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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 14, 1998
BRITE VOICE SYSTEMS, INC.
-------------------------
(Exact name of Registrant as specified in its Articles of Incorporation)
Kansas 0-17920 48-0986248
- ---------------------------- --------------- -----------------
(State or other jurisdiction Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
250 International Parkway, Suite 300, Heathrow, Florida 32746
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 357-1000
Not Applicable
--------------------------------
(Former name, or former address,
if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 14, 1998 (the "Closing Date"), Brite Voice Systems, Inc.
(the "Company") consummated the sale of its telecommunications management
services division to ProfitSource Corporation (subsequently named EPS
Solutions Corporation and hereinafter referred to as the "Buyer"). The
business sold included the Company's billing verification services, call
accounting services, associated software development, managed invoice
processing and professional technical temporary staffing (the "Business").
Substantially all of the assets of the Business were included in the
transaction, including (i) customer contracts; (ii) furniture, equipment and
other tangible personal property and intellectual property; (iii) proprietary
rights; (iv) accounts receivable as of December 1, 1998; (v) real property
leases; (vi) books, records and other documentation; and (vii) goodwill
(collectively the "Assets").
The transaction was effected pursuant to a Stock Purchase Agreement dated
November 30, 1998, by and among the Company, BVS Investco, Inc. ("Investco"),
TSL Services, Inc. ("Services"), and the Buyer (the "Agreement"), as amended by
an Agreement re: Preferred Stock entered into on December 10, 1998 (the
"Amendment"). Under the Agreement, as amended, the Company conveyed the Assets
and certain of the liabilities of the Business to Investco, a newly formed
wholly owned subsidiary of the Company. Investco, in turn, conveyed the Assets
and liabilities to Services in exchange for all of the issued and outstanding
common stock of Services
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(the "Shares"). Investco then conveyed the Shares to the Buyer in exchange
for (i) $20 million in cash, of which $212,500 was deposited in an escrow
account pending resolution of a dispute with a customer of the Business; (ii)
at the option of the Company, to be exercised within 30 days after the
Closing Date, the right to receive either 5,000 shares of subordinated Series
A preferred stock of Services or a $5,000,000 subordinated promissory note of
the Buyer; and (iii) a warrant to purchase shares of Services common stock
representing 10% of the fully diluted equity of Services as of the Closing
Date. The Buyer also assumed certain liabilities of the Business, including
(i) performance obligations arising after the Closing Date with respect to
contracts related to the Business which were assigned or subcontracted to the
Buyer, and (ii) accounts payable and accrued expenses incurred by the Company
in the ordinary course of the Business prior to the Closing Date, including,
without limitation, customer deposits, accrued salaries, vacations,
commissions and bonuses. The amount of the consideration was determined
through extensive negotiations between the Company, the Buyer, and their
respective financial advisors.
The foregoing summary of the Stock Purchase Agreement is not complete and
is qualified in all respects by reference to the Stock Purchase Agreement, and
the related Agreement re: Preferred Stock, copies of which are attached hereto
as Exhibits 2.1 and 2.2. Certain Schedules to the Stock Purchase Agreement, as
listed at pages iv-v thereof, have been omitted from Exhibit 2.1; however, any
omitted Schedule will be furnished supplementally to the Commission upon
request.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
2.1 Stock Purchase Agreement dated November 30, 1998, by and among Brite
Voice Systems, Inc., BVS Investco, Inc., TSL Services, Inc., and
ProfitSource Corporation
2.2 TSL Services, Inc. Agreement re: Preferred Stock
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRITE VOICE SYSTEMS, INC.
By: /s/ Glenn A. Etherington
-------------------------
Glenn A. Etherington
Chief Financial Officer
Dated: December 21, 1998
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.1 Stock Purchase Agreement dated November 30, 1998, by and among Brite
Voice Systems, Inc., BVS Investco, Inc., TSL Services, Inc., and
ProfitSource Corporation
2.2 TSL Services, Inc. Agreement re: Preferred Stock
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
BRITE VOICE SYSTEMS, INC.
BVS INVESTCO, INC.
"SELLER"
TSL SERVICES, INC.
THE "COMPANY"
AND
PROFITSOURCE CORPORATION
"BUYER"
NOVEMBER 30, 1998
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TABLE OF CONTENTS
1. Sale and Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2. Assumption of Certain Liabilities. . . . . . . . . . . . . . . .2
1.3. Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4. Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . .2
1.5. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. Representations and Warranties of Brite and Seller. . . . . . . . . . .2
2.1. Organization and Authority. . . . . . . . . . . . . . . . . . . . . .2
2.2. Authorization of Agreement . . . . . . . . . . . . . . . . . . .3
2.3. Acquired Assets. . . . . . . . . . . . . . . . . . . . . . . . .3
2.4. Financial Condition. . . . . . . . . . . . . . . . . . . . . . .3
2.5. Certain Property of Brite . . . . . . . . . . . . . . . . . . .4
2.6. Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . .6
2.7. No Conflict or Violation . . . . . . . . . . . . . . . . . . . .7
2.8. Labor and Employment Matters . . . . . . . . . . . . . . . . . .7
2.9. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . .8
2.10. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.11. Certain Agreements. . . . . . . . . . . . . . . . . . . . . . .9
2.12. Compliance with Applicable Law. . . . . . . . . . . . . . . . 10
2.13. Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.14. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 11
2.15. Intercompany and Affiliate Transactions; Insider Interests. . 11
2.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.17. Customers . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.18. No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 12
2.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . 13
2.20. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.22 The Company. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.23. Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.24. Ownership of Capital Stock. . . . . . . . . . . . . . . . . . 16
2.25. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.26. Accuracy of Information . . . . . . . . . . . . . . . . . . . 17
3. Representations and Warranties of Buyer . . . . . . . . . . . . . . . 17
3.1. Organization and Corporate Authority . . . . . . . . . . . . . 17
3.2. No Conflict or Violation . . . . . . . . . . . . . . . . . . . 17
3.3. Accuracy of Information. . . . . . . . . . . . . . . . . . . . 17
4. Certain Understandings and Agreements of the Parties. . . . . . . . . 17
4.1. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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4.2. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 18
4.3. Consolidation Transactions . . . . . . . . . . . . . . . . . . 18
4.4. Certain Changes and Conduct of Business. . . . . . . . . . . . 19
4.5. Restrictive Covenants. . . . . . . . . . . . . . . . . . . . . 21
4.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7. Access to Records and Files. . . . . . . . . . . . . . . . . . 26
4.8. Cooperation in Litigation. . . . . . . . . . . . . . . . . . . 26
4.9. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.10. Change of Name. . . . . . . . . . . . . . . . . . . . . . . . 27
4.11. Collection of Accounts Receivable . . . . . . . . . . . . . . 27
4.12. Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 27
4.13. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . 28
4.14. Closing Date Net Worth. . . . . . . . . . . . . . . . . . . . 28
4.15. Further Assurances. . . . . . . . . . . . . . . . . . . . . . 28
4.16. Notice of Breach. . . . . . . . . . . . . . . . . . . . . . . 28
4.17. Contracts and Licenses. . . . . . . . . . . . . . . . . . . . 28
4.18. Supplemental Disclosure . . . . . . . . . . . . . . . . . . . 29
4.19. HSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.20. Competing Proposals . . . . . . . . . . . . . . . . . . . . . 29
4.21. Series A Preferred Stock. . . . . . . . . . . . . . . . . . . 29
4.22. Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . 29
4.23. Real Property Leases. . . . . . . . . . . . . . . . . . . . . 29
5. Survival; Indemnification . . . . . . . . . . . . . . . . . . . . . . 30
5.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2. Indemnification by Brite . . . . . . . . . . . . . . . . . . . 31
5.3. Indemnification by Buyer . . . . . . . . . . . . . . . . . . . 32
5.4. Indemnification Procedure. . . . . . . . . . . . . . . . . . . 32
5.5. Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6. Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7. Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1. Conditions to Obligations of Each Party . . . . . . . . . . . 34
6.2. Conditions to Obligations of Buyer . . . . . . . . . . . . . . 35
6.3. Conditions to Obligations of Seller. . . . . . . . . . . . . . 37
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3. Assignability and Parties in Interest. . . . . . . . . . . . . 40
7.4. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 40
7.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.6. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.7. Complete Agreement . . . . . . . . . . . . . . . . . . . . . . 41
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7.8. Modifications, Amendments and Waivers. . . . . . . . . . . . . 41
7.9. Headings; References . . . . . . . . . . . . . . . . . . . . . 41
7.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 41
7.11. Due Diligence Investigation . . . . . . . . . . . . . . . . . 41
7.12. Expenses of Transactions. . . . . . . . . . . . . . . . . . . 41
7.13. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.14. Submission to Jurisdiction. . . . . . . . . . . . . . . . . . 43
7.15. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 43
7.16. Enforcement of the Agreement. . . . . . . . . . . . . . . . . 44
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EXHIBITS
A. Form of Seller Contribution Agreement
B. Form of Company Contribution Agreement
C. Form of Warrant
D. Form of Employee General Release Agreement
E. Form of Employment Agreements
F. Form of Opinion of Counsel to Brite and Seller
G. Form of Opinion of Counsel to the Buyer
H. Form of Stockholder Agreement
SCHEDULES
1.1(a) Acquired Assets
1.1(b) Excluded Assets
1.2 Assumed Liabilities
1.4 Purchase Price
2 Schedule of Exceptions
2.3 Acquired Assets
2.4 Financial Statements
2.5(a) Real Property
2.5(b) Personal Property
2.5(c) Proprietary Rights
2.5(c)(iii) Software Licenses
2.6 Year 2000 Compliance
2.7 Conflicts/Violations
2.8 Employees
2.9 Employee Plans
2.10 Litigation
2.11 Contracts
2.12 Compliance with Applicable Law
2.13 Licenses
2.14 Accounts Receivable
2.16 Insurance
2.17 Customers
2.22(c)-1 Certificate of Incorporation of the Company
2.22(c)-2 Bylaws of the Company
2.23(b)-1 Certificate of Incorporation of Seller
2.23(b)-2 Bylaws of Seller
2.25 Consents/Notices
4.9 Employees to be Employed by the Company
6.2 Certain Employees
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of November 30, 1998 by and among Brite Voice Systems, Inc.,
a Kansas corporation ("BRITE"), BVS Investco, Inc., a newly formed Delaware
corporation and wholly owned subsidiary of Brite ("SELLER"), TSL Services,
Inc., a newly formed Delaware corporation and wholly owned subsidiary of
Seller (the "COMPANY") and ProfitSource Corporation, a Delaware corporation
or its assignee ("BUYER").
A. Brite, acting through its Telecom Services Limited
division, is engaged in the business of telecommunications cost control,
including, without limitation, the provision of billing verification
services, call accounting services, software development, managed invoice
processing, and professional technical temporary staffing (the "BUSINESS").
B. Brite desires to sell and assign to Buyer, and Buyer
desires to purchase and assume from Brite, those certain assets, rights and
obligations of Brite described herein related to the Business by transferring
such assets, rights and obligations to the Seller, which in turn will
transfer such assets, rights and obligations to the Company, and will
transfer all of the issued and outstanding capital stock of the Company to
Buyer, all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. SALE AND TRANSFER
1.1. ASSETS.
(a) ACQUIRED ASSETS. On the terms and subject to the conditions
set forth in this Agreement, on December 1, 1998, (i) Brite, pursuant to a
Contribution Agreement in substantially the form attached hereto as EXHIBIT A
(the "SELLER CONTRIBUTION AGREEMENT") shall convey, transfer, assign, sell
and deliver to Seller, and Seller shall acquire and accept, all of the
assets, properties and rights of Brite listed on SCHEDULE 1.1(a) (the
"ACQUIRED ASSETS"); and (ii) Seller, pursuant to a Contribution Agreement in
substantially the form attached hereto as EXHIBIT B (the "COMPANY
CONTRIBUTION AGREEMENT") shall convey, transfer, assign, sell and deliver to
the Company, and the Company shall acquire and accept, all of the Acquired
Assets.
(b) EXCLUDED ASSETS. Notwithstanding anything contained in SECTION
1.1(a) to the contrary, Brite will not transfer to Seller or the Company and
neither Seller nor the Company will receive, any of the assets listed on
SCHEDULE 1.1(b) (the "EXCLUDED ASSETS"), all of which shall be retained by
Brite.
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1.2 ASSUMPTION OF CERTAIN LIABILITIES. On the terms and subject to
the conditions set forth in this Agreement, immediately before the Closing,
Seller, pursuant to the Seller Contribution Agreement and the Company,
pursuant to the Company Contribution Agreement, shall assume those certain
liabilities and obligations of Brite identified on SCHEDULE 1.2 (the "ASSUMED
LIABILITIES"). The Company will not assume, and will not be obligated or
liable for, any liability of Brite or Seller not listed on SCHEDULE 1.2
including, without limitation, accounts payable incurred other than in the
ordinary course of business or other indebtedness of Brite or Seller. Buyer
and the Company will be indemnified pursuant to SECTION 5.2 from and against
any claims in respect of any debts, obligations or liabilities of Brite or
Seller of any nature whatsoever other than the Assumed Liabilities.
1.3 CAPITAL STOCK. In connection with the transfers described in
SECTIONS 1.1 and 1.2, the Company will issue to Seller 45,000 shares of the
Company's Common Stock, $0.001 per share, which Shares shall be validly
issued, fully paid, and non-assessable (the "SHARES").
1.4 SALE AND PURCHASE. On the Closing Date (as hereinafter
defined) Seller shall sell to Buyer, and Buyer shall purchase from Seller,
the Shares, for the purchase price set forth in SCHEDULE 1.4 (the "PURCHASE
PRICE").
1.5 CLOSING. The closing of the sale and purchase of the Shares
(the "CLOSING") will take place at the offices of Gibson, Dunn & Crutcher
LLP, 4 Park Plaza, Irvine, California, on the earliest practicable date, as
determined by Buyer (the "CLOSING DATE") after all the conditions set forth
in SECTION 6 have either been satisfied or, in the case of conditions not
met, waived by the party entitled to the benefit of such conditions. Buyer
shall provide notice (the "CLOSING NOTICE") to Brite informing Brite of the
date selected as the Closing Date. At the Closing, Seller shall deliver to
Buyer or its designees a stock certificate, duly endorsed in blank (or
accompanied by duly executed stock powers), representing the Shares being
sold by Seller and each other instrument of transfer Buyer may reasonably
request to vest effectively in Buyer good and valid title to the Shares, free
and clear of any liens, pledges, options, security interest, trusts,
encumbrances or other rights or interests of any person or entity, together
with any taxes, direct or indirect, attributable to such transfer of the
Shares, and Buyer shall thereupon pay to Seller the Purchase Price.
2. REPRESENTATIONS AND WARRANTIES OF BRITE AND SELLER. Each
representation and warranty contained in this SECTION 2 is qualified by the
disclosures made in the disclosure schedule attached hereto as SCHEDULE 2
(the "DISCLOSURE SCHEDULE"). This SECTION 2 and the Disclosure Schedule
shall be read together as an integrated provision. Brite and Seller
represent and warrant to Buyer that:
2.1 ORGANIZATION AND AUTHORITY. Brite is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Kansas, with full corporate power and authority to carry on the Business
as it is now and has since its organization been conducted and as proposed to
be conducted, and to own or lease and operate the Acquired Assets. Seller
and the Company are corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware.
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2.2 AUTHORIZATION OF AGREEMENT. Brite and Seller have all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. This Agreement and all other
agreements and instruments to be executed by the parties hereto in connection
herewith, together with all other documents to be delivered in connection
herewith or therewith, (collectively, the "TRANSACTION DOCUMENTS"), have been
(or upon execution will have been) duly executed and delivered by Brite,
Seller and the Company and effectively authorized by all necessary action,
corporate or otherwise, and constitute (or upon execution will constitute)
legal, valid and binding obligations of Brite, Seller and the Company, as the
case may be, except as such enforceability may be limited by general
principles of equity and bankruptcy, insolvency, reorganization and
moratorium and other similar laws relating to creditors' rights (the
"BANKRUPTCY EXCEPTION.")
2.3 ACQUIRED ASSETS.
(a) OWNERSHIP. Before the transfers to Seller and the Company
described in SECTION 1.1, Brite is the lawful and sole owner of and has the
right to use and transfer to Seller, and Seller has the right to receive from
Brite and immediately transfer to the Company, each of the Acquired Assets.
The Acquired Assets are free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims
of any kind. The execution and delivery of the Seller Contribution Agreement
by Brite and Seller and the Company Contribution Agreement by Seller and the
Company will vest good and marketable title to the Acquired Assets in the
Company, free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any kind.
(b) SUFFICIENCY OF ASSETS. Except for the Excluded Assets, the
Acquired Assets (i) constitute all of the assets and properties used by Brite
in connection with the operation of the Business; and (ii) are sufficient and
adequate to conduct the Business.
2.4 FINANCIAL CONDITION.
(a) FINANCIAL STATEMENTS. SCHEDULE 2.4 sets forth the balance
sheets of the Business as of December 31, 1996 and December 31, 1997 and the
related statements of income and cash flow of the Business for the fiscal
years then ended (the "ANNUAL FINANCIAL STATEMENTS") and the balance sheet,
and the related statements of income and cash flow of the Business for the
nine month period ended September 30, 1998 (the "INTERIM FINANCIAL
STATEMENTS," and with the Annual Financial Statements, the "FINANCIAL
STATEMENTS"). The Financial Statements (i) were prepared in accordance with
the books and records of Brite; (ii) were prepared in accordance with
generally accepted accounting principles consistently applied; (iii) fairly
present the financial condition and the results of the operations of the
Business as at the relevant dates thereof and for the periods covered
thereby; (iv) contain and reflect all necessary adjustments and accruals for
a fair presentation of the financial condition and the results of the
operations of the Business as a stand alone entity without affiliation with
Brite for the periods covered by the Financial Statements (except that the
Interim Financial Statements are subject to year-end adjustments, the net
effect of which will not represent a Material Adverse Change); (v) contain
and reflect adequate provisions for all reasonably anticipated liabilities,
excluding those for all
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taxes, federal, state, local or foreign, with respect to the period then
ended and all prior periods; (vi) reflect accurately in all material respects
the assets, liabilities, costs and expenses of the Business as at the
relevant date thereof and for the period covered thereby; (vii) do not
contain any items of a special or nonrecurring nature, except as expressly
stated therein; and (viii) are in all material respects accurate, complete
and correct. The Financial Statements accurately reflect all information
normally reported to the independent public accountants of Brite for the
preparation of its financial statements. There have been no changes in
accounting principles or practices during the periods covered by the
Financial Statements.
(b) ABSENCE OF CERTAIN CHANGES. Since September 30, 1998 there has
not been any Material Adverse Change, or any event, action, or circumstance
of the kind described in SECTION 4.4. For purposes of this Agreement, a
"MATERIAL ADVERSE CHANGE" means any event, circumstance, condition,
development or occurrence causing, resulting in, having, or that could
reasonably be expected to have, a material adverse effect on the financial
condition, business, prospects, properties or results of operations of the
Business, the Company, or the Acquired Assets.
2.5 CERTAIN PROPERTY OF BRITE.
(a) REAL PROPERTY. Brite does not own any real property used in
connection with the Business. SCHEDULE 2.5(a) sets forth a true and complete
list of all real properties leased by Brite for use in connection with the
Business, including a brief description of the operating facilities located
thereon, the annual rent payable thereon, the length of the term, any option
to renew with respect thereto and the notice and other provisions with
respect to termination of rights to the use thereof.
(i) Until transfer to the Company pursuant to SECTION
1.1, Brite has a valid leasehold in the real property shown in
SCHEDULE 2.5(a), as leased by it, in each case under written leases that
are valid and enforceable (except as enforceability may be limited by the
Bankruptcy Exception) (each lease being referred to herein as a "REAL
PROPERTY LEASE", and collectively the "REAL PROPERTY LEASES") and to the
knowledge of Brite each Real Property Lease is a valid and binding
obligation of each of the other parties thereto (except as enforceability
may be limited by the Bankruptcy Exception);
(ii) Brite is not, and Brite and Seller do not have any
knowledge that any other party to any Real Property Lease is, in default
with respect to any material term or condition thereof, and Brite and
Seller do not have any knowledge that any event has occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance
upon any asset of Seller.
(b) PERSONAL PROPERTY. SCHEDULE 2.5(b) lists all , furniture,
fixtures, equipment and other items of tangible personal property owned or
leased by Brite and used in connection with the Business, other than Excluded
Assets (the "PERSONAL PROPERTY"). All items of Personal Property are in good
operating condition and repair. SCHEDULE 2.5(b) correctly identifies each
item of Personal Property as owned or leased by Brite. The items of Personal
Property identified
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as owned are Acquired Assets, and the items of Personal Property identified
as leased are leased pursuant to lease agreements that are Acquired Assets.
All of such leases are valid and in full force and effect and none of such
Personal Property is subject to any sublease, license or other agreement
granting to any person any right to use such property (each such lease,
sublease, license or other agreement, a "PERSONAL PROPERTY LEASE" and
collectively the "PERSONAL PROPERTY LEASES"). Prior to transfer pursuant
to SECTION 1.1 Brite is not in breach of or default, and no event has
occurred which, with due notice or lapse of time or both, may constitute such
a breach or default, under any Personal Property Lease.
(c) PROPRIETARY RIGHTS.
(i) SCHEDULE 2.5(c) sets forth a true and complete list of
all Proprietary Rights (either registered, applied for, or common law) owned
by, registered in the name of, licensed to, or otherwise used by Brite in
connection with the Business. For purposes of this Agreement "PROPRIETARY
RIGHTS" means trademarks and service marks (registered or unregistered),
trade dress, trade names including, without limitation, the names "TSL",
"Telecom Services Limited", "TOMS", "Fraud-Check, and "EZ-View" and other
names and slogans embodying business or product goodwill or indications of
origin associated with the Business, all applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated
therewith, as well as the following used in connection with the Business, but
specifically excluding any such Proprietary Rights used by Brite in the
Business and in other aspects of its business: (i) patents, patentable
inventions, discoveries, improvements, ideas, know-how, formulas,
methodologies, processes, technology and computer programs, software and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) associated, developed
or used in connection with the Business, and all applications or
registrations in any jurisdiction pertaining to the foregoing, including all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof; (ii) trade secrets, know-how, including confidential and
other non-public information associated, developed or used in connection with
the Business, and the right in any jurisdiction to limit the use or
disclosure thereof; (iii) copyrights in writings, designs, mask works or
other works associated, developed or used in connection with the Business,
and registrations or applications for registration of copyrights in any
jurisdiction; (iv) licenses, including, without limitation, software
licenses, immunities, covenants not to sue and the like relating to any of
the foregoing; (v) Internet Web sites, domain names and registrations or
applications for registration thereof associated, developed or used in
connection with the Business; (vi) customer lists associated, developed or
used in connection with the Business; (vii) books and records describing or
used in connection with any of the foregoing; (viii) claims or causes of
action arising out of or related to infringement or misappropriation of any
of the foregoing.
(ii) Until transfer pursuant to SECTION 1.1, all of the
Proprietary Rights used in connection with the Business are owned by Brite
free and clear of any and all liens, security interests, claims, charges and
encumbrances or are used by Brite pursuant to a valid and enforceable license
granting rights sufficiently broad to permit the historical and anticipated
uses of such Proprietary Rights in connection with the Business. Brite, and
after transfer pursuant to
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SECTION 1.1, the Company, has the right and authority to use the Proprietary
Rights in connection with the conduct of the Business in the manner presently
conducted.
(iii) SCHEDULE 2.5(c)(iii) identifies any licenses, sublicenses
or other agreements used in connection with the Business pursuant to which Brite
grants a license to any person to use the Proprietary Rights or is a licensee of
any of the Proprietary Rights.
(iv) The grants, registrations and applications included in
or applicable to the Proprietary Rights have not lapsed, expired or been
abandoned and no application or registration thereof is the subject of any
proceeding before any court, arbitrator, state, local or foreign government
agency, regulatory body, or other governmental authority or any department,
agency, board, commission, bureau or instrumentality of any of the foregoing
(each a "GOVERNMENTAL ENTITY," and collectively "GOVERNMENTAL ENTITIES").
There have not been any actions or other judicial or adversary proceedings
involving Brite or Seller concerning any of the Proprietary Rights, nor to
the knowledge of Brite or Seller, is any such action or proceeding threatened.
(v) To the knowledge of Brite and Seller, the conduct of the
Business does not conflict with valid patents, trademarks, trade secrets or
trade names, or other intellectual property of others. To the knowledge of
Brite and Seller, there are no conflicts with or infringements of any of the
Proprietary Rights by any third party.
(vi) Until transfer pursuant to SECTION 1.1, Brite, is the
sole owner of all trade secrets, including, without limitation, customer
lists, formulas, inventions, processes, know-how, computer programs and
routines associated, developed or used by Brite or its Affiliates in
connection with the Business (the "TRADE SECRETS"), free and clear of any
liens, encumbrances, restrictions, or legal or equitable claims of others,
and has taken all reasonable security measures to protect the secrecy,
confidentiality, and value of the Trade Secrets.
(vii) To the knowledge of Brite and Seller, all the Trade
Secrets are presently valid and protectible and are not part of the public
knowledge or literature; and have not, to the knowledge of Brite and Seller,
been used, divulged, or appropriated for the benefit of any past or present
employees or other persons, or to the detriment of Brite and Seller or the
Business.
2.6 YEAR 2000 COMPLIANCE. All date-related output, calculations or
results before, during or after the calendar year 2000 that are produced or
used by any material hardware, software, firmware or facilities systems (the
"COMPUTER SYSTEMS") used by Brite in connection with the Business are Year
2000 Compliant. For purposes of this section, "YEAR 2000 COMPLIANT" means:
(a) All dates receivable by the Computer Systems, as well as
calculations, output and results will (i) include a consistent-length century
indicator of at least two base ten digits, and (ii) have date elements in
interfaces and data storage that will permit specifying the century to
eliminate date ambiguity;
(b) When any date data is represented without a century, either in
an interface or in data storage, the correct century will be unambiguous for
all manipulations involving that data;
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(c) Data calculations involving either a single century or multiple
centuries will neither (i) cause an abnormal ending or operation, nor (ii)
generate incorrect results or results inconsistent with output or results
from any other century;
(d) When sorting by date, all records will be sorted in accurate
chronological sequence; and when the date is used as a key, records will be
read and written in accurate chronological sequence; and
(e) Leap years will be determined by the following standard: (i)
if dividing the year by 4 yields an integer, it is a leap year, except for
years ending in 00, but (ii) a year ending in 00 is a leap year if dividing
it by 400 yields an integer.
2.7 NO CONFLICT OR VIOLATION. The execution, delivery and
performance by Brite, Seller and the Company of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby do not and will not: (i) violate or conflict with any provision of
the charter documents or bylaws of Brite, Seller or the Company; (ii) violate
any provision or requirement of any domestic or foreign, national, state, or
local law, statute, judgment, order, writ, injunction, decree, award, rule,
or regulation of any Governmental Entity applicable to Brite, Seller or the
Company or the Business; (iii) violate, result in a breach of, constitute
(with due notice or lapse of time or both) a default or cause any obligation,
penalty, premium or right of termination to arise or accrue under any
Contract (as hereinafter defined); (iv) result in the creation or imposition
of any lien, charge or encumbrance of any kind whatsoever upon any of the
Acquired Assets; or (v) result in the cancellation, modification, revocation
or suspension of any license, permit, certificate, franchise, authorization
or approval issued or granted by any Governmental Entity in connection with
the Business (each a "LICENSE", and collectively, the "LICENSES").
2.8 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 2.8 lists all
employees, independent contractors and other persons employed or engaged by
Brite in connection with the Business (the "BUSINESS PERSONNEL") immediately
prior to the transfers described in SECTION 1.1, including date of employment
or retention, current title and compensation. There is no employment
agreement, collective bargaining agreement or other labor agreement
applicable to any of the Business Personnel to which Brite is a party or by
which it is bound. Brite has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of all
Business Personnel, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as
required by appropriate Governmental Entities and has withheld and paid to
the appropriate Governmental Entities or is holding for payment not yet due
to such authorities, all amounts required to be withheld from Business
Personnel and is not liable for any arrears of wages, taxes, penalties or
other sums for failure to comply with any of the foregoing. There is no
unfair labor practice complaint against Brite pending before the National
Labor Relations Board or any state or local agency with respect to the
Business or any Business Personnel; pending labor strike or other material
labor trouble affecting Brite with respect to the Business or any Business
Personnel; material labor grievance pending against Brite with respect to the
Business or any Business Personnel; pending representation question
respecting any Business Personnel; pending arbitration proceedings with
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respect to the Business or any Business Personnel arising out of or under any
c ollective bargaining agreement to which Brite is a party; or to the
knowledge of Brite or Seller, any basis for which a claim with respect to the
Business or any Business Personnel may be made under any collective
bargaining agreement to which Brite is a party.
2.9 EMPLOYEE PLANS.
(a) SCHEDULE 2.9 sets forth a true and complete list of all bonus,
pension, stock option, stock purchase, benefit, welfare, profit-sharing,
deferred compensation, retainer, consulting, retirement, welfare, disability,
vacation, severance, hospitalization, insurance, incentive, deferred
compensation and other similar fringe or employee benefit plans, funds,
programs or arrangements, whether written or oral, in each of the foregoing
cases which cover, are maintained for the benefit of, or relate to any or all
current or former Business Personnel, and any other entity ("ERISA
AFFILIATE") related to it under Section 414(b), (c), (m) and (o) of the
Internal Revenue Code (the "CODE") (the "EMPLOYEE PLANS"). With respect to
each Employee Plan, Brite will make available to Buyer upon request, to the
extent applicable, true and complete copies of (i) all plan documents, (ii)
the most recent determination letter received from the Internal Revenue
Service, (iii) the most recent application for determination filed with the
Internal Revenue Service, (iv) the latest actuarial valuations, (v) the
latest financial statements, (vi) the latest Form 5500 Annual Report,
including Schedule A and Schedule B thereto, (vii) all related trust
agreements, insurance contracts or other funding arrangements which implement
any of such Employee Plans, (viii) all Summary Plan Descriptions and
summaries of material modifications and all modifications thereto
communicated to employees, and (ix) in the case of stock options or stock
appreciation rights issued under any Employee Plan, a list of holders, dates
of grant, number of shares, exercise price per share and dates exercisable.
Neither Brite nor any ERISA Affiliate of Brite has any liability or
contingent liability with respect to the Employee Plans, nor will any of the
Acquired Assets be subject to any lien, charge or claim relating to the
obligations of Brite with respect to Business Personnel or Employee Plans.
(b) Neither Brite nor any ERISA Affiliate sponsors or has
sponsored, maintained, contributed to, incurred an obligation to contribute
to or withdraw from, any Multi-Employer Plan (as defined in Section
4000(a)(3) of ERISA) or any Multiple-Employer Plan (as defined in ERISA
Sections 4063 or 4064 or Code Section 413) related to Business Personnel,
whether or not terminated, for which any withdrawal or partial withdrawal
liability has been or could be incurred, whether or not any such liability
has been asserted by or on behalf of any such plan.
(c) There are no contracts, agreements, plans or arrangements
covering any Business Personnel with "change of control" or similar
provisions (each, a "CHANGE OF CONTROL ARRANGEMENT"). There is no contract,
agreement, plan or arrangement covering Brite, or any Business Personnel,
that individually or collectively could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G of
the Code. Neither Brite or any of its ERISA Affiliates has incurred any
liability with respect to Business Personnel under the Worker Adjustment
Retraining and Notification Act or any similar state law relating to
employment termination in connection with a mass layoff, plant closing or
similar event, and the transactions contemplated by this Agreement will not
give rise to any such liability.
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2.10 LITIGATION. There are no claims, actions, suits, proceedings,
labor disputes or investigations pending or, to the knowledge of Brite and
Seller, threatened before any Governmental Entity of any nature, brought by
or against Brite, Seller or the Company, the officers, directors, employees,
agents of Brite, Seller, or any of their respective Affiliates involving,
affecting or relating to the Business or any Acquired Assets, Assumed
Liabilities, or Business Personnel, or operations of Brite and Seller or the
transactions contemplated by this Agreement. None of Brite, Seller, the
Company or any of the Acquired Assets is subject to any order, writ,
judgment, award, injunction or decree of any Governmental Entity. For
purposes of this Agreement, "AFFILIATE" shall have the meaning ascribed to
such term in Rule 405 under the Securities Act of 1933, as amended. Buyer
and the Company will be indemnified pursuant to SECTION 5.2 from and against
any claims listed on, or arising out of, the items disclosed on SCHEDULE
2.10. Buyer shall assume responsibility for the lawsuit filed by Brite
against Donaldson, Lufkin & Jenrette described on SCHEDULE 2.10.
2.11 CERTAIN AGREEMENTS.
(a) SCHEDULE 2.11 sets forth a true and complete list of all material
contracts, agreements, instruments, licenses, commitments and other arrangements
relating to or affecting the Business or the Acquired Assets, including, without
limitation, all written, or to the knowledge of Brite and Seller, oral,
(i) contracts, agreements and commitments not made in the ordinary course of
business, (ii) agency and brokerage agreements, (iii) service and other customer
contracts, (iv) contracts, loan agreements, letters of credit, repurchase
agreements, mortgages, security agreements, guarantees, pledge agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing of money or for lines of credit, (v) tax sharing agreements, real
property leases or any subleases relating thereto, personal property leases,
employee plans, employment and labor agreements, any material agreement relating
to Proprietary Rights (including service agreements relating thereto) and
insurance contracts, (vi) agreements and other arrangements for the sale of any
assets, property or rights other than in the ordinary course of business or for
the grant of any options or preferential rights to purchase any assets, property
or rights, (vii) documents granting any power of attorney with respect to the
affairs of the Business, (viii) suretyship contracts, performance bonds, working
capital maintenance or other forms of guaranty agreements, (ix) contracts or
commitments related to the Business limiting or restraining Brite or any
Business Personnel from engaging or competing in any lines of business or with
any person or entity, (x) partnership or joint venture agreements, (xi) material
licenses, including, without limitation, material software licenses, and
(xii) all amendments, modifications, extensions or renewals of any of the
foregoing (each a "CONTRACT," and collectively, the "CONTRACTS.")
Notwithstanding SECTIONS 2.11(b)-(f) below, with respect to service and other
customer contracts referred to in (iii) above, other than the 1998 Contracts (as
defined below), Brite and Seller make no representations or warranties as to
whether each Contract is valid, binding and enforceable against the parties
thereto in accordance with its terms, whether each Contract is in full force and
effect on the date hereof, whether the Contracts provide for the consent of any
party thereto, or whether the Contracts would be breached by, or confer
additional rights to any party as a result of, the transactions contemplated
hereby. For purposes hereof "1998 CONTRACTS" refer to those Contracts either
(A) entered into
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during calendar year 1998 or (B) from which revenues were derived during
calendar year 1998. Each of the 1998 Contracts is identified by an asterisk
on Schedule 2.11.
(b) To the knowledge of Brite and Seller, each Contract is valid,
binding and enforceable against the parties thereto in accordance with its
terms, except as such enforceability may be limited by the Bankruptcy
Exception, and is in full force and effect on the date hereof. Brite has
performed all obligations required to be performed by it under, and is not in
material default or breach of, any Contract, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default.
(c) To the knowledge of Brite and Seller, no other party to any
Contract is in default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default.
(d) There are no pending or anticipated material disputes with any
party to any material Contract, and to the knowledge of Brite and Seller, no
party to any Contract intends to cancel or terminate any such agreement,
whether as a result of the transactions contemplated by this Agreement or
otherwise.
(e) Brite has delivered to Buyer or its representatives true and
complete originals or copies of all the Contracts and a copy of every
Material Notice received by Brite since January 1, 1996 with respect to any
of the Contracts. For purposes hereof, "MATERIAL NOTICE" includes only those
notices received alleging a material breach of a Contract or serious
performance issues that could lead to cancellation or material modification
of a contract or intention to terminate or materially modify a contract, and
is not intended to include routine correspondence.
(f) None of the Contracts provides for consent of any party
thereto, or would be breached by, or confer additional rights to any party as
a result of, the transactions contemplated hereby.
2.12 COMPLIANCE WITH APPLICABLE LAW. The operations of the Business
are, and have been, conducted in substantial compliance with all applicable
laws, regulations, orders and other requirements of all Governmental Entities
having jurisdiction over the Business and its assets, properties and
operations. Brite has not received any notice of any violation of any such
law, regulation, order or other legal requirement, and is not in default with
respect to any order, writ, judgment, award, injunction or decree of any
Governmental Entity, applicable to the Business or any of the Acquired
Assets. To the knowledge of Brite and Seller, there are no proposed changes
in any such laws, rules or regulations (other than laws of general
applicability) that would adversely affect the transactions contemplated by
this Agreement or all or a substantial part of the Business or any of the
Acquired Assets.
2.13 LICENSES.
(a) SCHEDULE 2.13 sets forth a true and complete list of all
Licenses issued or granted to Brite in connection with the Business, and all
pending applications therefor. Such Licenses constitute all consents,
approvals, authorizations and other requirements prescribed by any law,
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rule or regulation which must be obtained or satisfied by Brite in connection
with the Business or that are necessary for the execution, delivery and
performance by Brite, Seller and the Company of this Agreement and the other
Transaction Documents. The Licenses are sufficient and adequate in all
material respects to permit the continued lawful conduct of the Business in
the manner now conducted and the ownership, occupancy and operation of its
properties for their present uses and the execution, delivery and performance
of this Agreement. No jurisdiction in which Brite is not qualified or
licensed as a foreign corporation in connection with the Business has
demanded or requested that it qualify or become licensed as a foreign
corporation. Brite has delivered to Buyer or its representatives true and
complete copies of all the Licenses together with all amendments and
modifications thereto.
(b) Each License has been issued to, and duly obtained and fully
paid for by Brite and is valid, in full force and effect, and not subject to
any pending or known threatened administrative or judicial proceeding to
suspend, revoke, cancel or declare such License invalid in any respect.
Brite is not in violation in any material respect of any of the Licenses.
The Licenses have never been suspended, revoked or otherwise terminated,
subject to any fine or penalty, or subject to judicial or administrative
review, for any reason other than the renewal or expiration thereof.
2.14 ACCOUNTS RECEIVABLE. SCHEDULE 2.14 sets forth a list of all
accounts receivable of Brite that have arisen in connection with the Business
as of October 31, 1998. Not later than December 16, 1998, Seller shall
provide a list of all accounts receivable of Brite that have arisen in
connection with the Business as of December 1, 1998 (the "ACCOUNTS
RECEIVABLE"), including their aging. All accounts receivable as of October
31, 1998, and all Accounts Receivable as of December 1, 1998 will represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business that are current and collectible
in amounts not less than the aggregate amount thereof carried (or to be
carried) on the books of Brite and reflected in the Financial Statements, and
are not and will not be subject to any valid counterclaims or set-offs. No
more than twenty-five percent (25%), exclusive of accounts specifically
reserved for as bad debts as reflected in the Financial Statements and as
supported in the schedules to the Financial Statements, of the total dollar
value of the Accounts Receivable is past due more than ninety (90) days and
none of the Accounts Receivable in excess of sixty days are subject to any
dispute or contingency.
2.15 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
(a) There are no material transactions, intercompany agreements or
arrangements of any kind, direct or indirect, related to the Business,
between Brite and any director, officer, employee, stockholder, relative or
Affiliate of Brite, including, without limitation, loans, guarantees or
pledges to, by or for Brite or from, to, by or for any of such persons, that
are either (i) currently in effect, or (ii) reflected in Brite's financial
results.
(b) No officer, director or shareholder of Brite, or any Affiliate
of any such person, now has, or within the last two years had, either
directly or indirectly:
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(i) an equity or debt interest in any corporation,
partnership, joint venture, association, organization or other person or
entity which furnishes or sells, or during such period furnished or sold,
services or products to Brite in connection with the Business, or
purchased, or during such period purchased from Brite, any goods or
services in connection with the Business, or otherwise does, or during
such period did, business with Brite in connection with the Business;
(ii) a beneficial interest in any contract, commitment or
agreement to which Brite is or was a party or under which it was
obligated or bound or to which its properties may be or may have been
subject in connection with the Business, other than commitments or
agreements between Brite and such persons in their capacities as
employees, officers or directors of Brite; or
(iii) any rights in or to any of the assets, properties or
rights used by Brite in the Business.
2.16 INSURANCE. SCHEDULE 2.16 sets forth a true and correct list of
all current insurance policies of any nature whatsoever maintained by Brite
in connection with the Business and the annual or other premiums payable
thereunder. There are no outstanding requirements or recommendations by any
insurance company that issued any such policy or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
Governmental Entity that require or recommend any changes in the conduct of
the Business, or any repairs or other work to be done on or with respect to
any of the properties or assets of Brite associated with the Business. Brite
has not received any notice or other communication from any of its insurance
companies within the three (3) years preceding the date hereof canceling or
materially amending or materially increasing the annual or other premiums
payable under any of such insurance policies, and to the knowledge of Brite,
no such cancellation, amendment or increase of premiums is threatened.
2.17 CUSTOMERS. SCHEDULE 2.17 sets forth a true and complete list
of the fifteen (15) largest customers of the Business, together with revenues
to the Business from each such customer during the most recent complete
fiscal year and the current fiscal year to the date hereof. None of such
customers has given notice to Brite of an intention to terminate or
materially impair its business relationship with Brite and Brite and Seller
have no knowledge of any event that would precipitate the impairment, or
termination of, or the failure to renew, or entitle any such customer to
terminate, such business relationship.
2.18 NO UNDISCLOSED LIABILITIES. Except as and to the extent
specifically reflected or reserved against in the Interim Financial
Statements or as disclosed in this Agreement or the schedules hereto, and
except as incurred in the ordinary course of business since the date of the
Interim Financial Statements, Brite and Seller have no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due (including, without limitation,
any liability for taxes and interest, penalties and other charges payable
with respect to any such liability or obligation) which in the aggregate
would result in a Material Adverse Change and no facts or circumstances exist
which, with notice or the passage
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of time or both, could reasonably be expected to result in any claims against
or obligations or liabilities of Brite or Seller in connection with the
Business.
2.19. ENVIRONMENTAL MATTERS. Notwithstanding anything to the
contrary contained in this Agreement:
(a) The operations of the Business comply and have at all times
complied with all applicable laws, regulations and other requirements of
Governmental Entities or duties under the common law relating to toxic or
hazardous substances, wastes, pollution or to the protection of health,
safety or the environment (collectively, "ENVIRONMENTAL LAWS") and have
obtained and maintained in effect all licenses, permits and other
authorizations or registrations (collectively "ENVIRONMENTAL PERMITS")
required under all Environmental Laws and are in compliance with all such
Environmental Permits.
(b) Brite has not performed, failed to perform or suffered any act
which could give rise to, or otherwise incurred, liability to any person
(governmental or not) in connection with the Business under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601 ET SEQ. ("CERCLA"), or any other Environmental Laws, nor has it received
notice of any such liability or any claim therefor.
(c) To the knowledge of Brite and Seller, no hazardous substance,
hazardous waste, contaminant, pollutant or toxic substance (as such terms are
defined in or otherwise subject to any applicable Environmental Law and
collectively referred to herein as "HAZARDOUS MATERIALS") has been released,
placed, disposed of or otherwise come to be located on, at, beneath or near
any of the assets or properties owned or leased by it at any time in
connection with the Business or any other property in violation of any
Environmental Laws or that could subject it to liability under any
Environmental Laws.
(d) Brite has not in connection with the Business exposed any
Business Personnel or third party to any Hazardous Materials or conditions
that could subject it to any material liability under any Environmental Laws.
(e) Brite does not now own or operate, and has never owned or
operated, aboveground or underground storage tanks in connection with the
Business.
(f) To the knowledge of Brite and Seller, with respect to any or
all of the real properties leased at any time by Brite in connection with the
Business, there are no asbestos-containing materials, urea formaldehyde
insulation, polychlorinated biphenyls or lead-based paints present at any
such properties.
(g) There are no ongoing investigations or negotiations, pending or
threatened administrative, judicial or regulatory proceedings, any threatened
actions or claims, or consent decrees or other agreements in effect that
relate to environmental conditions in, on, under, about or related to Brite ,
its operations or the real properties leased at any time by Brite in each
case in connection with the Business or the Acquired Assets.
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(h) Brite has delivered to Buyer copies of all environmental
assessments, audits, studies and other environmental reports in its
possession or reasonably available to it relating to the Business or the
Acquired Assets.
2.20 TAXES.
(a) (i) All Tax Returns that are required to be filed by or
with respect to Brite or Seller have been duly filed and are correct and
complete in all respects; (ii) all Taxes owed or required to be withheld and
paid over by Brite or Seller have been paid in full; (iii) none of the Tax
Returns referred to in clause (i) contains any position which is or would be
subject to penalties under Section 6662 of the Internal Revenue Code of 1986,
as amended (the "CODE") (or any corresponding provision of state, local or
foreign Tax law); (iv) the Tax Returns referred to in clause (i) have either
been examined by the Internal Revenue Service or the appropriate state, local
or foreign taxing authority or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (v)
all deficiencies asserted or assessments made as a result of any such
examinations have been paid in full; (vi) no issues that have been raised by
the relevant taxing authority in connection with the examination of any of
the Tax Returns referred to in clause (i) are currently pending; (vii) there
is no dispute or claim concerning any liability for Taxes against Brite or
Seller either claimed or raised by any authority in writing or to which any
director or officer or employee responsible for Tax matters of Brite or
Seller has personal knowledge based upon personal contact with any agent of
such authority; (viii) no waivers of statutes of limitation have been given
by or required with respect to any Taxes of Brite or Seller; (ix) the unpaid
Taxes of Brite or Seller do not (or of Company immediately after its
formation, will not) exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth or included in Brite's most recent balance
sheet, Seller's most recent balance sheet, (or the Company's balance sheet);
and (x) to the knowledge of Brite and Seller (or any director, officer or
employee responsible for the Tax matters of Brite or Seller) (A) there is no
investigation or other proceeding pending, threatened or expected to be
commenced by any taxing authority for any jurisdiction in which Brite or
Seller does not file tax returns that may be subject to a given Tax liability
in such jurisdiction, and (B) there is no meritorious basis for such an
investigation or other proceeding that would result in such an assessment.
(b) No tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfers contemplated by this Agreement.
(c) Company will have no liability for Taxes of any person
(other than Company) under Treasury Regulations Section 1.1502-6, as a
transferee or successor, or otherwise.
(d) As a result of Buyer's purchase of the Shares, neither
Company nor Buyer will be obligated to make a payment to an individual
arising from employment or an independent contractor relationship with Brite,
Seller or Company that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code without
regard to whether such payment is reasonable compensation for personal
services performed or to be performed in the future.
(e) Company will not be a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement or arrangement on or
immediately after December 1, 1998.
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(f) Seller is eligible to make an election under Section
338(h)(10) of the Code (and any comparable election under state, local or
foreign tax law) with respect to the Company and the purchase of Shares under
this Agreement.
(g) For purposes of this Agreement (i) the term "TAX" or
"TAXES" means any income, corporation, gross receipts, profits, gains,
capital stock, capital duty, franchise, withholding, social security,
unemployment, disability, property, wealth, welfare, stamp, excise,
occupation, sales, use, value added, alternative minimum, estimated or other
similar tax (including any fee, assessment, or other charge in the nature of
or in lieu of any tax) imposed by any governmental entity (whether national,
local, municipal or otherwise) or political subdivision thereof, and any
interest, penalties, additions to tax or additional amounts in respect of the
foregoing, and including any transferee or secondary liability in respect of
any tax (whether imposed by law, contractual agreement or otherwise) and any
tax as a result of being a member of any affiliated, consolidated, combined,
unitary or similar group; and (ii) the term "TAX RETURNS" (or "TAX RETURN"
when used in the singular form) means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and
any claims for refunds of Taxes, including any amendments or supplements to
any of the foregoing.
2.21 BROKERS. Except for Ladenburg Thalmann & Co. Inc., whose
commissions, fees, expenses and other compensation shall be paid by Brite, no
broker, finder, investment banker, or other person is entitled to any
brokerage, finders or other fee or commission in connection with the
transaction contemplated by this Agreement, based upon arrangements made by
or on behalf of Brite or its Affiliates.
2.22 THE COMPANY.
(a) Except for execution and delivery of this Agreement, and other
than as agreed upon in writing by Buyer, the Company has had, and before the
transfer to the Company of the Acquired Assets as described in SECTION 1.1
and the assumption by the Company of the Assumed Liabilities as described in
SECTION 1.2, the Company will have had, no assets, liabilities, business, or
operations. Between December 1, 1998 and the Closing Date, the Company will
have no operations other than operation of the Business in the ordinary
course. At the Closing, the only assets of the Company will be the Acquired
Assets and the only obligations of the Company will be the Assumed
Liabilities, and such other assets or liabilities as arise due to the
operation of the Business in the ordinary course between December 1, 1998 and
the Closing Date.
(b) The Company has, and before the issuance described in SECTION
1.3, the Company will have had, no issued or outstanding capital stock or
other securities. At the Closing, the only issued or outstanding capital
stock or other securities of the Company will be the Shares, and there will
be no outstanding options or rights to acquire capital stock or other
securities.
(c) Complete and accurate copies of the Certificate of
Incorporation and bylaws of the Company are attached hereto as SCHEDULES
2.22(b)-1 and 2.22(b)-2, respectively.
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2.23 SELLER.
(a) Except for execution and delivery of this Agreement, and other
than as agreed upon in writing, Seller has had, and before the transfers as
contemplated by SECTION 1.1 hereof, Seller will have had, no assets,
liabilities, business, or operations. On December 1,1998, the only assets of
Seller will be the Shares.
(b) Complete and accurate copies of the Certificate of
Incorporation and bylaws of Seller are attached hereto as SCHEDULES 2.23(c)-1
and 2.23(c)-2, respectively.
2.24 OWNERSHIP OF CAPITAL STOCK.
(a) The authorized capital stock of the Company consists of One
Hundred Thousand (100,000) shares, of which Ninety Thousand (90,0000) shares
shall be common stock having a par value of $.001 per share (the "COMMON
STOCK"), and Ten Thousand (10,000) shares of preferred stock having a par
value of $.001 per share, including Five Thousand (5,000) shares of Series A
Preferred Stock. As of the Closing there will be Forty-Five Thousand
(45,000) shares of Common Stock issued and outstanding. There is no other
issued and outstanding capital stock of the Company.
(b) As of the Closing, the Shares will be all of the issued and
outstanding capital stock of the Company and will be validly issued and
outstanding, fully paid and non-assessable. Neither Seller nor the Company
has granted, issued or agreed to grant or issue any other equity interests in
the Company and there are no outstanding options, warrants, subscription
rights, securities that are convertible into or exchangeable for, or any
other commitments of any character relating to, any equity interests of the
Company.
(c) As of the Closing, the Seller will have good and valid title
to, and sole record and beneficial ownership of, the Shares, free and clear
of any claims, liens, pledges, options, security interests, trusts
encumbrances or other rights or interests of any person or entity and the
Seller has the absolute and unrestricted right, power and authority and
capacity to enter into this Agreement.
(d) All dividends, distributions and redemptions made or to be made
by the Company with respect to its equity interests have complied or will
comply with applicable law.
(e) All offers and sales of capital stock of the Company prior to
the date hereof were exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and were
registered or qualified under or exempt from all applicable state securities
laws.
(f) The Company does not own, and did not own at any time, directly
or indirectly, either of record or beneficially, any equity interest in any
entity, and does not have the right to acquire any equity interest in any
entity.
2.25 CONSENTS.
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SCHEDULE 2.25 lists all consents and notices required to be obtained or
given by or on behalf of the Company or the Stockholder before consummation
of the transactions contemplated by this Agreement in compliance with all
applicable laws, rules, regulations, or orders of any Governmental Entity, or
the provisions of any material Contract, and all such consents have been duly
obtained and are in full force and effect except where the failure to obtain
such consent will not have a Material Adverse Effect.
2.26 ACCURACY OF INFORMATION. None of the representations or
warranties or information provided and to be provided by Brite and Seller to
Buyer in this Agreement, the Disclosure Schedule, schedules or exhibits
hereto, or in any of the other Transaction Documents contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary in order to make the statements and facts contained
herein or therein not false or misleading. The descriptions set forth in the
Disclosure Schedule are accurate descriptions of the matters disclosed
therein. Copies of all documents heretofore or hereafter delivered or made
available to Buyer pursuant hereto were or will be complete and accurate
records of such documents.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Brite and Seller that:
3.1 ORGANIZATION AND CORPORATE AUTHORITY. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and the Transaction Documents have been (or upon
execution will have been) duly executed and delivered by Buyer and
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) legal, valid and binding
obligations of Buyer, except as such enforceability may be limited by the
Bankruptcy Exception.
3.2 NO CONFLICT OR VIOLATION. The execution, delivery and
performance by Buyer of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby do not and will not: (i)
violate or conflict with any provision of the charter documents of Buyer; or
(ii) violate any provision or requirement of any domestic or foreign,
national, state or local law, statute, judgment, order, writ, injunction,
decree, award, rule, or regulation of any Governmental Entity applicable to
Buyer.
3.3 ACCURACY OF INFORMATION. None of the representations or
warranties or information provided and to be provided by Buyer to Brite and
Seller in this Agreement, the schedules or exhibits hereto, or any of the
other Transaction Documents contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary in
order to make the statements and facts contained herein or therein, not false
or misleading.
4. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
4.1 ACCESS. Brite shall afford, to Buyer and Buyer's accountants,
counsel and representatives, full access during normal business hours
throughout the period prior to the
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Closing Date (or the earlier termination of this Agreement) to all of the
properties, books, Contracts and records of Brite related to the Business
(including, without limitation, Brite's accounting records, the workpapers of
Brite's independent accountants, and all environmental studies, reports and
other environmental records) and, during such period, shall furnish promptly
to Buyer all information concerning the Business, Acquired Assets, Assumed
Liabilities, and Business Personnel as Buyer may reasonably request.
4.2 CONFIDENTIALITY. For purposes hereof, Brite, Seller and the
Company will keep the matters contemplated herein and all information
provided by Buyer related to Buyer and the Consolidation Transaction (as
defined in SECTION 4.3) and potential participants therein, including
without limitation Deloitte & Touche LLP, confidential, and will not provide
information about such matters to any party or use such information except to
the extent necessary to effect the transactions contemplated hereby. Buyer
will keep the matters contemplated herein and all information provided by
Brite related to the Business and Brite confidential, and will not provide
information about such matters to any party or use such information except to
the extent necessary to effect the transactions contemplated hereby. Buyer
and Brite shall each cause their respective Affiliates, officers, directors,
employees, agents, and advisors to keep confidential all information received
in connection with the transactions contemplated hereby. Brite acknowledges
that Buyer may provide information about the Business to other participants
in the Consolidation Transaction. If this Agreement terminates without
consummation of the Closing, Buyer and Brite shall, and shall cause their
Affiliates to, each maintain the confidentiality of any information obtained
from the other in connection with the transactions contemplated hereby, the
Consolidation Transaction, and Buyer's business plans (the "INFORMATION"),
other than Information that (i) was in the public domain before the date of
this Agreement or subsequently came into the public domain other than as a
result of disclosure by the party to whom the Information was delivered; or
(ii) was lawfully received by a party from a third party free of any
obligation of confidence of or to such third party; or (iii) was already in
the possession of the party prior to receipt thereof, directly or indirectly,
from the other party; or (iv) is required to be disclosed in a judicial or
administrative proceeding after giving the other party as much advance notice
of the possibility of such disclosure as practicable so that the other party
may attempt to stop such disclosure; or (v) is subsequently and independently
developed by employees, consultants or agents of the party to whom the
Information was delivered without reference to the Information. If this
Agreement terminates without consummation of the Closing, Buyer and Brite
shall each return to the other all material containing or reflecting
Information provided by the other, shall not retain any copies, extracts, or
other reproductions thereof or derived therefrom, and shall thereafter
refrain from using the Information and shall maintain its confidentiality
pursuant to this Agreement.
4.3 CONSOLIDATION TRANSACTIONS. Concurrent with the transaction
contemplated hereby, Buyer is acquiring in a series of transactions various
other companies engaged in the business of cost reduction, cost recovery and
profit enhancement services by means of mergers into Buyer, or acquisitions
by Buyer of all or substantially all of the assets or stock or other equity
interests of such companies (collectively, the "CONSOLIDATION TRANSACTIONS").
Brite, Seller, and the Company acknowledge that as a result of the complexity
of the transactions contemplated hereby and the Consolidation Transactions,
the Closing contemplated hereby and
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the closing of the Consolidation Transactions must be concurrent at a time
designated by Buyer. Accordingly, Brite, Seller, and the Company shall upon
receipt of the Closing Notice but prior to the Closing Date (i) provide any
outstanding documentation required to effect the Closing pursuant to this
Agreement in escrow pending release upon authorization of Seller and Brite at
the Closing, (ii) complete performance of their respective obligations
hereunder and under the other Transaction Documents to be performed by the
Closing, and (iii) update the schedules hereto and any other documentation or
information provided to Buyer during the course of this transaction such that
all such disclosures shall be accurate and current as of the Closing Date.
4.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
(or the earlier termination of this Agreement), except as required or
permitted pursuant to the terms hereof, Brite, Seller and the Company shall
not:
(i) make any material change in the conduct of the
Business; or terminate or amend any Contract or enter into any new
contract related to the Business calling for payments by Brite in excess
of $100,000 over the life of the contract or series of related contracts,
without the prior written consent of Buyer, which may not be unreasonably
withheld;
(ii) make any change in the charter documents or bylaws
of the Company or permit the Company to have any assets, liabilities,
business, or operations other than operations in the ordinary course of
the Business, or to issue any shares of capital stock or equity
securities or grant any option, warrant or right to acquire any capital
stock or equity securities or issue any security convertible into or
exchangeable for the capital stock of Brite:
(iii) make any sale, assignment, transfer, lease,
abandonment or other conveyance of any of the Acquired Assets or any part
thereof, except transactions required pursuant to existing Contracts set
forth in SCHEDULE 2.11 and dispositions of inventory or worn out or
obsolete equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(iv) subject any of the Acquired Assets , or any part
thereof, to any lien, security interest, charge, interest or other
encumbrance, or suffer such to be imposed other than such liens, security
interests, charges, interests or other encumbrances as may arise in the
ordinary course of business consistent with past practices;
(v) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any employment, severance or
consulting agreement related to any Business Personnel, or grant any
increase in the compensation or benefits payable or to become payable to
(A) any executive or the Business, or (B) any Business Personnel other
than executives except in accordance with pre-existing contractual
provisions applicable to such non-executives;
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(vi) make or commit to make any capital expenditure in
connection with the Business in excess of $10,000 or to invest, advance,
loan, pledge or donate any monies to any customers or other persons or
entities or to make any similar commitments with respect to outstanding
bids or proposals in connection with the Business;
(vii) take any other action that would cause any of the
representations and warranties made herein not to remain true and correct
in all material respects;
(viii) make any change in any revenue recognition or cost
allocation practices or method of accounting or accounting principle,
method, estimate or practice related to the Business except for any such
change required by reason of a concurrent change in GAAP, or write down
the value of any Acquired Assets or write-off as uncollectible any
Accounts Receivable included in the Acquired Assets except in the
ordinary course of business consistent with past practices;
(ix) settle, release or forgive any material claim or
litigation or waive any material right related to the Business;
(x) prior to December 1, 1998, permit Seller to have any
interest in any Acquired Assets or Assumed Liabilities or any involvement
with the Business;
(xii) delay payment of payables or accelerate collection
of receivables relative to Brite's historical practices regarding the
timing of such payments and collections; or
(xi) commit itself to do any of the foregoing.
(b) From and after the date hereof and until December 1, 1998 (or
the earlier termination of this Agreement), Brite shall, and from December 1,
1998 to the Closing Date, the Company shall:
(i) maintain, in all material respects, the properties
of Brite associated with the Business in accordance with present
practices and in a condition suitable for their current use;
(ii) continue to conduct the Business in the ordinary
course consistent with past practices;
(iii) keep the books of account, records and files
associated with the Business in the ordinary course and in accordance
with existing practices;
(iv) continue to maintain existing business relationships
with suppliers and customers of the Business except to the extent that
such relationships are, at the same time, judged in good faith to be
non-beneficial;
(v) maintain and comply with all Licenses;
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(vi) comply with all Environmental Laws applicable to the
Business, and upon receipt of notice that there exists a violation of any
such Environmental Law, immediately notify Buyer in writing and promptly
(and in any event within the time permitted by the applicable
Governmental Entity) (A) as to areas over which Brite or Seller exercises
control, remove or remedy such violation in accordance with all
Environmental Laws; and (B) as to other areas, use its best efforts to
have such violation removed or remedied in accordance with all
Environmental Laws; and
(vii) keep in full force and effect any insurance policies
comparable in amount and scope to coverage maintained by Brite (or on
behalf of it) related to the Business or the Acquired Assets on the date
hereof.
4.5 RESTRICTIVE COVENANTS.
(a) NON-COMPETITION. After the Closing, without the prior written
consent of Buyer, Brite and Seller will not, directly or indirectly engage or
become interested in, as owner, employee, partner, through equity ownership,
investment of capital, lending of money or property, rendering of services,
or otherwise, either alone or in association with others, any business
competitive with the Business (including within the definition of the
Business, without limitation, any business of the type or types conducted by
Brite through its Telecom Services division at any time during the two (2)
year period preceding the Closing Date or under development by Brite in
connection with the Business on the Closing Date) in any county or any other
political subdivision of any state of the United States of America or of any
other country in the world where Brite conducted the Business at any time
during the two (2) year period preceding the Closing Date. This covenant not
to compete shall extend for a period of three (3) years from the Closing
Date. The parties hereto agree that the duration and area for which the
covenant not to compete set forth in this SECTION 4.4 is to be effective are
reasonable.
(b) CONFIDENTIALITY. Brite and Seller acknowledge their intent to
fully and effectively convey to Buyer all Proprietary Rights to be
transferred to Buyer pursuant hereto, including, without limitation, each
Trade Secret. Accordingly, notwithstanding the expiration of the covenant not
to compete set forth in this SECTION 4.4 Brite and Seller shall at all times
keep confidential and shall not disclose to others any Proprietary Rights and
shall not use or permit to be used any Proprietary Rights for any purpose
other than performance of obligations to Buyer.
(c) NON-DIVERSION. For a period of three (3) years following the
date hereof Brite and Seller shall not, and shall not permit any of their
Affiliates to, divert or attempt to divert or take advantage of or attempt to
take advantage of any actual or potential business or opportunities related
to the Business.
(d) NON-RECRUITMENT. For a period of three (3) years following the
date hereof, Brite and Seller will not, and shall not permit any of their
Affiliates to, hire away, or cause any other person to hire away, any of the
Business Personnel hired or retained by the Company after the Closing, or any
employee of Buyer or its Affiliates, or directly or indirectly entice or
solicit or seek to induce or influence any of such persons to leave their
employment.
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(e) REMEDIES. The covenants contained in SECTION 4.4 impose a
reasonable restraint on Brite and Seller in light of the activities and
business of Brite and Seller and future plans of Buyer. Brite and Seller
acknowledge that if Brite or Seller violates any of the covenants contained
in this SECTION 4.4 (collectively, the "RESTRICTIVE COVENANTS"), it will be
difficult to determine the resulting damages to Buyer and, in addition to any
other remedies Buyer may have, (i) Buyer shall be entitled to temporary
injunctive relief without being required to post a bond and permanent
injunctive relief without the necessity of proving actual damages, and (ii)
Buyer shall have the right to offset payment obligations to Seller to the
extent of any money damages incurred or suffered by Buyer. The Prevailing
Party (as defined in Section 7.15) shall be reimbursed by the non-prevailing
party for all costs including reasonable attorneys' fees and expenses that
may be incurred in enforcing or defending, to any extent, any of the
Restrictive Covenants, whether or not litigation is actually commenced and
including litigation of any appeal defended by Buyer where such party
succeeds in enforcing any of the Restrictive Covenants. Buyer may elect to
seek one or more remedies at its discretion on a case by case basis. Failure
to seek any or all remedies in one case shall not restrict Buyer from seeking
any remedies in another situation. Such action by Buyer shall not constitute
a waiver of any of its rights.
(f) SEVERABILITY AND MODIFICATION OF ANY UNENFORCEABLE COVENANT.
Each of the Restrictive Covenants will be read and interpreted with every
reasonable inference given to its enforceability. However, if any term,
provision or condition of the Restrictive Covenants is held by a court or
arbitrator to be invalid, void or unenforceable, the remainder of the
provisions thereof shall remain in full force and effect and shall in no way
be affected, impaired or invalidated. If a court or arbitrator should
determine any of the Restrictive Covenants are unenforceable because of
over-breadth, then the court or arbitrator shall modify such covenant so as
to make it enforceable to the fullest extent the court or arbitrator deems
reasonable and enforceable under the prevailing circumstances. The covenant
not to compete shall be deemed to be a series of separate covenants, one for
each and every county of each and every state of the United States of America
and each and every political subdivision of each and every country outside
the United States of America where the Business was conducted before the
Closing.
4.6 TAXES.
(a) BRITE'S RESPONSIBILITIES FOR TAXES. Brite and Seller
shall be liable for, and shall defend, indemnify and hold harmless Buyer and
its directors, officers, employees, attorneys and agents from and against any
and all Taxes of any kind or character that are (i) imposed on Seller, Brite
or its group (other than Company) for any taxable year or (ii) imposed on
Company, or for which Company may otherwise be liable, for any taxable year
or period that ends on or before the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date,
the portions of such taxable year ending on and including the Closing Date.
Without limiting the generality of the foregoing, such indemnification
obligation of Brite and Seller shall include (i) any obligation to contribute
to the payment of a tax determined on a consolidated, combined or unitary
basis with respect to a group of corporations that includes or included
Company and Taxes resulting from Company ceasing to be affiliated with Brite
(or, if applicable, to be a member of Brite's consolidated, combined or
unitary group) or attributable to the election to be made under Section
338(h)(10) of the Code, and (ii) any deferred income recharacterized as
income by reason of Treasury Regulations Section 1.1502-13 and Treasury
Regulations Section 1.1502-14 and
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any excess loss accounts taken into income under Treasury Regulations Section
1.1502-19 (and any similar state, local or foreign provision). The
indemnification obligation provided hereunder shall include indemnification
for costs and expenses, including reasonable attorney's fees and expenses and
other costs and expenses associated with defense of a claim or incurred in
obtaining indemnification hereunder, whether or not they are incurred in a
formal proceeding.
(b) BRITE'S TAX RETURN FILING OBLIGATIONS. Brite shall file
or cause to be filed when due (i) all consolidated, combined or unitary Tax
Returns that are required to be filed by or with respect to Company for
taxable years or periods ending on or before the Closing Date and (ii) all
other Tax Returns that are required to be filed by or with respect to Company
that are due on or prior to the closing Date, and Brite shall pay any Taxes
due in respect of (i) or (ii) above. Brite will take no position (unless
required by law) or make any election on such Tax Returns that would
adversely affect the Tax position of Company after the Closing Date.
(c) BUYER'S RESPONSIBILITIES FOR TAXES. Buyer shall be
liable for all Taxes of Company for any taxable year or period that begins
after November 30, 1998 and, with respect to any taxable year or period
beginning before and ending after November 30, 1998, the portion of such
taxable year beginning after November 30, 1998.
(d) BUYER'S TAX RETURN FILING OBLIGATIONS. Buyer shall file
or cause to be filed when due all Tax Returns that are required to be filed
by or with respect to Company, other than the consolidated, combined or
unitary Tax Returns referred to in SECTION 4.5(b) above, that are due after
the Closing Date, and Buyer shall pay any Taxes due in respect of the Tax
Returns described above, subject to reimbursement by Brite for Taxes Brite or
Seller is liable for under SECTION 4.5(a) above.
(e) TAXES FOR SHORT TAXABLE YEAR. Whenever it is necessary
to determine the liability under this SECTION 4.5 for Taxes of Company for a
portion of a taxable year or period that begins before and ends after
November 30, 1998, the determination of the Taxes of Company for the portion
of the year or period ending on, and the portion of the year or period
beginning after November 30, 1998, shall be determined by assuming that
Company had a taxable year or period which ended at the close of November 30,
1998 and that Company closed its books at that time.
(f) REVIEW OF TAX RETURNS AND OTHER FILINGS. To the extent
that one party (the "nonfiling party") would be liable under this SECTION 4.5
for Taxes payable with respect to, or would otherwise be subject to increased
liability for Taxes as a result of, Tax Returns or other filings filed by
another party (the "other party"), the other party shall allow the nonfiling
party adequate opportunity to review and comment on such Tax Returns or other
filings and shall not file such Tax Returns or other filings without the
consent of the nonfiling party; provided, such nonfiling party agrees that it
is liable for such Taxes hereunder and, provided further, that such consent
shall not be unreasonably withheld.
(g) CONTEST PROVISIONS. Buyer, Seller and Brite shall
promptly notify each other in writing upon receipt by any of them, or any of
their affiliates, or Company, of notice of any pending or threatened federal,
state, local, or foreign tax audits or assessments which may
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materially affect the tax liabilities of Savings for which Brite or Seller
would be required to indemnify Buyer pursuant to this Agreement.
Brite shall have the sole right to represent Company's
interests in any tax audit or administrative or court proceeding relating to
taxable periods ending on or before the Closing Date, and to employ counsel
of its choice, at its expense. Notwithstanding the foregoing, Brite (i)
shall consult with Buyer with respect to the resolution of any issue that
would affect Buyer or Company in any way and to any extent, in the taxable
periods subject to such proceeding or any other taxable periods (including,
but not limited to, any resolution that would result in the imposition of
income tax deficiencies, the reduction of asset basis or cost adjustments,
the lengthening of any amortization of depreciation periods, the denial of
amortization or depreciation deductions, or the reductions of loss or credit
carry forwards to Company or Buyer), and (ii) shall not settle any such issue
or file any amended return relating to such issue, without the consent of
Buyer, which consent shall not be unreasonably withheld.
Brite and Seller shall be entitled to participate at Brite's
expense in the defense of any claim for Taxes for a period described in
SECTION 4.5(e)) for the portion of the year or period ending on November 30,
1998 that is the subject of indemnification by Brite hereunder. Neither
Company nor Buyer may agree to settle any such claim for Taxes for the
portion of the year or period ending on November 30, 1998 that is the subject
of indemnification by Brite hereunder without the prior written consent of
Brite, which consent shall not be unreasonably withheld. Brite shall not
settle any such claim, or take any other action with respect to such claim,
without the consent of Buyer, which shall not be unreasonably withheld.
(h) TERMINATION OF TAX ALLOCATION AGREEMENTS. Any tax
allocation or sharing agreement or arrangement, whether or not written, that
may have been entered into by Seller, Brite or any member of Brite's group
and Company shall be terminated as to Company as of December 1, 1998, and no
payments which are owed by or to Company pursuant thereto shall be made
thereunder.
(i) SECTION 338(h)(10). At the request of Buyer, Seller
shall make a joint election with Buyer under Section 338(h)(10) of the Code
and under any similar provisions of state or foreign law with respect to the
purchase of Company's Shares. Seller and Brite represent that Seller's sale
of the Shares of Company is eligible for such election. If the election is
made, Seller and Buyer shall on the Closing Date exchange completed and
executed copies of Internal Revenue Service Form 8023, required schedules
thereto, and any similar state and foreign forms. If Buyer determines that
any changes are required in these forms as a result of information which is
first available after the Closing Date, Seller will promptly cooperate with
respect to such changes.
If an election under Section 338(h)(10) of the Code is made, Brite
and Buyer will (i) cause their respective accountants to negotiate in good
faith, on their behalf, and agree to, or (ii) appoint an appraiser to determine,
a purchase price and an allocation of that price among the assets of Company
that are deemed to have been acquired pursuant to Section 338(h)(10) of the Code
or state or foreign law equivalent. Company and Brite shall use the asset
values determined from such allocation for purposes of all reports and returns
with respect to Taxes, including Internal Revenue Service Form 8594 or any
equivalent statement.
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(j) EFFORTS TO OBTAIN CERTAIN DOCUMENTS. Brite and Seller
shall, upon request, use their reasonable best efforts to obtain any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce or eliminate any tax that
could be imposed on Company (including, but not limited to, with respect to
the transactions contemplated by this Agreement).
(k) COOPERATION AFTER CLOSING. After the Closing Date,
Brite, Seller and Buyer shall:
(i) assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns or reports which such
other party is responsible for preparing and filing in accordance with this
Section 4.5;
(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding, any Tax Return of Company;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records, and documents
relating to Taxes of Company;
(iv) provide timely notice to the other in writing of
any pending or threatened tax audits or assessments of Company for taxable
periods for which the other may have a liability under this Agreement;
(v) furnish the other with copies of all
correspondence received from any taxing authority in connection with any tax
audit or information request with respect to any such taxable period;
(vi) retain and (upon the other party's request)
provide records and information that are reasonably relevant to any audit,
litigation or other proceeding or to tax matters pertinent to Company
relating to any taxable year or period beginning before the Closing Date
until the expiration of the statute of limitations (and any extensions
thereof) of the respective taxable periods and give the other party
reasonable written notice prior to transferring, destroying or discarding any
such records and information; PROVIDED, if Buyer so requests, after receiving
notice that such records are to be destroyed or discarded, Brite shall allow
Buyer to take possession of such books and records; and, PROVIDED FURTHER,
that Buyer shall not be required to give such notice to Brite after the
expiration of the statute of limitations (and any extensions thereof known to
Buyer) of the respective tax period to which such books and records relate;
(vii) provide, upon request, all information that may
be required for reporting pursuant to Section 6043 of the Code and the
regulations thereunder; and
(viii) abide by all record retention agreements entered
into with any taxing authority.
(l) TRANSFER TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including penalties and
interest) incurred in connection with the transactions contemplated by this
Agreement shall be paid by Brite when due, and Brite will, at its expense,
file all necessary Tax Returns or other forms for such Taxes and other
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documentation with respect to all such matters. If required by applicable
law, Buyer will join in the execution of any such returns or documentation.
4.7 ACCESS TO RECORDS AND FILES. Brite shall have the right for a
period of three (3) years following the Closing Date to have reasonable
access to such books, records and accounts, correspondence, production
records, employment records and other similar information as are included in
the Acquired Assets pursuant to this Agreement for the limited purposes of
concluding its involvement in the Business prior to the Closing Date. Buyer
shall have the right for a period of three (3) years following the Closing
Date to have reasonable access to those books, records and accounts,
correspondence, and other records which are retained by Brite pursuant to the
terms of this Agreement to the extent that any of the foregoing relate to
Business or the Acquired Assets.
4.8 COOPERATION IN LITIGATION. Each party will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such
party relating to or arising out of the conduct of the Business prior to or
after December 1, 1998(other than litigation between Buyer and/or its
Affiliates or assignees, on the one hand, and Brite and/or its Affiliates or
assignees, on the other hand, arising out of the transactions contemplated by
this Agreement). The party requesting such cooperation shall pay the
out-of-pocket expenses (including reasonable legal fees and disbursements) of
the party providing such cooperation and of its officers, directors,
employees and agents reasonably incurred in connection with providing such
cooperation, but shall not be responsible to reimburse the party providing
such cooperation for such party's time spent in such cooperation or the
salaries or costs of fringe benefits or other similar expenses paid by the
party providing such cooperation to its officers, directors, employees and
agents while assisting in the defense or prosecution of any such litigation
or proceeding.
4.9 EMPLOYMENT.
(a) Other than as listed on SCHEDULE 1.2, neither the Company nor
Buyer shall assume any liabilities or obligations of Brite or Seller to any
current or former employee or agent of Brite or Seller. Brite and Seller
shall be solely responsible for, and neither the Company nor Buyer shall
have, any liability or obligation to or in respect of any employee or agent
or former employee or former agent of Brite or Seller or their beneficiaries
and dependents, including, without limitation, any liability or obligation
(i) arising from such employee or agent's actual or constructive termination
by Brite or Seller, or any notice and/or payment in lieu of notice required
by applicable law in connection with such termination, (ii) in respect of any
compensation, tenure, seniority, benefit or welfare plan or arrangement of
any kind, (iii) to trusts or other funds or any Governmental Entity, with
respect to unemployment compensation benefits, social security benefits,
fringe benefits or any other benefits or obligations, or (iv) for salaries,
vacation and holiday pay, sick pay, bonuses and other forms of compensation,
or (v) arising from the participation and/or accrual of benefits or
compensation under, or failure to participate in or to accrue compensation or
benefits under, any Employee Plans or other employee arrangement of Brite or
Seller. Except as otherwise provided in SECTION 4.8(b), neither
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the Company nor Buyer shall have any obligation to any employee or agent of
Brite or Seller to employ or engage any such employee or agent.
(b) SCHEDULE 4.9 sets forth a list of all Business Personnel to
whom Buyer intends, through the Company, to offer employment or engagements
comparable to those with Brite as of the date hereof. Buyer shall, through
the Company, offer employment or such similar engagements to all of the
persons listed on SCHEDULE 4.9 at such salaries, wages or compensation rates
and such medical insurance and other benefits as Buyer may determine At any
time after the Closing Buyer may, but is in no way obligated to, offer
employment or similar engagements to Business Personnel not listed on
SCHEDULE 4.9. Effective as of December 1, 1998, all employees of Brite
employed by the Company shall cease to participate in or accrue benefits
under any Employee Plan or arrangements maintained by Brite, except with
respect to continued participation in medical, life and disability coverages.
(c) If any of the Business Personnel elects to become employed or
engaged by the Company, the employment or relationship between such employee
or agent and Brite shall first terminate and such employee or agent shall
then be employed or engaged by the Company according to policies and
procedures determined by Buyer.
4.10 CHANGE OF NAME. Promptly after the Closing Date Brite and its
Affiliates will discontinue using the names "Telecom Services Limited", "TSL"
or any other names confusingly similar to "Telecom Services Limited", "TSL"
or any other name or names under which, at any time, the Business was
conducted.
4.11 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) Not later than December 16, 1998, Brite shall deliver to Buyer
a list of all Accounts Receivable outstanding on December 1, 1998, all of
which will be included in the Acquired Assets.
(b) Brite and Seller hereby authorize Buyer and the Company to open
any and all mail addressed to Brite (if delivered to Buyer or the Company) if
received on or after December 1, 1998 and hereby grants to Buyer and the
Company a power of attorney to endorse and cash any checks or instruments
made payable or endorsed to Brite or Seller or its order and received by
Buyer or the Company.
Brite and Seller shall forward promptly to Buyer any monies, checks or
instruments received by Brite or Seller after the Closing with respect to the
Accounts Receivable.
4.12 BEST EFFORTS. Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable consistent with applicable law to cause
the fulfillment of the conditions to Closing set forth herein and to
consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.
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4.13 BULK SALES LAWS. Brite and Seller shall comply with the
provisions of any applicable bulk sales laws applicable to the transactions
contemplated hereby, and shall be responsible and liable for the costs of any
non-compliance, irrespective of which party is obligated under such laws.
4.14 CLOSING DATE NET WORTH. On December 1, 1998, the Company will
have a net worth, calculated in accordance with GAAP, of at least Three
Million Six Hundret Thousand Dollars ($3,600,000).
4.15 FURTHER ASSURANCES. Upon the reasonable request of a party or
parties hereto at any time after the Closing Date, the other party or parties
shall forthwith execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as the requesting party or parties or its or their counsel may
reasonably request in order to perfect title of Buyer and its successors and
assigns to the Shares and title of the Company and its successors and assigns
to the Acquired Assets and otherwise to effectuate the purposes of this
Agreement.
4.16 NOTICE OF BREACH. At all times before the Closing, and
thereafter until the second anniversary of the Closing Date, each of the
parties hereto shall promptly give written notice with particularity of any
breach or inaccuracy of any representation, warranty, agreement or covenant
of such party contained herein or in any other Transaction Document to the
parties to whom or which such representation, warranty or covenant was made.
4.17 CONTRACTS AND LICENSES.
(a) Brite shall use its best efforts to obtain all necessary
consents, waivers, authorizations and approvals of all persons, firms or
corporations required in connection with the execution, delivery and
performance by Brite and the Company of this Agreement
(b) To the extent that the terms of any Contract or License require
the consent of any third party to avoid giving any third party the right to
cancel or terminate the Contract or License or impose extra charges or
penalties in connection with the transactions contemplated by this Agreement,
the assignment thereof to the Company will be deferred until such consent is
received. With respect to Contracts, pending receipt of such consents, Brite
will, to the extent legally permissible, subcontract performance to the
Company, and the Company will receive in respect of its subcontract
performance all payments earned under the Contract. If subcontracting is not
permissible, then pending assignment the parties will cooperate to determine
a reasonable arrangement that is designed to provide for Buyer the benefits
intended to be assigned to the Company (and indirectly to Buyer) under the
relevant Contract or License, including, without limitation, enforcement for
the account of Buyer of any and all rights of Brite against the other party
to any Contract arising out of the breach of cancellation of Contract by such
other party. However, notwithstanding this SECTION 4.17(b), Brite will not
be required to conduct the Business after the Closing, and Buyer will
reimburse Brite for costs incurred by Brite pursuant to this SECTION 4.17(b)
and will indemnify Brite against liabilities incurred in performance under
this SECTION 4.17(b) pursuant to SECTION 5.3. The reimbursement and
indemnification described in the preceding sentence shall not be subject to
SECTION 5.7.
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4.18 SUPPLEMENTAL DISCLOSURE. At the Closing, Brite shall promptly
supplement or amend each of the schedules and the Disclosure Schedule with
respect to any matter hereafter arising which, if existing or occurring at or
prior to the date hereof, would have been required to be set forth or listed
in the schedule or the Disclosure Schedule or which is necessary to complete
or correct any information in the schedules or the Disclosure Schedule.
4.19 HSR. Buyer and Brite shall cooperate in preparing and
delivering to the Department of Justice and the Federal Trade Commission
notification of the transactions contemplated hereby pursuant to, and shall
use their best efforts to obtain early termination of the waiting period
under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
ACT"). Buyer shall pay all filing fees payable under the HSR Act in
connection with the transactions contemplated hereby. Each of Buyer and
Brite shall pay its own costs incurred in preparation of all reports and
notifications required under the HSR Act.
4.20 COMPETING PROPOSALS.
(a) Brite shall not, directly or indirectly, initiate, solicit,
encourage or participate in any discussions or negotiations with, or provide
any nonpublic information to, any person or entity concerning any potential
offer (other than as described herein) to acquire the Business or any assets
thereof or interests therein, or any other transaction or arrangement that
would interfere with the transactions contemplated hereby (a "COMPETING
PROPOSAL");
(b) Brite shall promptly communicate to Buyer the existence or
occurrence and terms of any Competing Proposal or contact related thereto
which Brite or any of its employees, directors, or agents may receive in
respect of any such proposed transaction and the identity of the person,
entity or group from whom such proposal or contact was received; and
(c) Brite shall not transfer or hypothecate the Business or any
assets thereof or interests therein except to Buyer, or enter into any
agreement with any person other than Buyer in connection with any of the
foregoing.
4.21 SERIES A PREFERRED STOCK. Buyer shall not amend the Articles
of Incorporation of the Company in any manner which will diminish the rights
of the Series A Preferred Stock delivered to Seller as a portion of the
Purchase Price pursuant to SCHEDULE 1.4.
4.22 EMPLOYEE PLANS.
(a) Effective as of December 1, 1998 and contingent upon the
Closing, Transferred Employees shall cease to accrue benefits under the Brite
Voice Systems, Inc. 401(k) Plan ("Seller's 401(k) Plan"). Seller shall (1)
cause the account of each Transferred Employee who has an accrued benefit in
Seller's 401(k) Plan as of the Closing to become 100% vested and (2) cause
the account of each Transferred Employee in Seller's 401(k) Plan to include
an allocable share of such contributions as would have been made between the
last date of contribution and December 1, 1998 in the same manner as if the
transaction contemplated by this Agreement had not occurred. As soon as
practicable following December 1, 1998, Seller shall segregate, in accordance
with the spin-off provisions of Code Section 414(l), the accounts of the
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Transferred Employees under Seller's 401(k) Plan and shall transfer such
account balances to the trustee of a 401(k) Plan maintained by Buyer for such
Transferred Employees in a manner consistent with Code Section 414(l). All
such transfers from Seller's 401(k) Plan shall be in the form of cash or cash
equivalents. For purposes of this SECTION 4.22, the term Transferred
Employee shall mean each employee of Seller who as of the Closing becomes an
employee of Buyer, in each case whether or not actively employed on such date.
(b) Seller shall treat the transaction contemplated by this
Agreement as a termination of employment with respect to the Transferred
Employees for Seller's health plans, and shall be responsible to provide
health care continuation coverage under Seller's health plans pursuant to the
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), effective as of Closing. Buyer shall not assume, and Seller
agrees to be solely responsible for, all liabilities with respect to COBRA
coverage for Transferred Employees for qualifying events arising on or prior
to December 1, 1998.
4.23 REAL PROPERTY LEASES.
In the event that prior to the Closing Brite and Seller have failed to
obtain Consents to the transfer of the Real Property Leases from Brite to the
Company:
(a) Brite, Seller, the Company and Buyer shall continue to use
their best efforts to obtain such Consents after the Closing Date.
(b) Prior to the execution of the consent necessary to transfer a
Real Property Lease, Brite shall remain liable to the landlord and his
successors and assigns upon such Real Property Lease; PROVIDED, HOWEVER that
Brite's liability is subject to Buyer's obligation to indemnify Brite,
without regard to the Threshold described in SECTION 5.7, for any amounts
that Brite may be required to pay under such Real Property Lease which the
Company, had the lease been assigned, should have paid after December 1, 1998
under such Real Property Lease.
(c) With respect to any Real Property Lease which is terminated by
the lessor because of the change in tenancy from Brite to the Company, Brite
shall reimburse Buyer and the Company (and shall indemnify Buyer and the
Company without regard to the Threshold described in SECTION 5.7), for (i)
any increased rent payment incurred by Buyer or the Company to another
landlord for comparable replacement space for a term corresponding to the
original Real Property Lease term and for (ii) any and all costs incurred by
Buyer and the Company associated with relocating from the original space to
the replacement space.
5. SURVIVAL; INDEMNIFICATION.
5.1 SURVIVAL. The representations and warranties made in this
Agreement or in any exhibit, schedule, or any Transaction Document or
certificate shall survive any investigation made by any party hereto and the
Closing of the transactions contemplated hereby until the second anniversary
of the Closing Date, except those representations and warranties contained in
(i) SECTION 2.12 (Compliance with Law), 2.20 (Taxes), and 2.21 (Brokers),
which will survive until the expiration (including extensions) of the
applicable statute of limitations;
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(ii) SECTION 2.19 (Environmental Matters), which will survive until the
seventh anniversary of the Closing Date; and (iii) SECTIONS 2.3 (Acquired
Assets) and 2.22 (The Company) and 2.23 (The Seller), which will survive
indefinitely. As to any matter which is based upon willful fraud by the
indemnifying party, the representations and warranties set forth in this
Agreement shall expire only upon expiration of the applicable statute of
limitations. No party will be liable to another under any warranty or
representation after the applicable expiration of such warranty or
representation; provided however, if a claim or notice is given under this
SECTION 5 with respect to any representation or warranty prior to the
applicable expiration date, such claim may be pursued to resolution
notwithstanding expiration of the representation or warranty under which the
claim was brought. Any investigations made by or on behalf of any of the
parties prior to the date hereof shall not affect any of the parties'
obligations hereunder. Completion of the transactions contemplated hereby
shall not be deemed or construed to be a waiver of any right or remedy of any
of the parties.
5.2 INDEMNIFICATION BY BRITE. Subject to the limits set forth in
this SECTION 5, Brite, Seller and their successors and assigns shall jointly
and severally indemnify, defend and hold harmless Buyer and, if the
transactions contemplated hereby are consummated, the Company, and their
respective Affiliates, and the officers, directors, employees and agents of
any of them, from and against any and all claims, losses, damages,
liabilities obligations, assessments, penalties and interest, demands,
actions and expenses (including, without limitation, settlement costs and any
legal, accounting and other expenses for investigating or defending any
actions or threatened actions) ("LOSSES") reasonably incurred by any such
indemnitee, arising out of or in connection with any of the following:
(a) the operations of Brite or Seller and the ownership or
operation of the Excluded Assets including, without limitation, the operation
or maintenance of the Employee Plans at any time before or after the Closing;
(b) the ownership or operation of the Acquired Assets or Business
before December 1, 1998;
(c) any obligations of the Company accrued or arising from actions
taken by Brite, Seller or the Company before December 1, 1998 other than the
Assumed Liabilities;
(d) any untruth or inaccuracy of any representation or warranty
made by Brite, Seller or the Company in this Agreement or any Transaction
Document;
(e) the breach of any covenant, agreement or obligation of Brite,
Seller or the Company contained in this Agreement or any Transaction
Document;
(f) any claims against, or liabilities or obligations of, Brite or
Seller not specifically assumed by Buyer pursuant to this Agreement;
(g) employment or retention by Brite or its Affiliates of any
persons and termination of such employment or retention; and
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(h) any tax liability arising or resulting from the structure of
the transactions contemplated by this Agreement.
5.3 INDEMNIFICATION BY BUYER. Subject to the limits set forth in
this SECTION 5, Buyer and, if the transactions contemplated hereby are
consummated, the Company, shall indemnify, defend and hold harmless Brite and
its Affiliates and the officers, directors, employees and agents of any of
them from and against any and all Losses reasonably incurred by any such
indemnitee arising out of or in connection with any of the following:
(a) the ownership and operation of the Acquired Assets and the
Business after December 1, 1998;
(b) any untruth or inaccuracy of any representation or warranty
made by Buyer in this Agreement or any other Transaction Document;
(c) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any Transaction Document;
(d) any claims against, or liabilities or obligations of, Brite
specifically assumed by the Company pursuant to this Agreement;
(e) employment or retention by Buyer or its Affiliates of any
persons and termination of such employment or retention and;
(f) any obligations of the Company accrued or arising from actions
taken by Buyer or the Company after the Closing.
5.4 INDEMNIFICATION PROCEDURE.
(a) Whenever any claim shall arise for indemnification hereunder (a
"CLAIM"), the party entitled to indemnification (the "INDEMNITEE") shall
promptly give written notice to the party obligated to provide indemnity (the
"INDEMNITOR") with respect to the Claim after the receipt by the Indemnitee
of reliable information of the facts constituting the basis for the Claim;
but the failure to timely give such notice shall not relieve the Indemnitor
from any obligation under this Agreement, except to the extent, if any, that
the Indemnitor is materially prejudiced thereby.
(b) Upon receipt of written notice from the Indemnitee of a Claim,
the Indemnitor shall provide counsel (such counsel subject to the reasonable
approval of the Indemnitee) to defend the Indemnitee against the matter from
which the Claim arose, at the Indemnitor's sole cost, risk and expense. The
Indemnitee shall cooperate in all reasonable respects, at the Indemnitor's
sole cost, risk and expense, with the Indemnitor in the investigation, trial,
defense and any appeal arising from the matter from which the Claim arose;
provided, however, that the Indemnitee may (but shall not be obligated to)
participate in any such investigation, trial, defense and any appeal arising
in connection with the Claim. If the Indemnitee's participation in any such
investigation, trial, defense and any appeal arising from such Claim relates
to a legal
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position or defense that varies materially from the legal positions or
defenses pursued by the Indemnitor, and if the Indemnitee reasonably believes
that the Indemnitee's interests will be adversely and materially affected if
such legal position or defense is not pursued, the Indemnitor shall bear the
expense of the Indemnitee's separate participation, including all fees, costs
and expenses of one separate counsel for the Indemnitee (or multiple
Indemnitees). If the Indemnitee elects to so participate, the Indemnitor
shall cooperate with the Indemnitee, and the Indemnitor shall deliver to the
Indemnitee or its counsel copies of all pleadings and other information
within the Indemnitor's knowledge or possession reasonably requested by the
Indemnitee or its counsel that is relevant to the defense of such Claim and
that will not prejudice the Indemnitor's position, claims or defenses. The
Indemnitee and its counsel shall maintain confidentiality with respect to all
such information consistent with the conduct of a defense hereunder. The
Indemnitor shall have the right to elect to settle any claim for monetary
damages only without the Indemnitee's consent, if the settlement includes a
complee release of the Indemnitee. If the settlement does not include such a
release, it will be subject to the consent of the Indemnitee, which will not
be unreasonably withheld. The Indemnitor may not admit any liability of the
Indemnitee or waive any of the Indemnitee's rights without the Indemnitee's
prior written consent, which will not be unreasonably withheld. If the
subject of any Claim results in a judgment or settlement, the Indemnitor
shall promptly pay such judgment or settlement.
(c) If the Indemnitor fails to assume the defense of the subject of
any Claim in accordance with the terms of SECTION 5.4(b), or if the
Indemnitor fails diligently to prosecute such defense, the Indemnitee may
defend against the subject of the Claim, at the Indemnitor's sole cost, risk
and expense, in such manner and on such terms as the Indemnitee deems
appropriate, including, without limitation, settling the subject of the Claim
after giving reasonable notice to the Indemnitor. If the Indemnitee defends
the subject of a Claim in accordance with this Section, the Indemnitor shall
cooperate with the Indemnitee and its counsel, at the Indemnitor's sole cost,
risk and expense, in all reasonable respects, and shall deliver to the
Indemnitee or its counsel copies of all pleadings and other information
within the Indemnitor's knowledge or possession reasonably requested by the
Indemnitee or its counsel that are relevant to the defense of the subject of
any such Claim and that will not prejudice the Indemnitor's position, claims
or defenses. Indemnitee shall maintain confidentiality with respect to all
such information consistent with the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee
against Losses arising under this Agreement shall be in addition to any other
obligations the Indemnitor might otherwise have and any other rights the
Indemnitee might otherwise have.
5.5 PAYMENT. All payments owing under this SECTION 5 will be made
promptly as indemnifiable Losses are incurred. If the Indemnitee defends the
subject matter of any Claim in accordance with SECTION 5.4(c) or proceeds
with separate counsel in accordance with SECTION 5.4(b), the expenses
(including attorneys' fees) incurred by the Indemnitee shall be paid by the
Indemnitor in advance of the final disposition of such matter as incurred by
the Indemnitee, if the Indemnitee undertakes in writing to repay any such
advances in the event that it is ultimately determined that the Indemnitee is
not entitled to indemnification under the terms of this Agreement or
applicable law.
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5.6 SET-OFF. In addition to any rights of set off or other rights
that any of the Indemnitees may have at common law, by statute or otherwise,
each Indemnitee, notwithstanding SECTION 5.7, shall have the right to set off
any amount that is owed by such Indemnitee to an Indemnitor against any
amount otherwise payable by the Indemnitor to the Indemnitee.
5.7 LIMITATIONS. Notwithstanding any provision of this Agreement
to the contrary, except as otherwise contemplated in Section 5.6 and Section
4.17(b), no party shall have any obligation to indemnify any person entitled
to indemnity under this SECTION 5 or to pay damages in respect of contract
claims arising under this Agreement or any other Transaction Document unless
the persons so entitled to indemnity or recovery thereunder have suffered
Losses in an aggregate amount attributable to all claims and obligors in
excess of Two Hundred Thousand Dollars ($200,000) (the "THRESHOLD"). Once
the aggregate amount of Losses exceeds the Threshold, persons entitled to
recovery shall be entitled to recover the full amount of all Losses,
including any amounts which constituted the Threshold. No person shall be
entitled to indemnification under this SECTION 5 for Losses directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement or any duty to the
potential Indemnitor.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of
Brite, Seller and the Company, on the one hand, and Buyer, on the other hand,
to consummate the transactions contemplated hereby shall be subject to the
fulfillment, before the Closing Date, of the conditions set forth in this
SECTION 6.1, any one or more of which may be waived in writing by the party
entitled to the benefit of such condition; provided, however, that such
waiver will not diminish such party's right to indemnification pursuant to
SECTION 5, unless so stated, and provided further that Brite, Seller and the
Company will be required to perform their obligations hereunder,
notwithstanding lack of fulfillment of the conditions set forth in this
SECTION 6.1, if Buyer agrees in writing to be liable for, and to indemnify
Brite and Seller from and against, any obligations that Brite and Seller
would incur as a result of consummating the transactions contemplated hereby
notwithstanding the fact that the conditions in this SECTION 6.1 have not
been fulfilled.
(a) NO ACTION OR PROCEEDING. No preliminary or permanent
injunction or other order issued by any Governmental Entity that declares
this Agreement invalid in any material respect or prevents or would be
violated by the consummation of the transactions contemplated hereby, or
which materially adversely affects the assets, properties, operations,
prospects, net income or financial condition of Brite or Seller is in effect;
and no action or proceeding, has been instituted or threatened by any
Governmental Entity, other person, or entity which seeks to prevent or delay
the consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement the result of
which could constitute a Material Adverse Change.
(b) COMPLIANCE WITH LAW. There shall have been obtained all
permits, approvals, and consents of all Governmental Entities that counsel
for Buyer or for Brite and Seller may
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reasonably deem necessary or appropriate so that consummation of the
transactions contemplated by this Agreement will be in compliance with
applicable laws, including, without limitation, expiration or termination of
the waiting period prescribed by the HSR Act.
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to consummate the transactions contemplated hereby are subject to the
fulfillment, at or before the Closing Date, of the conditions set forth in
this SECTION 6.2, any one or more of which may be waived by Buyer in its
discretion; provided however, such waiver will not waive or diminish Buyer's
right to indemnification pursuant to SECTION 5, unless so stated:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Brite, Seller and the Company contained in this Agreement or in
any Transaction Document delivered pursuant hereto shall be true and correct
in all material respects as of the date hereof and on the Closing Date, and
at the Closing Brite, Seller and the Company shall each have delivered to
Buyer a certificate dated the Closing Date to such effect signed by the
President or any Vice President and the Secretary or any Assistant Secretary
of Brite, Seller and the Company.
(b) PERFORMANCE OF BRITE AND SELLER. Brite, Seller and the Company
have performed in all material respects all obligations required to be
performed by them under this Agreement on or before the Closing Date, and at
the Closing Brite shall have delivered to Buyer a certificate to such effect
dated the Closing Date and signed by the President or any Vice President and
the Secretary or any Assistant Secretary of Brite.
(c) CONSENTS TO ASSIGNMENTS OF CERTAIN CONTRACTS. All necessary
consents to the assignment of all Contracts requiring consents as a condition
to their assignment to and assumption by the Company as described herein
shall have been obtained in written instruments reasonably satisfactory to
Buyer.
(d) ADDITIONAL CLOSING DOCUMENTS OF BRITE. Buyer has received, or
is receiving at the Closing, all of the following, each duly executed by the
parties thereto (other than Buyer) and dated the Closing Date (or an earlier
date satisfactory to Buyer), in form and substance satisfactory to Buyer:
(i) Copies, certified by the Secretary or an Assistant
Secretary of Brite and Seller of resolutions of the Board of Directors of
Brite and Seller authorizing the execution, delivery and performance of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby;
(ii) Leasehold deeds of trust or similar forms of
conveyance in proper statutory form for recording duly executed and
acknowledged by Brite and Seller covering the Real Property Leases to be
conveyed to the Company pursuant to this Agreement;
(iii) Such further instruments of sale, transfer,
conveyance, assignment or delivery covering the Acquired Assets, or any
part thereof, as Buyer may reasonably
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require to assure the full and effective sale, transfer, conveyance,
assignment or delivery to the Company of the Acquired Assets to be
transferred pursuant to this Agreement; and
(iv) Such other documents as Buyer may reasonably
request.
(e) CONSENTS AND APPROVALS. All consents, waivers, authorizations
and approvals of any Governmental Entity, and of any other person or entity,
required under the Contracts, Licenses or otherwise in connection with the
execution, delivery and performance of this Agreement, the absence of which
could result in material liability or a Material Adverse Change or the
cancellation or adverse change in terms of, or payments under, any Contract,
have been duly obtained in form reasonably satisfactory to Buyer and are in
full force and effect on the Closing Date.
(f) NO ADVERSE CHANGES. Between the date of this Agreement and the
Closing Date there shall not have occurred any Material Adverse Change or any
event or circumstance that may result in a Material Adverse Change.
(g) DUE DILIGENCE. Buyer is satisfied with the results of its due
diligence review of the Acquired Assets, the business, operations, financial
condition and prospects of the Business.
(h) FINANCING. Buyer shall have available, on commercially
reasonable terms reasonably satisfactory to Buyer, debt financing sufficient
to finance the Cash Payment (as defined in Schedule 1.4), and to provide
Buyer with adequate working capital following the Closing.
(i) BULK SALES. Brite and Seller shall have complied, on their
behalf and on behalf of Buyer, with all bulk sales laws applicable to the
transactions contemplated hereby, including requirements imposed upon Buyer
under applicable law.
(j) AUDIT. A review of the books, records and results of
operations of the Business as of September 30, 1998 has been completed and
Buyer is satisfied that the results thereof are substantially consistent with
the unaudited financial statements of the Business through the same period
and other information provided to Buyer by Brite and do not reflect any
Material Adverse Change since December 31, 1997.
(k) EMPLOYEE MATTERS. Buyer is reasonably assured that the
employees and independent contractors identified on SCHEDULE 4.9 are of a
quantity and having the skills sufficient for the operation of the Business,
and are continuing their employment or affiliation with the Company after the
Closing on terms acceptable to Buyer, Buyer has received an Employee General
Release Agreement in the form of EXHIBIT D hereto executed by each such
employee or independent contractor, and the persons listed on SCHEDULE 6.2
shall have entered into employment contracts substantially in the form
attached hereto as EXHIBIT E.
(l) OPINION OF COUNSEL. Buyer has received a favorable opinion,
dated as of the Closing Date, from counsel to Brite and Seller in
substantially the form of EXHIBIT F. In giving such opinion, such counsel
may rely upon certificates of public officials, upon opinions of local
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counsel and, as to matters of fact, upon a certificate of Brite, or its
officers, and such counsel may assume that this Agreement has been duly
authorized, executed and delivered by Buyer.
(m) LEGAL MATTERS. All Transaction Documents required to be
executed or delivered by or on behalf of Brite, Seller and the Company under
this Agreement, and all other actions and proceedings required to be taken by
or on behalf of either of them in furtherance of the transactions
contemplated hereby, are in form and substance reasonably satisfactory to
counsel for Buyer.
(n) STOCKHOLDER AGREEMENT. Buyer has received an executed
Stockholder Agreement substantially in the form of EXHIBIT H.
(o) CERTIFICATES. Seller shall have delivered to Buyer the
certificates representing the Shares and the stock certificates or stock
powers as described in SECTION 1.4.
(p) STOCK BOOKS. The Company shall have delivered the stock books,
stock ledgers, minute books and corporate seals of the Company.
(q) OTHER CLOSING DOCUMENTS. Buyer has received such other duly
executed certificates, instruments and documents in confirmation of the
representations and warranties of Brite, Seller and the Company or in
furtherance of the transactions contemplated by this Agreement as Buyer or
its counsel may reasonably request.
6.3 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Brite
and Seller to consummate the transactions contemplated hereby are subject to
the fulfillment, at or before the Closing Date, of the conditions set forth
in this SECTION 6.3 any one or more of which may be waived by Brite and
Seller and the Company in writing in its discretion; provided however, such
waiver will not waive or diminish the right of Seller to indemnification
pursuant to SECTION 5, unless so stated:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Buyer contained in this Agreement or in any Transaction
Document shall be true and correct in all material respects on the date
hereof, and at the Closing Buyer shall have delivered to Brite a certificate
to such effect dated the Closing Date, signed by the President or any Vice
President and the Secretary or any Assistant Secretary of Buyer.
(b) PERFORMANCE OF COVENANTS. Each of the obligations of Buyer to
be performed on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed on or before the Closing Date, and
at the Closing Buyer shall have delivered to Brite a certificate to such
effect dated the Closing Date signed by the President or any Vice President
and the Secretary or any Assistant Secretary of Buyer.
(c) AUTHORITY. All actions required to be taken by, or on the part
of, Buyer to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Buyer.
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(d) ADDITIONAL CLOSING DOCUMENTS OF BUYER. Buyer has executed and
delivered, or is executing and delivering at the Closing the following
documents, each dated the Closing Date:
(i) Copies, certified by the Secretary or an Assistant
Secretary of Buyer, of resolutions of its Board of Directors authorizing
the execution and delivery of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby;
and
(ii) Such other closing documents as Brite may reasonably
request.
(e) CONSENTS AND APPROVALS. All consents, waivers, authorizations
and approvals of any Governmental Entity, and of any other person or entity,
required in connection with the execution, delivery and performance of this
Agreement, the absence of which could result in material liability to Brite,
have been duly obtained and are in full force and effect on the Closing Date;
provided however, that Brite, Seller and the Company will be required to
perform their obligations hereunder, notwithstanding lack of fulfillment of
the conditions set forth in this SECTION 6.3(e), if Buyer agrees in writing
to be liable for, and to indemnify Brite and Seller from and against, any
obligations that Brite or Seller would incur as a result of consummating the
transactions contemplated hereby notwithstanding the fact that the conditions
in this SECTION 6.3(e) have not been fulfilled.
(f) OPINION OF COUNSEL. Brite has received a favorable opinion, dated
as of the Closing Date, from counsel to Buyer, in substantially the form of
EXHIBIT G. In giving such opinion, such counsel may rely upon certificates of
public officials, upon opinions of local counsel and, as to matters of fact,
upon a certificate of Buyer, and such counsel may assume that this Agreement has
been duly authorized, executed and delivered by Brite.
(g) PURCHASE PRICE. Seller has received:
(i) the Cash Payment (as defined in SCHEDULE 1.4);
(ii) the Warrants (as defined in SCHEDULE 1.4); and
(iii) certificates representing the Preferred Stock (as
defined in SCHEDULE 1.4).
(h) LEGAL MATTERS. All Transaction Documents required to be
executed or delivered by or on behalf of Buyer under this Agreement, and all
other actions and proceedings required to be taken by or on behalf of Buyer
in furtherance of the transactions contemplated hereby, are in form and
substance reasonably satisfactory to counsel for Brite .
(i) OTHER CLOSING DOCUMENTS. Brite has received such other duly
executed certificates, instruments and documents in confirmation of the
representations and warranties of Buyer or in furtherance of the transactions
contemplated by this Agreement as Brite may reasonably request.
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7. MISCELLANEOUS.
7.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated (a) by Buyer, if (i) Brite, Seller or the Company
fails to comply in any material respect with any of its or their covenants or
agreements contained herein, or (ii) any of the representations and
warranties of Brite, Seller or the Company are breached or is inaccurate in
any material way; or (b) by Brite, or Buyer if (i) a Governmental Entity has
issued a non-appealable order, decree or ruling or taken any other action
(which order, decree or ruling the parties hereto have used their best
efforts to lift), which permanently restrains, enjoins or otherwise prohibits
the transactions contemplated by this Agreement; or (ii) a condition to its
performance hereunder has not been satisfied or waived prior to November 30,
1998. Notwithstanding the foregoing, a party may not terminate this
Agreement if the event giving rise to the termination right results from the
willful failure of such party to perform or observe any of the covenants or
agreements set forth herein to be performed or observed by such party or if
such party is, at such time, in material breach of this Agreement.
In the event of termination of this Agreement pursuant to this SECTION
7.1, written notice shall be given forthwith by the terminating party to the
other parties and this Agreement will terminate and the transactions
contemplated hereby will be abandoned, without further action by any party.
If this Agreement is terminated as provided herein, no party to this
Agreement will have any liability or further obligation to any other party to
this Agreement except as provided in SECTIONS 2.21 (Brokers), 4.2
(Confidentiality), 5 (Survival; Indemnification), 7.12 (Expenses), 7.13
(Arbitration), 7.14 (Submission to Jurisdiction) and 7.15 (Attorneys' Fees),
and except that termination of this Agreement will not affect any liability
of any party for any breach of this Agreement prior to termination, or any
breach at any time of the provisions hereof surviving termination.
7.2 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given upon
personal delivery or three (3) days after being mailed by certified or
registered mail, postage prepaid, return receipt requested, or one (1)
business day after being sent via a nationally recognized overnight courier
service if overnight courier service is requested from such service or upon
receipt of electronic or other confirmation of transmission if sent via
facsimile to the parties, their successors in interest or their assignees at
the following addresses and telephone numbers, or at such other addresses or
telephone numbers as the parties may designate by written notice in
accordance with this SECTION 7.2:
If to Buyer: President
ProfitSource Corporation
695 Town Center Drive, Suite 400
Costa Mesa, California 92626
Tel: (949) 429-5500
Fax: (949) 429-5599
With a copy to: Brian W. Copple
Gibson, Dunn & Crutcher LLP
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4 Park Plaza, Jamboree Center
Irvine, California 92614
Tel: (949) 451-3874
Fax: (949) 451-4220
If to Brite or Seller:
Brite Voice Systems, Inc.
250 International Parkway, Suite 300
Heathrow, Florida 32746
Attn: Glenn Etherington, CFO
Tel: (407) 357-1002
Fax: (407) 357-1400
With a copy to: Thomas P. Garretson
Triplett, Woolf & Garretson, LLC
2959 North Rock Road, Suite 300
Wichita, Kansas 67226
Tel: (316) 630-8100
Fax: (316) 630-8101
7.3 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement and any
of the rights, interests or obligations hereunder may not be assigned by any
of the parties hereto, except that Buyer may assign its rights and
obligations under this Agreement in whole or in part to any Affiliate or
Affiliates of Buyer or any successor to all or substantially all of the
Business or assets of Buyer and Brite may assign its rights and obligations
under this Agreement in whole or in part to any Affiliate or Affiliates of
Brite or any successor to all or substantially all of the Business or assets
of Brite with the written consent of Buyer, which consent may not be
unreasonably withheld. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns. Nothing in this Agreement will confer upon any person or entity not
a party to this Agreement, or the legal representatives of such person or
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to its choice-of-law principles.
7.5 COUNTERPARTS. Facsimile transmission of any signed original
document and/or retransmission of any signed facsimile transmission will be
deemed the same as delivery of an original. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.
7.6 PUBLICITY. Prior to the Closing Date, no party may, nor may it
permit its Affiliates to, issue or cause the publication of any press release
or other announcement with respect to this Agreement or the transactions
contemplated hereby without the consent of the other parties.
Notwithstanding the foregoing, in the event any such press release or
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announcement is required by law to be made by the party proposing to issue
the same, such party shall consult in good faith with the other party prior
to the issuance of any such press release or announcement. Buyer
acknowledges that upon the execution of this Agreement Brite is required by
law to announce its existence.
7.7 COMPLETE AGREEMENT. This Agreement, the exhibits and schedules
hereto, and the Transaction Documents contain or will contain the entire
agreement between the parties hereto with respect to the transactions
contemplated herein and shall supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, and understandings.
7.8 MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time prior to
the Closing Date or termination of this Agreement, any party may, (a) waive
any inaccuracies in the representations and warranties of any other party
contained in this Agreement or in any Transaction Document; and (b) waive
compliance by any other party with any of the covenants or agreements
contained in this Agreement. No waiver of any of the provisions of this
Agreement will be considered, or will constitute, a waiver of any of the
rights of remedies, at law or equity, of the party entitled to the benefit of
such provisions unless made in writing by the party entitled to the benefit
of such provision.
7.9 HEADINGS; REFERENCES. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. References herein to Sections,
Schedules and Exhibits refer to the referenced Sections, Schedules or
Exhibits hereof unless otherwise specified.
7.10 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal, or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal, or unenforceable in any other jurisdiction.
7.11 DUE DILIGENCE INVESTIGATION. All representations and
warranties contained herein which are made to the knowledge of a party shall
require that such party make reasonable investigation and inquiry with
respect thereto to ascertain the correctness and validity thereof.
7.12 EXPENSES OF TRANSACTIONS. All fees, costs and expenses
incurred by Buyer in connection with the transactions contemplated by this
Agreement shall be borne by Buyer, and all fees, costs, and expenses incurred
by Brite, Seller and the Company in connection with the transactions
contemplated by this Agreement shall be borne by Brite.
7.13 ARBITRATION.
(a) Any controversy or claim arising out of or relating to this
Agreement shall be solely and finally settled by arbitration administered by
the American Arbitration Association (the "AAA") in accordance with its
Commercial Arbitration Rules as then in effect (the "RULES"), except to the
extent such rules or procedures vary from the following provisions. The
arbitration shall be conducted by one independent and impartial arbitrator,
appointed by the AAA; provided
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however, if the claim and any counterclaim, in the aggregate, exceed Two
Hundred Thousand Dollars ($200,000) (the "THRESHOLD"), exclusive of interest
and attorneys' fees, the dispute shall be heard and determined by three (3)
arbitrators as provided herein (such arbitrator or arbitrators are
hereinafter referred to as the "ARBITRATOR"). The judgment of the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The arbitration proceedings shall be held in New York, New York
unless the parties otherwise agree to another location.
(b) If a party hereto determines to submit a dispute for
arbitration pursuant to this SECTION 7.13, such party shall furnish the other
party with whom it has the dispute with a notice of arbitration as provided
in the Rules (an "ARBITRATION NOTICE") which, in addition to the items
required by the Rules, shall include a statement of the nature, with
reasonable detail, of the dispute. If a party has a counterclaim against the
other party, such party shall furnish the party with whom it has the dispute
a notice of such claim as provided in the Rules (a "NOTICE OF COUNTERCLAIM")
within ten (10) days of receipt of the Arbitration Notice, which, in addition
to the items required by the Rules, shall include a statement of the nature,
with reasonable detail, of the dispute. A copy of the Arbitration Notice
shall be concurrently provided to the AAA, along with a copy of this
Agreement, and if pursuant to SECTION 7.11(a) one (1) Arbitrator is to be
appointed, a request to appoint the Arbitrator. A copy of the Notice of
Counterclaim shall be concurrently provided to the AAA. If the claim set
forth in the Notice of Counterclaim causes the aggregate amount in dispute to
exceed the Threshold, the Notice of Counterclaim shall so state. If pursuant
to SECTION 7.11(a) three (3) Arbitrators are to be appointed, within fifteen
(15) days after receipt of the Arbitration Notice, each party shall select
one person to act as Arbitrator and the two selected shall select a third
arbitrator within ten (10) days of their appointment. If the Arbitrators
selected by the parties are unable or fail to agree upon the third arbitrator
within such time, the third arbitrator shall be selected by the AAA. Each
Arbitrator shall be a practicing attorney or a retired or former judge with
at least twenty (20) years experience with and knowledge of securities laws,
complex business transactions, and mergers and acquisitions.
(c) Once an Arbitrator is assigned to hear the matter, the
Arbitrator shall schedule a pre-hearing conference to reach agreement on
procedural and scheduling matters, arrange for the exchange of information,
obtain stipulations and attempt to narrow the issues.
(d) At the pre-hearing conference, the Arbitrator shall have the
discretion to order, to the extent the Arbitrator deems relevant and
appropriate, that each party may (i) serve a maximum of no more than twenty
(20) requests for the production of documents and one set of ten (10)
interrogatories (without subparts) upon the other parties; and (ii) depose a
maximum of three (3) witnesses. All objections are reserved for the
arbitration hearing except for objections based on privilege and proprietary
or confidential information. The response to the document demand, the
documents to be produced, and the responses to the interrogatories shall be
exchanged thirty (30) days later. Each deposition must be concluded within
four (4) hours and all depositions must be taken within thirty (30) days of
the pre-hearing conference. Any party deposing an opponent's expert must pay
the expert's fee for attending the deposition. All discovery disputes shall
be decided by the Arbitrator.
(e) The parties must file briefs with the Arbitrator at least three
(3) days before the arbitration hearing, specifying the facts each intends to
prove and analyzing the applicable law.
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The parties have the right to representation by legal counsel throughout the
arbitration proceedings. The presentation of evidence at the arbitration
hearing shall be governed by the Federal Rules of Evidence. Oral evidence
given at the arbitration hearing shall be given under oath. Any party
desiring a stenographic record may secure a court reporter to attend the
arbitration proceedings. The party requesting the court reporter must notify
the other parties and the Arbitrator of the arrangement in advance of the
hearing, and must pay for the cost incurred.
(f) Each party may be joined as an additional party to an
arbitration involving other parties. If more than one arbitration is begun
and any party contends that two or more arbitrations are substantially
related and that the issues should be heard in one proceeding, the Arbitrator
selected in the first-filed of such proceedings shall determine whether, in
the interests of justice and efficiency, the proceedings should be
consolidated before that Arbitrator.
(g) The Arbitrator's award shall be in writing, signed by the
Arbitrator and shall contain a concise statement regarding the reasons for
the deposition of any claim.
(h) To the extent permissible under applicable law, the award of
the Arbitrator shall be final. It is the intent of the parties that the
arbitration provisions hereof be enforced to the fullest extent permitted by
applicable law.
7.14 SUBMISSION TO JURISDICTION. All actions or proceedings arising
in connection with this Agreement for preliminary or injunctive relief or
matters not subject to arbitration, if any, shall be tried and litigated
exclusively in the State and Federal courts located in New York, New York.
The aforementioned choice of venue is intended by the parties to be mandatory
and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this
Agreement in any jurisdiction other than that specified in this paragraph.
Each party hereby waives any right it may have to assert the doctrine of
FORUM NON CONVENIENS or similar doctrine or to object to venue with respect
to any proceeding brought in accordance with this paragraph, and stipulates
and acknowledges that it has had sufficient minimum contacts with New York
such that the State and Federal courts located in the New York, New York
shall have IN PERSONAM jurisdiction over each of them for the purpose of
litigating any dispute, controversy, or proceeding brought in accordance with
this paragraph. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated
by this paragraph by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in
SECTION 7.2. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
7.15 ATTORNEYS' FEES. If Buyer or any of its Affiliates, successors
or assigns brings any action, suit, counterclaim, cross-claim, appeal,
arbitration, or mediation for any relief against Brite or Seller or any of
their Affiliates successors or assigns, or if Brite or Seller or any of their
Affiliates successors or assigns brings any action, suit, counterclaim,
cross-claim, appeal, arbitration, or mediation for any relief against Buyer
or any of its Affiliates, successors or assigns, declaratory or otherwise, to
enforce the terms hereof or to declare rights hereunder (collectively, an
"ACTION"), in addition to any damages and costs which the prevailing party
otherwise would be entitled, the non-prevailing party shall pay to the
prevailing party a
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reasonable sum for attorneys' fees and costs (at the prevailing party's
attorneys' then-prevailing rates) incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award (collectively,
a "DECISION") granted therein, all of which shall be deemed to have accrued
on the commencement of such Action and shall be paid whether or not such
action is prosecuted to a Decision. Any Decision entered in such Action
shall contain a specific provision providing for the recovery of attorneys'
fees and costs incurred in enforcing such Decision.
For the purposes of this Section, attorneys' fees shall include,
without limitation, fees incurred in the following: (1) postjudgment motions
and collection actions; (2) contempt proceedings; (3) garnishment, levy and
debtor and third party examinations; (4) discovery; and (5) bankruptcy
litigation.
For purposes of this paragraph, "PREVAILING PARTY" includes, without
limitation, a party who agrees to dismiss an action on the other party's
payment of the sum allegedly due or performance of the covenants allegedly
breached, or who obtains substantially the relief sought by it. If there are
multiple claims, the prevailing party shall be determined with respect to
each claim separately. The prevailing party shall be the party who has
obtained the greater relief in connection with any particular claim,
although, with respect to any claim, it may be determined that there is no
prevailing party.
7.16 ENFORCEMENT OF THE AGREEMENT. Brite, Seller, the Company and
Buyer acknowledge that irreparable damage would occur if any of the
obligations of Brite, Seller and the Company under this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Buyer will be entitled to an injunction or injunctions to prevent breaches
of this Agreement by Brite, Seller or the Company and to enforce specifically
the terms and provisions hereto, this being in addition to any other remedy
to which Buyer is entitled at law or in equity.
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date first above written.
BRITE VOICE SYSTEMS, INC.
By: s/ Stanley G. Brannan
-----------------------------------------
Name: Stanley G. Brannan
-----------------------------------------
Title: President
-----------------------------------------
BVS INVESTCO, INC.
By: s/ Daniel F. Lindley
-----------------------------------------
Name: Daniel F. Lindley
-----------------------------------------
Title: Assistant Secretary
-----------------------------------------
TSL SERVICES, INC.
By: s/ Glenn A. Etherington
-----------------------------------------
Name: Glenn A. Etherington
-----------------------------------------
Title: President
-----------------------------------------
PROFITSOURCE CORPORATION
By: s/ David M. Ehlen
-----------------------------------------
Name: David M. Ehlen
-----------------------------------------
Title: Chief Operating Officer
-----------------------------------------
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EXHIBIT A
BVS INVESTCO, INC. CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is made and
entered into as of ___________ ___, 1998, by and between BRITE VOICE SYSTEMS,
INC., a Kansas corporation acting through its TSL division ("BRITE") , and
BVS Investco, Inc., a Delaware corporation ("SELLER"), with reference to the
following facts:
A. ProfitSource Corporation, a Delaware corporation
("PROFITSOURCE"), Brite, BVS and TSL Services, Inc. a Delaware corporation
(the "COMPANY"), have entered into that certain Stock Purchase Agreement of
even date herewith (the "PURCHASE AGREEMENT"), pursuant to which (i) Brite is
contributing substantially all of the assets of its TSL division (the
"BUSINESS") to Seller in exchange for all of the stock of Seller, (ii) Seller
is contributing the Business to the Company in exchange for all of the stock
of the Company, (iii) and ProfitSource is purchasing all of the stock of the
Company from Seller. Capitalized terms used herein and not otherwise defined
will have the meanings ascribed to them in the Purchase Agreement.
B. Consistent with the Purchase Agreement, Brite desires to
transfer to Seller the Acquired Assets and the Assumed Liabilities in
exchange for One Hundred Percent (100%) of the equity of Seller, on the terms
and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in
consideration of the mutual covenants and conditions contained herein, the
parties agree as follows:
I.
CONTRIBUTION OF ASSETS
1.1 CONTRIBUTION OF ASSETS. Subject to the terms and
conditions of this Agreement, Brite hereby sells, conveys, transfers, assigns
and grants to Seller, and Seller accepts, all of Brite's legal, beneficial
and other right, title and interest in and to the Acquired Assets, as more
particularly described on Schedule 1 (collectively, the "CONTRIBUTED ASSETS"):
1.2 ASSUMPTION OF LIABILITIES. Subject to the terms and
conditions of this Agreement, Brite hereby assigns and transfers to Seller,
and Seller assumes and agrees to perform according to their terms, the
Assumed Liabilities, as more particularly described on Schedule 2 (the
"ASSUMED LIABILITIES").
1.3 DELAYED TRANSFERS. If any consent with respect to the
assignment, transfer or bifurcation of any contract, agreement, lease or
other instrument included in the Contributed Assets or the Assumed
Liabilities is required in connection with the transfer to Seller hereby but
has not been obtained on or prior to the date hereof and Brite is unable (by
sublease or otherwise) to transfer the legal benefits and burdens thereof to
Seller, such contract,
<PAGE>
assignment, lease or instrument (each a "DELAYED ASSET") shall not be
transferred as a Contributed Asset hereunder and any related liability (each
a "DELAYED LIABILITY") shall not be assumed by Seller, unless and until such
required consent has been obtained or Brite is otherwise able to effect
transfer thereof to Seller without breach. Notwithstanding the foregoing, if
such a required consent to transfer is not obtained, or a transfer called for
hereunder cannot be completed for any other reason, Brite and Seller will
cooperate to attempt to provide to Seller the benefits of any such Delayed
Assets; PROVIDED, HOWEVER, that pending transfer as provided herein, Seller
shall assume, pay and perform (and indemnify and hold Brite harmless from and
against) all obligations and liabilities related to such Delayed Asset or
Delayed Liability and shall promptly reimburse Brite for all of its actual
costs and expenses in connection with any such arrangement. At such time and
on each occasion after the date hereof that transfer of a Delayed Asset or
Delayed Liability can be completed, such Delayed Asset or Delayed Liability
shall forthwith automatically be transferred and assigned to and assumed by
Seller hereunder.
II.
EXCHANGE SOLELY FOR stock
2.1 EXCHANGE SOLELY FOR STOCK. In exchange and as sole
consideration for the Contributed Assets, and (together with assumption of
the Assumed Liabilities) in full payment for such Contributed Assets, Seller
shall issue to Brite a certificate representing 1,000 shares of Company
common stock, par value $1.00 (the "COMMON STOCK"), which is One Hundred
Percent (100%) of the equity of Seller.
IN WITNESS WHEREOF, this Agreement is executed on behalf of the
parties by duly authorized representatives as of the Effective Date.
BRITE VOICE SYSTEMS, INC.,
a Kansas corporation
By: _______________________________
Name: _______________________________
Title: _______________________________
BVS INVESTCO, INC.,
a Delaware corporation
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
SCHEDULE 1
ACQUIRED ASSETS
<PAGE>
SCHEDULE 2
ASSUMED LIABILITIES
<PAGE>
EXHIBIT B
TSL SERVICES, INC. CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is made and entered
into as of __________ ___, 1998, by and between BVS Investco, Inc., a
Delaware corporation ("SELLER"), and TSL Services, Inc., a Delaware
corporation (the "COMPANY"), with reference to the following facts:
A. ProfitSource Corporation, a Delaware corporation
("PROFITSOURCE"), Brite Voice Systems, Inc., a Kansas corporation acting
through its TSL division ("BRITE"), BVS and the Company, have entered into
that certain Stock Purchase Agreement of even date herewith (the "PURCHASE
AGREEMENT"), pursuant to which (i) Brite is contributing substantially all of
the assets of its TSL division (the "BUSINESS") to Seller in exchange for all
of the stock of Seller, (ii) Seller is contributing the TSL Business to the
Company in exchange for all of the stock of TSL, (iii) and ProfitSource is
purchasing all of the stock of the Company from Seller. Capitalized terms
used herein and not otherwise defined will have the meanings ascribed to them
in the Purchase Agreement.
B. Consistent with the Purchase Agreement, Seller desires to
transfer to the Company the Acquired Assets and the Assumed Liabilities in
exchange for One Hundred Percent (100%) of the equity of the Company, on the
terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in consideration of the
mutual covenants and conditions contained herein, the parties agree as
follows:
I.
CONTRIBUTION OF ASSETS
1.1 CONTRIBUTION OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller hereby sells, conveys, transfers, assigns and
grants to the Company, and the Company accepts, all of Seller's legal,
beneficial and other right, title and interest in and to the Acquired Assets,
as more particularly described on Schedule 1 (collectively, the "CONTRIBUTED
ASSETS"):
1.2 ASSUMPTION OF LIABILITIES. Subject to the terms and
conditions of this Agreement, Seller hereby assigns and transfers to the
Company, and the Company assumes and agrees to perform according to their
terms, the Assumed Liabilities, as more particularly described on Schedule 2
(the "ASSUMED LIABILITIES").
1.3 DELAYED TRANSFERS. If any consent with respect to the
assignment, transfer or bifurcation of any contract, agreement, lease or
other instrument included in the
<PAGE>
Contributed Assets or the Assumed Liabilities is required in connection with
the transfer to the Company hereby but has not been obtained on or prior to
the date hereof and Seller is unable (by sublease or otherwise) to transfer
the legal benefits and burdens thereof to the Company, such contract,
assignment, lease or instrument (each a "DELAYED ASSET") shall not be
transferred as a Contributed Asset hereunder and any related liability (each
a "DELAYED LIABILITY") shall not be assumed by the Company, unless and until
such required consent has been obtained or Seller is otherwise able to effect
transfer thereof to the Company without breach. Notwithstanding the
foregoing, if such a required consent to transfer is not obtained, or a
transfer called for hereunder cannot be completed for any other reason,
Seller and the Company will cooperate to attempt to provide to the Company
the benefits of any such Delayed Assets; PROVIDED, HOWEVER, that pending
transfer as provided herein, the Company shall assume, pay and perform (and
indemnify and hold Seller harmless from and against) all obligations and
liabilities related to such Delayed Asset or Delayed Liability and shall
promptly reimburse Seller for all of its actual costs and expenses in
connection with any such arrangement. At such time and on each occasion
after the date hereof that transfer of a Delayed Asset or Delayed Liability
can be completed, such Delayed Asset or Delayed Liability shall forthwith
automatically be transferred and assigned to and assumed by the Company
hereunder.
II.
EXCHANGE SOLELY FOR stock
2.1 EXCHANGE SOLELY FOR STOCK. In exchange and as sole
consideration for the Contributed Assets, and (together with assumption of
the Assumed Liabilities) in full payment for such Contributed Assets, the
Company shall issue to Seller a certificate representing 45,000 shares of
Company common stock, par value $0.01 which is One Hundred Percent (100%) of
the equity of the Company.
IN WITNESS WHEREOF, this Agreement is executed on behalf of the
parties by duly authorized representatives as of the Effective Date.
BVS INVESTCO, INC.,
a Delaware corporation
By: _______________________________
Name: _______________________________
Title: _______________________________
TSL SERVICES, INC.,
a Delaware corporation
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
SCHEDULE 1
ACQUIRED ASSETS
<PAGE>
SCHEDULE 2
ASSUMED LIABILITIES
<PAGE>
EXHIBIT C
THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ISSUABLE UPON EXERCISE
HEREOF MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON MAY 15, 2005 OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
THE TRANSFER, SALE, ASSIGNMENT, PLEDGE, MORTGAGE, HYPOTHECATION, ENCUMBRANCE,
GIFT OF OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS RESTRICTED BY A STOCKHOLDER AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THIS CORPORATION.
WARRANT TO PURCHASE
5,000 SHARES OF COMMON STOCK
OF TSL SERVICES, INC.
AND, IN CERTAIN CIRCUMSTANCES,
SHARES OF COMMON STOCK OF
PROFITSOURCE CORPORATION
NO. 1
TRANSFER RESTRICTED -- SEE SECTION 5.02
This certifies that, for good and valuable consideration, BVS
Investco, Inc., a wholly owned subsidiary of Brite Voice Systems, Inc., and
its registered, permitted assigns (collectively, the "WARRANTHOLDER"), is
entitled to purchase from TSL Services, Inc., a Delaware corporation (the
"COMPANY"), subject to the terms and conditions hereof, at any time on or
after 9:00 A.M., New York time, on the second anniversary of the date of
issuance hereof (the "ISSUE DATE"), and before 5:00 P.M., New York time, on
May 15, 2005 (or, if such day is not a Business Day, at or before 5:00 P.M.,
New York time, on the next following Business Day), the number of fully paid
and non-assessable shares of Common Stock stated above at the Exercise Price.
The Exercise Price and the number of Warrant Shares are subject to adjustment
from time to time as provided in ARTICLE II and ARTICLE III hereof. Under
certain circumstances as described in SECTION 2.05, the Warrantholder also
has the right to receive, upon exercise of the Warrant, certain shares of the
Parent (as defined herein).
<PAGE>
ARTICLE I
1.01 DEFINITION OF TERMS. As used in this Warrant, capitalized
terms not otherwise defined shall have the following meanings:
(a) "BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which banks in the State of New York or State of California are
authorized by law to remain closed.
(b) "CHANGE IN CONTROL TRANSACTION" means (i) the acquisition by
any person, entity or group of beneficial owners of forty percent (40%) or
more of the combined voting power of the Company; (ii) the merger,
reorganization, or consolidation of the Company with or into another
corporation, a majority of the directors of which were not directors of the
Company immediately prior to the transaction and in which stockholders of the
Company immediately prior to the transaction directly or indirectly own less
than sixty percent (60%) of the voting power in such surviving entity; (iii)
approval by the stockholders of the Company of a plan of complete liquidation
of the Company; or (iv) an agreement for the sale or other disposition by the
Company of all or substantially all of the Company's assets, in each of cases
(i) through (iv) other than a transaction between the Company and any
affiliate of the Company (within the meaning of Rule 405 under the Securities
Act of 1933, as amended).
(c) "COMMON STOCK" means Common Stock, $.001 par value per share,
of the Company.
(d) "COMMON STOCK EQUIVALENTS" means Securities that are
convertible into or exercisable for shares of Common Stock.
(e) "CURRENT MARKET VALUE" of the Common Stock or Parent
Shares at any time shall be the fair value thereof as determined in good
faith by the Board of Directors in consultation with qualified independent
investment bankers or appraisers and with reference to market valuations if
the Common Stock or Parent Shares are the subject of a public offering or are
publicly traded, or the cash value of all consideration paid per share of
Common Stock or per Parent Share in case of a Change in Control.
(f) "DIVIDEND PAYMENTS" means cash payments by the Company of
Accrued Dividends on the Series A Preferred Stock.
(g) "EXERCISE PRICE" means $0.01 per Warrant Share as such price
may be adjusted from time to time pursuant to ARTICLE III.
(h) "EXPIRATION TIME" means 5:00 P.M., New York time, on May 15,
2005 or if such day is not a Business Day, the next succeeding day which is a
Business Day.
<PAGE>
(i) "ISSUED WARRANT SHARES VALUE" as of a Public Equity Offering
or a Change in Control Transaction means the Current Market Value on such
date of the Warrant Shares previously issued upon exercise of the Warrant.
(j) "PARENT" means ProfitSource Corporation, a Delaware
corporation, or its successor as the owner, directly or indirectly, of a
majority of the voting power of the Company.
(k) "PARENT SHARES" means the equity securities of the Parent
issued in the Public Equity Offering if the Public Equity Offering is by the
Parent.
(l) "PREFERRED STOCK LIQUIDATION PAYMENT" means the Redemption
Price paid for the Series A Preferred Stock upon a Public Equity Offering or
a Change in Control Transaction.
(m) "PUBLIC EQUITY OFFERING" means an underwritten public offering
of the equity securities of the Company or a Parent having net proceeds to
the issuer of at least $25 million.
(n) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(o) SERIES A PREFERRED STOCK" means the Series A Preferred Stock
of the Company.
(p) "TARGET VALUE" as of any measurement date means the value on
that date of an initial investment of $5 million made on the Issue Date,
assuming an Annual Internal Rate of Return from the Issue Date to that
measurement date of 40%.
"Annual Internal Rate of Return" as of any measurement date is
computed as follows:
1. Compute the ratio of the Redemption Price (as such term is
defined in the Company's Restated Certificate of Incorporation) paid for the
Series A Preferred Stock to the initial investment made on the Issue Date.
For example if the Redemption Price paid for the Series A Preferred Stock is
$6 Million and the initial investment made at the Issue Date is $5 million,
the ration is 1.2.
2. Raise this ratio to the power equivalent to the reciprocal of
the period of time (in years) between the measurement date and the initial
investment. For example, if the period of time between the measurement date
and the initial investment is two years, the ratio will be raised to the
power of 0.5.
3. Subtract 1.
<PAGE>
(q) "WARRANTS" means this Warrant and all other warrants that may
be issued in its place (together initially evidencing the right to purchase
an aggregate of up to 5,000 shares of Common Stock).
(r) "WARRANTHOLDER" means the person(s) or entity(ies) to whom
this Warrant is originally issued, or any successor in interest thereto, or
any assignee or transferee thereof, in whose name the Warrants are
registered upon the books to be maintained by the Company for that purpose.
(s) "WARRANT SHARES" means Common Stock or, under the
circumstances described in SECTION 2.05, Parent Shares, purchasable upon
exercise of the Warrants.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
2.01 DURATION OF WARRANT. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 A.M., New York time, on
the second anniversary of the Issue Date, and before the Expiration Time. If
this Warrant is not exercised before the Expiration Time it shall become
void and all rights hereunder shall thereupon cease.
2.02 EXERCISE OF WARRANT.
(a) Exercise of the Warrant may, in the discretion of the
Warrantholder, be effected as follows:
(i) by presentation and surrender of this Warrant to the
Company at its principal executive offices or at the office of its stock
transfer agent, if any, with the Subscription Form annexed hereto duly
executed and accompanied by payment of the full Exercise Price for each
Warrant Share to be purchased; or
(ii) by presentation and surrender of this Warrant to the Company
at its principal executive offices with a Cashless Exercise Form annexed
hereto duly executed (a "CASHLESS EXERCISE"). A single exercise may be
effected in part by payment of the Exercise Price in cash and in part by
Cashless Exercise. In the event of Cashless Exercise, the Exercise Price
shall be satisfied by retention by the Company of that number of Warrant
Shares (the "RETAINED SHARES") having an aggregate Current Market Value
on the date of exercise equal to the aggregate exercise price for all
Warrant Shares for which the Warrant is being exercised, so that the
Warrantholder receives the number of Warrant Shares for which the Warrant
is exercised less the Retained Shares. If the Retained Shares include a
fractional share, the Retained Shares will be rounded up to the nearest
whole share. The Company may, in its discretion, require that any
exercise be a Cashless Exercise.
<PAGE>
(b) Upon receipt of this Warrant with the Subscription Form duly
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, or, in case of
Cashless Exercise, with the Cashless Exercise form duly executed, the Company
shall cause to be issued certificates for the total number of whole Warrant
Shares issuable upon such exercise in such denominations as are requested for
delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder. The Warrantholder shall be deemed to be
the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then
be actually delivered to the Warrantholder. At the time this Warrant is
exercised, the Warrantholder will make such representations, and such legends
will be placed on certificates representing the Warrant Shares, as may be
reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without registration under the Securities Act.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant
to the Warrantholder.
(d) The Company shall pay any and all stock transfer and similar
taxes which may be payable in respect of the issue of this Warrant or in
respect of the issue of any Warrant Shares.
2.03 RESERVATION OF SHARES. The Company and the Parent hereby agree
that at all times there shall be reserved for issuance and delivery upon
exercise of this Warrant such number of Warrant Shares from time to time
issuable upon exercise of this Warrant. All such shares shall be duly
authorized, and when issued upon such exercise, shall be validly issued,
fully paid and nonassessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free
and clear of all preemptive rights (except the restrictions imposed by the
legend appearing at the top of Page 1 of this Warrant).
(e) As a condition to any exercise of the Warrant, the Company may
require the Warrantholder to deliver to the Company standard representations
as to the accredited status of the Warrantholder and compliance of the
exercise transaction with applicable securities laws, an opinion of competent
independent counsel reasonably satisfactory to the Company to that effect,
and covenants restricting transfer of the Warrant Shares, in addition to
those set forth hereon, as appropriate to comply with applicable securities
laws and rules governing private placements.
2.04 FRACTIONAL SHARES. The Warrant may be issued only for whole
shares, and neither the Company nor the Parent shall be required to issue any
fraction of a share of its capital stock in connection with the exercise of
this Warrant.
<PAGE>
2.05 SPECIAL RULES FOR PUBLIC EQUITY OFFERING. If a Public Equity
Offering occurs before a Change in Control Transaction, then the Warrant, to
the extent theretofore unexercised, will be automatically exercised in full
in a Cashless Exercise. If the Public Equity Offering is by the Parent, the
Warrant Shares will be Parent Shares. Notwithstanding anything herein to the
contrary, the number of Warrant Shares issuable upon such exercise (the
"EQUITY OFFERING EXERCISE SHARES") will be determined by subtracting all
Dividend Payments (regardless of the recipient thereof), the Preferred Stock
Liquidation Payment (regardless of the recipient thereof) and the Issued
Warrant Shares Value (regardless of the identity of the holder of the issued
Warrant Shares) from the Target Value and dividing that difference (if
positive) by the price to the public of a share or other security in the
Public Equity Offering. If the Dividend Payments plus the Preferred Stock
Liquidation Payment plus the Issued Warrant Shares Value exceeds the Target
Value at the time of the Public Equity Offering, the Warrant will not be
exercised and will be canceled and of no further effect. In connection with
the initial Public Equity Offering of the Company, the Warrantholder may
elect, in lieu of automatic exercise of the Warrant for the Equity Offering
Exercise Shares, to receive a cash payment (payable by the Company or the
Parent or the successor or assignee of either of them) equal to the product
of the number of Equity Offering Exercise Shares and the price to the public
of a share of or other security in the Public Equity Offering, whereupon the
Warrant will be canceled and of no further effect. Election by the
Warrantholder of the cash payment right described in the foregoing sentence
will require written notice to the Company to that effect at least 30 days
before the Public Equity Offering (or, if the Warrantholder has not received
at least 35 days prior notice of the Public Equity Offering, within five days
of receipt by the Warrantholder of notice of the Public Equity Offering).
Neither the Company nor the Parent will have any obligation to repurchase
Warrant Shares outstanding prior to the Equity Public Offering. If there has
been any Warrant transfer at the time of the Public Equity Offering, the
number of Warrant Shares for which such Warrant will be exercisable will be
determined by tracing Dividend Payments and the Preferred Stock Liquidation
Payment paid or payable on the Series A Preferred Stock oiginally issued with
the Warrant and the Issued Warrant Shares Value of Warrant Shares issued
under that Warrant, regardless of the recipients of those payments or the
holder of those shares.
2.06 SPECIAL RULES FOR CHANGE IN CONTROL TRANSACTION. If a Change
in Control Transaction occurs before a Public Equity Offering, then the
Warrant, to the extent theretofore unexercised, will be purchased by the
Company or the Parent or the successor or assignee of either of them. The
purchase price for the Warrant will be determined by subtracting all
Dividend Payments (regardless of the recipient thereof), the Preferred Stock
Liquidation Payment (regardless of the recipient thereof) and the Issued
Warrant Shares Value (regardless of the identity of the holder of the issued
Warrant Shares) from the Target Value. If the Dividend Payments plus the
Preferred Stock Liquidation Payment plus the Issued Warrant Shares Value
exceeds the Target Value at the time of the Change in Control Transaction,
the Warrant will be canceled without exercise or repurchase and of no further
effect. Warrant Shares outstanding prior to the Change in Control
Transaction will be treated in the same manner as other shares of Common
Stock. If there has been any Warrant transfer at the time of the change in
Control
<PAGE>
Transaction, the purchase price for each Warrant will be determined by
tracing Dividend Payments and the Preferred Stock Liquidation Payment paid or
payable on the Series A Preferred Stock originally issued with the Warrant
and the Issued Warrant Shares Value of Warrant Shares issued under that
Warrant, regardless of the recipients of those payments or the holder of
those shares.
2.07 ACCELERATION. Notwithstanding SECTION 2.01, upon the
dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger, or sale or conveyance of the
property of the Company as an entirety or substantially as an entirety)
Warrantholder shall have the right to immediately exercise the Warrant in
accordance with SECTION 2.02, subject however to expiration of the Warrant at
the Expiration Time.
2.08 NO REGISTRATION. Warrant Shares will be restricted
shares entitled to no registration rights and will be subject to the same
underwriter lockup applicable to shares held by affiliates of the Company.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and/or the number and kind of Warrant Shares
shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Article III.
3.01 MECHANICAL ADJUSTMENTS.
(a) If at any time after the Issue Date and prior to the exercise
of this Warrant in full, the Company shall, without receipt of consideration
(i) declare a dividend or make a distribution on the Common Stock payable in
shares of its capital stock (whether shares of Common Stock or of capital
stock of any other class); (ii) subdivide, reclassify or recapitalize
outstanding Common Stock into a greater number of shares; (iii) combine,
reclassify or recapitalize its outstanding Common Stock into a smaller number
of shares; or (iv) issue any shares of its capital stock by reclassification
of its Common Stock (including any such reclassification in connection with a
consolidation or a merger in which the Company is the continuing
corporation), the Company shall make appropriate and proportionate
adjustments to the Exercise Price and/or number of Common Stock Warrant
Shares in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
so that the Warrantholder shall be entitled to receive the aggregate number
and kind of shares which, if this Warrant had been exercised in full with
respect to all Warrant Shares then remaining subject to this Warrant
immediately prior to such event, he would have owned upon such exercise and
been entitled to receive by virtue of such dividend, distribution,
subdivision, combination,
<PAGE>
reclassification or recapitalization. Any adjustment required by this SECTION
3.01(a) shall be made successively immediately after the record date, in the
case of a dividend or distribution, or the effective date, in the case of a
subdivision, combination, reclassification or recapitalization to allow the
purchase of such aggregate number and kind of shares.
(b) In the event that at any time, as a result of any adjustment
made pursuant to SECTION 3.01(a), the Warrantholder thereafter shall become
entitled to receive any securities other than or in addition to Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in SECTION 3.01(a).
3.02 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
the Exercise Price is adjusted as herein provided, the Company shall prepare
and deliver forthwith to the Warrantholder a certificate signed by its Chief
Executive Officer or President, and by any Vice President, Treasurer or
Secretary, setting forth the adjusted number of shares purchasable upon the
exercise of this Warrant and the Exercise Price of such shares after such
adjustment, a brief statement of the facts requiring such adjustment and the
computation by which adjustment was made.
3.03 NO ADJUSTMENT FOR DIVIDENDS. No adjustment in respect of any
cash dividends paid by the Company shall be made during the term of this
Warrant or upon the exercise of this Warrant.
3.04 PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS. In
case of any reclassification or capital reorganization of the Company or
other change of outstanding shares of Common Stock (other than a subdivision
or a combination of the outstanding Common Stock and other than a change in
the par value of the Common Stock) or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which the Company is the continuing corporation and said merger
does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the class issuable upon
exercise of this Warrant) or in case of any sale, lease, transfer or
conveyance to another corporation of the property and assets of the Company
as an entirety or substantially as an entirety, the Company shall, as a
condition precedent to such transaction, cause such successor or purchasing
corporation, as the case may be, to execute with the Warrantholder an
agreement granting the Warrantholder the right thereafter, upon payment of
the Exercise Price in effect immediately prior to such action, to receive
upon exercise of this Warrant the kind and amount of shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such reclassification, change, consolidation,
merger, sale or conveyance had this Warrant been exercised immediately prior
to such action. Such agreement shall provide for adjustments in respect of
such shares of stock and other securities and property, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this ARTICLE III. In the event that in connection with any such
reclassification, capital reorganization, change, consolidation, merger, sale
or conveyance, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for, or of, a
security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of
<PAGE>
ARTICLE III. The provisions of this SECTION 3.04 shall similarly apply to
successive reclassification, capital reorganizations, consolidations,
mergers, sales or conveyances. This SECTION 3.04 will not supersede SECTION
2.05.
3.05 FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant
need not be changed because of any adjustments in the Exercise Price or the
number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares
as are stated in this Warrant, as initially issued.
3.06 TREATMENT OF WARRANTHOLDER. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not
be affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING
TO RIGHTS OF WARRANTHOLDER
4.01 NO RIGHTS AS SHAREHOLDERS: NOTICE TO WARRANTHOLDERS. Nothing
contained in this Warrant shall be construed as conferring upon the
Warrantholder or his or its transferees the right to vote or to receive
dividends or to consent to or receive notice as a shareholder in respect of
any meeting of shareholders for the election of directors or any other
matter, or any other rights whatsoever as a shareholder of the Company or the
Parent. The Company shall give notice to the Warrantholder by registered mail
if at any time prior to the expiration or exercise in full of the Warrants,
any of the following events shall occur:
(a) the Company shall authorize the payment of any dividend upon
shares of Common Stock payable in any securities or authorize the making of
any distribution (other than a cash dividend) to all holders of Common Stock;
(b) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, or sale or conveyance of the
property of the Company as an entirety or substantially as an entirety); or
(c) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common
Stock and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of
Common Stock outstanding) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety.
Such giving of notice shall be initiated at least ten Business Days
prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
shareholders entitled to such dividend, distribution or
<PAGE>
subscription rights, or for the determination of the shareholders entitled to
vote on such matter. Such notice shall specify such record date or the date
of closing the stock transfer books, as the case may be. Failure to provide
such notice shall not affect the validity of any action taken in connection
with such matter.
4.02 LOST STOLEN MUTILATED OR DESTROYED WARRANTS. If this Warrant
is lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as and in substitution for this
Warrant.
ARTICLE V
SPLIT-UP, COMBINATION,
EXCHANGE AND TRANSFER OF WARRANTS
5.01 SPLIT-UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANTS.
Subject to the provisions of SECTION 5.02, this Warrant may be split up,
combined or exchanged for another Warrant or Warrants containing the same
terms to purchase a like aggregate number of Warrant Shares. If the
Warrantholder desires to split up, combine or exchange Warrants, he or it
shall make such request in writing delivered to the Company and shall
surrender to the Company any Warrants to be so split up, combined or
exchanged. Upon any such surrender for a split up, combination or exchange,
the Company shall execute and deliver to the person entitled thereto a
Warrant or Warrants, as the case may be, as so requested. The Company shall
not be required to effect any split up, combination or exchange which will
result in the issuance of a Warrant entitling the Warrantholder to purchase
upon exercise a fraction of a share of Common Stock or a fractional Warrant.
The Company may require such Warrantholder to pay a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
split up, combination or exchange of Warrants.
5.02 RESTRICTIONS ON TRANSFER. Neither this Warrant nor the Warrant
Shares nor any interest herein or therein may be disposed of or encumbered
(any such action, a "TRANSFER") prior to the second anniversary of the Issue
Date, except to Brite Voice Systems, Inc., or any successor to the business
of such company. All transfers of this Warrant and Warrant Shares will be
made in such a manner as not to violate any applicable state securities laws
or the Securities Act and the rules and regulations promulgated thereunder.
At the time of a Transfer, the Warrantholder will make such representations,
and such legends will be placed on certificates representing this Warrant, as
may be reasonably required in the opinion of counsel to the Company to permit
a Transfer without such registration under the Securities Act. This Warrant
may be transferred in whole or part only together with the Series A Preferred
Stock of the Company issued and associated with this Warrant, on the basis
one underlying Warrant Share (as initially subject to this Warrant) with one
Share of Series A Preferred Stock.
<PAGE>
ARTICLE VI
OTHER MATTERS
6.01 PARENT OBLIGATION. The Parent will cause any successor Parent
to assume and fulfill the obligations of the Parent under SECTION 2.05.
6.02 AMENDMENTS AND WAIVERS. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of
holders of Warrants representing at least a majority of the Warrant Shares.
Holders shall be bound by any consent authorized by this Section whether or
not any Warrant has been marked to indicate such consent.
6.03 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
principles of conflicts of law.
6.04 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
6.05 ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provisions of this Warrant, or where any provisions hereof or
thereof is validly asserted as a defense, the prevailing party shall be
entitled to recover from the non-prevailing party reasonable attorneys' fees
and disbursements in addition to its costs and expenses and any other
available remedy.
6.06 NOTICE. Any notices or certificates by the Company or the
Parent to the Warrantholder and by the Warrantholder to the Company or the
Parent shall be deemed delivered if in writing and delivered in person or by
registered mail (return receipt requested) to the Warrantholder addressed in
care of Brite Voice Systems, Inc., 250 International Parkway, Heathrow,
Florida 32746 or, if the Warrantholder has designated, by notice in writing
to the Company, any other address, to such other address, and if to the
Company or the Parent, addressed to it at its headquarters.
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company and issued as of the ___ day of ________, 1998.
TSL SERVICES, INC.
By: ______________________________
Name: ____________________________
Title: ____________________________
PROFITSOURCE CORPORATION
By: ______________________________
Name: ____________________________
Title: ____________________________
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _________________ hereby sells, assigns and
transfers unto _________ the within Warrant, together with all right,
title and interest therein, and does hereby irrevocably constitute and
appoint attorney, to transfer said Warrant on the books of the within-named
Company with respect to the number of Warrant Shares set forth below, with
full power of substitution in the premises:
<TABLE>
<CAPTION>
NO. OF WARRANT
NAME(s) OF SHARES
ASSIGNEES(s) ADDRESS
<S> <C> <C>
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
</TABLE>
And if said transferred Warrant Shares shall not be all the Warrant
Shares represented by the Warrant, a new Warrant is to be issued in the name
of said undersigned for the balance remaining of the Warrant Shares
represented by said Warrant.
Dated: _________, 1998
___________________________________
NOTE: THE ABOVE SIGNATURE MUST CORRESPOND EXACTLY WITH THE NAME IN WHICH THE
WARRANT IS ISSUED AT THE TIME OF TRANSFER.
<PAGE>
SUBSCRIPTION FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT
PURSUANT TO SECTION 2.02(A)(I))
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder
___________ Warrant Shares, and tenders herewith payment of the purchase
price in full in the form of cash or a certified or official bank check in
the amount of $__________.
Please issue a certificate or certificates for such Warrant Shares
in the name of:
Name: ________________________________
(Please Address and Social Security Number below)
Signature: __________________________
Date: ________________________________
NOTE: THE ABOVE SIGNATURE MUST CORRESPOND EXACTLY WITH THE NAME IN WHICH THE
WARRANT IS ISSUED AT THE TIME OF EXERCISE.
If the number of shares are not all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the
name of the registered Warrant holder for the balance remaining of the shares
purchasable rounded up to the next higher number of shares.
<PAGE>
CASHLESS EXERCISE FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT
PURSUANT TO SECTION 2.02(A)(II))
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_______ Warrant Shares, pursuant to the Cashless Exercise provisions of the
Warrant, as provided for in Section 2.02(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Warrant Shares
in the name of:
Name: __________________________________
(Please print Address and Social
Security Number below)
Signature: _____________________________
Date: ___________________________________
NOTE: THE ABOVE SIGNATURE MUST CORRESPOND EXACTLY WITH THE NAME IN WHICH THE
WARRANT IS ISSUED AT THE TIME OF EXERCISE
If the number of shares are not all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the
name of the registered Warrant holder for the balance remaining of the shares
purchasable rounded up to the next higher number of shares.
<PAGE>
EXHIBIT D
EMPLOYEE GENERAL RELEASE AGREEMENT
This General Release Agreement (this "AGREEMENT") is made as of
_________ __, 1998, by and among ____________________________, an individual
("EMPLOYEE"), ProfitSource Corporation, a Delaware corporation
("PROFITSOURCE"), and TSL Services, Inc., a Delaware corporation ("TSL").
A. ProfitSource, TSL, Brite Voice Systems, Inc., a Kansas
corporation acting through its TSL Division ("BRITE") and BVS Investco, Inc.
a Delaware corporation ("SELLER"), have entered into that certain Stock
Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT"), pursuant
to which (i) Brite is contributing substantially all of the assets of its TSL
division (the "TSL BUSINESS"). to Seller in exchange for all of the stock of
Seller, (ii) Seller is contributing the TSL Business to TSL in exchange for
all of the stock of TSL, (iii) and ProfitSource is purchasing all of the
stock of TSL from Seller. Capitalized terms used herein and not otherwise
defined will have the meanings ascribed to them in the Purchase Agreement.
B. Employee desires to be employed by TSL and it is a condition
to the employment by TSL of Employee that Employee release TSL and its parent
corporation ProfitSource as set forth herein.
NOW, THEREFORE, in consideration of the execution and delivery of
this Agreement, the Confidentiality Agreement, the employment of Employee by
TSL, and of the mutual promises contained herein, the parties hereto agree as
follows, such agreement to be effective as of the time Employee is employed
or retained as a consultant by TSL or its affiliates, successors or assigns:
1. RELEASE.
(a) Employee, on behalf of himself and his agents, successors
and assigns, does hereby forever release, discharge and acquit ProfitSource,
TSL, their affiliates and their respective members, partners, principals,
shareholders, directors, officers, agents, employees and representatives and
respective successors and assigns (the "RELEASED PARTIES"), to the extent not
prohibited by applicable law, from any and all claims, demands, obligations,
damages, costs, liabilities and indebtedness, of every type, kind, nature,
description or character, whether known or unknown, suspected or unsuspected,
liquidated or unliquidated, arising from, under or related to Employee's
employment with Brite, Seller or their affiliates or the termination of that
employment or the transactions contemplated by the Purchase Agreement (the
"OUTSTANDING MATTERS").
(b) Employee acknowledges and agrees that the releases made
herein constitute final and complete releases of the Released Parties with
respect to all Outstanding Matters, and that by signing this Agreement, he is
forever giving up the right to sue or attempt to recover money, damages or
any other relief from the Released Parties for all claims he has or may have
with respect to the Outstanding Matters (even if any such claim is unforeseen
as of the date hereof). Without limiting the foregoing, Employee agrees that
he will not, directly or
<PAGE>
indirectly, (i) bring or cause to be brought, or participate in the
prosecution of, any action, proceeding or suit seeking recovery by or on
behalf of Employee from any Released Parties of any amount in respect of, or
damages with respect to, any of the Outstanding Matters, or (ii) defend any
action, proceeding or suit in whole or in part on the grounds that any or all
of the terms or provisions of this Agreement are illegal, invalid, not
binding, unenforceable or against public policy.
(c) Employee represents and warrants that he understands
California Civil Code Section 1542, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Employee, being aware of Section 1542, hereby expressly waives any
and all rights he may have thereunder as well as under any other statute or
common law principles of similar effect under the laws of any state or the
United States. This Agreement shall act as a general release of all future
claims of Employee against any Released Party that may arise from the
Outstanding Matters, whether such claims are currently known, unknown,
foreseen or unforeseen.
(d) Notwithstanding the foregoing, Employee does not by this
Agreement release Brite, Seller or its affiliates or the officers, directors,
employees or shareholders of Seller.
2. CONFIDENTIALITY AGREEMENT. As a condition of employment by
TSL, Employee shall execute and deliver the Confidentiality Agreement
attached hereto as EXHIBIT A.
3. EMPLOYMENT AT WILL. Employee acknowledges that execution of
this Agreement and the Confidentiality Agreement do not constitute a contract
for employment. Employee's employment with TSL will be at-will, which means
that either Employee or TSL may terminate Employee's employment at any time
for any reason or no reason without payment, penalty or further obligation.
Furthermore, no agreement is made by or on behalf of TSL regarding the
compensation, benefits, or other attributes of Employee's employment by TSL,
all of which will be determined in TSL's discretion consistent with its
prevailing policies and practices in effect from time to time unless
otherwise specified in a separate written agreement with Employee.
4. PROFITSOURCE ENTITY. ProfitSource, or any of its affiliates,
may, in TSL's discretion, act as the employer of Employee, and this Agreement
will apply regardless of which entity acts as the employer of Employee.
5. MISCELLANEOUS.
(a) BENEFITS. This Agreement will inure to the benefit
of the Released Parties and their respective successors, assigns and legal
representatives.
<PAGE>
(b) ENTIRE AGREEMENT; MODIFICATIONS. This Agreement
constitutes the entire understanding among the parties hereto with respect to
the subject matter hereof, and supersedes all other agreements, written or
oral, between or among the parties with respect to such subject matter. In
particular but without limitation, Employee represents and warrants that (a)
no promise, consideration or inducement has been offered except as herein
expressly set forth, (b) this Agreement has been executed without reliance
upon any statement or representation by ProfitSource, or any of its
affiliates or their respective representatives, agents or attorneys except
such as are expressly contained herein, and (c) Employee is legally
competent and is otherwise duly authorized to execute this Agreement and is
doing so voluntarily without duress.
(c) ADVICE OF COUNSEL. Employee acknowledges and represents
that he has had the opportunity to receive, from legal counsel of his own
choosing, full and adequate legal advice as to his legal rights and
obligations hereunder. Employee further acknowledges and represents that he
has read all of this Agreement and fully understands its content and legal
effect.
(d) ASSIGNMENT OF CLAIMS. Employee represents and warrants
that he has not assigned, encumbered or in any manner transferred all or any
portions of the claims or other matters released herein.
(e) ATTORNEYS' FEES AND COSTS. If any action, including an
action for declaratory relief, is brought to enforce or interpret provisions
of this Agreement, the prevailing party shall be entitled to recover its
actual attorneys' fees and costs from the non-prevailing party, in addition
to any other relief to which the party may be entitled.
(f) EFFECT OF HEADINGS. Headings used in this Agreement are
for convenience and reference only, and shall in no way affect the
interpretation, construction or meaning of this Agreement.
(g) AMENDMENTS. This Agreement may be modified only by an
agreement in writing and signed by all parties hereto.
(h) COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed to be an original, and all of
which shall be construed together and shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYEE PROFITSOURCE CORPORATION,
a Delaware corporation
Name:_________________________ By: ________________________
Printed Name: ________________ Name: ______________________
Title: _____________________
<PAGE>
TSL SERVICES INC.,
a Delaware corporation
By: ________________________
Name: ______________________
Title: _____________________
<PAGE>
EXHIBIT A TO
EMPLOYEE GENERAL RELEASE AGREEMENT
CONFIDENTIAL INFORMATION AND EMPLOYEE INVENTION AGREEMENT
<PAGE>
EXHIBIT E
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") is entered into
effective as of _________, 1998 (the "EFFECTIVE DATE") by and between TSL
Services, Inc., a Delaware corporation, (the "COMPANY"), and
__________________ ("EMPLOYEE").
The Company desires to retain the services of Employee, and
Employee desires to render such services, on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereto agree as follows:
1. EMPLOYMENT. Employee's employment with the Company will be
at-will, which means that either Employee or the Company may terminate
Employee's employment at any time for any reason or no reason without
payment, penalty or further obligation except as set forth in SECTION 8.
2. DUTIES. Employee shall initially serve as __________________
of the Company. In that capacity, Employee shall be responsible for
__________________________ __________________, and shall perform such related
duties and services as the Company's board of directors and/or its Chief
Executive Officer may from time to time assign, either directly or by
delegated authority. Employee's position and duties may be changed at any
time and from time to time by the Company's board of directors or Chief
Executive Officer. Such duties shall be rendered at such place or places as
the Company shall require based upon the interest, need, business and/or
opportunities of the Company.
3. TIME AND EFFORTS. While employed by the Company (the
"EMPLOYMENT PERIOD"), Employee shall use his best efforts and devote his time
and attention to the business of the Company on a full-time basis and shall
at all times faithfully and industriously and to the best of his ability,
experience and talent, perform all of the duties that may be required of him
pursuant to the terms hereof. During the Employment Period, Employee shall
not engage in any other employment or consulting activities without the
express written consent of the Company. The foregoing shall not preclude
Employee from engaging in civic, charitable and/or religious activities,
directing his own passive investments and/or serving on boards of directors
of other entities so long as such activities do not interfere or conflict
with Employee's duties hereunder as reasonably determined by the Company.
4. COMPENSATION. During the Employment Period, the Company shall
pay Employee at the annual rate of ____________ Thousand ($__,000) (as such
pay may be increased or decreased by the Company from time to time in its
discretion, the "ANNUAL SALARY") for all services rendered to the Company by
Employee, payable in accordance with the Company's regular payroll policies,
subject, however, to withholding deductions, including without limitation
social security taxes and applicable federal, state and local income and
other employment taxes. The Company may, but shall not be obligated to, pay
bonuses from time to time to Employee in accordance with such plans or
standards as the Company may develop.
<PAGE>
Employee has no right to any specific compensation or benefits other than as
set forth herein or required pursuant to applicable law.
5. VACATION. Employee shall be entitled to __ days of paid
vacation each year which will begin to accrue immediately upon the
commencement of full-time employment with the Company at a rate of __ days
per month. Vacation may be used, subject to approval by the Company
consistent with business needs, as it is earned. Employee may not accrue
more than 30 days of unused vacation. If Employee at any time has 30 days of
accrued unused vacation, no further vacation days shall accrue until Employee
again has fewer than 30 days of unused vacation. The Company shall pay
Employee for accrued unused vacation days only in connection with termination
of employment. Such payment shall be made on the basis of Employee's Annual
Salary at the time of payment, pro-rated for the number of accrued unused
vacation days at the time of termination.
6. BENEFITS. In addition to the compensation described in
SECTION 4, the Company shall provide Employee with benefits consistent with
the Company's employment policies as in effect from time to time.
7. CERTAIN DEFINITIONS.
(a) CAUSE. For purposes hereof, the term "CAUSE" has the
meaning set forth in SCHEDULE 1 hereto. Any termination by the Company of
Employee's employment within ninety (90) days after the Company's becoming
aware of the occurrence of an event or circumstance constituting "Cause" will
constitute termination for Cause, regardless of whether such Cause is
assertedly cured or susceptible of cure.
(b) GOOD REASON. If the Company breaches this Agreement in
any material respect and does not cure such breach within fifteen (15) days
of receipt from Employee of notice of such breach and demand for cure, and
Employee terminates Employee's employment with the Company within ninety (90)
days of such breach, such termination by Employee will be termination with
"GOOD REASON" for purposes hereof.
(c) DISABILITY. For purposes hereof, the term "DISABILITY"
shall mean that the Employee suffers an ongoing physical or psychological
condition or impairment that has rendered Employee unable, as determined in
good faith by the Company's Chief Executive Officer, to perform employee's
duties to the Company, notwithstanding reasonable accommodation by the
Company (the Company, at its option and expense, being entitled to retain a
physician to confirm the existence of such disability), for a period of three
(3) consecutive months or six (6) months in any 12-month period.
8. CERTAIN PAYMENTS.
(a) TERMINATION BY EMPLOYEE WITH GOOD REASON OR THE COMPANY
WITHOUT CAUSE. Subject to SECTION 8(c), if Employee's employment under this
Agreement is terminated by Employee with Good Reason or by the Company
without Cause, then contingent upon execution and delivery by Employee to the
Company of an unconditional release in form satisfactory to the Company of
all claims against the Company or any of its officers, directors or
affiliates arising from or in connection with this Agreement or Employee's
employment with the
<PAGE>
Company or the termination of that employment, Employee shall be entitled to
continue to receive regular monthly installments of his Annual Salary over
the Severance Period (as defined below) in accordance with the Company's
normal payroll schedule (the "SEVERANCE PAYMENT") for the duration of the
Severance Period. For purposes hereof, the "SEVERANCE PERIOD" means 90 days
following termination of employment.
(b) NO OTHER BENEFITS. Except as set forth in SECTION 8(a)
or SECTION 5 or as may be required by applicable law, the Company shall have
no obligations to pay any salary, bonus, accrued vacation or other amounts in
connection with any termination of Employee's employment or attributable to
the period after termination of Employee's employment. Without limiting the
foregoing, Employee will not be entitled to any severance payment or benefit
if Employee's employment under this Agreement is terminated by death, or by
Employee without Good Reason, or by the Company for Cause or Disability.
(c) POST-TERMINATION CAUSE. If any of the events or
circumstances constituting Cause listed in items A, B or C of Schedule 1
occurs during the Severance Period, then (i) the Company will have no further
obligation to provide to Employee the Severance Payment, and (ii) the Company
will be entitled to recover from Employee any Severance Payment amounts paid
to Employee or Employee's successors and assigns, together with the costs of
effecting such recovery.
9. CONFIDENTIALITY. Employee shall execute the Confidential
Information and Employee Invention Agreement attached hereto as EXHIBIT A
(the "CONFIDENTIALITY AGREEMENT"), which will survive termination or
expiration of this Agreement.
10. REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to the Company that (a) he is under no contractual restriction or
other restrictions or obligations that are inconsistent with the execution of
this Agreement, the performance of his duties and the covenants hereunder,
and (b) he is under no physical or mental disability that would interfere
with his keeping and performing all of the agreements, covenants and
conditions to be kept or performed hereunder.
11. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be interpreted under and
governed by the laws of the State of California, excluding its rules on
conflicts of law.
(b) ARBITRATION. Any controversy or claim or dispute arising out
of or in connection with or relating to this Agreement, or the invalidity,
termination, or breach hereof, or the course of dealing by the parties
hereunder (including the validity, scope and enforceability of this
arbitration clause or any claim based on contract, tort, or statute), whether
for damages or for equitable relief, shall be finally settled by arbitration
administered by the American Arbitration Association ("AAA") in accordance
with its then-existing employment arbitration rules ("RULES") (except as
modified by this Section). The arbitration shall be conducted before a single
arbitrator who shall be a retired or former judge or an attorney mutually
acceptable to the parties. During the 20 days following the commencement of
an arbitration, the parties will consult to define and limit the issues and
will exchange those documents or other evidence each intends to use at the
arbitration to support its case, and provide each other with names of all
<PAGE>
proposed witnesses. Each party shall be entitled to select and take the
deposition of no more than three persons in connection with the arbitration.
Each party shall cooperate fully in facilitating discovery. Evidence in the
arbitration will be limited to statements of counsel, documents disclosed
during the 20-day period mentioned above, written submissions of witnesses
identified during such period, and live testimony of not more than three
witnesses for each side.
(c) ATTORNEYS' FEES. If Employee shall bring any action, suit,
counterclaim, appeal, arbitration, or mediation (an "ACTION") for any relief
against the Company or any of the Company's affiliates, or if the Company
shall bring any Action for relief against Employee, declaratory or otherwise,
to enforce the terms hereof or to declare rights hereunder, or in respect of
Employee's employment by the Company or the termination of that employment,
in addition to any damages and costs which the prevailing party otherwise
would be entitled, the non-prevailing party shall pay to the prevailing party
a reasonable sum for ordinary and necessary attorneys' fees and costs
incurred in connection with prosecuting or defending such Action and/or
enforcing any judgment, order, ruling, or award (collectively, a "DECISION")
granted therein. Any Decision entered in such Action shall contain a specific
provision providing for the recovery of reasonable attorneys' fees and costs
incurred in enforcing such Decision. The court or arbitrator may fix the
amount of reasonable attorneys' fees and costs on the request of either
party. For the purposes of this SECTION 11(c), attorneys' fees shall
include, but not be limited to, fees incurred in the following: (i)
postjudgment motions and collection actions; (ii) contempt proceedings; (iii)
garnishment, levy , and debtor and third party examinations; (iv) discovery;
and (v) bankruptcy.
(d) MODIFICATION AND WAIVER. No waiver or modification of this
Agreement or any term hereof shall be binding unless it is in writing signed
by the parties hereto. No failure to insist upon compliance with any term,
provision or condition to this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a waiver of
any such term, provision or condition or as a waiver of any other term,
provision or condition of this Agreement.
(e) ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede and replace all prior employment
agreements, if any, between the parties. No oral statements or prior written
agreements with respect to the subject matter hereof which are not
specifically incorporated herein or in the Confidentiality Agreement shall be
of any force or effect.
(f) SEVERABILITY. If any provisions hereof shall be held or
construed to be illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of this Agreement, but
the same shall be construed and enforced just as though the illegal or
invalid provisions had not been included herein.
(g) NOTICES. Any notice, demand or other communication required,
permitted or desired to be given hereunder shall be in writing and shall be
deemed effectively given upon personal delivery, facsimile transmission (with
confirmation of receipt), delivery by reputable overnight delivery service or
five (5) days following deposit in the United States mail (if sent by
certified or registered mail, postage prepaid, return receipt requested), in
each case duly
<PAGE>
addressed to the Company at its headquarters or to Employee at his address of
record listed with the Company.
(h) HEADINGS. The section headings herein are intended for
reference and shall not by themselves determine the construction or
interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Employment Agreement as of the date set forth above.
EMPLOYEE: THE COMPANY:
TSL SERVICES, INC.,
a Delaware corporation
______________________________
By: ______________________________
Name: ______________________________
Title: ______________________________
<PAGE>
SCHEDULE 1 TO
EMPLOYMENT AGREEMENT
"CAUSE" means the occurrence of any one or more of the following
events or circumstances: (i) Employee violates any reasonable rule or
regulation of the Board, the Company's President or Chief Executive Officer
or the Employee's superiors that results in damage to the Company or any
parent corporation of the Company, any subsidiary corporation of the Company
or any entity controlling, controlled by, or under common control with the
Company (an "AFFILIATED ENTITY") or that is uncorrected by Employee within a
reasonable time not exceeding 15 days after receipt by Employee of notice
thereof; (ii) any willful misconduct or gross negligence by Employee in the
responsibilities assigned to Employee; (iii) any willful failure to perform
Employee 's job as required to meet the objectives of the Company or any
Affiliated Entity; (iv) any wrongful conduct of Employee which has an adverse
impact on the Company or any Affiliated Entity or which constitutes a
misappropriation of assets of the Company or any Affiliated Entity; (v)
Employee fails to comply with all material applicable laws and regulations in
performing Employee's duties and responsibilities to the Company; (vi)
Employee does any of the things described in (A)-(C) below; or (vii) any
other conduct that the Board of Directors of the Company reasonably
determines constitutes Cause for termination.
(A) Employee renders services for any organization or engages
directly or indirectly in any business that, in the judgment of the Chief
Executive Officer of the Company or other senior officer designated by the
Chief Executive Officer, is or becomes competitive with the Company or any
Affiliated Entity, or which organization or business, or the rendering of
services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the business or interests of the Company
or any Affiliated Entity. For an Employee whose employment has terminated,
the judgment of the Chief Executive Officer or such other senior officer
shall be based upon the Employee's position and responsibilities while
employed by the Company or any Affiliated Entity, the Employee's
post-employment responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company or any Affiliated Entity and the other organization or
business, the effect on the customers, suppliers and competitors of the
Company or any Affiliated Entity of Employee's assuming the post-employment
position, the guidelines established in any employee handbook, any employment
agreement with the Employee, and such other considerations as are deemed by
the Company to be relevant given applicable facts and circumstances.
(B) Employee fails to comply with the Confidentiality Agreement or
with the policies of the Company or any Affiliated Entity regarding
nondisclosure of confidential information, or without prior written
authorization from the Company or any Affiliated Entity discloses to anyone
outside the Company or any Affiliated Entity or uses for any purpose or in
any context other than in performance of Employee's duties to the Company or
any Affiliated Entity any confidential or trade secret information of the
Company or any Affiliated Entity.
(C) Employee breaches any agreement with or duty to the Company or
any Affiliated Entity.
<PAGE>
EXHIBIT A
CONFIDENTIAL INFORMATION AND
EMPLOYEE INVENTION AGREEMENT
<PAGE>
EXHIBIT F
Based upon the foregoing and in reliance thereon, and subject
to the assumptions, qualifications, exceptions and limitations set forth
herein, we are of the opinion that:
1. Each of the Acquisition Companies is a corporation, duly
incorporated and validly existing in the jurisdiction of its incorporation as
noted above, and each is in good standing in the jurisdiction of its
incorporation as noted above.
2. Each of the Acquisition Companies has the corporate power
and authority to own or lease its properties and to conduct its business as
presently being conducted by it.
3. To the best of our knowledge, the Company does not own
directly or indirectly any equity interest in, or any interest convertible
into or exchangeable or exercisable for any equity interest in, any
corporation, partnership, joint venture or other business association or
entity.
4. The authorized capital stock of the Company consists of
90,000 shares of common stock, having a par value of $0.001 per share (the
"Common Stock"), and 10,000 shares of preferred stock, having a par value of
$0.001 per share (the "Preferred Stock"), including 5,000 shares of Series A
Preferred Stock. As of the date hereof, 45,000 shares of Common Stock are
issued and outstanding, and each of such shares has been duly authorized and
validly issued, is fully paid and non-assessable and is not subject to any
lien, encumbrance, or adverse interest.
5. To the best of our knowledge, and except as otherwise
provided in the Purchase Agreement, no options, warrants, conversion or other
rights, agreements or commitments of any kind obligating the Company,
contingently or otherwise, to issue or sell any shares of its capital stock
or any securities convertible into or exchangeable for any such shares, are
outstanding, and no authorization therefor has been given.
6. Each of the Acquisition Companies has the corporate power
and authority to enter into and perform its obligations under the Purchase
Agreement and the other Transaction Documents to be executed and delivered by
it, and the execution, delivery and performance of such Transaction Documents
has been duly authorized by all necessary corporate actions of each of the
Acquisition Companies.
7. The Purchase Agreement and the other Transaction
Documents have been duly executed and delivered by each of the Acquisition
Companies and constitute the valid and binding obligation of each of the
Acquisition Companies, enforceable against each of them in accordance with
its terms.
<PAGE>
8. Upon payment for and delivery of the shares of Common
Stock of the Company (the "Shares") in accordance with the terms of the
Purchase Agreement, Buyer will be the owner of the Shares, free and clear of
any adverse claim or lien of any kind, except for any lien which may arise as
a result of the closing of the transaction contemplated by the Purchase
Agreement.
9. To the best of our knowledge, except as contemplated by
the Purchase Agreement or specifically consented to by Buyer, prior to the
Closing Date, Seller and the Company have not conducted business or had
operations of any type and each of Seller and the Company have owned no
assets and have incurred no liabilities other than those contributed on the
Closing Date to Seller, pursuant to the Seller Contribution Agreement, and to
Company pursuant to the Company Contribution Agreement.
Such opinion may be subject to Counsel's standard assumptions,
qualifications and exceptions, including without limitation exceptions to
opinions as to enforceability due to laws related to bankruptcy, insolvency
or creditors' rights, or to general principles or equity.
<PAGE>
EXHIBIT G
TSL BUYER OPINION
Based upon the foregoing and in reliance thereon, and subject
to the assumptions, qualifications, exceptions and limitations set forth
herein, we are of the opinion that:
1. Buyer is a corporation validly existing, and in good
standing in the State of Delaware.
2. Buyer has the corporate power and authority to enter into
and perform its obligations under the Purchase Agreement,
and the execution, delivery and performance of the Purchase
Agreement has been duly authorized by all necessary
corporate actions of Buyer.
3. The Purchase Agreement has been duly executed and delivered
by Buyer and constitutes the valid and binding obligation
of Buyer, enforceable against it in accordance with its
terms.
4. The shares of Series A Preferred Stock of TSL Services,
Inc. being issued in the transaction have been duly
authorized and validly issued and are fully paid and
non-assessable.
5. The Warrant being issued by TSL Services, Inc. in the
transaction has been duly executed and delivered by Buyer
and constitutes the valid and binding obligations of Buyer,
enforceable against it in accordance with its terms.
Such opinion may be subject to counsel's standard assumption,
qualifications and exceptions, including without limitation
exceptions to opinion as to enforceability due to laws related to
bankruptcy, insolvency or creditors' rights, or to general
principles of equity.
<PAGE>
EXHIBIT H
STOCKHOLDER AGREEMENT
This Stockholder Agreement (this "AGREEMENT") is made and entered
into as of ___________________________, ___, by and among TSL SERVICES, INC.,
a Delaware corporation (the "COMPANY") and each of the Company's stockholders
party hereto as evidenced by such stockholder's execution of the signature
pages hereof or receipt in transfer of stock of the Company from another
party hereto.
The Company and its Stockholders (as defined below) desire to
impose certain restrictions and obligations on themselves and the stock of
the Company owned by each of the Stockholders.
Therefore, in consideration of the foregoing premises and the
mutual promises and agreements of the parties hereto and other good and
valuable consideration, the parties hereto hereby agree as follows:
I.
DEFINITIONS
Capitalized terms used herein and not otherwise defined have the
respective meanings ascribed to them below.
"AFFILIATE" of the Company means any entity controlling, controlled
by, or under common control with the Company.
"BVS" means BVS Investco, Inc., a Delaware corporation and the
initial Stockholder hereunder.
"PARENT" means the corporation or other entity owning a majority of
the voting powers of the Company.
"SECURITIES" means all Warrants, Warrant Shares, and Series A
Preferred Stock.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock, par
value $.001 per share, of the Company.
"STOCKHOLDER" means BVS, as of the date hereof, and thereafter each
person or entity who at that time owns Securities and is party to this
Agreement.
"TRANSFER" means any transfer, sale, assignment, pledge, mortgage,
hypothecation, encumbrance, gift, grant, bequest, or other disposition of any
kind, of any Securities or any direct or indirect, contingent or
non-contingent, beneficial interest in any Securities. Without limitation,
any transfer or allocation of any rights in Securities upon death, pursuant
to a marital dissolution (whether by agreement or court decree), a voluntary
or
<PAGE>
involuntary bankruptcy or insolvency petition or proceeding, or any other
court order or process shall be a Transfer for purposes of this Agreement.
Notwithstanding the foregoing, however, any Transfer approved by the Company
in writing shall not be considered to be a Transfer for purposes of this
Agreement.
"WARRANTS" means the Warrants to purchase up to 5,000 shares of
common stock of the Company originally issued to BVS on the date hereof as
evidenced by that certain Warrant of even date herewith.
"WARRANT SHARES" means the shares of Common Stock of the Company
issuable or issued upon exercise of the Warrants.
II.
RESTRICTIONS ON TRANSFER
2.01 INVALIDITY OF TRANSFER NOT COMPLYING WITH THIS AGREEMENT. No
Transfer or attempted Transfer in contravention of this Agreement will be
effective for any purpose or confer on any transferee or attempted transferee
any rights whatsoever.
2.02 LEGEND ON SHARE CERTIFICATES. Certificates representing
Securities shall be stamped in a prominent manner with the following legend:
"The transfer, sale, assignment, pledge, mortgage,
hypothecation, encumbrance, gift or other disposition of
the Securities represented by this certificate is
restricted by a Stockholder Agreement, a copy of which may
be obtained at the principal office of this corporation."
2.03 STOP TRANSFER. The Company shall not recognize, and shall
issue appropriate instructions to its transfer agent (if any) to stop, any
Transfer or attempted Transfer in contravention of this Agreement.
2.04 NO TRANSFER FOR TWO YEARS. No Stockholder may Transfer any
Securities prior to the second anniversary of the date hereof.
2.05 TRANSFER IN TANDEM. Each Warrant to purchase one Warrant
Share will be associated with one share of Series A Preferred Stock, and no
Warrant to purchase one Warrant Share may be transferred without its
associated share of Series A Preferred Stock, and no share of Series A
Preferred Stock may be Transferred without its associated Warrant to purchase
one Warrant Share.
2.06 TRANSFER ONLY TO ACCREDITED INVESTORS. No Securities may be
transferred to any transferee other than an accredited investor as defined in
Regulation D under the Securities Act of 1933, as amended.
<PAGE>
III.
CONDITIONS OF TRANSFER
3.01 RIGHTS ON TRANSFER. Except as provided in SECTION 3.04 and
subject to ARTICLE IV, if any Stockholder desires or is required to make any
Transfer, before such Transfer may be made, the Company and the Parent shall
have the right (but not the obligation) to purchase, at the Purchase Price
(as defined in ARTICLE VI) and under the terms and conditions specified
herein, any and all of the Securities potentially subject to such Transfer.
3.02 EXERCISE OF RIGHTS.
(a) WRITTEN NOTICE. The transferring Stockholder shall give
written notice (for purposes of this ARTICLE III, the "REQUEST TO TRANSFER")
to the Company of the Securities subject to the proposed Transfer (the
"TRANSFER SECURITIES") and the proposed terms of such Transfer, including the
identity of the proposed transferee and the price and other material terms,
if any, of the proposed Transfer.
(b) THE COMPANY'S RIGHT. The Company shall have thirty (30) days
after its receipt of a Request to Transfer under this ARTICLE III (for
purposes of this ARTICLE III, the "COMPANY'S PURCHASE PERIOD") during which
to exercise its right to purchase, on the terms described in ARTICLE VI, the
Transfer Securities or any portion thereof by giving written notice to the
transferring Stockholder of the Transfer Securities, if any, as to which the
Company is exercising its right. The Company may exercise its right with
respect to all or any portion of the Transfer Securities. The Company's
failure to give written notice within the Company's Purchase Period shall be
deemed an election by the Company not to purchase any Transfer Securities.
(c) PARENT RIGHTS. If and to the extent that the Company does not
exercise its right to purchase all of the Transfer Securities, the Parent
shall have thirty (30) days after the expiration of the Company's Purchase
Period or earlier delivery by the Company of the notice of non-purchase
described in SECTION 3.02(b) (for purposes of this ARTICLE III, the "PARENT'S
PURCHASE PERIOD") during which to exercise the Parent's right to purchase, on
the terms described in ARTICLE VI, some or all of the Transfer Securities not
being purchased by the Company by giving written notice to the Company of the
number of Transfer Securities, if any, as to which the Parent is exercising
its purchase right. The failure by the Parent to give written notice within
the Parent's Purchase Period shall be deemed an election by the Parent not to
purchase any of the applicable Transfer Securities.
(d) SHARES NOT PURCHASED. The Stockholder proposing to make a
Transfer may Transfer any Transfer Securities not being purchased by the
Company or the Parent at any time within one hundred twenty (120) days after
the expiration of the Parent's Purchase Period or earlier delivery by the
Parent of the notice of non-purchase described in SECTION 3.02(c); provided,
however, that (i) such Transfer shall be on terms no more favorable to the
transferee than the terms specified in the applicable Request to Transfer,
(ii) the transferring Stockholder has obtained the Company's written consent
to the person or entity to which the Transfer will be made and the terms of
the Transfer, which consent will not be unreasonably withheld, provided
<PAGE>
that the Company may withhold consent, in its sole discretion, to any lien or
encumbrance upon Securities, and (iii) the transferee shall first enter into
this Agreement or otherwise agree in writing to be bound by and hold the
transferred Securities or interest therein pursuant to this Agreement.
(e) NO WRITTEN NOTICE BY TRANSFERRING STOCKHOLDER. If a
Stockholder purports to make a Transfer without providing a Request to
Transfer, or a purported Transfer is made or required to be made pursuant to
a court order, the Company's Purchase Period shall be deemed to start on the
date on which the Company's President or Chief Executive Officer obtains
actual and complete knowledge of the purported Transfer or order. Any such
purported Transfer or order shall be subject to the rights of the Company and
the Parent hereunder.
(f) DEATH. In case of a Transfer caused by the death of a
Stockholder who is a natural person, the provisions set forth above shall
apply except that the deceased Stockholder's heirs or administrators or legal
representatives will be substituted for the transferring Stockholder for
purposes of commissions and exercise of rights.
3.03 RIGHTS ON DISSOLUTION OF MARRIAGE. In the event of the
dissolution of the marriage of a Stockholder (the "DIVORCED STOCKHOLDER") and
the division of the property of the Divorced Stockholder and the Divorced
Stockholder's spouse (the "DIVORCED SPOUSE"), the Divorced Spouse, by
executing a Spousal Consent in substantially the form of EXHIBIT I to this
Agreement, agrees to accept other property in lieu of any interest which the
Divorced Spouse may assert in any Securities or under this Agreement. In the
event there is not sufficient marital or separate property to compensate the
Divorced Spouse for any interest the Divorced Spouse may assert in Securities
or under this Agreement, or if for any other reason there is a Transfer or
award of any interest in Shares to the Divorced Spouse, such Transfer or
award shall be treated as a proposed Transfer subject to SECTION 3.01. Any
Securities retained by the Divorced Stockholder and not transferred to the
Divorced Spouse shall not become subject to the purchase rights under this
Agreement as a result of the divorce or any Transfer to the Divorced
Stockholder of the Divorced Spouse's interest in such Securities.
Stockholders who are natural persons shall cause their respective current and
future spouses to execute and deliver to the Company a Spousal Consent in
substantially the form of EXHIBIT I.
IV.
PURCHASE PRICE AND PAYMENT
4.01 INITIAL PURCHASE PRICE. The "PURCHASE PRICE" applicable to
the purchase by the Company or the Parent of any Securities pursuant to this
Agreement shall be the lesser of (a) the proposed sale price specified in the
Request to Transfer, if applicable, and (b) the price at which the Warrants
or Series A Preferred Stock would, according to the terms thereof, be
redeemed or purchased by the Company if a Public Equity Offering (as defined
in the Warrant) occurred concurrently with the Transfer. Notwithstanding the
foregoing, however, the Company or the Parent may in its discretion (but
shall have no obligation to) pay any such higher price for any Securities
pursuant to this Agreement as the Company or the Parent may determine,
provided that such a discretionary higher price paid by the Company or the
Parent for certain
<PAGE>
Securities shall not create any obligation upon the Company or the Parent to
pay any discretionary higher price for any other Securities.
4.02 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
by delivering to the transferring Stockholder, or the legal representative of
such Stockholder, a bank certified or cashier's check or checks at a
"CLOSING" to be held within ten (10) days of final determination of the
Securities that will be purchased by the Company and the Parent pursuant to
their purchase rights under this Agreement and the price payable therefor.
At the Closing, the transferring Stockholder, or the Stockholder's legal
representative, shall deliver to the Company and/or the Parent purchasing the
Securities, as applicable, (individually a "PURCHASER" and collectively the
"PURCHASERS") the certificate or certificates representing the Securities to
be purchased, duly endorsed or accompanied by duly executed stock powers for
transfer to the Purchasers. Delivery of the Securities to the Purchasers
shall constitute the representation and warranty of the transferring
Stockholder to the Purchasers that the Securities being purchased are
delivered free and clear of all claims, encumbrances, or other rights or
interests of third parties, including without limitation community property
rights of spouses or former spouses (other than liens created in compliance
with this Agreement and fully disclosed), and that the Purchasers shall
obtain good and marketable title to the Securities (subject to this
Agreement). All parties to a purchase of Securities under this Agreement
shall promptly execute and file all agreements, documents, applications, and
instruments and shall take such additional actions required by applicable
securities and other laws, rules, or regulations to effect the sales of the
Securities pursuant hereto.
4.03 FAILURE TO DELIVER SECURITIES. If any Stockholder obligated to
transfer Securities hereunder fails or refuses to deliver on a timely basis
duly endorsed certificates representing the Securities to be sold to the
Company or the Parent, the Company or the Parent will have the right to
deposit the Purchase Price for such Securities in a special account with any
bank or trust company in the State of California, giving notice of such
deposit to the Stockholder obligated to sell, whereupon such Securities will
be deemed to have been purchased by the Company or the Parent. All such
monies, less any fees and expenses charged by the bank or trust company, will
be held by the bank or trust company for the benefit of the selling
Stockholder. All monies deposited with the bank or trust company remaining
unclaimed for six (6) years after the date of deposit must be repaid by the
bank or trust company to the Company on demand, and the selling Stockholder
may thereafter look only to the Company for payment.
4.04 REDEMPTION. This Agreement shall be subject to the provisions of
the Warrants and the Series A Preferred Stock governing redemption and
purchase by the Company thereof, which shall govern in case of any conflict
with this Agreement.
V.
GENERAL PROVISIONS
5.01 TRANSFEREES. Any person or entity acquiring Securities or
any interest therein pursuant to this Agreement shall take the same subject to
the terms of this Agreement,
<PAGE>
shall be a Stockholder for purposes of this Agreement and may not make any
Transfer except as provided in this Agreement.
5.02 EQUITABLE REMEDIES. The parties to this Agreement recognize
and agree that the Securities subject to this Agreement are of a peculiar and
unique character, and that this Agreement may be enforced by an injunction or
injunctions to prevent Transfers or other dispositions of the Securities not
in accordance with the terms of this Agreement or by a decree for specific
performance of the provisions of this Agreement.
5.03 AUTHORIZATION OF DIRECTORS. Subject to the provisions of this
Agreement, the Board of Directors of the Company shall have full authority to
prescribe regulations and conditions for the exercise of rights to purchase
Securities hereunder, the consummation of purchases and sales thereunder, and
any and all other matters necessary and convenient for the performance of
this Agreement.
5.04 COPY FOR INSPECTION. A copy of this Agreement shall be filed
in the principal office of the Company and shall be made available to
Stockholders upon request.
5.05 NOTICES. All written notices referred to in this Agreement
shall be communicated by means of registered or certified mail (return
receipt requested) or personal delivery and shall be effective for purposes
of determining compliance with the time requirements herein (unless otherwise
specifically provided herein) at the time of personal delivery, or upon
deposit in the United States mail, postage fully prepaid, addressed, if to
the Company, at its then principal place of business, if to a Stockholder, at
the latest address of such Stockholder shown on the books of the Company, or
if to the legal representative of a deceased Stockholder or to such deceased
Stockholder's heirs at law, at the latest address of such deceased
Stockholder shown on the books of the Company. Any such notice shall be
conclusively deemed to have been received by the addressee for purposes
hereof when tendered at the address to which it is so addressed.
5.06 LEGAL HOLIDAYS. In the event that any period of time
specified in this Agreement ends on a Saturday or Sunday or a legal holiday,
as defined under the present or any future laws of the State of California,
then such period shall be construed to include the next succeeding business
day.
5.07 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the successors, heirs, executors, administrators and assigns of the parties
hereto. In the event that any security subject to this Agreement or any
right hereunder shall be determined to be community property under the laws
of California or any other state or country, this Agreement shall bind the
community interest of the spouse, and such spouse's heirs, executors,
administrators and assigns, as well as the interest of the party in whose
name the security is registered.
5.08 AMENDMENT. This Agreement may be amended only with the
consent of the Company and Stockholders owning more than 90% of the economic
interest represented by all the Securities.
<PAGE>
5.09 TERMINATION OF AGREEMENT. This Agreement shall terminate upon
approval by the Company or redemption or purchase or exercise for Warrant
Shares or repayment in full of all of the Securities.
5.10 ATTORNEYS' FEES AND COSTS. If any party to this Agreement
brings any action or proceeding, at law or equity, to enforce this Agreement
or on account of any breach of this Agreement, the prevailing party or
parties shall be entitled to recover from the non-prevailing party or parties
the reasonable attorneys' fees and costs of the prevailing party or parties
incurred in such action.
5.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TSL SERVICES, INC. BVS INVESTCO, INC.
By:__________________________ By:__________________________
Name:________________________ Name:________________________
Title:_________________________ Title:_________________________
_____________________________
SIGNATURE OF STOCKHOLDER
NAME OF STOCKHOLDER:________________
<PAGE>
EXHIBIT I
TO
STOCKHOLDER AGREEMENT
SPOUSAL CONSENT
CONSENT TO STOCKHOLDER AGREEMENT OF
TSL SERVICES, INC.
The undersigned is the spouse of _______________ and acknowledges that
he or she has read the Stockholder Agreement among TSL SERVICES, INC., a
Delaware corporation (the "COMPANY"), and its Stockholders (the "AGREEMENT")
and clearly understands its provisions. The undersigned is aware that, by
the provisions of the Agreement, the undersigned and his or her spouse have
agreed to subject all their interest in the Company, including any community
property, joint tenancy, or tenancy in common interest, to the terms of the
Agreement, including provisions of the Agreement that restrict their ability
to sell or transfer their interest in the Company. The undersigned
understands and agrees that the Agreement provides that upon dissolution of
marriage the undersigned will not be entitled to any interest in the Company,
and must take other property in lieu of any such interest. The undersigned
hereby expressly approves of and agrees to be bound by the provisions of the
Agreement in its entirety, including without limitation those provisions
relating to sales and transfers of interests in the Company and limitations
on inheritance at death. If the undersigned predeceases his or her spouse
when his or her spouse owns an interest in the Company, he or she hereby
agrees not to devise or bequeath any interest he or she may have in the
Company in contravention of the Agreement.
Date: ______________________________
____________________________________
(Signature of spouse)
____________________________________
(Printed name of spouse)
<PAGE>
SCHEDULE 1.1(a)
ACQUIRED ASSETS
(i) All operating procedures, computer hardware, software and
other technology of Brite used in connection with the Business which exists
on the Closing Date, including without limitation, the names "TSL", "Telecom
Services Limited", "TOMS", "Fraud-Check, and "E-Z View";
(ii) All Accounts Receivable of Brite that have arisen in the
conduct of the Business and any security held by Brite for the payment
thereof;
(iii) All of Brite's right, title and interest in and to the Real
Property Leases used in connection with the Business, including, without
limitation, those listed on Schedule 2.5(a);
(iv) All books, records and accounts, correspondence, sales
records, employment records, customer, prospect and marketing lists, and any
other documentation pertaining to the Business;
(v) All rights of Brite under express or implied warranties from
the suppliers of Brite with respect to the Acquired Assets;
(vi) All of Brite's right, title and interest in and to the
Contracts, including, without limitation, those contracts listed on Schedule
2.11;
(vii) All of Brite's right, title and interest in and to the
Proprietary Rights, including, without limitation, the names "TSL", "Telecom
Services Limited", "TOMS", "Fraud-Check, and "E-Z View";
(viii) All prepaid items, deposits and other similar assets of
Brite that have arisen in the conduct of the Business existing on the Closing
Date;
(ix) All of Brite's right, title and interest in and to the
Personal Property, including, without limitation, those items listed on
Schedule 2.5(b).
(x) To the extent assignable, all of Brite's Licenses associated
with the Business, including, without limitation, those listed on Schedule
2.13;
(xi) All of the goodwill related to the Business and the Acquired
Assets; and
(xii) Except as specifically provided in SECTION 1.1, all other
assets and properties of Brite used in connection with the Business which
exist on the Closing Date whether tangible or intangible, real or personal.
<PAGE>
SCHEDULE 1.1(b)
EXCLUDED ASSETS
(i) Any cash or cash equivalents of Brite;
(ii) Except for the Donaldson, Lufkin & Jenrette matter disclosed
on SCHEDULE 2.10, any claims asserted by Brite in any litigation involving
Brite, whether or not disclosed in SECTION 2.10 of the Disclosure Schedule,
other than claims arising out of breaches of express or implied warranties
relating to any of Acquired Assets or claims associated with any Assumed
Liabilities;
(iii) Brite's minute books, tax returns and other corporate
documents;
(iv) All books, records, correspondence and other information
relating exclusively to Excluded Assets; and
(v) All Employee Plans and all liabilities or obligations arising
under, or in connection with the Employee Plans.
(vi) All amounts recovered from Morris Malz, David Flack and their
affiliated entities known as "Data Source" and "StaffTech".
<PAGE>
SCHEDULE 1.2
ASSUMED LIABILITIES
(i) Performance obligations arising after the Closing Date under
the Contracts assigned or subcontracted to the Company; and
(ii) Accounts payable and accrued expenses incurred by Brite in the
ordinary course of the Business prior to the Closing, including, without
limitation, customer deposits, accrued salaries, vacations, commissions and
bonuses, but excluding any amount payable to Kathy Hargrove and/or
Information Source, Inc. with respect to services rendered to Key Services
Corporation; and
(iii) Employee health insurance costs for the month of December,
1998 in the amount of $47,486.85, which amount shall be paid by Brite and
reimbursed by Buyer at the Closing, and all wages, benefits and other
employee-related claims which may arise as of the result of the Business
Personnel having been employees or independent contractors of the Business on
December 1, 1998; and.
(iv) All costs incurred prior to the Closing Date in connection
with the establishment of Internet services to be used by the Company
subsequent to the Closing Date, including consulting services and the
purchase of a server.
<PAGE>
SCHEDULE 1.4
PURCHASE PRICE
In exchange for the Shares, Buyer shall pay an aggregate purchase price
as described below:
(i) Buyer shall pay to Seller at the Closing Nineteen Million Two
Hundred Eighty Seven Thousand Five Hundred Dollars ($19,287,500) in cash, by
wire transfer to such account as may be specified by Seller in writing (the
"CASH PAYMENT");
(ii) Buyer shall deposit into the Escrow Account (as such term is
defined in the Escrow Agreement) Two Hundred Twelve Thousand Five Hundred
Dollars ($212,500) in cash which shall be managed in accordance with the
terms of the Escrow Agreement of even date herewith by and among the parties
hereto.
(iii) Buyer shall cause the Company to issue to Seller 5,000
shares of the Company's Series A Preferred Stock, described more particularly
in the Company's Certificate of Incorporation set forth in SCHEDULE 2.22(c)-1
(the "PREFERRED STOCK"), and
(iv) Buyer shall cause the Company to issue to Seller warrants in
the form of EXHIBIT C to purchase shares of the Company's Common Stock,
representing 10.0% of the fully diluted equity of the Company as of the
Closing Date (the "WARRANTS").
(v) In accordance with the terms of that certain amendment to
the Letter of Understanding by and among Brite, National Benefits
Consultants, LLC and Buyer, dated as of September 2, 1998 (the "THIRD
AMENDMENT"), the Five Hundred Thousand Dollars ($500,000) delivered by Buyer
to Brite pursuant to the terms of Amendment No. 3 shall be considered a
portion of the Purchase Price.
<PAGE>
EXHIBIT 2.2
TSL SERVICES, INC.
AGREEMENT RE: PREFERRED STOCK
In connection with that certain Stock Purchase Agreement (the
"Agreement") dated November 30, 1998 by and among ProfitSource Corporation, a
Delaware corporation ("Buyer"), Brite Voice Systems, Inc., a Kansas
corporation ("Brite"), BVS Investco, Inc., a Delaware corporation ("Seller'),
and TSL Services, Inc., a Delaware corporation ("TSL"), and in order for
Buyer to be able to obtain the financing contemplated by SECTION 6.2(h) of
the Agreement which is a condition to Buyer's obligation to consummate the
transactions contemplated by the Agreement, Buyer, Brite, Seller and TSL
agree as follows.
Seller shall have the option as a preferred stockholder of TSL to
vote to amend the preferred stock provisions of the Restated Certificate of
Incorporation of TSL in a manner satisfactory to the financial institutions
providing the financing for the Consolidation Transaction (as defined in the
Agreement). Such amendments shall incorporate the subordination provisions
of the Subordination Agreement, a copy of which is attached as Exhibit B
hereto and which is the subordination agreement used in connection with the
subordinated notes issued to other Consolidation Transaction participants, as
if the preferred stock were a subordinated note; provided, however, that if
for any reason Seller elects not to make such an amendment and not otherwise
terminate or waive the objectionable provisions of the Related Certificate of
Incorporation within 30 days after the Closing, then Seller hereby consents
to the termination and elimination of its preferred stock in exchange for a
Subordinated Note of Buyer in the form attached hereto as Exhibit A, issued
to Seller in the amount of $5,000,000, and hereby agrees to execute the
Subordination Agreement attached hereto as Exhibit B.
BRITE VOICE SYSTEMS, INC. PROFITSOURCE CORPORATION
By: s/ Glenn Etherington By: s/ Eric Watts
-------------------- ----------------------
Name: Glenn Etherington Name: Eric Watts
-------------------- ----------------------
Title: CFO & Secretary Title: President
-------------------- ----------------------
BVS INVESTCO, INC. TSL SERVICES, INC.
By: s/ Glenn Etherington By: s/ Glenn Etherington
-------------------- ----------------------
Name: Glenn Etherington Name: Glenn Etherington
-------------------- ----------------------
Title: President Title: President
-------------------- ----------------------
<PAGE>
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL FOR THE
HOLDER OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATED IN
THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT (AS AMENDED, MODIFIED OR RESTATED AND INCLUDING ANY SUBORDINATION
AGREEMENT ENTERED INTO IN REPLACEMENT THEREOF IN FAVOR OF ANY SENIOR
CREDITORS, THE "SUBORDINATION AGREEMENT") DATED AS OF DECEMBER 10, 1998 AMONG
THE COMPANY, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT
(AND SUBSEQUENT SENIOR CREDITORS), AND THE HOLDER (AS DEFINED BELOW), AS
SUBORDINATED CREDITOR, TO THE SENIOR DEBT (AS DEFINED IN SUCH SUBORDINATION
AGREEMENT) AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
<PAGE>
PROFITSOURCE CORPORATION
SUBORDINATED PROMISSORY NOTE
$((NOTE_AMOUNT)) DECEMBER 10, 1998
Profitsource Corporation, a Delaware corporation (together with its
successors and assignees under this Note, the "COMPANY"), for value received,
hereby promises to pay to NOTE_HOLDER or permitted successors, endorsees or
assignees (the "HOLDER"), the sum of NOTE_DESCRIPTION $(NOTE_AMOUNT),
together with any amounts added to the principal amount hereof pursuant to
SECTION 2 (collectively the "PRINCIPAL AMOUNT") on the Due Date, as defined
in SECTION 5.1.
The following is a statement of the rights of the Holder of this
Note and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:
1. DEFINITIONS. As used in this Note, the following terms,
unless the context otherwise requires, have the following meanings:
"COMPANY" includes any entity that succeeds to or assumes the
obligations of ProfitSource Corporation under this Note.
<PAGE>
"NON-EQUITY NOTEHOLDERS" means persons or entities receiving cash
and/or notes but no equity interest in consideration of sale of their
business to the Company or its affiliates.
"SENIOR INDEBTEDNESS" means all "Senior Debt", as such term is
defined in the Subordination Agreement.
"SUBORDINATION AGREEMENT" means that certain Subordination
Agreement dated as of December 10, 1998 among the Company, Bank of America
National Trust and Savings Association, a national banking association, as
agent for lenders under the Credit Agreement (as defined therein), and the
Holder, as the same may be amended, modified or restated, and including any
subordination agreement entered into in replacement thereof in favor of any
senior creditors.
2. INTEREST. On each February 15, May 15, August 15 and November
15 until the Principal Amount has been paid in full (each, an "INTEREST
PAYMENT DATE"), the Company shall pay interest in arrears through the most
recently completed fiscal quarter prior to such Interest Payment Date (each,
an "INTEREST PAYMENT") at the rate of ten percent (10%) per annum (the
"INTEREST RATE") on the Principal Amount. Interest shall be paid in cash
except that, to the extent necessary to comply with subordination provisions
or other covenants of the Company in favor of holders of Senior Indebtedness,
the Company may pay interest by increasing the Principal Amount by the amount
of any Interest Payment. On each Interest Payment Date, the percentage of
any Interest Payment hereunder made by the Company in cash shall not be less
than the percentage of any interest payment made on that Interest Payment
Date in cash by the Company to any other holder (other than Non-Equity
Noteholders) of a subordinated promissory note issued by the Company in
connection with any acquisition by the Company of the stock or assets of any
entity or business operation. In order to make an Interest Payment in whole
or part by increasing the Principal Amount, the Company must deliver to
Holder a notice in the form of EXHIBIT A hereto, executed on behalf of the
Company, and such notice shall constitute documentation of the increase of
the Principal Amount by the amount referenced in such notice and the
Company's obligation to pay the amount referenced in such notice, together
with interest thereon, as if such amount were included in the original
principal amount hereof. The Company shall make all cash payments to Holder
at such place as Holder may designate from time to time in writing. If any
payment under this Note becomes due on a Saturday or Sunday or a banking
holiday in the State of California, the maturity thereof will be extended to
the next succeeding business day.
3. EVENTS OF DEFAULT. If any of the following events shall occur
(herein individually referred to as an "EVENT OF DEFAULT"), the Holder of the
Note may, so long as such conditions exist, declare the entire Principal
Amount and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company:
(i) Failure by the Company to make any payment hereunder when
due and payable if such default is not cured by the Company within thirty
(30) days after the Holder has given the Company written notice of such
default; or
<PAGE>
(ii) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by the Company to the
institution of bankruptcy or insolvency proceedings against the Company or
the filing by the Company of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any other
similar federal or state law, or the consent by the Company to the filing
of any such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of the Company, or of any
substantial part of the Company's property, or the making by the Company of
an assignment for the benefit of creditors, or the taking of corporate
action by the Company in furtherance of any such action; or
(iii) The commencement of an action against the Company (and
service of process in connection therewith on the Company) seeking
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, upon the
final adjudication of such action and entry of an order for relief against
the Company thereon; or
(iv) The acceleration (but not voluntary prepayment) of an
aggregate principal amount of Senior Indebtedness exceeding Ten Million
Dollars ($10,000,000).
4. SUBORDINATION. This Note and the indebtedness evidenced
hereby are subordinated in the manner and to the extent set forth in the
Subordination Agreement, and each holder of this Note, by such Holder's
acceptance hereof, shall be bound by the provisions of the Subordination
Agreement.
5. PREPAYMENT, REPAYMENT AND REDEMPTION.
5.1 DUE DATE. For purposes hereof, the "DUE DATE" is the earliest
to occur of (a) December 10, 2001; (b) five (5) days after the closing of an
underwritten initial public offering of the equity securities of the Company
having gross proceeds to the Company of at least $200 million; and (c) the
date declared due and payable by the Holder upon the occurrence of an Event
of Default.
5.2 PREPAYMENT. The Principal Amount and any interest accrued
thereon may be prepaid by the Company in full or in part at any time and from
time to time without premium or penalty, provided that all payments made
hereunder are first to be applied to any accrued and unpaid interest
outstanding on the date of such payment.
5.3 BUSINESS DAYS. If any payment under this Note becomes due on
a Saturday or Sunday or a banking holiday in the State of California, the
maturity thereof will be extended to the next succeeding business day.
6. MISCELLANEOUS.
6.1 ASSIGNMENT. The Holder may not transfer this Note or assign
its rights or obligations hereunder without the express written consent of
the Company. Subject to the
<PAGE>
foregoing, the rights and obligations of the Company and the Holder of this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
6.2 WAIVER. Diligence, presentment, protest, demand, dishonor,
nonpayment, and notice of every kind are waived by all makers, sureties,
guarantors, and endorsers of this Note to the fullest extent permitted by
applicable law.
6.3 REMEDIES. No delay or omission on the part of Holder in
exercising any right or remedy under this Note or applicable law will operate
as a waiver of such right or remedy or of any other right or remedy. No
single or partial exercise of any power under this Note or applicable law
will preclude other or further exercise thereof or the exercise of any other
power. The release of any party liable under this Note will not operate to
release any other party liable under this Note.
6.4 AMENDMENT. No provision of this Note may be amended, waived
or modified except by written agreement of the Company and the Holder, except
that the Company and any sureties or guarantors of this Note consent to all
extensions without notice for any period or periods of time and to the
acceptance of partial payments before or after maturity, all without
prejudice to Holder. Holder will have the right to deal in any way, at any
time, with the Company, or with any surety or guarantor hereof, without
notice to any other party, and to grant any such party any extensions of time
for payment of any of the indebtedness hereunder, or to grant any other
indulgences or forbearances whatsoever, without notice to any other party and
without in any way affecting the liability of any such party.
6.5 USURY. All agreements between the Company and Holder are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of maturity of the
unpaid principal balance hereof, or otherwise, will the amount paid or agreed
to be paid to Holder for the use, forbearance or detention of money exceed
the highest lawful rate permissible under applicable usury laws. If, from
any circumstances whatsoever, fulfillment of any provision of this Note or
any agreement or guaranty securing this Note, at the time performance of such
provision is due, involves transcending the limit of validity prescribed by
law which a court of competent jurisdiction may deem applicable hereto, then
the obligation to be fulfilled will be reduced to the limit of such validity.
Furthermore, if, from any circumstances whatsoever, Holder ever receives as
interest an amount which would exceed the highest lawful rate, the amount
which would be excessive interest will be applied to the reduction of the
unpaid principal balance due hereunder and not to the payment of interest.
This provision controls every other provision of all agreements between the
Company and Holder.
6.6 SEVERABILITY. If any term or provision of this Note is held
invalid, illegal, or unenforceable, the validity of all other terms and
provisions hereof will in no way be affected thereby.
6.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding
that body of law relating to conflict of laws. Any legal action or
proceeding arising out of or in connection with this Note
<PAGE>
must be brought exclusively in the state or federal courts sitting in Orange
County, California. The Company hereby irrevocably submits to the
jurisdiction of each such court, and agrees that any summons, pleading,
judgment, memorandum of law, or other paper relevant to any such action or
proceeding, including without limitation, service of process sufficient for
personal jurisdiction in any action against the Company, will be sufficiently
served if delivered to the Company by certified or registered mail (with
return receipt) at its principal executive offices. Nothing in the preceding
sentence will affect the right of any party to proceed in any jurisdiction
for the enforcement or execution of any judgment, decree or order made by a
court of competent jurisdiction.
6.8 DISPUTES. If any dispute regarding this Note is substantially
related to any matter subject to arbitration between the Company and Holder,
that dispute regarding this Note will be consolidated with and resolved in
such arbitration.
6.9 ATTORNEY'S FEES. The Company agrees to pay the costs
(including without limitation reasonable attorney's fees and costs) of
enforcement and collection of this Note in case of any breach or default by
the Company hereunder.
6.10 OTHER OBLIGATIONS. Performance under this Note is not
intended and is not to be construed as an accord and satisfaction or other
release or discharge of any obligations or indebtedness of the Company to
Holder not otherwise evidenced specifically.
6.11 HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
6.12 OTHER SUBORDINATED NOTES AND SUBORDINATION AGREEMENTS. The
Company represents to the Holder that the form of subordinated note issued by
the Company to, and the form of subordination agreement entered into by, each
holder (other than Non-Equity Noteholders) of a subordinated promissory note
issued by the Company in connection with any acquisition by the Company of
the stock or assets of any entity or business operation closing
contemporaneously with the transactions giving rise to this Note will be the
same as this Note and the Subordination Agreement, respectively.
6.13 WAIVER OF JURY TRIAL / WAIVER OF OBJECTION TO VENUE. THE
COMPANY WAIVES THE RIGHT TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, AND ANY RIGHT
THE COMPANY MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON-CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT HEREUNDER.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed and delivered as of the date first written above.
PROFITSOURCE CORPORATION
By: _______________________________
Name: Mark C. Coleman
Title: Vice-President
<PAGE>
EXHIBIT A
TO
PROMISSORY NOTE
Pursuant to Section 2 of that certain Promissory Note (the "NOTE")
made by ProfitSource Corporation (the "COMPANY") to NOTE_HOLDER dated
December 10, 1998 in the original principal amount of $NOTE_AMOUNT, the
Company has elected to meet its obligation to pay, on the "Payment Date"
referenced below, interest in the amount of the "Interest Amount" referenced
below by adding such amount to the Principal Amount of the Note.
Payment Date: ________________________________________
Interest Amount: _____________________________________
The Company acknowledges its obligation to pay the Interest Amount,
together with interest thereon from and after the Payment Date, as if the
Interest Amount were included in the original principal amount of the Note.
PROFITSOURCE CORPORATION
By: ______________________________
Name: ____________________________
Title: ____________________________
Date: ____________________________
<PAGE>
EXHIBIT B
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") is entered into as
of ________ ___, 1998, by and among ProfitSource Corporation, a Delaware
corporation (the "COMPANY"); __________________________, a [Delaware]
corporation ("[NAME]"), as Agent ("AGENT") for Lenders ("LENDERS") under the
Credit Agreement described below; and _______________________ (the
"SUBORDINATED CREDITOR").
R E C I T A L S
A. [ProfitSource Operating Company], a Delaware corporation and a
wholly-owned subsidiary of the Company ("BORROWER"), Agent and Lenders will
enter into a Credit Agreement of even date herewith (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"CREDIT AGREEMENT") pursuant to which Lenders will, subject to the terms set
forth in the Credit Agreement, make loans and other extensions of credit to
Borrower, which loans and extensions of credit will be guarantied by the
Company pursuant to the Guaranty of even date herewith by the Company in
favor of Agent and Lenders (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the "GUARANTY").
B. Pursuant to that certain [Stock] [Asset] Purchase Agreement
dated ___________________, 1998 (the "PURCHASE AGREEMENT"), the Company has
issued to the Subordinated Creditor a Subordinated Promissory Note of even
date herewith in the initial principal amount of $___________________ (the
"SUBORDINATED NOTE").
C. As an inducement to Lenders to enter into the Credit
Agreement, Lenders have required the execution and delivery of this Agreement
by Subordinated Creditor and the Company.
NOW, THEREFORE, in order to induce Lenders to enter into the Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. The following terms shall have the following
meanings in this Agreement:
"COLLECTION ACTION" means (a) to demand, sue for, take or
receive from or on behalf of the Company (including, without
limitation, by set-off, counterclaim or in any other manner) the
whole or part of the Subordinated Debt, (b) to initiate or
participate with others in any suit, action or proceeding against
the Company with respect to the Subordinated Debt, to (i) enforce
payment of or to collect the whole or any part of the
Subordinated Debt or (ii) commence enforcement of any of the
rights and remedies under the Subordinated Debt Documents or
applicable
<PAGE>
law with respect to the Subordinated Debt, (c) to accelerate any
Subordinated Debt, or (d) to refuse or fail to perform any covenant
or agreement under the Purchase Agreement due to the occurrence of
a Subordinated Default.
"PROCEEDING" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, assignment for the benefit of creditors, appointment
of a custodian, receiver, trustee or other officer with similar
powers or any other proceeding for the liquidation, dissolution
or other winding up of the Company.
"SENIOR CREDITORS" means Agent and Lenders under the Credit
Agreement, all successors, assigns and participants thereof, and
any bank, commercial finance company or other lender from time to
time holding Senior Debt.
"SENIOR DEBT" means all indebtedness, obligations and
liabilities (whether or not liquidated or determinable) now or
hereafter owing by the Company or any of its subsidiaries
(including without limitation the Borrower) to any Senior
Creditor under or in respect of the Senior Debt Documents.
Senior Debt includes all interest accruing on the principal of
Senior Debt after the commencement of a Proceeding, whether or
not such interest accrues in any such Proceeding or is allowed as
a claim in any such Proceeding.
"SENIOR DEBT DOCUMENTS" means the Credit Agreement, the
Guaranty and all other agreements, documents and instruments now
or hereafter evidencing, securing or otherwise pertaining to all
or any portion of the Senior Debt, including any amendment,
modification, restatement, extension or renewal of the Credit
Agreement and successive refinancings or refundings of the Senior
Debt evidenced thereby.
"SENIOR DEFAULT" means any "Default" or "Event of Default"
described in the Senior Debt Documents or any condition or event
that (with or without notice, lapse of time, or both) would
permit the holders of Senior Debt to accelerate the maturity of
any Senior Debt if that condition or event were not cured or
removed within any applicable grace or cure period set forth
therein.
"SUBORDINATED DEBT" means all indebtedness, obligations and
liabilities of the Company now or hereafter owing under or in
respect of the Subordinated Note (including all indemnification
and other obligations of the Company under the Purchase Agreement
relating to the Subordinated Note, other than obligations to
deliver the cash and stock
<PAGE>
portions of the purchase price payable under the Purchase Agreement
at the closing thereunder).
"SUBORDINATED DEFAULT" means any "Event of Default" described
in the Subordinated Note.
2. SUBORDINATION.
2.1. SUBORDINATION OF SUBORDINATED DEBT TO SENIOR DEBT. Each of
the Company and Subordinated Creditor agrees that the payment of the
Subordinated Debt shall be subordinate and subject, in right of payment, to
the prior payment in full of the Senior Debt, and that each holder of Senior
Debt, whether now outstanding or hereafter created, incurred, assumed or
guaranteed, shall be deemed to have acquired, maintained or advanced such
Senior Debt in reliance upon the provisions contained in this Agreement.
2.2. PROCEEDINGS. In the event of any Proceeding involving the
Company, (a) after any Proceeding all Senior Debt first shall be paid in full
before any payment of or with respect to Subordinated Debt shall be made; (b)
any payment or distribution after any Proceeding, whether in cash, property
or securities which, but for the terms hereof, otherwise would be payable or
deliverable after any Proceeding in respect of the Subordinated Debt, shall
be paid or delivered directly to Agent or its successors until all Senior
Debt is paid in full, and Subordinated Creditor irrevocably authorizes,
empowers and directs all receivers, trustees, debtors in possession,
liquidators, custodians, conservators and others having authority in the
premises to effect all such payments and distributions, and Subordinated
Creditor also irrevocably authorizes, empowers and directs Agent or its
successors to demand, sue for, collect and receive every such payment or
distribution; (c) Subordinated Creditor agrees to execute and deliver to
Agent or its successors all such further reasonable instruments confirming
the irrevocable authorizations referred to in the foregoing clause (b) as
Senior Creditors may reasonably request at any time; (d) Subordinated
Creditor agrees not to initiate or prosecute or encourage any other entity to
initiate or prosecute any claim, objection, action or proceeding (or vote any
claim in a Proceeding which would have the effect of) challenging or
objecting to the enforceability of the Senior Debt or any liens or security
interests securing the Senior Debt; and (e) Subordinated Creditor agrees to
execute, verify, deliver, and file appropriate proofs of claim in respect of
the Subordinated Debt in connection with any such Proceeding and irrevocably
authorizes, empowers and appoints Agent or its successors as Subordinated
Creditor's agent and attorney-in-fact to execute, verify, deliver and file
such proofs of claim if Subordinated Creditor fails to do so prior to 5 days
before the expiration of the time to file any such proof of claim. The
Senior Debt shall continue to be treated as Senior Debt and the provisions of
this Agreement shall continue to govern the relative rights and priorities of
Senior Creditors and Subordinated Creditor even if all or part of the Senior
Debt or the security interests securing the Senior Debt are subordinated, set
aside, avoided or disallowed in connection with any such Proceeding and this
Agreement shall be reinstated if at any time within ___ months of any payment
of any of the Senior Debt such payment is rescinded or must otherwise be
returned by any holder of Senior Debt or any representative of such holder.
<PAGE>
2.3. RESTRICTION ON PAYMENT. Notwithstanding any provision of the
Subordinated Note or the Purchase Agreement to the contrary, the Company may
not make, and Subordinated Creditor may not receive or retain any payment of
or with respect to the Subordinated Debt until the Senior Debt is paid in
full and the Lenders are not obligated to extend further credit thereunder
except that, subject to SECTION 2.2 above, the Company may make scheduled
cash payments of accrued interest on the Subordinated Note so long as no
Senior Default shall have occurred and be continuing or would result
therefrom, the Company may repay the outstanding principal balance of the
Subordinated Note, together with accrued and unpaid interest thereon, from
the proceeds of an initial public offering of the Company's equity securities.
2.4. RESTRICTION ON ACTION BY SUBORDINATED CREDITORS.
Until the Senior Debt is paid in full and the Lenders are not
obligated to extend further credit thereunder, (a) Subordinated Creditor
shall not take any Collection Action with respect to the Subordinated Debt if
receipt of payment pursued in such Collection Action would violate this
Agreement and (b) Subordinated Creditor shall not, without the prior written
consent of Agent or its successors, agree to any amendment, modification or
supplement to the Subordinated Note that would be inconsistent with this
Agreement.
2.5. INCORRECT PAYMENTS. If any payment or distribution on account
of the Subordinated Debt not permitted to be made by the Company or received
by Subordinated Creditor under this Agreement is received by Subordinated
Creditor before all Senior Debt is paid in full , such payment or
distribution shall be held in trust by Subordinated Creditor for the benefit
of the Senior Creditors and shall be promptly paid over to Agent or its
successors for application to the payment of the Senior Debt then remaining
unpaid.
2.6. SALE, TRANSFER, ETC. Subordinated Creditor shall not sell,
assign, pledge, dispose of or otherwise transfer all or any portion of the
Subordinated Debt unless the purchaser, assignee, pledgee, or transferee has
acknowledged and undertaken for the benefit of Agent and the Lenders to be
bound by this Agreement. Notwithstanding the failure of Subordinated
Creditor to comply with the preceding sentence, the subordination effected
hereby shall survive any sale, assignment, pledgee, disposition or other
transfer of all or any portion of the Subordinated Debt, and the terms of
this Agreement shall be binding upon the successors and assigns of
Subordinated Creditor, as provided in SECTION 10 below.
2.7. LEGENDS. The Subordinated Note shall contain the following
legend:
"This Note and the indebtedness evidenced hereby are subordinated
in the manner and to the extent set forth in that certain Subordination
Agreement (the "Subordination Agreement") dated as of October ___, 1998 among
ProfitSource Corporation, ___________________, as Agent, and
________________, as Subordinated Creditor, to the Senior Debt (as defined in
such Subordination Agreement) and each holder of this Note, by its acceptance
hereof, shall be bound by the provisions of the Subordination Agreement."
<PAGE>
3. MODIFICATIONS TO SENIOR DEBT. Senior Creditors may at any time
and from time to time without the consent of or notice to Subordinated
Creditor, without incurring liability to Subordinated Creditor and without
impairing or releasing the obligations of Subordinated Creditor under this
Agreement, change the manner or place of payment or extend the time of
payment of or renew or alter any Senior Debt, or amend in any manner any
Senior Debt Documents, or increase the amount of the Senior Debt, provided
that immediately following any such increase, the ratio of the Company's
EBITDA to Total Interest Expense is at least 2:1. For purposes hereof,
"EBITDA" means the Company's consolidated earnings before interest, taxes,
depreciation and amortization for the four most recently completed fiscal
quarters, as adjusted to give effect to the use by the Company of the
proceeds of such increase in Senior Debt, including without limitation to
acquire any other entity, and, to the extent that such calculation includes
earnings of entities acquired by the Company since the beginning of such
four-quarter measurement period, including entities acquired with the
proceeds of such increase in Senior Debt, as further adjusted to give effect
to pro-forma adjustments made to such acquired company's historical earnings
in connection with the valuation, acquisition, and integration of such
company by the Company. For purposes hereof, "TOTAL INTEREST EXPENSE" means
the Company's anticipated consolidated pro forma annual interest expense at
the time of and after giving effect to such increase in Senior Debt.
4. CONTINUED EFFECTIVENESS OF THIS AGREEMENT. The terms of this
Agreement and the subordination effected hereby shall not be affected,
modified or impaired in any manner by: (a) any amendment or modification of
or supplement to the Senior Debt Documents or the Subordinated Note; (b) the
validity or enforceability of any of such documents; (c) the enforcement (or
lack of enforcement) or release of security interests securing payment of the
Senior Debt; or (d) any exercise or non-exercise of any right, power or
remedy under or in respect of the Senior Debt or the Subordinated Debt or any
of the instruments or documents referred to in clause (a) above.
Subordinated Creditor acknowledges that the provisions of this Agreement are
intended to be enforceable at all times, whether before, in connection with
or after the commencement of a Proceeding.
5. REPRESENTATIONS AND WARRANTIES. Subordinated Creditor hereby
represents and warrants to Senior Creditors that Subordinated Creditor is the
current and sole owner and holder of the Subordinated Note.
6. CUMULATIVE RIGHTS, NO WAIVERS, SPECIFIC PERFORMANCE. Any
failure or delay on the part of any party in exercising any right, remedy or
power granted hereunder, or abandonment or discontinuance of steps to enforce
the same, shall not operate as a waiver thereof or affect the rights of the
affected party thereafter to exercise the same. The parties acknowledge and
agree that the other parties hereto may have no adequate remedy at law for a
breach of this Agreement and each agrees that, in addition to all other
remedies hereunder, the parties hereto shall have the right to specific
performance.
7. MODIFICATION. Any modification or waiver of any provision of
this Agreement, or any consent to any departure by any party therefrom, shall
not be effective in any event unless the same is in writing and signed by
Agent or its successors and by Subordinated
<PAGE>
Creditor or its representative, and then such modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
given.
8. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied or sent by overnight courier service or United
States mail certified or registered and shall be deemed to have been given
(a) if delivered in person, when delivered; (b) if delivered by telecopy, on
the date of transmission if transmitted on a business day before 4:00 p.m.
(Chicago time) or, if not, on the next succeeding business day; (c) if
delivered by overnight courier, one business day after delivery to such
courier properly addressed; or (d) if by United States mail, four business
days after deposit in the United States mail, postage, prepaid and properly
addressed.
Notices shall be addressed as follows:
(a) If to Subordinated Creditor to:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
(b) If to the Company to:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
(c) If to Agent:
________________________
________________________
________________________
________________________
Attention: _______________
Telecopy: (___)_____-_____
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this SECTION 8. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
<PAGE>
9. SEVERABILITY. In the event that any provision of this
Agreement is determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby, and the
affected provision shall be modified to the minimum extent required by law so
as most fully to achieve the intention of this Agreement.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of Agent and each Senior Creditor and
shall be binding upon the successors and assigns of Subordinated Creditor and
the Company.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall be one and the same instrument.
12. DEFINES RIGHTS OF CREDITORS. The provisions of this Agreement
are solely for the purpose of defining the relative rights of Subordinated
Creditor and Senior Creditors and shall not be deemed to create any rights or
priorities in favor of any other person or entity, including, without
limitation, the Company.
13. CONFLICT. In the event of any conflict between any term,
covenant or condition of this Agreement and any term, covenant or condition
of any of the Subordinated Note, the provisions of this Agreement shall
control and govern.
14. SUBROGATION TO RIGHTS OF SENIOR CREDITORS. Subject to the
payment in full of all Senior Debt and termination of the commitments of the
Lenders to extend further credit under the Senior Debt Documents,
Subordinated Creditor shall be subrogated to the rights of Senior Creditors
to receive payments and distributions of cash, property and securities
applicable to the Senior Debt to the extent that distributions otherwise
payable to Subordinated Creditor have been applied to the Senior Debt, until
all amounts payable under the Subordinated Debt shall have been paid in full.
For purposes of such subrogation, no payments or distributions to Senior
Creditors of any cash, property or securities to which Subordinated Creditor
would be entitled except for the provisions of this Agreement, and no
payments over by Subordinated Creditor to Senior Creditors pursuant to the
provisions of this Agreement shall, as among the Company, its creditors other
than Senior Creditors and Subordinated Creditor, be deemed to be a payments
or distribution by the Company to or on account of the Senior Debt.
15. HEADINGS. The section headings used in this Agreement are for
convenience only and shall not affect the interpretation of any of the
provisions hereof.
16. TERMINATION. This Agreement shall terminate upon the
indefeasible payment in full of the Senior Debt and termination of the
commitments of the Lenders to extend further credit under the Senior Debt
Documents.
17. APPLICABLE LAW. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the internal laws (as opposed
to conflict of laws provisions) of the State of New York. Subordinated
Creditor and the Company hereby consent to the
<PAGE>
jurisdiction of any state or federal court located in New York, New York and
irrevocably agree that, subject to Agent's election, all actions or
proceedings arising out of or relating to this Agreement shall be litigated
in such courts. Nothing herein shall limit the right of any Senior Creditor
to bring proceedings against Subordinated Creditor or the Company in the
courts of any other jurisdiction.
18. WAIVER OF JURY TRIAL. EACH OF SUBORDINATED CREDITOR, THE
COMPANY, AGENT AND EACH SENIOR CREDITOR HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
19. WAIVER OF CONSOLIDATION. Subordinated Creditor acknowledges
and agrees that it will not at any time insist upon, plead or seek advantage
of any substantive consolidation, piercing the corporate veil or any other
judgment that causes an effective combination of the assets and liabilities
of the Company and any of its subsidiaries (including without limitation,
Borrower) in any case or proceeding under Title II of the United States Code
or similar proceeding.
IN WITNESS WHEREOF, the Company, Agent and Subordinated Creditor
have caused this Agreement to be executed as of the date first above written.
PROFITSOURCE CORPORATION
By: _________________________________
Its: _________________________________
AGENT:
___________________________
By: _________________________________
Its: _________________________________
SUBORDINATED CREDITOR:
___________________________
By: __________________________________
Its: __________________________________
