U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) September 17, 1998
FTI CONSULTING, INC.
(Exact name of registrant as specified in its charter)
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Maryland 0000887936 52-1261113
(State of other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
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2021 Research Drive, Annapolis, Maryland 21401
(Address of principal executive offices, including Zip Code)
(410) 224-8770
(Registrant's telephone number, including area code)
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FTI CONSULTING, INC.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 17,1998, FTI Consulting, Inc. (the "Company"), Kahn
Consulting, Inc., ("KCI"), KCI Management Corp. ("KCIM") and Stewart J. Kahn
("Kahn") and Barry M. Monheit ("Monheit", and together with Kahn, the "Principal
Stockholders") and those shareholders of KCI, other than the Principal
Stockholders (collectively, the "Stockholders") entered into a Stock Purchase
Agreement whereby all of the issued and outstanding shares of the capital stock
of KCI and KCIM was purchased by the Company for the purchase price of Twenty
Million Dollars ($20,000,000). Ten Million Dollars ($10,000,000) was paid to the
Stockholders at closing. The balance will be paid in two equal installments on
September 15, 1999 and 2000. The purchase price was based upon the Company's
evaluation of the financial condition, business operations and prospects of KCI
and was negotiated in an arms length transaction among unrelated and
unaffiliated (as defined under Rule 144 promulgated by the Securities and
Exchange Commission) parties. KCI and KCIM are in the business of providing
litigation consulting services, including expert testimony in financial
proceedings, forensic accounting, fraud investigation and fact-finding services,
as well as government contract consulting, in addition to providing strategic
advisory, turnaround, bankruptcy and trustee services.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. It is impracticable to provide the required
financial statements at this time. The required financial statements will be
filed as soon as practicable, but not later than 60 days after the filing date
of this Form 8-K report.
(b) Pro Forma Financial Information. It is impracticable to provide the
required proforma financial information at this time. The required proforma
financial information will be filed as soon as practicable, but not later than
60 days after the filing date of this Form 8-K report.
(c) Exhibits
2.1 Stock Purchase Agreement dated September 17, 1998 by and
among the Company, KCI, and the Stockholders.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
FTI CONSULTING, INC.
(Registrant)
By: /s/ Gary Sindler
------------------------------------------
Gary Sindler
Executive Vice President and Chief
Financial Officer, Secretary and Treasurer
DATED: October 2, 1998
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
FTI CONSULTING, INC.,
KAHN CONSULTING, INC.,
KCI MANAGEMENT CORP.
AND
THE STOCKHOLDERS NAMED THEREIN
DATED AS OF SEPTEMBER 17, 1998
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TABLE OF CONTENTS
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1. STOCK PURCHASE AND RELATED MATTERS.......................................................................1
1.1 TRANSFER OF STOCK......................................................................1
1.2 PURCHASE PRICE.........................................................................1
1.3 ACCOUNTING TERMS.......................................................................2
1.4 CLOSING DATE...........................................................................2
2. CLOSING..................................................................................................2
2.1 LOCATION AND DATE......................................................................2
2.2 DELIVERIES.............................................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
STOCKHOLDERS AND THE COMPANIES...........................................................................3
3.1 DUE ORGANIZATION.......................................................................3
3.2 AUTHORIZATION; VALIDITY................................................................3
3.3 NO CONFLICTS...........................................................................4
3.4 CAPITAL STOCK OF THE COMPANIES.........................................................4
3.5 TRANSACTIONS IN CAPITAL STOCK..........................................................5
3.6 ABSENCE OF CLAIMS AGAINST COMPANIES....................................................5
3.7 SUBSIDIARIES AND STOCK.................................................................5
3.8 COMPLETE COPIES OF MATERIALS...........................................................5
3.9 COMPANY FINANCIAL CONDITIONS...........................................................5
3.10 FINANCIAL STATEMENTS...................................................................5
3.11 LIABILITIES AND OBLIGATIONS............................................................6
3.12 BOOKS AND RECORDS......................................................................6
3.13 BANK ACCOUNTS; POWERS OF ATTORNEY......................................................6
3.14 ACCOUNTS AND NOTES RECEIVABLE..........................................................7
3.15 PERMITS................................................................................7
3.16 LEASED REAL PROPERTY...................................................................7
3.17 PERSONAL PROPERTY......................................................................9
3.18 INTELLECTUAL PROPERTY..................................................................9
3.19 MATERIAL CONTRACTS AND COMMITMENTS....................................................10
3.20 GOVERNMENT CONTRACTS..................................................................11
3.21 INTENTIONALLY OMITTED.................................................................11
3.22 INSURANCE.............................................................................11
3.23 ENVIRONMENTAL MATTERS.................................................................12
3.24 LABOR AND EMPLOYMENT MATTERS..........................................................13
3.25 EMPLOYEE BENEFIT PLANS................................................................13
3.26 TAXES.................................................................................17
3.27 CONFORMITY WITH LAW; LITIGATION.......................................................20
3.28 RELATIONS WITH GOVERNMENTS............................................................20
3.29 ABSENCE OF CHANGES....................................................................20
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4. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................22
4.1 DUE ORGANIZATION......................................................................22
4.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS................................................22
4.3 NO CONFLICTS..........................................................................22
4.4 FINANCING.............................................................................23
4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS...................................................23
4.6 CAPITAL STOCK OF BUYER................................................................23
4.7 TRANSACTIONS IN CAPITAL STOCK.........................................................23
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............................................................24
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS............................24
5.2 NO LITIGATION.........................................................................24
5.3 OPINION OF COUNSEL....................................................................24
5.4 CONSENTS AND APPROVALS................................................................24
5.5 CHARTER DOCUMENTS.....................................................................24
5.6 EMPLOYMENT AGREEMENTS.................................................................24
5.7 CLOSING DELIVERIES....................................................................25
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
AND THE COMPANIES.......................................................................................25
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS............................25
6.2 NO LITIGATION.........................................................................25
6.3 CONSENTS AND APPROVALS................................................................25
6.4 OPINION OF COUNSEL....................................................................25
6.5 EMPLOYMENT AGREEMENTS.................................................................25
6.6 CLOSING DELIVERIES....................................................................26
7. CERTAIN COVENANTS.......................................................................................26
7.1 NOTIFICATION OF CERTAIN MATTERS.......................................................26
7.2 UNPAID TAXES..........................................................................26
7.3 CERTAIN TAX MATTERS...................................................................26
7.5 FINANCING.............................................................................28
8. INDEMNIFICATION.........................................................................................28
8.1 GENERAL INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS.................................28
8.2 LIMITATION AND EXPIRATION.............................................................29
8.3 GENERAL INDEMNIFICATION BY BUYER......................................................30
8.4 LIMITATION AND EXPIRATION.............................................................31
8.5 INDEMNIFICATION PROCEDURES............................................................31
8.6 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS..................................33
9. GENERAL.................................................................................................34
9.1 SUCCESSORS AND ASSIGNS................................................................34
9.2 ENTIRE AGREEMENT......................................................................34
9.3 COUNTERPARTS..........................................................................34
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9.4 BROKERS AND AGENTS....................................................................35
9.5 EXPENSES..............................................................................35
9.6 SPECIFIC PERFORMANCE; REMEDIES........................................................35
9.7 NOTICES...............................................................................35
9.8 GOVERNING LAW.........................................................................36
9.9 SEVERABILITY..........................................................................36
9.10 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS.............................................36
9.11 AMENDMENT; WAIVER.....................................................................36
9.12 NONCOMPETITION AND CONFIDENTIALITY COVENANTS. .......................................36
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SCHEDULE:
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3.1(a) Jurisdictions Authorized or Qualified to do Business in
3.1(b) List of Directors and Officers
3.3 No Conflicts
3.4 List of Stockholders
3.7 Subsidiaries and Stock
3.10 Financial Statements
3.11 Liabilities and Obligations
3.13 Bank Accounts; Powers of Attorney
3.15 Permits
3.16(b) Real Property
3.16(c) Real Property Supplement
3.17(a) Personal Property
3.19(a) Significant Customers and Significant Suppliers
3.19(b) Material Contracts
3.19(c) Canceled Contracts
3.19(d) Third Party Consents
3.20 Government Contracts
3.22 Insurance
3.23(a) Hazardous Materials
3.25(b) Company Plans and Company Benefit Arrangements
3.25(d) Worker's Compensation Claims
3.25(e) Key Employees
3.25(f) Bonus Payments
3.27(b) Conformity with Law; Litigation
3.29 Absence of Changes
4.7 Transactions in Capital Stock
7.3(b) Allocation of Purchase Price
EXHIBITS
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Exhibit A List of Stockholders Party to the Agreement
Exhibit B Form of Promissory Note
Exhibit 5.6A Form of Kahn Employment Agreement
Exhibit 5.6B Form of Monheit Employment Agreement
Exhibit 5.6C Short Form Employment Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 17th day of September, 1998, by and between FTI Consulting, Inc., a
Maryland corporation ("Buyer"), Kahn Consulting, Inc., a New York corporation
("KCI"), KCI Management Corp., a New York corporation ("KCIM," and together with
KCI, the "Companies"), Stewart J. Kahn ("Kahn"), Barry M. Monheit ("Monheit,"
and together with Kahn, the "Principal Stockholders") and, for the limited
purposes set forth in the Recitals, Sections 1.1, 1.2, 2.2, 5.6 and 7.3 and
Article 9, those stockholders of KCI, other than the Principal Stockholders, set
forth on Exhibit A hereto (together with the Principal Stockholders, the
"Stockholders").
RECITALS
A. The Stockholders are the owners of all of the issued and outstanding
shares (the "Shares") of the capital stock of the Companies.
B. The Stockholders desire to sell to Buyer and Buyer desires to purchase
from the Stockholders the Shares pursuant to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. STOCK PURCHASE AND RELATED MATTERS
1.1 TRANSFER OF STOCK. Upon the terms and subject to the conditions hereof,
at the Closing (as defined in Section 2.1), Buyer will purchase from the
Stockholders, and the Stockholders will sell, transfer and deliver to Buyer, all
of the Shares, free and clear of all Liens (as defined below), in consideration
of payment of the Purchase Price specified in Section 1.2. For the purposes of
this Agreement, "Lien" means any security interest, pledge, encumbrance, lien
(statutory or otherwise), charge, security agreement, option, right of first
refusal, preemptive right, restriction on transfer or other preferential
arrangement of any kind or nature whatsoever.
1.2 PURCHASE PRICE.
(a) Closing Payment. For purposes of this Agreement, the "Purchase
Price" shall be $20,000,000 and shall be paid to the Stockholders as follows:
(i) Buyer shall pay $10,000,000 in cash (the "Closing Payment")
to the Stockholders via wire transfer of immediately available funds to an
account or accounts designated by the Stockholders at Closing and in the amounts
set forth on Exhibit A; and
(ii) Buyer shall deliver promissory notes (each a "Note" and,
collectively, the "Notes") in the form attached hereto as Exhibit B evidencing
Buyer's obligation to pay the balance of the Purchase Price to the Stockholders
in the amounts set forth on Exhibit A and in accordance with the following
schedule: (a) $5,000,000 on September 15, 1999 (the "First
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Payment") and (b) $5,000,000 on September 15, 2000 (the "Second Payment"). The
Notes shall provide for payment of simple interest on the unpaid principal at
the rate of 7.5% per annum from and after the Closing Date and shall provide for
payments to the Stockholders of all accrued but unpaid interest in quarterly
installments commencing on December 15, 1998 and continuing on the fifteenth day
of each succeeding March, June, September and December thereafter until the
Notes are paid in full (the "Interest Payments"); provided, however, that upon
an Event of Default (as defined in each Note), the Stockholders shall be
entitled to, and Buyer shall pay, compound interest on the unpaid principal
amount at the rate of 7.5% per annum from and after such Event of Default.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated to each of the Companies in accordance with the allocations set forth
on Schedule 7.3(b) attached hereto.
1.3 ACCOUNTING TERMS. Except as otherwise expressly provided herein or in
the schedules to this Agreement (the "Schedules"), all accounting terms used in
this Agreement shall be interpreted, and all financial statements, Schedules,
certificates and reports as to financial matters required to be delivered
hereunder shall be prepared, in accordance with generally accepted accounting
principles ("GAAP"), consistently applied.
1.4 CLOSING DATE. The representations and warranties of the parties set
forth in Articles 3 and 4 hereof shall be effective as of the Closing Date
unless they specifically refer to an earlier date.
2. CLOSING
2.1 LOCATION AND DATE. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at 10:00 a.m. at the offices of
Wilmer, Cutler & Pickering, 520 Madison Avenue, New York, New York, on or before
September 17, 1998, provided, that, all conditions to Closing shall have been
satisfied or waived, or at such other time, place and date as Buyer, the
Companies and the Stockholders may mutually agree, which date shall be referred
to as the "Closing Date."
2.2 DELIVERIES. (a) The Stockholders shall deliver to Buyer the following
at the Closing: (i) stock certificates representing the Shares, accompanied by
stock powers duly executed in blank or duly executed instruments of transfer and
any other documents that are necessary to transfer to Buyer good and marketable
title to the Shares free and clear of all Liens; (ii) resignations of such of
the directors of the Companies as are listed on Schedule 2.2 hereto; (iii) a
properly executed statement in a form reasonably acceptable to Buyer for
purposes of satisfying Buyer's obligations under Treas. Reg. Section
1.1445-2(b)(2); and (iv) all other documents, certificates, instruments or
writings required to be delivered by the Stockholders or the Companies at or
prior to the Closing pursuant to Article 5 of this Agreement.
(b) Buyer shall deliver to the Stockholders at the Closing: (i) in
immediately available funds the Closing Payment; (ii) the Notes; and (iii) all
other documents, certificates, instruments or writings required to be delivered
by Buyer at or prior to the Closing pursuant to Article 6 of this Agreement.
Upon condition that the Closing shall have occurred, Buyer shall
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deliver to the Stockholders the First Payment, Second Payment, and all Interest
Payments on the dates provided in Section 1.2 and the Notes in immediately
available funds according to such instructions as the Stockholders shall deliver
to Buyer in writing no later than five (5) business days prior to the date of
each such payment; provided, however, that Buyer's right to such payments shall
not be affected by any failure to comply with such notification requirements.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS AND THE
COMPANIES
To induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Principal Stockholders and the
Companies, jointly and severally, represents and warrants to Buyer, except as
required to be disclosed on a specific Schedule provided in connection herewith,
as follows (for purposes of this Agreement, the phrases "knowledge of the
Companies" or the "Companies' knowledge," or words of similar import, mean the
actual knowledge of the Principal Stockholders, individually and in their
respective capacities as an officer of each Company):
3.1 DUE ORGANIZATION. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and is duly authorized and qualified to do
business and to own, operate and lease its properties and to carry on its
business in the places and in the manner as now conducted under all applicable
material laws, regulations, ordinances and orders of public authorities.
Schedule 3.1(a) hereto contains a list of all jurisdictions in which each of the
Companies are authorized or qualified to do business. Except as set forth on
Schedule 3.1(a), each of the Companies is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business requires
it to be so qualified or otherwise authorized to transact business, other than
such jurisdictions where the failure to be so qualified or otherwise authorized
to transact business would not have a Material Adverse Effect on the Companies.
For purposes of this Agreement, "Material Adverse Effect" means any effect that
is materially adverse to the financial condition, assets, liabilities, prospects
or results of operations or property of a person, taken as a whole; provided,
however, that the following shall not be taken into account in determining
whether there has been a Material Adverse Effect: (i) any adverse effect
directly arising from or directly relating to general business or economic
conditions; (ii) any adverse effect directly arising from or directly relating
to conditions affecting the national or regional litigation, fraud
investigation, government contract, strategic advisory or turnaround consulting
business; and (iii) any adverse effect directly arising from or directly
relating to the announcement or pendency of any of the transactions contemplated
hereby or any of the other transaction documents executed in connection
herewith. The Companies have made available to Buyer true, complete and correct
copies of the Certificate of Incorporation and Bylaws of such Company
(collectively, the "Charter Documents"). The Companies are not in violation of
any Charter Documents. The minute books of the Companies have been made
available to Buyer and are complete and accurate in all material respects.
Schedule 3.1(b) contains a complete and accurate list of the directors and
officers of each of the Companies.
3.2 AUTHORIZATION; VALIDITY. Each of the Companies has the full legal
right, corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated
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hereby. The Stockholders have the full legal right and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by each of the Companies and the
performance by each of the Companies of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of each of the
Companies and this Agreement has been duly and validly authorized by all
necessary corporate action on behalf of each of the Companies. This Agreement is
a legal, valid and binding obligation of each of the Stockholders and each of
the Companies, enforceable against each of them in accordance with its terms
subject to applicable bankruptcy, reorganization, insolvency, moratorium, and
other rights affecting creditors' rights generally from time to time in effect
and as to enforceability, general equitable principles.
3.3 NO CONFLICTS. Except as set forth on Schedule 3.3, the execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated hereby, and the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under, any
document, agreement or other instrument to which either of the Companies or the
Stockholders is a party or by which either of the Companies or the Stockholders
is bound, or result in the creation or imposition of any lien, charge or
encumbrance on any of either of the Companies' properties pursuant to (i) any
law or regulation to which the Companies or the Stockholders or any of their
respective property is subject, or (ii) any judgment, order or decree to which
the Companies or the Stockholders are bound or any of their respective property
is subject, except where such conflicts or defaults would not, individually or
in the aggregate, have a Material Adverse Effect;
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the Companies, except
where such terminations or impairments would not, individually or in the
aggregate, have a Material Adverse Effect; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Companies or the Stockholders are subject or by which the
Companies or the Stockholders are bound, except where such violations would not,
individually or in the aggregate, have a Material Adverse Effect.
3.4 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of KCI
consists of 2,000,000 shares of common stock, $.01 par value, of which 100
shares are issued and outstanding. The authorized capital stock of KCIM consists
of 2,000,000 shares of common stock, $.01 par value, of which 100 shares are
issued and outstanding. All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholders free and clear of all Liens. All of the Shares
were offered, issued, sold and delivered by the Companies in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of the Shares was issued in violation of any preemptive rights.
There
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are no voting agreements or voting trusts with respect to any of the Shares.
Schedule 3.4 sets forth a list of all of the stockholders of the Companies and
the number of shares of the capital stock of the Companies they own.
3.5 TRANSACTIONS IN CAPITAL STOCK. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate either of the Companies to
issue or sell, or by which any shares or capital stock may otherwise become
outstanding. The Companies have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. As a result of the transactions contemplated by this Agreement, Buyer
will be the record and beneficial owner of all outstanding capital stock of each
of the Companies and rights to acquire capital stock of each of the Companies.
3.6 ABSENCE OF CLAIMS AGAINST COMPANIES. None of the Stockholders has any
claims of any kind against the Companies, nor have the Stockholders assigned any
such claims to any third party.
3.7 SUBSIDIARIES AND STOCK. The Companies have no subsidiaries. Except as
set forth on Schedule 3.7, the Companies do not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, nor, except as set forth on Schedule 3.7, are
either of the Companies, directly or indirectly, a participant in any joint
venture, partnership or other noncorporate entity.
3.8 COMPLETE COPIES OF MATERIALS. The Companies have made available to
Buyer true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is disclosed to in the Schedules or that
has been requested in writing by Buyer.
3.9 COMPANY FINANCIAL CONDITIONS. The Companies' earnings before taxes for
the eight-month period ended August 31, 1998 were not less than $450,000.
3.10 FINANCIAL STATEMENTS. Schedule 3.10 includes (a) true, complete and
correct copies of each of the Companies' audited balance sheets as of December
31, 1996 and 1997 (the end of its most recent completed fiscal year), and income
statements for the years ended December 31, 1996 and 1997 (collectively, the
"Audited Financials") and (b) true, complete and correct copies of each of the
Companies' unaudited balance sheet (the "Interim Balance Sheets") as of August
31, 1998 (the "Balance Sheet Date") and unaudited income statement, for the
eight-month period then ended (collectively, the "Interim Financials," and
together with the Audited Financials, the "Company Financial Statements"). The
Audited Financials have been prepared from the books and records of the
Companies, and except as set forth in the notes thereto or in Schedule 3.10, in
accordance with GAAP consistently applied and present fairly the financial
condition and results of operations of the Company. Since the dates of the
Audited Financials, there have been no material changes in the Companies'
accounting policies.
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3.11 LIABILITIES AND OBLIGATIONS.
(a) Except as set forth on Schedule 3.11, the Companies are not liable
for nor subject to any liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheets and
not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically required to be disclosed on any Schedule to this
Agreement or not required to be disclosed thereon because of the term or amount
involved or otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material.
(b) For purposes of this Section 3.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense or
obligation, either accrued, absolute, contingent, mature or unmature, and
whether fixed or unfixed, known or unknown, choate or inchoate, liquidated or
unliquidated, secured or unsecured.
3.12 BOOKS AND RECORDS. The Companies have made and kept books and records
and accounts, which fairly reflect its activities. The Companies have not
engaged in any transaction, maintained any bank account, or used any corporate
funds except for transactions, bank accounts, and funds which have been and are
reflected in its normally maintained books and records.
3.13 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.13 sets forth a complete
and accurate list as of the date of this Agreement of:
(a) the name of each financial institution in which each of the
Companies has any account or safe deposit box;
(b) the names in which such accounts or boxes are held;
(c) a brief description of the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity, if
any, holding a general or special power of attorney from either of the Companies
and a brief description of the terms of such power of attorney.
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3.14 ACCOUNTS AND NOTES RECEIVABLE. Each of the Companies has delivered to
Buyer a complete and accurate list, as of September 6, 1998, of the accounts and
notes receivable of such Company (including without limitation receivables from
and advances to employees and the Stockholders), which includes an aging of all
accounts and notes receivable showing amounts due in 30-day aging categories
(collectively, the "Accounts Receivable"). All Accounts Receivable represent
valid obligations arising from services actually performed in the ordinary
course of business. The Accounts Receivable (i) are reflected in the Interim
Balance Sheets and (ii) have been accounted for in the Audited Financials in
accordance with GAAP consistently applied. To the Companies' knowledge, there is
no contest, claim, or right of set-off under any contract with any obligor of an
Account Receivable relating to the amount or validity of such Account
Receivable.
3.15 PERMITS. Except as set forth on Schedule 3.15, each of the Companies
owns or holds all material licenses, franchises, permits and other governmental
authorizations, including without limitation permits, titles, licenses and
franchises necessary for the continued operation of its business as it is
currently being conducted (the "Permits"). The Permits are valid, and the
Companies have not received any written notice that any governmental authority
intends to modify, cancel, terminate or fail to renew any Permit. No present or
former stockholder, officer, manager, member or employee of either of the
Companies or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Companies have conducted and are conducting
their businesses in compliance with the material requirements, standards,
criteria and conditions set forth in the Permits and other applicable material
orders, approvals, variances, rules and regulations and are not in violation of
any of the foregoing. The transactions contemplated by this Agreement will not
result in a default under, or a breach or violation of, or adversely affect the
rights and benefits afforded to either of the Companies, by any Permit, except
where such violations would not, individually or in the aggregate, have a
Material Adverse Effect.
3.16 LEASED REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
leased, used or enjoyed by each of the Companies, together with any additions
thereto or replacements thereof. Neither of the Companies owns any Real
Property.
(b) Schedule 3.16(b) contains a complete and accurate description of
all real properties leased by the Company (including street address, owner,
landlord and the applicable Company's use thereof) (the "Leased Real Property")
which are necessary to conduct the business and operations of each of the
Companies.
(c) Except as set forth in Schedule 3.16(c):
(i) The Companies have a valid leasehold interest in all Leased
Real Property.
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(ii) To the knowledge of the Companies, the Leased Real
Properties currently have all water, sewer, gas, electric, telephone and other
utilities necessary or beneficial to the current operation of the Leased
Property, and all such utilities are adequate and sufficient for the current
operation of such properties, subject to normal interruptions in the ordinary
course.
(iii) To the Companies' knowledge, the Leased Real Property and
all present uses and operations of the Leased Real Property comply with all
applicable statutes, rules, regulations, ordinances, orders, writs, injunctions,
judgments, decrees, awards or restrictions of any government entity having
jurisdiction over any portion of the Leased Real Property (including, without
limitation, applicable statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health, employment and employment
practices and access by the handicapped) (collectively, "Laws"), covenants,
conditions, restrictions, easements, disposition agreements and similar matters
affecting the Leased Real Property.
(iv) The Companies have obtained all material approvals of
governmental authorities (including certificates of use and occupancy, licenses
and permits) required in connection with the use, occupation and operation of
the Leased Real Property.
(v) There are no pending or, to the knowledge of the Companies,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Leased Real Property or any other matters which do or may
adversely effect the current use or occupancy thereof, nor has either of the
Companies received notice of any pending or threatened special assessment
proceedings affecting any portion of the Leased Real Property.
(vi) There are no parties other than the Companies in possession
of any of the Leased Real Property or any portion thereof, and there are no
leases, subleases, licenses, concessions or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any portion of
the Leased Real Property or any portion thereof.
(vii) Intentionally omitted.
(viii) All oral or written leases, subleases, licenses,
concession agreements or other use or occupancy agreements pursuant to which the
Companies lease from any other party any Real Property, including all
amendments, renewals, extensions, modifications or supplements to any of the
foregoing or substitutions for any of the foregoing (collectively, the "Leases")
are valid and in full force and effect. The Companies have provided Buyer with
true and complete copies of all of the Leases, and all material correspondence
related thereto, including all correspondence pursuant to which any party
provided notice of the exercise of any operation granted to such party under
such Lease. The Leases and the Companies' interests thereunder are free of all
Liens including, to the Companies' knowledge, (x) liens, security interests or
encumbrances that have been placed by any landlord on any Leased Real Property
and subordination or similar agreements relating thereto and (y) any and all
orders, decrees, awards or judgments related to eminent domain or condemnation
proceedings, but excluding (a) easements, covenants, rights-of-way and other
restrictions of record, (b) current general real estate taxes and installments
for special assessments
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which are not yet due and payable and which will not be obligations of the
Companies, and (c) zoning, building, fire, health, environmental and pollution
control laws, ordinances, rules and safety regulations and other similar
restrictions.
(ix) Except as set forth on Schedule 3.16, none of the Leases
requires the consent or approval of any party thereto in connection with the
consummation of the transactions contemplated hereby.
3.17 PERSONAL PROPERTY.
(a) Schedule 3.17(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by each of the Companies with a current book value in
excess of $10,000 both (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date, including in each case true, complete and correct copies
of leases for material equipment and an indication as to which assets are
currently owned by the Stockholders or either of the Companies.
(b) Except for restrictions or limitations contained in financing
statements with respect to the personal property, the Companies currently own or
have a valid lease or license all personal property which is necessary to
conduct their businesses and operations as they are currently being conducted.
(c) All of the material machinery and equipment of the Companies,
including that listed on Schedule 3.17(a), is in good reasonably working order
and condition, ordinary wear and tear excepted. All leases set forth on Schedule
3.17(a) are in full force and effect and constitute valid and binding agreements
of the Companies, and the Companies are not in breach of any of their terms. All
fixed assets used by the Companies that are material to the operation of its
business are either owned by the Companies or leased under an agreement listed
on Schedule 3.17(a).
3.18 INTELLECTUAL PROPERTY.
(a) The Companies are the true and lawful owner of and have registered
their respective names with their jurisdiction of incorporation. Other than the
names of the Companies, the Companies do not own, use, license or otherwise
possess legally enforceable rights to use, any registered or unregistered Marks.
For purposes of this Section 3.18, the term "Mark" shall mean all right, title
and interest in and to any United States or foreign trademarks, service marks
and trade names now held by the Companies, including any registration or
application for registration of any trademarks and service marks in the United
States Patent and Trademark Office ("PTO") or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Companies, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by the Companies in the United States or any foreign country.
(b) The Companies do not own, use, license or otherwise possess
legally enforceable rights to use, any Patents or Copyrights. For purposes of
this Section 3.18, the term
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"Patent" shall mean any United States or foreign patent as well as any
application for a United States or foreign patent made by either of the
Companies; the term "Copyright" shall mean any United States or foreign
copyright, including any registration of copyrights, in the United States
Copyright Office or the equivalent thereof in any foreign county as well as any
application for a United States or foreign copyright registration made by either
of the Companies.
(c) The Companies do not own or use, and are not licensed to operate
under or use, any trade names, trade secrets, franchises, technology,
proprietary rights, know-how, or similar rights (collectively, "Other Rights")
in connection with the operation of its business.
(d) Marks, Patents, Copyrights and Other Rights are referred to
collectively herein as the "Intellectual Property." Intellectual Property not
owned by the Companies is referred to herein collectively as "Third Party
Intellectual Property." The Companies have no obligations to compensate any
person for the use of any Intellectual Property.
(e) The Stockholders and Companies are not, nor will they be as a
result of the execution and delivery of this Agreement or the performance of
their obligations hereunder, in violation of any Third Party Intellectual
Property license, sublicense or agreement. No claims with respect to any Third
Party Intellectual Property are currently pending or, to the knowledge of the
Companies, are threatened by any person, nor, to the Companies' knowledge, do
any grounds for any claims exist: (i) to the effect that the services provided
by the Companies, or the sale, licensing or use of any product as now used, sold
or licensed or proposed for use, sale or license by the Companies infringes on
any copyright, patent, trademark, service mark or trade secret; or (ii) against
the use by the Companies of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Companies' businesses as currently conducted by the
Companies. The Companies have (x) not been sued or charged in writing as a
defendant in any claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, patents, trademarks, service marks, or copyrights
and which has not been finally terminated, or been informed or notified in
writing by any third party that the Companies may be engaged in such
infringement or (y) no knowledge of any infringement liability with respect to,
or infringement by, the Companies of any trade secret, patent, trademark,
service mark, or copyright of another.
3.19 MATERIAL CONTRACTS AND COMMITMENTS.
(a) Schedule 3.19(a) sets forth a complete and accurate list of all
Significant Customers and Significant Suppliers. For purposes of this Agreement,
"Significant Customers" are the twenty (20) customers that have effected the
most purchases, in dollar terms, from each of the Companies during each of the
past four (4) fiscal quarters, and "Significant Suppliers" are the twenty (20)
suppliers who supplied the largest amount by dollar volume of products or
services to each of the Companies during the twelve (12) months ending on the
Balance Sheet Date.
(b) Schedule 3.19(b) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, material licenses or
permits, written or oral, to which each of the Companies are a party or by which
it or its properties are bound (including without
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limitation contracts with customers, joint venture or partnership agreements,
contracts with any labor organizations, employment agreements, consulting
agreements, loan agreements, indemnity or guaranty agreements, bonds, mortgages,
options to purchase land, liens, pledges or other security agreements) (i) to
which the Companies and the Stockholders or any affiliate of the Companies, the
Stockholders or any officer or director of the Company are parties ("Related
Party Agreements"); (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $10,000, or (iii) that may generate
revenues or income exceeding, during the current term thereof, $10,000
(collectively with the Related Party Agreements, the "Material Contracts"). The
Companies have delivered to Buyer true, complete and correct copies of the
Material Contracts.
(c) Except to the extent set forth on Schedule 3.19(c), (i) none of
the Significant Customers has canceled or reduced or, to the knowledge of the
Companies, is currently attempting or threatening to cancel or reduce, any
purchases from the Companies, (ii) none of the Significant Suppliers has
canceled or reduced or, to the knowledge of the Companies, is currently
attempting to cancel or reduce, the supply of products or services to the
Companies, (iii) the Companies have complied with all of their commitments and
obligations and are not in default under any of the Material Contracts, and no
notice of default has been received with respect to any thereof, and (iv) there
are no Material Contracts that were not negotiated at arm's length. Since
December 31, 1997, the Companies have not received any material written customer
complaints concerning their products and/or services.
(d) Each Material Contract is valid and binding on the Companies and
is in full force and effect and, to the Companies' knowledge, is not subject to
any default thereunder by any party obligated to the Companies pursuant thereto.
The Companies have obtained all necessary consents, waivers and approvals of
parties to any Material Contracts that are required in connection with any of
the transactions contemplated hereby, or are required by any governmental agency
or other third party or are advisable in order that any such Material Contract
remain in effect without modification after the Closing and without giving rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit ("Third Party Consents"). All Third Party Consents are listed on
Schedule 3.19(d).
3.20 GOVERNMENT CONTRACTS.
(a) Except as set forth on Schedule 3.20, neither of the Companies is
a party to any government contracts.
(b) Neither of the Companies has been suspended or debarred from
bidding on contracts or subcontracts for any agency or instrumentality of the
United States Government or any state or local government, nor, to the knowledge
of the Companies, has any suspension or debarment action been threatened or
commenced.
3.21 INTENTIONALLY OMITTED.
3.22 INSURANCE. Schedule 3.22 sets forth a complete and accurate list, as
of the Balance Sheet Date, of all insurance policies carried by the Companies
and all insurance loss runs or
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workmen's compensation claims received for the past two (2) policy years. The
Companies have made available to Buyer true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Companies are
otherwise in full compliance with the material terms of such policies. To the
Companies' knowledge, such policies of insurance are of the type and in amounts
customarily carried by persons conducting businesses similar to that of the
Companies. To the knowledge of the Companies, there have been no threatened
terminations of, or material premium increases with respect to, any of such
policies.
3.23 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. Other than as set forth on Schedule 3.23(a),
to the Companies' knowledge, no underground or aboveground storage tanks and no
amount of any substance that has been designated by any governmental entity or
by applicable federal, state, local or other applicable law to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as hazardous wastes pursuant to the Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws,
but excluding office, maintenance, janitorial and other supplies customarily
used in the operation of offices and properly and safely maintained (a
"Hazardous Material"), are present on the Leased Real Property.
(b) Hazardous Materials Activities. To the Companies' knowledge, the
Companies have not transported, stored, used, manufactured, disposed of or
released, or exposed their employees or others to, Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor have the
Companies disposed of, transported, sold, or manufactured any product containing
a Hazardous Material (collectively, "Company Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
governmental entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits and Compliance. Neither of the Companies currently is
required to hold any environmental approvals, permits, licenses, clearances or
consents (the "Environmental Permits") to conduct the Company's businesses.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Companies, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. To the
Companies' knowledge, there are no past or present actions, activities,
circumstances, conditions, events, or incidents that could involve the Companies
(or any person or entity whose liability the Companies have retained or assumed,
either by contract or operation of law) in any environmental litigation, give
rise to any environmental claim against the Companies, or impose upon the
Company (or any person or entity whose liability the Companies have retained
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or assumed, either by contract or operation of law) any environmental liability
including, without limitation, common law tort liability.
3.24 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and service
providers to the Companies.
(a) The Companies are and have been in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and has not and is not engaged in any unfair
labor practice;
(b) there is not now, nor within the past three (3) years has there
been, any unfair labor practice complaint against the Companies pending or, to
the Companies' knowledge, threatened, before the National Labor Relations Board
or any other comparable authority; and
(c) all persons classified by the Companies as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
the Companies have fully and accurately reported their compensation on IRS Forms
1099 when required to do so.
3.25 EMPLOYEE BENEFIT PLANS.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit arrangement,
obligation, custom, or practice to provide benefits, other than salary, as
compensation for services rendered, to present or former directors, employees,
agents, or independent contractors, other than any obligation, arrangement,
custom or practice that is an Employee Benefit Plan, including, without
limitation, employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary continuation for
disability, consulting, or other compensation arrangements, workers'
compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, any plans subject to Section 125 of the
Code, and any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
(ii) "Company Benefit Arrangement" means any Benefit Arrangement
sponsored or maintained by each of the Companies or with respect to which the
Companies have or may have any liability (whether actual, contingent, with
respect to any of its assets or otherwise) as of the Closing Date, in each case
with respect to any present or former directors, employees, or agents of the
Companies.
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(iii) "Company Plan" means, as of the Closing Date, any Employee
Benefit Plan for which the Companies are the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the
Companies or to which the Companies are or might be obligated to make payments,
in each case with respect to any present or former employees of the Companies.
Company Plan includes any Qualified Plans that covered employees of the
Companies and that were terminated on or after January 1, 1989.
(iv) "Employee Benefit Plan" has the meaning given in Section
3(3) of ERISA.
(v) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations and rules issued thereunder, or any
successor law.
(vi) "ERISA Affiliate" means any person that, together with the
Companies, would be or was at any time treated as a single employer under
Section 414 of the Code or Section 4001 of ERISA and any general partnership of
which either of the Companies is or has been a general partner.
(vii) "Multiemployer Plan" means any Employee Benefit Plan
described in Section 3(37) of ERISA.
(viii) "Qualified Plan" means any Company Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
(ix) "Welfare Plan" means any Employee Benefit Plan described in
Section 3(1) of ERISA.
(b) Schedule 3.25(b) contains a complete and accurate list of all
Company Plans and Company Benefit Arrangements. Schedule 3.25(b) specifically
identifies all Company Plans (if any) that are Qualified Plans.
(c) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements:
(i) true, correct, and complete copies of all the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to Buyer: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or
5500C/R and any financial statements attached thereto and those for the prior
three (3) years; (C) the last Internal Revenue Service determination letter, the
last IRS determination letter that covered the qualification of the entire plan
(if different), and the materials submitted by the Companies to obtain those
letters; (D) the most recent summary plan description; all summaries of material
modifications thereto, and the most recent actuarial reports and Statement of
Financial Accounting Standards Nos. 87, 106, and 112 reports; (E) the most
recent written descriptions of all non-written agreements relating to any
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such plan or arrangement; (F) all material reports and test results received
within the four (4) years preceding the date of this Agreement by third-party
administrators, actuaries, investment managers, consultants, or other
independent contractors (other than individual account records) or prepared by
employees of the Companies or their ERISA Affiliates; (G) all notices that were
given within the three (3) years preceding the date of this Agreement by the
IRS, Department of Labor, or any other governmental agency or entity with
respect to any plan or arrangement; and (H) employee manuals or handbooks
containing personnel or employee relations policies;
(ii) the Kahn Consulting, Inc. Profit Sharing 401(k) Plan (the
"Company 401(k) Plan") is the only Qualified Plan. The Companies have not
maintained or contributed to another Qualified Plan. The Internal Revenue
Service has issued a determination letter that the Company 401(k) Plan qualifies
under Section 401(a) of the Code, and that any trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the Code,
and nothing has occurred with respect to the design or operation of any
Qualified Plans that could adversely affect that determination cause the
imposition of any material liability, lien, penalty, or tax under ERISA or the
Code;
(iii) the Companies have not sponsored or maintained, had any
obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of their assets or otherwise) with respect to
any Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the
Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Company Plan and each Company Benefit Arrangement has
been maintained materially in accordance with its constituent documents and with
all applicable provisions of the Code, ERISA and other laws, including federal
and state securities laws;
(v) there are no pending claims or lawsuits by, against, or
relating to any Employee Benefit Plans or Benefit Arrangements that are not
Company Plans or Company Benefit Arrangements that would, if successful, result
in liability of either of the Companies or the Stockholders, and no claims or
lawsuits have been asserted, instituted or, to the knowledge of the Companies,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, against the assets of any trust or other funding arrangement under
any such Company Plan, by or against the Companies with respect to any Company
Plan or Company Benefit Arrangement, or, to the Companies' knowledge, by or
against the plan administrator or any fiduciary of any Company Plan or Company
Benefit Arrangement, and the Companies do not have knowledge of any fact that
could form the basis for any such claim or lawsuit. The Company Plans and
Company Benefit Arrangements are not presently under audit or examination (nor
has notice been received of a potential audit or examination) by the IRS, the
Department of Labor, or any other governmental agency or entity, and no matters
are pending with respect to the Company 401(k) Plan under the IRS's Voluntary
Compliance Resolution program, its Closing Agreement Program, or other similar
programs;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other
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payments or liabilities that would not occur without the transactions
contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred no
non-exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or to the knowledge of
the Companies breach of any fiduciary duty described in Section 404 of ERISA
that would, if successful, result in any material liability for either of the
Companies or any Stockholder, officer, director, or employee either of the
Companies;
(viii) all material reporting, disclosure, and notice
requirements of ERISA and the Code have been satisfied with respect to each
Company Plan and each Company Benefit Arrangement;
(ix) payment has been made of all amounts that the Companies are
required to pay as contributions to the Company Benefit Plans as of the last day
of the most recent fiscal year of each of the plans ended before the date of
this Agreement; all benefits accrued under any unfunded Company Plan or Company
Benefit Arrangement will have been paid, accrued, or otherwise adequately
reserved in accordance with GAAP as of the Balance Sheet Date; and all monies
withheld from employee paychecks with respect to Company Plans have been
transferred to the appropriate plan within the time required by law for such
withholding;
(x) the Companies have not prepaid or prefunded any Welfare Plan
through a trust, reserve, premium stabilization, or similar account, nor does it
provide benefits through a voluntary employee beneficiary association as defined
in Section 501(c)(9);
(xi) to the knowledge of the Companies, no statement, either
written or oral, has been made by the Companies to any person with regard to any
Company Plan or Company Benefit Arrangement that was not in accordance with the
Company Plan or Company Benefit Arrangement and that could have an adverse
economic consequence to the Companies;
(xii) the Companies have no liability (whether actual,
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan or Benefit Arrangement that is not a Company Plan or
Company Benefit Arrangement or with respect to any Employee Benefit Plan
sponsored or maintained (or which has been sponsored or maintained) by any ERISA
Affiliate;
(xiii) all group health plans of the Companies and their
affiliates have been operated in material compliance with the requirements of
Sections 4980B (and its predecessor) and 5000 of the Code, and the Companies
have provided, or will have provided before the Closing Date, to individuals
entitled thereto all required notices and coverage pursuant to Section 4980B
with respect to any "qualifying event" (as defined therein) occurring before or
on the Closing Date;
(xiv) no employee or former employee of the Companies or
beneficiary of any such employee or former employee is, by reason of such
employee's or former employee's employment, entitled to receive any benefits,
including, without limitation, death or medical benefits
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(whether or not insured) beyond retirement or other termination of employment as
described in Statement of Financial Accounting Standards No. 106, other than (i)
death or retirement benefits under a Qualified Plan, (ii) deferred compensation
benefits accrued as liabilities on the Closing Statement or (iii) continuation
coverage mandated under Section 4980B of the Code or other applicable law.
(d) Schedule 3.25(d) hereto contains the most recent quarterly listing
of workers' compensation claims and a schedule of workers' compensation claims
of the Companies for the last three (3) fiscal years.
(e) Schedule 3.25(e) hereto sets forth an accurate list, as of the
date hereof, of all employees of the Companies who may earn more than $75,000 in
1998, all officers and all directors, and lists all employment agreements with
such employees, officers and directors and the rate of compensation (and the
portions thereof attributable to salary, bonus, and other compensation
respectively) of each such person as of (a) the Balance Sheet Date and (b) the
date hereof.
(f) Except as set forth on Schedule 3.25(f), the Companies have not
declared or paid any bonus or other incentive compensation in contemplation of
the transactions contemplated by this Agreement.
3.26 TAXES.
(a) For purposes of this Agreement:
(i) "Tax" (including with correlative meaning the terms "Taxes"
and "Taxable") means (a) all foreign, federal, state, local and other income,
gross receipts, sales, use, ad valorem, value-added, intangible, unitary,
transfer, franchise, license, payroll, employment, estimated, excise,
environmental, stamp, occupation, premium, property, prohibited transactions,
windfall or excess profits, customs, duties or other taxes, levies, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto, (b)
any liability for payment of amounts described in clause (a) as a result of
transferee liability, of being a member of an affiliated, consolidated, combined
or unitary group for any period, or otherwise through operation of law, and (c)
any liability for payment of amounts described in clause (a) or (b) as a result
of any tax sharing, tax indemnity or tax allocation agreement or any other
express or implied agreement to indemnify any other person for Taxes.
(ii) The term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate, or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
(b) (i) All Tax Returns required to be filed on or before the date
hereof by or on behalf of each of the Companies have been filed, and such Tax
Returns are true, correct, and complete in all respects.
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(ii) Each of the Companies has paid in full on a timely basis all
Taxes owed by it, whether or not shown on any Tax Return.
(iii) The amount of each Companies' liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheets, and the amount of each Companies' liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the books and
records of each Company on the Closing Date.
(iv) There is no action, suit, proceeding, investigation, audit
or claim now proposed or pending against or with respect to either Company in
respect of any Tax.
(v) Each of the Companies has a taxable year ending on December
31, in each year commencing 1989.
(vi) Neither Company has agreed to, and neither will be required
to, make any adjustments under Code Section 481(a) as a result of a change in
accounting methods.
(vii) Each of the Companies has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor,
or other third party.
(viii) Neither Company has requested an extension of time within
which to file any Tax Return or been granted any extension or waiver of the
statute of limitations period applicable to any Tax Return, and all Tax Returns
of each Company for the preceding three years have been made available to and
delivered to Buyer.
(ix) There are (and as of immediately following the Closing there
will be) no Liens on the assets of either Company relating or attributable to
Taxes, other than liens for Taxes not yet due and payable.
(x) There is no basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of either Company or otherwise have an adverse effect on either
Company or their businesses.
(xi) None of the Companies' assets are treated as "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(xii) There are no contracts, agreements, plans or arrangements
covering any employee or former employee of either Company that, individually or
collectively, could give
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rise to the payment of any amount (or portion thereof) that would not be
deductible pursuant to Sections 280G, 404 or 162 of the Code.
(xiii) Neither of the Companies nor any direct or indirect
shareholder of either Company has filed a consent under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by
either Company.
(xiv) Neither of the Companies has been, nor has either of them
ever been, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(xv) Neither of the Companies is, nor has either of them ever
been, a party to a tax sharing, tax indemnity or tax allocation agreement, and
neither of the Companies has assumed the tax liability of any other person under
contract.
(xvi) Neither of the Companies is, nor has either of them ever
been, a member of an affiliated group filing a consolidated federal income Tax
Return. Neither of the Companies has, nor will either of them have up to an
including the Closing Date any interest in any other corporation with respect to
which either Company owns a majority of the common stock or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors.
(xvii) Neither of the Companies has any liability for the Taxes
of any individual or entity other than the Companies under section 1.1502-6 of
the Treasury regulations (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(xviii) Neither of the Companies is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for federal
income tax purposes.
(xix) KCI has been a validly electing S corporation within the
meaning of Code ss.ss.1361 and 1362 at all times since January 1, 1990, and will
be an S corporation up to and including the Closing Date except as KCI's S
corporation status is affected by the consummation of the transactions
contemplated herein.
(xx) KCI will not be liable for any Tax under Code ss.1374 in
connection with the deemed sale of the Companies' assets (including the assets
of any qualified subchapter S subsidiary) caused by its Section 338(h)(10)
Election. Neither KCI nor any qualified subchapter S subsidiary of KCI has, in
the past 10 years, (A) acquired assets from another corporation in a transaction
in which such Company's Tax basis for the acquired assets was determined, in
whole or in part, by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (B) acquired the stock of any
corporation which is a qualified subchapter S subsidiary.
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3.27 CONFORMITY WITH LAW; LITIGATION.
(a) Neither of the Companies has violated any law or regulation or any
order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it, except where such violations have not or could not, in the
aggregate, exceed $50,000.
(b) Except as set forth on Schedule 3.27(b), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Companies,
threatened against or affecting either of the Companies at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no written notice of any claim, action, suit or proceeding, whether pending
or threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against either of the Companies or against any of
their properties or business.
3.28 RELATIONS WITH GOVERNMENTS. The Companies have not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has either of them otherwise taken any
action that would cause such Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
3.29 ABSENCE OF CHANGES. Except as set forth on Schedule 3.29, since
December 31, 1997, each of the Companies has conducted its business in the
ordinary course and there has not been:
(a) any change, by itself or together with other changes, that has
affected adversely, or is likely to affect adversely, the business, operations,
affairs, prospects, properties, assets, profits or condition (financial or
otherwise) of such Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of such Company;
(c) any change in the authorized capital of the Companies or in their
outstanding securities or any change in their ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of such Company;
(e) except for the issuance of stock to the Stockholders listed on
Exhibit A hereto, any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by either of the Companies to any
of their officers, directors, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in accordance
with past practice, nor has either of the Companies entered into or amended any
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Company Benefit Arrangement, Company Plan, employment, severance or other
agreement relating to compensation or fringe benefits;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect on the Companies;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Companies to any person, including
without limitation the Stockholders or their affiliates;
(h) any cancellation, or agreement to cancel, forgive or release any
indebtedness or other obligation owing to the Companies, including without
limitation, any indebtedness or obligation of the Stockholders and their
affiliates;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Companies or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Companies;
(k) any waiver of any material rights or claims of the Companies;
(l) any breach, amendment or termination of any Material Contract,
Permit, or other right to which either of the Companies is a party;
(m) any transaction by the Companies outside the ordinary course of
business;
(n) any capital commitment by the Companies, either individually or in
the aggregate, exceeding $50,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Companies or
the revaluation by the Companies of any of their assets;
(p) any creation or assumption by the Companies of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Companies of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Companies in excess of
$50,000;
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(r) any loan by the Companies to any person or entity, incurring by
the Companies of any indebtedness, guaranteeing by the Companies of any
indebtedness, issuance or sale of any debt securities of the Companies or
guaranteeing of any debt securities of others;
(s) the commencement or notice or, to the knowledge of the Companies,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Companies or any of their affairs; or
(t) negotiation or agreement by the Companies or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with Buyer and their representatives
regarding the transactions contemplated by this Agreement).
4. REPRESENTATIONS AND WARRANTIES OF BUYER
To induce the Stockholders and the Companies to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer represents and
warrants to the Principal Stockholders and the Companies as follows:
4.1 DUE ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, and is
duly authorized and qualified to do business under all applicable material laws,
regulations, ordinances and orders of public authorities to carry on its
respective businesses in the places and in the manner as now conducted except
for where the failure to be so authorized or qualified would not have a Material
Adverse Effect on Buyer.
4.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of Buyer
executing this Agreement have all requisite corporate power and authority to
enter into and bind Buyer to the terms of this Agreement. Buyer has the full
legal right, power and corporate authority to enter into this Agreement and the
transactions contemplated hereby. The execution and delivery of this Agreement
by Buyer and the performance by Buyer of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of Buyer, and
this Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of Buyer
enforceable in accordance with its terms.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the Articles
of Incorporation or Bylaws of Buyer;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which Buyer is a party or by which
Buyer is bound, or result in the creation or imposition of any lien, charge or
encumbrance on any of Buyer's properties pursuant to (i) any law or regulation
to
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which Buyer or any of its property is subject, or (ii) any judgment, order or
decree to which Buyer is bound or any of its property is subject, except where
such conflicts or defaults would not, individually or in the aggregate, have a
Material Adverse Effect;
(c) result in termination or impairment of any permit, license,
franchise, contractual right or other authorization of Buyer, except where such
terminations or impairments would not, individually or in the aggregate, have a
Material Adverse Effect; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which Buyer is subject, or by which Buyer is bound, except where
such violations would not, individually or in the aggregate, have a Material
Adverse Effect.
4.4 FINANCING. Buyer shall have at Closing sufficient cash, available lines
of credit or other sources of immediately available funds to enable it to make
payment of the Closing Payment.
4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) Buyer has made available to the Stockholders and the Companies
copies of each registration statement, report, proxy statement, information
statement or schedule filed with the SEC by Buyer since its initial public
offering (the "Buyer SEC Documents"). As of their respective dates, the Buyer
SEC Documents complied in all material respects with the applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be.
(b) As of their respective dates, the consolidated financial
statements included in the Buyer SEC Documents complied as to form in all
material respects with then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented Buyer's consolidated financial position and that of its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and statements of cash flows for the periods then ended (subject, in
the case of unaudited statements, to the lack of footnotes thereto, to normal
year-end audit adjustments and to any other adjustments described therein).
4.6 CAPITAL STOCK OF BUYER. The authorized capital stock of Buyer consists
of 16,000,000 shares of common stock, par value $.01 per share, of which
4,781,895 shares are issued and outstanding and 4,000,000 shares of preferred
stock, par value $.01 per share, of which no shares are issued and outstanding.
All of such shares were offered, issued, sold and delivered by Buyer in
compliance with all applicable state and federal laws concerning the issuance of
securities.
4.7 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 4.7, no
option, warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists of any character, written or oral, which may
obligate Buyer to issue or sell, or by which any shares of capital stock may
otherwise become outstanding. Buyer has no obligation (contingent or
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otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to effect the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of the Principal Stockholders and the Companies
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by the Companies and the
Stockholders on or before the Closing Date shall have been duly complied with,
performed or satisfied; and certificates to the foregoing effects dated the
Closing Date and signed on behalf of the Stockholders and the Companies shall
have been delivered to Buyer.
5.2 NO LITIGATION. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging Buyer's proposed
acquisition of the Companies or limiting or restricting Buyer's conduct or
operation of the business of the Company (or its own business) following the
Closing shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened against Buyer, the Companies or their respective properties or any of
their officers or directors, that could materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
prospects of the Companies.
5.3 OPINION OF COUNSEL. Buyer shall have received an opinion from counsel
to the Principal Stockholders and the Companies, dated the Closing Date, in a
form reasonably satisfactory to counsel for Buyer.
5.4 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency or third party, relating to the consummation by
the Companies and the Stockholders of the transactions contemplated hereby shall
have been obtained and made. The Board of Directors of Buyer shall have issued a
resolution approving the transactions contemplated by this Agreement.
5.5 CHARTER DOCUMENTS. The Principal Stockholders shall have delivered to
Buyer (a) copies of the Certificate of Incorporation of the Companies certified
by an appropriate authority in the state of their incorporation dated a date no
later than five business days before the Closing Date and (b) copies of the
Bylaws of the Companies certified by the Secretaries of the Companies.
5.6 EMPLOYMENT AGREEMENTS. The Principal Stockholders shall each have
executed and delivered an employment agreement (each an "Employment Agreement"
and collectively, the
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"Employment Agreements") substantially in the form attached hereto as Exhibits
5.6A, 5.6B and 5.6C.
5.7 CLOSING DELIVERIES. The Stockholders and the Companies shall have made
the deliveries to Buyer as are called for by Section 2.2 of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANIES
The obligations of the Stockholders and the Companies to effect the
transactions contemplated hereby are subject to the satisfaction or waiver, at
or before the Closing Date, of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of Buyer contained in this Agreement shall be
true, correct and complete on and as of the Closing Date, all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by Buyer on or before the Closing Date shall have been
duly complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed by the President or any Vice President
of Buyer shall have been delivered to the Stockholders.
6.2 NO LITIGATION. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging Buyer's proposed
acquisition of the Companies, or limiting or restricting Buyer's conduct or
operation of the business of the Company (or its own business) following the
Closing shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against Buyer or the Companies, their respective properties or any
of their officers or directors, that could materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
prospects of the Buyer and its subsidiaries taken as a whole.
6.3 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency or third party relating to the consummation by
Buyer of the transactions contemplated herein shall have been obtained and made.
6.4 OPINION OF COUNSEL. The Stockholders and the Companies shall have
received an opinion from counsel to Buyer, dated the Closing Date, in a form
reasonably satisfactory to counsel for the Principal Stockholders and the
Companies.
6.5 EMPLOYMENT AGREEMENTS. Buyer shall have executed and delivered the
Employment Agreements substantially in the forms attached hereto as Exhibit
5.6A, 5.6B and 5.6C.
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6.6 CLOSING DELIVERIES. Buyer shall have made the deliveries to the
Stockholders and the Companies as are called for by Section 2.2 of this
Agreement.
7. CERTAIN COVENANTS
7.1 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give prompt
notice to the other parties hereto of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (b) any material failure of
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder. The delivery of any notice
pursuant to this Section 7.1 shall not, without the express written consent of
the other parties be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, (ii) modify the conditions set
forth in Articles 5 and 6, or (iii) limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
7.2 UNPAID TAXES. The Principal Stockholders jointly and severally covenant
and agree promptly to reimburse Buyer for any amount that the Companies'
liabilities for unpaid Taxes for all periods or portions thereof ending on or
before the Closing Date exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as such accruals are reflected on
the books and records of the Companies on the Closing Date, provided, however,
that the Principal Stockholders shall have the right, in their sole and absolute
discretion and at their own expense, to control the contest of any audit
litigation or other proceeding associated therewith; provided further that Buyer
and counsel of its own choosing shall have the right, at its own expense, to
participate fully in all aspects of such audit, litigation or other proceeding;
and provided further that the Principal Stockholders shall not settle any such
audit, litigation or other proceeding without the prior written consent of
Buyer, which consent shall not be unreasonably withheld.
7.3 CERTAIN TAX MATTERS.
(a) Section 338(h)(10) Election. The Stockholders will join with Buyer
in making an election under Code ss.338(h)(10) of the Code (and any
corresponding election under state, local, and foreign tax law) with respect to
the purchase and sale of the stock of KCI (a "Section 338(h)(10) Election").
Buyer acknowledges that a Section 338(h)(10) election is not applicable for New
York City tax purposes. Stockholders will include any income, gain, loss,
deduction, or other tax item resulting from the Section 338(h)(10) Election on
their Tax Returns. Stockholders shall also pay any Tax imposed on KCI
attributable to the making of the Section 338(h)(10) Election, including, but
not limited to, (i) any Tax imposed under Code ss.1374, (ii) any tax imposed
under Treas. Reg. ss.1.338(h)(10)-1(e)(1), or (iii) any state, local or foreign
Tax imposed on KCI's gain, and the Principal Stockholders shall indemnify Buyer,
KCI and its Subsidiaries against any adverse consequences (including, without
limitation, liabilities, expenses, costs, fees, Taxes, liens, proceedings and
settlements) arising out of any failure to pay any such Taxes provided, however,
that the Principal Stockholders shall have the right, in their sole and absolute
discretion, to control the contest of any audit litigation or other proceeding
associated therewith.
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(b) Allocation of Purchase Price. Buyer, the Companies and the
Stockholders agree that the Purchase Price and the liabilities of each of the
Companies (plus other relevant items) will be allocated to the assets of each of
the Companies for all purposes (including Tax and financial accounting) as shown
on Schedule 7.3(b) attached hereto. Buyer, the Companies, and the Stockholders
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
(c) Tax Periods Ending on or before the Closing Date. Sellers shall
prepare or cause to be prepared and Buyer shall file or cause to be filed all
Tax Returns for the Companies for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. The Stockholders shall include any
income, gain, loss, deduction or other tax items for such periods on their Tax
Returns in a manner consistent with the Schedule K-1s furnished by the Companies
to the Stockholders for such periods. Buyer shall cooperate with Stockholders,
at the Stockholders' expense, in prosecuting any refund claim that may be made
by KCI after the Closing Date due to a tax loss for any period (or portion
thereof) ending on or prior to the Closing Date, and the amount of any refund
claim shall be paid to the Stockholders as soon as reasonably practicable after
receipt thereof.
(d) Cooperation on Tax Matters.
(i) Buyer, the Companies, and the Stockholders shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Companies and the Stockholders agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Companies relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by
Buyer or Stockholders, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, the Companies or Stockholders, as the case may
be, shall allow the other party to take possession of such books and records.
Notwithstanding the foregoing, the Principal Stockholders shall have the right,
at their sole and absolute discretion and at their own expense, to control the
contest of any audit, litigation or other proceeding which applies, in whole or
in part, to a taxable period for which the Principal Stockholders are providing
indemnification pursuant to this Agreement; provided, that, Buyer and counsel of
its own choosing shall have the right, at its own expense, to participate fully
in all aspects of such audit, litigation or other proceeding; and provided
further that the Principal Stockholders shall not settle any such audit,
litigation or other proceeding without the prior written consent of Buyer, which
consent shall not be unreasonably withheld.
(ii) Buyer and Stockholders further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other
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Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(e) Certain Taxes. All stock transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any
corporate-level gains tax triggered by the sale of the Shares, any state or
municipal transfer tax), shall be paid by the Stockholders when due, and the
Stockholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, Buyer will, and will cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
7.4 PROFESSIONAL LIABILITY INSURANCE POLICY. Prior to the Closing, Buyer
shall obtain a professional liability insurance policy providing for "tail"
coverage (the "Professional Liability Insurance Policy"), and Buyer hereby
agrees to pay the costs and expenses of such Professional Liability Insurance
Policy.
7.5 FINANCING. Buyer shall have, prior to the dates on which payments
become due under the Notes or Employment Agreements, sufficient cash, available
lines of credit or other sources of immediately available funds to enable it to
make all payments due and payable under the Notes and Employment Agreements as
they become due and payable.
8. INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION BY THE PRINCIPAL STOCKHOLDERS. The Principal
Stockholders jointly and severally covenant and agree to indemnify, defend,
protect and hold harmless Buyer and its respective officers, directors,
employees, stockholders, successors and affiliates, including without
limitation, the Companies (individually, an "FTI Indemnified Party" and
collectively, the "FTI Indemnified Parties") from, against and in respect of all
liabilities, losses, claims, damages, punitive damages, causes of action,
lawsuits, administrative proceedings (including informal proceedings),
investigations, audits, demands, assessments, adjustments, judgments, settlement
payments, deficiencies, penalties, fines, interest (including interest from the
date of such damages) and costs and expenses (including without limitation
reasonable attorneys' fees and disbursements of every kind, nature and
description) (collectively, "Damages") suffered, sustained, incurred or paid by
the FTI Indemnified Parties in connection with, resulting from or arising out
of, directly or indirectly:
(i) any breach of any representation or warranty of the Principal
Stockholders or the Companies set forth in this Agreement or any schedule or
certificate, delivered by or on behalf of any of the Stockholders or the
Companies in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the part
of the Stockholders or, prior to the Closing Date, the Companies, in this
Agreement; or
(iii) the business, operations or assets of the Companies prior
to the
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Closing Date or the actions or omissions of the Companies' directors, officers,
shareholders, employees or agents prior to the Closing Date, except as otherwise
disclosed in the Company Financial Statements, this Agreement or the schedules
to this Agreement; or
(iv) any liability of the Companies for Taxes in excess of the
amount of the current liability accruals for such Taxes (excluding reserves for
deferred Taxes) for any Taxable period or portion thereof ending on or before
the Closing Date; or
(v) any litigation or other claims of any kind brought against
the Companies arising out of acts or omissions of the Companies or the
Stockholders prior to Closing, including, without limitation, those matters set
forth on Schedule 3.27(b); or
(vi) the failure to obtain, prior to the Closing Date, the
consent of Carnegie Hall Tower L.L.C. pursuant to that certain Lease Agreement
and related Guaranty Agreement, dated as of January 15, 1991, by Stewart J.
Kahn, as guarantor, in favor of Carnegie Hall Tower Limited Partnership, as
guarantee; or
(vii) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.1.
8.2 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 8.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$200,000 (the "Indemnification Deductible"); provided, however, that the
Indemnification Deductible shall not apply to (i) Damages arising out of any
breaches of the covenants of the Stockholders set forth in this Agreement or
representations made in Sections 3.4 (capital stock of the Companies), 3.5
(transactions in capital stock), 3.25 (employee benefit plans), 3.26 (taxes) or
3.27 (conformity with law; litigation), or (ii) Damages described in Section 8.1
(iii), (iv) or (vi); and further provided that if the aggregate amount of
Damages exceeds the Indemnification Deductible, then the Principal Stockholders
shall indemnify the FTI Indemnified Parties for the amount of Damages above the
Indemnification Deductible, but in no event greater than $12,000,000 (the
"Indemnification Limit");
(b) the aggregate amount of the Principal Stockholders' liability
under this Article 8 shall not exceed the Indemnification Limit;
(c) the indemnification obligations under this Article 8 shall
terminate as applicable, in accordance with clause (i), (ii) or (iii) of this
Section 8.2(c):
(i) (1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 8.2(c), the third anniversary of the
Closing Date;
(2) with respect to representations, warranties and
covenants contained in Sections 3.25 (employee benefit plans), 3.26 (taxes) and
the indemnifications set forth in Section 8.1(iii), (iv) or (v), on (A) the date
that is sixty (60) days after the expiration of the longest
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applicable federal or state statute of limitation (including extensions thereof)
with respect thereto, or (B) if there is no applicable statute of limitation,
(x) three (3) years after the Closing Date;
(3) with respect to representations and warranties contained
in Section 3.23 (environmental matters) ten (10) years after the Closing Date.
(ii) the final resolution of claims or demands (a "Claim")
pending as of the relevant dates described in clause (i) of this Section 8.2(c)
(such claims referred to as "Pending Claims"); and
(iii) with respect to representations and warranties contained in
Section 3.4 (capital stock of the Companies), there shall be no limitation.
8.3 GENERAL INDEMNIFICATION BY BUYER. Buyer and the Companies covenant and
agree to indemnify, defend, protect and hold harmless the Principal Stockholders
and their respective successors and assigns (individually, a "KCI Indemnified
Party" and collectively, the "KCI Indemnified Parties") from, against and in
respect of all Damages suffered, sustained, incurred or paid by the KCI
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(i) any breach of any representation or warranty of Buyer set
forth in this Agreement or any schedule or certificate delivered by or on behalf
of any of Buyer in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on the part
of Buyer or, after the Closing Date, the Companies, in this Agreement; or
(iii) the business, operations or assets of Buyer, or the acts or
omissions of Buyer's directors, officers, employees or agents in the performance
of their duties for or on behalf of Buyer, prior to the Closing Date, and the
business, operations or assets of the Companies after the Closing Date; or
(iv) except as provided in Section 7.2, any liability of the
Companies for Taxes for any Taxable period or portion thereof ending after the
Closing Date; or
(v) any litigation or other claims of any kind brought against
the Companies and/or the Principal Stockholders arising out of acts or omissions
of the Companies or Buyer after the Closing including, without limitation, any
litigation or other claims brought against either of the Principal Stockholders
in connection with that certain Lease Agreement and related Guaranty Agreement,
dated as of January 15, 1991, by Stewart J. Kahn, as guarantor, in favor of
Carnegie Hall Tower Limited Partnership, as guarantee; or
(vi) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.3.
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Notwithstanding any other provision in this Agreement to the contrary,
Buyer shall not be liable to the Principal Stockholders for any Damages arising
out of the actions or omissions of any Stockholder, except as otherwise provided
for under Buyer's or the Companies' Charter Documents or applicable state law
with respect to the Principal Stockholders' conduct for or on behalf of the
Companies or Buyer after the Closing Date.
8.4 LIMITATION AND EXPIRATION. Notwithstanding the foregoing:
(a) there shall be no liability for indemnification under Section 8.3
unless, and solely to the extent that, the aggregate amount of Damages exceeds
the Indemnification Deductible; provided, however, that the Indemnification
Deductible shall not apply to (i) Damages arising out of any breaches of the
covenants of the Buyer set forth in this Agreement or representations made in
Sections 4.6 (capital stock of Buyer) or 4.7 (transactions in capital stock), or
(ii) Damages described in Section 8.3(iii), (iv) or (v); and further provided
that if the aggregate amount of Damages exceeds the Indemnification Deductible,
then Buyer shall indemnify the Principal Stockholders for the amount of Damages
above the Indemnification Deductible, but in no event greater than the
Indemnification Limit;
(b) the aggregate amount of Buyer's liability under this Article 8
shall not exceed the Indemnification Limit;
(c) the indemnification obligations under this Article 8 shall
terminate, as applicable, in accordance with clause (i), (ii) or (iii) of this
Section 8.4(c):
(i) (1) except as to matters set forth in clause (i)(2) of this
Section 8.4(c), the third anniversary of the Closing Date;
(2) with respect to the indemnifications set forth in
Section 8.3(iii), (iv) or (v), on (A) the date that is sixty (60) days after the
expiration of the longest applicable federal or state statute of limitation
(including extensions thereof with respect thereto), or (B) if there is no
applicable statute of limitation, (x) three (3) years after the Closing Date;
(ii) the final resolution of Pending Claims as of the relevant
dates described in clause (i) of this 8.4(c); and
(iii) with respect to representations and warranties contained in
Section 4.6 (capital stock of Buyer), there shall be no limitation.
(d) with respect to Damages arising from the actions or omissions of
the Principal Stockholders on or prior to the Closing Date, the Principal
Stockholders shall have no right to claim indemnification from the Companies
after the Closing Date, except to the extent such Damages exceed the
Indemnification Limit.
8.5 INDEMNIFICATION PROCEDURES. All Claims for indemnification under this
Article 8 shall be asserted as follows:
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(a) In the event that any FTI Indemnified Party or KCI Indemnified
Party (whether a KCI Indemnified Party or FTI Indemnified Party, an "Indemnified
Party") has a Claim against any party obligated to provide indemnification
pursuant to Article 8 (the "Indemnifying Party") which does not involve a Claim
being asserted against or sought to be collected by a third party, the
Indemnified Party shall with reasonable promptness send a Claim Notice with
respect to such Claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within the Notice Period (as defined below)
that the Indemnifying Party disputes such Claim, the amount of such Claim shall
be conclusively deemed a liability of the Indemnifying Party hereunder to the
extent of any damages caused directly by any delay in such notification. In case
an objection is made in writing in accordance with this Section 8.5(a), the
Indemnified Party shall have thirty (30) days to respond in a written statement
to the objection. If after such thirty (30) day period there remains a dispute
as to any Claims, the parties shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
Claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties.
(b) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party, the Indemnified Party shall with reasonable promptness
notify the Indemnifying Party of such Claim, specifying the nature of such claim
and the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such Claim) (the
"Claim Notice"). The Indemnifying Party shall have thirty (30) days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not such party disputes the liability to the Indemnified
Party hereunder with respect to such Claim and (ii) if such party does not
dispute such liability, whether or not the Indemnifying Party desires, at the
sole cost and expense of the Indemnifying Party, to defend against such Claim,
provided that the Indemnifying Party is hereby authorized (but not obligated)
prior to and during the Notice Period to file any motion, answer or other
pleading and to take any other action which the Indemnifying Party shall deem
necessary or appropriate to protect the Indemnifying Party's interests. In the
event that Indemnifying Party notifies the Indemnified Party within the Notice
Period that the Indemnifying Party does not dispute the Indemnifying Party's
obligation to indemnify hereunder and desires to defend the Indemnified Party
against such Claim the Indemnifying Party shall have the right to defend by
appropriate proceedings, which proceedings shall be promptly settled or
prosecuted by the Indemnifying Party to a final conclusion, provided, that,
unless the Indemnified Party otherwise agrees in writing, such party may not
settle any matter (in whole or in part) unless such settlement includes a
complete and unconditional release of the Indemnified Party and, provided
further, that, in the event the settlement includes provision for non-monetary
relief by an Indemnified Party, such settlement is reasonably satisfactory to
such Indemnified Party. If the Indemnified Party desires to participate in, but
not control, any such defense or settlement the Indemnified Party may do so at
its sole cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against such Claim, whether by failure of such party to give
the Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party, without waiving any rights against such party, may settle or
defend against any such Claim in the Indemnified Party's sole discretion and the
Indemnified Party shall be entitled to recover from the Indemnifying Party the
amount of any
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settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(c) Intentionally omitted.
(d) Nothing herein shall be deemed to prevent the Indemnified Party
from making a claim, and an Indemnified Party may make a claim hereunder, for
potential or contingent claims or demands provided the Claim Notice sets forth
the specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such a claim or demand may be made and provided, further, however, that the
Noticed Period shall not be deemed to commence until such potential or
contingent claim or demand becomes an actual or noncontingent claim or demand.
(e) The Indemnified Party's failure to give reasonably prompt notice
as required by this Section 8.5 of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which the Indemnifying Party may
have to the Indemnified Party except to the extent, but only to the extent, that
failure to give such notice materially prejudices the Indemnifying Party.
8.6 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Principal Stockholders,
the Companies and Buyer in or pursuant to this Agreement or in any Schedule or
other agreement delivered pursuant hereto shall be deemed to have been made on
the date of this Agreement (except as otherwise provided herein or therein). The
representations of the Companies and the Principal Stockholders will survive the
Closing and will remain in effect until, and will expire upon, the termination
of the relevant indemnification obligation as provided in Section 8.2. The
representations of Buyer will survive the Closing and will remain in effect
until, and will expire upon the termination of the relevant indemnification
obligation as provided in Section 8.4. The covenants of the parties will survive
the Closing and expire in accordance with their respective terms.
8.7 ARBITRATION.
(a) Disputes as to Claims under this Agreement ("Disputes") shall be
resolved by binding arbitration which shall be administered by the American
Arbitration Association ("AAA") in Wilmington, Delaware, and, except as
expressly provided in this Agreement, shall be conducted in accordance with the
Expedited Procedures under the Commercial Arbitration Rules of the AAA, as such
rules may be amended from time to time. The hearing locale shall be Wilmington,
Delaware. A single, neutral Arbitrator shall be appointed by the AAA, within
five (5) business days after a Dispute is submitted for arbitration under this
Section 8.7, to preside over the arbitration and resolve the Dispute. The
Arbitrator shall be selected from the AAA's Commercial Panel, and shall be
qualified to practice law in at least one jurisdiction in the United States and
have expertise in the interpretation of commercial contracts. The parties shall
have five (5) business days to object in writing to the appointment of the
Arbitrator, the sole basis for such objection being an actual conflict
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of interest. The AAA, in its sole discretion, shall determine within five (5)
business days the validity of any objection to the appointment of the Arbitrator
based on an actual conflict of interest.
(b) The Arbitrator's decision (the "Decision") shall be binding, and
the prevailing party may enforce the Decision under the Agreement or in any
court of competent jurisdiction.
(c) The parties shall use their best efforts to cooperate with each
other in causing the arbitration to be held in as efficient and expeditious a
manner as practicable, including but not limited to, providing such documents
and making available such of their personnel as the Arbitrator may request, so
that the Decision may be reached timely. The Arbitrator shall take into account
the parties' stated goal of expedited proceedings in determining whether to
authorize discovery and, if so, the scope of permissible discovery and other
hearing and pre-hearing procedures.
(d) The authority of the Arbitrator shall be limited to deciding
liability for, and the proper amount of, a Claim, and shall have no authority to
award punitive damages. The Arbitrator shall render a Decision within sixty (60)
days after being appointed to serve as Arbitrator, unless the parties otherwise
agree in writing or the Arbitrator makes a finding that a party has carried the
burden of showing good cause for a longer period.
8.8 SATISFACTION OF INDEMNIFICATION LIABILITIES. The parties shall promptly
satisfy any indemnification liability which is not contested or is finally
determined to be due in accordance with this Article 8; provided, that, the
Principal Stockholders may, at their election and in their sole discretion,
satisfy any indemnification liability to the extent it exceeds the Closing
Payment prior to the date the liability becomes due and payable by authorizing,
in writing, Buyer to withhold an amount equal to the uncontested or finally
determined indemnification liability from the First Payment, Second Payment
and/or any Interest Payments, as the case may be, to be paid after such due
date.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Buyer or the Companies, and the heirs, personnel representatives and successors
of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (which includes the Schedules hereto)
sets forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
a written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement. Each of the Schedules to this Agreement is incorporated herein by
this reference and expressly made a part hereof.
9.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall
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be deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
9.4 BROKERS AND AGENTS. Buyer and the Stockholders (for themselves and on
behalf of the Companies) each represents and warrants to the other that it has
not employed any broker or agent in connection with the transactions
contemplated by this Agreement.
9.5 EXPENSES. Buyer has and will pay the fees, expenses and disbursements
of Buyer and its agents, affiliates, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement. The Companies
have and will pay the fees, expenses and disbursements of the Stockholders, the
Companies, and their agents, affiliates, representatives, financial advisers,
accountants and counsel incurred in connection with the subject matter of this
Agreement; provided, that, any such payments are made on or prior to the Closing
Date from the Companies' available funds.
9.6 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that the
other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition and confidentiality covenants referenced in Section 9.12. It is
accordingly agreed that, in addition to any other remedies which may be
available upon the breach of any such covenants or agreements, each party hereto
shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
parties', covenants and agreements contained in this Agreement.
9.7 NOTICES. Any notice, request, claim, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or sent by telefax
(with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to Buyer to:
FTI Consulting, Inc.
2021 Research Drive
Annapolis, MD 21401
Attn: Jack B. Dunn, IV
Telefax: 410-224-3552
with a required copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: Mark A. Dewire, Esq.
Telefax: 202-663-6363
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If to the Principal Stockholders or, prior to the Closing, the Companies
to:
Kahn Consulting, Inc.
152 West 57th Street
New York, NY 10019
Attn: Stewart J. Kahn
Telefax: 212-841-9350
with a required copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022
Attn: Charles H. Baker, Esq.
Telefax: 212-856-7814
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Maryland,
without giving effect to conflicts of law principles.
9.9 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
9.10 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Except as provided in
Article 8, no provision of this Agreement is intended, nor will be interpreted,
to provide or to create any third party beneficiary rights or any other rights
of any kind in any client, customer, affiliate, shareholder, employee, partner
of any party hereto or any other person or entity.
9.11 AMENDMENT; WAIVER. This Agreement may be amended by the parties hereto
at any time prior to the Closing by execution of an instrument in writing signed
on behalf of each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
9.12 NONCOMPETITION AND CONFIDENTIALITY COVENANTS. The noncompetition and
confidentiality covenants set forth in the Employment Agreements constitute a
material part of the
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purchase and sale transaction contemplated by this Agreement, and are supported
by adequate consideration.
[Execution page following.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FTI CONSULTING, INC.
By:
----------------------------------------
Name:
Title:
KAHN CONSULTING, INC.
By:
----------------------------------------
Name:
Title:
KCI MANAGEMENT CORP.
By:
----------------------------------------
Name:
Title:
PRINCIPAL STOCKHOLDERS
-----------------------------------------
Stewart J. Kahn
-----------------------------------------
Barry M. Monheit
<PAGE>
Agreed with respect to the Recitals,
Sections 1.1, 1.2, 2.2, 5.6 and 7.3
and Article 9:
STOCKHOLDERS
-----------------------------------------
Jay I. Borow
-----------------------------------------
John A. Cherpock
-----------------------------------------
Christopher J. Kearns
-----------------------------------------
Robert S. Rosenfeld
-----------------------------------------
Laureen M. Ryan
-----------------------------------------
Daniel J. Ventricelli
