in Section 6.g. of the BBM Agreement and provide
copies thereof to CenterPoint.
7.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, Seller, the Company and the Partners shall
(i) not, and each of Seller and the Company shall use its diligent efforts
to cause the Company Subsidiaries and any officer, director or employee of,
or any attorney, accountant, investment banker, financial advisor or other
agent retained by Seller, the Company or any Company Subsidiary not to,
initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of the Company
or any Company Subsidiary, or any capital stock or other equity interest of
Seller, the Company or any Company Subsidiary, whether by merger, purchase
of assets or otherwise, whether for cash, securities or any other
consideration or combination thereof, or enter into any joint venture or
partnership or similar arrangement, and (ii) promptly advise CenterPoint of
the terms of any communications Seller, the
35
<PAGE>
Company or the Partners may receive or become aware of relating to any bid
for part or all of Seller, the Company or any Company Subsidiary.
(b) Seller, the Company and the Partners (i) acknowledge that a breach
of any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
7.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding Companies consent to such
amendment or supplement, but Seller, the Company and a majority of the Partners
do not, Seller, the Company and a majority of the Partners may terminate this
Agreement at any time prior to the Closing Date. In the event that (i) Seller,
the Company or the Partners seek to amend or supplement a Schedule pursuant to
this Section 7.3, (ii) such amendment or supplement constitutes or reflects a
-----------
Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4 or
------------ ------------
Schedule 8.8, and (iii) CenterPoint and a majority of the Founding Companies do
- ------------
not consent to such amendment or supplement, this Agreement shall be deemed
terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to Seller's, the Company's or any Partner's
breach of a representation or warranty as of the date of this Agreement in which
case the Company shall pay to CenterPoint, as CenterPoint's exclusive remedy
(notwithstanding anything to the contrary) and as liquidated damages, and not as
a penalty, an amount equal to $2,000,000 (the "LIQUIDATED DAMAGES AMOUNT"). The
Company agrees that in the case of such termination CenterPoint and the Founding
Companies (excluding the Company) will sustain immediate and irreparable
economic harm and loss of goodwill and that actual losses
36
<PAGE>
suffered by such parties will be difficult, if not impossible, to ascertain, but
the Liquidated Damages Amount set forth herein is reasonable and has been
arrived at after a good faith effort to estimate such losses. Payment of the
Liquidated Damages Amount shall be made in cash to CenterPoint within thirty
(30) days of a termination pursuant to this Section 7.3 in connection with an
-----------
amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
7.4 Company Stockholders Meeting. The Company shall take all action in
----------------------------
accordance with applicable Laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Company's
stockholders to be held on the earliest practicable date determined in
consultation with CenterPoint to consider and vote upon approval of the Merger,
this Agreement and the transactions contemplated hereby. The Company shall
solicit the approval of the Merger, this Agreement and the transactions
contemplated hereby by the Company's stockholders and the Company's Board of
Directors shall recommend approval of the Merger, this Agreement and the
transactions contemplated hereby by the Company's stockholders.
7.5 Conversion. Prior to the Closing but effective only if, as and when
----------
the Closing occurs, Seller and the Partners shall cause the Company to complete,
and the Company shall complete, the Conversion, pursuant to applicable law and
present such evidence of the Conversion at the Closing, as CenterPoint or its
counsel may require.
ARTICLE VII
ADDITIONAL AGREEMENTS
8.1 Access to Information.
---------------------
8.1.1 The Company shall and shall cause the Company Subsidiaries to
afford to CenterPoint and its accountants, counsel, financial advisors and
other representatives, including without limitation the underwriters
engaged in connection with the IPO (each an "UNDERWRITER" and
collectively, the "UNDERWRITERS") and their counsel (collectively, the
"CENTERPOINT REPRESENTATIVES"), and to the other Founding Companies and
their accountants, counsel, financial advisors and other representatives,
and CenterPoint shall afford to the Partners, Seller and the Company and
their accountants, counsel, financial advisors and other representatives
(the "COMPANY REPRESENTATIVES"), upon reasonable notice, full access during
normal business hours throughout the period prior to the Closing Date to
all of its respective properties, books, contracts, commitments and records
(including, but not limited to, financial statements and Tax Returns) and,
during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall
use its best efforts to cause the CenterPoint Representatives to hold, and
the Partners, Seller and the Company shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict
37
<PAGE>
confidence all non-public information furnished to it in connection with
the transactions contemplated by this Agreement, except that each of
CenterPoint, the Partners and the Company may disclose any information that
it is required by law or judicial or administrative order to disclose. In
addition, CenterPoint will cause each of the other Founding Companies and
their members and stockholders to enter into a provision similar to this
Section 8.1 requiring each such Founding Company to keep confidential any
-----------
information obtained by such Founding Company in connection with the
transactions contemplated by this Agreement.
8.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Company based on the information in such material shall
be destroyed (and CenterPoint and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy such documents, memoranda and notes), and such
destruction (and reasonable best efforts) shall be certified in writing by
an authorized officer supervising such destruction.
8.2 Registration Statements.
-----------------------
8.2.1 Subject to the reasonable discretion of CenterPoint as advised
by the lead Underwriter, CenterPoint shall file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statements
and shall use all reasonable efforts to have the Registration Statements
declared effective by the SEC as promptly as practicable. CenterPoint shall
also take any action required to be taken under applicable state "blue sky"
or securities laws in connection with the issuance of CenterPoint Common
Stock. CenterPoint, Seller, the Company and the Partners shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with making such filings. All
information provided and to be provided by CenterPoint Seller, the Partners
and the Company, respectively, for use in the Registration Statements shall
be true and correct in all material respects without omission of any
material fact which is required to make such information not false or
misleading as of the date thereof and in light of the circumstances under
which given or made. Seller, the Company and the Partners agree promptly to
advise CenterPoint if at any time during the period in which a prospectus
relating to the offering or the Merger is required to be delivered under
the Securities Act, any information contained in the prospectus concerning
the Company, the Company Subsidiaries, Seller or the Partners becomes
incorrect or incomplete in any material respect, and to provide the
information needed to correct such inaccuracy or remedy such incompletion.
38
<PAGE>
8.2.2 CenterPoint agrees that it will provide to Seller and its counsel
copies of drafts of the Registration Statements (and any amendments thereto)
containing material changes to the information therein as they are prepared and
will not (i) file with the SEC, (ii) request the acceleration of the
effectiveness of or (iii) circulate any prospectus forming a part of, the
Registration Statements (or any amendment thereto) unless Seller and its counsel
(x) have had at least two days to review the revised information contained
therein (which changes shall be highlighted by computer generated marks
indicating the additions and deletions made from the prior draft reviewed by
Seller's counsel) and (y) have not objected to the substance of the information
contained therein. Any objections posed by Seller or its counsel shall be in
writing and state with specificity the material in question, the reason for the
objection, and Seller's proposed alternative. If the objection is founded upon a
rule promulgated under the Securities Act, the objection shall cite the rule.
Notwithstanding the foregoing, during the five (5) business days immediately
preceding the date scheduled for the filing of the Registration Statements and
any amendment thereto, Seller, and its counsel shall be obligated to respond to
proposed changes electronically transmitted to them within two (2) hours from
the time the proposed changes (in the case of the initial filing of the
Registration Statements, from the last circulated draft of the Registration
Statements; and, in the case of any subsequent filing of the Registration
Statements or any amendment thereof, from the most recently filed Registration
Statements or amendment thereof) are transmitted to Seller's counsel; provided,
--------
that, CenterPoint has provided to Seller or its counsel reasonable advance
- ----
notice of such proposed changes; provided, further, that such changes are
-------- -------
highlighted by computer generated marks indicating the additions and deletions
made from the prior draft reviewed by Seller's counsel.
8.2.3 CenterPoint will advise the Partner Representative of the
effectiveness of the Registration Statements, advise the Partner Representative
of the entry of any stop order suspending the effectiveness of the Registration
Statements or the initiation of any proceeding for that purpose, and, if such
stop order shall be entered, use its best efforts promptly to obtain the lifting
or removal thereof. Upon the written request of Seller, CenterPoint will furnish
to Seller a reasonable number of copies of the final prospectus associated with
the IPO.
8.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of the
-----------------
independent public accountants and legal counsel to CenterPoint and all filing,
printing and other reasonable, documented fees and expenses associated with the
IPO and Form S-4. Neither Seller, the Company nor the Partners will be liable
for any portion of the above expenses in the event the IPO is not completed.
CenterPoint shall also pay the underwriting discounts and commissions payable in
connection with the sale of CenterPoint Common Stock in the IPO. All other costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
8.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
39
<PAGE>
8.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint, Seller and the Company.
8.6 Registration Rights.
-------------------
8.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give Seller and the Partner Representative prompt written
notice of its intent to do so. Promptly after receipt of such notice,
Seller and the Partner Representative shall provide written notice to
CenterPoint of all Partners (and their respective current mailing address)
that beneficially own shares of CenterPoint Common Stock. Thereafter, upon
the written request of Seller or any of the Partners given within thirty
(30) days after receipt of such notice, CenterPoint will use its best
efforts to cause to be included in such registration all of the CenterPoint
Common Stock which Seller or any such Partner requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
-----------
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by Seller or any Partner at any time when
such shares are not then transferable in accordance with Section 12.2
------------
hereof. Registration rights under this Section 8.6 may be transferred in
-----------
whole or in part in connection with the transfer of any shares of
CenterPoint Common Stock received pursuant to this Agreement other than the
transferee of the kind described in clause (x) of Section 12.2 hereof.
------------
8.6.2 Except for underwriting commissions and discounts, all expenses
incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with respect
to the CenterPoint
40
<PAGE>
Common Stock (and such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Partner whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to such
Partner a reasonable number of copies of the prospectus covering the
offering and sale by the Partner of the shares to be covered thereby;
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise Seller and each Partner whose CenterPoint Common Stock
is to be covered by such registration of the effectiveness of such
registration statement, advise Seller and each such Partner of the entry of
any stop order suspending the effectiveness of such registration statement
or of the initiation of any proceeding for that purpose, and, if such stop
order shall be entered, use its best efforts promptly to obtain the lifting
or removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify Seller
and each Partner whose CenterPoint Common Stock is to be covered by such
registration, of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated therein
by reference includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading and, at the request of Seller or
such Partner, prepare and furnish to Seller or such Partner a post-
effective amendment or supplement to the registration statement or the
related prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading.
41
<PAGE>
8.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and
---
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
8.6.4 In consideration of the granting to Seller and the Partners of
the registration rights under this Section 8.6, Seller and the Partners
-----------
agree, and agree to enter into an agreement with the underwriters in
connection with an underwritten registration to the effect, that it/they
will not sell, transfer or otherwise dispose of, including, without
limitation, through put or short sale arrangements, shares of CenterPoint
Common Stock in the ten (10) days prior to the effectiveness of any
registration of CenterPoint Common Stock for sale to the public and for up
to ninety (90) days following the effectiveness of such registration,
provided that all directors, executive officers and holders of more than
five percent (5%) of the outstanding CenterPoint Common Stock agree to the
same restrictions; and further provided that, with respect to the first
public offering of shares of the CenterPoint Common Stock within three (3)
years following the IPO, Seller and the Partners shall have been afforded a
meaningful opportunity to include shares in such registration after any
reduction by reason of underwriters' written advice.
8.7 CenterPoint Covenants. After the date hereof and prior to the Closing
---------------------
Date or earlier termination of this Agreement in accordance with its terms,
CenterPoint shall comply in all material respects with all applicable Laws.
CenterPoint shall not take any action that would or is reasonably likely to
result in any of the representations or warranties of CenterPoint set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
8.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Partners released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Partners' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Partners against any and all claims made by lenders or
landlords under such guarantees.
8.9 Lock-Up Agreement. Seller and each Partner agree, and agree to enter
-----------------
into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, Seller and the
Partners will not offer, sell, contract to sell or otherwise dispose of any
shares of CenterPoint Common Stock, or any securities convertible into or
42
<PAGE>
exercisable or exchangeable for CenterPoint Common Stock, for a period of 180
days after the date of the final Prospectus of the IPO without the prior written
consent of the Underwriter except for shares of CenterPoint Common Stock
disposed of as bona fide gifts, subject to any remaining portion of the 180-day
period applying to any shares so disposed of.
8.10 Preparation and Filing of Tax Returns.
-------------------------------------
8.10.1 The Company shall be responsible for causing the timely filing
of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
8.10.2 Each of Seller, the Company, CenterPoint and the Partners
shall comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the
transaction as subject to the provisions of Section 351 of the Code.
8.11 Maintenance of Insurance. The Company covenants and agrees that all
------------------------
insurance policies listed, or required to be listed, on Schedule 4.20 will be
-------------
maintained in full force and effect through the Closing Date.
8.12 Administration. After the Closing, at the request of Seller,
--------------
CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule
--------
7.1.4(ii) using reasonable care and in accordance with the Company's policies in
- ---------
effect at Closing.
8.13 Payment of Special Bonus. After the Closing, CenterPoint shall cause
------------------------
the Company to make payments of the Special Bonus to the Persons and in the
amounts set forth on a schedule to be provided by the Partner Representative to
CenterPoint as soon as practicable after the Closing (which schedule shall be
substantially similar to the bonus projection schedule previously provided by
the Company to CenterPoint); provided, however, that (i) the Company shall make
such payments on a monthly basis (the first payment to be made one month after
the Closing Date), (ii) the aggregate payments to be made by the Company at the
end of each month shall be limited to the AR collected by the Company during
such month, (iii) one hundred eighty days after the Closing Date the Company
shall (A) make payments of AR collected through such date and not yet paid out
in accordance with this Section 8.13, and (B) distribute any then remaining AR
------------
as final payment of the Special Bonus, and (iv) in no event shall the liability
of CenterPoint and the Company under this Section 8.13 plus for all Taxes
------------
payable by the Company on account of the Special Bonus exceed the amount of the
AR.
43
<PAGE>
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Partners. Subject to Sections 9.7 and 9.8, the
-------------------------------
Partners jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Partner or any action,
demand or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the Partners
to indemnify, defend and save harmless for any misrepresentation or breach
of representation or warranty made in Section 5.1 hereof or in any
-----------
certificate, schedule, document, exhibit or other instrument delivered in
respect thereof shall not be joint and several, but such obligation shall
be several only and limited to the several Partner(s) making such
misrepresentation or breach;
(b) any failure by Seller, the Company or any Partner to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing, except that the obligation of the Partners
to indemnify, defend and save harmless for any breach of a covenant or
agreement by a Partner shall not be joint and several, but such obligation
shall be several only and limited to the several Partner(s) committing such
breach;
(c) any liability under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 ACT"), or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
the Company contained in any preliminary prospectus relating to the IPO,
the Registration Statements or any proxy statement or prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising
out of or based upon any omission to state therein a material fact relating
to the Company required to be stated therein or necessary to make the
statements therein not misleading, and not provided to CenterPoint or its
counsel by the Company; provided, however, that such indemnity shall not
-------- -------
inure to the benefit of any CenterPoint Indemnified Party to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and
(i) the Company provided, in writing, corrected information to CenterPoint
or its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included,
44
<PAGE>
or (ii) CenterPoint did not provide the Company and its counsel with the
information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.1(c); or
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Partners, Seller
or the Company in connection with the Acquisition or the transactions
contemplated by this Agreement with respect to brokerage, finders and other
fees or commissions, (ii) disallowance of any tax deduction to CenterPoint
or the Company with respect to any item listed on Schedule 2.5 and
------------
considered in determining Net Working Capital and of the Special Bonus,
(iii) any matter which is or should be listed on Schedule 4.10 or which is
-------------
listed on Schedule 7.1.4 hereto, (iv) the Excluded Assets, the Excluded
--------------
Liabilities, the transactions contemplated or referred to in Section 7.1.4,
-------------
and the transaction identified as item 1 on Schedule 4.9, and (v) any
------------
payment with respect to the Dissenting Shares.
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided, further that the
-------- --------
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
----------
Article IX, the Other Founding Companies, and each of their respective officers,
- ----------
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall be deemed to
be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
45
<PAGE>
9.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Partners and their respective Affiliates, and their
Affiliates' respective officers, directors, employees and agents (each, a
"PARTNER INDEMNIFIED PARTY") forever harmless from and against, and to promptly
pay to a Partner Indemnified Party or reimburse a Partner Indemnified Party for,
any and all Losses sustained or incurred by any Partner Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Partner Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder; or
(c) any liability under the 1933 Act, the 1934 Act or other Federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Seller, the Company or the Partners, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to Seller, the Company or the
Partners required to be stated therein or necessary to make the statements
therein not misleading, to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) Seller, the Company or Partners
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Seller, the Partner Representative and their counsel with
the information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
-------------
46
<PAGE>
9.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
9.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "INDEMNIFIED PARTY") receives
notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a
"THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
9.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Partners, may be granted by the Partner
Representative (as defined in Section 9.13)), which consent shall not be
------------
unreasonably withheld or delayed.
9.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified
47
<PAGE>
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim, if pursuant to or
as a result of such settlement or cessation, (i) injunctive or other
equitable relief would be imposed against the Indemnified Party, or (ii)
such settlement or cessation would lead to liability or create any
financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification hereunder,
or (iii) such settlement includes a written admission of guilt. The
Indemnifying Party shall not be entitled to control, and the Indemnified
Party shall be entitled to have sole control over, the defense or
settlement of any claim (A) to the extent that claim seeks an order,
injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations,
assets, condition (financial or otherwise) or prospects of the Indemnified
Party or (B) in a proceeding to which the Indemnifying Party is also a
party and the Indemnified Party determines in good faith that joint
representation would be inappropriate (and in each case the cost of such
defense shall constitute an amount for which the Indemnified Party is
entitled to indemnification hereunder). If an offer is made to settle a
Third Party Claim which all parties to such Third Party Claim (including
the Indemnifying Party) are prepared to settle and which offer the
Indemnifying Party is permitted to settle under this Section 9.3.3 only
-------------
upon the prior written consent of the Indemnified Party, the Indemnifying
Party will give prompt written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent to such firm offer within
(30) calendar days after its receipt of such notice, the Indemnified Party
may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer, plus costs
and expenses paid or incurred by the Indemnified Party through the end of
such (30) day period.
9.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM") will
be asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, together with a statement of any available information regarding such
claim, and the Indemnifying Party will have a period of thirty (30) calendar
days within which to satisfy such Direct Claim. If the Indemnifying Party does
not so respond within such thirty (30) calendar day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party under this Article IX.
----------
48
<PAGE>
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties, such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
9.7 Limitation on Indemnities.
-------------------------
9.7.1 Threshold for the Partners. With respect to representations and
--------------------------
warranties, the Partners shall not have any liability pursuant to Section
-------
9.1(a) hereof unless and until and only to the extent that the aggregate
------
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
-------------
Basic Purchase Consideration; provided, however, that this threshold shall
-------- -------
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.2 and 5.1.8 as it relates
-------------- ----- --- -----
to the representation and warranty of Seller and the Company set forth in
Section 4.16, and the Partners shall indemnify the CenterPoint Indemnified
------------
Parties for any Losses accruing thereunder in accordance with this Article
-------
IX without regard to such threshold.
--
9.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however, that this
-------- -------
threshold shall not apply to Losses arising out of the breach of
representations or
49
<PAGE>
warranties contained in Section 6.2 and CenterPoint shall indemnify the
-----------
Partner Indemnified Parties from any Losses occurring thereunder in
accordance with this Article IX without regard to such threshold.
----------
9.7.3 Limitations on Claims Against the Partners. The liability of
------------------------------------------
all Partners for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
-------------
Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Partner shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Partner or
by Seller on behalf of such Partner; provided further, however, that such
---------------- -------
limitations shall not apply to Losses arising out of breaches of
representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2, and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of Seller and the
-----
Company set forth in Section 4.16, and any Losses accruing thereunder shall
------------
not count towards such limitations.
9.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
9.8 Survival of Representations, Warranties and Covenants of the Partners,
----------------------------------------------------------------------
Seller and the Company; Time Limits on Indemnification Obligations.
- ------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of
Seller, the Company, the Company Subsidiaries and the Business, and
notwithstanding any Knowledge of facts determined or determinable by CenterPoint
pursuant to such investigation or right of investigation, CenterPoint has the
right to rely fully upon the representations, warranties, covenants and
agreements of the Partners, Seller and the Company contained in this Agreement
or in any certificate delivered pursuant to any of the foregoing. All such
representations, warranties, covenants and agreements of the Partners, Seller
and the Company shall survive the execution and delivery of this Agreement and
the Closing hereunder; provided, however, (i) that the Partners' obligations
-------- -------
pursuant to Section 9.1, other than those relating to covenants and agreements
-----------
to be performed by the Partners after the Closing, shall expire one (1) year
after the Closing, except with respect to obligations arising under or relating
to Section 4.16 hereof as it relates to federal, state, local and foreign income
------------
taxation, which shall survive until the earlier of (A) the expiration of the
applicable periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the Taxes or (B) the completion of the
final audit and determinations by the applicable taxing authority and final
disposition of any deficiency resulting therefrom; and (ii) solely to the extent
that CenterPoint actually incurs liability under the 1933 Act or the 1934 Act,
the obligations under Sections 9.1(c) or (d) above shall survive until the
--------------- ---
expiration of any applicable statute of limitations with respect to such claims.
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements of
50
<PAGE>
CenterPoint shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, that CenterPoint's obligations under
-------- -------
Section 9.2, other than those relating to covenants and agreements to be
- -----------
performed by CenterPoint after the Closing, shall expire one year after Closing,
except that, solely to the extent that the Partners actually incur liability
under the 1933 Act or the 1934 Act, the obligations under Section 9.2(c) or (d)
-------------- ---
above shall survive until the expiration of any applicable statute of
limitations with respect to such claims.
9.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
9.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
----------------------- ----------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any Law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
----------
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Partners and of the Partner Indemnified
Parties following the Closing against CenterPoint and its affiliates with
respect to any claim for relief resulting from, arising out of or otherwise by
virtue of this Agreement and the transactions contemplated hereby.
9.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Partners may satisfy their respective obligations, if any, under
this Article IX by tendering to the CenterPoint Indemnified Parties cash or
----------
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE" shall
- ------------
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (i) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
9.13 Partner Representative. Each of the Partners and Seller appoints
----------------------
Lawrence J. Porschen (the "PARTNER REPRESENTATIVE") as its agent and
representative with full power and authority to agree, contest or settle any
claim or dispute affecting any Partner made under Articles II or IX and to
otherwise act on behalf of the Partners in accordance with the terms of this
Agreement, including, without limitation, to direct the amount and manner of the
payment of the aggregate Basic Purchase Consideration; provided, that the
-------- ----
Partner Representative may be removed and a successor to the Person originally
serving as the Partner Representative may be designated in a writing signed by a
majority-in-interest of the Partners and delivered to CenterPoint in accordance
with Section 15.2.
------------
51
<PAGE>
ARTICLE X
CLOSING CONDITIONS
10.1 Conditions to Each Party's Obligation to Effect the Acquisition. The
---------------------------------------------------------------
respective obligations of each party to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Acquisition or any
of the Other Acquisitions shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Acquisition or any of the Other Acquisitions or make
the consummation of the Acquisition or any of the Other Acquisitions
illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Acquisition or any of the
Other Acquisitions and the transactions contemplated hereby and by the
Other Agreements (including, without limitation, any consents listed on
Schedules 4.3.2 or 4.12) shall have been obtained and be in effect;
--------------- ----
52
<PAGE>
(h) No action, suit or proceeding with respect to the Acquisition
has been filed or threatened by a third party and remains threatened or
remains pending before any court, Governmental Authority or regulatory
Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Company's stockholders
in the manner required by any applicable Law and the Company's
Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit
facilities providing for aggregate commitments of not less than $75
million.
10.2 Conditions to Obligation of the Partners, Seller and the Company to
-------------------------------------------------------------------
Effect the Acquisition. Unless waived by Seller, the obligation of the Partners,
- ----------------------
Seller and the Company to effect the Acquisition shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and Seller
and the Company shall have received a certificate of the Chief Executive
Officer or President of CenterPoint to that effect;
(b) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to Seller of the Acquisition;
(c) the Company shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to Seller, the Company and the
Partners;
(d) each of the Partners shall have been afforded the opportunity to
enter into an incentive compensation agreement (the "INCENTIVE COMPENSATION
AGREEMENT") with CenterPoint substantially in the form attached hereto as
Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to Seller, the Company and the
Partners a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State, showing
that CenterPoint is in good standing;
53
<PAGE>
(f) each of the Partners, the partners, members and stockholders of
the other Founding Companies who are to receive shares of CenterPoint
Common Stock pursuant to the Other Agreements, and the other stockholders
of CenterPoint other than those acquiring stock in the IPO shall have
entered into an agreement (the "STOCKHOLDERS AGREEMENT") substantially in
the form attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Acquisitions of the other Founding
Companies, on substantially the same terms as provided herein, shall have
been satisfied or waived by the applicable party and the Company;
(h) each of Seller and the Partners shall have been afforded the
opportunity to
review the executed employment agreement by and between CenterPoint and
Robert C. Basten; and
(i) the Company shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions, that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received in exchange for Company Stock in the Merger pursuant to
Section 351 of the Code, the final form of such opinion to be in form and
substance reasonably acceptable to the Company and the Partners.
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition.
-----------------------------------------------------------------
Unless waived by CenterPoint, the obligation of CenterPoint and Mergersub to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing of the additional following conditions:
(a) Seller and the Company shall have performed in all material
respects their respective agreements contained in this Agreement required
to be performed on or prior to the Closing Date and the representations and
warranties of Seller and the Company contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of each of Seller and the Company to
that effect;
(b) the Partners shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Partners contained in this Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing
Date as if made at and as of such date, and CenterPoint and the
Underwriters shall have received a Certificate of each Partner to that
effect;
(c) CenterPoint and the Underwriters shall have received an
opinion from Jerome Mandelstamm, Esq. counsel to Seller, the Company, and
the Partners, dated the
54
<PAGE>
Closing Date, in the form attached hereto as Exhibit 10.3(c), the final
---------------
form of such opinion to be in form and substance reasonably acceptable to
the Underwriters and CenterPoint;
(d) Seller and the Partners shall have caused the Attest Entity
and the Company, as applicable, to have executed and delivered a Separate
Practice Agreement substantially in the form attached hereto as Exhibit
-------
10.3(d)(A) and a Services Agreement substantially in the form attached
----------
hereto as Exhibit 10.3(d)(B);
------------------
(e) each Partner shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached hereto as Exhibit
-------
10.2(d);
------
(f) CenterPoint and the Underwriters shall have received
"Comfort" letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(g) Seller and the Company shall have delivered to CenterPoint
and the Underwriters a certificate, dated as of a date no later than ten
days prior to the Closing Date, duly issued by the appropriate Governmental
Authority in the state of organization of Seller, the Company and each
Company Subsidiary and, unless waived by CenterPoint, in each state in
which the Company or any Company Subsidiary is authorized to do business,
showing Seller, the Company or Company Subsidiary (as applicable) is in
good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Acquisition;
(i) the Partners shall have executed the Stockholders Agreement;
(j) Seller and the Partners shall have delivered to CenterPoint
an instrument in the form attached hereto as Exhibit 10.3(j), dated the
---------------
Closing Date, releasing the Company and the Company Subsidiaries from any
and all claims of Seller and the Partners against the Company and the
Company Subsidiaries and obligations of the Company and the Company
Subsidiaries to Seller and the Partner;
(k) the Company's interest in BBM and all Excluded Liabilities
related thereto, including without limitation under the BBM Agreement,
shall have been distributed,
55
<PAGE>
transferred, assigned and novated, as applicable, in form and substance on
terms and conditions acceptable to CenterPoint;
(l) the Company shall have presented evidence in form and substance on
terms and conditions satisfactory to CenterPoint of its compliance with the
provisions of Section 7.1.4 hereof, including, without limitation that as
-------------
of the Closing the amount of debt of the Company and the Company
Subsidiaries shall not exceed the amount reflected on Schedule 2.1 as Debt
------------
Assumed By CenterPoint;
(m) Seller, the Company and the Partners, as applicable, shall have
terminated or have caused the termination of any voting trusts, proxies or
other agreements or understandings to which Seller, the Company or any
Partner is a party or is bound with respect to any shares of capital stock
or other equity interests of the Company and the Company Subsidiaries and
shall have provided CenterPoint evidence of such termination that is
acceptable to CenterPoint's counsel;
(n) Seller, the Company and the Partners shall have completed the
Conversion of the Company and have presented evidence of such conversion in
accordance with Section 7.5;
(o) Seller, the Company and the Partners shall have delivered payoff
letters including a statement of per diem interest amounts and other
applicable release documents from all institutional lenders and creditors
of the Company and the Company Subsidiaries regarding the payment in full
of indebtedness at Closing, in each case in form and substance satisfactory
to CenterPoint (including, without limitation, applicable UCC-3 termination
statements); and
(p) the secretary of the Company shall have delivered certified copies
of the resolutions of the board of directors and shareholders of the
Company and the Partner Representative shall have delivered certified
copies of resolutions of the Partners, approving execution and delivery of
this Agreement, the Conversion, the Merger and the other actions,
agreements and documents, necessary or desirable to complete the
transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
56
<PAGE>
(b) by Seller,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of Seller, the
Company or any Partner or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of Seller,
the Company or any of the Partner or any of their affiliates or
associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30) days
after written notice of such default is given to CenterPoint; or
(c) by CenterPoint,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of CenterPoint
or any of its stockholders or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of
CenterPoint or any of its stockholders or any of their affiliates or
associates;
(iii) if Seller or the Company (A) fails to perform in any
material respect any of its material covenants in this Agreement and
(B) does not cure such default in all material respects within thirty
(30) days after written notice of such default is given to Seller or
the Company by CenterPoint;
(iv) if a Partner (A) fails to perform in any material respect
any of such Partner's material covenants in this Agreement and (B)
does not cure such default in all material respects within thirty (30)
days after written notice of such default is given to the Partner
Representative by CenterPoint; or
(d) by mutual consent of the Operating Committee of Seller and the
Board of Directors of CenterPoint.
11.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or Seller, as provided in Section 11.1, this Agreement
------------
shall forthwith become void and there shall be no further obligation on the part
of Seller, the Company, the Partners, CenterPoint or Mergersub or their
respective officers or directors (except the obligations set forth in this
Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall
- ------------ ------------ --- --- ----------
survive the
57
<PAGE>
termination). Nothing in this Section 11.2 shall relieve any party from
------------
liability for any breach of this Agreement.
11.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. CenterPoint
covenants and agrees that it shall not amend, modify or supplement the material
terms of any Other Agreement following the Closing without the prior written
consent of at least two thirds (2/3rds) of the members of CenterPoint's Board of
Directors; provided that no waiver of any restriction set forth in Article XII
-----------
shall be of any effect unless consented to by a majority of the members of
CenterPoint's Board of Directors who do not at the time of such proposed waiver
hold Restricted Shares within the meaning of this Agreement, any Other Agreement
or the Stockholders Agreement.
11.4 Waiver. At any time prior to the Closing Date, the parties hereto may
------
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
12.1 Transfer Restrictions. Except for distributions by Seller to the
---------------------
Partners and except as provided in Section 12.2, for a period of forty-two (42)
------------
months from the Closing, none of Seller nor any of the Partners shall (a) sell,
assign, exchange, transfer, distribute or otherwise dispose of, in whole or in
part, (i) any shares of CenterPoint Common Stock received by Seller in the
Acquisition and/or subsequently distributed by Seller to the Partners (the
"RESTRICTED SHARES"), or (ii) any interest (including, without limitation, an
option to buy or sell) in any Restricted Shares; or (b) engage in any
transaction, whether or not with respect to any Restricted Shares or any
interest therein, the intent or effect of which is to reduce the risk of owning
the Restricted Shares (including, without limitation, engaging in put, call,
short-sale, derivative, straddle or similar market transactions); provided,
however, for a period of one (1) year from the Closing, Seller shall not
distribute any Restricted Shares to any Partner.
12.2 Release of Restrictions. Effective eighteen (18) months following the
-----------------------
Closing, and every six (6) months thereafter, until all Restricted Shares shall
have been released from such restrictions, twenty percent (20%) of the original
number of Restricted Shares of Seller and/or each Partner shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no
------------
58
<PAGE>
longer be deemed Restricted Shares for any purposes of this Agreement; provided,
--------
that if a Partner's employment with CenterPoint or its subsidiary is terminated
- ----
within 30 months of the Closing other than through death, disability, retirement
or circumstances approved by the Company's management and reasonably approved by
CenterPoint's chief executive officer, the Restricted Shares then held by such
Partner (or held by Seller for such Partner) shall remain subject to the
restrictions set forth in Section 12.1 until the fifth anniversary of the
------------
Closing Date. Notwithstanding the foregoing and Section 12.1, Seller or a
------------
Partner may (x) at any time pledge or encumber all or part of Seller's or such
Partner's Restricted Shares, as applicable, provided that the pledgee or secured
party agrees in writing to be bound by the provisions contained in Article XII,
-----------
(y) at any time after the first anniversary of the Closing transfer all or part
of such Partner's Restricted Shares to another Partner or to an immediate family
member (or trust or other estate planning Person), provided, that any such
-------- ----
Partner, family member or other Person agrees in writing to be bound by the
provisions contained in Article XII, and (z) transfer or cause to be transferred
-----------
such Partner's Restricted Shares upon such Partner's disability or death. As
used in this Section 12.2, the terms "disability" and "retirement" shall have
------------
the meaning ascribed to them in CenterPoint's Employee Incentive Compensation
Plan. No attempted transfer of any nature whatsoever that is in violation of
this Section shall be treated as effective for any purpose.
12.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to Seller pursuant to this Agreement and/or subsequently distributed
by Seller to the Partners shall bear a legend substantially in the form set
forth below and containing such other information as CenterPoint may deem
necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATED MARCH __, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from Seller or any Partner (or a permitted transferee)
following the expiration of either all or a part of the restrictions on the
transfer of CenterPoint Common Stock set forth in this Article XII, CenterPoint
-----------
shall immediately notify its transfer agent that the applicable shares of
CenterPoint Common Stock are no longer restricted shares and shall direct the
transfer agent to reissue certificates of CenterPoint Common Stock which do not
contain a restrictive legend in place of the applicable restricted shares. In
the event Seller's or a Partner's request to remove the restrictive legend
coincides with Seller's or such Partner's request to sell the CenterPoint Common
Stock, CenterPoint shall take such actions as are required by its transfer agent
to allow the transfer agent to transfer the unrestricted CenterPoint Common
Stock free of any restrictive legend.
59
<PAGE>
ARTICLE XII
NONCOMPETITION
13.1 Prohibited Activities. Each Partner agrees severally, and not
---------------------
jointly, that such Partner will not, for a period of three (3) years following
the Closing Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Seller or Partner commences competition within a fifty (50) mile
radius of any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide any accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by the Partner to have been actively being solicited by the Company
or any Company Subsidiary to become a customer at any time during such
period;
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Partner may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type of nature similar to those sold
or provided by the Company to such customer or other Person, so as long in
connection therewith the Partner does not, directly or indirectly, provide such
services to another third party for hire.
60
<PAGE>
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Partner from (a)
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is traded on a national securities exchange
or over-the-counter so long as the Partner does not consult with or is not
employed by such competitor and (b) owning equity interests in Seller or Attest
Entity.
13.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Partner agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Partner, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Partners in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Partners that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Partner who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Partner shall enter into a business or pursue other activities not in
competition with CenterPoint and/or any subsidiary thereof, or similar
activities or business in locations the operations of which, under such
circumstances, does not violate this Article XIII and in any event such new
------------
business, activities or location are not in violation of this Article XIII or of
------------
such Partner's obligations under this Article XIII, such Partner shall not be
------------
chargeable with a violation of this Article XIII if CenterPoint and/or any
------------
subsidiary thereof shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
13.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Article XIII shall
-------------------- ------------
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any
61
<PAGE>
claim or cause of action of any Partner against CenterPoint (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by CenterPoint of such covenants. It
is specifically agreed that the period of three (3) years stated at the
beginning of this Article XIII, during which the agreements and covenants of
------------
each Partner made in this Article XIII shall be effective, shall be computed by
------------
excluding from such computation any time during which such Partner is in
violation of any provision of this Article XIII; provided, however, in all
------------ -------- -------
events CenterPoint shall initiate proceedings to enforce this Article XIII
------------
within four (4) years of the Closing Date. The covenants contained in this
Article XIII shall not be affected by any breach of any other provision hereof
- ------------
by any party hereto and shall have no effect if the transactions contemplated by
this Agreement are not consummated.
13.6 Materiality. The Company and each of the Partners hereby agree that
-----------
this covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
ARTICLE XV
GENERAL PROVISIONS
15.1 Brokers. Each of Seller, the Company and the Partners represents and
-------
warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Acquisition or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. CenterPoint represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Acquisition or the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of CenterPoint or
its stockholders (other than underwriting discounts and commission to be paid in
connection with the IPO).
15.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
15.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
62
<PAGE>
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
63
<PAGE>
15.2.2 If to the Company, to:
c/o Grace & Company P.C.
3117 South Big Bend Boulevard
St. Louis, MO 63143
Attn: Larry Porschen
Facsimile No.: (314) 647-8304
with a copy to:
Jerome Mandelstamm, Esq.
1010 Market Street
Suite 1600
St. Louis, MO 63101-2082
Facsimile No.: (314) 436-2303
15.2.3 If to the Partner Representative or the Partners, as
applicable, addressed to the addresses set forth on Schedule 15.2.3, with copies
---------------
to such counsel as set forth with respect to each Partner on such Schedule
--------
15.2.3, as applicable.
- ------
15.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and "HEREUNDER" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
15.4 Certain Definitions. As used in this Agreement, (i) the term "PERSON"
-------------------
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated association, corporation, entity, firm, association,
organization or other business in any form whatsoever or government (whether
Federal, state, county, city or otherwise, including, without limitation, any
instrumentality, division, agency or department thereof), (ii) the term
"AFFILIATE" shall have the meaning given for that term in Rule 405 under the
Securities Act, and shall include each past and present Affiliate of a Person
and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any individual who is a
64
<PAGE>
partner, member or shareholder of such Person or who is otherwise serving, or
who has served, as a director, officer, or trustee (or any capacity) of such
Person has, or at any time had, Knowledge of such fact or o ther matter.
15.5 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof and
(b) shall not be assigned by operation of law or otherwise, except that
CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
15.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
15.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
15.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
[remainder of page intentionally left blank]
65
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
/S/ Robert Basten
-----------------------------------------
Name:Robert Basten
------------------------------------
Its:President and Chief Executive Officer
-------------------------------------
GRACE MERGERSUB, INC.
By:/S/ Robert Basten
--------------------------------------
Name: Robert Basten
Its: President
GRACE CAPITAL, LLP
By:/S/ Wayne J. Grace
--------------------------------------
Name: Wayne J. Grace
Its: Partner
GRACE & COMPANY, P.C.
By:/S/ Wayne J. Grace
--------------------------------------
Name: Wayne J. Grace
Its: President
<PAGE>
PARTNERS
/S/ Wayne J. Grace
-----------------------------------------
WAYNE J. GRACE
/S/ Lawrence J. Porschen
-----------------------------------------
LAWRENCE J. PORSCHEN
/S/ Frank H. Brandhorst
-----------------------------------------
FRANK H. BRANDHORST
/S/ Jeffrey R. Greene
-----------------------------------------
JEFFREY R. GREENE
/S/ Patrick P. Rohrkaste
-----------------------------------------
PATRICK P. ROHRKASTE
/S/ Paul E. Schiavo
-----------------------------------------
PAUL E. SCHIAVO
/S/ Patrick E. Stark
-----------------------------------------
PATRICK E. STARK
/S/ Robert J. Bauer
-----------------------------------------
ROBERT J. BAUER
/S/ David W. Gresham
-----------------------------------------
DAVID W. GRESHAM
/S/ Kent T. Cornell
-----------------------------------------
KENT T. CORNELL
/S/ Larry R. Jourden
-----------------------------------------
LARRY R. JOURDEN
/S/ Lawrence H. Weber
-----------------------------------------
LAWRENCE H. WEBER
/S/ Gerald P. Townsend
-----------------------------------------
GERALD P. TOWNSEND
<PAGE>
EXHIBIT 2.10
--------------------------------
MERGER AGREEMENT
BY AND AMONG
CENTERPOINT ADVISORS, INC.,
REPPOND MERGERSUB INC.,
RA MERGERSUB LLC,
VERASOURCE MERGERSUB INC.,
THE REPPOND COMPANY, INC.,
REPPOND ADMINISTRATORS, L.L.C. AND
VERASOURCE EXCESS RISK LTD.
AND
BEN W. REPPOND, DEBORAH REPPOND,
LOUIS R. BARANSKY AND SCOTT D. PERRY
MARCH 31, 1999
--------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE OF STOCK.................................................................. 2
1.1 Merger................................................................................... 2
------
1.2 Effects of the Merger.................................................................... 3
---------------------
1.3 Directors and Officers of the Surviving Corporation...................................... 3
---------------------------------------------------
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT......................................................... 3
2.1 Merger Consideration..................................................................... 3
--------------------
2.1.1 Basic Purchase Consideration................................................... 3
----------------------------
2.1.2 Cancellation of Company Stock.................................................. 4
-----------------------------
2.1.3 Dissenting Shares.............................................................. 4
-----------------
2.1.4 Conversion of Mergersub Stock.................................................. 4
-----------------------------
2.2 Exchange of Certificates for Consideration............................................... 4
------------------------------------------
2.3 Purchase Price Adjustment................................................................ 5
-------------------------
2.4 Earnout Payments......................................................................... 5
----------------
2.4.1 Net Value Contingent Payment................................................... 5
----------------------------
2.4.2 Example........................................................................ 7
-------
2.4.3 Calculation of Earn-Out Contingent Payments.................................... 7
-------------------------------------------
2.4.4 Definitions.................................................................... 8
-----------
2.4.5 Example........................................................................ 10
-------
2.5 Collection of Accounts Receivable........................................................ 11
---------------------------------
2.6 Litigation............................................................................... 11
----------
ARTICLE III THE CLOSING AND CONSUMMATION DATE........................................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES..................................... 11
4.1 Organization and Qualification........................................................... 12
------------------------------
4.2 Company Subsidiaries..................................................................... 12
--------------------
4.3 Authority; Non-Contravention; Approvals.................................................. 12
---------------------------------------
4.4 Capitalization........................................................................... 14
--------------
4.5 Year 2000................................................................................ 14
---------
4.6 Financial Statements..................................................................... 14
--------------------
4.7 Absence of Undisclosed Liabilities....................................................... 15
----------------------------------
4.8 Accounts Receivable...................................................................... 15
-------------------
4.9 Absence of Certain Changes or Events..................................................... 15
------------------------------------
4.10 Litigation............................................................................... 18
----------
4.11 Compliance with Applicable Laws.......................................................... 18
-------------------------------
4.12 Licenses................................................................................. 19
--------
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.13 Material Contracts....................................................................... 19
------------------
4.14 Properties............................................................................... 22
----------
4.15 Intellectual Property.................................................................... 23
---------------------
4.16 Taxes.................................................................................... 24
-----
4.17 Employee Benefit Plans; ERISA............................................................ 25
-----------------------------
4.18 Labor Matters............................................................................ 27
-------------
4.19 Environmental Matters.................................................................... 27
---------------------
4.20 Insurance................................................................................ 28
---------
4.21 Interest in Customers and Suppliers; Affiliate Transactions.............................. 28
-----------------------------------------------------------
4.22 Business Relationships................................................................... 29
----------------------
4.23 Compensation............................................................................. 29
------------
4.24 Bank Accounts............................................................................ 29
-------------
4.25 Disclosure; No Misrepresentation......................................................... 29
--------------------------------
4.26 Title to and Transfer of Insurance Expirations........................................... 30
----------------------------------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.......................................... 30
5.1 Joint and Several Representations and Warranties......................................... 30
------------------------------------------------
5.1.1 Capitalization................................................................. 30
--------------
5.1.2 Authority...................................................................... 30
---------
5.1.3 Non-Contravention.............................................................. 30
-----------------
5.1.4 Approvals...................................................................... 31
---------
5.1.5 Litigation..................................................................... 31
----------
5.1.6 No Transfer.................................................................... 31
-----------
5.1.7 Disclosure..................................................................... 31
----------
5.1.8 Representations and Warranties of each of the Companies........................ 32
-------------------------------------------------------
5.2 Additional Joint and Several Representations and Warranties.............................. 32
-----------------------------------------------------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CENTERPOINT............................................... 32
6.1 Organization And Qualification........................................................... 32
------------------------------
6.2 Capitalization........................................................................... 33
--------------
6.3 No Subsidiaries.......................................................................... 33
---------------
6.4 Authority; Non-Contravention; Approvals.................................................. 34
---------------------------------------
6.5 Absence of Undisclosed Liabilities....................................................... 35
----------------------------------
6.6 Litigation............................................................................... 35
----------
6.7 Compliance with Applicable Laws.......................................................... 35
-------------------------------
6.8 No Misrepresentation..................................................................... 35
--------------------
ARTICLE VII CERTAIN COVENANTS AND OTHER TERMS........................................................... 36
7.1 Conduct of Business by the Companies Prior to the Effective Time......................... 36
----------------------------------------------------------------
7.2 No-Shop.................................................................................. 38
-------
7.3 Schedules................................................................................ 38
---------
7.4 Company Stockholder Meeting.............................................................. 39
---------------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII ADDITIONAL AGREEMENTS...................................................................... 39
8.1 Access to Information.................................................................... 39
---------------------
8.2 Registration Statements.................................................................. 40
-----------------------
8.3 Expenses and Fees........................................................................ 41
-----------------
8.4 Agreement to Cooperate................................................................... 42
----------------------
8.5 Public Statements........................................................................ 42
-----------------
8.6 Registration Rights...................................................................... 42
-------------------
8.7 CenterPoint Covenants.................................................................... 44
---------------------
8.8 Release of Guarantees.................................................................... 44
---------------------
8.9 Lock-Up Agreement........................................................................ 44
-----------------
8.10 Preparation and Filing of Tax Returns.................................................... 45
-------------------------------------
8.11 Insurance................................................................................ 45
---------
8.12 Management by Robert F. Driver Co., Inc.................................................. 45
---------------------------------------
8.13 Name of Companies........................................................................ 45
-----------------
ARTICLE IX INDEMNIFICATION............................................................................ 45
9.1 Indemnification by the Stockholders...................................................... 46
-----------------------------------
9.2 Indemnification by CenterPoint........................................................... 47
------------------------------
9.3 Indemnification Procedure for Third Party Claims......................................... 48
------------------------------------------------
9.4 Direct Claims............................................................................ 50
-------------
9.5 Failure to Give Timely Notice............................................................ 50
-----------------------------
9.6 Reduction of Loss........................................................................ 50
-----------------
9.7 Limitation on Indemnities................................................................ 51
-------------------------
9.7.1 Threshold for the Stockholders................................................. 51
------------------------------
9.7.2 Threshold for CenterPoint...................................................... 51
-------------------------
9.7.3 Limitations on Claims Against the Stockholders................................. 51
----------------------------------------------
9.7.4 Limitation on Claims Against CenterPoint....................................... 52
----------------------------------------
9.8 Survival of Representations, Warranties and Covenants of the Stockholders and the
----------------------------------------------------------------------------------
Companies; Time Limits on Indemnification Obligations.................................... 52
-----------------------------------------------------
9.9 Survival of Representations, Warranties and Covenants of CenterPoint; Time Limits on
-------------------------------------------------------------------------------------
Indemnification Obligations.............................................................. 52
---------------------------
9.10 Defense of Claims; Control of Proceedings................................................ 53
-----------------------------------------
9.11 Fraud; Exclusive Remedy.................................................................. 53
-----------------------
9.12 Manner of Satisfying Indemnification Obligations......................................... 53
------------------------------------------------
9.13 Stockholders' Representative............................................................. 53
----------------------------
ARTICLE X CLOSING CONDITIONS......................................................................... 54
10.1 Conditions to Each Party's Obligation to Effect the Merger............................... 54
----------------------------------------------------------
10.2 Conditions to Obligation of the Stockholders and the Companies to Effect the Merger...... 55
-----------------------------------------------------------------------------------
10.3 Conditions to Obligation of CenterPoint to Effect the Merger............................. 56
------------------------------------------------------------
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER......................................................... 58
11.1 Termination............................................................................. 58
-----------
11.2 Effect of Termination................................................................... 59
---------------------
11.3 Amendment............................................................................... 60
---------
11.4 Waiver.................................................................................. 60
------
ARTICLE XII TRANSFER RESTRICTIONS..................................................................... 60
12.1 Transfer Restrictions, Generally........................................................ 60
--------------------------------
12.2 Released Restrictions................................................................... 60
---------------------
12.3 Legend.................................................................................. 61
------
ARTICLE XIII NONCOMPETITION............................................................................ 61
13.1 Stockholder Prohibited Activities....................................................... 61
---------------------------------
13.2 CenterPoint Non-Solicitation............................................................ 63
----------------------------
13.3 Damages................................................................................. 63
-------
13.4 Reasonable Restraint.................................................................... 63
--------------------
13.5 Severability; Reformation............................................................... 64
-------------------------
13.6 Independent Covenant.................................................................... 64
--------------------
13.7 Materiality............................................................................. 64
-----------
ARTICLE XIV NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................................. 64
14.1 Stockholders' Covenant.................................................................. 64
----------------------
14.2 Damages................................................................................. 65
-------
14.3 Survival................................................................................ 65
--------
ARTICLE XV GENERAL PROVISIONS........................................................................ 65
15.1 Brokers................................................................................. 65
-------
15.2 Notices................................................................................. 66
-------
15.3 Interpretation.......................................................................... 67
--------------
15.4 Certain Definitions..................................................................... 67
-------------------
15.5 Entire Agreement; Assignment............................................................ 67
----------------------------
15.6 Applicable Law.......................................................................... 68
--------------
15.7 Counterparts............................................................................ 68
------------
15.8 Parties in Interest..................................................................... 68
-------------------
</TABLE>
(iv)
<PAGE>
Page
----
(v)
<PAGE>
Page
----
(vi)
<PAGE>
Page
----
(vii)
<PAGE>
Page
----
(viii)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.3 Purchase Price Adjustment
Schedule 2.4 Earnout Payments
Schedule 4.2 Investments
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.5 Year 2000
Schedule 4.6 Financial Statements
Schedule 4.7 Liabilities
Schedule 4.8 Accounts Receivable
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
(ix)
<PAGE>
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 4.26 Title to and Transfer of Insurance Expirations
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Liabilities
Schedule 7.1 Conduct of Business
Schedule 7.1.3 Terminated Agreements
Schedule 8.8 Stockholders' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Stockholders and Their Counsel
(x)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A List of Stockholders of The Reppond Company, Inc.
Exhibit B List of Stockholders of VeraSource Excess Risk Ltd.
Exhibit C List of Members of Reppond Administrators, L.L.C.
Exhibit 2.1(i)(a) Form of Reppond Note
Exhibit 2.1(i)(b) Form of Verasource Note
Exhibit 2.1(i)(c) Form of RA Note
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Employment Agreement
Exhibit 10.2(f) Form of Stockholders' Agreement
Exhibit 10.2(i) Form of Letter Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Companies and Stockholders
Exhibit 10.3(i) Form of Stockholders' Release
Exhibit 10.3(n) Form of Voting Agreement
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(xi)
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<S> <C>
Actions........................................................ Section 4.10.1
Acquisition Transaction........................................ Section 13.1
Affiliate...................................................... Section 15.4
Affiliate Transactions......................................... Section 4.2
Agreement...................................................... Introduction
Business....................................................... Introduction
CenterPoint.................................................... Introduction
CenterPoint Common Stock....................................... Section 2.1
CenterPoint Indemnified Party(ies)............................. Section 9.1
CenterPoint Material Adverse Effect............................ Section 6.4.3
CenterPoint Representatives.................................... Section 8.1.1
CenterPoint Required Statutory Approvals....................... Section 6.4.3
Closing........................................................ Article III
Closing Date................................................... Article III
Code........................................................... Introduction
Companies...................................................... Introduction
Company........................................................ Introduction
Company Equity................................................. Section 2.1
Company Material Adverse Effect................................ Section 4.3.3
Company Representatives........................................ Section 8.1.1
</TABLE>
(xii)
<PAGE>
<TABLE>
<S> <C>
Contracts..................................................... Section 4.13
Copyrights.................................................... Section 4.15
Defense Notice................................................ Section 9.31
DGCL.......................................................... Section 1.1
Direct Claim.................................................. Section 9.4
Dissenting Shares............................................. Section 2.1.3
Driver........................................................ Introduction
Earn-Out Contingent Payment................................... Section 2.4.3
Effective Time................................................ Section 1.1
Employee Plan................................................. Section 4.17.5(a)
Environmental and Safety Requirements......................... Section 4.19
ERISA......................................................... Section 4.17.5(b)
Excluded Receivables.......................................... Section 2.5
Financial Statements.......................................... Section 4.6
First Person.................................................. Section 4.17.5(c)
Form S-1...................................................... Section 4.3.3
Form S-4...................................................... Section 4.3.3
Founding Companies............................................ Introduction
GAAP.......................................................... Section 4.6.1
general increase.............................................. Section 4.23
Governmental Authority........................................ Section 4.3.2
</TABLE>
(xiii)
<PAGE>
<TABLE>
<S> <C>
Hazardous Materials............................................ Section 4.19
HSR Act........................................................ Section 4.3.3
Indemnified Party.............................................. Section 9.3.1
Indemnifying Party............................................. Section 9.3.1
Intellectual Property.......................................... Section 4.15
Intellectual Property Licenses................................. Section 4.15
IPO............................................................ Introduction
Knowledge...................................................... Section 15.4
Latest Balance Sheet........................................... Section 4.6
Laws........................................................... Section 4.11
Leased Property................................................ Section 4.14.1
Licenses....................................................... Section 4.12
Liens.......................................................... Section 4.3.2
Liquidated Damages Amount...................................... Section 7.3
Losses......................................................... Section 9.1
Market Price................................................... Section 9.12
Marks.......................................................... Section 4.15
Material Contracts............................................. Section 4.13
Merger......................................................... Introduction
Mergersub...................................................... Introduction
Mergersub Stock................................................ Section 6.2.1
</TABLE>
(xiv)
<PAGE>
<TABLE>
<S> <C>
Merger Documents.............................................. Section 1.1
Net Amounts................................................... Section 2.5
Net Value Contingent Payment.................................. Section 2.4.1
1933 Act...................................................... Section 4.3.3
1934 Act...................................................... Section 8.7(b)
Notes......................................................... Section 2.1.1
Organizational Documents...................................... Section 4.1
Other Agreements.............................................. Introduction
Other Mergers................................................. Introduction
Owned Property................................................ Section 4.14.1
Patents....................................................... Section 4.15
Person........................................................ Section 15.4
Plan Affiliate................................................ Section 4.17.5(c)
Policyholder.................................................. Section 13.1
Prospective Policyholder...................................... Section 13.1
RA............................................................ Introduction
RA Mergersub.................................................. Introduction
RA Note....................................................... Section 2.1
Real Property................................................. Section 4.14.1
Registration Statements....................................... Section 4.3.3
Reppond....................................................... Introduction
</TABLE>
(xv)
<PAGE>
<TABLE>
<S> <C>
Reppond Mergersub............................................... Introduction
Reppond Note.................................................... Section 2.1
Restricted Shares............................................... Section 12.2
Returns......................................................... Section 4.16
Schedules....................................................... Section 7.3
SEC............................................................. Section 4.3.3
Securities Act.................................................. Section 4.3.3
Stockholder Indemnified Party................................... Section 9.2
Stockholders.................................................... Introduction
Stockholders Agreement.......................................... Section 10.2(f)
Stockholders Earn-out........................................... Section 2.1.1
Stockholder's Note and Stock Purchase Consideration............. Section 2.1
Stockholder Representative...................................... Section 9.13
Surviving Corporation........................................... Section 1.2
Taxes........................................................... Section 4.16.2
Third Party Claim............................................... Section 9.3.1
Trade Secrets................................................... Section 4.15
Underwriters.................................................... Section 8.1.1
Verasource...................................................... Introduction
VeraSource Mergersub............................................ Introduction
VeraSource Note................................................. Section 2.1
Voting Agreement................................................ Introduction
</TABLE>
(xvi)
<PAGE>
MERGER AGREEMENT
----------------
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March 31, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
Reppond Mergersub Inc., a Delaware corporation and wholly-owned subsidiary of
CenterPoint ("REPPOND MERGERSUB"), RA Mergersub LLC, a Delaware limited
liability company and wholly-owned subsidiary of CenterPoint ("RA MERGERSUB"),
Verasource Mergersub Inc., a Delaware corporation and wholly-owned subsidiary of
CenterPoint ("VERASOURCE MERGERSUB") (Reppond Mergersub, RA Mergersub and
Verasource Mergersub, each, as the context requires, "MERGERSUB" and
collectively, the "MERGERSUBS"), The Reppond Company, Inc., a Washington
corporation ("REPPOND"), Reppond Administrators, L.L.C., a Washington limited
liability company ("RA"), VeraSource Excess Risk Ltd., a Washington
corporation ("VERASOURCE"), (Reppond, RA and Verasource, each individually, a
"COMPANY," and collectively, the "COMPANIES"), and the stockholders and
members of the Companies identified on Exhibit A, Exhibit B and Exhibit C to
--------- --------- ---------
this Agreement (each referred to herein as a "STOCKHOLDER" and, collectively,
the "STOCKHOLDERS").
WITNESSETH:
WHEREAS, (i) Reppond is engaged in the marketing of employee benefits
insurance, primarily group medical and dental insurance; (ii) RA provides COBRA,
IRC Section 125, single billing and direct dental reimbursement administration
services; and (iii) Verasource primarily markets stop loss insurance to brokers
and third party administration (the business provided, as it pertains to each
Company, the "BUSINESS" and collectively the "BUSINESSES");
WHEREAS, the Boards of Directors of the Companies, CenterPoint and
Mergersubs deem it advisable and in the best interests of their respective
shareholders to approve and consummate the business combination transaction
provided for herein in which RA Mergersub would merge with RA, Reppond Mergersub
would merge with Reppond and Verasource Mergersub would merge with Verasource,
with RA, Reppond and Verasource being the surviving corporations or limited
liability company, as the case may be, in the mergers (each, a "MERGER,"
collectively, the "MERGERS");
WHEREAS, certain Stockholders have entered into a Voting Agreement dated
the date hereof (the "VOTING AGREEMENT") pursuant to which among other things
such Stockholders have agreed to vote the shares of capital stock of the Company
that such Stockholders own or control, directly or indirectly, to approve the
Merger and the transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") similar to this Agreement with each of Reznick Fedder & Silverman,
P.C., Robert F. Driver Co., Inc. ("DRIVER"), Mann Frankfort Stein & Lipp, P.C.,
Berry, Dunn, McNeil & Parker, Chartered,
<PAGE>
Urbach Kahn & Werlin PC, Self Funded Benefits, Inc. d/b/a Insurance Design
Administrators, Grace & Company, P.C., Simione, Scillia, Larrow & Dowling LLC,
Follmer Rudzewicz & Co., P.C., and Holthouse, Carlin & Van Trigt (which
companies together with the Companies are collectively referred to herein as the
"FOUNDING COMPANIES"), which agreements provide for the merger of a wholly-
owned subsidiary of CenterPoint with each such Founding Company (the "OTHER
MERGER") simultaneously with the Merger.
WHEREAS, simultaneously with the consummation of the Merger, CenterPoint
will close an initial public offering (the "IPO") of CenterPoint Common Stock
(as defined in Section 2.1); and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free to the Stockholders under the
provisions of Section 351 of the Internal Revenue Code of 1986, as amended (the
"CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
2
<PAGE>
ARTICLE I
PURCHASE AND SALE OF STOCK
I.1 Merger. Upon the terms and subject to the conditions set forth in this
------
Agreement and in reliance upon the representations and warranties set forth
herein, (i) RA Mergersub shall be merged with and into RA, the result of which
will cause the separate corporate existence of RA Mergersub to cease and RA to
continue under the laws of the State of Washington, (ii) Reppond Mergersub shall
be merged with and into Reppond, the result of which will cause the separate
corporate existence of Reppond Mergersub to cease and Reppond to continue under
the laws of the State of Washington, (iii) Verasource Mergersub shall be merged
with and into Verasource, the result of which will cause the separate corporate
existence of Verasource Mergersub to cease and Verasource to continue under the
laws of the State of Washington. As promptly as possible on the Closing Date,
the parties shall cause the Mergers to be completed by filing articles of merger
and certificates of merger, as applicable (the "MERGER DOCUMENTS"), with the
Secretary of State of the State of Washington, as provided in the Washington
Business Corporation Act, as amended and the Washington Limited Liability
Company Act, as amended and with the Secretary of State of the State of
Delaware, as provided in the General Corporation Law of the State of Delaware,
as amended (the "DGCL"). The Mergers shall become effective (the "EFFECTIVE
TIME") upon the filing of the Merger Documents with the Secretary of State of
the State of Washington and the Secretary of State of the State of Delaware or
at such later time, contemporaneously with the closing sale of the IPO, as
agreed by CenterPoint and the Companies and specified in the Merger Documents.
I.2 Effects of the Merger. At the Effective Time (a) the separate
---------------------
existence of Mergersubs shall cease and (i) RA Mergersub shall be merged with
and into RA, with RA being the surviving entity, (ii) Reppond Mergersub shall be
merged with and into Reppond, with Reppond being the surviving corporation,
(iii) Verasource Mergersub shall be merged with and into Verasource, with
Verasource being the surviving corporation, (the surviving Company is sometimes
referred to herein as the "SURVIVING CORPORATION"), (b) the Certificates of
Incorporation and By-laws of the Surviving Corporation shall be amended in form
and substance acceptable to CenterPoint and as specified in the Merger
Documents, (c) the Mergers shall have all the effects provided by applicable
law, and (d) the Company shall be a wholly-owned subsidiary of CenterPoint.
I.3 Directors and Officers of the Surviving Corporation. From and after
---------------------------------------------------
the Effective Time, the directors and officers of each Mergersub shall be the
directors and officers of the Surviving Corporation until their successors are
duly elected and qualified.
3
<PAGE>
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
II.1 Merger Consideration.
--------------------
II.1.1 Basic Purchase Consideration. At the Closing, by virtue of
----------------------------
the Mergers and without any action on the part of the holders thereof:
(a) the outstanding shares of capital stock of Reppond,
consisting of 500 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of common stock,
par value $.01 per share, of CenterPoint ("CENTERPOINT COMMON STOCK") determined
in accordance with the formula set forth in Schedule 2.1(a); (ii) a promissory
---------------
note (the "REPPOND NOTE") in the form of Exhibit 2.1(i)(a) and (iii) the right
-----------------
to the contingent payment described in Section 2.4 (the "NET VALUE CONTINGENT
-----------
PAYMENT") for Reppond;
(b) the outstanding shares of capital stock of Verasource,
consisting of 250 shares of common stock, par value $1.00 per share, shall be
converted into the right to receive (i) that number of shares of CenterPoint
Common Stock determined in accordance with the formula set forth in Schedule
--------
2.1(b); (ii) a promissory note (the "VERASOURCE NOTE") in the form of Exhibit
- ------ -------
2.1(i)(b) and (iii) the right to the Net Value Contingent Payment for
- ---------
Verasource;
(c) the outstanding equity of RA, consisting of 500 units of
ownership interest in RA (the outstanding shares of capital stock of Reppond and
Verasource and the outstanding equity of RA, collectively, the "COMPANY
EQUITY"), shall be converted into the right to receive (i) that number of shares
of CenterPoint Common Stock determined in accordance with the formula set forth
in Schedule 2.1(c); (ii) a promissory note (the "RA NOTE", along with the
---------------
Verasource Note and the Reppond Note, the "NOTES") in the form of Exhibit
-------
2.1(i)(c) and (iii) the right to the Net Value Contingent Payment for RA;
- ---------
(d) in addition to the Stockholder's Note and Stock Purchase
Consideration (as hereinafter defined) and in consideration of the Merger, Ben
Reppond will receive the right to the Earn-out Contingent Payments set forth in
Section 2.4.3.
- -------------
The sum of (i) the value of the shares of CenterPoint Common Stock and
(ii) the value of the Notes (determined as set forth on Schedule 2.1(d)) to be
---------------
issued to each Stockholder in respect of each Company is herein referred to as
"STOCKHOLDER'S NOTE AND STOCK PURCHASE CONSIDERATION." Schedule 2.1(d) sets
---------------
forth the value of the Stockholder's Note and Stock Purchase Consideration for
each Stockholder in respect of each Company.
4
<PAGE>
II.1.2 Cancellation of Company Stock. Each share of capital stock of
-----------------------------
Reppond and Verasource held in treasury shall be canceled and retired and no
payment shall be made in respect thereof.
II.1.3 Dissenting Shares. Each outstanding share of capital stock of
-----------------
Reppond and Verasource, the holder of which has perfected his right to dissent
under applicable law and has not effectively withdrawn or lost such right as of
the Effective Time (the "DISSENTING SHARES") shall not be converted into the
right to receive the consideration set forth in Section 2.1.1, and the holder
-------------
thereof shall be entitled only to such rights as are granted by applicable law.
Reppond and Verasource shall give CenterPoint prompt notice upon receipt by
Reppond and Verasource of any such written demands for payment of fair value of
shares of capital stock of Reppond and Verasource and any other instruments
provided pursuant to applicable law. Any payments made in respect of Dissenting
Shares shall be made by the applicable Surviving Corporation.
II.1.4 Conversion of Mergersub Stock. At the Effective Time, each
-----------------------------
share of Mergersub Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Mergers and without any action on the
part of the holder thereof, be converted into and become one validly issued,
fully paid and non-assessable share of the applicable Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the applicable Surviving Corporation.
II.2 Exchange of Certificates for Consideration. At the Closing, the
------------------------------------------
Stockholders shall deliver to CenterPoint the original certificates representing
the Company Equity or other evidence of ownership in a form and substance
acceptable to CenterPoint, duly endorsed in blank by the Stockholders or
accompanied by blank stock powers, in exchange for (i) issuance and delivery by
CenterPoint to the Stockholders of certificates representing the number of
shares of CenterPoint Common Stock determined in accordance with Section 2.1,
-----------
and (ii) delivery by CenterPoint of the Notes. The Stockholders agree promptly
to cure any deficiencies with respect to the endorsement of the certificates or
other documents of conveyance with respect to such Company Equity. The
certificates representing CenterPoint Common Stock to be delivered pursuant to
this Article II shall bear legends as provided in Section 12.3 below. At the
---------- ------------
Closing, all shares or membership interests of Company Equity shall be
transferred and delivered to CenterPoint, and each of the Stockholders holding a
certificate or other evidence of ownership representing any such shares or
membership interests of Company Equity shall cease to have any rights with
respect thereto, except the right to receive the Stockholder's Note and Stock
Purchase Consideration, the Net Value Contingent Payment and the Earn-out
Contingent Payments.
II.3 Purchase Price Adjustment. At Closing, the amount of capital
-------------------------
expenditures, not to exceed $600,000, made by the Companies for computer
hardware and software database and programming upgrades as well as tenant
improvement costs, new furniture and equipment costs, and relocation costs
associated with the expansion into the office space currently held by
ProBusiness Services, Inc. will be treated as working capital of the Companies
and to the extent
5
<PAGE>
that the working capital of the Companies at Closing is in excess of $400,000, a
cash payment equal to such excess amount shall be paid to the Stockholders at
Closing. The principal amount of the Notes may be adjusted at the Closing in
accordance with Schedule 7.1.3(a) and after the Closing in accordance with the
-----------------
formula set forth in Schedule 2.3.
------------
II.4 Earnout Payments.
----------------
II.4.I Net Value Contingent Payment. In addition to the CenterPoint
----------------------------
Common Stock and the Notes, the Stockholders shall be entitled to receive from
CenterPoint the Net Value Contingent Payment, if any, for the Calculation Period
(as defined below) based on the formula set forth below which payment shall be
allocated among the Stockholders in accordance with their ownership interest in
each Company.
(a) Calculation of Net Value Contingent Payment. The Net Value
-------------------------------------------
Contingent Payment, if any, shall be equal to the sum of (i) 25% x Target I Net
Value, (ii) 15% x Target II Net Value, and (iii) 10% x Target III Net Value.
(b) Definitions. For purpose of Section 2.4.1, the following
-----------
terms shall have the following meanings:
(i) "Baseline EBITDA" shall be equal to $4,705,000.
(ii) "Calculation Period" means the twelve month period
ending on the fourth anniversary of the last day of the month in which the
Closing falls.
(iii) "Driver" means The Robert F. Driver Co., Inc.
(iv) Driver EBITDA Percentage" means the ratio of the Driver
EBITDA compared to the Driver revenue for the Calculation Period (which amounts
shall include any portion of the Companies' EBITDA or Companies' revenue to the
extent any of the Companies are not part of Driver's operations in the
Calculation Period).
(v) "EBITDA" means earnings before interest, taxes,
depreciation and amortization, calculated in accordance with GAAP on a
consistent basis.
(vi) "EB Acquisition" means each entity or portion of such
entity acquired as part of CenterPoint's employee benefits business after
December 9, 1998 (other than Driver, the Companies or Self-Funded Benefits,
Inc., d/b/a Insurance Design Administrators); provided that no such acquired
entity will be deemed to be an "EB Acquisition" if Ben Reppond shall have
objected in writing to its inclusion in such calculation on or prior to the
acquisition closing for such EB Acquisition.
6
<PAGE>
(vii) "EB Operations" means CenterPoint's employee benefits
business, which shall consist of the current operations of the Companies and of
Driver (excluding Self-Funded Benefits, Inc., dba Insurance Design
Administrators) plus any EB Acquisition.
(viii) "EB Operations Revenue" means the revenue of the EB
Operations during the Calculation Period.
(ix) "EB Operations EBITDA" means EB Operations Revenue
multiplied by the Driver EBITDA Percentage.
(x) "EB Acquisitions Pro Forma EBITDA" means (a) the pro
forma annual EBITDA upon which the valuation was made for each EB Acquisition
(inclusive of a 7% compounded annual growth rate from the date of each EB
Acquisition closing through the end of the Calculation Period; provided that if
there is a Termination, only EB Acquisition closings occurring prior to the
Termination shall be included) less (b) the pro forma annual EBITDA upon which
the valuation was made for any portion of the EB Operations that was sold by
CenterPoint or its affiliates prior to the end of the Calculation Period;
provided that if there is a Termination, only sales prior to the Termination
shall be included. In the case of any EB Acquisition occurring during the
Calculation Period, the pro forma annual EBITDA of that EB Acquisition for
purposes of clause (a) above shall be multiplied by a fraction, the numerator of
which is the number of days from the EB Acquisition closing through the end of
the Calculation Period and the denominator of which is 365.
(xi) "Net EBITDA" means the result obtained by the
following formula:
EB Operations EBITDA - Baseline EBITDA - EB Acquisitions Pro
Forma EBITDA
(xii) "Net Value" means the result obtained by multiplying
7.0 times Net EBITDA. In the event of a sale of the entire EB Operations, the
Net Value Contingent Payment shall be payable as of the last day of the third
month following such sale.
(xiii) "Target I Net Value" shall mean all Net Value, if
any, between $2,400,000 and including $5,000,000.
(xiv) "Target II Net Value" shall mean all Net Value, if
any, between $5,001,000 and including $10,000,000.
(xv) "Target III Net Value" shall mean all Net Value, if
any, greater than $10,000,000.
(xvi) "Termination" shall mean the termination of Ben
Reppond without Cause or upon Constructive Termination pursuant to the
Employment Agreement between Ben Reppond and Reppond dated as of the Closing
Date.
7
<PAGE>
II.4.2 Example
-------
Net Value Contingent Payment
<TABLE>
<CAPTION>
<S> <C> <C>
EB Operations EBITDA $ 6,105,000
Less: Baseline EBITDA ($ 4,705,000)
Less: EB Acquisitions Pro Forma EBITDA:
EB Acquisitions Pro Forma EBITDA $ 250,000
Compounded Growth Rate @ 7% for 3 years 1.225
----------
Compounded EB Acquisition Pro Forma EBITDA $ 306,250
Pro Forma EBITDA of EB Acquisition sold ($ 41,429)
----------
$ 264,821 ($ 264,821)
========== ------------
Net EBITDA $ 1,135,179
Fixed EBITDA Multiple 7.0
------------
Net Value $ 7,946,253
============
Amount between $2,400,000 and $5,000,000 (25% x $2,600,000) $ 650,000
Amount between $5,000,001 and $10,000,000 (15% x $2,946,253) $ 441,938
Amount in excess of $10,000,000 $ 0
------------
Amount of Net Value Contingent Payment $ 1,091,938
</TABLE>
II.4.3 Calculation of Earn-Out Contingent Payments. Ben Reppond
-------------------------------------------
shall be entitled to receive from CenterPoint, contingent payments, if any, for
each of the twelve month periods ending on the first anniversary of the Closing
through the fifth anniversary of the Closing (each, an "Earn-Out Contingent
Payment").
(a) The Earn-Out Contingent Payment for the twelve months ending
on the first anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2000 - $1,894,000 - REQUIRED RETURN) - SCOTT
PERRY'S 2000 BONUS
(b) The Earn-Out Contingent Payment for the twelve months ending
on the second anniversary of the Closing shall be equal to the result obtained
by the following formula:
50% X (COMPANIES' EBITDA 2001 - $2,026,000 - REQUIRED RETURN) - SCOTT
PERRY'S 2001 BONUS
(c) The Earn-Out Contingent Payment for the twelve months ending
on the third anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2002 - $2,168,000 - REQUIRED RETURN) - SCOTT
PERRY'S 2002 BONUS
8
<PAGE>
(d) The Earn-Out Contingent Payment for the twelve months ending
on the fourth anniversary of the Closing shall be equal to the result obtained
by the following formula:
50% X (COMPANIES' EBITDA 2003 - $2,320,000 - REQUIRED RETURN) - SCOTT
PERRY'S 2003 BONUS
(e) The Earn-Out Contingent Payment for the twelve months ending
on the fifth anniversary of the Closing shall be equal to the result obtained by
the following formula:
50% X (COMPANIES' EBITDA 2004 - $2,483,000 - REQUIRED RETURN) - SCOTT
PERRY'S 2004 BONUS
(f) If there is a Termination at any time prior to the end of the
fifth anniversary of the Closing, Reppond shall continue to receive on each date
when any unpaid future Earn-Out Contingent Payment is due the amount of the
Earn-Out Contingent Payment then due in the manner calculated herein, except
that Reppond may elect, by written notice delivered to CenterPoint within 30
days of such Termination, to instead receive on each date when any unpaid future
Earn-Out Contingent Payment is due, an amount equal to the most recent Earn-Out
Contingent Payment received by Reppond.
II.4.4 Definitions. For purpose of Section 2.4.3, the following
----------- -------------
terms shall have the following meanings:
(a) "Acquisition Overhead XXXX" means the expense allocated to
Overhead by each PNW Acquisition for the twelve months ending on the anniversary
date of the Closing in the applicable period, where "XXXX" is the applicable
year.
(b) "Companies' EBITDA XXXX" means the Companies' EBITDA,
including any PNW Acquisition EBITDA, for the twelve months ending on the
anniversary date of the Closing, in the applicable period, where "XXXX" is the
applicable year, as calculated in accordance with GAAP and consistent with past
practices. For purposes of calculating the Companies' EBITDA, the maximum
corporate overhead to be charged will be the lesser of (x) the Maximum Overhead
or (y) the Overhead for the Companies and the PNW Acquisitions for the relevant
period.
(c) "Companies' Overhead XXXX" means the expenses of the
Companies allocated to overhead for the twelve months ending on the anniversary
date of the Closing in the applicable year, where "XXXX" is the applicable year.
(d) "Companies' Pro Forma EBITDA XXXX" means the Companies'
EBITDA for the twelve months ending on the date of the Closing, as calculated in
accordance with GAAP and consistent with past practices, inclusive of a 7%
compounded annual growth rate from the date of the Closing through the
anniversary date of the Closing in the applicable year, where "XXXX" is the
applicable year.
9
<PAGE>
(e) "Companies' Revenue XXXX" means the revenue of the Companies
for the twelve months ending on the anniversary date of the Closing in the
applicable year, where "XXXX" is the applicable year.
(f) "Driver EBITDA XXXX" means the Driver EBITDA for the twelve
months ending on the anniversary date of the Closing in the applicable year,
where "XXXX" is the applicable year.
(g) "Driver Revenue XXXX" means the Driver revenue for the year
ending on the anniversary date of the Closing in the applicable year, where
"XXXX" is the applicable year.
(h) "Earn-Out Base" shall mean the difference between "Companies'
EBITDA XXXX" and "Companies' Pro Forma EBITDA XXXX." Such amount shall be
reduced by the "Required Return", if any.
(i) "EBITDA" means earnings before interest, taxes, depreciation
and amortization, calculated in accordance with GAAP on a consistent basis.
(j) "Maximum Overhead" shall be calculated based upon the
following formula: (Companies' Revenue XXXX + PNW Acquisition Revenue XXXX) x
(Companies' Overhead XXXX + Acquisition Overhead XXXX) / (Companies' Revenue
1999 + PNW Acquisition Pro Forma Revenue XXXX).
(k) "Overhead" means the dollar amount of overhead mutually
agreed to by CenterPoint and the Stockholders' Representative which shall
consist of information technology, human resources, accounting and finance,
corporate management, facilities, risk management and marketing. "Overhead"
shall include expenses incurred directly by the relevant companies and indirect
expenses reasonably allocated to the relevant companies.
(l) "PNW Acquisition" means each entity in the business of
insurance brokerage and related services within Driver's business, including
property and casualty, worker's compensation, employee benefits, surety,
personal lines and financial services (including 401(k) plans, life insurance
and annuity production) located in Washington, Montana, Idaho, Alaska and
northern Oregon that was acquired as part of CenterPoint's business during the
applicable period.
(m) "PNW Acquisition EBITDA XXXX" means the EBITDA earned by each
PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(n) "PNW Acquisition Pro Forma Revenue XXXX" means the pro forma
revenue for valuation purposes allocable to each PNW Acquisition for the twelve
months ending
10
<PAGE>
on the anniversary date of the Closing in the applicable year, where "XXXX" is
the applicable year.
(o) "PNW Acquisition Revenue XXXX" means the revenue earned by
each PNW Acquisition for the twelve months ending on the anniversary date of the
Closing in the applicable year, where "XXXX" is the applicable year.
(p) "Purchase Price" means the sum of the purchase prices,
including contingent consideration, for each PNW Acquisition, if any, acquired
by CenterPoint in or prior to the relevant twelve month period and not sold
prior to the end of such period.
(q) "Required Rate of Return" means 15% per annum. Pro rata
reductions in the percentage will be made for acquisitions made in the relevant
period.
(r) "Required Return" means the product of the "Required Rate of
Return" times the "Purchase Price". In no case shall the "Required Return"
exceed "PNW Acquisition Revenue".
(s) "Scott Perry's XXXX Bonus" means any "Bonus" payable to Scott
Perry by Verasource pursuant to Section 2.2 of his employment agreement with
-----------
Verasource dated the Closing Date with respect to the twelve month period ending
in the applicable year, where "XXXX" is the applicable year.
In the event of a sale of entire Companies' operations prior
to the fifth anniversary of the Closing, the required payment, if any, shall be
due in sixty days from the date of such sale. Such payment shall represent the
final payment due pursuant to Section 2.4.4.
-------------
II.4.5 Example. Earn Out Contingent Payment 2000 (assuming a PNW
-------
Acquisition of $1,000,000 in the eighth month of the twelve month period ending
in 2000):
<TABLE>
<CAPTION>
<S> <C>
Companies' EBITDA 2000 $ 2,100,000
Less: Companies' Pro Forma EBITDA 2000 ($ 1,894,000)
Required Return (.15 x $1,000,000 x 4/12) ($ 50,000)
------------
Earn-Out Base $ 156,000
Fixed Earn-Out Percentage 50%
------------
Amount of Earn-Out Contingent Payment 2000 $ 78,000
Before Scott Perry's 2000 Bonus
Scott Perry's 2000 Bonus $ 18,000
Amount of Earn-Out Contingent Payment 2000 $ 60,000
</TABLE>
11
<PAGE>
II.4.6 Procedure. The procedure for determining each Contingent
---------
Payment is set forth in Schedule 2.4.
------------
II.5 Collection of Accounts Receivable. The Stockholders shall be entitled
---------------------------------
to receive any amounts collected by the Companies with respect to any accounts
receivable due to the Companies from any insurance companies, which amounts are
more than 45 days past due as of December 9, 1998 (the "EXCLUDED RECEIVABLES"),
net of any commissions or taxes owed on the Excluded Receivables or money spent
on the collection of the Excluded Receivables (the "NET AMOUNTS"). To the extent
such Excluded Receivables are collected on or prior to the Closing, the Net
Amounts shall be first used as a setoff against any reduction that would
otherwise be made in the principal amount of the Notes pursuant to Section 2.3,
-----------
and any remaining amount shall be used to increase the principal amount of the
Notes. If any Excluded Receivables are collected after the Closing, the Net
Amounts shall be paid by CenterPoint to the Stockholders on a quarterly basis.
CenterPoint covenants that after the Closing it will use reasonable commercial
efforts to collect any Excluded Receivables.
II.6 Litigation. The Stockholders of Reppond shall be entitled to the
----------
proceeds, if any, received as a result of the resolution of the matter entitled
The Reppond Company, Inc. v. Mary K. Knehr, et al. (reflected on Schedule 4.10
- -------------------------------------------------- -------------
attached hereto), net of all attorneys' fees and other costs incurred after the
Closing. Nothing in this Section 2.6 shall require Reppond to prosecute this
-----------
matter; any and all decisions regarding the matter and the resolution thereof
shall be in the discretion of Driver in consultation with management of Reppond.
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Merger and the other transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Katten
Muchin & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES
Each Company hereby represents and warrants to CenterPoint, severally but
not jointly, as to itself, as of the date hereof and, subject to Section 7.3, as
-----------
of the date on which CenterPoint and the lead Underwriter (as defined in Section
-------
8.1.1) execute and deliver the Underwriting Agreement related to the IPO and as
- -----
of the Closing Date, as follows:
12
<PAGE>
IV.1 Organization and Qualification. Each of Reppond and Verasource is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington. RA is a limited liability company organized under
the laws of the State of Washington. The Company has the requisite power and
authority under state and federal law to own, lease and operate its assets and
properties and to carry on its business (or Business) as it is now being
conducted and is licensed or otherwise authorized to transact or engage in the
Business and is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification, license or
authorization necessary. True, accurate and complete copies of the Company's
Organizational Documents, in each case as in effect on the date hereof, have
heretofore been delivered to CenterPoint or its representatives. "ORGANIZATIONAL
DOCUMENTS" means (a) the articles or certificate of incorporation and the bylaws
of a corporation (professional or otherwise), (b) the partnership agreement and
any statement of partnership of a general partnership, (c) the limited
partnership agreement and the certificate of limited partnership of any limited
partnership, (d) the operating or limited liability company agreement and
certificate of formation of any limited liability company, (e) any charter or
similar document adopted and filed in connection with the creation, formation,
organization or governance (as applicable) of any Person and (f) any amendment
to any of the foregoing.
IV.2 Company Subsidiaries. The Company does not own, directly or
--------------------
indirectly, securities or other interests having the power to elect a majority
of any such Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of such Person. Except as
set forth in Schedule 4.2, the Company does not, directly or indirectly, own, of
------------
record or beneficially, or control any capital stock, securities convertible
into capital stock or any other equity interest in any Person.
IV.3 Authority; Non-Contravention; Approvals.
---------------------------------------
IV.3.1 The Company has full right, power and authority to enter into
this Agreement and, subject to the approval of the Merger and the transactions
contemplated hereby by the Company's stockholders, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger and the transactions contemplated hereby by the Company's stockholders.
This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by CenterPoint,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
13
<PAGE>
IV.3.2 The execution and delivery of this Agreement by the Company
does not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any claim, lien, privilege,
mortgage, charge, hypothecation, assessment, security interest, pledge or other
encumbrance, conditional sales contract, equity charge, restriction, or adverse
claim of interest of any kind or nature whatsoever (each a "LIEN" and
collectively, the "LIENS") upon the Business or any of the properties or assets
of the Company under, any of the terms, conditions or provisions of (i) the
Organizational Documents of the Company , (ii) any statute, law, ordinance,
rule, regulation, state or federal regulatory agency bulletin, state attorney
general opinion, judgment, decree, order, injunction, writ, permit or license of
any court or federal, state, provincial, local or foreign government, or any
subdivision, agency or authority of any thereof, including any state's
department of insurance ("GOVERNMENTAL AUTHORITY") applicable to the Company,
the Business, or properties or assets of each of the Companies, or (iii) any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company is a party or by which the Company or any of the
properties or assets of the Company may be bound or affected. The consummation
by the Company of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, or creation or acceleration
of Liens under the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the immediately preceding sentence, subject, in the
case of the terms, conditions or provisions of the items described in clauses
(ii) or (iii) above, to obtaining (prior to the Closing Date) such consents
required from third parties set forth on Schedule 4.3.2.
--------------
IV.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4 are
collectively the "REGISTRATION STATEMENTS") with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"SECURITIES ACT"or the "1933 ACT"), the declaration of the effectiveness thereof
by the SEC and filings, if required, with various state securities or "blue sky"
authorities, (ii) any filing which may be required under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act"), and (iii) the
Washington Office of the Insurance Commissioner, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, individually or in the aggregate, have a "COMPANY
MATERIAL ADVERSE EFFECT," which, for purposes of this Agreement means a material
adverse effect on the operations, assets, condition (financial or other),
operating results, employee or client relations, or prospects of the Company.
14
<PAGE>
IV.4 Capitalization.
--------------
IV.4.1 The authorized capital stock of Reppond consists of 50,000
shares of common stock, of which 500 shares are issued and outstanding. The
authorized ownership interest of RA consists of 500 units of ownership interest,
of which 500 units are issued and outstanding. The authorized capital stock of
Verasource consists of 50,000 shares of common stock of which 250 shares are
issued and outstanding. All of the issued and outstanding shares of the Company
are validly issued and are fully paid, nonassessable and free of preemptive
rights. The Stockholders are all of the holders of equity of their respective
Company and own beneficially and of record all of the issued and outstanding
shares or membership interests, as the case may be, of the Company Equity as set
forth in Schedule 4.4, which shares constitute all of the outstanding shares or
------------
membership interests, as the case may be, of capital stock or equity of the
Company.
IV.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock or membership interests of the Company or
obligating the Company to grant, extend or enter into any such agreement or
commitment or obligating the Company to convey or transfer any Company Equity.
As of the Closing Date, there will be no voting trusts, proxies or other
agreements or understandings to which the Company is a party or is bound with
respect to the voting of any shares of capital stock or other equity interests
of the Company.
IV.5 Year 2000. Except as set forth on Schedule 4.5, to the Knowledge of
--------- ------------
the Company, all of the computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
the Company in the conduct of the Business will not malfunction, will not cease
to function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth (20/th/) and twenty-first (21/st/) centuries and (ii)
date-related data in connection with any valid date in the twentieth (20/th/)
and twenty-first (21/st/) centuries, except for any malfunctions or generations
of incorrect data or results that would not individually or in the aggregate
have a Company Material Adverse Effect. Nothing in this Section 4.5 is intended
-----------
or shall be construed as a representation or warranty with respect to embedded
systems.
IV.6 Financial Statements. The Company has previously furnished to
--------------------
CenterPoint copies of the unaudited balance sheet of the Company as of December
31, 1997 and the audited combined balance sheet of the Companies as of December
31, 1998 (the "LATEST BALANCE SHEET"), and the related unaudited statements of
income, shareholders' equity and cash flow of the Company for each of the years
in the three (3) year period ended December 31, 1997 and the related audited
combined statements of income, shareholders' equity and cash flow of the
Companies for the one
15
<PAGE>
year period ended December 31, 1998, including all notes thereto (collectively,
the "FINANCIAL STATEMENTS"). Except as set forth in Schedule 4.6, the
------------
Financial Statements relating to the Company are accurate and complete in all
material respects, consistent with the books and records of the Company, and
fairly presents in all material respects the financial condition, assets and
liabilities of the Company as of its date and the results of operations and cash
flows for the periods related thereto, in each case in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP").
IV.7 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
---------------------------------- --------
4.7, the Company has not, as of the date of the Latest Balance Sheet, nor has it
- ---
incurred since that date, any liabilities or obligations of any nature (whether
known or unknown, absolute, contingent, accrued, direct, indirect, perfected,
inchoate, unliquidated or otherwise), except (i) to the extent clearly and
accurately reflected or accrued or fully reserved against in the Financial
Statements or (ii) liabilities and obligations which have arisen after the date
of the Latest Balance Sheet in the ordinary course of business and consistent
with past custom and practices (none of which is a liability resulting from a
breach of contract, breach of warranty, tort, infringement claim, legal
violation or lawsuit). Such liabilities include, but are not limited to, any
claim or potential claim against the Company by any employee benefit plan,
client or government agency (including, but not limited to, the IRS or
Department of Labor) related to the Company's alleged failure to properly
administer or advise any employee benefit plan or related to the sale or
brokerage of any products or services relating to any employee benefit plans of
current or former clients of the Company.
IV.8 Accounts Receivable. Except as set forth on Schedule 4.8, all of the
------------------- ------------
accounts receivable reflected in the Latest Balance Sheet or arising from the
date thereof until the Closing Date have arisen or will arise in the ordinary
course of the Company's Business, are not and will not be subject to any
defense, counterclaim or setoff, subject to insureds' rights to cancel insurance
coverage and have been collected or are and will be collectible in the ordinary
course of business using normal collection practices and policies employed by
the Company as of the date of this Agreement, in each case subject to any
allowance for doubtful accounts determined in accordance with the Company's past
custom and practices.
IV.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, the Company has conducted its
- ---
business only in the ordinary course consistent with past custom and practices.
Except as set forth on Schedule 4.9, since the date of the Latest Balance Sheet,
------------
there has not been any:
(a) material adverse change in the operations, condition (financial or
otherwise), operating results, assets, liabilities, employee, client or
policyholder relations or prospects of the Company;
16
<PAGE>
(b) damage, destruction or loss of any property owned by the Company ,
or used in the operation of the Business, whether or not covered by
insurance, having a replacement cost or fair market value in excess of five
percent (5%) of the amount of net property, plant and equipment shown on
the Latest Balance Sheet, in the aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Company of any right, power, claim or debt, except the collection of
accounts in the ordinary course of business consistent with past custom and
practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Company or the Business;
(e) loan or advance by the Company to any Person, other than as a
result of services performed for, or expenses properly and reasonably
advanced for the benefit of, customers in the ordinary course of business
consistent with past custom and practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Company's capital stock or other equity
interests or any direct or indirect redemption, purchase, or other
acquisition of the Company's capital stock or other equity interests, or
the payment of principal or interest on any note, bond, debt instrument or
debt to any Affiliate (as defined in Section 15.4) of the Company, except
------------
bonuses and distributions to employees and Stockholders disclosed to
CenterPoint in writing that are consistent with the Company's past custom
and practices or as otherwise contemplated by this Agreement;
(h) incurrence by the Company of debts, liabilities or obligations
except (i) current liabilities incurred in connection with or for services
rendered or goods supplied in the ordinary course of business consistent
with past custom and practices, (ii) liabilities on account of taxes and
governmental charges (but not penalties, interest or fines in respect
thereof), and (iii) obligations or liabilities incurred by virtue of the
execution of this Agreement;
(i) issuance by the Company of any notes, bonds, or other debt
securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
17
<PAGE>
(j) entry by the Company into, or amendment or termination of, any
material commitment, contract, agreement, or transaction, other than in the
ordinary course of business and other than expiration of contracts in
accordance with their terms, except the Company may amend any such material
commitment, contract, agreement or transaction necessary to prevent the
relevant commitment, contract, agreement or transaction from terminating
due to the transactions contemplated herein, provided that all material
terms of such commitment, contract, agreement or transaction shall remain
the same;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Company
that accounted for revenues during the last twelve months in excess of five
percent (5%) of the consolidated net revenues of the Company, or change in
the relationship of the Company with any client or Governmental Authority
that is reasonably expected to adversely affect the Company or the
Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Company;
(m) discharge or satisfaction by the Company of any material liability
or encumbrance or payment by the Company of any material obligation or
liability, other than current liabilities paid in the ordinary course of
its business consistent with past custom and practices;
(n) sale, lease or other disposition by the Company of any tangible
assets having an aggregate replacement cost or fair market value in excess
of five percent (5%) of the amount of net property, plant and equipment
shown on the Latest Balance Sheet other than in the ordinary course of
business, or the sale, assignment or transfer by the Company of any
trademarks, service marks, trade names, corporate names, copyright
registrations, trade secrets, lists of past and present customers, lists of
potential customers, insurance policy expiration data or rights, research
sales data, analyses, sales and marketing materials, scheduling and service
methods, sales and service manuals, or other intangible assets or
disclosure of any proprietary or confidential information of the Company
relating to or used in connection with the Business to any Person other
than an employee, agent, attorney, accountant or other representative of
the Company that has agreed in writing to maintain the confidentiality of
any such proprietary confidential information;
(o) capital expenditures or commitments therefor by the Company in
excess of $50,000 individually or $100,000 in the aggregate;
18
<PAGE>
(p) mortgage, pledge or other encumbrance of any asset of the
Company or creation of any easements, Liens or other interests against or
on any of the Real Property (as defined in Section 4.14.1);
--------------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Company has
Knowledge, is reasonably expected to result in a Company Material Adverse
Effect.
IV.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
IV.10.1 There is no suit, action, proceeding, investigation, claim or
order pending or, to the Knowledge of the Company, threatened against the
Company, or with respect to the Merger, or with respect to any Employee Plan,
any fiduciary of any such plan (or pending or, to the Knowledge of the Company,
threatened against any of the officers, directors, members, partners or
employees of the Company with respect to its business or proposed business
activities), or to which the Company is otherwise a party, or that is reasonably
expected to have a Company Material Adverse Effect, before any court, or before
any Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of the Company, is there any basis for any such Action.
IV.10.2 The Company is not subject to any unsatisfied or continuing
judgment, order or decree of any court or Governmental Authority. The Company is
not, to its knowledge, exposed, from a legal standpoint, to any liability or
disadvantage that is reasonably expected to result in a Company Material Adverse
Effect, and the Company is not a party to any legal action to recover monies
due it or for damages sustained by it, other than collection of past due charges
for services rendered or expenses incurred by the Company.
IV.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as uninsured
and lists the individual and aggregate policy limits for the insurance covering
each insured Action and the applicable policy deductibles for each insured
Action.
IV.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Company was a party during the five (5) year period
preceding the Closing Date, the date such litigation was commenced and
concluded, and the nature of the resolution thereof (including amounts paid in
settlement or judgment).
19
<PAGE>
IV.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, the Company and every person acting on behalf of the Company has
- ---- ----
complied in all material respects with all laws, rules, regulations, regulatory
agency bulletins, attorney general opinions, writs, injunctions, decrees, and
orders (collectively, "LAWS") applicable to the Company, and every person
acting on behalf of the Company in relation to the operation of the Business,
and has not received any notice of any alleged claim or threatened claim,
violation of, citation for non-compliance with, or liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability and, to the Knowledge of the Company, no
event has occurred or circumstances exist that (with or without notice or lapse
of time) is reasonably expected to constitute or result in a violation by the
Company or any Person acting on behalf of the Company of any Law or that gives
rise to any liability on the part of the Company under any Law. The Company has
not received notice of potential claims, allegations, grievances or complaints
against or pertaining to the Business, including any consumer complaints from
any state departments of insurance.
IV.12 Licenses. Schedule 4.12 lists all Licenses maintained by the Company
-------- -------------
and each Licensed Person that are material to the conduct of the Business.
"LICENSES" means all notifications, licenses, permits, franchises, certificates,
approvals, exemptions, classifications, qualifications, registrations and other
similar documents and authorizations, and applications therefor held by the
Company and each Person acting on behalf of the Company whose activities require
Licenses ("LICENSED PERSON") and issued or submitted to the Company or any
Licensed Persons by any Governmental Authority or other Person. All such
Licenses are valid, binding and in full force and effect. Except as described on
Schedule 4.12, the execution, delivery and performance of this Agreement and the
- -------------
consummation of the transactions contemplated hereby will not adversely affect
any such Licenses. To the Knowledge of the Company, the Company has taken all
necessary action to maintain such Licenses. Except as set forth in Schedule
--------
4.12, no loss or expiration of any such License is pending or, to the Company's
- ----
Knowledge, threatened or reasonably foreseeable. Except as set forth in Schedule
--------
4.12, no Person engages in or transacts the Business on behalf of the Company or
- ----
Licensed Person in any State without a License, nor does the Company engage in
or transact the Business in any State without a License.
IV.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "MATERIAL CONTRACTS"), as of or on the date hereof,
the Company is not a party to or bound by, any written or oral leases,
agreements or other contracts or legally binding contractual rights or
contractual obligations or contractual commitments (each a "CONTRACT" and
collectively, the "CONTRACTS") relating to or in any way affecting the
operation or ownership of the Business that are of a type described below and no
such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Company is to
receive consulting services (other than consulting agreements that may be
terminated by the
20
<PAGE>
Company on not more than 30 days notice without penalty), employment
agreement, change-in-control agreement, or collective bargaining
arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness, other than any contract with an insurance
carrier under which the Company is responsible for the payment of insurance
premiums whether or not such premiums are first collected by the Company;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Company;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Company;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Company upon ninety (90) calendar days or less
notice without penalty;
(i) any Contract under which such Company is (A) a lessee or
sublessee of any machinery, equipment, vehicle or other tangible personal
property, or (B) a lessor of any tangible personal property owned by such
Company, in either case having an original purchase price or requiring
aggregate lease payments in excess of $50,000;
(j) any Contract under which the Company has granted or received a
license or sublicense or under which it is obligated to pay or has the
right to receive a royalty, license fee or similar payment, in either case
which provides for payments over the life of such Contract in excess of
$25,000, except such Contracts with insurance companies
21
<PAGE>
whereby the Company is acting as an insurance producer and has the right to
receive any commission payments;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Company of any real
property on which the Company conducts any aspect of the Business, (B)
granting any options to lease or purchase all or any portion of the Real
Property, or (C) providing for labor, services or materials to the Real
Property (including, without limitation, brokerage or management services)
involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Company from
conducting business anywhere in the United States or elsewhere in the
world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Company, which, if
amended, modified or terminated as a result of, relating to or in
connection with a failure to provide prior notice, or gain such consent or
approval, would result in a Company Material Adverse Effect;
(r) any Contract under which the Company would be considered an
employee benefit plan "administrator" as such term is defined in Section
3(16) of ERISA or a "fiduciary" as such term is defined in Section 3(21) of
ERISA; or
(s) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Company in excess of
$25,000.
The Company has provided CenterPoint or its counsel with a true and
complete copy of each written Material Contract and a true and complete summary
of each oral Material Contract, in each case including all amendments or other
modifications thereto. Except as set forth on Schedule 4.13, each Material
-------------
Contract is a valid and binding obligation of, and enforceable in accordance
with its terms against the Company and, to the Knowledge of the Company, the
other parties thereto, and is in full force and effect, subject only to
bankruptcy, reorganization,
22
<PAGE>
receivership and other laws affecting creditors' rights generally and equitable
principles. Except as set forth on Schedule 4.13, the Company has performed in
-------------
all material respects all obligations required to be performed by it as of the
date hereof and will have performed in all material respects all obligations
required to be performed by it as of the Closing Date under each Material
Contract and the Company has not, nor, to the Knowledge of the Company, no other
party to any Material Contract is in breach or default thereunder, and, to the
Knowledge of the Company, there exists no condition which would, with or without
the lapse of time or the giving of notice, or both, constitute a breach or
default thereunder. The Company has not been notified that any party to any
Material Contract intends to cancel, terminate, not renew, or exercise an option
under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
IV.14 Properties.
----------
IV.14.1 Schedule 4.14.1-1 is a correct and complete list, and a
-----------------
brief description of, all real estate in which the Company has an ownership
interest (the "OWNED PROPERTY") and all real property leased by the Company
(the "LEASED PROPERTY"). Except as lessee of Leased Property, the Company is
not a lessee under or otherwise a party to any lease, sublease, license,
concession or other agreement, whether written or oral, pursuant to which
another Person has granted to the Company the right to use or occupy all or any
portion of any real property.
The Company has good and marketable fee simple title to the Owned Property
and, assuming good title in the Landlord, a valid leasehold interest in the
Leased Property (the Owned Property and the Leased Property being sometimes
referred to herein as "REAL PROPERTY"), in each case free and clear of all
Liens, assessments or restrictions (including, without limitation, inchoate
liens arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) Liens for current taxes not yet due, (c) (i) minor
imperfections of title, including utility and access easements depicted on
subdivision plats for platted lots that do not impair the intended use of the
property, if any, none of which materially impairs the current operations of the
Company or the Business, and (ii) zoning laws and other land use restrictions or
restrictive covenants that do not materially impair the present use of the
property subject thereto, and (d) Liens, assessments, and restrictions pursuant
to and by virtue of the terms of the lease of the Leased Property. The Real
Property constitutes all real properties reflected on the Financial Statements
or used or occupied by the Company in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule 4.14.1-
---------------
2(a):
- ----
(a) the Company is in exclusive possession thereof and no easements,
licenses or rights are necessary to conduct the Business thereon in
addition to those which exist as of the date hereof;
23
<PAGE>
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Company, there
is no threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
- -----------
(i) the Company is in exclusive, peaceful and undisturbed
possession thereof and, to the Knowledge of each of the Companies, no
easements, licenses or rights are necessary to conduct the Business thereon
in addition to those which exist as of the date hereof; and
(ii) to the Knowledge of the Company, no portion thereof is
subject to any pending condemnation proceeding or proceeding by any public
or quasi-public authority materially adverse to the Leased Property and
there is no threatened condemnation or proceeding with respect thereto.
IV.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by each of the Companies, except as
sold or otherwise disposed of or acquired in the ordinary course of business.
Except as set forth on Schedule 4.14.2, the Company has good and marketable
---------------
title to, or a valid leasehold interest in, or valid license of, such personal
property (including, without limitation, machinery, equipment and computers), in
each case free and clear of any Liens (other than Liens that are part of such
leasehold or license), and each such asset is in working order and has been
maintained in a commercially reasonable manner and does not contain, to the
Knowledge of the Company, any material defect. Except as set forth on Schedule
--------
4.14.2, no personal property (including, without limitation, software and
- ------
databases maintained on off-premises computers) used by the Company in
connection with the Business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement or
is located other than on the Real Property.
24
<PAGE>
IV.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
software, technical information, data, process technology, plans and drawings,
lists of past and present customers, lists of potential customers, insurance
expiration data and rights, business plans, performance standards, catalogues,
research sales data, analyses, and programs, sales and marketing materials,
scheduling and service methods, sales and service manuals and all other
proprietary, confidential and other similar information (in whatever form or
medium) relating to or used in connection with the Business (collectively, the
"TRADE SECRETS"), and the business and goodwill of the Company as a going
concern owned, used or licensed by the Company (collectively, the "INTELLECTUAL
PROPERTY") are all those necessary to enable the Company to conduct and to
continue to conduct the Business substantially as it is currently conducted.
Schedule 4.15 contains a complete and accurate list of all material Patents,
- -------------
Marks and Copyrights and a brief description of all material Trade Secrets
owned, used by or directly licensed to the Company, and a list of all material
license agreements and arrangements with respect to any of the Intellectual
Property to which the Company is a party, whether as licensee, licensor or
otherwise (collectively, the "INTELLECTUAL PROPERTY LICENSES"). Except as set
forth on Schedule 4.15, (i) all of the Intellectual Property is owned, or
-------------
to the Knowledge of the Company used under a valid Intellectual Property
License, by the Company and is free and clear of all Liens and other adverse
claims; (ii) the Company has not received any written notice that it is or has
infringed on, misappropriated or otherwise conflicted with, and otherwise has no
Knowledge that it is infringing on, misappropriating, or otherwise conflicting
with the intellectual property rights of any third parties; (iii) there is no
claim pending or, to the Knowledge of the Company, threatened against the
Company with respect to the alleged infringement or misappropriation by the
Company of, or a conflict with, any intellectual property rights of others; (iv)
the operation of any aspect of the Business in the manner in which it has
heretofore been operated or is presently operated does not give rise to any such
infringement or misappropriation; and (v) there is no infringement or
misappropriation of the Intellectual Property by a third party or claim, pending
or, to the Knowledge of the Company, threatened against any third party with
respect to the alleged infringement or misappropriation of the Intellectual
Property.
IV.16 Taxes.
-----
25
<PAGE>
IV.16.1 Except as set forth on Schedule 4.16.1-1, the Company has
-----------------
timely and accurately prepared and filed or will timely and accurately prepare
and file all federal, state (including any state premium filings), local and
foreign returns, declarations and reports, information returns and statements
(collectively, the "RETURNS") for Taxes (as defined in Section 4.16.2) required
--------------
to be filed by or with respect to the Company before the Closing Date, and has
paid or caused to be paid, or has made adequate provision or set up an adequate
accrual or reserve for the payment of, all Taxes required to be paid in respect
of the periods for which Returns are due on or prior to the Closing Date, and
will establish an adequate accrual or reserve for the payment of all Taxes
payable in respect of the period, including portions thereof, subsequent to the
last of said periods required to be so accrued or reserved, in each case in
accordance with GAAP up to and including the Closing Date. All such Returns are
or will be true and correct in all material respects. The Company has delivered
to CenterPoint true and complete copies of all Returns referred to in the first
sentence of this Section 4.16.1 (including any amendments thereof) for the five
--------------
(5) most recent taxable years. The Company is not delinquent in the payment of
any Tax, and no material deficiencies for any Tax, assessment or governmental
charge have been threatened, claimed, proposed or assessed. No waiver or
extension of time to assess any Taxes has been given or requested. No written
claim, or any other claim, by any taxing authority in any jurisdiction where the
Company does not file Tax returns is pending pursuant to which the Company is or
may be subject to taxation by that jurisdiction. The Company's Returns were last
audited by the Internal Revenue Service or comparable state, local or foreign
agencies on the dates set forth on Schedule 4.16.1-2.
-----------------
IV.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions, interest
or other assessments, including, without limitation, income, gross receipts,
excise, property, sales, employment, withholding, social security, occupation,
use, service, service use, license, payroll, franchise, transfer and recording
taxes, fees and charges, windfall profits, severance, customs, import, export,
employment or similar taxes, charges, fees, levies or other assessments, imposed
by the United States, or any state (including any state premium tax filings),
local, foreign or provincial government or subdivision or any agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis.
IV.17 Employee Benefit Plans; ERISA.
-----------------------------
IV.17.1 Other than any liability for payment of benefits in the
ordinary course of plan operation under any plan or policy listed on Schedule
--------
4.17.1 or as otherwise described on Schedule 4.17.1, the Company has not and
- ------ ---------------
is not reasonably expected to have any liability (including contingent
liability) whether direct or indirect (and regardless of whether it would be
derived from a current or former Plan Affiliate as defined in Section 4.17.5(c))
-----------------
with respect to any of the following (whether written, unwritten or terminated):
(i) any employee welfare benefit plan, as defined in Section 3(1) of "ERISA,"
including, but not limited to, any medical plan, life insurance plan, short-term
or long-term disability plan or dental plan; (ii) any "employee pension
26
<PAGE>
benefit plan," as defined in Section 3(2) of ERISA (as defined in Section
-------
4.17.5(b)), including, but not limited to, any excess benefit plan, top hat plan
- ---------
or deferred compensation plan or arrangement, nonqualified retirement plan or
arrangement, qualified defined contribution or defined benefit arrangement; or
(iii) any other benefit plan, policy, program, arrangement or agreement,
including, but not limited to, any material fringe benefit plan or program,
personnel policy, bonus or incentive plan, stock option, restricted stock, stock
bonus, holiday pay, vacation pay, sick pay, bonus program, service award, moving
expense, reimbursement program, tool allowance, safety equipment allowance,
deferred bonus plan, salary reduction agreement, change-of-control agreement,
employment agreement or consulting agreement.
IV.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited financial
- -----------------
statements, if any, for the three (3) most recent plan years; a copy of each
trust agreement or other funding vehicle with respect to each such plan; a copy
of any and all determination letters, rulings or notices issued by a
Governmental Authority with respect to such plan; a copy of the Form 5500 Annual
Report for the three (3) most recent plan years; and a copy of each and any
general explanation or communication which was required to be distributed or
otherwise provided to participants in such plan and which describes all or any
relevant aspect of each plan, including summary plan descriptions and/or summary
of material modifications, have been delivered or made available to CenterPoint.
A description of each unwritten Employee Plan, including a description of
eligibility, participation, benefits, funding arrangements and assets or other
relevant aspects of the obligation, is set forth on Schedule 4.17.2.
---------------
IV.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to the
Company, each Employee Plan (i) has been and is operated and administered in
compliance with its terms; (ii) has been and is operated, administered,
maintained and funded in compliance with the applicable requirements of the Code
in such a manner as to qualify, where appropriate and intended, for both Federal
and state purposes, for income tax exclusions, tax-exempt status, and the
allowance of deductions and credits with respect to contributions thereto; (iii)
where appropriate, has received a favorable determination letter from the
Internal Revenue Service upon which the sponsor of the plan may currently rely;
(iv) has been and currently complies in form and in operation in all respects
with all applicable requirements of ERISA and the Code and any applicable
reporting and disclosure requirements of Federal and state laws, including but
not limited to the requirement of Part 6 of subtitle B of Title I of ERISA and
Section 4980B of the Code. With respect to each Employee Plan, no Person has:
(i) entered into any nonexempt "prohibited transaction," as such terms are
defined in ERISA or the Code; (ii) breached a fiduciary obligation or (iii) any
liability for any failure to act or comply in connection with the administration
or investment of the assets of such plan; and no Employee Plan has any liability
and there is no liability in connection with any Employee Plan, other than a
liability (i) which is expressly and adequately reflected in the Latest Balance
Sheets, (ii) which is discretionary or terminable at will by the Company without
incurring any such liability, or (iii) which is adequately funded under a
funding arrangement separate from
27
<PAGE>
the assets of the Company or a Plan Affiliate (and only to the extent of such
funding). Any contribution made or accrued with respect to any Employee Plan is
fully deductible by the Company or a Plan Affiliate.
IV.17.4 Neither the Company nor a Plan Affiliate has ever sponsored,
maintained, contributed to or been required to contribute to, or has any
liability, whether direct or indirect, with respect to any Employee Plan which
is or has ever been (i) a "multiemployer plan" as defined in Section 4001 of
ERISA, (ii) a "multiemployer plan" within the meaning of Section 3(37) of ERISA,
(iii) a "multiple employer plan" within the meaning of Code Section 413(c), (iv)
a "multiple employer welfare arrangement" within the meaning of Section 3(40) of
ERISA, (v) subject to the funding requirements of Section 412 of the Code or to
Title IV of ERISA, or (vi) provides for post-retirement medical, life insurance
or other welfare-type benefits other than any benefits required under Section
4980B of the Code.
IV.17.5 As used in this Agreement, the following terms shall have
the following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy, program,
arrangement or agreement described in Section 4.17.1, whether or not
--------------
scheduled;
(b) the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term "PLAN
AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or which
would be treated or have been treated with the First Person as under common
control or whose employees would be or have been treated as employed by the
First Person, under Section 414 of the Code or Section 4001(b) of ERISA and
any regulations, administrative rulings and case law interpreting the
foregoing.
IV.18 Labor Matters. Except as set forth on Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years the Company has not experienced any, strike,
picketing, boycott, work stoppage or slowdown or other similar labor dispute,
union organizational activity, allegation, charge or complaint of unfair labor
practice, employment discrimination or other matters relating to the employment
of labor pending or, to the Knowledge of the Company, threatened against the
Company, or which might affect the Company; nor, to the Knowledge of the
Company, is there any basis for any such allegation, charge, or complaint. There
is no request for representation pending and, to the Knowledge of the Company,
no question concerning representation has been raised. There is no grievance
pending that is reasonably expected to result in a Company Material Adverse
Effect nor any arbitration proceeding arising out of a union agreement. To the
Knowledge of the Company, no key employee and no group of employees has
announced or otherwise indicated any plans to terminate employment with the
Company. The Company has complied with all applicable laws relating to the
employment of labor, including provisions thereof
28
<PAGE>
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes. The Company is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, ordinances or regulations.
IV.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
the Company is operating and has operated its business in compliance with all
applicable Environmental and Safety Requirements (as defined later in this
Section); (ii) to the actual knowledge of the senior officers of the Company,
without any duty to inquire (notwithstanding the definition of "Knowledge" in
Section 15.4), there are no Hazardous Materials (as defined later in this
- ------------
Section) present at, on or under any real property currently or formerly owned,
leased or used by the Company (other than those present in office supplies and
cleaning/maintenance materials) for which the Company is or is reasonably
expected to be responsible, or otherwise have any liability, for response costs
under any Environmental and Safety Requirements; (iii) the Company has disposed
of all waste materials generated by the Company at any real property currently
or formerly owned, leased or used by the Company in compliance with applicable
Environmental and Safety Requirements; and (iv) there are and have been no
facts, events, occurrences or conditions at or related to any real property
currently or formerly owned, leased or used by the Company that is reasonably
expected to cause or give rise to liabilities or response obligations of the
Company under any Environmental and Safety Requirements. The term "ENVIRONMENTAL
AND SAFETY REQUIREMENTS" means any federal, state and local laws, statutes,
regulations or other requirements relating to the protection, preservation or
conservation of the environment or worker health and safety, all as amended or
reauthorized. The term "HAZARDOUS MATERIALS" means "hazardous substances," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S) 9601 et seq., "hazardous wastes," as defined by the Resource
Conservation Recovery Act, 42 U.S.C. (S) 6901 et seq., asbestos in any form or
condition, polychlorinated biphenyls and any other material, substance or waste
to which liability or standards of conduct may be imposed under any
Environmental and Safety Requirement.
IV.20 Insurance. The Company has in full force and effect commercially
---------
reasonable amounts of insurance (including, but not limited to, errors and
omissions insurance up to $1,000,000 in the aggregate for each of RA and
Verasource and up to $1,250,000 in the aggregate for Reppond) to protect the
Company's ownership or interest in, and operation of, its assets against the
types of liabilities, customarily insured against in connection with operations
similar to the Business, and all premiums due on such policies have been paid.
To the Company's Knowledge, the Company has complied with the provisions of all
such policies and is not in default under any of such policies. Schedule 4.20
-------------
contains a complete and correct list of all such insurance policies. The Company
has not received any notice of cancellation or nonrenewal, or intent to cancel
or nonrenew, or increase premiums with respect to such insurance policies.
Schedule 4.20 also contains a list of all claims or asserted claims reported to
- -------------
insurers under such policies relating to the ownership or interest in the
Company's assets, or operation of the Business, including all errors and
omissions claims and similar types of claims, actions or proceedings
29
<PAGE>
asserted against the Company arising out of the Business at any time within the
past three (3) years.
IV.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21, and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, no Stockholder, Affiliate of a Stockholder or Affiliate of the Company
(i) possesses, directly or indirectly, any financial interest in, or is a
director, officer, employee or affiliate of any Person that is a client,
supplier, customer, lessor, lessee or competitor of the Company, (ii) owns,
directly or indirectly, in whole or in part, or has any interest in any tangible
or intangible property used in the conduct of the Business, or (iii) is a party
to an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Company other than through a customary
employment relationship or through distributions made with respect to the
Company Equity (provided such distributions have been made consistent with the
Company's past custom and practices). Schedule 4.21 sets forth the parties to
-------------
and the date, nature and amount of each transaction during the last five years
involving the transfer of any cash, property or rights to or from the Company
from, to or for the benefit of any Affiliates (other than customary employment
relationships or distributions made with respect to the Company Equity)
("AFFILIATE TRANSACTIONS"), and any existing commitments of the Company to
engage in the future in any Affiliate Transactions. Except as disclosed, each
Affiliate Transaction and each transaction with former Affiliates of the Company
was effected on terms equivalent to those that have been established in an
arm's-length transaction.
IV.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Company representing one percent (1%) or more of the Company's revenues for the
twelve (12) months ended December 31, 1998. Except as set forth on Schedule
--------
4.22, since December, 31, 1998, none of such clients has canceled or
substantially reduced its business with the Company nor are any of such clients
threatening to do so. To the Knowledge of the Company, no policyholders,
current clients or customers, retail producers, licensed agents and brokers,
bona-fide associations and/or groups, or insurance carriers that accounts for
one percent (1%) or more of the Company's consolidated net revenue or supplier
of the Company, will cease to do business with, or substantially reduce its
business with, the Company after the consummation of the transactions
contemplated hereby.
IV.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners, of each Person who earned from the Company in 1998 total
compensation in excess of $100,000. Except as set forth in Schedule 4.23, no
-------------
Person listed thereon has received any bonus or increase in compensation and
there has been no "general increase" in the compensation or rate of compensation
payable to any employees, partners, members or owners of the Company since the
date of the Latest Balance Sheet, other than in the Company's ordinary course of
business, consistent with past custom and practices nor since that date has
there been any oral or written promise to employees, partners, members or
30
<PAGE>
owners of any bonus or increase in compensation, other than in the Company's
ordinary course of business, consistent with past custom and practices. The term
"GENERAL INCREASE" as used herein means any increase generally applicable to a
class or group, but does not include increases granted to individuals for merit,
length of service or change in position or responsibility made on the basis of
the custom and past practices of the Company. Schedule 4.23 includes the date
-------------
and amount of the last bonus or similar distribution or increase in compensation
for each listed individual.
IV.24 Bank Accounts. Schedule 4.24 is a true and complete list of each bank
------------- -------------
in which the Company has an account or safe deposit box, the number of each such
account or box, and the names of all Persons authorized to draw thereon or to
have access thereto.
IV.25 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Company contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to CenterPoint as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Company, there is no fact or circumstance that has not
been disclosed to CenterPoint herein that has or is reasonably expected to have
a Company Material Adverse Effect.
IV.26 Title to and Transfer of Insurance Expirations. Except as set forth
----------------------------------------------
on Schedule 4.26, as of the effective date of this Agreement, the Company has
-------------
good and valid rights, free and clear of any known restrictions, to Insurance
Expirations (as hereinafter defined). For the purpose of this Section 4.26,
------------
"INSURANCE EXPIRATIONS" is defined as the right to service, continue and renew,
and collect all commissions and other amounts on, all insurance policies of
every type and description produced or placed by or through the Company,
including all of (i) the expiration data relating to such policies of insurance
produced or placed by or through the Company, (ii) all books, records and files
pertaining to all insurance policies, including, without limitation, all
computerized data records and all other records and files regardless of the
media in or on which such data, records or files are maintains, and (iii) the
customer and prospective customer lists used by the Company.
31
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
V.1 Joint and Several Representations and Warranties. Each Stockholder of
------------------------------------------------
a Company, jointly and severally with the other stockholders or members of such
Company, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows:
V.1.1 Capitalization. Such Stockholder owns beneficially and of
--------------
record all of the issued and outstanding shares or other equity interest in the
Company Equity as set forth opposite the name of such Stockholder in Schedule
--------
4.4. Such Company Equity is free and clear of all Liens, and such Stockholder
- ---
has good and marketable title to such Company Equity. At the Closing as provided
in this Agreement, CenterPoint will acquire good and valid title to such Company
Equity, free and clear of any Lien other than any Lien created by CenterPoint.
V.1.2 Authority. Such Stockholder has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Stockholder, and, assuming the due authorization, execution and delivery hereof
by CenterPoint, constitutes a valid and legally binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
V.1.3 Non-Contravention. The execution and delivery of this Agreement
-----------------
by such Stockholder does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of any Company under, any of the terms,
conditions or provisions of (i) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to such Stockholder or (ii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which such
Stockholder is a party or by which such Stockholder may be bound or affected
other than those licenses, franchises, permits, concessions or instruments of
any Governmental Authority. The consummation by such Stockholder of the
transactions contemplated hereby will not result in a violation, conflict,
breach, right of termination, creation or acceleration of Liens under the of the
terms, conditions or provisions of the items described in clauses (i) and (ii)
of the immediately preceding sentence subject to obtaining (prior to the Closing
Date) the consents set forth on Schedule 4.3.2.
--------------
32
<PAGE>
V.1.4 Approvals. To the Knowledge of such Stockholder, and except
---------
with respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various state
securities or "blue sky" authorities, (ii) any filing which may be required
under the HSR Act, and (iii) The Washington Office of the Insurance
Commissioner, no declaration, filing, or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by such Stockholder or the
consummation by such Stockholder of the transactions contemplated hereby.
V.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to the
Knowledge of such Stockholder, threatened against such Stockholder relating to
(i) the transactions contemplated by this Agreement, or (ii) any action taken by
such Stockholder or contemplated by such Stockholder in connection with the
consummation by such Stockholder of the transactions contemplated hereby.
V.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements, rights
or warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement to deliver or sell, or cause to be
delivered or sold, shares or other equity interests of the Company Equity owned
by such Stockholder or obligating such Stockholder to grant, extend or enter
into any such agreement or commitment or obligating such Stockholder to convey
or transfer any Company Equity. As of the Closing Date, there will be no voting
trusts, proxies or other agreements or understandings to which such Stockholder
is a party or is bound with respect to the voting of any shares of capital stock
or other equity interests of the Company other than the Voting Agreement.
V.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Stockholder contained in this Agreement or any of the written statements or
certificates furnished at or prior to the Closing by or on behalf of such
Stockholder to CenterPoint or its representatives in connection herewith or
pursuant hereto, contains any untrue statement of a material fact, or omits or
will omit to state any material fact required to make the statements contained
herein or therein not misleading.
V.1.8 Representations and Warranties of each of the Companies. To
-------------------------------------------------------
such Stockholder's actual knowledge, the representations and warranties of the
Company in which it holds an equity interest set forth in Article IV of this
----------
Agreement are true and correct.
V.2 Additional Joint and Several Representations and Warranties.
-----------------------------------------------------------
V.2.1 Each of the Stockholders of Reppond jointly and severally
represents and warrants to CenterPoint that the authorized capital stock of
Reppond consists of 50,000 shares of
33
<PAGE>
common stock, of which 500 shares are issued and outstanding all of which are
validly issued and are fully paid, nonassessable and free of preemptive rights.
V.2.2 Each of the members of RA jointly and severally represents and
warrants to CenterPoint that the authorized ownership interests of RA consists
of 500 units of ownership interest, of which 500 units are issued and
outstanding all of which are validly issued and are fully paid, nonassessable
and free of preemptive rights.
V.2.3 Each of the Stockholders of Verasource jointly and severally
represents and warrants to CenterPoint that the authorized capital stock of
Verasource consists of 50,000 shares of common stock, of which 250 shares are
issued and outstanding all of which are validly issued and are fully paid,
nonassessable and free of preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to each of the Companies and the
Stockholders as of the date hereof and, subject to Section 7.3, as of the date
-----------
on which CenterPoint and the lead Underwriter execute and deliver the
Underwriting Agreement related to the IPO and as of the Closing Date as follows:
VI.1 Organization And Qualification. Each of CenterPoint and each Mergersub
------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. True, accurate and complete copies of each of
CenterPoint's and Mergersub's Certificate of Incorporation and By-laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to each of the Companies.
34
<PAGE>
VI.2 Capitalization.
--------------
VI.2.1 The authorized capital stock of CenterPoint consists of 20,000
shares of CenterPoint Common Stock, of which 17,500 shares were outstanding as
of the date hereof. All of the issued and outstanding shares of CenterPoint
Common Stock are validly issued and are fully paid, nonassessable and free of
preemptive rights. Immediately prior to the Closing Date, the authorized
capital stock of CenterPoint will consist of 50,000,000 shares of CenterPoint
Common Stock, of which the number of shares set forth in the Form S-1 will be
issued and outstanding, and 10,000 shares of Preferred Stock, par value $0.01
per share, none of which will be issued and outstanding. Other than (i) shares
of CenterPoint Common Stock issued pursuant to a split of the shares outstanding
as of the date of this Agreement, (ii) shares of CenterPoint Common Stock issued
in accordance with the Merger and the Other Mergers, and (iii) shares of
CenterPoint Common Stock that may be issued to new members of management in lieu
of shares previously issued to current members of management, but which will not
increase the number of shares of outstanding CenterPoint Common Stock, no shares
of CenterPoint Common Stock will be issued prior to the consummation of the IPO.
Each Mergersub's authorized capital stock consists solely of 100 shares of
common stock, par value $.01 per share (the "MERGERSUB STOCK"), all of which are
issued and outstanding, are owned free and clear of any Liens by CenterPoint ,
and are fully paid, nonassessable and free of pre-emptive rights.
VI.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement obligating CenterPoint to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of CenterPoint
or obligating CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to the
voting of any shares of capital stock of CenterPoint. The shares of CenterPoint
Common Stock issued to the Stockholders in the Merger will at the Closing Date
be duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and issued pursuant to an effective registration statement as
required by the 1933 Act or an exemption thereof.
VI.2.3 The Notes have been duly authorized and when duly executed,
authenticated, issues and delivered will be duly and validly issued and
outstanding and will constitute the valid and legally binding obligations of
CenterPoint enforceable in accordance with their terms.
VI.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation and
Mergersubs (and similar entries created for similar purposes with respect to
other Agreements), CenterPoint has no subsidiaries
35
<PAGE>
and it does not own any capital stock of any corporation or any equity or other
interest of any nature whatsoever in any Person.
VI.4 Authority; Non-Contravention; Approvals.
---------------------------------------
VI.4.1 Each of CenterPoint and each Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of CenterPoint and each Mergersub, and no other corporate
proceedings on the part of CenterPoint or each Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation by
CenterPoint and each Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and each Mergersub
and, assuming the due authorization, execution and delivery hereof by each of
the Companies and the Stockholders, constitutes a valid and legally binding
agreement of CenterPoint and each Mergersub, enforceable against each of them in
accordance with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
VI.4.2 The execution and delivery of this Agreement by CenterPoint and
each Mergersub do not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of CenterPoint or any Mergersub under any of the
terms, conditions or provisions of (i) the Certificate of Incorporation or By-
laws of CenterPoint or any Mergersub, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or Governmental Authority applicable to CenterPoint or any Mergersub or
any of their respective properties or assets, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
CenterPoint or any Mergersub is now a party or by which CenterPoint, each
Mergersub or any of their respective properties or assets, may be bound or
affected. The consummation by CenterPoint or any Mergersub of the transactions
contemplated hereby will not result in any violation, conflict, breach, right of
termination or acceleration or creation of Liens under any of the terms,
conditions or provisions of the items described in clauses (i) through (iii) of
the immediately preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (ii) above, to
obtaining (prior to the Closing Date) CenterPoint Required Statutory Approvals
(as defined in Section 6.4.3) and, in the case of the terms, conditions or
-------------
provisions of the items described in clause (iii) above, to obtaining (prior to
the Closing Date) consents required from commercial lenders, lessors or other
third parties.
VI.4.3 Except with respect to (i) the filing of the Registration
Statements with the SEC pursuant to the 1933 Act, the declaration of the
effectiveness of the Registration Statements
36
<PAGE>
by the SEC and filings, if required, with various state securities or blue sky
authorities, and (ii) any filing which may be required under the HSR Act (the
filings and approvals referred to in clauses (i) through (iii) are collectively
referred to as the "CENTERPOINT REQUIRED STATUTORY APPROVALS") no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by CenterPoint or any Mergersub or the
consummation by CenterPoint or any Mergersub of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, are not reasonably expected to, in the aggregate, have a material
adverse effect on the business operations, properties, assets, condition
(financial or other), results of operations or prospects of CenterPoint and its
subsidiaries, taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
VI.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor any Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor any Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
VI.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint or Mergersub, threatened against,
relating to or affecting CenterPoint, before any court, Governmental Authority
or any arbitrator that seek to restrain or enjoin the consummation of the Merger
or the IPO or which could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to have a CenterPoint
Material Adverse Effect. CenterPoint is not subject to any unsatisfied or
continuing judgment, order or decree of any court or Governmental Authority.
CenterPoint is not a party to any legal action to recover monies due it or for
damages sustained by it.
VI.7 Compliance with Applicable Laws. Each of CenterPoint and each
-------------------------------
Mergersub has complied in all material respects with all Laws applicable to it,
and has not received any notice of any alleged claim or threatened claim,
violation of or liability or potential responsibility under any such Law which
has not heretofore been cured and for which there is no remaining liability and,
to the Knowledge of CenterPoint, no event has occurred or circumstances exist
that (with or without notice or lapse of time) may constitute or result in a
violation by CenterPoint or each Mergersub of any Law or may give rise to any
liability on the part of the CenterPoint or any Mergersub under any Law.
VI.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint set forth in this Agreement or in any of the certificates,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to the Stockholders or any of the Companies as contemplated by any
provision hereof contains any untrue statement of a material fact or omits to
37
<PAGE>
state a material fact necessary to make the statements contained herein or
therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to the Companies herein that has or is
reasonably expected to have a CenterPoint Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
VII.1 Conduct of Business by the Companies Prior to the Effective Time.
----------------------------------------------------------------
VII.1 Except as otherwise contemplated by this Agreement and
Schedule 7.1, after the date hereof and prior to the Closing Date or earlier
- ------------
termination of this Agreement, unless CenterPoint shall otherwise agree in
writing, each of the Companies shall:
(a) in all material respects conduct its businesses in the ordinary
and usual course and consistent with past customs and practices;
(b) not (i) amend its Organizational Documents, (ii) split, combine
or reclassify its outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise except dividends or distributions which (A) are consistent with
past customs and practices and (B) do not result in a Company Material
Adverse Effect;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of (i) any additional shares of, or any options, warrants
or rights of any kind to acquire any shares of, its capital stock or equity
interests of any class, (ii) any debt with voting rights or (iii) any debt
or equity securities convertible into or exchangeable for, or any rights,
warrants, calls, subscriptions, or options to acquire, any such capital
stock, debt with voting rights or convertible securities;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business in a manner consistent with past customs and practices,
(B) borrowings to refinance existing indebtedness on commercially
reasonable terms, or (C) liability related to placing insurance with
insurance companies and collecting premiums therefor in the ordinary course
of business, (ii) redeem, purchase, acquire or offer to purchase or acquire
any shares of its capital stock or equity interests or any options,
warrants or rights to acquire any of its capital stock or equity interests
or any security convertible into or exchangeable for its capital stock or
equity interests, (iii) sell, pledge, dispose of or encumber any assets or
businesses other than dispositions in the ordinary course of business in a
manner consistent
38
<PAGE>
with past customs and practices or (iv) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(e) use commercially reasonable efforts to (i) preserve intact its
business organizations and goodwill, (ii) keep available the services of
its present officers and key employees, and (iii) preserve the goodwill and
business relationships with clients and others having business
relationships with it and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by this
Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of materiality
and the general status of ongoing operations;
(g) not (i) increase in any manner the base compensation of, or enter
into any new bonus or incentive agreement or arrangement with, any of its
employees, partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of such
Company, as applicable, (ii) pay or agree to pay any additional pension,
retirement allowance or other employee benefit under any Employee Plan to
any such Person, whether past or present, (iii) enter into any new
employment, severance, consulting, or other compensation agreement with any
of its existing employees, partners, members or owners, (iv) amend or enter
into a new Employee Plan (except as required by Law) or amend or enter into
a new collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any businesses or any Person or division
thereof or otherwise acquire or agree to acquire any assets in each case
which are material to it other than in the ordinary course of business in a
manner consistent with past customs and practices;
(j) not sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets;
(k) maintain with financially responsible insurance companies the
insurance described in Section 4.20 herein;
------------
(l) except as may be permitted by Section 7.1.1(b), maintain a level
----------------
of working capital consistent with historic levels and past customs and
practices; and
39
<PAGE>
(m) collect and bill receivables in the ordinary and usual course and
consistent with past custom and practices.
VII.1.2 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Stockholders or the Companies
shall take any action that would or is reasonably likely to result in any of the
representations or warranties of the Stockholders or the Companies set forth in
this Agreement being untrue or in any of the conditions to the consummation of
the transactions contemplated hereunder set forth in Article X (other than
---------
Section 10.1(i)) not being satisfied.
- ---------------
VII.1.3 Prior to the Closing, the Companies, shall terminate,
without any liability to the Companies, all agreements relating to the voting of
the Companies' capital stock, and all agreements and obligations of the
Companies relating to borrowed money and/or involving payments to or for the
benefit of a Stockholder or former stockholder of the Companies, or an Affiliate
or family member of a Stockholder or former stockholder of the Company,
including without limitation those set forth on Schedule 7.13(a), but excluding
----------------
(A) those listed on Schedule 7.1.3(b), and (B) items approved by CenterPoint in
-----------------
writing.
VII.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, each of the Companies and the Stockholders
shall (i) not, and each of the Companies shall use its diligent efforts to
cause any officer, director or employee of, or any attorney, accountant,
investment banker, financial advisor or other agent retained by any Company
not to, initiate, solicit, negotiate, encourage, or provide non-public or
confidential information to facilitate, any proposal or offer to acquire
all or any substantial part of the business and properties of any Company,
or any capital stock or other equity interest of any Company, whether by
merger, purchase of assets or otherwise, whether for cash, securities or
any other consideration or combination thereof, or enter into any joint
venture or partnership or similar arrangement, and (ii) promptly advise
CenterPoint of the terms of any communications any Company or the
Stockholders may receive or become aware of relating to any bid for part or
all of any Company.
(b) The Company and the Stockholders (i) acknowledge that a breach of
any of their covenants contained in this Section 7.2 will result in
-----------
irreparable harm to CenterPoint which will not be compensable in money
damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
VII.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all
40
<PAGE>
the schedules to this Agreement (the "SCHEDULES") to correct any matter which
would constitute a breach of any such party's representations and warranties
herein; provided, however, that no amendment or supplement to a Schedule that
--------
constitutes or reflects a Company Material Adverse Effect or affects Schedule
--------
4.2, Schedule 4.4 or Schedule 8.8 may be made unless CenterPoint and a majority
- --- ------------ ------------
of the Founding Companies consent to such amendment or supplement. No amendment
or supplement to a Schedule shall be made later than three (3) business days
prior to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) any Company seeks to amend
-----------
or supplement a Schedule pursuant to this Section 7.3, (ii) such amendment or
-----------
supplement constitutes or reflects a Company Material Adverse Effect or affects
Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii) CenterPoint and a majority
- ------------ ------------ ------------
of the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to a breach of a representation or warranty as
of the date of this Agreement in which case the Companies shall pay to
CenterPoint as an exclusive remedy (notwithstanding anything to the contrary)
and as liquidated damages, and not as a penalty, an amount equal to $2,000,000
(the "LIQUIDATED DAMAGES AMOUNT"). Each of the Companies agrees that in the case
of such termination, CenterPoint and the Founding Companies will sustain
immediate and irreparable economic harm and loss of goodwill and that actual
losses suffered by such parties will be difficult, if not impossible, to
ascertain, but the Liquidated Damages Amount set forth herein is reasonable and
has been arrived at after a good faith effort to estimate such losses. Payment
of the Liquidated Damages Amount shall be made in cash to CenterPoint within
thirty (30) days of a termination pursuant to this Section 7.3 in connection
-----------
with an amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
VIII.4 Company Stockholder Meeting. The Company shall take all action in
---------------------------
accordance with applicable laws and its Organizational Documents necessary to
duly call, give notice of, convene and hold a meeting of the Stockholders to be
held on the earliest practicable date determined in consultation with
CenterPoint to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby by the Stockholders, and the Company's
Board of Directors or Managers shall recommend approval of the Merger, this
Agreement and the transactions contemplated hereby by the Stockholders.
ARTICLE VII
ADDITIONAL AGREEMENTS
41
<PAGE>
VIII.1 Access to Information.
---------------------
VIII.1.1 Each of the Companies shall afford to CenterPoint and its
accountants, counsel, financial advisors and other representatives, including
without limitation the underwriters engaged in connection with the IPO (each an
"UNDERWRITER" and collectively, the "UNDERWRITERS") and their counsel
(collectively, the "CENTERPOINT REPRESENTATIVES"), and to the Founding
Companies and their accountants, counsel, financial advisors and other
representatives, and CenterPoint shall afford to the Stockholders and each of
the Companies and their accountants, counsel, financial advisors and other
representatives (the "COMPANY REPRESENTATIVES"), upon reasonable notice, full
access during normal business hours throughout the period prior to the Closing
Date to all of its respective properties, books, contracts, commitments and
records (including, but not limited to, financial statements and Tax Returns)
and, during such period, shall furnish promptly to one another all due diligence
information requested by the other party. CenterPoint shall hold and shall use
its best efforts to cause the CenterPoint Representatives to hold, and the
Stockholders and each of the Companies shall hold and shall use their best
efforts to cause the Company Representatives to hold, in strict confidence all
non-public information furnished to it in connection with the transactions
contemplated by this Agreement, except that each of CenterPoint, the
Stockholders and each of the Companies may disclose any information that it is
required by law or judicial or administrative order to disclose. In addition,
CenterPoint will cause each of the other Founding Companies and their members
and stockholders to enter into a provision similar to this Section 8.1 requiring
-----------
each such Founding Company to keep confidential any information obtained by such
Founding Company in connection with the transactions contemplated by this
Agreement.
VIII.1.2 In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly return to the disclosing
party all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts or
other reproductions of such written material. In the event of such termination,
all documents, memoranda, notes and other writings prepared by CenterPoint or
any Company based on the information in such material shall be destroyed (and
CenterPoint and each of the Companies shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy such
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
VIII.2 Registration Statements.
-----------------------
42
<PAGE>
VIII.2.1 Subject to the reasonable discretion of CenterPoint as
advised by the lead Underwriter, CenterPoint shall file with the SEC as soon as
is reasonably practicable after the date hereof the Registration Statements and
shall use all reasonable efforts to have the Registration Statements declared
effective by the SEC as promptly as practicable. CenterPoint shall also take any
action required to be taken under applicable state "blue sky" or securities laws
in connection with the issuance of CenterPoint Common Stock. CenterPoint, each
of the Companies and the Stockholders shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with making such filings. All information provided and to be provided
by CenterPoint and each of the Companies, respectively, for use in the
Registration Statements shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the circumstances
under which given or made. Each of the Companies and the Stockholders agrees
promptly to advise CenterPoint if at any time during the period in which a
prospectus relating to the offering of the Merger is required to be delivered
under the Securities Act, any information contained in the prospectus concerning
each of the Companies, or the Stockholders becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy or remedy such incompletion.
VIII.2.2 CenterPoint agrees that it will provide to the Companies and
its counsel copies of drafts of the Registration Statements (and any amendments
thereto) containing material changes to the information therein as they are
prepared and will not (i) file with the SEC, (ii) request the acceleration of
the effectiveness of or (iii) circulate any prospectus forming a part of, the
Registration Statements (or any amendment thereto) unless the Companies and
their counsel (x) have had at least two days to review the revised information
contained therein (which changes shall be highlighted by computer generated
marks indicating the additions and deletions made from the prior draft reviewed
by the Companies' counsel) and (y) have not objected to the substance of the
information contained therein. Any objections posed by the Companies or their
counsel shall be in writing and state with specificity the material in question,
the reason for the objection, and the Companies' proposed alternative. If the
objection is founded upon a rule promulgated under the Securities Act, the
objection shall cite the rule. Notwithstanding the foregoing, during the five
(5) business days immediately preceding the date scheduled for the filing of the
Registration Statements and any amendment thereto, the Companies and their
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed changes (in
the case of the initial filing of the Registration Statements, from the last
circulated draft of the Registration Statements; and, in the case of any
subsequent filing of the Registration Statements or any amendment thereof, from
the most recently filed Registration Statements or amendment thereof) are
transmitted to the Companies' counsel; provided, that, CenterPoint has provided
to the Companies or their counsel reasonable advance notice of such proposed
changes; provided, further, that such changes are highlighted by computer
generated marks indicating the additions and deletions made from the prior draft
reviewed by the Companies' counsel.
43
<PAGE>
VIII.2.3 CenterPoint will advise the Stockholder Representative of
the effectiveness of the Registration Statements, advise the Stockholder
Representative of the entry of any stop order suspending the effectiveness of
the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts promptly
to obtain the lifting or removal thereof. Upon the written request of any
Stockholder, Cornerstone will furnish to such Stockholder a reasonable number of
copies of the final prospectus associated with the IPO.
VIII.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of
-----------------
the independent public accountants and legal counsel to CenterPoint and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. Neither the Companies nor the Stockholders will be
liable for any portion of the above expenses in the event the IPO is not
completed. CenterPoint shall also pay the underwriting discounts and commissions
payable in connection with the sale of CenterPoint Common Stock in the IPO.
Subject to Sections 8.11 and 11.2, all other costs and expenses incurred in
-------------
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; provided, however, that CenterPoint
shall pay the fees and expenses of Hales Capital Advisors, LLC described in
Schedule 15.1 in connection with the Merger.
- -------------
VIII.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
VIII.5 Public Statements. Except as may be required by law, no party
-----------------
hereto nor any Affiliate of any party hereto shall issue any press release or
any written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint and each of the Companies.
44
<PAGE>
VIII.6 Registration Rights.
-------------------
VIII.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions, CenterPoint
will give each of the Stockholders prompt written notice of its intent to do so.
Upon the written request of any of the Stockholders given within thirty (30)
days, CenterPoint will use its best efforts to cause to be included in such
registration all of the CenterPoint Common Stock which any such Stockholder
requests, provided that CenterPoint shall have the right to reduce the number of
shares included in such registration, if CenterPoint is advised in writing in
good faith by any managing underwriter of the securities being offered pursuant
to any registration statement under this Section 8.6 that the number of shares
-----------
to be sold by Persons other than CenterPoint is greater than the number of such
shares which can be offered without adversely affecting the offering; in such
case, CenterPoint may reduce the number of shares offered for the accounts of
such Persons to a number deemed satisfactory by such managing underwriter. Any
such reduction shall occur first by eliminating from such registration any
shares held by Persons other than Persons holding CenterPoint Common Stock
directly or indirectly immediately following the Closing and then reducing pro
rata (based upon the number of shares requested to be registered) the number of
shares offered for the account of such Person. CenterPoint shall not be
obligated to register any shares of CenterPoint Common Stock held by any
Stockholder at any time when such shares are not then transferable in accordance
with Section 12.2. Registration rights under this Section 8.6 may be transferred
------------ -----------
in whole or in part in connection with the transfer of any shares of CenterPoint
Common Stock received pursuant to this Agreement other than the transfer of the
kind described in clause (x) of Section 12.2 hereof.
-------------
VIII.6.2 Except for underwriting commissions and discounts, all
expenses incurred in connection with the registrations under this Section 8.6
-----------
(including all registration, filing, qualification, legal, printer and
accounting fees) shall be paid by CenterPoint. In connection with registrations
under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as soon
as reasonably practicable, a registration statement with respect to the
CenterPoint Common Stock (and such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be required by applicable law) and use its best efforts to cause such
registration to promptly become and remain effective for a period of at
least one hundred twenty (120) days (or such shorter period during which
holders shall have sold all CenterPoint Common Stock which they requested
to be registered);
(b) upon the written request of a Stockholder whose CenterPoint
Common Stock is to be covered by any such registrations, furnish to such
Stockholder a reasonable number of copies of the prospectus covering the
offering and sale by the Stockholder of the shares to be covered thereby;
45
<PAGE>
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Stockholder whose CenterPoint Common Stock is to
be covered by such registration of the effectiveness of such registration
statement, advise each such Stockholder of the entry of any stop order
suspending the effectiveness of such registration statement or of the
initiation of any proceeding for that purpose, and, if such stop order
shall be entered, use its best efforts promptly to obtain the lifting or
removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Stockholder whose CenterPoint Common Stock is to be covered by such
registration of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated
therein by reference includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading and, at the request of
such Stockholder, prepare and furnish to such Stockholder a post-effective
amendment or supplement to the registration statement or the related
prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of such shares, such prospectus shall not include any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein not misleading.
VIII.6.3 In connection with each registration pursuant to this
Section 8.6 covering an underwritten registration public offering, CenterPoint
- -----------
and each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CenterPoint's size and investment
stature, including indemnification.
VIII.6.4 In consideration of the granting to the Stockholders of
the registration rights under this Section 8.6, the Stockholders agree, and
-----------
agree to enter into an agreement with the underwriters in connection with an
underwritten registration to the effect, that they will not sell, transfer or
otherwise dispose of, including, without limitation, through put or short sale
arrangements, shares of CenterPoint Common Stock in the ten (10) days prior to
the effectiveness of any registration of CenterPoint Common Stock for sale to
the public and for up to ninety (90) days following the effectiveness of such
registration, provided that all directors,
46
<PAGE>
executive officers and holders of more than five percent (5%) of the outstanding
CenterPoint Common Stock agree to the same restrictions; and further provided
that, with respect to the first public offering of shares of the CenterPoint
Common Stock within three (3) years following the IPO, the Stockholders shall
have been afforded a meaningful opportunity to include shares in such
registration after any reduction by reason of underwriters' written advice.
VIII.7 CenterPoint Covenants. After the date hereof and prior to the
---------------------
Closing Date or earlier termination of this Agreement in accordance with its
terms, CenterPoint shall comply in all material requests with all applicable
laws. CenterPoint shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of CenterPoint set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
VIII.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Stockholders released from any and
all guarantees on any indebtedness and leases that they personally guaranteed
for the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Stockholders' guarantees thereafter shall have no
further force and effect, then CenterPoint shall not be obligated to use any
efforts to obtain release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Stockholders against any and all claims made by lenders or
landlords under such guarantees.
VIII.9 Lock-Up Agreement. Each Stockholder agrees, and agrees to enter
-----------------
into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, the Stockholder will
not offer, sell, contract to sell or otherwise dispose of any shares of
CenterPoint Common Stock, or any securities convertible into or exercisable or
exchangeable for CenterPoint Common Stock, for a period of 180 days after the
date of the final Prospectus for the IPO without the prior written consent of
the Underwriter except for shares of CenterPoint Common Stock disposed of as
bona fide gifts, subject to any remaining portion of the 180-day period applying
to any shares so disposed of.
VIII.10 Preparation and Filing of Tax Returns.
-------------------------------------
VIII.10.1 Each Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for such Company; provided however, that
CenterPoint and its advisors shall have the right to review and approve such
returns prior to filing, which approval shall not be unreasonably withheld.
CenterPoint shall, and shall cause its Affiliates to, provide to each Company
such cooperation and information as any of them reasonably requested in filing
any return, amended return or claim for refund, determining a liability for
Taxes or a right to refund
47
<PAGE>
of Taxes or in conducting any audit or other proceeding in respect of Taxes.
Each Company shall bear all costs of filing such returns.
VIII.10.2 Each of the Company, CenterPoint and the Stockholders
shall comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and shall treat the transaction
as subject to the provisions of Section 351 of the Code.
VIII.11 Insurance. Each Company covenants and agrees that all insurance
---------
policies listed, or required to be listed, on Schedule 4.20 will be maintained
-------------
in full force and effect through the Closing Date. Each Company will purchase
directors' and officers' liability and errors and omissions insurance (or
maintain its existing insurance) for the Company and its Stockholders for a
period of five (5) years after the Closing Date or provide comparable coverage
providing at least the same benefits as those coverage amounts and deductibles
for other agencies similarly situated in the insurance industry. CenterPoint
shall cause Robert F. Driver Co., Inc. to bear one-half of the expense of such
insurance.
VIII.12 Management by Robert F. Driver Co., Inc. Each of the Companies
----------------------------------------
acknowledges that its day-to-day management and operations shall be governed and
supervised by Robert F. Driver Co., Inc. or as otherwise provided by
CenterPoint.
VIII.13 Name of Companies. CenterPoint shall cause the Companies to be
-----------------
operated under a name in which "Reppond" is equally as prominent or more
prominent than "Driver" if the name "Driver" is used to describe the Company.
ARTICLE IX
INDEMNIFICATION
IX.1 Indemnification by the Stockholders. Subject to Sections 9.7 and 9.8,
----------------------------------- ------------ ---
each Stockholder jointly and severally (with respect to the Company in which it
formerly held an equity interest) agrees to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
(a) any misrepresentation or breach of a representation or warranty
made by such Stockholder in Article V herein or in any certificate,
---------
schedule, document, exhibit or other instrument delivered hereunder by such
Stockholder or any action, demand or claim
48
<PAGE>
by any third party against or affecting any CenterPoint Indemnified Party
which, if successful, would give rise to a breach of any such
representation or warranty;
(b) any failure by such Company or such Stockholder to observe or
perform any of their covenants and agreements set forth herein related to
the period prior to the Closing period, except that the obligation of the
Stockholders to indemnify, defend and hold harmless for any failure to
observe or perform any covenant or agreement shall not be joint and
several, but such obligation shall be several only and limited to the
several Stockholder(s) failing to observe or perform such covenant or
agreement;
(c) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to such Company, contained in any preliminary prospectus
relating to the IPO, the Registration Statements or any proxy statement or
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission to state therein a
material fact relating to such Company required to be stated therein or
necessary to make the statements therein not misleading, and not provided
to CenterPoint or its counsel by any Company; provided, however, that such
indemnity shall not inure to the benefit of any CenterPoint Indemnified
Party to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and (i) any Company provided, in writing, corrected
information to CenterPoint or its counsel for inclusion in the final
prospectus prior to distributing such prospectus, and such information was
not so included, or (ii) CenterPoint did not provide the Companies and
their counsel with the information required to be provided pursuant to
Section 8.2.2, and such information is the basis for the untrue statement
-------------
or omission (or alleged untrue statement or omission) giving rise to the
liability under this Section 9.1(c); or
--------------
(d) (i) any arrangements made by or on behalf of such Stockholder or
such Company in connection with the Merger or the transactions contemplated
by this Agreement with respect to brokerage, finders and other fees or
commissions except as set forth in Section 8.3, (ii) any Loss relating to,
-----------
resulting from, arising out of or otherwise by virtue of any matter which
is or should be listed on Schedule 4.10 hereto and (iii) any payment with
-------------
respect to Dissenting Shares.
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies (excluding
the Companies), and their respective officers, directors, employees, agents,
employee plans and plan fiduciaries, plan administrators or other Person dealing
with any such plans; provided, however, that the Founding Companies, and each of
their respective officers, directors, employees, agents, employee plans and plan
fiduciaries, plan administrators or other Persons dealing with any such plans,
shall cease to be a "CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder
as of the Closing, and thereafter such Persons shall have no further rights and
remedies under this Article IX (except to
----------
49
<PAGE>
the extent a Person is an officer, director, employee or agent of CenterPoint as
a result of the consummation of the transactions contemplated under the Other
Agreements); provided, further that the subsidiaries of CenterPoint shall
include the Companies and the Founding Companies from and after the Closing.
Accordingly, for purposes of this Article IX and subject to the limitations set
----------
forth in this Article IX, the Founding Companies, and each of their respective
----------
officers, directors, employees, agents, employee plans and plan fiduciaries,
plan administrators or other Persons dealing with any such plans, shall be
deemed to be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
IX.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Stockholders, the Companies and their respective
Affiliates, and their Affiliates respective officers, directors, employees and
agents (each, a "STOCKHOLDER INDEMNIFIED PARTY") forever harmless from and
against, and to promptly pay to a Stockholder Indemnified Party or reimburse a
Stockholder Indemnified Party for, any and all Losses sustained or incurred by
any Stockholder Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Stockholder Indemnified Party which, if successful, would
give rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Founding Companies contained in
any preliminary prospectus relating to the IPO, the Registration Statements
or any proxy statement or prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon
any
50
<PAGE>
omission or alleged omission to state therein a material fact relating to
CenterPoint or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading; or
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to any of the Companies or the Stockholders, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
any proxy statement or prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to any of the Companies or the
Stockholders required to be stated therein or necessary to make the
statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and (i) the Companies or
Stockholders provided, in writing, corrected information to CenterPoint or
its counsel for inclusion in the final prospectus prior to distributing
such prospectus, and such information was not so included, or (ii)
CenterPoint did not provide the Companies and their counsel with the
information required to be provided pursuant to Section 8.2.2, and such
-------------
information is the basis for the untrue statement or omission (or alleged
untrue statement or omission) giving rise to the liability under this
Section 9.2(d).
-------------
IX.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
51
<PAGE>
IX.3.1 In the event that subsequent to the Closing any Person entitled
to indemnification under this Agreement (an "INDEMNIFIED PARTY") receives
notice of the assertion of any claim, issuance of any order or the commencement
of any action or proceeding by any Person who is not a party to this Agreement
or an Affiliate of a party, including, without limitation, any domestic or
foreign court or Governmental Authority (a "THIRD PARTY CLAIM"), against such
Indemnified Party, against which a party to this Agreement is required to
provide indemnification under this Agreement (an "INDEMNIFYING PARTY"), the
Indemnified Party shall give written notice thereof together with a statement of
any available information regarding such claim to the Indemnifying Party within
thirty (30) days after learning of such claim (or within such shorter time as
may be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after receipt
from the Indemnified Party of notice of such claim, to conduct at its expense
the defense against such claim in its own name, or if necessary in the name of
the Indemnified Party; provided, however, that the Indemnified Party shall have
the right to approve the defense counsel selected by the Indemnifying Party,
which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten (10) days after the Defense Notice is provided, then the Indemnifying
Party shall propose an alternate defense counsel, who shall be subject again to
the Indemnified Party's approval.
IX.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party shall have
the right to conduct such defense in good faith at the cost and expense of the
Indemnifying Party and the Indemnifying Party shall reimburse the Indemnified
Party for all costs, expenses and settlement amounts actually paid in connection
therewith provided, however, that under no circumstances shall the Indemnified
-------- -------
Party compromise or settle any Third Party Claim without the prior written
consent of the Indemnifying Party (which, in the case of the Stockholders, may
be granted by the Stockholder Representative (as defined in Section 9.13)),
------------
which consent shall not be unreasonably withheld or delayed.
IX.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with and
make available to the Indemnifying Party such assistance and materials as may be
reasonably requested by it, all at the expense of the Indemnifying Party, and
the Indemnified Party shall have the right at its expense to participate in the
defense assisted by counsel of its own choosing, provided that the Indemnified
Party shall have the right to compromise and settle the claim only with the
prior written consent of the Indemnifying Party (which, in the case of the
Stockholders, may be granted by the Stockholder Representative (as defined in
Section 9.13)), which consent shall not be unreasonably withheld or delayed.
- ------------
Without the prior written consent of the Indemnified Party, the Indemnifying
Party will not enter into any settlement of any Third Party Claim or cease to
defend against such claim, if pursuant to or as a result of such settlement or
cessation, (i) injunctive or other equitable
52
<PAGE>
relief would be imposed against the Indemnified Party, or (ii) such settlement
or cessation would lead to liability or create any financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder, or (iii) such settlement includes a
written admission of guilt. The Indemnifying Party shall not be entitled to
control, and the Indemnified Party shall be entitled to have sole control over,
the defense or settlement of any claim (A) to the extent that claim seeks an
order, injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party or (B)
in a proceeding to which the Indemnifying Party is also a party and the
Indemnified Party determines in good faith that joint representation would be
inappropriate (and in each case the cost of such defense shall constitute an
amount for which the Indemnified Party is entitled to indemnification
hereunder). If an offer is made to settle a Third Party Claim which all parties
to such Third Party Claim (including the Indemnifying Party) are prepared to
settle and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party, the
- -------------
Indemnifying Party will give prompt written notice to the Indemnified Party to
that effect. If the Indemnified Party fails to consent to such firm offer within
thirty (30) calendar days after its receipt of such notice, the Indemnified
Party may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third Party
Claim will not exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnified Party through the end of such
thirty (30) day period.
IX.3.4 Any judgment entered, order issued or settlement agreed upon
in the manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
IX.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM")
will be asserted by giving the Indemnifying Party reasonably prompt written
notice thereof, together with a statement of any available information regarding
such claim, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such thirty (30) calendar day period, the
Indemnifying Party will be deemed to have rejected such claim, in which event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party under this Article IX.
----------
IX.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure,
53
<PAGE>
any party entitled to receive such notice was deprived of its right to recover
any payment under any applicable insurance coverage, or deprived of its right to
assert any claim because of expiration of the applicable statute of limitations,
or was otherwise directly and materially damaged as a result of such failure to
give timely notice.
IX.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
IX.7 Limitation on Indemnities.
-------------------------
IX.7.1 Threshold for the Stockholders. With respect to
------------------------------
representations and warranties, the Stockholders of any Company shall not have
any liability pursuant to Section 9.1(a) hereof unless and until and only to the
--------------
extent that the aggregate amount of Losses accrued pursuant to Section 9.1(a)
-------------
exceeds 1% of the aggregate of the Stockholder's Note and Stock Purchase
Consideration for all stockholders or members of such Company; provided,
however, that this threshold shall not apply to Losses arising out of breaches
of representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2 and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of the Companies set
- -----
forth in Sections 4.8(b) and 4.16, and the Stockholders shall indemnify the
--------------- ----
CenterPoint Indemnified Parties for any Losses accruing thereunder in accordance
with this Article IX without regard to such threshold.
----------
IX.7.2 Threshold for CenterPoint. With respect to representations
-------------------------
and warranties, CenterPoint shall not have any liability to the stockholders or
members of any Company pursuant to Section 9.2(a) hereof unless and until and
--------------
only to the extent that the aggregate amount of the Losses accrued pursuant to
Section 9.2(a) exceeds 1% of the aggregate of the Stockholder's Note and Stock
- -------------
Purchase Consideration for all stockholders or members of such Company;
provided, however, that this threshold shall not apply to Losses arising out of
- -------- -------
the breach of representations
54
<PAGE>
or warranties contained in Section 6.2 and CenterPoint shall indemnify the
-----------
Stockholder Indemnified Parties from any Losses occurring thereunder in
accordance with this Article IX without regard to such threshold.
----------
IX.7.3 Limitations on Claims Against the Stockholders. Each
----------------------------------------------
Stockholder's liability for misrepresentations and breaches of representations
and warranties under Section 9.1(a) with respect to itself and any Company in
-------------
which it owns an equity interest shall be limited to 100% of the Stockholder's
Note and Stock Purchase Consideration with respect to such Company; provided,
--------
however, that such limitations shall not apply to Losses arising out of breaches
- -------
of representations or warranties contained in Sections 5.1.1, 5.1.2, 5.2, and
-------------- ----- ---
5.1.8 as it relates to the representation and warranty of the Companies set
- -----
forth in Section 4.16, and any Losses accruing thereunder shall not count
------------
towards such limitations.
IX.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint to any Stockholder under Section 9.2(a) shall be limited to 100% of
--------------
the Stockholder's Note and Stock Purchase Consideration payable to all of the
stockholders or members of the Company in which such Stockholder previously held
an equity interest; provided, however, that this limitation shall not apply to
-------- -------
Losses arising out of breaches of representations or warranties in Section 6.2
-----------
and any Losses accruing thereunder shall not count towards such limitation.
IX.8 Survival of Representations, Warranties and Covenants of the
------------------------------------------------------------
Stockholders and the Companies; Time Limits on Indemnification Obligations.
- --------------------------------------------------------------------------
Notwithstanding any right of CenterPoint to fully investigate the affairs of any
of the Companies or the Businesses, and notwithstanding any Knowledge of facts
determined or determinable by CenterPoint pursuant to such investigation or
right of investigation, CenterPoint has the right to rely fully upon the
representations, warranties, covenants and agreements of the Companies and the
Stockholders contained in this Agreement or in any certificate delivered
pursuant to any of the foregoing. All such representations, warranties,
covenants and agreements of the Stockholders and each of the Companies shall
survive the execution and delivery of this Agreement and the Closing hereunder;
provided, however, (i) that the Stockholders' obligations pursuant to Section
-------
9.1, other than those relating to covenants and agreements to be performed by
- ---
the Stockholders after the Closing, shall expire one (1) year after the Closing,
except with respect to obligations arising under or relating to Section 4.16
------------
hereof as it relates to federal, state, local and foreign income taxation, which
shall survive until the earlier of (A) the expiration of the applicable periods
(including any extensions) of the respective statutes of limitation applicable
to the payment of the Taxes or (B) the completion of the final audit and
determinations by the applicable taxing authority and final disposition of any
deficiency resulting therefrom; and (ii) solely to the extent that CenterPoint
actually incurs liability under the 1933 Act or the 1934 Act, the obligations
under Sections 9.1(c) or (d) above shall survive until the expiration of any
-------------- ---
applicable statute of limitations with respect to such claims.
IX.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. Notwithstanding any right of the
- ------------------------------------------
Companies or the
55
<PAGE>
Stockholders to fully investigate the affairs of CenterPoint, and
notwithstanding any Knowledge of facts determined or determinable by the
Companies or the Stockholders pursuant to such investigation or right of
investigation, the Companies and the Stockholders have the right to rely fully
upon the representations, warranties, covenants and agreements of CenterPoint
contained in this Agreement or in any certificate delivered pursuant to any of
the foregoing. All representations, warranties, covenants and agreements of
CenterPoint shall survive the execution and delivery of this Agreement and the
Closing hereunder; provided, however, that CenterPoint' obligations under
-------- -------
Section 9.2, other than those relating to covenants and agreements to be
- -----------
performed by CenterPoint after the Closing, shall expire one year after Closing,
except that, solely to the extent that the Stockholders or Stockholder
Indemnified Party actually incur liability under the 1933 Act or the 1934 Act,
the obligations under Sections 9.2(c) or (d) above shall survive until the
-------------- ---
expiration of any applicable statute of limitations with respect to such claims.
IX.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
IX.11 Fraud; Exclusive Remedy. The limitations set forth in this Article
----------------------- -------
IX shall not apply to fraud by any party. In the absence of fraud and
- --
notwithstanding any law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
----------
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Stockholders and of the Stockholder
Indemnified Parties following the Closing against CenterPoint and its affiliates
with respect to any claim for relief resulting from, arising out of or otherwise
by virtue of this Agreement and the transactions contemplated hereby.
IX.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Stockholders may satisfy their respective obligations, if any,
under this Article IX by (i) agreeing to reduce the principal to be paid under
----------
the Notes, or (ii) tendering to the CenterPoint Indemnified Parties cash or
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE" shall
- ------------
mean the average closing (last) price for a share of CenterPoint Common Stock
(as reported on the exchange or market on which such shares are then listed or
traded) for the most recent twenty (20) days that such shares have traded ending
on the date two (2) days prior to the date tendered pursuant to clause (ii) of
the preceding sentence, or, if such shares are not then listed or traded on an
exchange or other market, the fair market value of such shares as determined by
an appraiser reasonably agreed to by the parties.
IX.13 Stockholders' Representative. Each Stockholder appoints Ben Reppond
----------------------------
(the "STOCKHOLDER REPRESENTATIVE") as its agent and representative with full
power and authority to agree, contest or settle any claim or dispute affecting
any Stockholder made under Articles II or
-----------
56
<PAGE>
IX and to otherwise act on behalf of the Stockholders in accordance with the
- --
terms of this Agreement including, without limitation, to direct the amount and
manner of the payment of the Stockholder's Note and Stock Purchase
Consideration; provided, that the Stockholder Representative may be removed and
a successor to the Person originally serving as the Stockholder Representative
may be designated in a writing signed by a majority in interest of the
Stockholders and delivered to CenterPoint in accordance with Section 15.2.
------------
ARTICLE X
CLOSING CONDITIONS
X.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending or issued by any federal or state court which seeks to
prevent or prevents the consummation of the IPO, the Merger or any of the
Other Mergers shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1(d) shall
---------------
have been satisfied.
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or any of the Other Mergers or make the
consummation of the Merger or any of the Other Mergers illegal;
57
<PAGE>
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Merger or any of the Other
Mergers and the transactions contemplated hereby and by the Other
Agreements (including, without limitation, any consents listed on Schedules
---------
4.3.2 or 4.12) shall have been obtained and be in effect;
----- ----
(h) No action, suit or proceeding with respect to the Merger has been
filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Stockholders in the
manner required by any applicable Law and the Company's Organizational
Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
X.2 Conditions to Obligation of the Stockholders and the Companies to
-----------------------------------------------------------------
Effect the Merger. Unless waived by the Companies, the obligation of the
- -----------------
Stockholders and the Companies to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) CenterPoint, Mergersub and each of the Founding Companies shall
have performed in all material respects their agreements contained in this
Agreement and each Other Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of CenterPoint
contained in this Agreement and each Other Agreement shall be true and
correct in all material respects on and as of the date made and on and as
of the Closing Date as if made at and as of such date, and the Companies
shall have received a certificate of the Chief Executive Officer or
President of CenterPoint to that effect;
(b) no Governmental Authority shall have promulgated or formally
proposed any statute, rule or regulation which, when taken together with
all such promulgations, would materially impair the value to the
Stockholders of the Merger;
(c) the Companies shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Companies and Stockholders;
(d) Each of Ben Reppond, Louis Baransky and Scott Perry shall have
been afforded the opportunity to enter into an employment agreement (the "
EMPLOYMENT
58
<PAGE>
AGREEMENT") with one of the Companies substantially in the form attached
hereto as Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Companies and the
Stockholders a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the Delaware Secretary of State,
showing that CenterPoint is in good standing;
(f) each of the Stockholders, the partners, the members and the
stockholders, partners and members of the Founding Companies who are to
receive shares of CenterPoint Common Stock pursuant to the Other
Agreements, and the other stockholders of CenterPoint other than those
acquiring stock in the IPO shall have entered into an agreement (the "
STOCKHOLDERS AGREEMENT") substantially in the form attached hereto as
Exhibit 10.2(f);
---------------
(g) all conditions to the Mergers of the Founding Companies, on
substantially the same terms as provided herein, shall have been satisfied
or waived by the applicable party and the Companies; and
(h) the Companies shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Equity in the Merger pursuant to Section
351 of the Code, the final form of such opinion to be in form and substance
reasonably acceptable to the Companies and the Stockholders.
(i) Driver shall have signed and delivered to the Stockholders the
Letter Agreement between the Stockholders and Driver substantially in the
form attached hereto as Exhibit 10.2(i).
---------------
X.3 Conditions to Obligation of CenterPoint to Effect the Merger. Unless
------------------------------------------------------------
waived by CenterPoint, the obligation of CenterPoint and Mergersub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
additional following conditions:
(a) each of the Companies shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of each of the Companies contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and
CenterPoint and the Underwriters shall have received a Certificate of the
Chief Executive Officer or President of each of the Companies to that
effect;
59
<PAGE>
(b) the Stockholders shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing
Date as if made at and as of such date, and CenterPoint and the
Underwriters shall have received a Certificate of each Stockholder to that
effect;
(c) CenterPoint and the Underwriters shall have received an opinion
from Orrick, Herrington & Sutcliffe, LLP and/or Pete Lewicki, counsel to
each of the Companies, dated the Closing Date, in the form attached hereto
as Exhibit 10.3(c), the final form of such opinion to be in form and
---------------
substance reasonably acceptable to the Underwriters and CenterPoint;
(d) each of Ben Reppond, Louis Baransky and Scott Perry shall have
executed and delivered the Employment Agreement referred to in Section
-------
10.2(d);
-------
(e) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from each of the Companies' independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(f) each of the Companies shall have delivered to CenterPoint and the
Underwriters a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the appropriate Governmental Authority
in the state of organization of each Company, unless waived by CenterPoint,
in each state in which each Company is authorized to do business, showing
such Company (as applicable) is in good standing, authorized to do business
and/or in compliance with all laws and regulations, whichever is
applicable;
(g) no Governmental Authority shall have promulgated or formally
proposed any statute, rule, regulation or bulletin, or otherwise
promulgated a policy pursuant to its authority under any statute, which,
when taken together with all such promulgations, would materially impair
the value to CenterPoint of the Merger;
(h) the Stockholders shall have executed the Stockholders Agreement;
(i) the Stockholders shall have delivered to CenterPoint an instrument
in the form attached hereto as Exhibit 10.3(i), dated the Closing Date,
---------------
releasing their respective
60
<PAGE>
Companies from any and all claims of the Stockholders against the Companies
and obligations of the Companies to the Stockholders;
(j) Reserved;
(k) each of the Companies and the Stockholders, as applicable, shall
have terminated or have caused the termination of any voting trusts,
proxies or other agreements or understandings to which any such Company or
any Stockholder is a party or is bound with respect to any shares of
capital stock or other equity interests of such Company and shall have
provided CenterPoint evidence of such termination that is acceptable to
CenterPoint's counsel;
(l) to the extent any of the Companies' contracts and agreements with
insurance carriers, referring agents and insurance producers (collectively
referred to as "INSURANCE ENTITIES") will be terminated as a result of this
Agreement or the transactions contemplated herein, each of the Companies
shall have: (i) entered into new contracts with each of the Insurance
Entities under the same material terms and conditions as the previous
contracts and agreements terminated as a result of this Agreement or the
transactions contemplated herein; or (ii) obtained amendments or waivers of
the contracts and agreement with each of Insurance Entities such that the
contracts and agreements will not terminate as a result of this Agreement
or the transactions contemplated herein, provided that such amendments or
waivers do not modify the material terms of such contracts or agreements,
except where the failure to have entered into such contracts or to have
obtained such amendments or waiver would not have a Company Material
Adverse Effect;
(m) each of the Companies has provided to CenterPoint certified copies
of all licenses and registrations necessary for such Company to conduct
their Business, and each of the Companies has modified or amended the
information given the relevant Government Authorities in obtaining such
licenses and registrations necessary to prevent this Agreement or the
transactions contemplated herein from canceling or terminating such
licenses and registrations;
(n) the Company shall have presented evidence satisfactory to
CenterPoint of its compliance with the provisions of Section 7.1.3 hereof;
-------------
(o) the Stockholders and/or the Companies shall have delivered to
CenterPoint a payoff letter including a statement of per diem interest
amounts and other applicable release documents from all such lenders or
creditors regarding the payment in full of such indebtedness (which will be
paid in accordance with Schedule 7.1.3(a) at Closing) in each case in form
-----------------
and substance satisfactory to CenterPoint (including, without limitation,
applicable UCC-3 termination statements); and
61
<PAGE>
(p) the secretary of the Companies shall have delivered certified
copies of the resolutions of the board of directors and shareholders of the
Company approving execution and delivery of this Agreement, the Merger and
the other actions, agreements and documents necessary or desirable to
complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
XI.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by all of the Companies,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of any of the
Companies or the Stockholders or any of their affiliates or
associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of each of the
Companies or any of the Stockholders or any of their affiliates or
associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint; or
(c) CenterPoint,
(i) if the Merger is not completed by August 31, 1999 other
than on account of delay or default on the part of CenterPoint or any
of its stockholders or any of their affiliates or associates;
(ii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of CenterPoint or
any of its stockholders or any of their affiliates or associates;
(iii) if any Company (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all
62
<PAGE>
material respects within thirty (30) days after written notice of such
default is given to such Company by CenterPoint;
(iv) if any Stockholder (A) fails to perform in any material
respect any of such Stockholder's material covenants in this Agreement
and (B) do not cure such default in all material respects within
thirty (30) days after written notice of such default is given to the
Stockholder Representative by CenterPoint; or
(d) by mutual consent of all of the Boards of Directors of the
Companies and CenterPoint.
XI.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either CenterPoint or the Companies, as provided in Section 11.1,
------------
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Companies, the Stockholders, CenterPoint,
Mergersub or their respective officers or directors (except the obligations set
forth in this Section 11.2 and in Sections 8.1, 8.3, 8.5 and Article IX, all of
------------ ------------ --- --- ----------
which shall survive the termination). Nothing in this Section 11.2 shall relieve
------------
any party from liability for any breach of this Agreement.
XI.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors of CenterPoint and the Company or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law; provided that
no waiver of any restriction set forth in Article XII shall be of any effect
-----------
unless consented to by a majority of the members of CenterPoint's Board of
Directors who do not at the time of such proposed waiver hold Restricted Shares
within the meaning of this Agreement, any Other Agreement or the Stockholder
Agreement.
XI.4 Waiver. At any time prior to the Closing Date, the parties hereto
------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
63
<PAGE>
ARTICLE XII
TRANSFER RESTRICTIONS
XII.1 Transfer Restrictions, Generally. Except as provided in Section
-------------------------------- -------
12.2, for a period of forty-two (42) months from the Closing, the Stockholders
- ----
shall not (a) sell, assign, exchange, transfer, distribute or otherwise dispose
of, in whole or in part, (i) any shares of CenterPoint Common Stock received by
the Stockholders in the Merger (the "RESTRICTED SHARES"), or (ii) any interest
(including, without limitation, an option to buy or sell) in any Restricted
Shares; or (b) engage in any transaction, whether or not with respect to any
Restricted Shares or any interest therein, the intent or effect of which is to
reduce the risk of owning Restricted Shares (including, without limitation,
engaging in put, call, short-sale, derivative, straddle or similar market
transactions).
XII.2 Released Restrictions. Effective eighteen (18) months following the
---------------------
Closing and every six (6) months thereafter, until all of such Stockholder's
Restricted Shares shall have been released from such restrictions, 20% of the
original number of Restricted Shares of each Stockholder shall no longer be
subject to the restrictions set forth in Section 12.1 and shall no longer be
------------
deemed Restricted Shares for any purposes of this Agreement; provided that if a
Stockholder's employment with CenterPoint or its subsidiaries is terminated
within thirty (30) months of the Closing other than through death, disability,
retirement, without Cause or within sixty (60) days of a Constructive
Termination (as defined in such Stockholder's employment agreement with the
relevant Company dated the Closing Date) or due to circumstances approved by the
Board of Directors or Managers, as the case may be, of the relevant Company or
approved by CenterPoint's Chief Executive Officer, the Restricted Shares held by
such Stockholder shall remain subject to the restrictions set forth in Section
-------
12.1 until the fifth anniversary of the Closing Date. Notwithstanding the
- ----
foregoing, a Stockholder may (x) at any time pledge or encumber all or part of
such Stockholder's Restricted Shares, provided that the pledgee or secured party
agrees in writing to be bound by the provisions contained in Article XII, (y) at
-----------
any time transfer all or part of such Stockholder's Restricted Shares to another
Stockholder or to an immediately family member (or trust or other estate
planning Person), provided that any such Stockholder, family member or other
Person agrees in writing to be bound by the provisions contained in Article XII,
-----------
and (z) transfer or cause to be transferred such Stockholder's Restricted Shares
upon such Stockholder's disability or death. As used in this Section 12.2, the
------------
terms "disability" and "retirement" shall have the meaning ascribed to them in
CenterPoint's Employee Incentive Compensation Plan. No attempted transfer of
any nature whatsoever that is in violation of this Section shall be treated as
effective for any purpose.
XII.3 Legend. The certificates evidencing the CenterPoint Common Stock
------
delivered to the Stockholders pursuant to Article II of this Agreement shall
----------
bear a legend substantially in the form set forth below and containing such
other information as CenterPoint may deem necessary or appropriate:
64
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A MERGER
AGREEMENT DATED MARCH 31, 1999. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND MAY
BE INSPECTED BY THE REGISTERED OWNER OF THIS CERTIFICATE OR
A DULY AUTHORIZED REPRESENTATIVE OF SUCH OWNER UPON REQUEST
DURING NORMAL BUSINESS HOURS.
Upon request from any Stockholder (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer restricted shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable restricted share certificates. In
the event a Stockholder's request to remove the restrictive legend coincides
with his request to sell the CenterPoint Common Stock, CenterPoint shall take
such actions as are required by its transfer agent to allow the transfer agent
to transfer the unrestricted CenterPoint Common Stock free of any restrictive
legend.
ARTICLE XII
NONCOMPETITION
XIII.1 Stockholder Prohibited Activities. Each Stockholder agrees severally
---------------------------------
and not jointly, that such Stockholder will not, for a period of three (3) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
for themselves or on behalf of or in conjunction with any other Person:
(a) engage, directly or indirectly, as an officer, director,
shareholder, owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant or advisor, or
as a sales representative in, or otherwise own, operate, manage, control,
engage in, participate in, act as a representative, agent, consultant or
advisor to, or render services for (alone or in association with any
person, firm corporation or other entity, including through agents, brokers
or surplus line brokers), any business selling or providing insurance or
other related services in direct competition with the Companies, within any
business market where the Companies conducted or conducts business at any
time prior to termination.
65
<PAGE>
(b) sell or provide, directly or indirectly, any insurance or other
related services of a type or nature similar to those sold or provided by
any of the Companies, or solicit for the purpose of selling or providing
any such services to, or otherwise accept commissions from, any Person that
was a customer of the Companies or any affiliate thereof (including any
agents or brokers that produce insurance through any of the Companies or
any affiliate or subsidiary thereof) at any time during the preceding one-
year period or that was known by the Stockholder to have been actively
solicited by any of the Companies to become a customer at any time during
such period;
(c) call upon any Person who is, at that time within the Territory
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person;
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period; and
(e) disclose the identity of (i) any agents, brokers or surplus
lines brokers that produce insurance through any of the Companies or a
subsidiary or affiliate thereof or (ii) any Policyholder or Prospective
Policyholder, to any person, firm, corporation, association or other
entity, for any reason or purpose whatsoever.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Stockholder from
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is traded on a national securities exchange
or over-the-counter so long as the Stockholder does not consult with or is not
employed by such competitor. For the purpose of this Agreement, "POLICYHOLDER"
means any person, firm, corporation or entity that was issued any insurance
policy by CenterPoint or the Companies, or an agent, broker, or surplus line
broker which or who placed such insurance coverage through CenterPoint or any
subsidiary or affiliate thereof. For the purpose of this Agreement,
"Prospective Policyholder" means any person, firm, corporation or entity
contacted or solicited by CenterPoint or any subsidiary or affiliate thereof, or
an agent, broker or surplus line broker which or who places insurance through
CenterPoint or any subsidiary or affiliate thereof (whether directly or
66
<PAGE>
indirectly) or who contacted CenterPoint or any subsidiary or affiliate thereof,
or an agent or broker which places insurance through CenterPoint or any
subsidiary or affiliate thereof (whether directly or indirectly) for the purpose
of having such persons, firms, corporations or entities become policyholders of
CenterPoint or any subsidiary or affiliate thereof.
XIII.2 CenterPoint Non-Solicitation. CenterPoint will not, for a period of
----------------------------
two (2) years following the date hereof, for any reason whatsoever, directly or
indirectly, for themselves or on behalf of or in conjunction with any other
Person, solicit to employ any Person who is an employee of any of the Companies
(and with whom CenterPoint had contact or with which such employee was
specifically identified to CenterPoint during its due diligence investigation of
the Companies) for the purpose or with the intent of enticing such employee away
from or out of the employee of any of the Companies or hire such Person.
XIII.3 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint or the Companies as a result of a breach of the covenants in Section
-------
13.1 or 13.2, and because of the immediate and irreparable damage that could be
- ---- ----
caused to CenterPoint or the Companies, respectively, for which it would have no
other adequate remedy, each party agrees that the foregoing covenants may be
enforced by CenterPoint or the applicable Company, as the case may be, in the
event of breach by the other party, by injunctions and restraining orders.
XIII.4 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in Section 13.1 impose a reasonable restraint on the
------------
Stockholders in light of the activities and business of CenterPoint (including
the subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Stockholders that such covenants be construed and enforced in accordance with
the changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Stockholder who has entered into an employment agreement, incentive compensation
agreement or other similar agreement with CenterPoint and/or any subsidiary
thereof as set forth herein shall thereafter cease to be employed thereunder,
and such Stockholder shall enter into a business or pursue other activities not
in violation of Section 13.1 or of such Stockholder's obligations under Section
------------ -------
13.1, such Stockholder shall not be chargeable with a violation of Section 13.1
- ---- ------------
if CenterPoint and/or any subsidiary thereof shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
XIII.5 Severability; Reformation. The covenants in Section 13.1 are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
67
<PAGE>
XIII.6 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against CenterPoint (including the subsidiaries thereof or of CenterPoint
against any Company), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by CenterPoint or such Company of
such covenants. It is specifically agreed that the period of three (3) years
stated at the beginning of this Article XIII, during which the agreements and
------------
covenants of each Stockholder made in this Article XIII shall be effective,
------------
shall be computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Article XIII. In all events
------------
CenterPoint shall initiate proceedings to enforce this Article XIII within four
------------
(4) years of the Closing Date. The covenants contained in this Article XIII
------------
shall not be affected by any breach of any other provision hereof by any party
hereto and shall have no effect if the transactions contemplated by this
Agreement are not consummated.
XIII.7 Materiality. Each of the Companies and the Stockholders hereby
-----------
agree that this covenant is a material and substantial part of this transaction.
ARTICLE XIV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
XIV.1 Stockholders' Covenant. The Stockholders recognize and
----------------------
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of the Companies, the
Founding Companies and/or CenterPoint, such as strategic plans, systems,
operational policies, marketing plans, relationships with policyholders, sales
and marketing techniques, customer lists and potential customer lists,
expiration data and pricing and cost policies that are valuable, special and
unique assets of each of the Companies', the Founding Companies' and/or
CenterPoint's respective businesses. The Stockholders agree that they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
(a) to authorized representatives of CenterPoint,
(b) following the Closing, such information may be disclosed by
the Stockholders as is required in the course of performing their duties to
CenterPoint, and
(c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this
Section 14.1, unless
------------
(i) such information becomes known to the public generally
through no fault of the Stockholders,
68
<PAGE>
(ii) disclosure is required by law or the order of any
governmental authority under color of law, provided that prior to
disclosing any information pursuant to this clause (ii), the
Stockholder shall, if possible, give prior written notice thereof to
CenterPoint and provide CenterPoint with the opportunity to contest
such disclosure, or
(iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit
against the disclosing party.
In the event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section 14.1, CenterPoint shall be entitled to an injunction
------------
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
CenterPoint from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
XIV.2 Damages. Because of the difficulty of measuring economic losses
-------
as a result of the breach of the foregoing covenants in Section 14.1, and
------------
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunction and restraining orders.
XIV.3 Survival. The obligations of the parties under this Article XIV
-------- -----------
shall survive the termination of this Agreement.
ARTICLE XV
GENERAL PROVISIONS
XV.1 Brokers. Each of the Companies and the Stockholders represents
-------
and warrants that no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee (except for any fee described in Schedule 15.1)
-------------
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
CenterPoint represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CenterPoint or its stockholders (other than
underwriting discounts and commission to be paid in connection with the IPO).
XV.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery
69
<PAGE>
service, mailed by registered or certified mail (return receipt requested) or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by notice given in accordance with
this Section):
XV.2.1. If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
XV.2.2 If to the Companies, to:
The Reppond Company, Inc.
10900 Northeast Fourth Street
Suite 1200
Bellevue, WA 98004
Attn: Ben Reppond
Facsimile No.: (425) 974-4404
with a copy to:
Orrick, Herrington & Sutcliffe, LLP
400 Sansome Street
San Francisco, CA 94111-5759
Attn: Geoffrey P. Leonard, Esq.
Facsimile No.: (415) 773-5759
XV.2.3 If to the Stockholder Representative or the
Stockholders, as applicable, addressed to the addresses set forth on Schedule
--------
15.2.3, with copies to such counsel as set forth with respect to each
- ------
Stockholder on such Schedule 15.2.3, as applicable.
---------------
70
<PAGE>
XV.3. Interpretation. The table of contents and headings contained in
--------------
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "1 herein," "1 hereof" and "1
hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision and (ii)
reference to any Article or Section means such Article or Section hereof. No
provision of this Agreement shall be interpreted or construed against any party
hereto solely because such party or its legal representative drafted such
provision.
XV.4 Certain Definitions. As used in this Agreement, (i) the term "
-------------------
PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, entity, firm,
association, organization or other business in any form whatsoever or government
(whether Federal, state, county, city or otherwise, including, without
limitation, any instrumentality, division, agency or department thereof), (ii)
the term "AFFILIATE" shall have the meaning given for that term in Rule 405
under the Securities Act, and shall include each past and present Affiliate of a
Person and the members of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any Person who is a partner,
member or shareholder of such Person or who is otherwise serving, or who has
served, as a director, officer or trustee (or any capacity) of such Person has,
or at any time had, knowledge of such fact or other matter.
XV.5 Entire Agreement; Assignment. This Agreement (including the
----------------------------
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof including, without limitation, the Letter of Intent dated December
28, 1998 and (b) shall not be assigned by operation of law or otherwise, except
that CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
XV.6 Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
XV.7 Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
71
<PAGE>
XV.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
---------------------
[remainder of page intentionally left blank]
72
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
By: /s/ Robert C. Basten
---------------------------------------
Name: Robert C. Basten
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
REPPOND MERGERSUB INC.
By: /s/ Robert C. Basten
---------------------------------------
Name: Robert C. Basten
--------------------------------------
Its: President
---------------------------------------
RA MERGERSUB LLC
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
---------------------------------------
Its: President
---------------------------------------
VERASOURCE MERGERSUB INC.
By: /s/ Robert C. Basten
----------------------------------------
Name: Robert C. Basten
---------------------------------------
Its: President
---------------------------------------
<PAGE>
THE REPPOND COMPANY, INC.
By: /s/ Ben W. Reppond
--------------------------------------
Name: Ben W. Reppond
------------------------------------
Its: President
------------------------------------
REPPOND ADMINISTRATORS, L.L.C.
By: /s/ Ben W. Reppond
--------------------------------------
Name: Ben W. Reppond
-----------------------------------
Its: Member
------------------------------------
VERASOURCE EXCESS RISK LTD.
By: /s/ Ben W. Reppond
--------------------------------------
Name: Ben W. Reppond
-----------------------------------
Its: President
-----------------------------------
STOCKHOLDERS
/s/ Ben W. Reppond
--------------------------------------
Ben W. Reppond
/s/ Deborah Reppond
--------------------------------------
Deborah Reppond
/s/ Louis R. Baransky
--------------------------------------
Louis R. Baransky
/s/ Scott D. Perry
--------------------------------------
Scott D. Perry
<PAGE>
SCHEDULE 2.3
------------
REDUCTIONS IN THE NOTES
-----------------------
If the Companies' average annual EBITDA (as calculated in accordance with
Section 2.4. 1, for the three years ending on the third anniversary of the last
- --------------
day of the month in which the Closing falls is less than $1,770,000 (the "Pro
Forma EBITDA"), a reduction shall be made in the aggregate principal balance of
the Notes on a dollar for dollar basis in an amount equal to six times the
amount of the shortfall. As it relates to the contents of this Schedule 2.3, in
------------
no event shall the reduction of the principal amount of the Notes exceed
$1,000,000 in the aggregate for the Notes.
If Ben Reppond is terminated from his employment with Reppond within one year
after the Closing, there will be no reduction in the principal balance of the
Notes. If Ben Reppond is terminated from his employment with Reppond more than
one year after the Closing but before the third anniversary of the Closing, Pro
Forma EBITDA will be calculated for the period beginning after the Closing and
ending upon the termination date.
75
<PAGE>
SCHEDULE 2.4
PROCEDURES FOR DETERMINATION OF CONTINGENT PAYMENT
--------------------------------------------------
1. Financial Statements and Contingent Payment Report. As promptly as
--------------------------------------------------
practicable, but no later than the Annual Determination Date (as hereafter
defined), CenterPoint shall prepare and deliver to the Stockholder
Representative, as representative for the former holders of the Company Equity,
(i) a copy of the financial statements for the EB Operations and the Companies
for the applicable twelve month period (the "Financial Statements"), and (ii) a
contingent payment report (the "Contingent Payment Report"), together with
supporting documentation with respect thereto, for the purpose of determining
the amount of the Net Value Contingent Payment or the Earn-Out Contingent
Payments, if any. The Financial Statements and the Contingent Payment Report
shall be prepared by the independent certified public accountants of CenterPoint
in accordance with GAAP. As used herein, the "Annual Determination Date" shall
be on or before the date that is 60 days after the end of the applicable period,
with respect to each Contingent Payment Report.
2. Dispute Notice. The Stockholder Representative shall have 30 days from the
--------------
date on which the Financial Statements and Contingent Payment Report are
delivered to it to review such documents (the "Review Period"). The
Stockholder Representative and its auditors shall be provided with full access
to the work papers of the CenterPoint auditor and reasonable access to the
accounting personnel of CenterPoint and its subsidiaries in connection with such
review. If the Stockholder Representative shall have any objections to the
Contingent Payment Report, on or prior to the last day of the Review Period, it
will deliver a written notice to CenterPoint describing in reasonable detail its
objections and the basis for such objections (the "Dispute Notice"). The
Dispute Notice shall set forth the Stockholder Representative's position as to
the disputed items on the Contingent Payment Report. The Stockholder
Representative may deliver to CenterPoint at any time a notice accepting the
Contingent Payment Report without objection.
3. Resolution by Independent Accountant. The Stockholder Representative and
------------------------------------
CenterPoint will use their reasonable best efforts to resolve any objection
raised in a Dispute Notice and agree upon the resolution of such objections. If
a final resolution is not obtained within 14 days after CenterPoint has received
the Dispute Notice, then the dispute shall be submitted to an independent
accounting firm to be agreed between the parties (hereinafter referred to as the
"Independent Accountant") to resolve any remaining such objections. The
Independent Accountant shall conduct such review of the Financial Statements,
the Contingent Payment Report, the Dispute Notice, any related work papers of
the CenterPoint auditors and any supporting documentations as CenterPoint or the
Stockholder Representative request or the Independent Accountant in its sole
discretion deems
<PAGE>
necessary, and the Independent Accountant shall conduct such hearings, receive
such written briefs or hear such presentations by the parties as the Independent
Accountant in its sole discretion deems necessary. CenterPoint on the one hand,
and the Stockholder (from the proceeds of the Net Value Contingent Payment or
the Earn-Out Contingent Payment, as applicable), on the other hand, shall share
equally in the payment of all fees of the Independent Accountant incurred in the
resolution of such objections.
4. The Adjustment Report. The Independent Accountant shall, as promptly as
---------------------
practicable and in no event later than 30 days following the completions of
testimony and submission of evidence, deliver to CenterPoint and the Stockholder
Representative a report (the "Adjustment Report"), in which the Independent
Accountant shall, after considering all matters set forth in the Dispute Notice
and consideration of any objections thereto, determine what adjustments, if any,
should be made to the Contingent Payment Report and the amounts to be paid in
respect of a Contingent Payment. The Adjustment Report shall set forth, in
reasonable detail, the Independent Accountant's determination with respect to
each of the disputed items or amounts specified in the Dispute Notice, and the
revisions, if any, to be made to the Contingent Payment Report, together with
supporting calculations. The Adjustment Report shall be final and binding upon
CenterPoint, the Companies and the Stockholders, and shall be deemed a final
arbitration award that is enforceable pursuant to the terms of the Federal
Arbitration Act, 9 U.S.C. (S)(S)1 et seq.
-- ---
5. Resolution by the Parties. If Centerpoint and the Stockholder
-------------------------
Representative resolve all objections raised by the Stockholder Representative
in the Dispute Notice without resort to the Independent Accountant, CenterPoint
and the Stockholder Representative will, within five days of such resolution,
mutually cause the Contingent Payment Report to be revised as appropriate to
reflect such resolution, mutually cause the Contingent Payment Report to be
revised as appropriate to reflect such resolution. Such revised Contingent
Payment Report (or the draft Contingent Payment Report prepared by the
CenterPoint, if the Stockholder Representative does not object thereto) shall
constitute the final Contingent Payment Report and shall be final and binding
upon CenterPoint, the Company and the Former Stockholders.
6. Contingent Payment Report.
-------------------------
6.1 Operations of the Company; Adjustment. "Net Value" calculated pursuant
-------------------------------------
to Section 2.4.1 and the Earn-Out Contingent Payments calculated pursuant
-------------
to Section 2.4.3(a) through (e) shall be reduced by the amount of
---------------- ---
interest income that could have been earned on monies either distributed to
CenterPoint or transferred from the EB Operations or the Companies to
another entity. Such distributions and transfers should be accounted for
and shall bear interest at the rate of 7% compounded annually from the date
of such distribution or transfer.
<PAGE>
7. Payment. The Net Value Contingent Payment, if any, will be in the form of
-------
cash and will be payable on the date that is 15 months after the end of the
Calculation Period (the "Payment Date"), with interest accruing at 7.0% per
annum from the date that is 12 months prior to the Payment Date. The Earn-out
Contingent Payments shall be payable within three months after the end of the
relevant twelve month period for the prior year. Notwithstanding the foregoing,
if payment of the Net Value Contingent Payment or the Earn-Out Contingent
Payment has not occurred by the applicable date (as specified above) based on an
unresolved dispute, then the Net Value Contingent Payment or the Earn-Out
Contingent Payment, as applicable, shall be paid in cash no later than two
business days after the earliest occurrence of one of the following events: (1)
acceptance by the Stockholder Representative of the Contingent Payment Report;
(2) the expiration of the Review Period without the filing of any Dispute
Notice; (3) the resolution of the Dispute Notice or (4) the delivery of the
Adjustment Report.
8. No Negative Payments. If the amount calculated under Section 2.4.1 or 2.4.3
-------------------- ------- -----
is negative, the payment under such Section shall be zero and the Stockholders
shall have no obligation to refund to CenterPoint the amount of such negative
calculation expressed as a positive number and such negative number will not be
carried forward into subsequent periods.
3
<PAGE>
EXHIBIT 2.11
-------------------------------
MERGER AGREEMENT
by and among
CENTERPOINT ADVISORS, INC.,
SSLD MERGERSUB LLC,
SIMIONE, SCILLIA, LARROW & DOWLING LLC,
RICHARD C. SIMIONE, ANTHONY P. SCILLIA,
JOSEPH NATARELLI, WALTER R. FULTON,
JOHN H. SCHUYLER, W. EDWARD DOWLING,
WILLIAM H. MCCABE, PETER A. LAINE, RICHARD L. DEVITA,
RONALD LARROW, GEORGE RIGGS III
AND MARY ELLEN WALKAMA
AND
ALL OF THE MEMBERS OF
SIMIONE, SCILLIA, LARROW & DOWLING LLC
March 31, 1999
-------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER............................................................................. 2
1.1 Merger................................................................................. 2
1.2 Effects of the Merger.................................................................. 2
1.3 Managers and Officers of the Surviving Company......................................... 3
ARTICLE II CONSIDERATION AND MANNER OF PAYMENT.................................................... 3
2.1 Merger Consideration................................................................... 3
2.1.1 Basic Purchase Consideration........................................................... 3
2.1.2 Intentionally Omitted.................................................................. 3
2.1.3 Intentionally Omitted.................................................................. 3
2.1.4 Conversion of Company Interests........................................................ 3
2.1.5 Exchange of Certificates............................................................... 3
2.2 Post Closing Adjustments to Basic Purchase Consideration............................... 4
2.2.1 Adjustments for Net Working Capital Shortfall/Excess................................... 4
2.2.2 Preliminary Balance Sheet and Adjustment............................................... 4
2.2.3 Interim Adjustment..................................................................... 4
2.2.4 Final Adjustment....................................................................... 4
2.2.5 Disputes............................................................................... 4
2.2.6 Payment of Adjustments................................................................. 5
2.4 Assignment of Uncollected AR........................................................... 5
2.5 Definitions............................................................................ 6
ARTICLE III THE CLOSING AND CONSUMMATION DATE...................................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER........................................... 7
4.1 Organization and Qualification......................................................... 7
4.2 Company Subsidiaries................................................................... 7
4.3 Authority; Non-Contravention; Approvals................................................ 8
4.4 Capitalization......................................................................... 9
4.5 Year 2000.............................................................................. 10
4.6 Financial Statements................................................................... 10
4.7 Absence of Undisclosed Liabilities..................................................... 11
4.8 Unbilled Fees and Expenses............................................................. 11
4.9 Absence of Certain Changes or Events................................................... 11
4.10 Litigation............................................................................. 14
4.11 Compliance with Applicable Laws........................................................ 14
4.12 Licenses and Permits................................................................... 15
4.13 Material Contracts..................................................................... 15
4.14 Properties............................................................................. 18
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
4.15 Intellectual Property................................................................... 19
4.16 Taxes................................................................................... 20
4.17 Employee Benefit Plans; ERISA........................................................... 21
4.18 Labor Matters........................................................................... 23
4.19 Environmental Matters................................................................... 23
4.20 Insurance............................................................................... 24
4.21 Interest in Customers and Suppliers; Affiliate Transactions............................. 25
4.22 Business Relationships.................................................................. 25
4.23 Compensation............................................................................ 25
4.24 Bank Accounts........................................................................... 26
4.25 Professional Credentials................................................................ 26
4.26 Disclosure; No Misrepresentation........................................................ 26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE MEMBERS........................................... 27
5.1 Several Representations and Warranties.................................................. 27
5.1.1 Capitalization.......................................................................... 27
5.1.2 Authority............................................................................... 27
5.1.3 Non-Contravention....................................................................... 27
5.1.4 Approvals............................................................................... 28
5.1.5 Litigation.............................................................................. 28
5.1.6 No Transfer............................................................................. 28
5.1.7 Disclosure.............................................................................. 28
5.1.8 Seller Representations and Warranties................................................... 29
5.2 Joint and Several Representations and Warranties........................................ 29
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF CENTERPOINT........................................... 29
6.1 Organization And Qualification.......................................................... 29
6.2 Capitalization.......................................................................... 29
6.3 No Subsidiaries......................................................................... 30
6.4 Authority; Non-Contravention; Approvals................................................. 30
6.5 Absence of Undisclosed Liabilities...................................................... 32
6.6 Litigation.............................................................................. 32
6.7 Compliance with Applicable Laws......................................................... 32
6.8 No Misrepresentation.................................................................... 32
ARTICLE VII CERTAIN COVENANTS AND OTHER TERMS....................................................... 33
7.1 Conduct of Business by the Seller and the Company Pending the Acquisition............... 33
7.2 No-Shop................................................................................. 35
7.3 Schedules............................................................................... 36
7.4 Company Member Meeting; Seller Member Meeting........................................... 37
7.5 Asset Transfer.......................................................................... 37
ARTICLE VIII ADDITIONAL AGREEMENTS................................................................... 37
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
8.1 Access to Information................................................................... 37
8.2 Registration Statements................................................................. 38
8.3 Expenses and Fees....................................................................... 40
8.4 Agreement to Cooperate.................................................................. 40
8.5 Public Statements....................................................................... 40
8.6 Registration Rights..................................................................... 40
8.7 CenterPoint Covenants................................................................... 42
8.8 Release of Guarantees................................................................... 42
8.9 Lock-Up Agreement....................................................................... 43
8.10 Preparation and Filing of Tax Returns................................................... 43
8.11 Maintenance of Insurance................................................................ 43
8.12 Administration.......................................................................... 43
ARTICLE IX INDEMNIFICATION......................................................................... 44
9.1 Indemnification by the Members.......................................................... 44
9.2 Indemnification by CenterPoint.......................................................... 46
9.3 Indemnification Procedure for Third Party Claims........................................ 47
9.4 Direct Claims........................................................................... 48
9.5 Failure to Give Timely Notice........................................................... 49
9.6 Reduction of Loss....................................................................... 49
9.7 Limitation on Indemnities............................................................... 49
9.7.1 Threshold for the Members............................................................... 49
9.7.2 Threshold for CenterPoint............................................................... 50
9.7.3 Limitations on Claims Against the Members............................................... 50
9.7.4 Limitation on Claims Against CenterPoint................................................ 50
9.8 Survival of Representations, Warranties and Covenants of the Members
and the Seller; Time Limits on Indemnification Obligations.............................. 50
9.9 Survival of Representations, Warranties and Covenants of CenterPoint;
Time Limits on Indemnification Obligations.............................................. 51
9.10 Defense of Claims; Control of Proceedings............................................... 51
9.11 Fraud; Exclusive Remedy................................................................. 51
9.12 Manner of Satisfying Indemnification Obligations........................................ 51
ARTICLE X CLOSING CONDITIONS...................................................................... 52
10.1 Conditions to Each Party's Obligation to Effect the Acquisition......................... 52
10.2 Conditions to Obligation of the Members, Seller and the Company
to Effect the Acquisition............................................................... 53
10.3 Conditions to Obligation of CenterPoint to Effect the Acquisition....................... 54
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER....................................................... 57
11.1 Termination............................................................................. 57
11.2 Effect of Termination................................................................... 58
11.3 Amendment............................................................................... 58
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C>
11.4 Waiver.................................................................................. 58
ARTICLE XII TRANSFER RESTRICTIONS................................................................... 58
12.1 Transfer Restrictions Generally......................................................... 58
12.2 Release of Restrictions................................................................. 59
12.3 Legend.................................................................................. 59
ARTICLE XIII NONCOMPETITION.......................................................................... 60
13.1 Prohibited Activities................................................................... 60
13.2 Damages................................................................................. 61
13.3 Reasonable Restraint.................................................................... 61
13.4 Severability; Reformation............................................................... 62
13.5 Independent Covenant.................................................................... 62
13.6 Materiality............................................................................. 62
ARTICLE XIV [Reserved].............................................................................. 62
ARTICLE XV GENERAL PROVISIONS...................................................................... 62
15.1 Brokers................................................................................. 62
15.2 Notices................................................................................. 63
15.3 Interpretation.......................................................................... 64
15.4 Certain Definitions..................................................................... 64
15.5 Entire Agreement; Assignment............................................................ 64
15.6 Applicable Law.......................................................................... 64
15.7 Counterparts............................................................................ 65
15.8 Parties in Interest..................................................................... 65
</TABLE>
(iv)
<PAGE>
LIST OF SCHEDULES
-----------------
Schedule 2.1 Consideration
Schedule 2.5 Net Working Capital Adjustment Items
Schedule 4.2 Company Subsidiaries
Schedule 4.3.2 Required Consents
Schedule 4.4 Capitalization
Schedule 4.7 Liabilities
Schedule 4.9 Certain Changes and Events
Schedule 4.10 Litigation
Schedule 4.11 Noncompliance with Applicable Laws
Schedule 4.12 Licenses and Permits
Schedule 4.13 Material Contracts
Schedule 4.14.1-1 Real Property
Schedule 4.14.1-2(a) Exceptions Regarding Owned Property
Schedule 4.14.1-2(b) Exceptions Regarding Leased Property
Schedule 4.14.2 Tangible Personal Property; Liens
Schedule 4.15 Intellectual Property
Schedule 4.16.1-1 Taxes
Schedule 4.16.1-2 Tax Audits
Schedule 4.17.1 Employee Plans
Schedule 4.17.2 Unwritten Employee Plans
Schedule 4.18 Labor Matters
(v)
<PAGE>
Schedule 4.19 Environmental Matters
Schedule 4.20 Insurance
Schedule 4.21 Affiliate Transactions
Schedule 4.22 Business Relationships
Schedule 4.23 Compensation
Schedule 4.24 Bank Accounts
Schedule 6.2 CenterPoint's Capitalization
Schedule 6.5 Undisclosed Liabilities
Schedule 7.1.4 Terminated Employee Plans and Agreements
Schedule 7.5 Retained Assets and Retained Liabilities
Schedule 8.8 Members' Guarantees
Schedule 15.1 Brokers
Schedule 15.2.3 Members and Their Counsel
(vi)
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A Members of the Seller
Exhibit 10.2(c) Form of Opinion of CenterPoint's Counsel
Exhibit 10.2(d) Form of Incentive Compensation Agreement
Exhibit 10.2(f) Form of Stockholders Agreement
Exhibit 10.3(c) Form of Opinion of Counsel to Company and Members
Exhibit 10.3(d)(A) Form of Separate Practice Agreement
Exhibit 10.3(d)(B) Form of Services Agreement
Exhibit 10.3(j) Form of Release
CenterPoint agrees to furnish supplementally to the Securities Exchange
Commission, upon request, a copy of any omitted exhibit or schedule to this
Agreement.
(vii)
<PAGE>
DEFINED TERMS
-------------
<TABLE>
<S> <C>
AR............................................................... Section 2.5(a)
Accounting Licenses.............................................. Section 4.12
Actions.......................................................... Section 4.10.1
Acquisition...................................................... Introduction
Acquisition Transaction.......................................... Section 13.1
Affiliate........................................................ Section 15.4
Affiliate Transactions........................................... Section 4.21
Agreement........................................................ Introduction
Arbitrator....................................................... Section 2.2.5
Asset Transfer................................................... Introduction
Attest Entity.................................................... Section 7.1.2
Attestation Practice............................................. Introduction
Basic Purchase Consideration..................................... Section 2.1.1
Business......................................................... Introduction
Cash Consideration............................................... Section 2.1.1
Closing.......................................................... Article III
Closing Balance Sheet............................................ Section 2.2.2
Closing Date..................................................... Article III
Code............................................................. Introduction
Company.......................................................... Introduction
Company Interests................................................ Section 2.1.1
Company Material Adverse Effect.................................. Section 4.3.3
Company Subsidiaries............................................. Section 4.2
Consummation Date................................................ Article III
Contracts........................................................ Section 4.13
Copyrights....................................................... Section 4.15
CenterPoint...................................................... Introduction
</TABLE>
(viii)
<PAGE>
<TABLE>
<S> <C>
CenterPoint Accountants...................................... Section 2.2.2
CenterPoint Common Stock..................................... Section 2.1
CenterPoint Indemnified Party(ies)........................... Section 9.1
CenterPoint Material Adverse Effect.......................... Section 6.4.3
CenterPoint Representatives.................................. Section 8.1.1
CenterPoint Required Statutory Approvals..................... Section 6.4.3
Defense Notice............................................... Section 9.3.1
Direct Claim................................................. Section 9.4
Disputed Item................................................ 2.2.5
Effective Time............................................... Section 1.1
Employee Plan................................................ Section 4.17.5(a)
Environmental and Safety Requirements........................ Section 4.19
ERISA........................................................ Section 4.17.5(b)
Final Adjustment............................................. Section 2.2.4
Financial Statements......................................... Section 4.6
First Person................................................. Section 4.17.5(c)
Form S-1..................................................... Section 4.3.3
Form S-4..................................................... Section 4.3.3
Founding Companies........................................... Introduction
GAAP......................................................... Section 4.6
General increase............................................. Section 4.23
Governmental Authority....................................... Section 4.3.2
Hazardous Materials.......................................... Section 4.19
HSR Act...................................................... Section 4.3.3
Incentive Compensation Agreement............................. Section 10.2(d)
Indemnified Party............................................ Section 9.3.1
Indemnifying Party........................................... Section 9.3.1
Intellectual Property........................................ Section 4.15
</TABLE>
(ix)
<PAGE>
<TABLE>
<S> <C>
Intellectual Property Licenses.................................. Section 4.15
Interim Adjustment.............................................. Section 2.2.3
IPO............................................................. Introduction
Knowledge....................................................... Section 15.4
Latest Balance Sheet............................................ Section 4.6
Laws............................................................ Section 4.11
Leased Property................................................. Section 4.14.1
Licenses........................................................ Section 4.12
Liens........................................................... Section 4.3.2
Liquidated Damages Amount....................................... Section 7.3
Losses.......................................................... Section 9.1
Market Price.................................................... Section 9.12
Marks........................................................... Section 4.15
Material Contracts.............................................. Section 4.13
Member.......................................................... Introduction
Member Indemnified Party........................................ Section 9.2
Members' Representative......................................... Section 9.13
Members......................................................... Introduction
Merger.......................................................... Introduction
Mergersub....................................................... Introduction
Mergersub Interests............................................. Section 6.2.1
Merger Documents................................................ Section 1.1
Net Working Capital............................................. Section 2.5(b)
Newco........................................................... Introduction
1933 Act........................................................ Section 4.3.3
1934 Act........................................................ Section 8.7(b)
Organizational Documents........................................ Section 4.1
Other Agreements................................................ Introduction
</TABLE>
(x)
<PAGE>
<TABLE>
<S> <C>
Other Acquisitions............................................. Introduction
Other Founding Companies....................................... Section 9.1
Owned Property................................................. Section 4.14.1
Patents........................................................ Section 4.15
Permanent Disability........................................... Section 12.2
Person......................................................... Section 15.4
Plan Affiliate.................................................Section 4.17.5(c)
Real Property.................................................. Section 4.14.1
Registration Statements........................................ Section 4.3.3
Resolution Period.............................................. Section 2.2.5
Restricted Shares.............................................. Section 12.1
Retained Assets................................................ Section 7.5
Retained Liabilities........................................... Section 7.5
Returns........................................................ Section 4.16.1
Schedules...................................................... Section 7.3
SEC............................................................ Section 4.3.3
Securities Act................................................. Section 4.3.3
Seller......................................................... Introduction
Seller Interests............................................... Section 5.1.1
Seller Representatives......................................... Section 8.1.1
Separate Practice Agreement.................................... Section 9.1(d)
Services Agreement............................................. Section 9.1(d)
Special Bonus Plan............................................. Section 2.5(c)
Stockholders Agreement......................................... Section 10.2(f)
Surviving Company.............................................. Section 1.2
Target......................................................... Section 2.5(d)
Tax Accrual.................................................... Section 2.5(e)
Taxes.......................................................... Section 4.16.2
</TABLE>
(xi)
<PAGE>
<TABLE>
<S> <C>
Territory...................................................... Section 13.1(a)
Third Party Claim.............................................. Section 9.3.1
Trade Secrets.................................................. Section 4.15
Underwriters................................................... Section 8.1.1
Voting Agreement............................................... Introduction
</TABLE>
(xii)
<PAGE>
THIS MERGER AGREEMENT (this "AGREEMENT") is made as of March __, 1999, by
and among CenterPoint Advisors, Inc., a Delaware corporation ("CENTERPOINT"),
SSLD Mergersub LLC, a Delaware limited liability company and wholly-owned
subsidiary of CenterPoint ("MERGERSUB"), Simione, Scillia, Larrow & Dowling LLC,
a Connecticut limited liability company (the "SELLER"), and the members of the
Seller identified on Exhibit A to this Agreement (each a "MEMBER" and,
---------
collectively, the "MEMBERS").
WITNESSETH:
WHEREAS, the Seller engages directly, and indirectly through the Company
Subsidiaries, in the business of providing accounting, tax and other related
services (such business provided by the Seller is referred to as the
"BUSINESS");
WHEREAS, prior to, and in anticipation of, completion of the transactions
contemplated hereby (a) the Seller will form and transfer, assign and convey to
a wholly-owned limited liability company ("NEWCO" or the "COMPANY") all of the
Seller's right, title and interest in and to all of its assets and liabilities
(the "ASSET TRANSFER") other than the Retained Assets and Retained Liabilities,
(b) the Seller will retain those Retained Assets required to provide services
related to the practice of accounting that, pursuant to applicable laws and
regulations, may only be conducted by certified public accountants (the
"ATTESTATION PRACTICE");
WHEREAS, the Boards of Directors of CenterPoint and Mergersub deem it
advisable and in the best interests of their respective security holders to
approve and consummate the business combination transaction provided for herein
in which Company would merge with the Mergersub, with the Mergersub being the
surviving entity in the merger (the "ACQUISITION" or "MERGER");
WHEREAS, certain Members have entered into a Voting Agreement dated the
date hereof (the "VOTING AGREEMENT") pursuant to which among other things such
Members have agreed to take all action necessary to approve the Merger and the
transactions contemplated by this Agreement;
WHEREAS, CenterPoint is entering into other agreements (the "OTHER
AGREEMENTS") substantially similar to this Agreement with each of Reznick Fedder
& Silverman, P.C., Robert F. Driver Company, Inc., Mann Frankfort Stein & Lipp,
P.C., The Reppond Company, Inc., Reppond Administrators, LLC, Verasource Excess
Risk Ltd., Berry, Dunn, McNeil & Parker,
<PAGE>
Chartered, Urbach Kahn & Werlin PC, Self Funded Benefits, Inc. d/b/a Insurance
Design Administrators, Grace & Company, P.C., Follmer Rudzewicz & Co., P.C., and
Holthouse, Carlin & Van Trigt (which companies together with the Company are
collectively referred to herein as the "FOUNDING COMPANIES"), which agreements
provide for the merger of a wholly-owned subsidiary of CenterPoint with each
such Founding Company (the "OTHER ACQUISITIONS") simultaneously with the
Acquisition; CenterPoint has provided a side letter to each holder of equity
interests of the Seller to such effect;
WHEREAS, simultaneously with the consummation of the Acquisition,
CenterPoint will close an initial public offering (the "IPO") of CenterPoint
Common Stock (as defined in Section 2.1); and
-----------
WHEREAS, the parties intend the acquisition of CenterPoint Common Stock
pursuant to the terms hereof to be tax-free under the provisions of Section 351
of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
I.1 Merger. Upon the terms and subject to the conditions set forth in
------
this Agreement and in reliance upon the representations and warranties set forth
herein, the Company shall be merged with and into the Mergersub, the result of
which will cause the separate corporate existence of the Company to cease and
the Mergersub to continue under the laws of the State of Delaware. As promptly
as possible on the Closing Date, the parties shall cause the Merger to be
completed by filing certificates of merger (the "MERGER DOCUMENTS") with the
Secretary of State of the State of Delaware, as provided in the Delaware Limited
Liability Company Act. The Merger shall become effective (the "EFFECTIVE TIME")
upon the filing of the Merger Documents with the Secretary of State of the State
of Delaware or at such later time, contemporaneously with the closing of the
IPO, as agreed by CenterPoint and the Company and specified in the Merger
Documents.
I.2 Effects of the Merger. At the Effective Time (i) the separate
---------------------
existence of the Company shall cease and the Company shall be merged with and
into the Mergersub, with the Mergersub being the surviving company in the Merger
(the Mergersub is sometimes referred to herein as the "SURVIVING COMPANY"), (ii)
the Certificate of Formation and Operating
2
<PAGE>
Agreement of the Mergersub shall survive and continue as specified in the Merger
Documents, (iii) the Merger shall have all the effects provided by applicable
law, and (iv) the Mergersub shall be a wholly-owned subsidiary of CenterPoint.
I.3 Managers and Officers of the Surviving Company. From and after the
----------------------------------------------
Effective Time, the managers and officers of Mergersub shall be the managers and
officers of the Surviving Company until their successors are duly elected and
qualified.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
II.1 Merger Consideration.
--------------------
II.1.1 Basic Purchase Consideration. At the Closing, by virtue of the
----------------------------
Merger and without any action on the part of the holders thereof, the
outstanding membership interests of the Company (collectively, the "COMPANY
INTERESTS") shall be converted into the right to receive: (a) that number of
shares of CenterPoint common stock, par value $.01 per share (the "CENTERPOINT
COMMON STOCK") determined in accordance with the formula set forth in Schedule
--------
2.1 (the "STOCK CONSIDERATION") and (b) the amount of cash set forth in Schedule
- --- --------
2.1 (the "CASH CONSIDERATION"). The sum of the Cash Consideration and the Stock
- ---
Consideration is herein referred to as "BASIC PURCHASE CONSIDERATION."
II.1.2 Intentionally Omitted.
---------------------
II.1.3 Intentionally Omitted.
---------------------
II.1.4 Conversion of Company Interests. At the Effective Time, the
-------------------------------
Company Interests shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become interests of the
Surviving Company. Such newly issued interests shall thereafter constitute all
of the issued and outstanding membership interests of the Surviving Company.
II.1.5 Exchange of Certificates. At the Closing, the Seller shall
------------------------
deliver to CenterPoint the original Company Interest certificates, if any, duly
endorsed in blank by the Seller or accompanied by blank assignments separate
from certificate or other applicable documents of conveyance satisfactory to
CenterPoint, in exchange for the allocated share of (a) CenterPoint Common Stock
certificates representing the Stock Consideration and (b) payment of the Cash
Consideration by certified check, cashier's check or wire transfer of
immediately available funds to a bank account or bank accounts in the amounts
and manner specified by the Member Representative in a writing delivered to
CenterPoint at least three (3) business days prior to the
3
<PAGE>
Closing Date. The interests represented by the Company Interest certificates (or
other documents of ownership, if any) so delivered shall be canceled. Until
surrendered as contemplated by this Section 2.1.5, each certificate (or other
-------------
documents of ownership, if any) representing the Company Interests represents
only the right to receive Basic Purchase Consideration, as adjusted in
accordance with this Article II.
II.2 Post Closing Adjustments to Basic Purchase Consideration.
--------------------------------------------------------
II.2.1 Adjustments for Net Working Capital Shortfall/Excess. The
----------------------------------------------------
Basic Purchase Consideration shall be (a) reduced dollar-for-dollar to the
extent Net Working Capital on the Closing Date is less than the Target or
(b) increased dollar-for-dollar to the extent Net Working Capital on the
Closing Date is greater than the Target.
II.2.2 Preliminary Balance Sheet and Adjustment. At or about the
----------------------------------------
Closing, the Company will prepare, and the Firm of PricewaterhouseCoopers
LLP (the "CENTERPOINT ACCOUNTANTS") will review, a balance sheet of the
Company, as of the Closing Date, in accordance with GAAP and consistent
with the accounting policies and practices used in connection with the
preparation of the Financial Statements (the "CLOSING BALANCE SHEET") along
with a preliminary calculation of any excess or shortfall of Net Working
Capital as compared to the Target.
II.2.3 Interim Adjustment. As soon as practicable, the Company will
------------------
prepare and deliver to CenterPoint a revised calculation of Net Working
Capital reflecting all collections of AR up to the date 90 days from the
Closing Date. Within 10 days of receipt of such calculation, CenterPoint
will deliver to the Member Representative a written report indicating the
amount and nature of any adjustment to the Basic Purchase Consideration
determined in accordance with Section 2.2.1 (the "INTERIM ADJUSTMENT").
-------------
II.2.4 Final Adjustment. As soon as practicable, the Company will
----------------
prepare and deliver to CenterPoint a final calculation of Net Working
Capital revised to reflect all collections of AR up to the date 180 days
from the Closing Date. CenterPoint will review such calculation and any
records, work papers and other documents related thereto. Within 10 days
of receipt of such calculation, CenterPoint will deliver to the Member
Representative a written report indicating the amount and nature of any
adjustment to the Basic Purchase Consideration determined in accordance
with Section 2.2.1 (the "FINAL ADJUSTMENT").
-------------
II.2.5 Disputes. The parties hereto shall not object to the Interim
--------
Adjustment which shall be binding on the parties hereto, and shall withhold
all objections until delivery of the Final Adjustment report. If the
Member Representative does not object (or otherwise respond) in writing to
the Final Adjustment report within 30 days after its delivery, the Final
Adjustment shall automatically become final, binding and conclusive
4
<PAGE>
on all parties hereto. Any objection to the Final Adjustment report shall
be in writing and shall specify the item or items in dispute (each a
"DISPUTED ITEM").
If the Member Representative and CenterPoint are unable to resolve any
Disputed Item within 30 days after notice from the Member Representative
that a dispute exists (the "RESOLUTION PERIOD") then a representative from
the office of a nationally recognized accounting firm (the "ARBITRATOR")
selected jointly by CenterPoint and the Members' Representative will
arbitrate the dispute. The Member Representative and CenterPoint shall,
within 20 days after expiration of the Resolution Period, present their
respective positions with respect to any Disputed Item to the Arbitrator
together with such materials as the Arbitrator deems appropriate. To the
extent any Disputed Item is similar to a disputed item under the Other
Agreements, the Arbitrator shall arbitrate the Disputed Item based on the
submitted materials and without regard to the disputed item under the Other
Agreements. The Arbitrator shall, after the submission of the materials,
submit a written decision on each Disputed Item to the Member
Representative and CenterPoint and such determination shall be final and
binding on the parties hereto. The arbitration shall be conducted in
Chicago, Illinois. The parties hereto agree that the cost of the Arbitrator
shall be borne by the non-prevailing party or as determined by the
Arbitrator.
II.2.6 Payment of Adjustments. In the event Net Working Capital is
----------------------
less than the Target, the Seller and the Members shall pay the amount of
the shortfall to CenterPoint. In the event Net Working Capital is greater
than the Target, CenterPoint shall pay the amount of the excess to the
Seller. Any payment required to be made pursuant to this paragraph shall be
made, within ten days of delivery of the report indicating any adjustment,
by wire transfer of immediately available funds to an account designated in
writing by the party that is to receive payment of such adjustment. In
respect of the Final Adjustment, the party making a payment required by
such adjustment shall make such payment within ten days after the Final
Adjustment becomes final and shall receive credit for or return of any
amount previously paid in connection with the Interim Adjustment.
II.3 Post-Closing Management of AR. Following the Closing, the billing,
-----------------------------
servicing, administering and collection of the AR shall be conducted by the
Company. The Company shall take all such actions as may be necessary or
advisable to collect the AR in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Company's credit and collection policy in effect at Closing. The Company may
modify, adjust or write-off AR from time to time in accordance with the
Company's credit and collection policy in effect at Closing. Unless otherwise
required by contract or law, payments by an obligor in respect of services
rendered or expenses advanced by the Company shall be applied as follows: in the
event any such payment specifically references the invoice being paid or clearly
relates to an outstanding invoice, the payment will be applied to the
corresponding invoice; and, in any other case, the payment will be applied to
satisfy AR relating to such obligor in the order that such AR arose. Any
adjustment, modification or write off affecting AR and fees and expenses
receivable
5
<PAGE>
and unbilled fees and expenses of the Company incurred after Closing with
respect to the same client engagement shall be allocated ratably to the pre-
Closing and post-Closing periods.
II.4 Assignment of Uncollected AR. If any AR remain uncollected by the
----------------------------
Company as of 180 days after the Closing Date, the Company will assign the
uncollected AR to the Seller. Notwithstanding the foregoing, the Company will
retain the sole right to service, administer and collect the uncollected AR in
accordance with Section 2.3.
-----------
II.5 Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
(a) "AR" means any fees and expenses receivable and unbilled fees and
expenses of the Company on the Closing Date.
(b) "NET WORKING CAPITAL" means an amount determined as of the Closing
Date, whenever calculated, equal to difference between: (i) the sum of any
AR, prepaid expenses and other current assets less (ii) the sum of accounts
----
payable, accrued current liabilities, the items listed on Schedule 2.5, the
------------
Tax Accrual and the portion of employer-paid FICA attributable to Medicare,
payable in connection with deferred compensation and the Special Bonus
Plan. For purposes of this Section 2.5(b), the Special Bonus Plan accrual
shall not constitute a current liability.
(c) "SPECIAL BONUS PLAN" means the Company's Special Bonus Plan.
(d) "TARGET" means an amount equal to 1% of the Company's net revenues
for the four quarter period ending on the last day of the calendar quarter
prior to Closing.
(e) "TAX ACCRUAL" means an amount equal to the product of (i) Net
Working Capital (calculated before deduction of the Tax Accrual) less an
amount equal to any tax deductions realized by CenterPoint as a result of
any payments pursuant to the Special Bonus Plan, times (ii) the sum of 34%
plus the effective state tax rate on the Company (net of federal tax
benefit). A negative Tax Accrual shall be treated as a current asset for
purposes of Section 2.5(b)(i).
6
<PAGE>
ARTICLE III
THE CLOSING AND CONSUMMATION DATE
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Katten
Muchin & Zavis, Chicago, Illinois, contemporaneously with the closing of the
IPO, or at such other time and date as the parties hereto may mutually agree
(the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to CenterPoint, as of the date
hereof and, subject to Section 7.3, as of the date on which CenterPoint and the
-----------
lead Underwriter (as defined in Section 8.1.1) execute and deliver the
-------------
Underwriting Agreement related to the IPO and as of the Closing Date, as follows
(provided, however, that all representations and warranties with respect to the
-------- -------
Company shall be as of the Closing Date):
IV.1 Organization and Qualification. The Seller is a limited liability
------------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Connecticut. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company Interests are free and clear of all Liens, and the Seller
has good and marketable title to such Company Interests. Each Company
Subsidiary (as defined in Section 4.2) is duly organized, validly existing and
-----------
in good standing under the laws of the state of its organization set forth on
Schedule 4.2. Each of the Seller, the Company and the Company Subsidiaries has
- ------------
the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, and is
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary. True, accurate and complete
copies of the Seller's and each Company Subsidiary's Organizational Documents,
in each case as in effect on the date hereof, have heretofore been delivered to
CenterPoint. "ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation (professional or otherwise), (b)
the partnership agreement and any statement of partnership of a general
partnership, (c) the limited partnership agreement and the certificate of
limited partnership of any limited partnership, (d) the operating or limited
liability company agreement and certificate of formation of any limited
liability company, (e) any charter or similar document adopted and filed in
connection with the creation, formation, organization or governance (as
applicable) of any Person and (f) any amendment to any of the foregoing.
7
<PAGE>
IV.2 Company Subsidiaries. Schedule 4.2 sets forth the name (including any
-------------------- ------------
assumed names), jurisdiction of organization and ownership of the issued and
outstanding equity interests of each Person in which the Seller owns, directly
or indirectly, securities or other interests having the power to elect a
majority of such Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of such Person
(each a "COMPANY SUBSIDIARY" and collectively, the "COMPANY SUBSIDIARIES").
Except as set forth on Schedule 4.2, the Seller does not, directly or
------------
indirectly, own, of record or beneficially, or control any capital stock,
securities convertible into capital stock or any other equity interest in any
Person.
IV.3 Authority; Non-Contravention; Approvals.
---------------------------------------
IV.3.1 The Seller has full right, power and authority to enter into
this Agreement and, subject to approval of the Mergers and the transactions
contemplated hereby by the Seller's Managers and Members, to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by the Seller has been duly authorized by all necessary
corporate action on the part of the Company and the Seller, subject to the
approval of the Merger and the transactions contemplated hereby by the
Seller's Managers and the Members. This Agreement has been duly executed
and delivered by the Seller, and, assuming the due authorization, execution
and delivery hereof by CenterPoint, constitutes a valid and legally binding
agreement of the Seller, enforceable against the Seller in accordance with
its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
IV.3.2 The execution and delivery of this Agreement by the Seller
does not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any claim,
lien, privilege, mortgage, charge, hypothecation, assessment, security
interest, pledge or other encumbrance, conditional sales contract, equity
charge, restriction, or adverse claim of interest of any kind or nature
whatsoever (each a "LIEN" and collectively, the "LIENS"), upon any of the
properties or assets of the Seller, the Company or any Company Subsidiary
under, any of the terms, conditions or provisions of (i) the Organizational
Documents of the Seller, the Company or any Company Subsidiary, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or federal, state,
provincial, local or foreign government, or any subdivision, agency or
authority of any thereof ("GOVERNMENTAL AUTHORITY") applicable to the
Seller, the Company, any Company Subsidiary, or the Business, properties or
assets of the Seller, the Company or any Company Subsidiary, except for
those items discussed in (ii) above relating to regulating, licensing or
permitting the practice of public accountancy, or (iii)
8
<PAGE>
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind to which the Seller, the Company or any Company
Subsidiary is a party or by which the Seller, the Company, or any Company
Subsidiary or any of the properties or assets of the Seller, the Company or
any Company Subsidiary may be bound or affected. The consummation by the
Seller and the Company of the transactions contemplated hereby will not
result in a violation, conflict, breach, right of termination, creation or
acceleration of Liens under the of the terms, conditions or provisions of
the items described in clauses (i) through (iii) of the immediately
preceding sentence, subject in the case of the terms, conditions or
provisions of the items described in clause (iii) above, to obtaining
(prior to the Closing Date) such consents required from third parties set
forth on Schedule 4.3.2, and except for those items described in (ii) above
--------------
relating to regulating, licensing or permitting the practice of public
accountancy.
IV.3.3 Except for (i) the filing in connection with the IPO of a
registration statement on Form S-1 (the "FORM S-1") and the filing of a
registration statement on Form S-4 (the "FORM S-4") (Form S-1 and Form S-4
are collectively the "REGISTRATION STATEMENTS") with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT" or the "1933 ACT"), the declaration of the
effectiveness thereof by the SEC and filings, if required, with various
state securities or "blue sky" authorities, (ii) any filing which may be
required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"), and (iii ) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by the Seller or the consummation by the Seller
of the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals
which, if not made or obtained, as the case may be, would not, individually
or in the aggregate, have a "COMPANY MATERIAL ADVERSE EFFECT," which, for
purposes of this Agreement means a material adverse effect on the
operations, assets, condition (financial or other), operating results,
employee or client relations, or prospects of the Seller, the Company or
any Company Subsidiary.
IV.4 Capitalization.
--------------
4.4.1 The equity ownership of the Seller and the Company is truly and
accurately set forth on Schedule 4.4 hereto. The authorized capital stock
------------
(or other equity ownership interests) of each of the Company Subsidiaries,
if any, and the number of such shares (or other equity ownership interests)
issued and outstanding is completely and accurately set forth in Schedule
--------
4.4. All of the membership interests of the Seller, the Company, and such
---
Company Subsidiary issued and outstanding shares (or other equity ownership
9
<PAGE>
interests), are validly issued and are fully paid, nonassessable and free
of preemptive rights. The Members are all of the members of the Seller and
own beneficially and of record all of the membership interests of the
Seller as set forth in Schedule 4.4, which interests constitute all of the
------------
outstanding membership interests of the Seller. The Seller is the sole
member of the Company and owns beneficially and of record all of the
membership interests of the Company as set forth on Schedule 4.4, which
------------
interests constitute all of the outstanding membership interests of the
Company. The Seller or the Company, as applicable, owns all shares (or
other equity ownership interests) of the Company's Subsidiaries as
indicated on Schedule 4.4, in each case free and clear of all Liens, and
------------
the Seller or the Company, as applicable, has good and marketable title to
such shares (or other equity ownership interests) of the Company
Subsidiaries. All of such issued and outstanding shares (or other equity
ownership interests) are validly issued and are fully paid, nonassessable
and free of preemptive rights. Upon the delivery of and payment for the
Company Interests at the Closing as provided in this Agreement, CenterPoint
will acquire good and valid title to such Company Interests, free and clear
of any Lien other than any Lien created by CenterPoint.
4.4.2 Except as set forth on Schedule 4.4, there are no outstanding
------------
subscriptions, options, calls, contracts, commitments, undertakings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement to issue, deliver or sell, or cause to be issued, delivered or sold,
membership interests (or other equity ownership interests) of the Seller or the
Company or equity interests of any Company Subsidiary or obligating the Seller
or the Company or any Company Subsidiary to grant, extend or enter into any such
agreement or commitment or obligating the Seller or the Company or any Company
Subsidiary to convey or transfer any membership interests in the Company or
Company Subsidiary stock (or other equity ownership interests), as the case may
be. As of the Closing Date, there will be no voting trusts, proxies or other
agreements or understandings to which the Seller or the Company or any Company
Subsidiary is a party or is bound with respect to the voting of any shares of
capital stock or other equity interests of the Seller or the Company or any
Company Subsidiary.
IV.5 Year 2000. To the Knowledge of the Seller, all of the computer
---------
software, computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Seller, the Company or any
Company Subsidiary in the conduct of the Business will not malfunction, will not
cease to function, will not generate incorrect data, and will not produce
incorrect results when processing, providing, and/or receiving (i) date-related
data into and between the twentieth (20/th/) and twenty-first (21/st/) centuries
and (ii) date-related data in connection with any valid date in the twentieth
(20/th/) and twenty-first (21/st/) centuries, except for any malfunctions or
generations of incorrect data or results that would not individually or in the
aggregate have a 1 Company Material Adverse Effect. Nothing in this Section 4.5
-----------
is intended or shall be construed as a representation or warranty with respect
to embedded systems.
10
<PAGE>
IV.6 Financial Statements. The Seller has previously furnished to
--------------------
CenterPoint copies of the audited consolidated balance sheet of the Seller as of
December 31 in each of the years 1997 and 1998 (the "LATEST BALANCE SHEET"), and
the related audited consolidated statements of income, members' equity and cash
flow for each of the years in the three (3) year period ended December 31,
1998, including all notes thereto (collectively, the "FINANCIAL STATEMENTS").
Each of the Financial Statements is accurate and complete in all material
respects, is consistent with the books and records of the Seller and the Company
Subsidiaries (which, in turn, are accurate and complete in all material
respects), and fairly presents in all material respects the financial condition,
assets and liabilities of the Seller and the Company Subsidiaries as of its date
and the results of operations and cash flows for the periods related thereto, in
each case in accordance with generally accepted accounting principles, applied
on a consistent basis ("GAAP").
IV.7 Absence of Undisclosed Liabilities. (a) Except as disclosed in
----------------------------------
Schedule 4.7, neither the Seller, the Company nor any Company Subsidiary had, as
- ------------
of the date of the Latest Balance Sheet, nor has it incurred since that date,
any liabilities or obligations of any nature (whether known or unknown,
absolute, contingent, accrued, direct, indirect, perfected, inchoate,
unliquidated or otherwise), except (i) to the extent clearly and accurately
reflected or accrued or fully reserved against in the Financial Statements or
(ii) liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business and consistent with past custom
and practices (none of which is a liability resulting from a breach of contract,
breach of warranty, tort, infringement claim, legal violation or lawsuit)
IV.8 Unbilled Fees and Expenses. At the Closing, all unbilled fees and
--------------------------
expenses at net realizable value reflected in the records of the Company and the
Company Subsidiaries arose in the ordinary course of business, and will be
billable in the ordinary course of business using normal billing practices and
adjustments employed as of the date of this Agreement by the Company and each
Company Subsidiary. Upon such billing, any such amounts will be collectible in
the ordinary course of business using normal collection practices and policies
employed by the Company and each Company Subsidiary (net of any allowance for
doubtful accounts determined in accordance with the Seller's past practice and
custom).
IV.9 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
4.9, since the date of the Latest Balance Sheet, each of the Seller, the Company
- ----
and the Company Subsidiaries has conducted its business only in the ordinary
course consistent with past custom and practices. Except as set forth on
Schedule 4.9 (setting forth, without limitation, payments of accounts receivable
- ------------
to Members and employees of the Company or Seller as bonus compensation or
otherwise), since the date of the Latest Balance Sheet, there has not been any:
(a) material adverse change in the operations, condition (financial
or otherwise), operating results, assets, liabilities, employee or client
relations or prospects of the Seller, the Company or any Company
Subsidiary;
11
<PAGE>
(b) damage, destruction or loss of any property owned by the Seller,
the Company or any Company Subsidiary, or used in the operation of the
Business, whether or not covered by insurance, having a replacement cost or
fair market value in excess of five percent (5%) of the amount of net
property, plant and equipment shown on the Latest Balance Sheet, in the
aggregate;
(c) voluntary or involuntary sale, transfer, surrender, cancellation,
abandonment, waiver, release or other disposition of any kind by the
Seller, the Company or any Company Subsidiary of any right, power, claim,
debt, except the collection of accounts and billing of work-in-process,
each in the ordinary course of business consistent with past custom and
practices;
(d) strike, picketing, boycott, work stoppage, union organizational
activity, allegation, charge or complaint of employment discrimination or
other labor dispute or similar occurrence that is reasonably expected to
adversely affect the Seller, the Company, a Company Subsidiary or the
Business;
(e) loan or advance by the Seller, the Company or any Company
Subsidiary to any Person, other than as a result of services performed for,
or expenses properly and reasonably advanced for the benefit of, customers
in the ordinary course of business consistent with past custom and
practices;
(f) notice (formal or otherwise) of any liability, potential liability
or claimed liability relating to environmental matters;
(g) declaration, setting aside, or payment of any dividend or other
distribution in respect of the Seller's or the Company's capital stock or
other equity interests or any direct or indirect redemption, purchase, or
other acquisition of the Seller's or the Company's or any Company
Subsidiary's capital stock or other equity interests, or the payment of
principal or interest on any note, bond, debt instrument or debt to any
Affiliate (as defined in Section 15.4) of the Seller, the Company or any
------------
Company Subsidiary, except bonuses and distributions to employees and
Members disclosed to CenterPoint in writing that are consistent with the
Company's past custom and practices or as otherwise contemplated by this
Agreement;
(h) incurrence by the Seller, the Company or any Company Subsidiary of
debts, liabilities or obligations except current liabilities incurred in
connection with or for services rendered or goods supplied in the ordinary
course of business consistent with past custom and practices, liabilities
on account of taxes and governmental charges (but not penalties, interest
or fines in respect thereof), and obligations or liabilities incurred by
virtue of the execution of this Agreement;
12
<PAGE>
(i) issuance by the Seller, the Company or any Company Subsidiary of
any notes, bonds, or other debt securities or any equity securities or
securities convertible into or exchangeable for any equity securities;
(j) entry by the Seller, the Company or any Company Subsidiary into,
or amendment or termination of, any material commitment, contract,
agreement, or transaction, other than in the ordinary course of business
and other than expiration of contracts in accordance with their terms;
(k) loss or threatened loss of, or any material reduction or
threatened material reduction in revenues from, any client of the Seller,
the Company or any Company Subsidiary that accounted for revenues during
the last twelve months in excess of one percent (1%) of the consolidated
net revenues of the Seller, the Company and the Company Subsidiaries, or
change in the relationship of the Seller, the Company or any Company
Subsidiary with any client or Governmental Authority that is reasonably
expected to adversely affect the Seller, the Company, any Company
Subsidiary or the Business;
(l) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by the Seller, the Company or any Company Subsidiary;
(m) discharge or satisfaction by the Seller, the Company or any
Company Subsidiary of any material liability or encumbrance or payment by
the Seller, the Company or any Company Subsidiary of any material
obligation or liability, other than current liabilities paid in the
ordinary course of its business consistent with past custom and practices;
(n) sale, lease or other disposition by the Seller, the Company or any
Company Subsidiary of any tangible assets (having an aggregate replacement
cost or fair market value in excess of five percent (5%) of the amount of
net property, plant and equipment shown on the Latest Balance Sheet) other
than in the ordinary course of business, or the sale, assignment or
transfer by the Seller, the Company or any Company Subsidiary of any
trademarks, service marks, trade names, corporate names, copyright
registrations, trade secrets or other intangible assets, or disclosure of
any proprietary confidential information of the Seller, the Company or any
Company Subsidiary to any Person other than an employee, agent, attorney,
accountant or other representative of the Seller or the Company that has
agreed to maintain the confidentiality of any such proprietary confidential
information;
(o) capital expenditures or commitments therefor by the Seller, the
Company or any Company Subsidiary in excess of $50,000 individually or
$100,000 in the aggregate;
13
<PAGE>
(p) mortgage, pledge or other encumbrance of any asset of the Seller,
the Company or any Company Subsidiary or creation of any easements, Liens
or other interests against or on any of the Real Property (as defined in
Section 4.14.1);
--------------
(q) adoption, amendment or termination of any Employee Plan (as
defined in Section 4.17.5(a)) or increase in the benefits provided under
-----------------
any Employee Plan, or promise or commitment to undertake any of the
foregoing in the future; or
(r) an occurrence or event not included in clauses (a) through (q)
that has resulted or, based on information of which the Seller or the
Company has Knowledge, is reasonably expected to result in a Company
Material Adverse Effect.
IV.10 Litigation. Except as set forth on Schedule 4.10 (which shall
---------- -------------
disclose the parties to, nature of and relief sought for each matter to be
disclosed on Schedule 4.10):
--------------
IV.10.1 There is no suit, action, proceeding, investigation, claim
or order pending or, to the Knowledge of the Seller, threatened against the
Seller, the Company or any Company Subsidiary, or with respect to the
Merger, or with respect to any Employee Plan, or any fiduciary of any such
plan (or pending or, to the Knowledge of the Seller, threatened against any
of the officers, directors, members, partners or employees of the Seller,
the Company or any Company Subsidiary with respect to its business or
proposed business activities), or to which the Seller, the Company or any
Company Subsidiary is otherwise a party, or that is reasonably expected to
have a Company Material Adverse Effect, before any court, or before any
Governmental Authority (each an "ACTION" and collectively, the "ACTIONS");
nor, to the Knowledge of the Seller, is there any basis for any such
Action.
IV.10.2 Neither the Seller, the Company nor any Company Subsidiary
is subject to any unsatisfied or continuing judgment, order or decree of
any court or Governmental Authority. Neither the Seller, the Company nor
any Company Subsidiary, to the Seller's Knowledge, is otherwise exposed,
from a legal standpoint, to any liability or disadvantage that is
reasonably expected to result in a Company Material Adverse Effect, and
neither the Seller, the Company nor any Company Subsidiary is a party to
any legal action to recover monies due it or for damages sustained by it,
other than collection of past due charges for services rendered or expenses
incurred by the Seller or the Company.
IV.10.3 Schedule 4.10 lists the insurer for each Action covered by
-------------
insurance or designates such Action, or a portion of such Action, as
uninsured and lists the individual and aggregate policy limits for the
insurance covering each insured Action and the applicable policy
deductibles for each insured Action.
14
<PAGE>
IV.10.4 Schedule 4.10 sets forth all material closed litigation
-------------
matters to which the Seller, the Company or any Company Subsidiary was a
party during the five (5) year period preceding the Closing Date, the date
such litigation was commenced and concluded, and the nature of the
resolution thereof (including amounts paid in settlement or judgment).
IV.11 Compliance with Applicable Laws. Except as set forth on Schedules
------------------------------- ---------
4.11 and 4.19, each of the Seller, the Company and the Company Subsidiaries has
- ---- ----
complied in all material respects with all laws, rules, regulations, writs,
injunctions, decrees, and orders (collectively, "LAWS") applicable to it or to
the operation of the Business, and has not received any notice of any alleged
claim or threatened claim, violation of or liability or potential responsibility
under any such Law which has not heretofore been cured and for which there is no
remaining liability and, to the Knowledge of the Seller, no event has occurred
or circumstances exist that (with or without notice or lapse of time) is
reasonably expected to constitute or result in a violation by the Seller, the
Company or any Company Subsidiary of any Law that gives rise to any liability on
the part of the Seller, the Company or any Company Subsidiary under any Law.
IV.12 Licenses and Permits. Schedule 4.12 lists all licenses used by the
-------------------- -------------
Seller, the Company and the Company Subsidiaries that are material to the
conduct of the Business. "Licenses" means all notifications, licenses, permits,
franchises, certificates, approvals, exemptions, classifications, registrations
and other similar documents and authorizations, and applications therefor
(collectively, the "LICENSES") held by the Seller, the Company or any Company
Subsidiary and issued by, or submitted by the Seller, the Company or any Company
Subsidiary to, any Governmental Authority or other Person, other than those
relating to the practice of public accountancy. Section B of Schedule 4.12
-------------
lists all licenses, certificates, approvals, registrations and other similar
documents and authorizations, and applications therefor relating to the practice
of public accountancy (the "ACCOUNTING LICENSES") held by the Seller, the
Company or a Company Subsidiary and issued by, or submitted by the Seller, the
Company or any Company Subsidiary to, any Governmental Authority or other
Person. All such Licenses and Accounting Licenses are valid, binding and in
full force and effect. Except as described on Schedule 4.12, the execution,
-------------
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not adversely affect any such Licenses.
To the Knowledge of the Seller, the Seller, the Company and the Company
Subsidiaries have taken all necessary action to maintain such Licenses. No loss
or expiration of any such License is pending or, to the Seller's Knowledge,
threatened or reasonably foreseeable.
IV.13 Material Contracts. Except as listed or described on Schedule 4.13
------------------ -------------
(such contracts, or those which should have been listed on Schedule 4.13, are
-------------
herein referred to as the "1 MATERIAL CONTRACTS"), as of or on the date hereof,
neither the Seller, the Company nor any Company Subsidiary is a party to or
bound by, any written or oral leases, agreements or other contracts or legally
binding contractual rights or contractual obligations or contractual commitments
(each a
15
<PAGE>
"CONTRACT" and collectively, the "CONTRACTS") relating to or in any way
affecting the operation or ownership of the Business that are of a type
described below and no such agreements are currently in negotiation or proposed:
(a) any consulting agreement pursuant to which the Seller, the Company
or a Company Subsidiary is to receive consulting services (other than
consulting agreements that may be terminated by the Seller, the Company or
a Company Subsidiary on not more than 30 days notice without penalty),
employment agreement, change-in-control agreement, or collective bargaining
arrangement with any labor union;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $50,000;
(c) any Contract for the purchase, maintenance or acquisition, or the
sale or furnishing, of materials, supplies, merchandise, machinery,
equipment, parts or other property or services (except if such Contract is
made in the ordinary course of business and requires aggregate future
payments of less than $25,000);
(d) any Contract, other than trade payables in the ordinary course of
business, relating to the borrowing of money, or the guaranty of another
Person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(e) any Contract granting any Person a Lien on all or any part of the
assets of the Seller, the Company or any Company Subsidiary;
(f) any Contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
------------
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any Contract granting to any Person an option or a first refusal,
first-offer or similar preferential right to purchase or acquire any
material assets of the Seller, the Company or any Company Subsidiary;
(h) any Contract with any agent, distributor or representative which
is not terminable by the Seller, the Company or a Company Subsidiary upon
ninety (90) calendar days or less notice without penalty;
(i) any Contract under which the Seller, the Company or any Company
Subsidiary is (A) a lessee or sublessee of any machinery, equipment,
vehicle or other
16
<PAGE>
tangible personal property, or (B) a lessor of any tangible personal
property owned by the Seller, the Company or any Company Subsidiary, in
either case having an original purchase price or requiring aggregate lease
payments in excess of $50,000;
(j) any Contract under which the Seller, the Company or any Company
Subsidiary has granted or received a license or sublicense or under which
it is obligated to pay or has the right to receive a royalty, license fee
or similar payment, in either case which provides for payments over the
life of such Contract in excess of $25,000;
(k) any Contract concerning an Affiliate Transaction (as defined in
Section 4.21);
------------
(l) any Contract providing for the indemnification or holding harmless
of any officer, director, employee or other Person;
(m) any Contract (A) for purchase or sale by the Seller, the Company
or any Company Subsidiary of any real property on which the Seller, the
Company or any Company Subsidiary conducts any aspect of the Business, (B)
granting any options to lease or purchase all or any portion of the Real
Property, or (C) providing for labor, services or materials to the Real
Property (including, without limitation, brokerage or management services)
involving aggregate future payments of more than $25,000;
(n) any Contract limiting, restricting or prohibiting the Seller, the
Company or any Company Subsidiary from conducting business anywhere in the
United States or elsewhere in the world;
(o) any joint venture or partnership Contract;
(p) any lease, sublease or associated agreements relating to the
Leased Property (as defined in Section 4.14.1);
--------------
(q) any Contract requiring prior notice, consent or other approval
upon a change of control in the equity ownership of the Seller, the Company
or any Company Subsidiary, which, if amended, modified or terminated as a
result of, relating to or in connection with a failure to provide prior
notice, or gain such consent or approval, would result in a Company
Material Adverse Effect; or
(r) any other Contract, whether or not made in the ordinary course of
business, which involves future payments by the Seller, the Company or any
Company Subsidiary in excess of $25,000.
17
<PAGE>
The Seller has provided CenterPoint with a true and complete copy of each
written Material Contract and a true and complete summary of each oral Material
Contract, in each case including all amendments or other modifications thereto.
Except as set forth on Schedule 4.13, each Material Contract is a valid and
-------------
binding obligation of, and enforceable in accordance with its terms against, the
Seller, the Company or a Company Subsidiary, as applicable, and, to the
Knowledge of the Seller, the other parties thereto, and is in full force and
effect, subject only to bankruptcy, reorganization, receivership and other laws
affecting creditors' rights generally and equitable principles. Except as set
forth on Schedule 4.13, the Seller, the Company or one of the Company
-------------
Subsidiaries, as applicable, has performed in all material respects all
obligations required to be performed by it as of the date hereof and will have
performed in all material respects all obligations required to be performed by
it as of the Closing Date under each Material Contract and neither the Seller,
the Company or Company Subsidiary, as applicable, nor, to the Knowledge of the
Seller, any other party to any Material Contract is in breach or default
thereunder, and, to the Knowledge of the Seller, there exists no condition which
would, with or without the lapse of time or the giving of notice, or both,
constitute a breach or default thereunder. The Seller has not been notified
that any party to any Material Contract intends to cancel, terminate, not renew,
or exercise an option under any Material Contract, whether in connection with
the transactions contemplated hereby or otherwise.
IV.14 Properties.
----------
IV.14.1 Schedule 4.14.1-1 is a correct and complete list, and a
-----------------
brief description of, all real estate in which the Seller, the Company or
any of the Company Subsidiaries has an ownership interest (the "OWNED
PROPERTY") and all real property leased by the Seller and the Company (the
"LEASED PROPERTY"). Except as lessee of Leased Property, neither the
Seller, the Company nor any Company Subsidiary is a lessee under or
otherwise a party to any lease, sublease, license, concession or other
agreement, whether written or oral, pursuant to which another Person has
granted to the Seller, the Company or any Company Subsidiary the right to
use or occupy all or any portion of any real property.
The Seller, the Company or one of the Company Subsidiaries has good
and marketable fee simple title to the Owned Property and, assuming good
title in the Landlord, a valid leasehold interest in the Leased Property
(the Owned Property and the Leased Property being sometimes referred to
herein as "REAL PROPERTY"), in each case free and clear of all Liens,
assessments or restrictions (including, without limitation, inchoate liens
arising out of the provision of labor, services or materials to any such
real estate) other than (a) mortgages shown on the Financial Statements as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) Liens for current taxes not yet due, (c)
(i) minor imperfections of title, including utility and access easements
depicted on subdivision plats for platted lots that do not impair the
intended use of the property, if any, none of which materially impairs the
current operations of the Seller, the Company or the
18
<PAGE>
Business, and (ii) zoning laws and other land use restrictions or
restrictive covenants that do not materially impair the present use of the
property subject thereto and (d) Liens, assessments, and restrictions
pursuant to and by virtue of the terms of the lease of the Leased Property.
The Real Property constitutes all real properties reflected on the
Financial Statements or used or occupied by the Seller, the Company or any
Company Subsidiary in connection with the Business or otherwise.
With respect to the Owned Property, except as reflected on Schedule
--------
4.14.1-2(a):
-----------
(a) the Seller, the Company or one of the Company Subsidiaries is in
exclusive possession thereof and no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof;
(b) no portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Owned Property and, to the Knowledge of the Seller, there is
no threatened condemnation or proceeding with respect thereto;
(c) there is no violation of any covenant, condition, restriction,
easement or agreement of any Governmental Authority that affects the Owned
Property or the ownership, operation, use or occupancy thereof;
(d) no portion of any parcel of the Owned Property is subject to any
roll-back tax, dual or exempt valuation tax, and no portion of any Owned
Property is omitted from the appropriate tax rolls; and
(e) all assessments and taxes currently due and payable on such Owned
Property have been paid.
With respect to the Leased Property, except as reflected on Schedule
--------
4.14.1-2(b):
- -----------
(i) the Seller, the Company and/or one of the Company
Subsidiaries is in exclusive, peaceful and undisturbed possession thereof
and, to the Knowledge of the Seller, no easements, licenses or rights are
necessary to conduct the Business thereon in addition to those which exist
as of the date hereof; and
(ii) to the Knowledge of the Seller, no portion thereof is
subject to any pending condemnation proceeding or proceeding by any public
or quasi-public authority materially adverse to the Leased Property and
there is no threatened condemnation or proceeding with respect thereto.
19
<PAGE>
IV.14.2 The Latest Balance Sheet and/or Schedule 4.14.2 reflect all
---------------
material tangible personal property owned by the Seller or any Company
Subsidiary, except as sold or otherwise disposed of or acquired in the
ordinary course of business. Except as set forth on Schedule 4.14.2, the
---------------
Seller, the Company or one of the Company Subsidiaries has good and
marketable title to, or a valid leasehold interest in, or valid license of,
such personal property (including, without limitation, machinery, equipment
and computers), in each case free and clear of any 1 Liens (other than
Liens that are part of such leasehold or license), and each such asset is
in working order and has been maintained in a commercially reasonable
manner and does not contain, to the Knowledge of the Seller, any material
defect. Except as set forth in Schedule 4.14.2, no personal property
---------------
(including, without limitation, software and databases maintained on off-
premises computers) used by the Seller, the Company or any Company
Subsidiary in connection with the Business is held under any lease,
security agreement, conditional sales contract or other title retention or
security arrangement or is located other than on the Real Property.
IV.15 Intellectual Property. The (i) patents, patent applications,
---------------------
inventions and discoveries that may be patentable (collectively, the "PATENTS"),
(ii) registered and unregistered trademarks, trade names, company names, assumed
business names and service marks (collectively, the "MARKS"), (iii) copyrights
(the "COPYRIGHTS"), and (iv) know how, trade secrets, confidential information,
client lists, software, technical information, data, process technology, plans
and drawings (collectively, the "TRADE SECRETS") owned, used or licensed by the
Seller, the Company or any Company Subsidiary (collectively, the "INTELLECTUAL
PROPERTY") are all those necessary to enable the Seller, the Company and the
Company Subsidiaries to conduct and to continue to conduct the Business
substantially as it is currently conducted. Schedule 4.15 contains a complete
-------------
and accurate list of all material Patents, Marks and Copyrights and a brief
description of all material Trade Secrets owned, used by or directly licensed to
the Seller, the Company or any Company Subsidiary, and a list of all material
license agreements and arrangements with respect to any of the Intellectual
Property to which the Seller, the Company or any Company Subsidiary is a party,
whether as licensee, licensor or otherwise (collectively, the "INTELLECTUAL
PROPERTY LICENSES"). Except as set forth on Schedule 4.15, (i) all of the
-------------
Intellectual Property is owned, or to the Knowledge of Seller used under a valid
Intellectual Property License, by the Seller, the Company or one of the Company
Subsidiaries, and is free and clear of all Liens and other adverse claims; (ii)
neither the Seller, the Company nor any Company Subsidiary has received any
written notice that it is or has infringed on, misappropriated or otherwise
conflicted with, or otherwise has Knowledge that it is infringing on,
misappropriating, or otherwise conflicting with the intellectual property rights
of any third parties; (iii) there is no claim pending or, to the Knowledge of
Seller, threatened against the Seller, the Company or any Company Subsidiary
with respect to the alleged infringement or misappropriation by the Seller, the
Company or Company Subsidiary, or a conflict with, any intellectual property
rights of others; (iv) the operation of any aspect of the Business in the manner
in which it has heretofore been operated or is presently operated does not give
rise to any such infringement or misappropriation; and (v) there is no
infringement or misappropriation of the Intellectual Property by a third party
20
<PAGE>
or claim, pending or, to the Knowledge of the Seller, threatened, against any
third party with respect to the alleged infringement or misappropriation of the
Intellectual Property.
IV.16 Taxes.
-----
IV.16.1 Except as set forth on Schedule 4.16.1-1, each of the Seller,
-----------------
the Company and the Company Subsidiaries has timely and accurately prepared
and filed or will timely and accurately prepare and file all federal,
state, local and foreign returns, declarations and reports, information
returns and statements (collectively, the "RETURNS") for Taxes (as
defined in Section 4.16.2) required to be filed by or with respect to the
--------------
Company or the Company Subsidiaries before the Closing Date, and has paid
or caused to be paid, or has made adequate provision or set up an adequate
accrual or reserve for the payment of, all Taxes required to be paid in
respect of the periods for which Returns are due on or prior to the Closing
Date, and will establish an adequate accrual or reserve for the payment of
all Taxes payable in respect of the period, including portions thereof,
subsequent to the last of said periods required to be so accrued or
reserved, in each case in accordance with GAAP up to and including the
Closing Date. All such Returns are or will be true and correct in all
material respects. The Seller and the Company have delivered to CenterPoint
true and complete copies of all Returns referred to in the first sentence
of this Section 4.16.1 (including any amendments thereof) for the five (5)
--------------
most recent taxable years. Neither the Seller, the Company nor any Company
Subsidiary is delinquent in the payment of any Tax, and no material
deficiencies for any Tax, assessment or governmental charge have been
threatened, claimed, proposed or assessed. No waiver or extension of time
to assess any Taxes has been given or requested. No written claim, or any
other claim, by any taxing authority in any jurisdiction where the Seller,
the Company or any Company Subsidiary does not file Tax returns is pending
pursuant to which the Seller, the Company or Company Subsidiary, as
applicable, is or may be subject to taxation by that jurisdiction. The
Seller's, the Company's and the Company Subsidiaries' Returns were last
audited by the Internal Revenue Service or comparable state, local or
foreign agencies on the dates set forth on Schedule 4.16.1-2.
-----------------
IV.16.2 For purposes of this Agreement, the term "TAXES" shall mean
all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, employment, withholding, social
security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by the United States,
or any state, local, foreign or provincial government or subdivision or any
agency thereof, whether computed on a separate, consolidated, unitary,
combined or any other basis.
IV.17 Employee Benefit Plans; ERISA.
-----------------------------
21
<PAGE>
IV.17.1 Except as described in Schedule 4.17.1, neither the Seller,
---------------
the Company nor any Company Subsidiary has or is reasonably expected to
have any liability (including contingent liability) whether direct or
indirect (and regardless of whether it would be derived from a current or
former Plan Affiliate, as defined in Section 4.17.5(c)) with respect to any
-----------------
of the following (whether written, unwritten or terminated): (i) any
employee welfare benefit plan, as defined in Section 3(1) of "ERISA,"
including, but not limited to, any medical plan, life insurance plan,
short-term or long-term disability plan or dental plan; (ii) any "employee
pension benefit plan," as defined in Section 3(2) of ERISA (as defined in
Section 4.17.5(b)), including, but not limited to, any excess benefit plan,
-----------------
top hat plan or deferred compensation plan or arrangement, nonqualified
retirement plan or arrangement, qualified defined contribution or defined
benefit arrangement; or (iii) any other benefit plan, policy, program,
arrangement or agreement, including, but not limited to, any material
fringe benefit plan or program, personnel policy, bonus or incentive plan,
stock option, restricted stock, stock bonus, holiday pay, vacation pay,
sick pay, bonus program, service award, moving expense, reimbursement
program, tool allowance, safety equipment allowance, deferred bonus plan,
salary reduction agreement, change-of-control agreement, employment
agreement or consulting agreement.
IV.17.2 A complete copy of each written Employee Plan (as defined in
Section 4.17.5(a)) as amended to the Closing, together with audited
-----------------
financial statements, if any, for the three (3) most recent plan years; a
copy of each trust agreement or other funding vehicle with respect to each
such plan; a copy of any and all determination letters, rulings or notices
issued by a Governmental Authority with respect to such plan; a copy of the
Form 5500 Annual Report for the three (3) most recent plan years; and a
copy of each and any general explanation or communication which was
required to be distributed or otherwise provided to participants in such
plan and which describes all or any relevant aspect of each plan, including
summary plan descriptions and/or summary of material modifications, have
been delivered to CenterPoint. A description of each unwritten Employee
Plan, including a description of eligibility, participation, benefits,
funding arrangements and assets or other relevant aspects of the
obligation, is set forth in Schedule 4.17.2.
---------------
IV.17.3 Except as is not reasonably expected to give rise to any
liability (including contingent liability), whether direct or indirect, to
the Seller, the Company or any Company Subsidiary, each Employee Plan (i)
has been and is operated and administered in compliance with its terms;
(ii) has been and is operated, administered, maintained and funded in
compliance with the applicable requirements of the Code in such a manner as
to qualify, where appropriate and intended, for both Federal and state
purposes, for income tax exclusions, tax-exempt status, and the allowance
of deductions and credits with respect to contributions thereto; (iii)
where appropriate, has received a favorable determination letter from the
Internal Revenue Service upon which the sponsor of the plan may currently
22
<PAGE>
rely; (iv) has been and currently complies in form and in operation in all
respects with all applicable requirements of ERISA and the Code and any
applicable reporting and disclosure requirements of Federal and state laws,
including but not limited to the requirement of Part 6 of subtitle B of
Title I of ERISA and Section 4980B of the Code. With respect to each
Employee Plan, no Person has: (i) entered into any nonexempt "1 prohibited
transaction," as such terms are defined in ERISA or the Code; (ii) breached
a fiduciary obligation or (iii) any liability for any failure to act or
comply in connection with the administration or investment of the assets of
such plan; and no Employee Plan has any liability and there is no liability
in connection with any Employee Plan, other than a liability (i) which is
expressly and adequately reflected in the Latest Balance Sheets, (ii) which
is discretionary or terminable at will by the Seller, the Company or one of
the Company Subsidiaries without incurring any such liability, or (iii)
which is adequately funded under a funding arrangement separate from the
assets of the Seller, the Company, any Company Subsidiary or a Plan
Affiliate (and only to the extent of such funding). Any contribution made
or accrued with respect to any Employee Plan is fully deductible by the
Seller, the Company, a Company Subsidiary or a Plan Affiliate.
IV.17.4 Neither the Seller, the Company nor any Company Subsidiary or
Plan Affiliate has ever sponsored, maintained, contributed to or been
required to contribute to, or has any liability, whether direct or
indirect, with respect to any Employee Plan which is or has ever been (i) a
"multiemployer plan" as defined in Section 4001 of ERISA, (ii) a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, (iii) a
"multiple employer plan" within the meaning of Code Section 413(c), (iv) a
"multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA, (v) subject to the funding requirements of Section 412 of the
Code or to Title IV of ERISA, or (vi) provides for post-retirement medical,
life insurance or other welfare-type benefits.
IV.17.5 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) the term "EMPLOYEE PLAN" shall mean any plan, policy,
program, arrangement or agreement described in Section 4.17.1, whether or
--------------
not scheduled;
(b) the term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended; and
(c) with respect to any Person ("FIRST PERSON"), the term
"PLAN AFFILIATE" shall mean any other Person with whom the First Person
constitutes or has constituted all or part of a controlled group, or which
would be treated or have been treated with the First Person as under common
control or whose employees would be or have been treated as employed by the
First Person, under Section 414
23
<PAGE>
of the Code or Section 4001(b) of ERISA and any regulations, administrative
rulings and case law interpreting the foregoing.
IV.18 Labor Matters. Except as set forth in Schedule 4.18, there is no, and
------------- -------------
within the last three (3) years neither the Seller, the Company nor any Company
Subsidiary has experienced any, strike, picketing, boycott, work stoppage or
slowdown or other similar labor dispute, union organizational activity,
allegation, charge or complaint of unfair labor practice, employment
discrimination or other matters relating to the employment of labor pending or,
to the Knowledge of the Seller, threatened against the Seller, the Company or
any Company Subsidiary, or which might affect the Seller, the Company or any
Company Subsidiary; nor, to the Knowledge of the Seller, is there any basis for
any such allegation, charge, or complaint. There is no request for
representation pending and, to the Knowledge of the Seller, no question
concerning representation has been raised. There is no grievance pending that
is reasonably expected to result in a Company Material Adverse Effect nor any
arbitration proceeding arising out of a union agreement. To the Knowledge of
the Seller, no employee that is key to the Business and no group of employees
has announced or otherwise indicated any plans to terminate employment with the
Seller, the Company or any Company Subsidiary. Each of the Seller, the Company
and any Company Subsidiary has complied with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes. Neither the Seller, the Company nor any Company Subsidiary is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any such laws, ordinances or regulations.
IV.19 Environmental Matters. Other than as disclosed on Schedule 4.19, (i)
--------------------- -------------
each of the Seller, the Company and the Company Subsidiaries is operating and
has operated its business in compliance with all applicable Environmental and
Safety Requirements (as defined later in this Section); (ii) to the actual
knowledge of the managers of the Seller, without any duty to inquire
(notwithstanding the definition of "Knowledge" in Section 15.4), there are no
------------
Hazardous Materials (as defined later in this Section) present at, on or under
any real property currently or formerly owned, leased or used by the Seller, the
Company or Company Subsidiary (other than those present in office supplies and
cleaning/maintenance materials) for which the Seller, the Company or a Company
Subsidiary is or is reasonably expected to be responsible, or otherwise have any
liability, for response costs under any Environmental and Safety Requirements;
(iii) each of the Seller, the Company and the Company Subsidiaries has disposed
of all waste materials generated by the Seller, the Company or such Company
Subsidiary at any real property currently or formerly owned, leased or used by
the Seller, the Company or Company Subsidiary in compliance with applicable
Environmental and Safety Requirements; and (iv) there are and have been no
facts, events, occurrences or conditions at or related to any real property
currently or formerly owned, leased or used by the Seller, the Company or
Company Subsidiary that is reasonably expected to cause or give rise to
liabilities or response obligations of the Seller, the Company or any Company
Subsidiary under any Environmental and Safety Requirements. The term
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means any federal, state and local laws,
statutes, regulations or other requirements relating to the protection,
preservation or conservation of the environment or worker
24
<PAGE>
health and safety, all as amended or reauthorized. The term "HAZARDOUS
MATERIALS" means "hazardous substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., "hazardous wastes," as defined by the Resource Conservation Recovery
Act, 42 U.S.C. (S) 6901 et seq., asbestos in any form or condition,
polychlorinated biphenyls and any other material, substance or waste to which
liability or standards of conduct may be imposed under any Environmental and
Safety Requirement.
IV.20 Insurance. Each of the Seller, the Company and the Company
---------
Subsidiaries has in full force and effect commercially reasonable amounts of
insurance to protect the Seller's, the Company's and Company Subsidiaries'
ownership or interest in, and operation of, its assets against the types of
liabilities, including professional malpractice, customarily insured against in
connection with operations similar to the Business, and all premiums due on such
policies have been paid. To the Seller's Knowledge, each of the Seller, the
Company and the Company Subsidiaries has complied with the provisions of all
such policies and is not in default under any of such policies. Schedule 4.20
-------------
contains a complete and correct list of all such insurance policies. Neither
the Seller, the Company nor any Company Subsidiary has received any notice of
cancellation or intent to cancel or increase premiums with respect to such
insurance policies. Schedule 4.20 also contains a list of all claims or asserted
-------------
claims reported to insurers under such policies relating to the ownership or
interest in the Seller's, the Company's and the Company Subsidiaries' assets, or
operation of the Business, including all professional malpractice claims and
similar types of claims, actions or proceedings asserted against the Seller, the
Company or any Company Subsidiary arising out of the Business at any time within
the past three (3) years.
IV.21 Interest in Customers and Suppliers; Affiliate Transactions. Except
-----------------------------------------------------------
as described on Schedule 4.21 and except for ownership as an investment of not
-------------
more than one percent (1%) of any class of capital stock of any publicly-traded
company, no Member, Affiliate of a Member or Affiliate of the Seller, the
Company or any Company Subsidiary (i) possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or affiliate of, any
Person that is a client, supplier, customer, lessor, lessee or competitor of the
Seller, the Company or any Company Subsidiary, (ii) owns, directly or
indirectly, in whole or in part, or has any interest in any tangible or
intangible property used in the conduct of the Business, or (iii) is a party to
an agreement or relationship, that involves the receipt by such Person of
compensation or property from the Seller, the Company or any Company Subsidiary
other than through a customary employment relationship or through distributions
made with respect to the Seller Interests or equity interests in any Company
Subsidiary (provided such distributions have been made consistent with the
Seller's, the Company's or any Company Subsidiary's, as the case may be, past
custom and practices). Schedule 4.21 sets forth the parties to and the date,
-------------
nature and amount of each transaction during the last five years involving the
transfer of any cash, property or rights to or from the Seller, the Company or
any Company Subsidiary from, to or for the benefit of any Affiliates (other than
customary employment relationships, or distributions made with respect to the
Seller Interests) ("AFFILIATE TRANSACTIONS"), and any existing commitments of
the Seller, the Company or any Company Subsidiary to engage in the future in any
Affiliate Transactions.
25
<PAGE>
Except as disclosed, each Affiliate Transaction and each transaction with former
Affiliates of the Seller, the Company or any Company Subsidiary was effected on
terms equivalent to those that would have been established in an arm's-length
transaction.
IV.22 Business Relationships. Schedule 4.22 lists all clients of the
---------------------- -------------
Seller, the Company and each Company Subsidiary representing one percent (1%) or
more of the Seller's or the Company's, as applicable, consolidated net revenues
for the twelve (12) months ended December 31, 1998. Except as set forth on
Schedule 4.22, since December 31, 1998, none of such clients has canceled or
- -------------
substantially reduced its business with the Seller, the Company or Company
Subsidiary, as applicable, nor are any of such clients threatening to do so. To
the Knowledge of the Seller, no client that accounts for one percent (1%) or
more of the Seller's or the Company's consolidated net revenue or supplier of
the Seller, the Company or any Company Subsidiary, will cease to do business
with, or substantially reduce its business with, the Seller, the Company or
Company Subsidiary, as applicable, after the consummation of the transactions
contemplated hereby.
IV.23 Compensation. Schedule 4.23 is a complete list setting forth the
------------ -------------
names and current total compensation, including, without limitation, salary and
bonuses paid to employees and draws or other distributions paid to partners,
members or owners of each Person who earned from the Seller, the Company or a
Company Subsidiary in 1998 total compensation in excess of $100,000. Except as
set forth in Schedule 4.23, no Person listed thereon has received any bonus or
-------------
increase in compensation and there has been no "general increase" in the
compensation or rate of compensation payable to any employees, partners, members
or owners of the Seller, the Company or any Company Subsidiary since the date of
the Latest Balance Sheet, other than in the Seller's or the Company's ordinary
course of business, consistent with past custom and practices, nor since that
date has there been any oral or written promise to employees, partners, members
or owners of any bonus or increase in compensation, other than in the Seller's
or the Company's ordinary course of business, consistent with past custom and
practices. The term "GENERAL INCREASE" as used herein means any increase
generally applicable to a class or group, but does not include increases granted
to individuals for merit, length of service or change in position or
responsibility made on the basis of the custom and past practices of the Seller,
the Company or any Company Subsidiary. Schedule 4.23 includes the date and
-------------
amount of the last bonus or similar distribution or increase in compensation for
each listed individual.
IV.24 Bank Accounts. Schedule 4.24 is a true and complete list of each
------------- -------------
bank in which the Seller, the Company or any Company Subsidiary has an account
or safe deposit box, the number of each such account or box, and the names of
all Persons authorized to draw thereon or to have access thereto.
IV.25 Professional Credentials. Each Member is a Certified Public
------------------------
Accountant in good standing in one of the States of the United States or the
District of Columbia, and entitled to practice in one of the jurisdictions in
which the Seller, the Company or any Company Subsidiary
26
<PAGE>
maintains an office, and there are no disciplinary proceedings pending or
threatened against the Seller, the Company, any Company Subsidiary or any of the
Members by any Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy.
IV.26 Disclosure; No Misrepresentation. No representation or warranty of
--------------------------------
the Seller contained in this Agreement or in any of the certification,
schedules, lists, documents, exhibits, or other instruments delivered or to be
delivered to CenterPoint as contemplated by any provision hereof contains any
untrue statement regarding a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein not misleading.
To the Knowledge of the Seller, there is no fact or circumstance that has not
been disclosed to CenterPoint herein that has or is reasonably expected to have
a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
V.1 Several Representations and Warranties. Each Member, severally and
--------------------------------------
not jointly, hereby represents and warrants to CenterPoint as of the date hereof
and, subject to Section 7.3, as of the date on which CenterPoint and the lead
-----------
Underwriter execute and deliver the Underwriting Agreement related to the IPO
and as of the Closing Date as follows (provided, however that all
representations and warranties with respect to the Company shall be as of the
Closing Date):
5.1.1 Capitalization. Such Member owns beneficially and of record
--------------
all of the membership interests of the Seller ("SELLER INTERESTS") as set
forth opposite the name of such Member in Schedule 4.4. At the Closing as
------------
provided in this Agreement, CenterPoint will acquire good and valid title
to the Company Interests, free and clear of any Lien other then a Lien
created by CenterPoint.
5.1.2 Authority. Such Member has full right, capacity, power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by such Member, and, assuming the due authorization, execution and delivery
hereof by CenterPoint, constitutes a valid and legally binding agreement of
such Member, enforceable against such Member in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
5.1.3 Non-Contravention. The execution and delivery of this
-----------------
Agreement by such Member does not violate, conflict with or result in a
breach of any provision of, or
27
<PAGE>
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien
upon any of the properties or assets of the Seller, the Company or any
Company Subsidiary under, any of the terms, conditions or provisions of (i)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority
applicable to such Member, except for those items relating to regulating,
licensing or permitting the practice of public accountancy or (ii) other
than those licenses, franchises, permits, concessions or instruments of any
Governmental Authority, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which such Member is a
party or by which such Member may be bound or affected. The consummation by
such Member of the transactions contemplated hereby will not result in a
violation, conflict, breach, right of termination, creation or acceleration
of Liens under the of the terms, conditions or provisions of the items
described in clauses (i) and (ii) of the immediately preceding sentence,
subject to obtaining (prior to the Closing Date) the consents set forth on
Schedule 4.3.2 except for those relating to regulating, licensing or
--------------
permitting the practice of public accountancy.
5.1.4 Approvals. To the Knowledge of such Member, and except with
---------
respect to (i) the filing of the Registration Statements with the SEC
pursuant to the 1933 Act, the declaration of the effectiveness of the
Registration Statements by the SEC and filings, if required, with various
state securities or "1 blue sky" authorities, (ii) any filing which may be
required under the HSR Act, (iii) any filing which may be required by any
Governmental Authority or self-regulatory organization regulating,
licensing or permitting the practice of public accountancy, no declaration,
filing, or registration with, or notice to, or authorization, consent or
approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by such Member or the consummation by such
Member of the transactions contemplated hereby.
5.1.5 Litigation. There is no action, claim, suit, proceeding
----------
(disciplinary or otherwise), arbitration or investigation pending, or to
the Knowledge of such Member, threatened against such Member relating to
(i) the transactions contemplated by this Agreement, (ii) any action taken
by such Member or contemplated by such Member in connection with the
consummation by such Member of the transactions contemplated hereby or
(iii) the practice of public accountancy by such Member.
5.1.6 No Transfer. There are no outstanding subscriptions, options,
-----------
calls, contracts, commitments, undertakings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement to deliver or sell, or
cause to be delivered or sold, any Company Interests or obligating the
Seller to grant, extend or enter into any such agreement or
28
<PAGE>
commitment or obligating the Seller to convey or transfer any Company
Interests. As of the Closing Date, there will be no voting trusts, proxies
or other agreements or understandings to which the Seller is a party or is
bound with respect to the voting of any membership interests or other
equity interests of the Company other than the Voting Agreement.
5.1.7 Disclosure. No representation or warranty by or on behalf of
----------
such Member contained in this Agreement or any of the written statements or
certificates furnished at or prior to the Closing by or on behalf of such
Member to CenterPoint or its representatives in connection herewith or
pursuant hereto, contains any untrue statement of a material fact, or omits
or will omit to state any material fact required to make the statements
contained herein or therein not misleading.
5.1.8 Seller Representations and Warranties. To such Member's
-------------------------------------
actual knowledge, the representations and warranties of the Seller and the
Company set forth in Article IV of this Agreement are true and correct.
----------
V.2 Joint and Several Representations and Warranties. The Members jointly
------------------------------------------------
and severally represent and warrant to CenterPoint that each of the Seller
Interests and (as of the Closing Date) the Company Interests are owned
beneficially and of record in accordance with Schedule 4.4, and all such Seller
------------
Interests and Company Interests are validly issued and are fully paid,
nonassessable and free of preemptive rights.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants to the Seller and the Members as of the
date hereof and, subject to Section 7.3, as of the date on which CenterPoint and
-----------
the lead Underwriter execute and deliver the Underwriting Agreement related to
the IPO and as of the Closing Date as follows:
VI.1 Organization And Qualification. CenterPoint is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
True, accurate and complete copies of CenterPoint's Certificate of Incorporation
and By-laws, as in effect on the date hereof, including all amendments thereto,
have heretofore been delivered to the Company. Mergersub is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the requisite power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted. True, accurate and complete copies of Mergersub's
29
<PAGE>
Certificate of Formation and Operating Agreement, as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to the
Company.
VI.2 Capitalization.
--------------
VI.2.1 The authorized capital stock of CenterPoint consists of
20,000 shares of CenterPoint Common Stock, of which 17,500 shares are
outstanding as of the date hereof. All of the issued and outstanding shares
of CenterPoint Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights. Immediately prior to the
Closing Date, the authorized capital stock of CenterPoint will consist of
50,000,000 shares of CenterPoint Common Stock, of which the number of
shares set forth in the Form S-1 will be issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which will be issued and outstanding. Other than (i) shares of CenterPoint
Common Stock issued pursuant to a split of the shares outstanding as of the
date of this Agreement, (ii) shares of CenterPoint Common Stock issued in
accordance with the Acquisition and the Other Acquisitions, and (iii)
shares of CenterPoint Common Stock that may be issued to new members of
management in lieu of shares previously issued to current members of
management, but which will not increase the number of shares of outstanding
CenterPoint Common Stock, no shares of CenterPoint Common Stock will be
issued prior to the consummation of the IPO. Mergersub's authorized equity
ownership consists solely of the membership interests (the "MERGERSUB
INTERESTS"), all of which are issued and outstanding, are owned free and
clear of any Liens by CenterPoint, and are fully paid, nonassessable and
free of preemptive rights.
VI.2.2 Except as set forth on Schedule 6.2, as of the date hereof,
------------
there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating CenterPoint
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of CenterPoint or obligating
CenterPoint to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which CenterPoint is a party or is bound with respect to
the voting of any shares of capital stock of CenterPoint. The shares of
CenterPoint Common Stock issued to Seller in the Acquisition will at the
Closing Date be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and issued pursuant to a
registration statement as required by the 1933 Act or an exemption
therefrom.
VI.3 No Subsidiaries. Except for CenterPoint's ownership of 100% of the
---------------
capital stock of Professional Service Group, Inc., a Delaware corporation, and
the subsidiaries established by CenterPoint to consummate the transactions
hereunder and in the Other Agreements, CenterPoint
30
<PAGE>
has no subsidiaries and it does not own any capital stock of any corporation or
any equity or other interest of any nature whatsoever in any Person.
VI.4 Authority; Non-Contravention; Approvals.
---------------------------------------
VI.4.1 Each of CenterPoint and Mergersub has all requisite right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of CenterPoint and Mergersub, and no other corporate
proceedings on the part of CenterPoint or Mergersub are necessary to
authorize the execution and delivery of this Agreement or the consummation
by CenterPoint and Mergersub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by CenterPoint and Mergersub
and, assuming the due authorization, execution and delivery hereof by the
Company and the Members, constitutes a valid and legally binding agreement
of CenterPoint and Mergersub, enforceable against each of them in
accordance with its terms, except that such enforcement may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles.
VI.4.2 The execution and delivery of this Agreement by CenterPoint
and Mergersub does not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of
any Lien upon any of the properties or assets of CenterPoint and Mergersub
under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-laws of CenterPoint, (ii) the Certificate of Formation
or Operating Agreement of Mergersub, (iii) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or
license of any court or Governmental Authority applicable to CenterPoint or
Mergersub or any of their respective properties or assets, or (iv) any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of
any kind to which CenterPoint or Mergersub is now a party or by which
CenterPoint, Mergersub or any of their respective properties or assets, may
be bound or affected, except those items described in clause (ii) relating
to regulating, licensing or permitting the practice of public accountancy.
The consummation by CenterPoint and Mergersub of the transactions
contemplated hereby will not result in any violation, conflict, breach,
right of termination or acceleration or creation of Liens under any of the
terms, conditions or provisions of the items described in clauses (i)
through (iii) of the immediately preceding sentence, subject, in the case
of the terms, conditions or provisions of the items described in clause
(ii) above, to obtaining (prior to the Closing Date) CenterPoint Required
Statutory Approvals and except for those items
31
<PAGE>
described in (iii) above relating to regulating, licensing, or permitting
the practice of public accountancy.
VI.4.3 Except with respect to (i) the filing in connection with the
IPO of the Registration Statements with the SEC pursuant to the 1933 Act,
the declaration of the effectiveness of the Registration Statements by the
SEC and filings, if required, with various state securities or "blue sky"
authorities, (ii) any filing which may be required under the HSR Act, (iii)
any filing which may be required by any Governmental Authority or self-
regulatory organization regulating, licensing or permitting the practice of
public accountancy (the filings and approvals referred to in clauses (i)
through (iii) are collectively referred to as the "CENTERPOINT REQUIRED
STATUTORY APPROVALS") no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by CenterPoint or Mergersub or the consummation by
CenterPoint or Mergersub of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be,
are not reasonably expected to, in the aggregate, have a material adverse
effect on the business operations, properties, assets, condition (financial
or other), results of operations or prospects of CenterPoint and its
subsidiaries, taken as a whole (a "CENTERPOINT MATERIAL ADVERSE EFFECT").
VI.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
6.5, neither CenterPoint nor Mergersub has incurred any liabilities or
- ---
obligations (whether known or unknown, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise) of any nature. Except as set
forth on Schedule 6.5, neither CenterPoint nor Mergersub has engaged in any
------------
business activities of any type or kind whatsoever, nor entered into any
agreements nor is it bound by any obligation or undertaking.
VI.6 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the Knowledge of CenterPoint, threatened against, relating to or
affecting CenterPoint or Mergersub, before any court, Governmental Authority or
any arbitrator that seek to restrain or enjoin the consummation of the
Acquisition or the IPO or which could reasonably be expected, either alone or in
the aggregate with all such claims, actions or proceedings, to have a
CenterPoint Material Adverse Effect. CenterPoint is not subject to any
unsatisfied or continuing judgment, order or decree of any court or Governmental
Authority. CenterPoint is not a party to any legal action to recover monies due
it or for damages satisfied by it.
VI.7 Compliance with Applicable Laws. Each of CenterPoint and Mergersub
-------------------------------
has complied in all material respects with all Laws applicable to it, and has
not received any notice of any alleged claim or threatened claim, violation of
or liability or potential responsibility under any such Law which has not
heretofore been cured and for which there is no remaining liability and, to the
Knowledge of CenterPoint, no event has occurred or circumstances exist that
(with or
32
<PAGE>
without notice or lapse of time) may constitute or result in a violation by
CenterPoint or Mergersub of any Law or may give rise to any liability on the
part of the CenterPoint or Mergersub under any Law.
VI.8 No Misrepresentation. None of the representations and warranties of
--------------------
CenterPoint or Mergersub set forth in this Agreement or in any of the
certificates, schedules, lists, documents, exhibits, or other instruments
delivered or to be delivered to the Seller or the Members as contemplated by any
provision hereof contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading. To the Knowledge of CenterPoint, there is no fact or
circumstance that has not been disclosed to Seller herein that has or is
reasonably expected to have a Company Material Adverse Effect.
ARTICLE VII
CERTAIN COVENANTS AND OTHER TERMS
VII.1 Conduct of Business by the Seller and the Company Pending the
-------------------------------------------------------------
Acquisition.
- -----------
VII.1.1 Except as otherwise contemplated by this Agreement, after
the date hereof and prior to the Closing Date or earlier termination of
this Agreement, unless CenterPoint shall otherwise agree in writing, the
Seller shall, and shall cause the Company and each Company Subsidiary to:
(a) in all material respects conduct the Business in the
ordinary and usual course and consistent with past customs and
practices;
(b) not (i) amend its Organizational Documents, (ii) split,
combine or reclassify its outstanding equity ownership or (iii)
declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise except dividends or distributions
which (A) are consistent with past customs and practices, (B) do not
result in a Company Material Adverse Effect and (c) as set forth on
Schedule 7.5;
------------
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of (i) any additional membership interests of,
or any options, warrants or rights of any kind to acquire any of its
membership interests or equity interests of any class, (ii) any debt
with voting rights or (iii) any debt or equity securities convertible
into or exchangeable for, or any rights, warrants, calls,
subscriptions, or options to acquire, any such membership interests,
debt with voting rights or convertible securities;
33
<PAGE>
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business in a manner consistent with past customs
and practices or (B) borrowings to refinance existing indebtedness on
commercially reasonable terms, (ii) redeem, purchase, acquire or offer
to purchase or acquire any shares of its capital stock or equity
interests or any options, warrants or rights to acquire any of its
capital stock or equity interests or any security convertible into or
exchangeable for its capital stock or equity interests, (iii) sell,
pledge, dispose of or encumber any assets or businesses other than
dispositions in the ordinary course of business in a manner consistent
with past customs and practices (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use commercially reasonable efforts to (i) preserve intact
its business organizations and goodwill, (ii) keep available the
services of its present officers and key employees, and (iii) preserve
the goodwill and business relationships with clients and others having
business relationships with it and not engage in any action, directly
or indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of CenterPoint to report operational matters of
materiality and the general status of ongoing operations;
(g) except as contemplated by Schedule 4.9, not (i) increase in
any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees,
partners, members or owners, except in the ordinary course of
business in a manner consistent with past customs and practices of the
Seller, the Company or any Company Subsidiary, as applicable, (ii) pay
or agree to pay any additional pension, retirement allowance or other
employee benefit under any Employee Plan to any such Person, whether
past or present, (iii) enter into any new employment, severance,
consulting, or other compensation agreement with any of its existing
employees, partners, members or owners, (iv) amend or enter into a new
Employee Plan (except as required by Law) or amend or enter into a new
collective bargaining agreement, or (v) engage in any new Affiliate
Transaction;
(h) comply in all material respects with all applicable Laws;
(i) not make any material investment in, directly or indirectly,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other
34
<PAGE>
manner, any businesses or any Person or division thereof or
otherwise acquire or agree to acquire any assets in each case which
are material to it other than in the ordinary course of business in
a manner consistent with past customs and practices;
(j) other than as set forth on Schedule 7.5, not sell, lease,
------------
license, encumber or otherwise dispose of, or agree to sell, lease,
license, encumber or otherwise dispose of, any of its assets other
than in the ordinary course of business, consistent with past
customs and practices;
(k) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts
and against such risks and losses in a manner consistent with past
customs and practices in all material respects; and
(l) collect and bill receivables in the ordinary and usual
course and consistent with past custom and practices.
7.1.2 Prior to the Closing the Members shall have (a) amended its
organizational documents in form and substance satisfactory to CenterPoint and
its counsel for the purpose of conducting Attestation Practice after the Closing
("ATTEST ENTITY") and (b) used its diligent efforts to have secured, or have
caused the Attest Entity to have secured, all licenses, permits, approvals and
authorizations necessary to conduct the Attestation Practice in accordance with
applicable laws and regulations.
7.1.3 Notwithstanding the fact that such action might otherwise be
permitted pursuant to this Article, none of the Seller, the Members or the
Company shall take, or permit any Company Subsidiary to take, any action that
would or is reasonably likely to result in any of the representations or
warranties of the Members or the Seller set forth in this Agreement being untrue
or in any of the conditions to the consummation of the transactions contemplated
hereunder set forth in Article X (other than Section 10.1(i)) not being
---------
satisfied.
7.1.4 Prior to the Closing, the Seller and/or the Members, as applicable,
shall terminate, without any liability to the Company or the Company
Subsidiaries, all agreements relating to the voting of the Company's membership
interests, and all agreements and obligations of the Company and the Company
Subsidiaries relating to borrowed money and/or involving payments to or for the
benefit of a member or former member of the Company, or an Affiliate or family
member of a member or former member of the Company, including without limitation
those set forth on Schedule 7.1.4, but excluding (A) debt reflected on Schedule
-------------- --------
2.1 as Debt Assumed By CenterPoint, (B) items reflected on Schedule 2.5, (C) to
- --- ------------
the extent such agreements and obligations result in Indirect Costs under the
Incentive Compensation Agreement, (D) that certain lease between the Seller and
S&S Realty dated on or about the Closing Date, and (E) items approved by
CenterPoint in writing.
35
<PAGE>
VII.2 No-Shop.
-------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, the Company, the Seller and the Members
shall (i) not (and each of Seller and the Company shall use its diligent
efforts to cause the Company Subsidiaries and any officer, director or
employee of, or any attorney, accountant, investment banker, financial
advisor or other agent retained by the Company, the Seller or any Company
Subsidiary not to), initiate, solicit, negotiate, encourage, or provide
non-public or confidential information to facilitate, any proposal or offer
to acquire all or any substantial part of the business and properties of
the Seller, the Company or any Company Subsidiary, or any equity ownership
interests of the Seller, the Company or any Company Subsidiary, whether by
merger, purchase of assets or otherwise, whether for cash, securities or
any other consideration or combination thereof, or enter into any joint
venture or partnership or similar arrangement, and (ii) promptly advise
CenterPoint of the terms of any communications the Seller, the Company or
the Members may receive or become aware of relating to any bid for part or
all of the Seller, the Company or any Company Subsidiary.
(b) Each of the Seller, the Company and the Members (i) acknowledge
that a breach of any of their covenants contained in this Section 7.2 will
-----------
result in irreparable harm to CenterPoint which will not be compensable in
money damages; and (ii) agree that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the other party for a breach of such covenant.
VII.3 Schedules. Each party hereto agrees that with respect to the
---------
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing promptly to
supplement or amend and deliver to the other parties all the schedules to this
Agreement (the "1 SCHEDULES") to correct any matter which would constitute a
breach of any such party's representations and warranties herein; provided,
--------
however, that no amendment or supplement to a Schedule that constitutes or
- -------
reflects a Company Material Adverse Effect or affects Schedule 4.2, Schedule 4.4
------------ ------------
or Schedule 8.8 may be made unless CenterPoint and a majority of the Founding
------------
Companies consent to such amendment or supplement. No amendment of or
supplement to a Schedule shall be made later than three (3) business days prior
to the anticipated effectiveness of the Form S-1. For all purposes of this
Agreement, including, without limitation, for purposes of determining whether
the conditions set forth in Sections 10.2 and 10.3 have been fulfilled, the
------------- ----
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 7.3. In the event that (i) one of the other Founding
-----------
Companies seeks to amend or supplement a Schedule pursuant to Section 7.3 of one
-----------
of the Other Agreements, (ii) such amendment or supplement constitutes or
reflects a Company Material Adverse Effect (as defined in such Other Agreement)
or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8 of such Other Agreement,
------------ ------------ ------------
and (iii) CenterPoint and a majority of the Founding
36
<PAGE>
Companies consent to such amendment or supplement, but Seller or the Members do
not, Seller or a majority of the Members may terminate this Agreement at any
time prior to the Closing Date. In the event that (i) Seller or the Members seek
to amend or supplement a Schedule pursuant to this Section 7.3, (ii) such
-----------
amendment or supplement constitutes or reflects a Company Material Adverse
Effect or affects Schedule 4.2, Schedule 4.4 or Schedule 8.8, and (iii)
------------- ------------ -----------
CenterPoint and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated.
No party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section 7.3,
-----------
unless this Agreement is so terminated in connection with an amendment of or
supplement to a Schedule relating to Seller's, the Company's or any Member's
breach of a representation or warranty as of the date of this Agreement in which
case the Seller or the Company shall pay to CenterPoint, as CenterPoint's
exclusive remedy (notwithstanding anything to the contrary) and as liquidated
damages, and not as a penalty, an amount equal to $2,000,000 (the "LIQUIDATED
DAMAGES AMOUNT"). The Seller and the Members agree that in the case of such
termination CenterPoint and the Founding Companies (excluding the Seller) will
sustain immediate and irreparable economic harm and loss of goodwill and that
actual losses suffered by such parties will be difficult, if not impossible, to
ascertain, but the Liquidated Damages Amount set forth herein is reasonable and
has been arrived at after a good faith effort to estimate such losses. Payment
of the Liquidated Damages Amount shall be made in cash to CenterPoint within
thirty (30) days of a termination pursuant to this Section 7.3 in connection
-----------
with an amendment of or supplement to a Schedule relating to a breach of a
representation or warranty as of the date of this Agreement.
VII.4 Company Member Meeting; Seller Member Meeting. The Seller shall take,
---------------------------------------------
and shall cause the Company to take, all action in accordance with applicable
Laws and its respective Organizational Documents necessary to duly call, give
notice of, convene and hold a meeting of the Company's members and the Seller's
members to be held on the earliest practicable date determined in consultation
with CenterPoint or consider and vote upon approval of the Merger, this
Agreement and the transactions contemplated hereby. The Seller shall solicit,
and the Seller shall cause the Company to solicit, the approval of the Merger,
this Agreement and the transactions contemplated hereby by the Company's members
and the Seller's members, respectively, and each of the Company's Managers and
the Seller's Managers shall recommend approval of the Merger, this Agreement and
the transactions contemplated hereby by the Company's members and the Seller's
members.
VII.5 Asset Transfer. Prior to the Closing, in addition to those actions
--------------
specified in Section 7.1.2 to be taken, the Members and the Seller shall (i)
-------------
cause Seller to form Newco pursuant to Organizational Documents in form and
substance acceptable to CenterPoint, and (ii) cause Seller to complete the Asset
Transfer to Newco (including, without limitation, obtaining any necessary third
party consents to such Asset Transfer) pursuant to conveyance documents in form
and substance acceptable to CenterPoint, except that those liabilities and/or
assets set forth on
37
<PAGE>
Schedule 7.5 attached hereto (the "RETAINED LIABILITIES" and the "RETAINED
- ------------
ASSETS", respectively) shall not be transferred to Newco. Notwithstanding
anything to the contrary contained herein or any related agreement, Newco will
not assume, agree to pay, perform or discharge or in any way be responsible for
any debts, liabilities, or obligations of Seller or any Member of any kind or
nature whatsoever set forth on Schedule 7.5 as a Retained Liability or relating
------------
to the Retained Assets.
ARTICLE VII
ADDITIONAL AGREEMENTS
VIII.1 Access to Information.
---------------------
VIII.1.1 The Seller shall and shall cause the Company and the Company
Subsidiaries to afford to CenterPoint and its accountants, counsel, financial
advisors and other representatives, including without limitation the
underwriters engaged in connection with the IPO (each an "UNDERWRITER" and
collectively, the "UNDERWRITERS") and their counsel (collectively, the
"CENTERPOINT REPRESENTATIVES"), and to the other Founding Companies and their
accountants, counsel, financial advisors and other representatives, and
CenterPoint shall afford to the Members, Seller and the Company and their
accountants, counsel, financial advisors and other representatives (the "SELLER
REPRESENTATIVES"), upon reasonable notice, full access during normal business
hours throughout the period prior to the Closing Date to all of its respective
properties, books, contracts, commitments and records (including, but not
limited to, financial statements and Tax Returns) and, during such period, shall
furnish promptly to one another all due diligence information requested by the
other party. CenterPoint shall hold and shall use its best efforts to cause the
CenterPoint Representatives to hold, and the Members, Seller and the Company
shall hold and shall use their best efforts to cause the Seller Representatives
to hold, in strict confidence all non-public information furnished to it in
connection with the transactions contemplated by this Agreement, except that
each of CenterPoint, the Members, Seller and the Company may disclose any
information that it is required by law or judicial or administrative order to
disclose. In addition, CenterPoint will cause each of the other Founding
Companies and their members or stockholders, as applicable, to enter into a
provision similar to this Section 8.1 requiring each such Founding Company to
-----------
keep confidential any information obtained by such Founding Company in
connection with the transactions contemplated by this Agreement.
VIII.1.2 In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly return to the disclosing party
all non-public written material provided pursuant to this Section 8.1 or
-----------
pursuant to the Other Agreements and shall not retain any copies, extracts
or other reproductions of such written material. In the event of such
termination, all documents, memoranda, notes and other writings prepared by
CenterPoint or the Seller based on the information in such material shall
be destroyed
38
<PAGE>
(and CenterPoint and the Seller shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy
such documents, memoranda and notes), and such destruction (and reasonable
best efforts) shall be certified in writing by an authorized officer
supervising such destruction.
VIII.2 Registration Statements.
-----------------------
VIII.2.1 Subject to the reasonable discretion of CenterPoint as
advised by the lead Underwriter, CenterPoint shall file with the SEC as
soon as is reasonably practicable after the date hereof the Registration
Statements and shall use all reasonable efforts to have the Registration
Statements declared effective by the SEC as promptly as practicable.
CenterPoint shall also take any action required to be taken under
applicable state "blue sky" or securities laws in connection with the
issuance of CenterPoint Common Stock. CenterPoint, the Seller and the
Members shall promptly furnish to each other all information, and take such
other actions, as may reasonably be requested in connection with making
such filings. All information provided and to be provided by CenterPoint,
the Seller and the Members, respectively, for use in the Registration
Statements shall be true and correct in all material respects without
omission of any material fact which is required to make such information
not false or misleading as of the date thereof and in light of the
circumstances under which given or made. The Seller and the Members agree
promptly to advise CenterPoint if at any time during the period in which a
prospectus relating to the offering or the Merger is required to be
delivered under the Securities Act, any information contained in the
prospectus concerning the Company, the Seller, the Company Subsidiaries or
the Members becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy or remedy such
incompletion.
VIII.2.2 CenterPoint agrees that it will provide to the Seller and
its counsel copies of drafts of the Registration Statements (and any
amendments thereto) containing material changes to the information therein
as they are prepared and will not (i) file with the SEC, (ii) request the
acceleration of the effectiveness of or (iii) circulate any prospectus
forming a part of, the Registration Statements (or any amendment thereto)
unless the Seller and its counsel (x) have had at least two days to review
the revised information contained therein (which changes shall be
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Seller's counsel) and
(y) have not objected to the substance of the information contained
therein. Any objections posed by the Seller or its counsel shall be in
writing and state with specificity the material in question, the reason for
the objection, and the Seller's proposed alternative. If the objection is
founded upon a rule promulgated under the Securities Act, the objection
shall cite the rule. Notwithstanding the foregoing, during the five (5)
business days immediately preceding the date scheduled for the filing of
the Registration Statements and any amendment thereto, the Seller and its
counsel shall be obligated to respond to proposed changes electronically
transmitted to them within two (2) hours from the time the proposed
39
<PAGE>
changes (in the case of the initial filing of the Registration Statements,
from the last circulated draft of the Registration Statements; and, in the
case of any subsequent filing of the Registration Statements or any
amendment thereof, from the most recently filed Registration Statements or
amendment thereof) are transmitted to the Seller's counsel; provided, that,
-------- ----
CenterPoint has provided to the Seller or its counsel reasonable advance
notice of such proposed changes; provided, further, that such changes are
-------- -------
highlighted by computer generated marks indicating the additions and
deletions made from the prior draft reviewed by the Seller's counsel.
VIII.2.3 CenterPoint will advise each Members' Representative of the
effectiveness of the Registration Statements, advise each Members'
Representatives of the entry of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceeding for that
purpose, and, if such stop order shall be entered, use its best efforts
promptly to obtain the lifting or removal thereof. Upon the written
request of any Member, CenterPoint will furnish to such Member a reasonable
number of copies of the final prospectus associated with the IPO.
VIII.3 Expenses and Fees. CenterPoint shall pay the fees and expenses of
-----------------
the independent public accountants and legal counsel to CenterPoint and all
filing, printing and other reasonable, documented fees and expenses associated
with the IPO and Form S-4. Neither Seller, the Company nor the Members will be
liable for any portion of the above expenses in the event the IPO is not
completed. CenterPoint shall also pay the underwriting discounts and commissions
payable in connection with the sale of CenterPoint Common Stock in the IPO. All
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
VIII.4 Agreement to Cooperate. Subject to the terms and conditions herein
----------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
VIII.5 Public Statements. Except as may be required by law, no party hereto
-----------------
nor any Affiliate of any party hereto shall issue any press release or any
written public statement with respect to this Agreement or the transactions
contemplated by this Agreement or the Other Agreements without the prior written
consent of CenterPoint and the Seller.
40
<PAGE>
VIII.6 Registration Rights.
-------------------
VIII.6.1 At any time after the second anniversary but prior to the
fourth anniversary of the Closing Date, whenever CenterPoint proposes to
register any CenterPoint Common Stock for its own account or the account of
others under the Securities Act for a public offering for cash other than a
registration relating to employee benefit plans or acquisitions,
CenterPoint will give Seller and the Member Representative prompt written
notice of its intent to do so. Promptly after receipt of such notice,
Seller and the Member Representative shall provide written notice to
CenterPoint of all Members (and their respective current mailing address)
that beneficially own shares of CenterPoint Common Stock. Thereafter, upon
the written request of Seller or any of the Members given within thirty
(30) days after receipt of such notice, CenterPoint will use its best
efforts to cause to be included in such registration all of the CenterPoint
Common Stock which Seller or any such Member requests, provided that
CenterPoint shall have the right to reduce the number of shares included in
such registration, if CenterPoint is advised in writing in good faith by
any managing underwriter of the securities being offered pursuant to any
registration statement under this Section 8.6 that the number of shares to
-----------
be sold by Persons other than CenterPoint is greater than the number of
such shares which can be offered without adversely affecting the offering;
in such case, CenterPoint may reduce the number of shares offered for the
accounts of such Persons to a number deemed satisfactory by such managing
underwriter. Any such reduction shall occur first by eliminating from such
registration any shares held by Persons other than Persons holding
CenterPoint Common Stock directly or indirectly immediately following the
Closing and then reducing pro rata (based upon the number of shares
requested to be registered) the number of shares offered for the account of
such Person. CenterPoint shall not be obligated to register any shares of
CenterPoint Common Stock held by Seller or any Member at any time when such
shares are not then transferable in accordance with Section 12.2.
------------
Registration rights under this Section 8.6 may be transferred in whole or
-----------
in part in connection with the transfer of any shares of CenterPoint Common
Stock received pursuant to this Agreement other than to a transferee of the
kind described in clause (x) of Section 12.2 hereof.
------------
VIII.6.2 Except for underwriting commissions and discounts, all
expenses incurred in connection with the registrations under this Section
-------
8.6 (including all registration, filing, qualification, legal, printer and
---
accounting fees) shall be paid by CenterPoint. In connection with
registrations under this Section 8.6, CenterPoint shall
-----------
(a) use its best efforts to prepare and file with the SEC as
soon as reasonably practicable, a registration statement with
respect to the CenterPoint Common Stock (and such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be required by applicable law) and
use its best efforts to cause such registration to promptly become
and remain effective for a period of at least one hundred twenty
(120) days
41
<PAGE>
(or such shorter period during which holders shall have sold all
CenterPoint Common Stock which they requested to be registered);
(b) upon the written request of Seller or a Member whose
CenterPoint Common Stock is to be covered by any such registrations,
furnish to such Seller or Member a reasonable number of copies of the
prospectus covering the offering and sale by the Seller or Member of the
shares to be covered thereby;
(c) use its best efforts to register and qualify the CenterPoint
Common Stock covered by such registration statement under applicable state
securities laws as the holders shall reasonably request for the
distribution for the CenterPoint Common Stock;
(d) take such other actions as are reasonable and necessary to
comply with the requirements of the 1933 Act and the regulations
thereunder;
(e) advise each Member and/or Seller whose CenterPoint Common
Stock is to be covered by such registration of the effectiveness of such
registration statement, advise each such Member and Seller of the entry of
any stop order suspending the effectiveness of such registration statement
or of the initiation of any proceeding for that purpose, and, if such stop
order shall be entered, use its best efforts promptly to obtain the lifting
or removal thereof; and
(f) at any time when a prospectus relating to any CenterPoint
Common Stock is required to be delivered under the 1933 Act, notify each
Member and Seller whose CenterPoint Common Stock is to be covered by such
registration, of the happening of any event as a result of which the
registration statement, the prospectus or any document incorporated therein
by reference includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements made therein not misleading and, at the request of such
Member or Seller, prepare and furnish to such Member or Seller a post-
effective amendment or supplement to the registration statement or the
related prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading.
VIII.6.3 In connection with each registration pursuant to this Section
-------
8.6 covering an underwritten registration public offering, CenterPoint and each
- ---
participating holder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an
42
<PAGE>
arrangement between such managing underwriters and companies of CenterPoint's
size and investment stature, including indemnification.
VIII.6.4 In consideration of the granting to Seller and the Members of
the registration rights under this Section 8.6, Seller and the Members
-----------
agree, and agree to enter into an agreement with the underwriters in
connection with an underwritten registration to the effect, that it/they
will not sell, transfer or otherwise dispose of, including, without
limitation, through put or short sale arrangements, shares of CenterPoint
Common Stock in the ten (10) days prior to the effectiveness of any
registration of CenterPoint Common Stock for sale to the public and for up
to ninety (90) days following the effectiveness of such registration,
provided that all directors, executive officers and holders of more than
five percent (5%) of the outstanding CenterPoint Common Stock agree to the
same restrictions; and further provided that, with respect to the first
public offering of shares of the CenterPoint Common Stock within three (3)
years following the IPO, Seller and the Members shall have been afforded a
meaningful opportunity to include shares in such registration after any
reduction by reason of underwriters' written advice.
VIII.7 CenterPoint Covenants. After the date hereof and prior to the
---------------------
Closing Date or earlier termination of this Agreement in accordance with its
terms, CenterPoint shall comply in all material respects with all applicable
Laws. CenterPoint shall not take any action that would or is reasonably likely
to result in any of the representations or warranties of CenterPoint set forth
in this Agreement being untrue or in any of the conditions to the consummation
of the transactions contemplated hereunder set forth in Article X not being
---------
satisfied.
VIII.8 Release of Guarantees. CenterPoint shall use all commercially
---------------------
reasonable efforts and good faith to have the Members released from any and all
guarantees on any indebtedness and leases that they personally guaranteed for
the benefit of the Company as set forth on Schedule 8.8, with all such
------------
guarantees on indebtedness and leases being assumed by CenterPoint, if necessary
to achieve such releases. If any guaranteed indebtedness is repaid in full with
proceeds from the IPO and the Members' guarantees thereafter shall have no
further force or effect, then CenterPoint shall not be obligated to use any
efforts to obtain a release of such guarantee. In the event that CenterPoint
cannot obtain such releases from the lenders of any such guaranteed indebtedness
or lessors of any guaranteed leases, CenterPoint agrees to indemnify, defend and
hold harmless the Members against any and all claims made by lenders or
landlords under such guarantees.
VIII.9 Lock-Up Agreement. Seller and each Member agrees, and agrees to
-----------------
enter into an agreement with the Underwriter on or prior to the date on which
preliminary Prospectuses are delivered to the effect that, Seller and the Member
will not offer, sell, contract to sell or otherwise dispose of any shares of
CenterPoint Common Stock, or any securities convertible into or exercisable or
exchangeable for CenterPoint Common Stock, for a period of 180 days after the
date of the final Prospectus of the IPO without the prior written consent of the
Underwriter except
43
<PAGE>
for shares of CenterPoint Common Stock disposed of as bona fide gifts, subject
to any remaining portion of the 180-day period applying to any shares so
disposed of.
VIII.10 Preparation and Filing of Tax Returns.
-------------------------------------
VIII.10.1 The Company shall be responsible for causing the timely
filing of the final pre-Closing Returns for the Company and the Company
Subsidiaries; provided, however, that CenterPoint and its advisors shall
have the right to review and approve such returns prior to filing, which
approval shall not be unreasonably withheld. CenterPoint shall, and shall
cause its Affiliates to, provide to the Company such cooperation and
information reasonably requested in filing any return, amended return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
The Company shall bear all costs of filing such returns.
VIII.10.2. Each of Seller, CenterPoint and the Members shall (and the
Seller and CenterPoint, as applicable, shall cause the Company to) comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and shall treat the transaction as
subject to the provisions of Section 351 of the Code.
VIII.11 Maintenance of Insurance. The Seller covenants and agrees that
------------------------
all insurance policies listed, or required to be listed, on Schedule 4.20 will
be maintained in full force and effect through the Closing Date.
VIII.12 Administration. After the Closing, at the request of Seller,
--------------
CenterPoint shall, directly or through one or more of its subsidiaries,
administer and manage the collection of amounts referred to on Schedule 7.5
------------
using reasonable care and in accordance with the Company's policies in effect at
Closing
ARTICLE IX
INDEMNIFICATION
IX.1 Indemnification by the Members. Subject to Sections 9.7 and 9.8, the
------------------------------ ------------ ---
Members jointly and severally agree to indemnify, defend and save the
CenterPoint Indemnified Parties (hereinafter defined), forever harmless from and
against, and to promptly pay to a CenterPoint Indemnified Party or reimburse a
CenterPoint Indemnified Party for, any and all Losses (hereinafter defined)
sustained or incurred by any CenterPoint Indemnified Party resulting from,
arising out of, in connection with or otherwise by virtue of:
44
<PAGE>
(a) any misrepresentation or breach of a representation or warranty
made in Article V herein or in any certificate, schedule, document, exhibit
---------
or other instrument delivered hereunder by any Member or any action, demand
or claim by any third party against or affecting any CenterPoint
Indemnified Party which, if successful, would give rise to a breach of any
such representation or warranty, except that the obligation of the Members
to indemnify, defend and save harmless for any misrepresentation or breach
of representation or warranty made in Section 5.1 hereof or in any
-----------
certificate, schedule, document, exhibit or other instrument delivered in
respect thereof shall not be joint and several, but such obligation shall
be several only and limited to the several Member(s) making such
misrepresentation or breach;
(b) any failure by Seller or any Member to observe or perform any of
their covenants and agreements set forth herein related to the period prior
to the Closing except that the obligation of the Members to indemnify,
defend and save harmless for any failure to observe or perform any covenant
or agreement shall not be joint and several, but such obligation shall be
several only and limited to the several Member(s) failing to observe or
perform such covenant or agreement, except that the obligations of the
Members to indemnify, defend and save harmless for any breach of a covenant
or agreement by a Member shall not be joint and several, but such
obligation shall be several only and limited to the several Member(s)
committing such breach;
(c) any liability under the 1933 Act, the 1934 Act or other federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Seller or the Company, contained in any preliminary
prospectus relating to the IPO, the Registration Statements or any proxy
statement or prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission to state
therein a material fact relating to Seller or the Company required to be
stated therein or necessary to make the statements therein not misleading,
and not provided to CenterPoint or its counsel by Seller or the Company;
provided, however, that such indemnity shall not inure to the benefit of
-------- -------
any CenterPoint Indemnified Party to the extent that such untrue statement
(or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and (i) Seller or the
Company provided, in writing, corrected information to CenterPoint or its
counsel for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Seller, the Company and their counsel with the information
required to be provided pursuant to Section 8.2.2, and such information is
-------------
the basis for the untrue statement or omission (or alleged untrue statement
or omission) giving rise to the liability under this Section 9.1(c);
--------------
(d) notwithstanding anything contained in this Agreement to the
contrary, (i) any arrangements made by or on behalf of the Members, Seller
or the Company in
45
<PAGE>
connection with the Acquisition or the transactions contemplated by this
Agreement with respect to brokerage, finders and other fees or commissions,
(ii) disallowance of any tax deduction to CenterPoint or the Company with
respect to any item listed on Schedule 2.5 and considered in determining
Net Working Capital, (iii) any Retained Liabilities, and (iv) any Loss
relating to, resulting from, arising out of or otherwise by virtue of any
matter which is or should be listed on Schedule 4.10 or 7.1.4 hereto.
-------------
As used herein, the "CENTERPOINT INDEMNIFIED PARTIES" shall mean
CenterPoint, its Subsidiaries and Affiliates, the Founding Companies other than
the Company (the "OTHER FOUNDING COMPANIES"), and their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Person dealing with any such plans; provided, however,
-------- -------
that the Other Founding Companies, and each of their respective officers,
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall cease to be a
"CENTERPOINT INDEMNIFIED PARTY" for all purposes hereunder as of the Closing,
and thereafter such Persons shall have no further rights and remedies under this
Article IX (except to the extent a Person is an officer, director, employee or
- ----------
agent of CenterPoint as a result of the consummation of the transactions
contemplated under the Other Agreements); provided, further that the
-------- -------
Subsidiaries of CenterPoint shall include the Company, the Company Subsidiaries
and the other Founding Companies from and after the Closing. Accordingly, for
purposes of this Article IX and subject to the limitations set forth in this
----------
Article IX, the Other Founding Companies, and each of their respective officers,
- ----------
directors, employees, agents, employee plans and plan fiduciaries, plan
administrators or other Persons dealing with any such plans, shall be deemed to
be third party beneficiaries of this Agreement.
As used in this Agreement, "LOSSES" shall mean the following: (i) in the
event the Agreement is terminated pursuant to Section 11.1 and the Closing does
------------
not occur, any and all out-of-pocket costs and expenses (including reasonable
fees and expenses of the attorneys, accountants and other experts), or (ii)
subsequent to the Closing, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, interests, fines, penalties, actual or punitive damages or
costs or expenses of any and all investigations, proceedings, judgments, orders,
environmental analyses, remediations, settlements and compromises (including
reasonable fees and expenses of the attorneys, accountants and other experts).
IX.2 Indemnification by CenterPoint. CenterPoint agrees to indemnify,
------------------------------
defend and save each of the Members and their respective Affiliates, and their
Affiliates respective officers, directors, employees and agents (each, a "MEMBER
INDEMNIFIED PARTY") forever harmless from and against, and to promptly pay to a
Member Indemnified Party or reimburse a Member Indemnified Party for, any and
all Losses sustained or incurred by any Member Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any of the following:
46
<PAGE>
(a) any misrepresentation or breach of a representation or warranty
made herein or in any document or other instrument delivered hereunder by
CenterPoint or any action, demand or claim by any third party against or
affecting any Member Indemnified Party which, if successful, would give
rise to a breach of any such representation or warranty;
(b) any failure by CenterPoint to observe or perform any of its
covenants and agreements set forth herein or in any document or other
instrument delivered hereunder;
(c) any liability under the 1933 Act, the 1934 Act or other Federal or
state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to CenterPoint or any of the Other Founding Companies
contained in any preliminary prospectus relating to the IPO, the
Registration Statements or any proxy statement or prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material
fact relating to CenterPoint or any of the Other Founding Companies
required to be stated therein or necessary to make the statements therein
not misleading; and
(d) any liability under the 1933 Act, the 1934 Act, or other federal
or state law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact relating to Seller, the Company or the Members, contained in any
preliminary prospectus relating to the IPO, the Registration Statements or
proxy statement or any prospectus forming a part thereof, or any amendment
thereof or supplement thereto, or arising out of or based upon any omission
to state therein a material fact relating to Seller, the Company or the
Members required to be stated therein or necessary to make the statements
therein not misleading, to the extent such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred
in, any preliminary prospectus and (i) Seller, the Company or Members
provided, in writing, corrected information to CenterPoint or its counsel
for inclusion in the final prospectus prior to distributing such
prospectus, and such information was not so included, or (ii) CenterPoint
did not provide Seller, the Company and their counsel with the information
required to be provided pursuant to Section 8.2.2, and such information is
-------------
the basis for the untrue statement or omission (or alleged untrue statement
or omission) giving rise to the liability under this Section 9.2(d).
-------------
IX.3 Indemnification Procedure for Third Party Claims.
------------------------------------------------
47
<PAGE>
IX.3.1 In the event that subsequent to the Closing any Person
entitled to indemnification under this Agreement (an "INDEMNIFIED PARTY")
receives notice of the assertion of any claim, issuance of any order or the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an Affiliate of a party, including, without
limitation, any domestic or foreign court or Governmental Authority (a
"THIRD PARTY CLAIM"), against such Indemnified Party, against which a party
to this Agreement is required to provide indemnification under this
Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice thereof together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty
(30) days after learning of such claim (or within such shorter time as may
be necessary, in the Indemnified Party's reasonable judgment, to give the
Indemnifying Party a reasonable opportunity to respond to and defend such
claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "DEFENSE NOTICE") within ten days (10) after
receipt from the Indemnified Party of notice of such claim, to conduct at
its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the
-------- -------
Indemnified Party shall have the right to approve the defense counsel
selected by the Indemnifying Party, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within ten (10) days after
the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's approval.
IX.3.2 In the event that the Indemnifying Party shall fail to timely
give the Defense Notice, it shall be deemed to have elected not to conduct
the defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith at the cost and
expense of the Indemnifying Party and the Indemnifying Party shall
reimburse the Indemnified Party for all costs, expenses and settlement
amounts actually paid in connection therewith; provided, however, that
-------- -------
under no circumstances shall the Indemnified Party compromise or settle any
Third Party Claim without the prior written consent of the Indemnifying
Party (which, in the case of the Members, may be granted by the Member
Representative (as defined in Section 9.13)), which consent shall not be
------------
unreasonably withheld or delayed.
IX.3.3 In the event that the Indemnifying Party does elect to conduct
the defense of the subject claim, the Indemnified Party will cooperate with
and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing, provided that the Indemnified Party shall have the right to
compromise and settle the claim only with the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim
48
<PAGE>
or cease to defend against such claim, if pursuant to or as a result of
such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or (iii) such
settlement includes a written admission of guilt. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
(A) to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party or (B) in a proceeding to
which the Indemnifying Party is also a party and the Indemnified Party
determines in good faith that joint representation would be inappropriate
(and in each case the cost of such defense shall constitute an amount for
which the Indemnified Party is entitled to indemnification hereunder). If
an offer is made to settle a Third Party Claim which all parties to such
Third Party Claim (including the Indemnifying Party) are prepared to settle
and which offer the Indemnifying Party is permitted to settle under this
Section 9.3.3 only upon the prior written consent of the Indemnified Party,
-------------
the Indemnifying Party will give prompt written notice to the Indemnified
Party to that effect. If the Indemnified Party fails to consent to such
firm offer within (30) calendar days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim will not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Indemnified Party through
the end of such (30) day period.
IX.3.4 Any judgment entered, order issued or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
IX.4 Direct Claims. It is the intent of the parties hereto that all direct
-------------
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to and benefit from the terms of this Article IX.
----------
Any claim under this Article IX by an Indemnified Party for indemnification
----------
other than indemnification against a Third Party Claim, (a "DIRECT CLAIM") will
be asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, together with a statement of any available information regarding such
claim, and the Indemnifying Party will have a period of thirty (30) calendar
days within which to satisfy such Direct Claim. If the Indemnifying Party does
not so respond within such thirty (30) calendar day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party under this Article IX.
----------
49
<PAGE>
IX.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
-----------------------------
give timely, complete or accurate notice as provided in Section 9.3 or 9.4 will
----------- ---
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under any applicable
insurance coverage, or deprived of its right to assert any claim because of
expiration of the applicable statute of limitations, or was otherwise directly
and materially damaged as a result of such failure to give timely notice.
IX.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
-----------------
reduced by receipt of payment (i) under insurance policies (net of any
retroactive adjustment or other reimbursement to the insurer in respect of such
payment), (ii) from third parties not affiliated with the Indemnified Party, or
(iii) the amount of any tax benefit to the CenterPoint Indemnified Parties such
payments and/or tax benefits (net of the expenses of the recovery thereof) shall
be credited against such Loss. The pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and the Indemnified Party shall not
have any obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such Loss. The Indemnified Party shall
cooperate, at no expense to the Indemnified Party, in any reasonable efforts of
the Indemnifying Party in pursuing such payments, including expressly
acknowledging the Indemnifying Party's right and standing to pursue such
payments, and the Indemnified Party will use its customary efforts short of
litigating with an insurer or third party to collect amounts due from such
insurer or third party. If any insurance or third party reimbursement is
obtained subsequent to payment by an Indemnifying Party in respect of a Loss,
such reimbursement (to the extent of amounts theretofore paid by the
Indemnifying Party on account of such Loss) shall be promptly paid over to the
Indemnifying Party.
IX.7 Limitation on Indemnities.
-------------------------
IX.7.1 Threshold for the Members. With respect to representations and
-------------------------
warranties, the Members shall not have any liability pursuant to Section
-------
9.1(a) hereof unless and until and only to the extent that the aggregate
-----
amount of Losses accrued pursuant to Section 9.1(a) exceeds 1% of aggregate
--------------
Basic Purchase Consideration; provided, however, that this threshold shall
-------- -------
not apply to Losses arising out of breaches of representations or
warranties contained in Sections 5.1.1, 5.1.2, 5.2 and 5.1.8 as it relates
-------------- ----- --- -----
to the representation and warranty of the Seller set forth in Section 4.16,
------------
and the Members shall indemnify the CenterPoint Indemnified Parties for any
Losses accruing thereunder in accordance with this Article IX without
----------
regard to such threshold.
IX.7.2 Threshold for CenterPoint. With respect to representations and
-------------------------
warranties, CenterPoint shall not have any liability pursuant to Section
-------
9.2(a) hereof unless and until and only to the extent that the aggregate
------
amount of the Losses accrued pursuant to Section 9.2(a) exceeds 1% of
-------------
aggregate Basic Purchase Consideration; provided, however,
-------- -------
50
<PAGE>
that this threshold shall not apply to Losses arising out of the breach of
representations or warranties contained in Section 6.2 and CenterPoint
-----------
shall indemnify the Member Indemnified Parties from any Losses occurring
thereunder in accordance with this Article IX without regard to such
----------
threshold.
IX.7.3 Limitations on Claims Against the Members. The liability of
-----------------------------------------
all Members for misrepresentations and breaches of representations and
warranties under Section 9.1(a) shall be limited to 100% of aggregate Basic
--------------
Purchase Consideration in the aggregate; provided, however, that such
-------- -------
liability for a Member shall be limited to three times the aggregate Basic
Purchase Consideration received, directly or indirectly, by such Member;
provided further, however, that such limitations shall not apply to Losses
-------- ------- -------
arising out of breaches of representations or warranties contained in
Sections 5.1.1, 5.1.2, 5.2, and 5.1.8 as it relates to the representation
-------------- ----- --- -----
and warranty of the Seller set forth in Section 4.16, and any Losses
------------
accruing thereunder shall not count towards such limitations.
IX.7.4 Limitation on Claims Against CenterPoint. The liability of
----------------------------------------
CenterPoint under Section 9.2(a) shall be limited to 100% of aggregate
--------------
Basic Purchase Consideration in the aggregate; provided, however, that this
-------- -------
limitation shall not apply to Losses arising out of breaches of
representations or warranties in Section 6.2 and any Losses accruing
-----------
thereunder shall not count towards such limitation.
IX.8 Survival of Representations, Warranties and Covenants of the Members
--------------------------------------------------------------------
and the Seller; Time Limits on Indemnification Obligations. Notwithstanding any
- ----------------------------------------------------------
right of CenterPoint to fully investigate the affairs of the Members, Seller,
the Company and the Business, and notwithstanding any Knowledge of facts
determined or determinable by CenterPoint pursuant to such investigation or
right of investigation, CenterPoint has the right to rely fully upon the
representations, warranties, covenants and agreements of the Members and the
Seller contained in this Agreement or in any certificate delivered pursuant to
any of the foregoing. All such representations, warranties, covenants and
agreements of the Members and the Seller shall survive the execution and
delivery of this Agreement and the Closing hereunder; provided, however, (i)
-------- -------
that the Members' obligations pursuant to Section 9.1, other than those relating
-----------
to covenants and agreements to be performed by the Members after the Closing,
shall expire one (1) year after the Closing, except with respect to obligations
arising under or relating to Section 4.16 hereof as it relates to federal,
------------
state, local and foreign income taxation, which shall survive until the earlier
of (A) the expiration of the applicable periods (including any extensions) of
the respective statutes of limitation applicable to the payment of the Taxes or
(B) the completion of the final audit and determinations by the applicable
taxing authority and final disposition of any deficiency resulting therefrom;
and (ii) solely to the extent that CenterPoint actually incurs liability under
the 1933 Act or the 1934 Act, the obligations under Sections 9.1(c) or (d) above
-------------- ---
shall survive until the expiration of any applicable statute of limitations with
respect to such claims.
IX.9 Survival of Representations, Warranties and Covenants of CenterPoint;
---------------------------------------------------------------------
Time Limits on Indemnification Obligations. All representations, warranties,
- ------------------------------------------
covenants and agreements
51
<PAGE>
of CenterPoint shall survive the execution and delivery of this Agreement and
the Closing hereunder; provided, however, that CenterPoint' obligations under
-------- -------
Section 9.2, other than those relating to covenants and agreements to be
- -----------
performed by CenterPoint after the Closing, shall expire one year after Closing,
except that, solely to the extent that the Members actually incur liability
under the 1933 Act or the 1934 Act, the obligations under Sections 9.2(c) or (d)
--------------- ---
above shall survive until the expiration of any applicable statute of
limitations with respect to such claims.
IX.10 Defense of Claims; Control of Proceedings. Notwithstanding anything
-----------------------------------------
in this Agreement to the contrary, to the extent any Loss subject to
indemnification hereunder would exceed the Indemnifying Party's indemnity
obligations under this Agreement, the Indemnified Party shall be entitled to
control the defense of such claim or management of such proceeding with respect
to such excess Loss.
IX.11 Fraud; Exclusive Remedy. The limitations set forth in this Article IX
-----------------------
shall not apply to fraud by any party. In the absence of fraud and
notwithstanding any law to the contrary and any rights that would otherwise be
available thereunder, the indemnification provisions of this Article IX set
forth the sole and exclusive remedy of the CenterPoint Indemnified Parties
following the Closing against the Members and of the Member Indemnified Parties
following the Closing against CenterPoint and its affiliates with respect to any
claim for relief resulting from, arising out of or otherwise by virtue of this
Agreement and the transactions contemplated hereby.
IX.12 Manner of Satisfying Indemnification Obligations. Subsequent to the
------------------------------------------------
Closing, the Members may satisfy their respective obligations, if any, under
this Article IX (i) by tendering to the CenterPoint Indemnified Parties cash or
shares of CenterPoint Common Stock that are then transferable in accordance with
Section 12.2, such shares to be valued at the Market Price. "MARKET PRICE"
- ------------
shall mean the average closing (last) price for a share of CenterPoint Common
Stock (as reported on the exchange or market on which such shares are then
listed or traded) for the most recent twenty (20) days that such shares have
traded ending on the date two (2) days prior to the date tendered pursuant to
clause (i) of the preceding sentence, or, if such shares are not then listed or
traded on an exchange or other market, the fair market value of such shares as
determined by an appraiser reasonably agreed to by the parties.
9.13 Members' Representative. Seller and each Member appoints Anthony P.
-----------------------
Scillia and Joseph Natarelli (the "MEMBER REPRESENTATIVE") as its agent and
representative with full power and authority to agree, contest or settle any
claim or dispute affecting any Member made under Articles II or IX and to
otherwise act on behalf of the Members in accordance with the terms of this
Agreement including, without limitation, to direct the amount and manner of the
payment of aggregate Basic Purchase Consideration; provided, that the Member
-------- ----
Representative may be removed and a successor to the Person originally serving
as the Member Representative may be designated in a writing signed by a majority
in interest of the Members and delivered to CenterPoint in accordance with
Section 15.2.
- ------------
52
<PAGE>
ARTICLE X
CLOSING CONDITIONS
X.1 Conditions to Each Party's Obligation to Effect the Acquisition. The
---------------------------------------------------------------
respective obligations of each party to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing of the following conditions:
(a) the Underwriting Agreement related to the IPO shall have been
executed and the closing of the sale of CenterPoint Common Stock to the
Underwriters pursuant thereto shall have occurred simultaneously with the
Closing hereunder;
(b) the closings of the transactions contemplated under each of the
Other Agreements shall have occurred simultaneously with the Closing
hereunder, unless terminated in accordance with Section 7.3 of the
-----------
applicable Other Agreement;
(c) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(d) no preliminary or permanent injunction or other order or decree
shall be pending before or issued by any federal or state court which seeks
to prevent or prevents the consummation of the IPO, the Acquisition or any
of the Other Acquisitions shall have been issued and remain in effect;
(e) the minimum price condition set forth on Schedule 2.1 shall have
------------
been satisfied;
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Acquisition or any of the Other Acquisitions or make
the consummation of the Acquisition or any of the Other Acquisitions
illegal;
(g) all material governmental and third party waivers, consents and
approvals required for the consummation of the Acquisition or any of the
Other Acquisitions and the transactions contemplated hereby and by the
Other Agreements (including, without limitation, any consents listed on
Schedules 4.3.2 or 4.12) shall have been obtained and be in effect;
--------------- ----
53
<PAGE>
(h) No action, suit or proceeding with respect to the Acquisition has
been filed or threatened by a third party and remains threatened or remains
pending before any court, Governmental Authority or regulatory Person;
(i) This Agreement, the Merger and the transactions contemplated
hereby shall have been approved and adopted by the Company's member and
Seller's members in the manner required by any applicable Law and the
respective Organizational Documents; and
(j) CenterPoint shall have entered into one or more credit facilities
providing for aggregate commitments of not less than $75 million.
X.2 Conditions to Obligation of the Members, Seller and the Company to
------------------------------------------------------------------
Effect the Acquisition. Unless waived by the Company, the obligation of the
- ----------------------
Members, Seller and the Company to effect the Acquisition shall be subject to
the fulfillment at or prior to the Closing of the following additional
conditions:
(a) CenterPoint, Mergersub and each of the Other Founding Companies
shall have performed in all material respects their agreements contained in
this Agreement and each Other Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of
CenterPoint contained in this Agreement and each Other Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and Seller
shall have received a certificate of the Chief Executive Officer or
President of CenterPoint to that effect;
(b) no Governmental Authority or self regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to the Seller of the Acquisition;
(c) the Seller shall have received an opinion from Katten Muchin &
Zavis, dated as of the Closing Date, containing the substantive opinions
set forth in Exhibit 10.2(c), the final form of such opinion to be in form
---------------
and substance reasonably acceptable to the Seller and Members;
(d) each of the Members shall have been afforded the opportunity to
enter into a pooled compensation agreement (the "INCENTIVE COMPENSATION
AGREEMENT") with CenterPoint substantially in the form attached hereto as
Exhibit 10.2(d);
---------------
(e) CenterPoint shall have delivered to the Seller and the Members a
certificate, dated as of a date no later than ten days prior to the Closing
Date, duly issued by the
54
<PAGE>
Delaware Secretary of State, showing that CenterPoint is in good standing;
(f) each of the Members, the members and stockholders of the other
Founding Companies who are to receive shares of CenterPoint Common Stock
pursuant to the Other Agreements, and the other stockholders of CenterPoint
other than those acquiring stock in the IPO shall have entered into an
agreement (the "STOCKHOLDERS AGREEMENT") substantially in the form
attached hereto as Exhibit 10.2(f);
---------------
(g) all conditions to the Acquisitions of the other Founding
Companies, on substantially the same terms as provided herein, shall have
been satisfied or waived by the applicable party and the Company;
(h) each of Seller and the Members shall have been afforded the
opportunity to review the executed employment agreement by and between
CenterPoint and Robert C. Basten; and
(i) the Seller shall have received an opinion of Katten Muchin &
Zavis, dated as of the Closing Date and based upon certain factual
representations and assumptions that for federal income tax purposes there
will be no gain or loss recognized with respect to the CenterPoint Common
Stock received for their Company Interests in the Merger pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended, the final
form of such opinion to be in form and substance reasonably acceptable to
the Seller and the Members.
X.3. Conditions to Obligation of CenterPoint to Effect the Acquisition.
-----------------------------------------------------------------
Unless waived by CenterPoint, the obligation of CenterPoint and Mergersub to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing of the additional following conditions:
(a) each of the Company and the Seller shall have performed in all
material respects each of their agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of the Seller contained in this Agreement
shall be true and correct in all material respects on and as of the date
made and on and as of the Closing Date as if made at and as of such date,
and CenterPoint and the Underwriters shall have received a Certificate of
the Managing Principal of the Seller to that effect;
(b) the Members shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date and the representations and warranties of the Members
contained in this Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if
made at and as of such date, and CenterPoint and the Underwriters shall
have received a Certificate of each Member to that effect;
55
<PAGE>
(c) CenterPoint and the Underwriters shall have received an opinion
from Brenner, Salzman & Wallman, counsel to the Company, the Seller and the
Members dated the Closing Date, in the form attached hereto as Exhibit
-------
10.3(c), the final form of such opinion to be in form and substance
-------
reasonably acceptable to the Underwriters and CenterPoint;
(d) the Company shall, and the Members shall have caused Attest Entity
to, execute and deliver the Separate Practice Agreement substantially in
the form attached hereto as Exhibit 10.3(d)(A) and the Services Agreement
------------------
substantially in the form attached hereto as Exhibit 10.3(d)(B);
------------------
(e) each Member shall have executed and delivered the Incentive
Compensation Agreement substantially in the form attached hereto as Exhibit
-------
10.2(d);
-------
(f) CenterPoint and the Underwriters shall have received "Comfort"
letters in customary form from the Company's independent public
accountants, dated the effective date of the Form S-1 and the Closing Date
(or such other date reasonably acceptable to CenterPoint), with respect to
certain financial statements and other financial information included in
the Form S-1 and any subsequent changes in specified balance sheet and
income statement items, including total assets, working capital, total
Members' equity, total revenues and the total and per share amounts of net
income;
(g) each of the Seller and the Company shall have delivered to
CenterPoint and the Underwriters a certificate, dated as of a date no later
than ten days prior to the Closing Date, duly issued by the appropriate
Governmental Authority in the state of organization of the Company and each
Company Subsidiary and, unless waived by CenterPoint, in each state in
which the Seller, the Company or any Company Subsidiary is authorized to do
business, showing the Seller, the Company or Company Subsidiary (as
applicable) is in good standing;
(h) no Governmental Authority or self-regulatory organization
regulating, licensing or permitting the practice of public accountancy
shall have promulgated or formally proposed any statute, rule or regulation
which, when taken together with all such promulgations, would materially
impair the value to CenterPoint of the Acquisition;
(i) the Members shall have executed the Stockholders Agreement;
(j) Seller and the Members shall have delivered to CenterPoint an
instrument in the form attached hereto as Exhibit 10.3(j), dated the
---------------
Closing Date, releasing the Company (including its subsidiaries) from any
and all claims of the Members against the Company (including its
subsidiaries) and obligations of the Company (including its subsidiaries)
to the Members and Seller;
56
<PAGE>
(k) the Members and other principals of the Seller shall have
delivered a release to CenterPoint regarding any unallocated guaranteed
allocations in form and substance satisfactory to CenterPoint including,
without limitation, that as of the Closing the amount of debt of the
Company and the Company Subsidiaries shall not exceed the amount reflected
on Schedule 2.1 as Debt Assumed by CenterPoint;
------------
(l) Seller, the Company and the Members, as applicable, shall have
terminated or have caused the termination of any voting trusts, proxies or
other agreements or understandings to which Seller, the Company or any
Member is a party or is bound with respect to any shares of capital stock
or other equity interests of the Company and shall have provided
CenterPoint evidence of such termination that is acceptable to
CenterPoint's counsel;
(m) the Company shall have adopted Amended and Restated Articles of
Organization and Operating Agreement in form and substance acceptable to
CenterPoint;
(n) the Seller shall have caused to be completed the formation of
Newco and consummation of the Asset Transfer (including receipt of any
required third-party consents) and other actions specified in Section 7.5,
-----------
and shall have presented evidence of completion of such actions in
accordance with Section 7.5;
-----------
(o) a payoff letter including a statement of per diem interest amounts
and other applicable release documents from all institutional lenders or
creditors regarding the payment in full of indebtedness of the Company at
Closing, in each case in form and substance satisfactory to CenterPoint
(including, without limitation, applicable UCC-3 termination statements);
(p) the Seller and/or the Company shall have paid in full any
indebtedness owed by Seller and/or the Company to the Members or non-Member
principals of the Seller, and shall have provided evidence of same
reasonably satisfactory to CenterPoint;
(q) the Seller shall have caused all automobile leases to which the
Seller is a party (together with all vehicle insurance policies and
maintenance agreements, if any) to be assigned in full to the individual
beneficiary of such lease or terminated, and shall have provided evidence
of same reasonably satisfactory to CenterPoint;
(r) the Seller shall have entered into or shall have caused the
Company to enter into a written lease regarding the Hamden, Connecticut
office in form and substance reasonably acceptable to CenterPoint; and
(s) the Managing Principal of the Seller and the Company shall have
delivered certified copies of the resolutions of the Managers and Members
of the Seller and the
57
<PAGE>
Company approving execution and delivery of this Agreement, the Merger and
the other actions, agreements and documents necessary or desirable to
complete the transactions contemplated herein.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
XI.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) pursuant to Section 7.3;
-----------
(b) by the Seller,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of Seller, the
Company or the Members or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of
Seller, the Company or any of the Members or any of their affiliates
or associates;
(iii) if CenterPoint (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to CenterPoint;
or
(c) by CenterPoint,
(i) if the Acquisition is not completed by August 31, 1999
other than on account of delay or default on the part of CenterPoint
or any of its Members or any of their affiliates or associates;
(ii) if the Acquisition is enjoined by a final, unappealable
court order not entered at the request or with the support of
CenterPoint or any of its stockholders or any of their affiliates or
associates;
(iii) if the Seller (A) fails to perform in any material
respect any of its material covenants in this Agreement and (B) does
not cure such default in all material respects within thirty (30)
days after written notice of such default is given to Seller or the
Company by CenterPoint;
58
<PAGE>
(iv) if the Members (A) fail to perform in any material respect
any of their material covenants in this Agreement and (B) do not
cure such default in all material respects within thirty (30) days
after written notice of such default is given to the Member
Representative by CenterPoint; or
(d) by mutual consent of the Managers of the Seller and the Board
of Directors of CenterPoint.
XI.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either CenterPoint or the Seller, as provided in Section 11.1, this Agreement
------------
shall forthwith become void and there shall be no further obligation on the part
of Seller, the Company, the Members, CenterPoint, Mergersub, or their respective
officers or directors (except the obligations set forth in this Section 11.2 and
------------
in Sections 8.1, 8.3, 8.5 and Article IX, all of which shall survive the
------------ --- --- ----------
termination). Nothing in this Section 11.2 shall relieve any party from
------------
liability for any breach of this Agreement.
XI.3 Amendment. This Agreement may not be amended except by action taken
---------
by the Boards of Directors or Managers of the Seller and CenterPoint, as
applicable, or duly authorized committees thereof and then only by an instrument
in writing signed on behalf of each of the parties hereto and in compliance with
applicable law. CenterPoint covenants and agrees that it shall not amend,
modify or supplement the material terms of any Other Agreement following the
Closing without the prior written consent of at least two thirds (2/3rds) of the
members of CenterPoint's Board of Directors; provided that no waiver of any
restriction set forth in Article XII shall be of any effect unless consented to
-----------
by a majority of the members of CenterPoint's Board of Directors who do not at
the time of such proposed waiver hold Restricted Shares within the meaning of
this Agreement, any Other Agreement or the Stockholders Agreement.
XI.4. Waiver. At any time prior to the Closing Date, the parties hereto may
------
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant thereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE XII
TRANSFER RESTRICTIONS
XII.1 Transfer Restrictions Generally. Except as provided in Section
------------------------------- -------
12.2, for a period of forty- two (42) months from the Closing, Seller and the
- ----
Members shall not (a) sell, assign, exchange, transfer, distribute or otherwise
dispose of, in whole or in part, (i) any shares of CenterPoint Common Stock
received by the Seller and the Members in the
59
<PAGE>
Acquisition and/or subsequently distributed by Seller to the Members (the
"RESTRICTED SHARES"), or (ii) any interest (including, without limitation, an
option to buy or sell) in any Restricted Shares; or (b) engage in any
transaction, whether or not with respect to any Restricted Shares or any
interest therein, the intent or effect of which is to reduce the risk of owning
the Restricted Shares (including, without limitation, engaging in put, call,
short-sale, derivative, straddle or similar market transactions).
XII.2 Release of Restrictions. Effective eighteen (18) months following
-----------------------
the Closing and every six (6) months thereafter, until all Restricted Shares
shall have been released from such restrictions, twenty percent (20%) of the
original number of Restricted Shares of Seller and/or each Member shall no
longer be subject to the restrictions set forth in Section 12.1 and shall no
------------
longer be deemed "Restricted Shares" for any purposes of this Agreement;
provided that if a Member's employment with CenterPoint or its subsidiary is
terminated within thirty (30) months of the Closing other than through death,
disability, retirement or circumstances approved by the Seller's management and
reasonably approved by CenterPoint's chief executive officer, the Restricted
Shares then held by such Member (or held by Seller for such Member) shall remain
subject to the restrictions set forth in Section 12.1 until the fifth
anniversary of the Closing Date. Notwithstanding the foregoing and Section
-------
12.1, Seller or a Member may (x) at any time pledge or encumber all or part of
- ----
such Seller's or Member's Restricted Shares, as applicable, provided that the
pledgee or secured party agrees in writing to be bound by the provisions
contained in Article XII, (y) at any time transfer all or part of such Seller's
-----------
or Member's Restricted Shares to another Member or to an immediate family member
(or trust or other estate planning Person), provided that any such Member,
family member or other person agrees in writing to be bound by the provisions
contained in Article XII, and (z) transfer or cause to be transferred such
-----------
Member's Restricted Shares upon such Member's disability or death, provided,
--------
however, that Seller shall not transfer or distribute any Restricted Shares for
- -------
the one year period following the Closing, except for a transfer of a Member's
Restricted Shares upon such Member's disability or death. As used in this
Section 12.2, the terms "disability" and "retirement" shall have the meaning
- ------------
ascribed to them in CenterPoint's Employee Incentive Compensation Plan. No
attempted transfer of any nature whatsoever that is in violation of this Section
shall be treated as effective for any purpose.
XII.3 Legend. The certificates evidencing CenterPoint Common Stock
------
delivered to the Seller pursuant to this Agreement and/or subsequently
distributed by Seller to the Members shall bear a legend substantially in the
form set forth below and containing such other information as CenterPoint may
deem necessary or appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
DISPOSITION THEREOF ARE SUBJECT TO THE TERMS OF A
MERGER AGREEMENT DATED MARCH __, 1999. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION AND
60
<PAGE>
MAY BE INSPECTED BY THE REGISTERED OWNER OF THIS
CERTIFICATE OR A DULY AUTHORIZED REPRESENTATIVE OF SUCH
OWNER UPON REQUEST DURING NORMAL BUSINESS HOURS.
Upon request from any Member (or a permitted transferee) following the
expiration of either all or a part of the restrictions on the transfer of
CenterPoint Common Stock set forth in this Article XII, CenterPoint shall
-----------
immediately notify its transfer agent that the applicable shares of CenterPoint
Common Stock are no longer restricted shares and shall direct the transfer agent
to reissue certificates of CenterPoint Common Stock which do not contain a
restrictive legend in place of the applicable restricted shares. In the event a
Member's request to remove the restrictive legend coincides with his request to
sell the CenterPoint Common Stock, CenterPoint shall take such actions as are
required by its transfer agent to allow the transfer agent to transfer the
unrestricted CenterPoint Common Stock free of any restrictive legend.
ARTICLE XII
NONCOMPETITION
XIII.1 Prohibited Activities. Each Member agrees severally, and not
---------------------
jointly, that such Member will not, for a period of three (3) years following
the Closing Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling or providing accounting, tax,
consulting or other related services of a type or nature similar to those
sold or provided by the Company at or within one year prior to the date
that such Member commences competition within a fifty (50) mile radius of
any office location of the Company or any Company Subsidiary (the
"TERRITORY");
(b) sell or provide accounting, tax, consulting or other related
services of a type or nature similar to those sold or provided by the
Company to, or solicit for the purpose of selling or providing any such
services to, any Person that was a customer of the Company or any Company
Subsidiary at any time during the preceding one-year period or that was
known by Member to have been actively being solicited by the Company or any
Company Subsidiary to become a customer at any time during such period;
61
<PAGE>
(c) call upon any Person who is, at that time, within the Territory,
an employee of CenterPoint (including the subsidiaries and affiliates
thereof) for the purpose or with the intent of enticing such employee away
from or out of the employ of CenterPoint (including the subsidiaries and
affiliates thereof), or hire such Person; or
(d) enter into, or call upon or request non-public information for
the purpose of entering into, an Acquisition Transaction (as hereinafter
defined) with any Person with respect to which CenterPoint or any
subsidiary or affiliate thereof has made an offer or proposal for, or
entered into discussions or negotiations for, or evaluated with the intent
of making a proposal for, an Acquisition Transaction, within the preceding
one-year period.
Notwithstanding the foregoing, a Member may be employed by a customer of
the Company or any other Person for the purpose of providing accounting, tax,
consulting or other related services of a type or nature similar to those sold
or provided by the Company to such customer or other Person, so long as in
connection therewith the Member does not provide such services to another third
party for hire.
For purposes of this Agreement, an "ACQUISITION TRANSACTION" means a
merger, consolidation, purchase of material assets, purchase of a material
equity interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit any Member from (a) acquiring
as an investment not more than one percent (1%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter so long as the Member does not consult with or is not employed
by such competitor and (b) owning equity interests the Company or the Attest
Entity.
XIII.2 Damages. Because of the difficulty of measuring economic losses to
-------
CenterPoint as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to CenterPoint for
which it would have no other adequate remedy, each Member agrees that the
foregoing covenant may be enforced by CenterPoint in the event of breach by such
Members, by injunctions and restraining orders.
XIII.3 Reasonable Restraint. It is agreed by the parties hereto that the
--------------------
foregoing covenants in this Article XIII impose a reasonable restraint on the
------------
Members in light of the activities and business of CenterPoint (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CenterPoint; but it is also the intent of CenterPoint and the
Members that such covenants be construed and enforced in accordance with the
changing activities and business of CenterPoint (including the subsidiaries
thereof) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that any
Member who has entered into an employment agreement, incentive compensation
agreement or other similar
62
<PAGE>
agreement with CenterPoint and/or any subsidiary thereof as set forth herein
shall thereafter cease to be employed thereunder, and such Member shall enter
into a business or pursue other activities not in competition with CenterPoint
and/or any subsidiary thereof, or similar activities or business in locations
the operations of which, under such circumstances, does not violate this Article
-------
XIII and in any event business, activities or location are not in violation of
- ----
this Article XIII or of such Member's obligations under this Article XIII, such
------------ ------------
Member shall not be chargeable with a violation of this Article XIII if
------------
CenterPoint and/or any subsidiary thereof shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
XIII.4 Severability; Reformation. The covenants in this Article XIII are
------------------------- ------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
XIII.5 Independent Covenant. All of the covenants in this Article XIII
-------------------- ------------
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Member
against CenterPoint (including the subsidiaries thereof), whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by CenterPoint of such covenants. It is specifically agreed that the period of
three (3) years stated at the beginning of this Article XIII, during which the
------------
agreements and covenants of each Member made in this Article XIII shall be
------------
effective, shall be computed by excluding from such computation any time during
which such Member is in violation of any provision of this Article XIII;
------------
provided, however, in all events CenterPoint shall initiate proceedings to
- -------- -------
enforce this Article XIII within four (4) years of the Closing Date. The
------------
covenants contained in this Article XIII shall not be affected by any breach of
------------
any other provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
XIII.7 Materiality. The Company and the Members hereby agree that this
-----------
covenant is a material and substantial part of this transaction.
ARTICLE XIV
[RESERVED]
63
<PAGE>
ARTICLE XV
GENERAL PROVISIONS
XV.1 Brokers. Each of Seller and the Members represents and warrants that
-------
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee (except for any fee described in Schedule 15.1) or commission in
-------------
connection with the Acquisition or the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
CenterPoint represents and warrants that no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Acquisition or the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of CenterPoint or its stockholders (other
than underwriting discounts and commission to be paid in connection with the
IPO).
XV.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
XV.2.1 If to CenterPoint or Mergersub, to:
CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
XV.2.2 If to the Seller, to:
Simione, Scillia, Larrow & Dowling LLC
555 Long Wharf Drive
New Haven, Connecticut 06511
Attn: Anthony P. Scillia
64
<PAGE>
Facsimile No.: (203) 776-1065
with a copy to:
Brenner, Salzman & Wallman
271 Whitney Avenue
New Haven, Connecticut 06511
Attn: Wayne Martino, Esq.
Facsimile No.: (203) 562-2098
XV.2.3 If to the Member Representative or the Members, as
applicable, addressed to the addresses set forth on Schedule 15.2.3, with copies
---------------
to such counsel as set forth with respect to each Member on such Schedule
--------
15.2.3, as applicable.
- ------
XV.3 Interpretation. The table of contents and headings contained in this
--------------
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "HEREIN," "HEREOF" and "HEREUNDER" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
XV.4 Certain Definitions. As used in this Agreement, (i) the term "PERSON"
-------------------
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated association, corporation, entity, firm, association,
organization or other business in any form whatsoever or government (whether
Federal, state, county, city or otherwise, including, without limitation, any
instrumentality, division, agency or department thereof), (ii) the term
"AFFILIATE" shall have the meaning given for that term in Rule 405 under the
Securities Act, and shall include each past and present Affiliate of a Person
and the stockholders of such Affiliate's immediate family or their spouses or
children and any trust the beneficiaries of which are such individuals or
relatives, and (iii) an individual will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or matter, or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter and a prudent individual would conduct such
investigation; a Person, other than an individual, will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if any individual who is a
shareholder or member of such Person or who is otherwise serving, or who has
served, as a director, officer, or trustee (or any capacity) of such Person has,
or at any time had, knowledge of such fact or other matter.
65
<PAGE>
XV.5. Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof and
(b) shall not be assigned by operation of law or otherwise, except that
CenterPoint may assign this Agreement to any wholly-owned subsidiary of
CenterPoint.
XV.6. Applicable Law. This Agreement shall be governed in all respects,
--------------
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
XV.7. Counterparts. This Agreement may be executed via facsimile or
------------
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
XV.8 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and their respective successors,
permitted assigns, heirs, legal representatives and executors and except as
expressly set forth in herein, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
66
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
CENTERPOINT ADVISORS, INC.
/S/ Robert Basten
-----------------------------------------------
Name: Robert Basten
-----------------------------------------
Its: President and Chief Executive Officer
------------------------------------------
SSLD MERGERSUB LLC
By: Centerpoint Advisors, Inc., its sole Managing
Member
/S/ Robert Basten
-----------------------------------------------
By: Robert Basten
-------------------------------------------
Its: President and Chief Executive Officer
------------------------------------------
SIMIONE, SCILLIA, LARROW & DOWLING LLC
/S/ Richard C. Simione
----------------------------------------------
Name: Richard C. Simione
-----------------------------------------
Its: Managing Principal
------------------------------------------
/S/ Richard L. DeVita
----------------------------------------------
RICHARD L. DEVITA, individually and as a manager of
Seller
MEMBERS:
/S/ Richard C. Simione
------------------------------------------------
Richard C. Simione
67
<PAGE>
/S/ Anthony P. Scillia
-----------------------------------------------
Anthony P. Scillia
/S/ Joseph Natarelli
-----------------------------------------------
Joseph Natarelli
/S/ Walter R. Fulton
-----------------------------------------------
Walter R. Fulton
/S/ John H. Schuyler
-----------------------------------------------
John H. Schuyler
/S/ W. Edward Dowling
-----------------------------------------------
W. Edward Dowling
/S/ William H. McCabe
------------------------------------------------
William H. McCabe
/S/ Peter A. Laine
------------------------------------------------
Peter A. Laine
/S/ Ronald Larrow
-------------------------------------------------
Ronald Larrow
/S/ George Riggs III
-------------------------------------------------
George Riggs III
/S/ Mary Ellen Walkama
--------------------------------------------------
Mary Ellen Walkama
68
<PAGE>
Exhibit 3.1
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENTERPOINT ADVISORS, INC.
(original Certificate of Incorporation
filed November 9, 1998)
CenterPoint Advisors, Inc.(the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify:
A. That the Board of Directors of the Corporation adopted a resolution
setting forth the Amended and Restated Certificate of Incorporation set forth
below, declaring it advisable and submitting it to the stockholders entitled to
vote in respect thereof for their consideration of such Amended and Restated
Certificate of Incorporation.
B. That by written consent executed in accordance with Section 228 of the
DGCL, the holders of a majority of the outstanding stock have voted in favor of
the adoption of the Amended and Restated Certificate of Incorporation set forth
below.
C. That the Amended and Restated Certificate of Incorporation set forth
below has been duly adopted in accordance with Sections 242 and 245 of the DGCL.
ARTICLE I
The name of the corporation is CenterPoint Advisors, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Corporation Trust Center, Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
<PAGE>
ARTICLE III
The nature of the business to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
A. The Corporation shall have authority to issue the following classes of
stock, in the number of shares and at the par value as indicated opposite the
name of the class:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PAR VALUE
CLASS AUTHORIZED PER SHARE
- --------------------------------------- ---------- ---------
<S> <C> <C>
Common Stock (the"Common Stock") 50,000,000 $.01
Preferred Stock (the "Preferred Stock") 10,000,000 $.01
</TABLE>
As of the date of the filing of this Amended and Restated Certificate of
Incorporation, each issued share of Common Stock of the Corporation shall be
reclassified and changed into [______________] shares of Common Stock having the
terms specified in this ARTICLE IV. Each outstanding stock certificate which
immediately prior to the date hereof represented a number of shares of Common
Stock shall, without any action on the part of the holder, hereupon and
hereafter, until surrendered as hereinafter provided, represent that number of
shares of Common Stock equal to [_______________] times the number of shares of
the Common Stock represented by such certificate. The registered holder of each
such certificate may on or after the date hereof surrender such certificate to
the Corporation for cancellation and, upon such surrender, shall receive in
exchange therefor, without charge, a new certificate registered in the name of
such holder representing that number of shares of Common Stock equal to
[______________] times the number of shares of Common Stock which, prior to the
date of filing hereof, was represented by the certificate(s) representing shares
of Common Stock.
B. The designations and the powers, preferences and relative,
participating, optional or other rights of the capital stock and the
qualifications, limitations or restrictions thereof are as follows:
1. Common Stock.
a. Voting Rights: Except as otherwise required by law or
expressly provided herein, the holders of shares of Common Stock shall
be entitled to one vote per share on each matter submitted to a vote
of the stockholders of the Corporation.
b. Dividends: Subject to the rights of the holders, if any, of
Preferred Stock, the holders of Common Stock shall be entitled to
receive cash dividends as,
-2-
<PAGE>
when and if declared, and at such times and in such amounts as may be
determined, by the Board of Directors of the Corporation.
c. Liquidation Rights: In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and
other liabilities of the Corporation and the preferential amounts to
which the holders of any outstanding shares of Preferred Stock shall
be entitled upon dissolution, liquidation or winding up, the assets of
the Corporation available for distribution to stockholders shall be
distributed ratably among the holders of the shares of Common Stock.
2. Preferred Stock. Preferred Stock may be issued from time to time
in one or more series. Subject to the other provisions of this Amended and
Restated Certificate of Incorporation and any limitations prescribed by
law, the Board of Directors is authorized to provide for the issuance of
and to issue shares of the Preferred Stock in one or more series, and by
filing a certificate pursuant to the laws of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and any qualifications, limitations or
restrictions thereof. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of
the Common Stock, without a vote of the holders of any Preferred Stock, or
of any series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing such series of
Preferred Stock.
ARTICLE V
The business and affairs of the Corporation shall be managed by or under
the direction of a board of directors. The number of directors shall be
determined from time to time by resolution adopted by the affirmative vote of a
majority of the directors in office at the time of adoption of such resolution.
Upon the closing of a public offering of Common Stock, the number of directors
shall initially be seventeen.
At each annual meeting of stockholders, directors will be elected by the
holders of the Common Stock to succeed those directors whose terms are expiring.
A director shall hold office until the annual meeting of stockholders in the
year in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to such director's prior death,
resignation, retirement or removal from office. Except as required by law or the
provisions of this Amended and Restated Certificate of Incorporation, all
vacancies on the Board of Directors and newly-created directorships shall be
filled by the Board of Directors. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his or her predecessor.
-3-
<PAGE>
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation and any
resolutions of the Board of Directors applicable thereto. Notwithstanding
anything to the contrary contained in this Amended and Restated Certificate of
Incorporation, the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of the shares entitled to vote generally in the
election of directors shall be required to amend, alter or repeal, or to adopt
any provision inconsistent with, this Article V.
ARTICLE VI
The Board of Directors of the Corporation may adopt a resolution proposing
to amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter prescribed
by statute.
ARTICLE VII
A. Indemnification of Officers and Directors: The Corporation shall:
1. indemnify, to the fullest extent permitted by the DGCL, any
director, officer, employee or agent of the Corporation who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
such person reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful; and
2. indemnify any director, officer, employee or agent of the
Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by
-4-
<PAGE>
reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper; and
3. to the extent that a present or former director or officer of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Article VII.A.1. and 2., or
in defense of any claim, issue or matter therein, indemnify such person
against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith; and
4. make any indemnification under Article VII.A.1. and 2. (unless
ordered by a court) only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in Article VII.A.1. and 2. Such
determination shall be made, with respect to a person who is an officer or
director at the time of such determination, (1) by the Board of Directors
by a majority vote of the directors who are not parties to such action,
suit or proceeding, even if less than a quorum, or (2) by a committee of
such directors designated by a majority vote of such directors, even if
less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or
(4) by the stockholders of the Corporation; and
5. pay expenses (including attorney's fees) incurred by a director or
officer in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation as authorized in this
Article VII. Such expenses (including attorneys fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
Notwithstanding anything to the contrary in this Article VII.A, (i)
the Corporation shall not be obligated to pay expenses incurred by a
director or officer with respect to any threatened, pending, or completed
claims, suits or actions, whether civil, criminal, administrative,
investigative or otherwise ("Proceedings"), initiated or brought
voluntarily by
-5-
<PAGE>
such director or officer and not by way of defense (other than Proceedings
brought to establish or enforce a right to indemnification under the
provisions of this Article VII, unless a court of competent jurisdiction
determines that each of the material assertions made by such director or
officer in such Proceedings were not made in good faith or were frivolous)
and (ii) the Corporation shall not be obligated to indemnify such director
or officer for any amount paid in settlement of a Proceeding covered hereby
without the prior written consent of the Corporation to such settlement;
and
6. not deem the indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Article VII as
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, or
vote of stockholders or disinterested directors, or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office; and
7. have the right, authority and power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article VII; and
8. deem the provisions of this Article VII to be a contract between
the Corporation and each director, officer, employee or agent who serves in
such capacity at any time while this Article VII is in effect and any
repeal or modification of this Article VII shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon such state
of facts. The provisions of this Article VII shall not be deemed to be a
contract between the Corporation and any directors, officers, employees or
agents of any other corporation (the "Second Corporation") which shall
merge into or consolidate with the Corporation when the Corporation shall
be the surviving or resulting Corporation, and any such directors,
officers, employees or agents of the Second Corporation shall be
indemnified to the extent required under the DGCL only at the discretion of
the Board of Directors of the Corporation; and
9. continue the indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VII, unless otherwise provided
when authorized or ratified, as to a person who has ceased to be a
director, officer, employee or agent of the Corporation, and the
indemnification and advancement of expenses provided by, or granted
pursuant to,
-6-
<PAGE>
this Article VII shall inure to the benefit of the heirs,
executors and administrators of such a person.
B. Elimination of Certain Liability of Directors: No director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, as the same exists or hereafter may be amended, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended to authorize the further elimination or
limitation of liability of directors, then the liability of a director of the
Corporation existing at the time of such elimination or limitation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended DGCL. Any repeal or modification of this
Article VII shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE VIII
A director of the Corporation shall not, in the absence of fraud, be
disqualified by his office from dealing or contracting with the Corporation
either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a
director of the Corporation be liable to account to the Corporation for any
profit realized by him from or through any transaction or contract of the
Corporation by reason of the fact that such director, or any firm of which such
director is a member or any corporation of which such director is an officer,
director or stockholder, was interested in such transaction or contract if such
transaction or contract has been authorized, approved or ratified in a manner
provided in the DGCL for authorization, approval or ratification of transactions
or contracts between the Corporation and one or more of its directors or
officers or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest.
ARTICLE IX
A. Written Consent. At any time after the closing of an initial public
offering of the Corporation's Common Stock, any action required or permitted to
be taken by the stockholders of the Corporation shall be effected only at a duly
called annual or special meeting of stockholders of the Corporation and shall
not be effected by consent in writing by the holders of outstanding stock
pursuant to Section 228 of the DGCL or any other provision of the DGCL.
-7-
<PAGE>
B. Special Meetings. Special meetings of stockholders of the Corporation
may be called upon not less than ten (10) nor more than sixty (60) days' written
notice only by the Board of Directors pursuant to a resolution approved by a
majority of the Board of Directors.
C. Amendment. Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least eighty percent (80%) of the shares entitled to vote
generally in the election of directors shall be required to amend, alter or
repeal, or to adopt any provision inconsistent with, this Article IX.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware as the By-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors of the Corporation
or in the By-laws of the Corporation. Election of directors need not be by
written ballot unless the By-laws of the Corporation so provide.
ARTICLE XI
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of the DGCL or on the application of trustees in dissolution or of
any receiver or receivers appointed for the Corporation under the provisions of
Section 279 of the DGCL, order a meeting of the creditors or class of creditors
and/or the stockholders or class of stock of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths (3/4) of the value of the creditors or class
of creditors and/or the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement or to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, said compromise or arrangement of said reorganization shall, if
sanctioned by the Court to which said application has been made, be binding on
all the creditors or class of creditors and/or on all the stockholders or class
of stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE XII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, alter amend or repeal
the By-laws of the Corporation. The By-laws of the Corporation may be altered,
amended, or repealed or new By-laws may be adopted,
-8-
<PAGE>
by the Board of Directors in accordance with the preceding sentence or by the
vote of the holders of at least eighty percent (80%) of the voting power of the
shares of the Corporation entitled to vote generally in the election of
directors at an annual or special meeting of stockholders, provided that if such
alteration, amendment, repeal or adoption of new By-laws is effected at a duly
called special meeting, notice of such alteration, amendment, repeal or adoption
of new By-laws is contained in the notice of such special meeting.
-9-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its Chief Executive Officer on
__________, 1999.
CENTERPOINT ADVISORS, INC.
By:
--------------------------
Robert C. Basten
Chief Executive Officer
-10-
<PAGE>
Exhibit 3.2
FORM OF AMENDED AND RESTATED
BY-LAWS
OF
CENTERPOINT ADVISORS, INC.
ARTICLE I
---------
OFFICES
-------
Section 1.1. Registered Office. The registered office of CenterPoint
Advisors, Inc. (the "Corporation") shall be in the City of Wilmington, County of
New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1. Place of Meeting. All meetings of the stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated by the Board of Directors in its notice of
the meeting or in a duly executed waiver of notice thereof.
Section 2.2. Time of Annual Meeting. Annual meetings of stockholders at
which stockholders shall elect directors as provided in the Corporation's
Amended and Restated Certificate of Incorporation and Section 2.4 of Article II
of these By-laws and transact such other business as may properly be brought
before the meeting in accordance with Section 2.4 of Article II of these By-laws
shall be held on such business day within the 180-day period following the end
of the Corporation's fiscal year as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting.
Section 2.3. Notice of Annual Meetings. Except as otherwise required by
law, written notice of the annual meeting stating the place, date and hour of
the meeting shall be given to each
<PAGE>
stockholder entitled to vote at such meeting not fewer than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 2.4 Proposals by Stockholders. Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business to be
transacted by the stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation's notice with respect to such meeting, (ii) by
or at the direction of the Board of Directors of the Corporation or (iii) by any
stockholder of record of the Corporation who was a stockholder of record at the
time of the giving of the notice provided for in the following paragraph, who is
entitled to vote at the meeting and who has complied with the notice procedures
set forth in this Article II, Section 2.4.
For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of the foregoing paragraph,
(a) the stockholder must have given timely notice thereof in writing to the
secretary of the Corporation at the principal executive offices of the
Corporation, (b) such business must be a proper matter for stockholder action
under the General Corporation Law of the State of Delaware, (c) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the Corporation with a Solicitation Notice, as
that term is defined in this Article II, Section 2.4, such stockholder or
beneficial owner must, in the case of a proposal, have delivered a proxy
statement and form of proxy to holders of at least the percentage of the
Corporation's voting shares required under applicable law to carry any such
proposal, or, in the case of a nomination or nominations, have delivered a proxy
statement and form of proxy to holders of a percentage of the Corporation's
voting shares reasonably believed by such stockholder or beneficial holder to be
sufficient to elect the nominee or nominees proposed to be nominated by such
stockholder (the number of voting shares required to carry the proposal or elect
the nominees, being the "Required Number"), and must, in either case, have
included in such materials the Solicitation Notice and (d) if no Solicitation
Notice relating thereto has been timely provided pursuant to this section, the
stockholder or beneficial owner proposing such business or nomination must not
have solicited proxies for a number of shares equal to or greater than the
Required Number. To be timely, a stockholder's notice shall be delivered to the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 45 or more than 75 days prior to the first anniversary
(the "Anniversary") of the date on which the Corporation first mailed its proxy
materials for the preceding year's annual meeting of stockholders; provided,
however, that if the date of the annual meeting is advanced more than 30 days
prior to, or delayed by more than 30 days after, the anniversary of the
preceding year's annual meeting, or if it is the first annual meeting of
stockholders of the Corporation, notice by the stockholder to be timely must be
so delivered not later than the close of business on the later of (i) the 90/th/
day prior to such annual meeting or (ii) the 10/th/ day following the day on
which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person as would be required to be disclosed in solicitations of
proxies for the election of such nominees as directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and such person's written consent to serve as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at
the meeting and any material interest in such business of such stockholder and
the beneficial owner, if any, on whose
-2-
<PAGE>
behalf the proposal is made; (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner, (ii) the class and number of shares of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of a proposal, at least the percentage of the Corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the Corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
Notwithstanding anything in the second sentence of the second paragraph of
this Section 2.4 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 55 days prior
to the Anniversary, a stockholder's notice required by these By-laws shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary of the
Corporation at the principal executive offices of the Corporation not later than
the close of business on the 10/th/ day following the day on which such public
announcement is first made by the Corporation.
Only persons nominated in accordance with the procedures set forth in this
Section 2.4 shall be eligible to serve as directors, and only such business
shall be conducted at an annual meeting of stockholders, as shall have been
brought before the meeting in accordance with the procedures set forth in this
section. The chair of the meeting shall have the power and the duty to
determine whether a nomination or any business proposed to be brought before the
meeting has been made in accordance with the procedures set forth in these By-
laws and, if any proposed nomination or business is not in compliance with these
By-laws, to declare that such defective proposed business or nomination shall
not be presented for stockholder action at the meeting and shall be disregarded.
Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the Corporation's
notice of meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of record of the
Corporation who is a stockholder of record at the time of giving notice provided
for in this paragraph, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 2.4. Nominations
by stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice required by
the second paragraph of this Section 2.4 shall be delivered to the Secretary of
the Corporation at the principal executive offices of the Corporation not later
than the close of business on the later of the 90/th/ day prior to such special
meeting or the 10/th/ day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
-3-
<PAGE>
For purposes of this section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or a
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 2.4, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to matters set forth in this
Section 2.4. Nothing in this Section 2.4 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.5. Special Meetings of the Stockholders. Special meetings of
the stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors. The
business transacted at any special meeting of the stockholders shall be limited
to the purposes stated in the notice for the meeting transmitted to
stockholders.
Section 2.6. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given by the Secretary of the
Corporation not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 2.7. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted, and which shall be (i) not more than sixty (60) nor
less than ten (10) days before the date of a meeting, and (ii) not more than
sixty (60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for any adjourned meeting.
Section 2.8. Voting Lists. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
-4-
<PAGE>
Section 2.9. Quorum and Adjournments. The holders of a majority of the
voting power of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business, except as
otherwise provided by statute or by the Corporation's Amended and Restated
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any such meeting of the stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented; provided that if
the adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed by the directors for the adjourned meeting, a new
notice shall be transmitted to the stockholders of record entitled to vote at
the adjourned meeting. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2.10. Vote Required. When a quorum is present at any meeting of
all stockholders, the affirmative vote of the holders of a majority of the
voting power of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Corporation's Amended and Restated Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question; provided, however, all
elections of directors shall be determined by a plurality of the votes cast.
Section 2.11. Voting Rights. Unless otherwise provided in the
Corporation's Amended and Restated Certificate of Incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one (1)
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three (3)
years from its date, unless the proxy provides for a longer period. At any
meeting of the stockholders, every stockholder entitled to vote may vote in
person or by proxy authorized by an instrument in writing or by a transmission
permitted by law filed in accordance with the procedure established for the
meeting. Any copy, facsimile telecommunication or other reliable reproduction
of the writing or transmission created pursuant to this paragraph may be
substituted or used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could be used;
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission. All
voting, including on the election of directors may (except where otherwise
required by law) be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or by his or her proxy, a stock vote
shall be taken. Every stock vote shall be taken by ballots, each of which shall
state the name of the stockholder or proxy voting and such other information as
may be required under the procedure established for the meeting. The
Corporation may, and to the extent required by law shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and
-5-
<PAGE>
sign an oath to faithfully execute the duties of inspector with strict
impartiality and according to the best of his or her ability. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
Section 2.12. Presiding Over Meetings. The Chairman of the Board of
Directors shall preside at all meetings of the stockholders. In the absence or
inability to act of the Chairman, the Chief Executive Officer, President or a
Vice President (in that order) shall preside, and in their absence or inability
to act another person designated by one of them shall preside. The Secretary of
the Corporation shall act as Secretary of each meeting of the stockholders. In
the event of his or her absence or inability to act, the chairman of the meeting
shall appoint a person who need not be a stockholder to act as Secretary of the
meeting.
Section 2.13. Conducting Meetings. Meetings of the stockholders shall be
conducted in a fair manner but need not be governed by any prescribed rules of
order. The presiding officer of the meeting shall establish an agenda for the
meeting. The presiding officer's rulings on procedural matters shall be final.
The presiding officer is authorized to impose reasonable time limits on the
remarks of individual stockholders and may take such steps as such officer may
deem necessary or appropriate to assure that the business of the meeting is
conducted in a fair and orderly manner.
ARTICLE III
-----------
DIRECTORS
---------
Section 3.1. General Powers. The business and affairs of the Corporation
shall be under the direction of and managed by, a board comprised of directors,
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not required by statute, by the Corporation's Amended and
Restated Certificate of Incorporation or by these By-laws to be done by the
stockholders. Directors need not be residents of the State of Delaware or
stockholders of the Corporation. The number of directors shall be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the directors in office at the time of adoption of such resolution.
Section 3.2. Election. Directors shall be elected for a term of one (1)
year or other term as specified in the Corporation's Amended and Restated
Certificate of Incorporation, and each director elected shall hold office during
the term for which he or she is elected and until his or her successor is
elected and qualified, subject, however, to his or her prior death, resignation,
retirement or removal from office.
Section 3.3. Vacancies. Any vacancies occurring in the Board of Directors
and newly created directorships shall be filled in the manner provided in the
Corporation's Amended and Restated Certificate of Incorporation.
Section 3.4. Place of Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. The first
-6-
<PAGE>
meeting of each newly elected Board of Directors shall be held immediately
following the adjournment of the annual meeting of the stockholders at the same
place as such annual meeting and no notice of such meeting shall be necessary to
the newly elected directors in order to legally constitute the meeting, provided
a quorum shall be present. In the event such meeting is not held at such time
and place, the meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 3.5. Participation by Conference Telephone. Unless otherwise
restricted by the Corporation's Amended and Restated Certificate of
Incorporation or these By-laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting.
Section 3.6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
Section 3.7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or Chief Executive Officer on at
least one day's notice to each director, either personally, or by courier,
telephone, telefax, mail or telegram. Special meetings shall be called by the
Chairman of the Board or Chief Executive Officer in like manner and on like
notice at the written request of two or more of the directors comprising the
Board of Directors stating the purpose or purposes for which such meeting is
requested. Notice of any meeting of the Board of Directors for which a notice is
required may be waived in writing signed by the person or persons entitled to
such notice, whether before or after the time of such meeting, and such waiver
shall be equivalent to the giving of such notice. Attendance of a director at
any such meeting shall constitute a waiver of notice thereof, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because such meeting is not lawfully convened.
Neither the business to be transacted at nor the purpose of any meeting of the
Board of Directors for which a notice is required need be specified in the
notice, or waiver of notice, of such meeting. The Chairman of the Board shall
preside at all meetings of the Board of Directors. In the absence or inability
to act of the Chairman of the Board, a Vice Chairman of the Board (if one shall
have been chosen), the Chief Executive Officer, a President or an Executive Vice
President (in that order) shall preside, and in their absence or inability to
act another director designated by one of them shall preside.
Section 3.8. Quorum; No Action on Certain Matters. At all meetings of the
Board of Directors, a majority of the then duly elected directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Corporation's Amended and Restated Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
-7-
<PAGE>
Section 3.9. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the Chairman of the
Board or Chief Executive Officer. Such resignation shall take effect at the
time specified therein and, unless tendered to take effect upon acceptance
thereof, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.10. Informal Action. Unless otherwise restricted by the
Corporation's Amended and Restated Certificate of Incorporation or these By-
laws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board of Directors or committee consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 3.11. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his or her dissent shall be entered in the approved minutes of the
meeting or unless he or she shall file his or her written dissent to such action
with the person acting as the Secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 3.12. Compensation of Directors. In the discretion of the Board
of Directors, the directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors or a committee thereof, may be paid a
stated salary or a fixed sum for attendance at each meeting of the Board of
Directors or a committee thereof, and may be awarded other compensation for
their services as directors. No such payment or award shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
-8-
<PAGE>
ARTICLE IV
----------
COMMITTEES OF DIRECTORS
-----------------------
Section 4.1. General Provisions. A majority of the votes of the Board of
Directors may create one or more committees and appoint members of the Board of
Directors to serve on the committee or committees. Each committee shall have
two or more members, who serve at the pleasure of the Board of Directors.
Except as limited by law, each committee shall have such authority as the Board
of Directors may from time to time direct.
Section 4.2. Executive Committee. The Board of Directors may designate
two or more directors to constitute an executive committee, which committee
shall have and may exercise such authority of the Board of Directors in the
management of the Corporation as the Board of Directors shall from time to time
delegate to such committee; provided, however, that such committee shall not
have the authority of the Board of Directors in reference to amending the
Certificate of Incorporation, adopting a plan of merger or adopting a plan of
consolidation with another corporation or corporations, recommending to the
stockholders the sale, lease, exchange, mortgage, pledge or other disposition of
all or substantially all of the property and assets of the Corporation,
recommending to the stockholders a voluntary dissolution of the Corporation,
amending, altering or repealing the By-laws of the Corporation, electing or
removing officers of the Corporation or members of the executive committee,
electing directors to fill vacancies of the Board of Directors, changing the
size of the Board of Directors, fixing the compensation of any member of the
executive committee, declaring dividends or amending, altering or repealing any
resolution of the Board of Directors which by its terms provided that it shall
not be amended, altered or repealed by the executive committee. The designation
of such committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed upon it or him by law.
Section 4.3. Committee Minutes. Each committee shall keep regular minutes
of its meetings and shall file such minutes and all written consents executed by
its members with the Secretary of the Corporation. Each committee may determine
the procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings; one-
third of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
-9-
<PAGE>
ARTICLE V
---------
NOTICES
-------
Section 5.1. Manner of Notice. Whenever, under applicable law or the
Corporation's Amended and Restated Certificate of Incorporation or these By-
laws, notice is required to be given to any director or stockholder, unless
otherwise provided in the Corporation's Amended and Restated Certificate of
Incorporation or these By-laws, such notice may be given in writing, by courier
or mail, addressed to such director or stockholder, at such director's or
stockholder's address as it appears on the records of the Corporation, with
freight or postage thereon prepaid, and such notice shall be deemed to be given
at the time when the same shall have been deposited with such courier or in the
United States mail. Notice may be given orally if such notice is confirmed in
writing in a manner provided therein. Notice to directors may also be given by
telegram, mailgram, telex or telecopier.
Section 5.2. Waiver. Whenever any notice is required to be given under
applicable law or the provisions of the Corporation's Amended and Restated
Certificate of Incorporation or these By-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
----------
OFFICERS
--------
Section 6.1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall be a Chairman of the Board,
a Chief Executive Officer, a President, a Chief Financial Officer, one or more
Vice Presidents, a Secretary and a Treasurer. The Board of Directors may also
choose a Chief Accounting Officer, one or more Chief Operating Officers, one or
more Assistant Secretaries and Assistant Treasurers and such additional officers
as the Board of Directors may deem necessary or appropriate from time to time.
Membership on the Board of Directors shall not be a prerequisite to the holding
of any other office. Any number of offices may be held by the same person,
unless the Corporation's Amended and Restated Certificate of Incorporation or
these By-laws otherwise provide.
Section 6.2. Other Officers and Agents. The Board of Directors may choose
such other officers and agents as it shall deem necessary, which officers and
agents shall hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time by the Board of
Directors.
Section 6.3. Salaries. The salaries or other compensation of the officers
and agents of the Corporation shall be fixed from time to time by the Board of
Directors, and no officer shall be prevented from receiving such salary or other
compensation by reason of the fact that such officer is also a director of the
Corporation.
-10-
<PAGE>
Section 6.4. Term of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualified or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time, either with or without cause, by the
affirmative vote of a majority of the directors then in office at any meeting of
the Board of Directors. If a vacancy shall exist in the office of the
Corporation, the Board of Directors may elect any person to fill such vacancy,
such person to hold office as provided in Section 6.1 of this Article VI.
Section 6.5. The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors and
shall see that orders and resolutions of the Board of Directors are carried into
effect. The Chairman of the Board shall perform such duties as may be assigned
to him by the Board of Directors.
Section 6.6. The Chief Executive Officer. The Chief Executive Officer
shall be the principal executive officer of the Corporation and shall, in
general, supervise and control all of the business and affairs of the
Corporation, unless otherwise provided by the Board of Directors. In the
absence of the Chairman of the Board, the Chief Executive Officer shall preside
at all meetings of the stockholders and of the Board of Directors and shall see
that orders and resolutions of the Board of Directors are carried into effect.
The Chief Executive Officer may sign bonds, mortgages, certificates for shares
and all other contracts and documents whether or not under the seal of the
Corporation except in cases where the signing and execution thereof shall be
expressly delegated by law, by the Board of Directors or by these By-laws to
some other officer or agent of the Corporation. The Chief Executive Officer
shall have general powers of supervision and shall be the final arbiter of all
differences between officers of the Corporation and the Chief Executive
Officer's decision as to any matter affecting the Corporation shall be final and
binding as between the officers of the Corporation subject only to its Board of
Directors.
Section 6.7. The President. The President shall keep the Chairman of the
Board fully informed concerning the business of the Corporation under his
supervision. In the absence or incapacity of the Chairman of the Board, if the
Chairman of the Board has been designated Chief Executive Officer, the President
shall perform the duties of the Chief Executive Officer, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The President shall have concurrent power with the
Chief Executive Officer to sign bonds, mortgages, certificates for shares and
other contracts and documents, whether or not under the seal of the Corporation
except in cases where the signing and execution thereof shall be expressly
delegated by law, by the Board of Directors, or by these By-laws to some other
officer or agent of the Corporation. In general, the President shall perform
all duties incident to the office of the President and such other duties as the
Chief Executive Officer or the Board of Directors may from time to time
prescribe.
Section 6.8. The Chief Financial Officer. The Chief Financial Officer
shall: (a) have charge of and be responsible for the maintenance of adequate
books of account for the Corporation; (b) have charge and custody of all funds
and securities of the Corporation, and be responsible therefor and for the
receipt and disbursement thereof; and (c) perform all the duties incident to the
office of the Chief Financial Officer and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors. If
required by the Board of
-11-
<PAGE>
Directors, the Chief Financial Officer shall give a bond for the faithful
discharge of the Chief Financial Officer's duties in such sum and with such
surety or sureties as the Board of Directors may determine.
Section 6.9. The Vice-Presidents. In the absence of the President, the
Vice-Presidents (in the order designated, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice-Presidents shall perform such other
duties and have such other powers as the Chief Executive Officer or the Board of
Directors may from time to time prescribe.
Section 6.10. The Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, or cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer,
under whose supervision the Secretary shall be. The Secretary shall have
custody of the corporate seal of the Corporation and the Secretary or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by the Secretary's
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by such officer's signature.
Section 6.11. The Treasurer. In the absence of the Chief Financial
Officer or in the event of the Chief Financial Officer's inability or refusal to
act, the Treasurer shall perform the duties of the Chief Financial Officer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Chief Financial Officer. The Treasurer shall perform such
other duties and have such other powers as the Chief Executive Officer or the
Board of Directors may from time to time prescribe.
Section 6.12. The Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Chief Executive Officer or the Board of Directors may from time to
time prescribe.
Section 6.13. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of the Treasurer's inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Chief Executive Officer or the Board of Directors may from
time to time prescribe.
-12-
<PAGE>
ARTICLE VII
CERTIFICATES OF STOCK, TRANSFERS AND RECORD DATES
Section 7.1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by (a) the Chairman of the Board, the President, the Chief Executive
Officer or an Executive Vice President, and (b) the Chief Financial Officer,
Treasurer, Secretary, an Assistant Secretary or an Assistant Treasurer of the
Corporation; certifying the number of shares owned by such holder in the
Corporation. If the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Subject to the foregoing, certificates of stock of
the Corporation shall be in such form as the Board of Directors may from time to
time prescribe.
Section 7.2. Facsimile Signatures. Where a certificate is countersigned (1)
by a transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
Section 7.3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as the Corporation shall require and/or give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation or its transfer agent or registrar with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 7.4. Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation
-13-
<PAGE>
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 7.5. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not the
Corporation shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
ARTICLE VIII
CONFLICT OF INTERESTS
Section 8.1. Contract or Relationship Not Void. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because such director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such director's or
officer's vote is counted for such purpose, if:
(i) The material facts as to such director's or officer's relationship or
interest and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(ii) The material facts as to such director's or officer's relationship or
interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by vote of the
stockholders; or
(iii) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of
Directors, a committee there of, or the stockholders.
Section 8.2. Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
-14-
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Amended and Restated Certificate
of Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock or rights to acquire same, subject
to the provisions of the Corporation's Amended and Restated Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 9.2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 9.3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 9.4. Seal. The corporate seal shall have inscribed thereon the name
of the Corporation and the words "Corporate Seal, Delaware." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 9.5. Stock in Other Corporations. Shares of any other corporation
which may from time to time be held by this Corporation may be represented and
voted at any meeting of stockholders of such corporation by the Chairman of the
Board, the Chief Executive Officer, a President, the Chief Financial Officer or
an Executive Vice President of the Corporation, or by any proxy appointed in
writing by the Chairman of the Board, the Chief Executive Officer, a President,
the Chief Financial Officer or an Executive Vice President of the Corporation,
or by any other person or persons thereunto authorized by the Board of
Directors. Shares represented by certificates standing in the name of the
Corporation may be endorsed for sale or transfer in the name of the Corporation
by the Chairman of the Board, the Chief Executive Officer, a President, the
Chief Financial Officer or any Executive Vice President of the Corporation or by
any other officer of officers thereunto authorized by the Board of Directors.
Shares belonging to the Corporation need not stand in the name of the
Corporation, but may be held for the benefit of the Corporation in the
individual name of the Chief Financial Officer or of any other nominee
designated for the purpose of the Board of Directors.
-15-
<PAGE>
ARTICLE X
AMENDMENTS
These By-laws may be altered, amended, or repealed or new by-laws may be
adopted only in the manner provided in the Corporation's Amended and Restated
Certificate of Incorporation.
-16-
<PAGE>
Exhibit 10.7
FORM OF STOCKHOLDERS' AGREEMENT
-------------------------------
THIS STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of __________,
1999, by and among CenterPoint Advisors, Inc. (the "Corporation"), which is a
party hereto solely for the purpose of making the representations and warranties
set forth in Section 1, CPA Holdings, LLC ("Holdings"), BGL Capital Partners,
L.L.C. ("BGL"), Steven P. Colmar, Benjamin H. Crawford, William G. Parkhouse,
William J. Lynch, Leonard A. Potter, James G. Lynch, MFSL Investments, L.P.
("MFSL"), Reznick, Fedder & Silverman, C.P.A.s, L.L.C. ("Reznick"),Jonathan R.
Rutenberg, Robert C. Basten, Rondol E. Eagle, De Ann L. Brunts, Dennis W. Bikun,
[insert LLCs created by Founders to hold Common Stock, if applicable] and each
of the other persons which is a signatory hereto. Holdings, BGL, MFSL, Reznick
and Messrs. Rutenberg, Colmar, Crawford, Parkhouse, William J. Lynch, Potter and
James G. Lynch are collectively referred to herein as the "Sponsors"; Messrs.
Basten, Eagle, Brunts and Bikun are collectively referred to herein as
"Management"; [Founders' LLC's] are collectively referred to herein as
"Founders' LLC's"; and each other person which is a signatory hereto is referred
to herein as a "Founding Company Owner."
WHEREAS, on the date hereof, the Sponsors and Management are the sole
owners of the common stock, par value $0.01 per share (the "Common Stock"), of
the Corporation; and
WHEREAS, it is anticipated that within 30 days after the consummation of
the Corporation's initial public offering (the "IPO"), Holdings will distribute
all of its shares of Common Stock among BGL, MFSL, Reznick, and Messrs. Colmar,
Crawford, Parkhouse, William J. Lynch, Potter and James G. Lynch, whereupon such
persons will become owners of Common Stock; and
WHEREAS, upon the consummation of each of the Merger Agreements dated
_______ __, 1999, by and among the Corporation, the Founders' LLCs, the Founding
Company Owners and the Founding Companies set forth on Schedule I hereto
(collectively, the "Merger Agreements"), the Founders' LLC's and/or Founding
Company Owners will become owners of Common Stock; and
WHEREAS, it is anticipated that during the term of this Agreement, the
Founders' LLCs may distribute some or all of their shares of Common Stock to the
Founding Company Owners who are their members, whereupon such persons will
become owners of Common Stock; and
WHEREAS, each of the undersigned parties believes that the continuity of
management is essential to the success of the business of the Corporation, and
that to preserve such continuity, it is essential for the undersigned parties to
vote for the election of the board of directors of the Corporation (the "Board")
as hereinafter provided; and
WHEREAS, pursuant to the Merger Agreements, the Common Stock owned by the
Founders' LLCs and the Founding Company Owners will be subject to certain
restrictions on transfer; and
<PAGE>
WHEREAS, each of the undersigned parties believes that it is in the best
interests of the Corporation that the Sponsors and Management also agree to be
bound by restrictions on the transfer of their Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned parties agree as
follows:
1. Representations and Warranties.
(a) Organization. The Corporation represents and warrants that it is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of Holdings, BGL, Reznick and each
Founders' LLC severally represents and warrants that it is a limited
liability company duly organized, validly existing and in good standing
under the laws of its state of organization. MFSL represents and warrants
that it is a limited partnership validly existing under the laws of the
State of Texas.
(b) Authority. Each signatory hereto that is not a natural person
severally represents and warrants that it has full right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by such signatory has been duly authorized by all necessary
action on the part of such signatory and its shareholders, partners or
members, as the case may be.
(c) Enforceability. Each signatory hereto severally represents and
warrants that this Agreement has been duly executed and delivered by such
signatory and, assuming the due authorization, execution and delivery
hereof by each of the other signatories hereto, constitutes a valid and
legally binding agreement of such signatory, enforceable against such
signatory in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
(d) Non-Contravention. Each signatory hereto severally represents and
warrants that the execution and delivery of this Agreement by such
signatory does not violate, conflict with or result in a breach of any
provision of any of the terms, conditions or provisions of (i) the
organizational documents of any signatory hereto that is not a natural
person, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or federal,
state, provincial, local or foreign government, or any subdivision, agency
or authority of any thereof ("Governmental Authority") applicable to such
signatory, or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which such signatory is
a party.
-2-
<PAGE>
(e) Approvals. Each signatory hereto severally represents and
warrants that no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by such
signatory or the consummation by such signatory of the transactions
contemplated hereby.
(f) Common Stock Issued to Holdings and Management. The Corporation
represents and warrants that the shares of Common Stock held by Holdings,
Reznick, Rutenberg and Management are validly issued, fully paid,
nonassessable and free of preemptive rights and that such shares were
issued by Cornerstone pursuant to a valid exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and
applicable state securities or blue sky laws.
2. Composition of Board of Directors Immediately Following the Offering.
Immediately upon the closing of the Offering, the Board shall be composed of 17
members, consisting of (i) ten Founding Company Owners (or their selected
representatives), each designated by his or her respective Founding Company,
(ii) one director designated by BGL, (iii) Mr. Basten, (iv) Ms. Brunts and (v)
four independent directors, not employed by the Corporation or its subsidiaries
or affiliates, the Founding Companies or their respective subsidiaries or
affiliates or BGL. The directors shall initially be elected for a term expiring
at the Annual Meeting of the Corporation's stockholders relating to the fiscal
year ending December 31, 1999 but currently expected to be held in 2000 (the
"2000 Annual Meeting"). The initial members of the Board and the persons by
whom they are designated, if applicable, are set forth on Schedule II hereto.
3. Nominations for Annual Meetings. With respect to each Annual Meeting
of the Corporation's stockholders beginning with the 2000 Annual Meeting up to
and including the Annual Meeting relating to the fiscal year ending December 31,
2003 but currently expected to be held in 2004 (the "2004 Annual Meeting"), and
in each case at any adjournment thereof, each of the undersigned parties shall
take any and all action necessary as a stockholder and/or director or officer of
the Corporation (in each case, subject to applicable fiduciary duties) to cause
those directors listed on Schedule II attached hereto whose terms are then
expiring, or their designated successors as provided in Section 5 herein, to be
nominated for election to the Board and included as nominees in the
Corporation's proxy statement prepared and distributed in connection with the
Annual Meeting.
4. Election of Directors at the Annual Meetings. Each of the undersigned
parties shall vote the shares of Common Stock which it owns or hereafter
acquires, or over which it has voting control or hereafter acquires voting
control, in any manner necessary to cause all nominees nominated pursuant to
Section 2 herein to be elected to the Board at each Annual Meeting of the
Corporation's stockholders beginning with the 2000 Annual Meeting and up to and
including the 2004 Annual Meeting.
5. Successors. In the event that the Board determines (in its reasonable
discretion) that a member of the Board is unable for any protracted period to
discharge his/her duties to the
-3-
<PAGE>
Corporation, or such member resigns or is removed from the Board or declines to
stand for re-election to the Board, each of the undersigned parties shall take
any and all action necessary (subject to applicable fiduciary duties) as a
stockholder and/or director or officer of the Corporation to cause the then-
incumbent Board to nominate as a successor director (i) if the director being
replaced was designated by the former owners of a Founding Company or by BGL,
such individual as shall be designated by the persons who originally designated
such director or their permitted transferees who execute this Agreement in
accordance with Section 7 hereof and (ii) in all other cases, such individual as
shall be approved by a majority of the then-incumbent Board, and each of the
undersigned parties shall take any and all action necessary as a stockholder
and/or director or officer of the Corporation (in each case, subject to
applicable fiduciary duties) to elect such successor director to the Board.
6. Term. Notwithstanding the earlier termination or dissolution of
Holdings, BGL, MFSL, Reznick and/or any Founders' LLC, the term of this
Agreement shall run from the date hereof until immediately following the final
adjournment of the 2004 Annual Meeting.
7. Assignment. Except with respect to the assignment of this Agreement
to a transferee of Common Stock owned by one or more of the parties hereto, this
Agreement shall only be assignable by the written consent of all of the parties
hereto. This Agreement shall be assigned to and binding on all transferees of
the Common Stock owned by the parties hereto (unless such transfer is made
pursuant to (i) a registered public securities offering or (ii) Rule 144 under
the Act (either such transfer a "Public Sale")) and no transfer other than a
Public Sale shall be of any force or effect whatsoever, unless and until the
transferee executes a counterpart of this Agreement.
8. Expansion of Board of Directors. This Agreement is not intended to
limit in any respect the Board's authority to increase from time to time the
size of the Board in accordance with Article V of the Corporation's Amended and
Restated Certificate of Incorporation.
9. Transfer Restrictions. Except as provided below, for a period of
forty-two (42) months from the closing of the IPO (the "Closing"), the Sponsors
and Management shall not (a) sell, assign, exchange, transfer, encumber, pledge,
distribute or otherwise dispose of, in whole or in part, (i) any shares of the
Corporation's Common Stock held by the Sponsors or Management as of the date of
this Agreement (the "Restricted Shares"), or (ii) any interest (including,
without limitation, an option to buy or sell) in any such Restricted Shares; or
(b) engage in any transaction, whether or not with respect to any Restricted
Shares or any interest therein, the intent or effect of which is to reduce the
risk of owning the Restricted Shares (including, without limitation, engaging in
put, call, short-sale, straddle or similar market transactions). Effective
eighteen (18) months following the Closing, and every six (6) months thereafter,
until all Restricted Shares shall have been released from such restrictions,
one-fifth (1/5th) of the original Restricted Shares held by each Sponsor and
member of Management shall be released from the restrictions set forth in the
preceding sentence. Notwithstanding the foregoing, (A) Each of Holdings, BGL,
MFSL and Reznick may distribute Restricted Shares to persons who are its members
or partners as of the date of this Agreement; (B) any Sponsor, permitted
distributee of a Sponsor or member of Management who is a natural person
-4-
<PAGE>
may transfer Restricted Shares to immediate family members (or trusts or other
estate planning entities for the benefit of such person or family members); (C)
Messrs. Colmar, Crawford, Parkhouse, William J. Lynch, Potter and James G. Lynch
may transfer Restricted Shares to the persons named on Schedule III hereto (or
trusts or other estate planning entities for the benefit of such named persons);
(D) any Sponsor, permitted distributee of a Sponsor or member of Management who
is a natural person may transfer or cause to be transferred Restricted Shares
upon the death or Permanent Disability of such person; and (E) the Sponsors and
Management may pledge or encumber Restricted Shares; provided, however, that
with respect to distributions, transfers or pledges pursuant to clauses (A),
(B), (C) and (E) above, the distributee, transferee or pledgee must agree in
writing to be bound by the restrictions set forth in this Section 9. The term
"Permanent Disability" as used in the preceding sentence shall be as defined in
the disability plan of the Corporation, or if not defined therein, Permanent
Disability shall mean the incapacity of the subject person, due to injury,
illness, disease, or bodily or mental infirmity, to engage in the performance of
substantially all of such member's usual duties of employment with the
Corporation, for a period of 60 consecutive days or for a period of 90 days
during any 12-month period (whether or not consecutive). Such disability shall
be determined by the Board of Directors of the Corporation in good faith based
in part upon the receipt and in reliance on competent medical advice from one or
more individuals, selected by the Board of Directors of the Corporation in good
faith, who are qualified to give such professional medical advice.
10. Amendment. This Agreement may be amended from time to time by an
instrument in writing signed by the holders of 66 2/3% of the shares of Common
Stock then held by the parties hereto and their permitted assignees; provided,
however, that (i) no amendment shall be made which would materially adversely
affect the rights of any such signatory without the consent of the persons so
affected and (ii) no waiver of any restriction set forth in Section 9 shall be
of any effect unless consented to by a majority of the members of the
Corporation's Board of Directors who do not at the time of such proposed waiver
hold Restricted Shares within the meaning of this Agreement or any Merger
Agreement.
11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original.
12. Governing Law. This Agreement shall be governed by and enforced in
accordance with the laws and decisions of the State of Delaware, without regard
to the choice of law provisions thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed, and has entered into this Agreement effective the date and year
first above written.
CENTERPOINT ADVISORS, INC.
By: ____________________________________
Robert C. Basten
President and Chief Executive Officer
CPA HOLDINGS, LLC
By: BGL Capital Partners, L.L.C.
By: BGL Management Company, L.L.C.
By: ____________________________________
Scott H. Lang
Managing Member
BGL CAPITAL PARTNERS, L.L.C.
By: BGL Management Company, L.L.C.
By: ____________________________________
Scott H. Lang
Managing Member
MFSL INVESTMENTS, L.P.
By: MFSL GP, L.L.C., its general partner
By: ____________________________________
Richard Stein
Manager
-6-
<PAGE>
REZNICK, FEDDER & SILVERMAN, C.P.A.s, L.L.C.
By:
______________________________
[Name]
[Title]
(Additional Signatures Follow)
___________________________________
Jonathan R. Rutenberg
___________________________________
Steven P. Colmar
___________________________________
Benjamin H. Crawford
___________________________________
William G. Parkhouse
___________________________________
William J. Lynch
___________________________________
Leonard A. Potter
___________________________________
James G. Lynch
___________________________________
Robert C. Basten
-7-
<PAGE>
___________________________________
Rondol E. Eagle
___________________________________
DeAnn Brunts
___________________________________
Dennis W. Bikun
(Additional Signatures Follow)
-8-
<PAGE>
OWNERS OF REZNICK, FEDDER & SILVERMAN, P.C.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-9-
<PAGE>
OWNERS OF ROBERT F. DRIVER COMPANY, INC.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-10-
<PAGE>
OWNERS OF FOLLMER, RUDZEWICZ & COMPANY, P.C.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-11-
<PAGE>
OWNERS OF MANN FRANKFORT STEIN & LIPP, P.C.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-12-
<PAGE>
OWNERS OF BERRY, DUNN, MCNEIL & PARKER, CHARTERED
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-13-
<PAGE>
OWNERS OF URBACH KAHN & WERLIN, PC
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-14-
<PAGE>
OWNERS OF SELF FUNDED BENEFITS, INC.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-15-
<PAGE>
OWNERS OF HOLTHOUSE CARLIN & VAN TRIGT LLP
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-16-
<PAGE>
OWNERS OF GRACE & COMPANY, P.C.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-17-
<PAGE>
OWNERS OF SIMIONE, SCILLIA, LARROW & DOWLING, LLC
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-18-
<PAGE>
OWNERS OF THE REPPOND COMPANY, INC.,
REPPOND ADMINISTRATORS, L.L.C. AND
VERASOURCE EXCESS RISK LTD.
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
___________________________________
(Additional Signatures Follow)
-19-
<PAGE>
SCHEDULE I
----------
NAME OF FOUNDING COMPANY
------------------------
Robert F. Driver Co., Inc.
Follmer, Rudzewicz & Company, P.C.
Mann Frankfort Stein & Lipp, P.C.
Berry, Dunn, McNeil & Parker, Chartered
Urbach Kahn & Werlin, PC
Self Funded Benefits, Inc.
Holthouse Carlin & Van Trigt LLP
Grace & Company, P.C.
Simione, Scillia, Larrow & Dowling, LLC
The Reppond Company, Inc., Reppond Administrators, L.L.C. and VeraSource Excess
Risk Ltd.
I-1
<PAGE>
SCHEDULE II
-----------
BOARD OF DIRECTORS
------------------
NAME DESIGNATED BY
- ------------------------ ---------------------------------------
Robert C. Basten N/A
DeAnn L. Brunts N/A
Scott H. Lang BGL
David Reznick Reznick, Fedder & Silverman, P.C.
Thomas R. Corbett Robert F. Driver Co., Inc.
Tony Frabotta Follmer, Rudzewicz & Company, P.C.
Richard H. Stein Mann Frankfort Stein & Lipp, P.C.
Charles H. Roscoe Berry, Dunn, McNeil & Parker, Chartered
Steven N. Fischer Urbach Kahn & Werlin, PC
Robert F. Gallo Self Funded Benefits, Inc.
Philip J. Holthouse Holthouse Carlin & Van Trigt LLP
Wayne J. Grace Grace & Company, P.C.
Anthony Scillia Simione, Scillia, Larrow & Dowling, LLC
William J. Lynch N/A
Louis C. Fornetti N/A
[INDEPENDENT DIRECTOR] N/A
[INDEPENDENT DIRECTOR] N/A
II-1
<PAGE>
SCHEDULE III
------------
Craig P. Colmar
Clifford D. Haigler
Korn Ferry
Don Sanders
Katherine Sanders
John Drury
George Ball
Bill De Arman
Ben Morris
John Mundy
Vern Stewart
John Gilmore
Walter Deroeck
Dr. Charles Mclintick
Dick Tesauro
Randy Kurtz
Bruce Cole
Walter Bissex
Dr. Brown
Dr. McClung
II-2
<PAGE>
Exhibit 10.8
FORM OF INCENTIVE COMPENSATION AGREEMENT
THIS AGREEMENT is made as of _________, 1999, by and among CenterPoint Advisors,
Inc., a Delaware corporation ("CenterPoint"), [Founder/CenterPoint Advisors,
Inc.], a ________ corporation (the "Company"), and the persons listed on Exhibit
A attached hereto (as such Exhibit is amended in accordance with the terms
hereof, the "Participants").
WHEREAS, an entity or entities in which the Participants own, directly or
indirectly, all of the equity or membership interests has entered into a Merger
Agreement dated as of March 31, 1999 by and among the parties hereto (the
"Merger Agreement"), whereby such entity or entities has agreed to merge with
one or more subsidiaries of CenterPoint;
WHEREAS, the Participants will occupy a position of trust and confidence with
the Company after the date of this Agreement and during the period of this
Agreement will become familiar with the Company's proprietary and confidential
information;
WHEREAS, the agreements and covenants contained herein are essential to protect
the Company and its goodwill and CenterPoint would not complete the transactions
contemplated by the Merger Agreement without the rights and protection that this
Agreement provides with respect to proprietary and confidential information and
post-termination restrictions;
WHEREAS, the parties' obligation to consummate the transactions contemplated by
the Merger Agreement is subject to the condition that the parties hereto execute
and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Services; Authority. Each Participant, severally and not jointly, promises
to perform and discharge in a manner deemed adequate by the Committee such
duties as may be assigned by the Committee from time to time and to comply with
all policies and procedures established by the CenterPoint Board of Directors in
effect from time to time; provided, however, that such policies and procedures
shall not be materially inconsistent with the delegation of authority contained
in this Agreement. Each Participant shall obtain and maintain such licenses,
credentials or other certifications required to perform his or her services for
the Company. The Company shall reimburse each Participant for all direct costs
incurred to maintain such licenses, credentials or certifications.
The Committee shall have general control of and responsibility for ordinary
course, day-to-day operations of the Company, including (i) acceptance,
management and termination of client and prospective client relationships, (ii)
client billing and collection, (iii) staffing, quality control and the
management of professional engagements, (iv) hiring, retention, training,
compensation, benefits and other similar matters concerning personnel, (v)
business development and marketing, (vi) management of facilities and equipment
and (vii) establishing policies and procedures to implement the foregoing.
<PAGE>
Such operations shall be conducted in compliance with applicable laws as well as
the annual budget developed by the Committee and CenterPoint. Such operations
shall be conducted consistent with generally applicable policies and procedures
established by CenterPoint's Board of Directors not materially inconsistent with
the delegation of authority contained in this Agreement; provided that any such
policy or procedure that modifies the aggregate benefits provided to employees
under any employee benefit program in place as of the date hereof must be
approved by the affirmative vote of two-thirds of the members of CenterPoint's
Board of Directors. For so long as this Agreement is in force and effect,
CenterPoint and the Company acknowledge and agree that the power and authority
of the Company's directors and officers to manage the business and affairs of
the Company shall be subject to the delegation of authority to the Committee
contained in this Agreement.
2. Compensation.
(a) Base Pool. The Base Pool for any calendar year shall be an amount equal
to Base Earnings less Contribution plus the Bonus Pool for the prior calendar
year; provided that for the year 2000, the Base Pool shall not be less than the
Base Pool for the year 1999 (without regard to any adjustment specified in
paragraph 2(e) hereof). "Base Earnings" means $________, /1/ as adjusted
pursuant to paragraphs 3(b) and (c). "Contribution" means $ _________, as
adjusted pursuant to paragraph 3(c).
(b) Payments of Base Pool. At or about the beginning of each annual period,
the Committee shall determine a base salary for each Participant for such
period. Such base salary may be changed at any time and from time to time by the
Committee. Changes in base salary that are inconsistent with the Company's prior
practice shall be subject to the review and approval of CenterPoint, which
approval shall not be unreasonably withheld. In no event shall the aggregate of
all Participants' base salaries and Indirect Costs exceed 75% (85% for 1999 and
2000) of the Base Pool. The Company shall pay to each Participant the base
salary in substantially equal installments twice monthly or at such other time
or times as may be determined by the Company. The Company shall have the right
to deduct any federal, state or local taxes required by law to be withheld with
respect to any payment hereunder and pay the applicable amounts to the
appropriate taxing authority.
(c) Bonus Pool. The Bonus Pool for any calendar year shall be an amount
equal to (x) the Unpaid Base Amount plus (y) the Earned Bonus Amount. The
"Unpaid Base Amount" for any year means the amount of Base Earnings for such
year less the amount of Contribution for such year less the amount of base
salaries and Indirect Costs paid from the Base Pool for such year. The "Earned
Bonus Amount" for any year means 60% of the number that results from subtracting
(x) the amount of Base Earnings for such year from (y) the amount of actual
Operating Earnings for such year.
- -----------------
/1/An estimated amount of Operating Earnings for the Company for the four
calendar quarters ended prior to closing, including agreed upon add-backs.
Following the closing, CenterPoint's accountants will calculate the actual
amount of Operating Earnings for such period (including agreed upon add-backs)
and Base Earnings shall be such actual amount.
2
<PAGE>
(d) Calculation and Payment of Bonus Pool.
(i) Within 60 days after the end of each calendar year, the Company
shall calculate the amount of the Bonus Pool with respect to the preceding
calendar year and submit such calculation to CenterPoint for review. CenterPoint
shall have 30 days to review and approve such calculation. After the
determination and review of the Bonus Pool, the Committee shall determine the
incremental compensation ("Bonus") payable to each Participant. The aggregate of
all Bonus payments shall not exceed the amount of the Bonus Pool. Within 10 days
after the determination of the Bonus payment, the Company shall pay to each
recipient the Bonus established with respect to such period; provided that the
Company shall have the right to deduct from all such payments any federal, state
or local taxes required by law to be withheld with respect to such payment and
pay the applicable amounts to the appropriate taxing authority.
(ii) If the Bonus Pool is a negative number, the Company shall not pay
any Bonus with respect to such year and at the option of the Committee (i) the
Company shall deduct an amount of such deficiency determined by the Committee
from the next succeeding payment(s) owing to such Participant or (ii) each
Participant shall promptly refund to the Company such amount as determined by
the Committee. A person who ceases to be a Participant will continue to be
liable for any payment for such year under this subparagraph.
(e) Adjustment for calendar year 1999. For purposes of all calculations
and payments with respect to the calendar year 1999, all amounts shall be
adjusted based on the seasonality percentages set forth on Exhibit B attached
hereto. For example, if this Agreement becomes effective at the end of the first
quarter of 1999, then Base Earnings and Contribution for 1999 will be 100 minus
the applicable cumulative percent as shown on Exhibit B of the amount calculated
for the calendar year 1999. If this Agreement becomes effective at any time
other than the end of a calendar quarter, the applicable percentage shall be an
interpolation of the amounts shown on Exhibit B based on the days elapsed
between the two calendar quarters. The amount of Operating Earnings for 1999
shall be determined for the period from the date hereof to and including
December 31, 1999.
3. Participants.
(a) The initial Participants are listed on Exhibit A hereto. Subject to
the approval of CenterPoint, which approval shall not be unreasonably withheld
or delayed, the Committee, on behalf of the Company, may designate additional
Participants from time to time. No person shall become a Participant unless such
person agrees in writing to be subject to and bound by all of the terms,
conditions and restrictions of this Agreement by signing an Instrument of
Accession substantially in the form of Exhibit C hereto. A person shall cease to
be a Participant at such time as determined by the Committee.
(b) For any person who initially becomes a Participant after being an
employee of the Company, effective as of the time such person becomes a
Participant, the amount of Base Earnings for such year shall be adjusted by
adding the salary, bonus and Indirect Costs associated with such person paid or
payable with respect to the portion of the prior calendar year that corresponds
to the portion of the then current calendar year that such person will be a
Participant. Effective for the next calendar year, the amount of Base Earnings
shall be readjusted by subtracting the preceding
3
<PAGE>
adjustment and adding the salary, bonus and Indirect Costs associated with such
person paid or payable with respect to the calendar year prior to the year such
person initially became a Participant.
(c) For any person who initially becomes a Participant as a result of an
acquisition of any professional services practice, effective as of the time such
person becomes a Participant, the amount of Base Earnings and Contribution shall
be adjusted as approved by the Committee and CenterPoint, which adjustments
shall reflect the amount of expected margin contributed by such acquisition as
determined by the terms of such acquisition, including as expenses any
compensation to any parties who become Participants in connection with such
acquisition and any overhead allocation and return on invested capital
allocation with respect thereto.
4. Restrictive Covenants.
(a) If, during the period ending with the second anniversary of the day
any Participant ceases to be employed by the Company (the "Restrictive Period"),
such Participant,
directly or indirectly, whether individually or as an officer,
director, shareholder, owner, partner, joint venturer, employee, independent
contractor, consultant or advisor to or of any entity, or in any other capacity,
engages, participates or invests in any business that renders services similar
to the business conducted by CenterPoint and its subsidiaries to any person or
entity that was a client of CenterPoint and its subsidiaries (including the
Company) at or within one year of the earlier of such Participant's termination
of employment or such engagement, participation or investment,
such Participant agrees to pay to the Company 125% of the greater of
(i) the average annual fees charged by CenterPoint and its subsidiaries to
any such client for the prior three year period (or the average annualized fees
for the time such clients were served by CenterPoint and its subsidiaries if
less than three years) or
(ii) the fees charged by CenterPoint and its subsidiaries to any such
client during the most recent 12 month period;
provided, however, that nothing contained herein shall prevent Participant from
investing in up to 1% of the outstanding stock of any such business that is
publicly-traded and listed on a recognized national, international or regional
securities exchange or traded in the U.S. over-the-counter market, but only if
Participant is not actively involved in, and does not render consulting services
to, such business.
Such amount is payable within 10 days after receipt by Participant of notice
from the Company that any amount is due to the Company. Any unpaid amount shall
bear interest at the rate of two percent over the highest "prime rate" of
interest reported by The Wall Street Journal on the date of such notice.
4
<PAGE>
(b) If during the Restrictive Period, such Participant solicits for
employment or engagement, or influences or induces to leave the employment, or
knowingly causes to be employed or engaged, any employee of, or person engaged
by, CenterPoint or any of its subsidiaries, such Participant agrees to pay the
Company an amount equal to 50% of the greater of such person's total cash
compensation for the (i) 12 month period ending prior to, or (ii) if known, the
12 month period ending after, such person's termination of employment with
CenterPoint or its subsidiaries. Such amount is payable within 10 days after
receipt by Participant of notice from the Company that any amount is due to the
Company. Any unpaid amount shall bear interest at the rate of two percent over
the highest "prime rate" of interest reported by The Wall Street Journal on the
date of such notice.
(c) During the Restrictive Period, such Participant shall not knowingly
enter into, or call upon or request non-public information for the purpose of
entering into, a merger, consolidation, purchase of a material equity interest
or material assets, tender offer, recapitalization, accumulation of equity,
proxy solicitation or other business combination (an "Acquisition Transaction")
with any entity with respect to which CenterPoint or any of its subsidiaries has
made an offer or proposal for, or entered into discussions or negotiations for,
or evaluated with the intent of making a proposal for, an Acquisition
Transaction, within the prior six-month period.
(d) Participant acknowledges and agrees that the covenants set forth in
this Agreement (collectively, the "Restrictive Covenants") are reasonable and
necessary for the protection of the Company's and CenterPoint's goodwill and
business interests, that irreparable injury will result to the Company if
Participant breaches any of the terms of said Restrictive Covenants, and that in
the event Participant breaches or threatens to breach any such Restrictive
Covenants, the Company will have no adequate remedy at law. Participant
accordingly agrees that in the event Participant breaches or threatens to breach
any of the Restrictive Covenants, the Company shall be entitled to immediate
temporary injunctive and other equitable relief, without the necessity of
showing actual monetary damages. Nothing contained herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or the threat of such a breach by Participant, including the
recovery of any damages which it is able to prove. If any court of competent
jurisdiction shall at any time deem the Restrictive Covenants to be
unreasonable, the other provisions of this Agreement shall nevertheless stand,
the Restrictive Covenants shall be deemed to be amended as may be considered
reasonable by such court, and as so amended shall be enforced.
(e) The Restrictive Covenants set forth in this paragraph 4 shall not
apply to any Participant who ceases to be employed by the Company if CenterPoint
fails to make funds available to the Company such that the Company fails to make
any payment of the Base Pool or Bonus Pool that is required to be made pursuant
to the terms of this Agreement and such failure continues for a period of 30
days after CenterPoint's receipt of notice of such failure from such Participant
(a "Default"). If a Participant ceases to be employed by the Company following a
Default, CenterPoint agrees that it will not seek to enforce against such
Participant the covenants contained in Section 13.1 (a) through (c) of the
Merger Agreement.
5. Intellectual Property Rights. Participant will promptly communicate,
disclose and transfer to the Company free of all encumbrances and restrictions
(and will execute and deliver any papers and take any reasonable action at any
time deemed reasonably necessary by the Company to further establish such
transfer) all of Participant's right, title and interest in and to all ideas,
discoveries,
5
<PAGE>
inventions and improvements relating to the Company's business created,
originated, developed or conceived of by Participant solely or jointly with
others during the term of Participant's employment with the Company, whether or
not during normal working hours. Participant agrees that all right, title and
interest in and to all such ideas, discoveries, inventions and improvements
shall belong solely to the Company, whether or not they are protected or
protectible under applicable patent, trademark, service mark, copyright or trade
secret laws. Participant agrees that all work or other material containing or
reflecting any such ideas, discoveries, inventions or improvements shall be
deemed work made for hire as defined in Section 101 of the Copyright Act, 15
U.S.C.(S)101. Such transfer shall include all patent rights, copyrights,
trademark and service mark rights, and trade secret rights (if any) to such
ideas, discoveries, inventions and improvements in the United States and in all
other countries. Participant further agrees, at the expense of the Company, to
take all such reasonable actions and to execute and deliver all such assignments
and other lawful papers relating to any aspect of the prosecution of such rights
in the United States and all other countries as the Company may request at any
time during the period that Participant is employed with the Company or after
termination thereof.
6. Confidential Information. Other than in the performance of his or her
duties as an employee of the Company, during the Restrictive Period and
thereafter, Participant shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, directly or
indirectly furnish, make available or disclose to any third party or use for the
benefit of himself or any third party, any information relating to the business
or affairs of CenterPoint and its subsidiaries ("Confidential Information"),
including, but not limited to, information relating to financial statements,
employees, clients, suppliers, pricing, marketing, equipment, programs,
strategies, analyses, profit margins, or other proprietary information of or
used by CenterPoint or its subsidiaries in connection with the business
conducted by each of them; provided, however, that Confidential Information
shall not include any information which is in the public domain or becomes known
in the industry through no wrongful act on the part of Participant. Participant
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to the Company and CenterPoint.
7. Return of Company Materials Upon Termination. Participant acknowledges that
all price lists, sales manuals, catalogs, binders, forms, policies, training
materials, client lists and other client information, supplier lists and other
supplier information, financial information, memoranda, correspondence and other
records or documents including information stored on computer disks or in
computer readable form, containing Confidential Information prepared by
Participant or coming into Participant's possession by virtue of Participant's
employment by the Company is and shall remain the property of the Company and
that upon termination of Participant's employment with the Company, Participant
shall return immediately to the Company all such items, together with all copies
thereof, in Participant's possession.
8. Definitions.
(a) "Committee" means the committee determined pursuant to the agreement
dated as of ____________, 1999, as amended, among the Participants.
6
<PAGE>
(b) "Indirect Costs" means all costs paid by the Company with respect to
any person's employment, including FICA and Medicare taxes, medical, life and
disability insurance, contributions to defined benefit or defined contribution
plans, personal use of automobiles and airplanes, social and athletic clubs,
personal use of business clubs, and other similar fringe or personal benefits,
policies, programs or arrangements, but excluding appropriate travel and
entertainment expenses for the promotion of the Company's business incurred by
Participants that may be reimbursed in accordance with the Company's policies
and procedures in effect from time to time.
(c) "Operating Earnings" means, for any period, the sum of:
(i) the net income (or loss) of the Company and its consolidated subsidiaries,
excluding:
. provisions for income taxes,
. interest expense other than as related to capital leases, which capital leases
shall be treated as if they were operating leases for purposes of the
calculation of Operating Earnings,
. depreciation expense except to the extent such expense exceeds the amount of
depreciation expense reflected in the calculation of Base Earnings,
. any amortization of excess purchase price and any other expenses resulting
directly from payment of the consideration associated with the transaction
contemplated by the Merger Agreement,
. any extraordinary items,
. the income (or loss) of any Person in which any other Person (other than the
Company or its consolidated subsidiaries) has a joint interest except to the
extent of the amount of dividends or other distributions actually paid to the
Company or its consolidated subsidiaries by such Person during such period,
. any CenterPoint corporate allocations other than (i) for the expenses incurred
by CenterPoint for business functions that were formerly conducted by the
Company in an amount initially not to exceed the amount of expenses of such
functions then incurred by the Company and (ii) as determined by CenterPoint's
Board of Directors (which determination may otherwise increase or decrease the
amount of Operating Earnings) in connection with any change to employee benefits
and policies affecting all of the Founding Companies (as such term is defined in
the Merger Agreement) whereby any Founding Company suffers a net incremental
expense adversely affecting net income without receiving a corresponding
increase in the benefits provided,
. expenses in connection with any acquisition of a professional services
practice completed prior to the transaction contemplated by the Merger
Agreement,
. the base salary, Bonus and Indirect Costs of any Participant, and
less
7
<PAGE>
(ii) if there is a Deficiency, the amount resulting from multiplying the
Deficiency by the rate of interest payable at the end of the calendar year by
CenterPoint on its senior unsecured debt or, if CenterPoint does not have senior
unsecured debt outstanding, then the highest "prime rate" of interest reported
by The Wall Street Journal at the end of the calendar year plus 200 basis
points. A "Deficiency" is the negative number, if any, resulting from
subtracting (i) the product of Base DSO times Average Daily Revenue for the
period for which any Deficiency is being determined from (ii) the sum of the
Company's net accounts receivable and net work-in-process at the end of such
period. "Average Daily Revenue" means, for any period, the amount of net revenue
of the Company during such period divided by the number of days in such period.
"DSO" means (i) the sum of the Company's net accounts receivable and net
work-in-process at the end of any period divided by (ii) Average Daily Revenue
for such period. "Base DSO" means the average amount of DSO determined for the
Professional Services Firms with respect to the period in which any Deficiency
is being determined or, for all periods ending prior to the fourth anniversary
hereof, the amount of DSO for the Company determined for the 1998 calendar year,
if greater.
Except as specifically provided to the contrary, all amounts shall be
determined in accordance with generally accepted accounting principles set forth
in the opinions and pronouncements of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board and Securities and Exchange Commission or their respective
successors, consistently applied and maintained throughout the periods
indicated.
(d) "Person" means any natural person, corporation, partnership, limited
liability company or other business structure as a separate legal entity.
(e) "Professional Services Firms" means Berry, Dunn, McNeil & Parker,
Follmer, Rudzewicz & Co., Grace & Company, Holthouse, Carlin & Van Trigt, Mann
Frankfort Stein & Lipp, Reznick Fedder & Silverman, Simione, Scillia, Larrow &
Dowling and Urbach Kahn & Werlin.
(f) "Pro Rata Share" with respect to any Participant means the percentage
amount that such Participant's base salary for the applicable period and Bonus
for the preceding period bears to the sum of all Participants' base salaries and
Bonuses for such periods.
9. Miscellaneous.
(a) This Agreement will be governed by and construed in accordance with the
internal law (and not the law of conflicts) of the State of Illinois.
(b) This Agreement does not create any partnership, joint venture or
fiduciary relationship of any kind between any Participant and the Company. This
Agreement shall not be deemed to limit in any way the Company's rights or powers
with respect to its operations, funding, sale or closure, or obligate the
Company in any way with respect to the funding or continuation of its
operations. This Agreement shall not be deemed to create a contract of
employment between the Company and any Participant and shall create no right in
any Participant to continue in the Company's employ for any specific period of
time.
8
<PAGE>
(c) The rights of a Participant or any person claiming through a
Participant are solely those of an unsecured general creditor of the Company and
the Company's obligation shall be an unfunded and unsecured promise to pay. No
Participant or any other person has any rights, interests or prior claims
whatsoever in the Company's assets. The Company's obligations under this
Agreement will be satisfied from the general assets of the Company, and any
asset that may be used or acquired by the Company shall not be deemed to be held
under any trust or escrow for the benefit of the Participants, nor shall it be
considered security for the performance of the Company's obligations.
(d) This Agreement constitutes the entire agreement between the parties
and supersedes any prior understandings and agreements between the parties
relating to its subject matter. This Agreement shall not confer any rights or
remedies upon any person other than the parties and their permitted assigns.
(e) No Participant may directly or indirectly transfer, assign, convey,
sell, encumber or in any way alienate ("Transfer") any interest in this
Agreement. To the fullest extent permitted by law, Transfers in violation of
this paragraph shall be null and void ab initio.
(f) To the extent permitted by applicable law, the Company shall have the
right to offset amounts owed to any Participant pursuant to this Agreement by
any Losses for which CenterPoint or the Company is entitled to indemnification
under the Merger Agreement.
(g) This Agreement may be modified, altered, supplemented or amended
pursuant to a written agreement executed by CenterPoint, the Company and
Participants whose aggregate Pro Rata Share for the then current calendar year
is at least ____% of the sum of all Participants' base salaries for such period
and Bonuses for the prior period. This Agreement may also be modified, altered,
supplemented or amended in a manner that affects all Professional Services Firms
in the same manner pursuant to a written instrument executed by CenterPoint and
the Company and upon the affirmative vote of (i) all representatives of
Professional Services Firms if such action is to be effective prior to the third
anniversary of the date hereof, (ii) at least 75% of the representatives of
Professional Services Firms if such action is to be effective after the third
anniversary of the date hereof. A representative of a Professional Services
Firms shall be the person designated by such entity to serve as a director of
CenterPoint or if no such person is designated, then a person designated by the
Committee. Any modification, alteration, supplement or amendment in accordance
with the provisions hereof shall be effective with respect to all Participants.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CENTERPOINT ADVISORS, INC.
By:_____________________________________
Its:____________________________________
[FOUNDER/CENTERPOINT, INC.]
By:_____________________________________
Its:____________________________________
[PARTICIPANTS]
10
<PAGE>
EXHIBIT A
Participants
------------
<PAGE>
EXHIBIT C
Instrument of Accession
-----------------------
The undersigned, in connection with becoming a Participant under the
Incentive Compensation Agreement dated as of _____, 1999 by and among
[Founder/CenterPoint Advisors, Inc.] (the "Company") and the other parties
thereto (as amended, the "Agreement"), hereby agrees to become subject to and
bound by all of the terms, conditions and restrictions of the Agreement. This
instrument shall take effect and shall become an integral part of the Agreement
immediately upon execution and delivery to the Company.
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned.
Dated:________________________
________________________________________
Printed Name:___________________________
<PAGE>
Exhibit 10.9
FORM OF SEPARATE PRACTICE AGREEMENT
-----------------------------------
THIS AGREEMENT (this "Agreement") is entered into as of [__________ __],
1999 (the "Effective Date"), by and among [Founder/CenterPoint Advisors, Inc.],
a Maryland corporation and a wholly owned subsidiary of CenterPoint Advisors,
Inc. (the "Company"), the certified public accountants (each a "CPA" and
collectively, the "CPAs") whose names appear on attached Exhibit A (the
"Members"), and [Founder L.L.C.], a _________ limited liability company (the
"Firm").
RECITALS
A. Members desire to operate the Firm as a public accounting practice
independent of Company.
B. Company has clients who from time to time require Attest Services
which Company is not able to provide to its clients (as used in this Agreement,
"Attest Services" means the practice of public accountancy that pursuant to
applicable laws, regulations or ethics rules may only be conducted by licensed
certified public accountants).
C. It is the parties' intention that the Firm will provide Attest
Services and that such activities by Members will not be considered a violation
of their contractual agreements with Company.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Company, the Members, and the Firm
agree as follows:
1. Subject to the terms of this Agreement, Members may own and operate
the Firm and provide and bill for Attest Services to the Company's clients
through the Firm (the "Separate Practice") under the name " _________" until
this Agreement is terminated according to its terms. The Firm shall not, and the
Members shall not permit the Firm to, conduct any business activities of any
type or kind whatsoever other than the provision of Attest Services.
2. Members shall cause the Firm to operate as a separate legal entity and
observe all legal requirements and customary practices necessary to assure that
the Firm is a separate and distinct legal entity from any other person or
entity.
3. The Firm shall inform all of its clients that it is not a part of
Company and that the Firm is responsible for the work of the Separate Practice.
In addition, Members shall assure that the Firm has its own business identity,
including, without limitation, letterhead and business cards. Upon
<PAGE>
soliciting or accepting any new client, the Firm shall use commercially
reasonable efforts to learn from such client all relationships between it and
Company and Company's affiliates, and the Firm shall promptly advise Company of
the identity of any such new client and all such relationships. The Firm shall
enter into separate engagement letters relating to the Attest Services to be
provided with each client of the Company. The Firm shall not provide Attest
Services to the Company or any of the Company's affiliates.
4. The Firm shall obtain and maintain, at its sole cost and expense,
accounting malpractice insurance in an amount at least equal to such insurance
maintained by the Company as of the date of this Agreement. Insurance shall be
maintained with an insurance company acceptable to Company. The Firm shall
provide Company with evidence of such coverage at the time this Agreement is
signed, which coverage shall include a provision requiring the insurance carrier
to notify Company at least 30 days before such coverage lapses, is canceled or
is not renewed. At the time of termination of this Agreement in accordance with
its terms, if the insurance obtained by the Firm has not been on an "occurrence"
basis, the Firm shall obtain "tail" coverage covering all claims made based upon
occurrences during the term of this Agreement. In the event that the Firm fails
to maintain any insurance required to be maintained by them pursuant to this
Section 4, the Company may, but shall not be obligated to, maintain such
insurance on Firm's behalf and offset its expenses with respect thereto from any
amounts owing by Company to the Firm, pursuant to this Agreement or otherwise.
The provisions of this Section 4 shall survive any termination of this
Agreement.
5. Each Member shall be, and shall cause the Firm to be, properly
registered as a certified public accountant and a certified public accounting
firm, respectively, in good standing in each state in which it conducts its
business. Members and the Firm shall comply with all applicable ethical,
professional and legal requirements. The Firm shall make provisions for adequate
quality review procedures in accordance with applicable professional and legal
requirements in such state. The Firm shall immediately notify Company of any
pending or threatened disciplinary proceeding by any State Society of CPAs, the
American Institute of Certified Public Accountants or any other federal or state
regulatory authority that could result in the loss of such registration,
licensure, or membership.
6. The Company and Members acknowledge and agree that other persons may
from time to time acquire membership interests in the Firm. The Firm shall not
issue or permit the transfer of any membership interests unless (i) the person
acquiring such interests agrees in writing to be subject to and bound by all of
the terms, conditions and restrictions of this Agreement by signing an
Instrument of Accession in the form of attached Exhibit B and (ii) such person
is a CPA or the person's equity is owned entirely by CPAs, in each case,
licensed in at least one jurisdiction in which the Firm provides Attest
Services.
Members and the Firm may not assign this Agreement or any rights
and/or obligations hereunder without the prior written consent of Company. Any
such attempted assignment shall be void ab initio. Company shall have the right
to assign its rights and delegate its obligations hereunder to any affiliate of
Company or to any third party succeeding to all or substantially all of the
assets of Company.
2
<PAGE>
7. Unless terminated earlier pursuant to the terms hereof, this Agreement
shall be effective as of the Effective Date and shall continue for a period of
40 years thereafter; provided, however, that this Agreement may be terminated:
a. By Company or Firm, in the event that it is determined by any court,
accounting or other regulatory body that the operation of the Separate Practice
in accordance with the terms of this Agreement violates any law, rule or
regulation (including, without limitation, any law, rule or regulation
prohibiting the practice of accounting by non-professional corporations or
partnerships); or
b. Subject to any applicable cure period, by the non-breaching party, in
the event of a breach of any of the terms of this Agreement or the Services
Agreement dated the date hereof between the Company and the Firm.
8. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, sent by nationally recognized
overnight delivery service, mailed by registered or certified mail (return
receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
If to Company: c/o CenterPoint Advisors, Inc.
225 West Washington Street
16th Floor
Chicago, Illinois 60606
Attn: Robert Basten
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attn: Howard S. Lanznar, Esq.
Facsimile No.: (312) 902-1061
3
<PAGE>
If to Firm or __________________________
Members: __________________________
__________________________
__________________________
__________________________
__________________________
Attn: ____________________
Facsimile: _______________
with a copy to: __________________________
__________________________
__________________________
__________________________
__________________________
Attn: ____________________
Facsimile: _______________
1 Peachtree Center
303 Peachtree Street
Suite 5300
Atlanta, GA 30308
Attn: Jeff Haidet
Facsimile: (404) 527-4198
9. Company shall have the right from time to time upon reasonable notice
to the Firm during normal business hours to audit, copy, review and examine the
books, records and tax returns and reports of the Firm.
10. This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Illinois applicable to
contracts executed and to be performed wholly within such state, without giving
effect to its choice of law rules.
11. Any dispute, controversy or claim arising out of, relating to, or
connected with, this Agreement, its interpretation, the breach thereof or any
other agreement entered into in connection with the transactions contemplated
herein, including the arbitrability of such dispute, controversy or claim, shall
be settled exclusively by final and binding arbitration venued in Chicago,
Illinois in accordance with the Arbitration Rules for Professional Accounting
and Related Services Disputes of the American Arbitration Association, and
judgment upon the award entered by the arbitrator may be entered in any court
having jurisdiction thereof; provided, however, that nothing herein shall be
construed to prohibit Company from seeking in any court of competent
jurisdiction any injunctive or other equitable relief to which it is entitled
hereunder.
12. This Agreement shall not be modified or amended except by a written
document executed by Company and the holders of a majority of the voting power
of the issued and outstanding Interests in the Firm.
13. This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof.
4
<PAGE>
14. This Agreement may be executed via facsimile or otherwise in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
15. This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and permitted successors and assigns, and except as
expressly set forth herein, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
* * *
5
<PAGE>
IN WITNESS WHEREOF, Company, the Members and the Firm have executed this
Agreement as of the Effective Date.
[FOUNDER/CENTERPOINT, INC.]
By:_________________________________
Name:_______________________________
Its:________________________________
[FOUNDER L.L.C.]
By:_________________________________
Name:_______________________________
Its:________________________________
<PAGE>
MEMBERS
------------------
<PAGE>
EXHIBIT A
List of Members
---------------
<PAGE>
EXHIBIT B
Form of Instrument of Accession to Separate Practice Agreement
--------------------------------------------------------------
The undersigned, in connection with becoming the owner or holder of record
of a [_______________ (_____%)] membership interest in [Founder L.L.C.], a
Maryland limited liability company (the "Firm"), hereby agrees to become party
to and bound by that certain Separate Practice Agreement, dated as of
[__________________], 1999, by and among the Firm, [Founder/CenterPoint, Inc.]
(the "Company") and the Members of the Firm. This instrument shall take effect
and shall become an integral part of the Separate Practice Agreement immediately
upon execution and delivery to the Firm and the Company of this instrument.
IN WITNESS WHEREOF, this instrument has been duly executed by or on behalf
of the undersigned.
Dated: _________________
[FOUNDER/CENTERPOINT, INC.]
By:_________________________________
Name:_______________________________
Its:________________________________
[FOUNDER L.L.C.]
By:_________________________________
Name:_______________________________
Its:________________________________
____________________________________
[NEW MEMBER]
<PAGE>
Exhibit 10.10
FORM OF SERVICES AGREEMENT
This Services Agreement (this "Agreement"), is entered into as of
[__________ __], 1999, (the "Effective Date") by and between
[Founder/CenterPoint Advisors, Inc.], a [___________] corporation ("Company"),
and [Attest L.L.C.], a [________ limited liability company] ("Firm").
RECITALS
A. Firm provides professional accounting services through individual
Certified Public Accountants (each a "CPA" and collectively, the "CPAs") who are
employed or otherwise retained by Firm.
B. Company owns certain assets that can be used to provide professional
accounting services and management, administrative and other support services.
C. Pursuant to the terms and conditions of this Agreement, Firm desires
to obtain the services of Company in performing such business functions so as to
permit Firm to devote its full professional time and attention to the rendering
of professional accounting services.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, Company and Firm agree as
follows:
ARTICLE I
Relationship of the Parties
---------------------------
Section 1.1 Appointment. Firm hereby appoints Company as its agent for the
management and administration of the business functions and business affairs of
Firm, and Company hereby accepts such appointment, subject at all times to the
terms and conditions of this Agreement.
Section 1.2 Independent Contractor. Firm and Company intend for Company to act
and perform as an independent contractor, and the provisions hereof are not
intended to create any partnership, joint venture, agency or employment
relationship between the parties hereto, except as otherwise expressly provided
herein. Company and Firm agree that Firm shall retain the exclusive authority
to direct the professional and ethical aspects of its accounting practice.
Company shall exercise neither control nor direction over the accounting
methods, procedures or decisions of Firm.
<PAGE>
Section 1.3 Practice of Accountancy. The parties hereto acknowledge that Company
is not authorized or qualified to engage in any activity which under applicable
laws, regulations or ethics rules may only be performed by licensed certified
public accountants ("Attest Services") and that nothing herein shall be
construed as the provision of Attest Services by Company. To the extent any act
or service required of Company is construed or deemed to constitute the
provision of Attest Services, Company is released from any obligation to
provide, and Firm shall be deemed not to have requested Company to provide, such
act or service without otherwise affecting the other terms of this Agreement.
ARTICLE II
Services to be Provided by Company
----------------------------------
Section 2.1 Scope of Services Provided. Company shall provide or arrange for the
provision of the services set forth in this Article II. Except to the extent
necessary to comply with applicable laws, regulations or professional standards,
Firm will not act in a manner which would prevent Company from performing its
duties hereunder and will provide such information and assistance to Company as
is reasonably required by Company to perform its services hereunder. Company
shall cause its employees to comply with all applicable federal, state and local
laws, rules and regulations in Company's provision of services hereunder.
Section 2.2 General Administrative Services.
(a) Billing and Collection.
----------------------
(i) Firm hereby appoints Company for the term of this Agreement to be
its true and lawful attorney-in-fact, and in connection therewith,
grants to Company a power of attorney, coupled with an interest,
for the following purposes :
(A) to bill clients in Firm's name and on Firm's behalf, unless
prohibited by law;
(B) to collect, receive and administer accounts receivable
resulting from such billing in Firm's name and on its behalf;
(C) to take possession of and endorse in the name of Firm (and/or
in the name of an individual accountant, such payment
intended for purpose of payment of professional fees related
to Firm) any notes, checks, money orders, insurance payments
and other instruments received in payment of accounts
receivable;
(D) to initiate the institution of legal proceedings in the name
of Firm, to collect any accounts and monies owed to Firm and
to enforce the rights of Firm as creditor under any contract
or in connection with the rendering of any service; and
(E) to sign checks, drafts, bank notes or other instruments on
behalf of Firm.
2
<PAGE>
(ii) Firm covenants, and shall cause each of its employees, to forward
any payments received for services provided by or on behalf of Firm for deposit
in a separate bank account owned solely by Firm (the "Firm Account"), and to
otherwise apply such funds in a manner consistent with the terms of this
Agreement. Firm and Company agree that Company shall be entitled to (and is
hereby authorized) to transfer funds from the Firm Account in payment of the
Service Fee (as determined pursuant to Article IV hereof). Firm and Company
agree to execute from time to time such documents and instructions as shall be
required by the bank maintaining the Firm Account to effect the foregoing
provisions and to extend or amend such documents and instructions as reasonably
required to effect the intent of this Section 2.2(a)(ii). Any action or
threatened action by Firm that materially interferes with or could materially
interfere with the operation of this Section 2.2(a)(ii), will constitute a
breach of this Agreement and will entitle Company, in addition to any other
remedies it may have at law or in equity, to seek a court ordered assignment of
the rights provided to Company pursuant to subparagraph (i) above and this
subparagraph (ii) and to distribute account debtor letters to clients
instructing them to make payment directly to and in the name of Company for
services rendered by Firm; provided that any amounts received by Company in
excess of the amount owed to Company by the Firm shall be held by Company for
the benefit of Firm.
(iii) All monies shall be accounted for by Company as being distinctly
attributable to Firm. Firm shall execute such documents in form and substance as
approved by Company to permit Company to exercise the rights and powers granted
to Company pursuant to this Section 2.2(a). Firm shall cooperate with, and at
the request of Company shall provide reasonable assistance to, Company with the
functions set forth herein.
(iv) The administration of accounts receivable pursuant to this
Section 2.2(a) shall include, without limitation, the right to: (A) extend the
time of payment of such accounts; (B) discharge or release the obligors of any
such accounts receivables; (C) sue, assign or sell at a discount such contracts,
subject to customary practice; and (D) take such other measures to procure
payment of any such accounts as Company shall deem reasonable and appropriate.
(b) Accounting. Company shall administer and maintain the operation of a
bookkeeping and accounting system for Firm, including the maintenance, custody
and supervision of business records, ledgers and reports; and the establishment,
administration and implementation of accounting procedures, controls and
systems.
(c) Cash Management. Company shall manage the cash and cash equivalents of
Firm, and Company shall be entitled (and is hereby authorized) to transfer such
cash from the Firm Account and to use such cash for purposes as Company deems
appropriate.
(d) Other Services. Company shall supply to Firm all reasonably necessary
or appropriate services for the reasonably efficient operation of Firm,
including without limitation, clerical, purchasing, payroll, computer,
information management, preparation of tax returns, printing, postage and
duplication services, in each case consistent with the past practice and custom
of the Company. Company shall prepare quarterly unaudited accrual financial
statements for Firm containing a balance sheet and income statement, which shall
be delivered to Firm as soon as practicable, but no later than 45 days after the
end of each fiscal quarter.
3
<PAGE>
(e) Records and Files.
-----------------
(i) Company's Business and Financial Records. At all times during and
after the term of this Agreement, including any extensions or renewals hereof,
all business records, including but not limited to, business agreements, books
of account, personnel records, general administrative records and all
information generated under or contained in the management information system
pertaining to Company's obligations hereunder, and other business information of
Company of any kind or nature shall be and remain the sole property of, and
shall be managed and maintained by, Company. Notwithstanding the foregoing, the
Firm shall maintain all files pertaining to client engagements.
(ii) Access to Records. Except as prohibited by law, at all times
during and after the term of this Agreement, each party and its authorized
agents shall be entitled, upon request and with reasonable advance notice, to
obtain access (within not more than 10 business days following receipt of such
notice by the other party or parties) to all records of the other party directly
related to the performance of such party's obligations pursuant to this
Agreement.
(iii) Compliance with Law. The management and maintenance of all files
and records by Company and Firm shall comply with all applicable federal, state
and local statutes, rules and regulations.
Section 2.3 Facilities.
(a) Premises. Company shall provide such office space and facilities (the
"Premises") as Company and Firm shall jointly and reasonably determine to be
necessary or appropriate for Firm to conduct its business. The Premises shall be
subject to such expansion or reduction as jointly and reasonably reviewed and
approved by Company and Firm.
(b) Personal Property. Company shall provide such equipment, furniture,
fixtures, furnishings and other personal property reasonably necessary or
appropriate for the reasonably efficient operation of Firm for the use of Firm
pursuant to the terms hereof (the "Personal Property").
Section 2.4 Personnel. Company shall provide personnel, including, without
limitation, professional, administrative, clerical, secretarial, bookkeeping and
collection personnel as are reasonably necessary for the conduct of Firm's
operations. All personnel provided under this Section 2.4 shall be employees of
Company or one of its Affiliates, and Company shall determine and cause to be
paid the salaries and benefits of all such personnel.
Section 2.5 Inventory and Supplies. Company shall provide to Firm inventory and
supplies that are reasonably required in connection with the operation of the
Firm.
Section 2.6 No Warranty. Firm acknowledges that Company has not made and will
not make any express or implied warranties or representations that the services
provided by Company will result in any particular amount or level of
professional accounting practice or income to Firm.
4
<PAGE>
Section 2.7 Financial Planning and Budgeting.
(a) Budgeting. Company shall prepare, subject to the Firm's approval, all
annual capital and operating budgets (each an "Annual Budget" and collectively,
the "Annual Budgets"). For purposes of developing the initial Annual Budget, the
Company and Firm shall take into account the categories of expenses determined
by Company. The Annual Budget for each subsequent year shall reflect Firm's
anticipated staffing requirements for the next fiscal year, as well as other
anticipated expenses of Firm. The Annual Budget for each year shall remain in
full force and effect until the Annual Budget for the subsequent year is duly
adopted by the Firm.
(b) Capital Expenditures. Subject to the terms contained herein, Company
will make funds available for capital expenditures and improvements by Company
on behalf of Firm as follows:
(i) Budgeted Expenditures. All budgeted capital expenditures and
improvement projects shall be subject to final review and approval by the
Company and Firm prior to the making of any actual expenditure. Such review and
approval shall be based on confirming that the assumption, facts and
circumstances on which the decision to budget for such expenditure was based
still support and justify the actual expenditures.
(ii) Non-Budgeted Expenditures. Non-budgeted capital expenditures and
improvement projects shall be jointly and reasonably evaluated and approved by
the Firm and Company prior to the making of any actual non-budgeted expenditure.
ARTICLE III
Obligations of Firm
-------------------
Section 3.1 Licensing. Firm shall ensure that each person employed as a CPA has
all required licenses, credentials, approvals or other certifications to perform
his or her duties and services for Firm and, in the event that Firm becomes
aware of any disciplinary actions or malpractice actions initiated against any
such person, Firm shall promptly inform Company of such action and the
underlying facts and circumstances.
Section 3.2 Attest Services. Firm shall use and occupy the Premises exclusively
for the provision of Attest Services. Firm shall provide Attest Services to its
clients in compliance at all times with ethical standards, laws, rules and
regulations applicable to the operations of Firm. From time to time Firm, after
consultation with the Company, will adopt and implement fee schedules for
clients which shall be reasonable in relation to fees generally being charged in
the same or similar market areas.
Section 3.3 Firm's Internal Matters. Except as set forth herein, Firm shall be
responsible for matters involving its governance, employees and similar internal
matters, including, but not limited to, distribution of income among its
members, disposition of Firm's property and ownership interests (subject to any
restrictions contained herein), hiring and firing of its employees, licensing
and implementing all compliance plans and procedures as described in Section
3.4.
5
<PAGE>
Section 3.4 Compliance with Laws. Firm shall, and shall use its best efforts
to cause the employees of Firm to, comply with all applicable federal, state and
local laws, rules, regulations and restrictions in the conduct of Firm's
business. Firm and Company shall adopt a compliance plan or procedures to
assist Company and Firm in complying with applicable laws, rules and regulations
applicable to their respective duties, and Firm agrees to abide, and to cause
its employees to abide, by any such compliance plan or procedures. Firm shall
not take, and shall use its best efforts to prohibit any of its employees from
undertaking, any action that is not in accord with the regulatory compliance
plans, policies and manuals so developed.
Section 3.5 Firm Employee Benefit Plans. Firm shall not enter into or offer
to any of its or Company's employees any "employee benefit plan" (as defined in
Section 3(3) of ERISA) without the prior written consent of Company.
Section 3.6 Operating Agreements. Firm shall enforce the terms of any
operating agreements to which it is a party and any restrictive covenants of
which it is the beneficiary. Firm shall inform Company of any breach or
violation, or suspected breach or violation, of any such covenants or
restrictions and shall consult with Company in its efforts to enforce such
covenants and restrictions.
Section 3.7 Negative Covenants of Firm. During the term of this Agreement,
Firm shall not take any action or inaction which, in Company's reasonable
discretion, would impair Company's ability to provide services hereunder or
would be inconsistent with the terms, conditions and representations contained
in this Agreement.
ARTICLE IV
Financial and Security Arrangements
-----------------------------------
Section 4.1 Service Fee. In consideration of the services to be provided and
the substantial commitment of capital and other resources and effort to be made
by Company hereunder, Company shall be paid the service fee (the "Service Fee")
in accordance with the terms of attached Fee Schedule.
Section 4.2 Reasonable Value. Firm and Company acknowledge and agree that the
Service Fee has been negotiated at arm's length and represents the reasonable
value of the facilities, equipment and services furnished by Company pursuant to
this Agreement, considering the nature and volume of the services required and
the risks assumed by Company. Payment of the Service Fee is not intended to be
and shall not be interpreted or applied as permitting Company to share in Firm's
fees for accounting services or any other services.
Section 4.3 Annual Reconsideration of Service Fee. Firm and Company recognize
that the arrangements contemplated by this Agreement are unique and that they
have limited bases upon which to establish the Service Fee. They further
recognize that the Service Fee must be adjusted periodically to take into
consideration the expense levels, other demand for and salaries of personnel
provided to Firm and the changes in facilities and equipment made available to
Firm. Firm and Company agree to reconsider the reasonable value of the
facilities, equipment and services furnished
6
<PAGE>
by Company pursuant to this Agreement on an annual basis in conjunction with the
preparation of the Annual Budget.
ARTICLE V
Term and Termination
--------------------
Section 5.1 Term of Agreement. This Agreement shall commence as of the
Effective Date and shall expire on the 40th anniversary thereof unless earlier
terminated pursuant to the terms of either Section 5.3 or Section 5.4.
Section 5.2 [Reserved].
Section 5.3 Termination by Firm. Firm may, in its sole discretion, terminate
this Agreement by giving written notice thereof to Company (after the giving of
any required notices and the expiration of any applicable waiting periods set
forth below) upon the occurrence of any of the following events:
(a) Company shall admit in writing its inability to generally pay its debts
when due, apply for or consent to the appointment of a receiver, trustee or
liquidator of all or substantially all of its assets, file a petition in
bankruptcy or make an assignment for the benefit of creditors, or upon other
action taken or suffered by Company, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors, except for the filing of a
petition in involuntary bankruptcy against Company which is dismissed within 90
days thereafter.
(b) Company shall engage in gross negligence or fraud in the performance of
any material duty or material obligation imposed upon it by this Agreement (a
"Material Company Default"), and such Material Company Default shall continue
for a period of 90 days after written notice thereof has been given to Company
by Firm; provided, however, that no such Material Company Default shall
constitute a basis for termination by Firm if during the foregoing 90 day period
Company has initiated steps to materially cure such Material Company Default,
but such Material Company Default cannot, based on a reasonable effort by
Company, be materially cured within such period.
(c) Notwithstanding anything to the contrary contained herein, Firm may, in
its sole discretion and at any time, terminate any or all of Company's duties
under (i) Sections 2.2(a), (b), (c), 2.5 and/or 2.7 of this Agreement by
delivering written notice of such intent to terminate no less than one year
prior to the effective date of such termination or (ii) Section 2.3 of this
Agreement by delivering written notice of such intent to terminate no less than
one year prior to the scheduled termination of any lease for such Premises or,
if such Premises are not leased, no less than one year prior to the effective
date of such termination.
Section 5.4 Termination by Company. Company may, in its sole discretion,
terminate this Agreement by giving written notice thereof to Firm (after the
giving of any required notices and the expiration of any applicable waiting
periods set forth below) upon the occurrence of any of the following events:
7
<PAGE>
(a) Firm shall admit in writing of its inability to generally pay its debts
when due, apply for or consent to the appointment of a receiver, trustee or
liquidator of all or substantially all of its assets, file a petition in
bankruptcy or make an assignment for the benefit of creditors, or upon other
action taken or suffered by Firm, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors, except for the filing of a
petition in involuntary bankruptcy against Firm which is dismissed within 90
days thereafter.
(b) Firm or any of its employees (1) fails to adhere to any compliance
plan, policy, or manual as contemplated in Section 3.4 hereof, (2) engages in
any conduct or is formally accused of conduct for which Firm's ability or
license reasonably would be expected to be subject to revocation or suspension,
whether or not actually revoked or suspended, or (3) is otherwise disciplined by
any licensing, regulatory or professional entity or institution, the result of
any of which event described in subparagraphs (1) through (2) above, in the
absence of termination of the licensed professional who is the subject of such
matter or other action of Firm to monitor and cure such act or conduct by such
employee, does or reasonably would be expected to materially and adversely
affect the Firm.
Section 5.5 Effective Date of Termination. Any termination of this Agreement
shall be effective (the "Termination Date") as follows:
(a) Immediately upon receipt of a termination notice pursuant to Sections
5.3 or 5.4 (a "Termination Notice") and expiration of applicable cure periods;
or
(b) Upon the expiration of this Agreement pursuant to Sections 5.1 or 5.2.
Section 5.6 Effect Upon Termination. Upon the Termination Date, except as
provided below, this Agreement shall terminate and shall be of no further force
and effect and all further obligations of Company and its Affiliates under this
Agreement shall terminate without further liability of its Company or its
Affiliates to Firm, except as follows:
(a) Each party hereto shall provide the other party with reasonable access
to books and records owned by it to permit such requesting party to satisfy
reporting and contractual obligations which may be required of it;
(b) Any amounts due and owing but unpaid to either Company or its
Affiliates or Firm as of the Termination Date shall be paid promptly by the
appropriate party; and
(c) Any and all covenants and obligations of either party hereto which by
their terms or by reasonable implication are to be performed, in whole or in
part, after the termination of this Agreement, shall survive such termination,
including, without limitation, the obligations of the parties pursuant to
Section 2.2(e)(ii) and the applicable provisions of Articles VI and VII.
8
<PAGE>
ARTICLE VI
Arbitration
-----------
If a claim, controversy, dispute or disagreement arising out of or relating to
this Agreement, cannot be resolved by agreement of the Company and Firm, the
parties agree that any such claim, controversy, dispute or disagreement shall be
settled by final and binding arbitration venued in Chicago, Illinois in
accordance with the Arbitration Rules for Professional Accounting and Related
Services Disputes of the American Arbitration Association, and judgment upon the
award entered by the arbitrator may be entered in any court having jurisdiction
thereof; provided, however, that the terms and provisions of this Article VI
shall not preclude any party hereto from seeking, or a court of competent
jurisdiction from granting, injunctive or other equitable relief for any breach
of any duty, obligation, covenant, representation or warranty, the breach of
which may cause irreparable harm or damage to the party seeking such equitable
relief.
ARTICLE VII
General Provisions
------------------
Section 7.1 Entire Agreement; Assignment. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise,
except that Company may assign this Agreement or subcontract any or all of its
responsibilities hereunder to any of its Affiliates. Any attempted assignment
in violation of this Agreement shall be null and void ab initio.
Section 7.2 Amendments. This Agreement shall not be modified or amended
except by a written document executed by all parties to this Agreement.
Section 7.3 Waiver of Provisions. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any other terms and conditions hereof.
Section 7.4 Additional Documents. Each of the parties hereto agrees to
execute any document or documents that may be reasonably requested from time to
time by the other party to implement or complete such party's obligations
pursuant to this Agreement.
Section 7.5 Contract Modifications for Prospective Legal Events. In the event
any state or federal laws or regulations, now existing or enacted or promulgated
after the date hereof, are interpreted by judicial decision, a regulatory agency
or independent legal counsel in such a manner as to indicate that this Agreement
or any provision hereof may be in violation of such laws or regulations, Firm
and Company shall amend this Agreement as necessary to preserve the underlying
economic and financial arrangements between Firm and Company and without
substantial economic detriment to either party. If this Agreement cannot be so
amended, the terms of Sections 5.3(b) and 5.4 shall apply. To the extent any act
or service required of Company in this Agreement should be construed or deemed,
by any governmental authority, agency or court to constitute the provision of
9
<PAGE>
Attest Services, the performance of said act or service by Company shall be
deemed waived and forever unenforceable and the provisions of this Section 7.5
shall be applicable. Neither party shall claim or assert illegality as a defense
to the enforcement of this Agreement or any provision hereof; instead, any such
purported illegality shall be resolved pursuant to the terms of this Section 7.5
and Section 7.7.
Section 7.6 Parties In Interest; No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Except
as provided in Section 7.1, neither this Agreement nor any other agreement
contemplated hereby shall be deemed to confer upon any Person not a party hereto
or thereto any rights or remedies hereunder or thereunder.
Section 7.7 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as part of this Agreement a provision as similar in
its terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
Section 7.8 Applicable Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Illinois applicable to contracts executed and to be performed wholly within such
state, without giving effect to its choice of law rules.
Section 7.9 No Waiver; Remedies Cumulative. No party hereto shall by any act
(except by written instrument pursuant to Section 7.3), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default in or breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of any party hereto, any right, power or privilege hereunder shall operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
Section 7.10 Interpretation. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "1 herein," "1 hereof" and "1 hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
10
<PAGE>
Section 7.11 Gender and Number. When the context requires, the gender of all
words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
Section 7.12 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by nationally
recognized overnight delivery service, mailed by registered or certified mail
(return receipt requested) or sent via facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by notice
given in accordance with this Section):
If to Company: [founding company]
[address]
With a copy to: Katten Muchin & Zavis
55 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Facsimile No.: (312) 902-1061
Attn: Howard S. Lanznar, Esq.
If to Firm: [Firm]
[address]
With a copy to: [Firm's counsel]
[address]
Section 7.13 Counterparts. This Agreement may be executed via facsimile or
otherwise in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 7.14 Definitions. For the purposes of this Agreement, the following
definitions shall apply:
"Affiliate," with respect to any Person, means a Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. Notwithstanding the foregoing, for
definitional purposes of this Agreement, Firm shall not be deemed an Affiliate
of Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board and Securities and Exchange Commission or their respective
successors, consistently applied and maintained throughout the periods
indicated.
11
<PAGE>
"Person" means any natural person, corporation, partnership, limited
liability company or other business structure recognized as a separate legal
entity.
* * *
12
<PAGE>
IN WITNESS WHEREOF, the Firm and Company have executed this Services
Agreement as of the Effective Date.
Firm:
[NEWCO]
By:______________________________________
Title:___________________________________
By:______________________________________
Title:___________________________________
Company:
[FOUNDER/CENTERPOINT ADVISORS, INC.]
By:______________________________________
Title:___________________________________
By:______________________________________
Title:___________________________________
<PAGE>
FEE SCHEDULE
(a) The Company shall be entitled to a monthly service fee payable in
arrears upon presentation of an invoice equal to the sum of the following
amounts:
(i) the product of the Firm Ratio times the aggregate expenses of the
Company for such month for general administrative costs, Premises
occupancy, utilities and similar costs and salaries, taxes and benefits
with respect to personnel (other than professional personnel);
(ii) for each professional employee of the Company (other than members
or employees of the Firm) and each employee of an Affiliate of the Company,
the product of such employee's hourly billing rate then in effect times the
number of hours (or fractions thereof) devoted by such employee to the
business and affairs of the Firm during such month; and
(iii) the funds expended by the Company during such month on the
Firm's behalf for capital expenditures and improvements as provided in
Section 2.7(b) and other out-of-pocket expenses directly attributable to
the Firm's business.
(b) "Firm Ratio" for any period is the number that results from dividing
the aggregate number of hours (or fractions thereof) devoted by professional
employees of the Company that are members or employees of the Firm during such
period to the business and affairs of the Firm divided by the aggregate number
of hours (or fractions thereof) devoted by all professional employees of the
Company during such period to the business and affairs of the Firm and the
Company or its Affiliates.
<PAGE>
Exhibit 23.1 Consent of Independent Accountants
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated as shown below,
relating to the respective financial statements which appear in such
Prospectus.
<TABLE>
<CAPTION>
Company Opinion Date
- ------- -----------------
<S> <C>
CenterPoint Advisors, Inc................................... April 5, 1999
Reznick Fedder & Silverman, P.C............................. January 29, 1999
Robert F. Driver Co., Inc................................... February 10, 1999
Mann Frankfort Stein & Lipp, P.C............................ January 29, 1999
Follmer, Rudzewicz & Company, P.C........................... February 4, 1999
Berry, Dunn, McNeil & Parker, Chartered..................... January 9, 1999
Urbach Kahn & Werlin PC..................................... February 9, 1999
Self Funded Benefits, Inc. d/b/a Insurance Design
Administrators............................................. February 5, 1999
Grace & Company, P.C........................................ February 12, 1999
Holthouse Carlin & Van Trigt LLP............................ January 31, 1999
The Reppond Companies....................................... January 29, 1999
Simione, Scillia, Larrow & Dowling LLC...................... January 29, 1999
</TABLE>
We also consent to the references to us under the heading "Experts" in
such Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
April 5, 1999
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
The Board of Directors
Robert F. Driver Co., Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
KPMG LLP
San Diego, California
April 5, 1999
<PAGE>
Exhibit 23.4
Consent
I, David Reznick, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ David Reznick
--------------------------------
David Reznick
Dated: March 26, 1999
<PAGE>
Exhibit 23.5
Consent
I, Thomas W. Corbett, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Thomas W. Corbett
-----------------------------------
Thomas W. Corbett
Dated: April 5, 1999
<PAGE>
Exhibit 23.6
Consent
I, Richard H. Stein, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Richard H. Stein
-------------------------------
Richard H. Stein
Dated: April 5, 1999
<PAGE>
Exhibit 23.7
Consent
I, Anthony P. Frabotta, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Anthony P. Frabotta
-------------------------------------
Anthony P. Frabotta
Dated: March 31, 1999
<PAGE>
Exhibit 23.8
Consent
I, Charles H. Roscoe, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Charles H. Roscoe
----------------------------------
Charles H. Roscoe
Dated: April 5, 1999
<PAGE>
Exhibit 23.9
Consent
I, Steven N. Fischer, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Steven N. Fischer
-----------------------------------
Steven N. Fischer
Dated: April 5, 1999
<PAGE>
Exhibit 23.10
Consent
I, Robert F. Gallo, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Robert F. Gallo
---------------------------------
Robert F. Gallo
Dated: April 5, 1999
<PAGE>
Exhibit 23.11
Consent
I, Wayne J. Grace, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Wayne J. Grace
----------------------------------
Wayne J. Grace
Dated: April 5, 1999
<PAGE>
Exhibit 23.12
Consent
I, Philip J. Holthouse, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Philip J. Holthouse
------------------------------------
Philip J. Holthouse
Dated: April 5, 1999
<PAGE>
Exhibit 23.13
Consent
I, Anthony P. Scillia, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Anthony P. Scillia
-----------------------------------
Anthony P. Scillia
Dated: April 5, 1999
<PAGE>
Exhibit 23.14
Consent
I, Louis C. Fornetti, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ Louis C. Fornetti
-----------------------------------
Louis C. Fornetti
Dated: April 1, 1999
<PAGE>
Exhibit 23.15
Consent
I, William J. Lynch, do hereby consent to the inclusion of biographical
information about me, including my name, age, positions to be held with
CenterPoint Advisors, Inc., a Delaware corporation (the "Company") and its
subsidiary, my expected term as a director of the Company and the other
information required to be provided in the Company's Registration Statements on
Form S-1 and S-4 (the "Registration Statements") to be filed with the Securities
and Exchange Commission which information will appear principally in the section
entitled "Management -- Executive Officers and Directors." I further consent to
the filing of this consent as an exhibit to the Registration Statements.
/s/ William J. Lynch
------------------------------------
William J. Lynch
Dated: April 5, 1999
