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) June 13, 1997
ESQUIRE COMMUNICATIONS LTD.
(Exact name of registrant as specified in charter)
DELAWARE 1-11782 13-3703760
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
216 EAST 45TH STREET, NEW YORK, NY 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 687-8010
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Asset Purchase Agreement dated as of June 13, 1997 (the
"KKA Agreement"), by and among Esquire Communications Ltd. ("Esquire"), Krauss,
Katz & Ackerman, Inc. ("KKA") and the stockholders of KKA, on June 13, 1997,
Esquire, through a wholly-owned subsidiary, acquired substantially all the
assets of KKA. The purchase price paid by Esquire consisted of $9,000,000 of
cash. Esquire may pay to KKA additional consideration of up to 300,000 shares of
Common Stock of Esquire based on the annual revenues derived from KKA's business
for the three years beginning January 1, 1997.
In connection with the KKA Agreement, Harvey Krauss, Leonard Katz and
Robert Ackerman, the stockholders of KKA, entered into employment agreements
with Esquire.
Pursuant to an Asset Purchase Agreement dated as of June 18, 1997 (the
"ANS Agreement"), by and among Esquire, American Network Services, Inc. ("ANS"),
and the stockholders of ANS, on June 18, 1997, Esquire, through a wholly-owned
subsidiary, acquired substantially all of the assets of ANS. The purchase price
paid by Esquire consisted of $6,440,000 of cash and 750,000 shares of Common
Stock of Esquire. Esquire granted to the stockholders of ANS the right to
require Esquire to register the shares of Common Stock received by them pursuant
to the ANS Agreement under a Registration Statement to be filed under the
Securities Act of 1933.
In connection with the ANS Agreement, Dr. John C. Durham, the president
and a stockholder of ANS, was elected as a director of Esquire. A stockholders
agreement previously entered into by various stockholders of Esquire was amended
to provide that such stockholders would agree to use their best efforts to elect
Dr. Durham as a director of the Company until he ceases to own at least 56,995
shares of Common Stock of Esquire.
The cash portion of the purchase price for the acquisitions was obtained
by Esquire from borrowings made pursuant to its existing Credit Agreement with
Antares Leveraged Capital Corp. and from the sale by Esquire of 7,500 additional
shares of Series A Convertible Preferred Stock for an aggregate sales price of
$7.5 million. The shares were sold pursuant to a Purchase Agreement dated
October 23, 1996 with Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Antares
Leveraged Capital Corp. Pursuant to an amendment to such agreement, such
entities will have the right from time to time on or prior to December 17, 1998
to acquire up to an additional 7,500 shares of Series A Convertible Preferred
Stock at a price of $1,000 per share, which shares shall have the same terms as
the existing Series A Convertible Preferred Stock.
The purchase price and all negotiations relating to the transactions
were on an arm's length basis. The assets acquired by Esquire will continue to
be used in Esquire's court reporting business.
The foregoing description of each of the acquisitions is qualified in
its entirety by reference to the complete texts of the KKA Agreement and ANS
Agreement which are filed as exhibits to this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
(a), (b) It is impractical to provide the financial statements of KKA
and ANS and the pro forma financial information at this time. Such financial
statements and pro forma financial information will be filed as soon as
practicable but not later than 60 days from the date hereof.
EXHIBITS
10.1 Asset Purchase Agreement dated as of June 13, 1997,
among Esquire, Krauss, Katz & Ackerman, Inc., Harvey Krauss,
Leonard Katz and Robert Ackerman.
10.2 Asset Purchase Agreement dated as of June 18,
1997, among Esquire, American Network Services, Inc.,
John C. Durham, David Rainwater, William Bird and Jeff Johnson.
10.3 Amendment No. 1 dated as of June 17, 1997 to Purchase
Agreement dated October 23, 1996, among Esquire, Golder,
Thoma, Cressey, Rauner Fund IV, L.P. and Antares
Leveraged Capital Corp.
10.4 Amendments No.1 and No. 2 to Stockholder's Agreement
dated October 23, 1996, among Esquire and various stockholders of
Esquire.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESQUIRE COMMUNICATIONS LTD.
Dated: June 25, 1997 By:/s/ David Higson
David Higson
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
10.1 Asset Purchase Agreement dated as of
June 13, 1997, among Esquire,
Krauss, Katz & Ackerman, Inc.,
Harvey Krauss, Leonard Katz and
Robert Ackerman.
10.2 Asset Purchase Agreement dated as of
June 18,1997, among Esquire,
American Network Services, Inc.,
John C. Durham, David Rainwater and
William Bird and Jeff Johnson.
10.3 Amendment No. 1 dated as of June 17,
1997 to Purchase Agreement dated
October 23, 1996, among Esquire,
Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and Antares Leveraged
Capital Corp.
10.4 Amendments No. 1 and No. 2 to
Stockholder's Agreement dated
October 23, 1996, among Esquire and
various stockholders of Esquire.
Exhibit 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
KRAUSS, KATZ & ACKERMAN, INC.
AND
ESQUIRE COMMUNICATIONS LTD.
June 13, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made this 13th day of June, 1997, by and among Krauss,
Katz & Ackerman, Inc., a Pennsylvania corporation ("Seller"), Harvey Krauss,
Leonard Katz and Robert Ackerman (collectively the "Principals") and Esquire
Communications Ltd., a Delaware corporation ("Buyer").
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all the assets of Seller relating to the operation of Seller's
court reporting business (the "Business") upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. SALE AND TRANSFER OF ASSETS
1.1. Based upon and subject to the terms, conditions, agreements,
representations and warranties hereinafter set forth, the Seller does hereby
agree to sell, assign, transfer, deliver and convey to Buyer on the Closing Date
(as hereinafter defined), and Buyer does hereby agree to purchase, acquire,
accept and take possession of on the Closing Date, all of Seller's right, title
and interest in and to all assets, properties, rights and business of Seller of
every kind and description wherever located (except for cash) used in or related
to the Business (all of which are hereinafter sometimes referred to as the
"Assets"), including without limitation, the following assets of Seller:
(a) All accounts receivable of Seller;
(b) All office supplies, office machines, office furniture,
machinery, equipment, fixtures, inventory, leasehold improvements and computer
hardware and software systems, including those described on Schedule 1.1(b)
hereto;
(c) All vendor and customer lists, work-in-process and
computerized information of the Seller with respect to the Assets;
(d) All general intangibles relating to Seller's
Business including, without limitation, any trade name, any design and logo
relating to the name, contracts and commitments with customers, licenses (to the
extent assignable), claims and deposits; and
(e) All books, records, forms, promotional materials and
documents of Seller relating to the foregoing, including, without
limitation, accounting, payroll and tax records and telephone and telecopier
numbers.
2. ASSUMPTION OF LIABILITIES AND OBLIGATIONS
2.1. The Assets will be sold, conveyed, transferred and assigned to the
Buyer on the Closing Date free and clear of all liens, security interests,
mortgages, claims, restrictions, charges and encumbrances (collectively,
"Liens") whatsoever. The Buyer does not assume, accept or undertake any
obligations, duties, debts or liabilities of Seller of any kind whatsoever
pursuant to this Agreement or otherwise, except that from and after the Closing
Date Buyer hereby agrees to assume and to pay and discharge the following
liabilities (the "Assumed Liabilities") of Seller (to the extent Seller is not
in default and solely to the extent to be performed after the Closing Date):
(a) All accounts payable and liabilities and obligations with
respect to work-in-process incurred in the normal course of business;
(b) $150,000 due and owing by Seller to CoreStates Bank N.A.;
(c) All liabilities and obligations arising under the
agreements and the office leases as set forth on Schedule 2.1 hereto;
(d) All accrued vacation or sick pay of employees of Seller
who become employees of Buyer, to the extent earned but not used prior to the
Closing, the amount of which at May 31, 1997 is set forth on Schedule 2.1(d)
hereto; and
(e) The outstanding principal of and interest due on the
promissory note dated August 17, 1993 in the original aggregate principal
amount of $184,190 payable by Krauss, Katz & Ackerman Acquisition Company, Inc.
to the order of DeSimone Reporting Group, Inc., which note is current in
accordance with its terms and has not been amended or modified.
2.2. Except as provided in paragraph 2.1 and notwithstanding anything
else to the contrary contained herein, Buyer is not assuming and shall not be
liable for any liabilities of Seller, including, without limitation, any
liabilities (i) under contracts and leases which shall not have been assigned to
Buyer pursuant to this Agreement (including, but not limited to, any union
agreements); (ii) for indebtedness for borrowed money; (iii) by reason of or
arising as the result of any default or breach by Seller of any contract, for
any penalty assessed against Seller under any contract or relating to or arising
out of any event which with the passage of time or after giving of notice, or
both, would constitute or give rise to such a breach, default or penalty,
whether or not such contract is being assigned to and assumed by Buyer pursuant
to this Agreement; (iv) the existence of which would conflict with or constitute
a breach of any representation, warranty, covenant or agreement of Seller or the
Principals contained herein; (v) to any shareholder or affiliate of Seller or to
any present or former employee, officer or director of or consultant to Seller
(or independent contractor retained by Seller) for services rendered prior to
the Closing Date, including, without limitation, any bonuses, any termination or
severance pay related to Seller's employees, and any post retirement medical
benefits or other compensation or benefits; (vi) relating to the execution,
delivery and consummation of this Agreement and the transactions contemplated
hereby, including, without limitation, any and all taxes incurred as a result of
the sale contemplated by this Agreement; (vii) for any taxes accrued or incurred
prior to the Closing Date or relating to any period (or portion of a period)
prior thereto; (viii) relating to or arising out of any environmental matter,
including, without limitation, any violation of any environmental law or any
other law relating to health and safety of the public or the employees of
Seller; or (ix) relating to, or arising out of, services rendered by Seller, or
the conduct or operation of the business of Seller, prior to the Closing Date,
except for Assumed Liabilities.
3. CLOSING
The closing of this Agreement (the "Closing") shall take place at a
place mutually determined by Seller and Buyer at 10:00 A.M. local time, on the
date hereof or at such other date or time as Buyer and Seller may agree upon
(the date of Closing being hereinafter referred to as the "Closing Date").
4. PURCHASE PRICE
4.1. The total purchase price (the "Purchase Price") to be paid by Buyer
for the Assets is $9,000,000, subject to increase, payable on the Closing Date
by the delivery by Buyer to Seller of a certified or bank cashier's check in
such amount or by means of a wire transfer in such amount to an account number
and depository designated by Seller.
4.2. Seller shall pay to Buyer on the Closing Date the aggregate amount
of all prepayments made to or advances received by Seller under all contracts
being assumed by Buyer pursuant to this Agreement including, but not limited to,
all deposits made with respect to such agreements. All adjustments customary in
acquisitions, including utilities, compensation, rent and other items, shall be
apportioned between Buyer and Seller as of the Closing Date.
4.3. The Purchase Price shall be allocated by Buyer and Seller to the
Assets in accordance with Schedule 4.3 hereto, which Schedule shall be prepared
on or after the Closing Date. Each party hereto agrees to reflect the Assets
upon its books for tax reporting purposes in accordance with such determination
and to file all tax returns in accordance with and based upon such
determination.
4.4. (a) The Purchase Price shall be subject to increase based on annual
revenues of the Business for each of the three calendar years ending December
31, 1997, December 31, 1998 and December 31, 1999 (each of such years being
hereinafter referred to as an "Earn Out Period") as hereinafter set forth, which
revenues shall be determined in accordance with generally accepted accounting
principles. If the total revenues from the Business for the year ending December
31, 1997 are more than $7,000,000, then the Seller shall receive 100,000 shares
of Common Stock of the Buyer, par value $.01 per share (the "Common Stock"). If
the total revenues from the Business for the year ending December 31, 1998 are
more than $7,500,000, then the Seller shall receive 100,000 shares of Common
Stock. If the total revenues for the Business for the year ending December 31,
1999 (the "Third Earn Out Period") are more than $8,000,000, then the Seller
shall receive 100,000 shares of Common Stock. If the revenues for any one or
more of the three Earn Out Periods exceed $7,000,000, $7,500,000 or $8,000,000,
respectively (such amounts being hereinafter referred to as the "Minimums"), any
amounts in excess of the Minimums may be carried forward or backward to meet the
Minimums for a prior or succeeding Earn Out Period. For example, if the revenues
for the first Earn Out Period are $6,900,000 and the revenues for the second
Earn Out Period are $8,300,000, $100,000 of the amount in excess of $7,500,000
may be carried back to meet the Minimum for the first Earn Out Period, and the
balance of $700,000 may be carried forward to the third Earn Out Period. In
addition, if in any Earn Out Period the revenues are at least 90% of the Minimum
for such Earn Out Period, then the Seller shall receive a pro rata portion of
the 100,000 shares for such Earn Out Period calculated by multiplying 100,000 by
a fraction, the numerator of which is the total revenues for such Earn Out
Period and the denominator of which is the Minimum for such Earn Out Period. For
example, if the actual revenues for the first Earn Out Period are $6,650,000,
the Buyer will issue 95,000 shares for such Earn Out Period.
(b) Buyer shall not, prior to the end of the Third Earn Out
Period, (i) transfer control of the Business, dispose of any substantial
asset relating to the Business or take any other action (including, without
limitation relocating the offices of the Business from their present locations
or terminating the employment of persons working in such offices) which would
have a material adverse effect on the total revenues of the Business without the
prior written consent of Seller or a majority of the Principals or (ii) divert
to Buyer or its affiliates any business opportunity which would be appropriate
for the Business to undertake.
(c) In the event of any change in the Common Stock prior to the
end of the Third Earn Out Period by reason of stock dividends,
split-ups, recapitalizations, combinations or similar events, the number of
shares of Common Stock to be delivered pursuant to subparagraph (a) hereof shall
be appropriately adjusted.
(d) The shares of Common Stock to be delivered pursuant to
subparagraph (a) hereof (collectively, the "Shares") will not be
registered under the Securities Act of 1933, as amended (the "Securities Act").
The owners of the Shares will be afforded registration rights pursuant to a
Registration Rights Agreement (the "Registration Rights Agreement") in
substantially the form of Exhibit A attached hereto.
(e) In determining revenues under this Agreement, (x) there
shall be included the revenues from any referrals by Seller to any of
Buyer's other offices and (y) there shall be excluded the annual revenues (i) of
any acquired businesses, which revenues shall be equal to the annual revenues of
the acquired businesses for the twelve month period of time prior to any such
acquisitions; provided, however, that revenues from any business acquired in the
ordinary course of business through a finder, contingent compensation or similar
agreement consistent with Seller's prior practices shall be included if there is
no cash, notes or securities paid or issued in such acquisition, with any
compensation being contingent on future revenues generated, and (ii) derived
from Buyer's corporate services division or 50% of revenues derived from other
national marketing program.
(f) As promptly as practicable after the end of each Earn Out
Period, but not later than 90 days following the end of each Earn Out
Period, Buyer shall deliver to the Principals its calculation of the total
revenues of the Business for such Earn Out Period. Within 30 days of receipt of
such calculation (the "Response Period"), the Principals shall notify Buyer in
writing as to whether they agree or disagree with such calculation, and if they
disagree, the reasons therefor (the "Dispute Notice"). If the Principals do not
respond to Buyer's notice within the Response Period, they shall be deemed to
have accepted Buyer's calculation of the total revenues of the Business for such
Earn Out Period. In the event of a dispute, the Principals, on the one hand, and
the Buyer, on the other hand, shall work together to resolve any such dispute.
If such dispute cannot be resolved within ten days following Buyer's receipt of
the Dispute Notice, either Buyer or the Principals may submit the dispute to an
independent accounting firm jointly selected by Buyer and the Principals, whose
determination shall be final and binding on both Buyer and the Principals. The
fees and expenses of such accounting firm shall be shared equally by Buyer and
the Principals. Buyer shall promptly issue Shares to the Principals to the
extent the final calculation of the total revenues of the Business for such Earn
Out Period exceed the amounts specified in subparagraph (a).
(g) From and after the Closing and until the end of the Third
Earn Out Period, Buyer shall provide the Principals with copies of the
Buyer's quarterly financial statements showing the total revenues of the
Business for such quarter.
(h) From and after the Closing and until the end of the Third
Earn Out Period, the Principals shall have access to the Buyer's (and
its auditor's) work papers relating to the total revenues of the Business and
may review or audit such work papers at their own expense.
4.5. On the Closing Date, the accounts receivable of Seller shall exceed
the Assumed Liabilities (which Assumed Liabilities for purposes of calculating
compliance with this paragraph will consist of $150,000 due and owing by Seller
to CoreStates Bank N.A. and all accounts payable of the Business) by at least
$600,000. If the accounts receivable do not exceed Assumed Liabilities by at
least $600,000, then the cash portion of the Purchase Price shall be reduced by
the amount by which accounts receivable are less than $600,000 in excess of
Assumed Liabilities. If the accounts receivable exceed the Assumed Liabilities
by more than $600,000, then the cash portion of the Purchase Price shall be
increased by the amount by which accounts receivable are more than $600,000 in
excess of Assumed Liabilities. Within 60 days after the Closing Date, Buyer
shall prepare and furnish to Seller a statement (the "Statement") reflecting the
accounts receivable and Assumed Liabilities as of the Closing Date, which shall
be prepared in accordance with generally accepted accounting principles and in
accordance with the same practices as used by Seller in preparing the December
31, 1996 financial statements.
For purposes of this Section 4.5, accounts payable shall not include any
obligations of Seller to refund duplicate payments which may have been received
by Seller. Buyer shall withhold from the Purchase Price or other amounts due by
Buyer to Seller hereunder an amount equal to one-half of any amounts identified
by Buyer's accountants as duplicate payments for Seller's prior fiscal year;
provided, however that the amount to be withheld shall not exceed $65,000 (the
"Deduction"). If subsequent to 120 days after the Closing the Seller advises
Buyer in writing that less than the Deduction in the aggregate has been refunded
within 120 days after the Closing Date to Seller's clients as a result of
duplicate payments, then the Buyer shall promptly pay to Seller or the
Principals, by wire transfer to an account designated by them, the difference
between the Deduction and the aggregate amounts so refunded.
4.6. Seller shall have the right to review the Statement and to object
to any items contained therein within 30 days after its receipt thereof. If
Seller does not so object within 30 days, Buyer's determination shall be final
and binding on the parties. If Seller objects to any items within such 30 days,
Seller and Buyer shall consult with each other and attempt to reach an
agreement. If they are unable to reach any agreement within 60 days, the matter
shall be referred to an independent accounting firm jointly selected by Seller
and Buyer, whose determination shall be final and binding on the Buyer and the
Seller. The fees and expenses of the jointly selected accounting firm shall be
paid one-half by Buyer and one-half by Seller.
5. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PRINCIPALS
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller and the Principals jointly and
severally represent and warrant as follows:
5.1. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. Seller has the
power and the authority and all licenses and permits required by governmental
authorities to own and operate its properties and carry on its business as now
being conducted. Except as set forth on Schedule 5.1 hereto, the Seller does not
have any subsidiaries and does not own beneficially or of record any equity
interest in any corporation, partnership or other business organization or
entity.
5.2. Seller has the corporate power and authority and the Principals
have the legal capacity to execute and perform this Agreement and all other
agreements to be entered into in connection with the transactions contemplated
hereby. All the issued and outstanding shares of capital stock of the Seller are
owned beneficially and of record by the Principals.
5.3. The execution, delivery and performance of this Agreement and all
other agreements to be entered into in connection with the transactions
contemplated hereby have been duly authorized by the Board of Directors and
shareholders of the Seller and by all necessary corporate action, and do not
violate or conflict with any provisions of the Certificate of Incorporation or
Bylaws of the Seller or any agreement, instrument, law, order or regulation to
which Seller or the Principals is a party or by which Seller or any Principal is
bound. Except as set forth on Schedule 5.3 hereto, no consent, approval or
authorization of, or filing with or notification to, any lender, security
holder, governmental agency or other person or entity is required by Seller or
the Principals in connection with the execution, delivery and performance by the
Seller and the Principals of this Agreement and the consummation of the
transactions contemplated hereby.
5.4. This Agreement, and all other instruments delivered by Seller and
the Principals in connection herewith, have been duly executed and delivered by
the Seller or the Principals and are legal, valid and binding obligations of
Seller and the Principals, enforceable in accordance with their respective
terms.
5.5. The Seller is the owner of and has good, valid and marketable title
to the Assets (other than those Assets which are being leased by Seller from
third parties as described on Schedule 5.5) free and clear of all Liens. The
Assets to be sold and conveyed to Buyer hereunder constitute all of the assets
used in or required by Seller in the normal operation and conduct of its
Business, other than cash and those Assets which are leased as set forth on
Schedule 5.5. The fixed assets included in the Assets are in good repair and
operating condition, normal wear and tear excepted.
5.6. Except as set forth on Schedule 5.6, there is no action, suit,
litigation or proceeding pending, or to the knowledge of Seller or the
Principals, threatened against or relating to the Assets or the Business nor
does Seller or any Principal know of any basis for any such action, or of any
governmental investigation relating to the Assets or the Business.
5.7. There does not exist any order, writ, injunction or decree that has
been issued by, or requested of, any court or governmental agency which is
against, or binding on, Seller or any Principal which do or may affect, limit or
control the Assets or Buyer's use thereof.
5.8. Seller and the Principals have obtained all required approvals or
authorizations of this Agreement and any other agreements to be entered into in
connection with the transactions contemplated hereby which are required by law
or otherwise in order to make this Agreement or any other agreements entered
into in connection with the transactions contemplated hereby binding upon Seller
and the Principals.
5.9. The utilization of the Assets being sold and conveyed to Buyer
hereunder do not infringe upon or violate in any way the rights evidenced by any
outstanding patents, trademarks or trade names, whether registered or
unregistered, held or owned by any third parties.
5.10. Seller's relationships with its customers are in all material
respects good, and Seller and the Principals are not aware of any facts or
circumstances which might alter, negate, impair or in any way adversely affect
the continuity of any such customer relationships.
5.11. The accounts receivable of Seller are actual and bona fide
receivables representing obligations for the total amount thereof which arose in
the ordinary course of business, and are collectible in full within one year
after the Closing Date.
5.12. There are no Liens for any federal, state, county or local
franchise, income, excise, property, business, sales, commercial rent,
employment or other taxes upon the Assets. Except as set forth on Schedule 5.12
hereto, Seller has timely filed all federal, state, county and local franchise,
income, excise, property, business, sales, commercial rent and employment and
other tax returns which are required to be filed through the Closing Date, and
has paid, or will pay, all taxes which are due and payable on or before the
Closing Date.
5.13. Schedule 5.13 contains a complete and accurate list of all
personnel utilized in Seller's business, including full and part-time persons,
employees and independent contractors. Buyer will not be liable for any
obligations to the foregoing persons which relate to the period of time prior to
the Closing Date, except for accrued vacation and sick pay as provided in
Section 2.1(d) hereof.
5.14. The Seller has furnished to Buyer a balance sheet of the Seller as
at December 31, 1996 (the "Balance Sheet Date"), and the related statements of
income, retained earnings and cash flows for the year then ended, together with
the notes thereto (collectively, the "Financial Statements"), as compiled by
independent public accountants. The Financial Statements fairly present the
financial position, results of operations and cash flows of the Seller as at, or
for the period ended on, such date. Seller's total income and gross profit for
its fiscal year ended December 31, 1996 were not less than $6,800,000 and
$2,825,000, respectively. Since the Balance Sheet Date, (a) Seller has conducted
its business in a consistent manner in the regular and ordinary course, (b)
there has not been any material adverse change in the business, operations or
financial condition of Seller, and (c) there has not been any damage,
destruction or loss affecting the Business.
5.15. Each of the material agreements to which Seller is a party or to
which it is subject or by which it is bound is listed on Schedule 5.15 attached
hereto (true and complete copies of which have been furnished to Buyer) and is a
valid and subsisting contract of all of the parties thereto in full force and
effect in all material respects without modification. Seller has performed in
all material respects all obligations required to be performed by it and is not
in default under any agreement, instrument or other document to which it is a
party or to which it is subject or by which it is bound, and no event has
occurred thereunder which, with or without the lapse of time or the giving of
notice, or both, would constitute a default by it thereunder. To the knowledge
of Seller and the Principals, no other party is in default under any such
agreement, instrument or other document.
5.16. There are no labor strikes, disputes, slow downs, work stoppages
or other labor troubles or grievances pending or, to Seller's or the Principals'
knowledge, threatened against or involving Seller. Seller is not a party to any
union agreements. No unfair labor practice complaint before the National Labor
Relations Board, no discharge or grievance before the Equal Employment
Opportunity Commission and no complaint, charge or grievance of any nature
before any similar or comparable state, local or foreign agency, in any case
relating to Seller or the conduct of its business is pending or, to Seller's or
the Principals' knowledge, threatened.
5.17. Except as set forth on Schedule 5.17 hereto, Seller has complied
and is in compliance with all laws, orders and regulations of any governmental
authority applicable to Seller, its Business, assets or property or its
operations, including, without limitation, laws relating to zoning, building
codes, antitrust, occupational safety and health, environmental protection and
conservation, water or air pollution, toxic and hazardous waste and substances
control, consumer product safety, product liability, hiring, wages, hours,
employee benefit plans and programs, collective bargaining and withholding and
social security taxes.
5.18. No representation or warranty by Seller or the Principals
contained in this Agreement, and no statement contained in any Schedule, Exhibit
or certificate furnished to Buyer under this Agreement, contains any untrue
statement of any material fact, or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading.
5.19. Seller and the Principals consent to the placement of the
following legend on each certificate representing any Shares issued pursuant to
this Agreement and acknowledge that stop transfer instructions will be placed
with the Buyer's transfer agent:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER
SUCH ACT (OR AN EXEMPTION FROM SUCH REGISTRATION) IS THEN IN
EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION FROM
COUNSEL FOR THE ISSUER OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO
ACTION' LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
TO SUCH TRANSFER OR SALE."
5.20. Seller and the Principals understand that the Shares will not be
registered under the Securities Act for the reason that the sale provided for in
this Agreement is exempt pursuant to Section 4 of the Securities Act. Seller and
the Principals represent that they are experienced in evaluating companies such
as the Buyer, have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of their investment,
and have the ability to suffer the total loss of their investment in the Shares.
Seller and the Principals are accredited investors within the meaning of Rule
501 of Regulation D promulgated under the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer represents and warrants
as follows:
6.1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Buyer has the power and
the authority and all licenses and permits required by governmental authorities
to own and operate its properties and carry on its business as now being
conducted.
6.2. The Buyer has the corporate power and authority to execute and
perform this Agreement and all other agreements to be entered into in connection
with the transactions contemplated hereby.
6.3. The execution, delivery and performance of this Agreement and all
other agreements to be entered into in connection therewith have been duly
authorized by the Board of Directors of the Buyer and by all necessary corporate
action, and do not violate or conflict with any provisions of the Certificate of
Incorporation or Bylaws of the Buyer or any agreement, instrument, law or
regulation to which the Buyer is a party or by which Buyer is bound.
6.4. No approval or authorization of this Agreement or any other
agreement to be entered into in connection with the transactions contemplated by
this Agreement is required by law or otherwise in order to make this Agreement
or any other agreements entered into in connection herewith binding upon the
Buyer, except as set forth on Schedule 6.4 and for approval of the listing of
the Shares on the Nasdaq Stock Market and on the Boston Stock Exchange. Upon the
execution and delivery of this Agreement and any other agreement in connection
therewith, such agreements will constitute legal, valid and binding obligations
of Buyer, enforceable in accordance with their respective terms.
6.5. The Shares to be issued pursuant to this Agreement, when so issued,
will be duly and validly authorized and issued, fully paid and non-assessable
and free and clear of any Liens created by the Buyer (other than restrictions
arising under the Securities Act and state securities laws).
7. CONDITIONS TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller hereunder are, at the option of the
Seller, subject to the following conditions:
7.1. The representations and warranties of Buyer contained herein shall
be true and correct on the date when made and at and as of the Closing Date as
if then made, and Buyer shall have performed and complied with all agreements,
covenants and conditions required hereunder to be performed or complied with by
it prior to or at the Closing.
7.2. At the Closing, the Seller shall have received an opinion, dated
the Closing Date, of Stroock & Stroock & Lavan LLP, counsel for Buyer, in form
and substance reasonably satisfactory to the Seller.
7.3. At the Closing, the Seller shall have received certified copies of
the resolutions of the Board of Directors of Buyer authorizing and approving
this Agreement.
7.4. There shall not be any order, injunction or decree of any court
having jurisdiction to restrain, enjoin, invalidate or otherwise prevent this
Agreement and the consummation of the transactions contemplated hereby, and
there shall not be any litigation or proceeding by any commission, agency or
department of the federal or any foreign, state or local government to restrain,
enjoin, invalidate or otherwise prevent this Agreement and the consummation of
the transactions contemplated hereby.
7.5. All governmental approvals required for the consummation of this
Agreement shall have been obtained.
7.6. All legal matters in connection with this Agreement and the
transactions contemplated by this Agreement, and all documents and instruments
incident thereto, shall be reasonably satisfactory in form and substance to
counsel to the Seller, and the Seller and such counsel shall have received all
such documents and instruments, or copies thereof (certified if requested), as
they may have reasonably requested.
7.7. The Seller shall have received a certificate of an officer of
Buyer, dated the Closing Date, in form and substance satisfactory to the Seller,
certifying as to the fulfillment on behalf of Buyer of the conditions specified
in paragraph 7.1 hereof.
7.8. Each of the Principals shall have entered into an employment
agreement with the Buyer in substantially the form of Exhibit B attached hereto.
7.9. The Registration Rights Agreement shall have been executed and
delivered by the parties thereto.
8. CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer hereunder are, at the option of Buyer, subject
to the following conditions:
8.1. The representations and warranties of the Seller and the Principals
contained herein shall be true and correct on the date when made and at and as
of the Closing Date as if then made and the Seller and the Principals shall have
performed and complied with all agreements, covenants and conditions required
hereunder to be performed or complied with by them prior to or at the Closing.
8.2. At the Closing, Buyer shall have received an opinion dated the
Closing Date, from Morgan, Lewis & Bockius LLP, counsel for the Seller, in form
and substance reasonably satisfactory to Buyer.
8.3. Buyer shall have received certified copies of the resolutions of
the Board of Directors and shareholders of the Seller authorizing and approving
this Agreement.
8.4. There shall not be any order, injunction or decree of any court
having jurisdiction to restrain, enjoin, invalidate or otherwise prevent this
Agreement and the consummation of the transactions contemplated hereby, and
there shall not be any litigation or proceeding by any commission, agency or
department of the federal or any foreign, state or local government to restrain,
enjoin, invalidate or otherwise prevent this Agreement and the consummation of
the transactions contemplated hereby.
8.5. All governmental approvals required for the consummation of this
Agreement and the other transactions contemplated hereby shall have been
obtained and all consents and approvals of any other persons required for the
consummation of this Agreement and the other transactions contemplated hereby,
the withholding of which would have a material adverse effect on the financial
condition or business of the Seller, shall have been obtained.
8.6. At the Closing, Buyer shall have received from each state or other
jurisdiction in which the Seller is incorporated or qualified as a foreign
corporation, good standing (or equivalent) certificates dated within thirty days
prior to the Closing Date, as to the due incorporation or organization, legal
existence and qualification of the Seller in such jurisdiction.
8.7. Since the Balance Sheet Date, there shall have been no material
adverse change in the properties, assets, business, results of operations or
financial condition of the Seller.
8.8. All legal matters in connection with this Agreement and the
transactions contemplated by this Agreement, and all documents and instruments
incident thereto, shall be reasonably satisfactory in form and substance to
Stroock & Stroock & Lavan LLP, counsel to Buyer, and Buyer and such counsel
shall have received such documents and instruments, or copies thereof (certified
if requested), as they may have reasonably requested.
8.9. Buyer shall have received a certificate of the Seller executed by
its President, dated the Closing Date, in form and substance satisfactory to
Buyer, certifying as to the fulfillment on behalf of the Seller of the
conditions specified in paragraphs 8.1, 8.4, 8.5 and 8.7 hereof.
8.10. Each of the Principals shall have entered into an employment
agreement with the Buyer in substantially the form of Exhibit B attached hereto.
9. CLOSING DOCUMENTS
9.1. Seller agrees to deliver to Buyer on the Closing Date appropriate
assignments and bills of sale with respect to the Assets being sold hereunder,
together with the documents required to be delivered by Seller pursuant to
Section 8 hereof. Seller shall amend its Certificate of Incorporation to change
its name so that Buyer may utilize the corporate name of Seller after the
Closing, which amendment shall be filed within three business days after the
Closing.
9.2. Buyer agrees to deliver on the Closing the Purchase Price,
consisting of cash, and the documents required to be delivered by Buyer pursuant
to Section 7 hereof.
10. COSTS
Each party covenants and agrees that it shall be responsible for and
bear its respective costs and expenses in connection with, or arising out of,
the negotiation or consummation of this Agreement and the transactions
contemplated hereby, including, but not limited to, legal and accounting fees
and expenses. Seller shall be responsible for any sales, use or transfer taxes
applicable to the transactions provided for herein.
11. INDEMNIFICATION
11.1. INDEMNIFICATION BY SELLER. Seller and the Principals jointly and
severally hereby agree to indemnify Buyer against and hold it harmless from any
and all losses, liabilities, costs, damages, claims and expenses (including,
without limitation, reasonable attorneys fees and expenses incurred by Buyer in
any action or proceeding between Buyer and Seller and/or the Principals or
between Buyer and any third party or otherwise) ("Damages") which Buyer may
sustain at any time by reason of (i) noncompliance with any applicable bulk
sales or transfer law, (ii) any liability or contract of, or claim against,
Seller, whether contingent or absolute, direct or indirect, known or unknown,
matured or unmatured (including but not limited to liabilities for taxes)
relating to the operations of Seller prior to the Closing Date, except for
Assumed Liabilities, (iii) any liability or claim arising in any way from any
service rendered, or action taken by, or relating to the operations of, Seller
prior to the Closing Date, except for the Assumed Liabilities, (iv) any
liability or claim under any environmental laws relating to any event, action or
failure to act which occurred prior to the Closing Date, or (v) the breach or
inaccuracy of or failure to comply with, or the existence of any facts resulting
in the inaccuracy of, any of the warranties, representations, conditions,
covenants or agreements of Seller or the Principals contained in this Agreement
or in any agreement delivered pursuant hereto, or arising out of the
consummation of the transactions contemplated hereby. Buyer shall have the right
to set-off and deduct any Damages incurred by it under this Agreement from any
payments required to be made by Buyer under this Agreement. In addition, at
Seller's election, Seller shall have the right to reimburse Buyer for Damages by
having Buyer set-off and deduct such Damages from amounts payable to Seller
pursuant to Section 4.4 of this Agreement. The Seller and the Principals shall
not have any liability to indemnify the Buyer except to the extent that the
aggregate of the Damages exceeds $75,000 (and then only to the extent of the
excess) and in no event shall Seller or the Principals have any liability for
any Damages which exceed the amount of the Purchase Price.
11.2. INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
Seller and the Principals harmless from and against any and all Damages in
excess of $75,000 (which amount shall only apply to subparagraph (ii) below and
not to Assumed Liabilities) which Seller or the Principals may sustain at any
time by reason of (i) any Assumed Liability by Buyer or (ii) the breach or
inaccuracy of or failure to comply with any warranties, representations,
conditions, covenants or agreements of Buyer contained in this Agreement or in
any agreement, certificate or document delivered pursuant to or in connection
with this Agreement or arising out of the Closing of the transactions
contemplated hereby.
11.3. PROCEDURES FOR INDEMNIFICATION. In the event that any claim is
asserted against any party hereto, or any party hereto is made a party defendant
in any action or proceeding, and such claim, action or proceeding involves a
matter which is the subject of this indemnification, then such party (an
"Indemnified Party") shall give written notice to the other party hereto (the
"Indemnifying Party") of such claim, action or proceeding, and such Indemnifying
Party shall have the right to join in the defense of said claim, action or
proceeding at such Indemnifying Party's own cost and expense and, if the
Indemnifying Party agrees in writing to be bound by and to promptly pay the full
amount of any final judgment from which no further appeal may be taken and if
the Indemnified Party is reasonably assured of the Indemnifying Party's ability
to satisfy such agreement, then at the option of the Indemnifying Party, such
Indemnifying Party may take over the defense of such claim, action or
proceeding, except that, in such case, the Indemnified Party shall have the
right to join in the defense of said claim, action or proceeding at its own cost
and expense.
12. NON-COMPETITION
12.1. Each of the Seller and the Principals agrees that for a period of
two years after the Closing Date, they (and their affiliates) will not, directly
or indirectly, within a radius of 100 miles of metropolitan Philadelphia,
Pennsylvania, or 100 miles surrounding Seller's existing place of business or in
any county or city in which Seller conducted its business (the "Territory"), (i)
engage in any business the same as or similar to, or engage in competition with,
the business heretofore or presently engaged in by Seller, (ii) render services
to or have any interest, as a shareholder, owner, agent, consultant, lender or
guarantor or any other interest, in any other person engaged in the rendering of
services, which are currently being rendered by Seller, or (iii) engage in
competition with, or sell, services as are referred to in clause (ii) of this
paragraph; provided, however, that the foregoing shall not be deemed to prevent
the Seller or the Principals from investing in securities if such class of
securities in which the investment is so made is listed on a national securities
exchange, is issued by a company registered under Section 12(g) of the
Securities Exchange Act of 1934 or is traded on the Nasdaq Stock Market or
over-the-counter, so long as such investment holdings do not, in the aggregate,
constitute more than 5% of the voting stock of any company's securities.
12.2. Neither Seller nor any Principal nor any affiliate of any of them,
for a period of two years from and after the Closing Date, shall, directly or
indirectly, (i) hire, offer to hire, entice away, retain, employ or solicit or
attempt to solicit (either for itself or as agent for another) for employment or
induce, persuade or encourage any person to leave Buyer's employ who, prior to
the Closing Date was, or during such two year period will be, employed or
retained by Buyer as a consultant, independent contractor, reporter, agent,
employee or otherwise or (ii) divert or attempt to divert from Buyer any
business whatsoever by influencing or attempting to influence any client or
supplier of Buyer.
12.3. Seller and the Principals acknowledge and agree that any breach of
this Section 12 is likely to result in irreparable injury to Buyer, that
monetary damages will be an inadequate remedy of such breach and that,
accordingly, in addition to any other remedy that Buyer may have, Buyer shall be
entitled to enforce the specific performance of this Section 12 and to seek both
permanent and temporary relief in the event of any breach hereof.
12.4. The parties acknowledge that the time, scope, geographic area and
other provisions of this Section 12 have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the transactions contemplated by this
Agreement. If any portion of this Section 12 shall be determined to be invalid
and unenforceable as written, each such portion shall be enforced to the extent
reasonable under the circumstances and such determination shall not affect the
validity or enforceability of the balance hereof, and such balance shall remain
in full force and effect. It is understood that Seller and the Principal are
entering into this non-competition agreement in order to induce Buyer to enter
into this Agreement.
13. BROKERS
Each party represents and warrants to the other (and agrees to indemnify
and hold harmless the other against breach of any such representation and
warranty) that it has not engaged any broker, finder or similar person or entity
in connection with the transactions provided for herein.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained herein, and all other
representations and warranties of the Seller, the Principals and Buyer contained
in the instruments executed in connection with the consummation of the
transactions provided for herein, shall survive the execution of this Agreement,
the consummation of the sale contemplated hereby and any investigation made by
any party hereto and shall terminate two years after the Closing Date; provided,
however, that the parties shall be liable for all claims for indemnification
made in writing prior to the expiration of such two year period of time in
accordance with the procedures set forth in Section 11.
15. NOTICES
All notices, requests, demands, documents and other communications given
or due hereunder shall hereafter be made in writing and shall be deemed to have
been duly given when hand delivered, when received if sent by telecopier or by
same day or overnight recognized commercial courier service or three days after
being mailed by certified or registered mail, postage prepaid:
if to the Seller or Principals to:
Krauss, Katz & Ackerman, Inc.
1880 John F. Kennedy Blvd.
Philadelphia, Pennsylvania 19103
Attention: President
with a copy to:
F. Traynor Beck
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
and if to the Buyer to:
Malcolm Elvey
Esquire Communications Ltd.
216 East 45th Street
New York, New York 10017
with a copy to:
Martin H. Neidell
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
16. COMPLETE AGREEMENT
This Agreement and the accompanying schedules and exhibits contain the
complete agreement between the parties hereto with respect to the sale
contemplated hereby and supersede all prior covenants and understandings between
the parties hereto with respect to such sale. This Agreement shall not be
amended or modified except by a writing signed by each party to be charged and
this Agreement may not be discharged except by performance in accordance with
its terms or by a writing signed by each party to be charged.
17. SEVERABILITY
In case any one or more of the provisions hereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
18. WAIVER, REMEDIES
No waiver of any breach of any provision of this Agreement shall be held
to be a waiver of any other or subsequent breach, and the failure of a party to
enforce at any time any provision hereof shall not be deemed a waiver of any
right of any such party to subsequently enforce such provision or any other
provision hereunder. All remedies afforded in this Agreement shall be taken and
construed as cumulative, that is, in addition to every other remedy provided
herein or by law.
19. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. COOPERATION; COVENANTS AFTER CLOSING
The Principals will continue to use their best efforts on and after the
Closing Date in endeavoring to effect the collection of accounts receivable
owing to Seller at the Closing Date.
21. AUTHORIZATION; MAIL
The Principals shall have the right and authority to collect for the
account of Buyer all receivables and other items which shall be transferred to
Buyer as provided herein, and Buyer may endorse with the name of Seller any
checks received on account of any such receivables or other items. Any cash or
other property that Seller may receive in respect of any such receivables or
other items shall belong to Buyer. Seller agrees to deliver to Buyer promptly
upon receipt any mail, checks or other documents received by it pertaining to
the Assets or otherwise to the business of Seller, as conducted by Buyer, or any
of the Assumed Liabilities. Buyer agrees to deliver to Seller any mail which it
receives to which it is not entitled by reason of this Agreement or otherwise
and to which Seller is entitled.
22. FURTHER ASSURANCES
Seller agrees at any time and from time to time after the Closing Date,
upon the request of Buyer, to do, execute, acknowledge and deliver, or to cause
to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, powers of attorney and assurances as may be required for
the better assigning, transferring, conveying, and confirming to Buyer, or to
its successors and assigns, of any or all of the Assets and to carry out the
terms and conditions of this Agreement.
23. CONFIDENTIALITY
Seller and the Principals, on the one hand, and Buyer, on the other
hand, severally agree not to, directly or indirectly, without the prior written
consent of the other, use or disclose to any person, firm or corporation, any
information, trade secrets, confidential customer information, technical data or
know-how relating to the products, processes, methods, equipment or business
practices of the other.
24. BENEFIT OF PARTIES; ASSIGNMENT
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns. The
Agreement may not be assigned by Seller or the Principals except with the prior
written consent of Buyer. Buyer may freely assign this Agreement to a
wholly-owned subsidiary of Buyer; provided, however, that Buyer shall guarantee
the obligations of such subsidiary. Nothing herein contained shall confer or is
intended to confer on any third party or entity which is not a party to this
Agreement any rights under this Agreement.
25. ARBITRATION
Mindful of the high cost of litigation, not only in dollars but time and
energy as well, the parties intend to and do hereby establish a quick, final and
binding out-of-court dispute resolution procedure to be followed in the unlikely
event any controversy should arise out of or concerning the performance of this
Agreement. Accordingly, the parties do hereby covenant and agree as follows:
(a) Any controversy, dispute or claim of whatever nature
arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort or statute, shall be settled, at the request of any party to this
Agreement, through arbitration by a dispute resolution process administered by
any mutually agreed upon arbitration firm involving final and binding
arbitration conducted at a location determined by the arbitrator administered by
and in accordance with the then existing rules of practice and procedure of such
arbitration firm and judgment upon any award rendered by the arbitrator may be
entered by any state or federal court having jurisdiction thereof. If the
parties are unable to agree upon an arbitration firm, then the American
Arbitration Association office located in Philadelphia, Pennsylvania shall
select an arbitration firm to conduct such arbitration.
26. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be entirely performed in such State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their authorized representatives as
of the day and year first above written.
Krauss, Katz & Ackerman, Inc.
By:___________________________
___________________________
Harvey Kruass
___________________________
Leonard Katz
___________________________
Robert Ackerman
Esquire Communications Ltd.
By:_________________________
Exhibit 10.2
ASSET PURCHASE AGREEMENT
BETWEEN
AMERICAN NETWORK SERVICES, INC.
AND
ESQUIRE COMMUNICATIONS LTD.
June 18, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made this 18th day of June, 1997, by and among American
Network Services, Inc., a Georgia corporation ("Seller"), John C. Durham, David
Rainwater, William Bird and Jeff Johnson (collectively the "Principals") and
Esquire Communications Ltd., a Delaware corporation ("Buyer").
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all the assets of Seller relating to the operation of Seller's
DepoNet(R) court reporting referral network and all other lines of business,
proposed lines of business and strategic plans (the "Business") upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. SALE AND TRANSFER OF ASSETS
1.1. Based upon and subject to the terms, conditions, agreements,
representations and warranties hereinafter set forth, the Seller does hereby
agree to sell, assign, transfer, deliver and convey to Buyer and Buyer does
hereby agree to purchase, acquire, accept and take possession of, all of
Seller's right, title and interest in and to all assets, properties, rights and
business of Seller of every kind and description wherever located (except for
the Excluded Assets, as hereinafter defined) used in or related to the Business
(all of which are hereinafter sometimes referred to as the "Assets"), including
without limitation, the following assets of Seller:
(a) All trade accounts receivable of Seller relating to the
Business;
(b) All office supplies, office machines, office furniture,
machinery, equipment, fixtures, inventory, leasehold improvements and
computer hardware and software systems, including those described on Schedule
1.1(b) hereto;
(c) All vendor and customer lists, work-in-process and
computerized information of the Seller with respect to the Business;
(d) All general intangibles relating to the Business including,
without limitation, the DepoNet(R) name, any other trade name, any
design and logo relating to the name, contracts and commitments with members,
the Purchase and Redemption Agreement among Seller, the Principals and C. Wayne
Parkman dated May 24, 1996 (the "Parkman Agreement"), licenses and claims;
(e) All books, records, forms, promotional materials and
documents of Seller relating to the foregoing, including, without
limitation, accounting, payroll and tax records and telephone and telecopier
numbers (including 800 number); and
(f) The stock of Seller's subsidiary, Lawyers Choice
Incorporated, and all lines of business, proposed lines of business and
strategic plans of Seller unrelated to the DepoNet(R) court reporting referral
system, including but not limited to Seller's Lawyers ChoiceSM, Expert PlusSM,
MCI consulting, factoring and receivables management programs.
1.2. The following assets and any and all contract rights relating
thereto (the "Excluded Assets") shall be specifically excluded from the Assets
to be acquired by Buyer hereunder:
(a) All cash, cash equivalents and accounts;
(b) All receivables other than trade accounts receivable;
(c) All utility deposits, lease deposits, or similar items;
(d) All tax refunds, including income, franchise, sales and
use taxes;
(e) Rights under insurance policies, indemnity agreements and
the like, to the extent that the liability covered by such instruments has not
been assumed by Buyer hereunder; and
(f) Stock records, minute books and such other books and
records of Seller which Seller is required by law or governmental
regulations to maintain, other than those related to Lawyers Choice
Incorporated.
1.3. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
PRINCIPALS CONTAINED HEREIN AND AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE
ASSETS ARE BEING SOLD ON AN "AS- IS, WHERE-IS" BASIS, WITHOUT ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
2. ASSUMPTION OF LIABILITIES AND OBLIGATIONS
2.1. The Assets are being sold, conveyed, transferred and assigned to
the Buyer free and clear of all liens, security interests, mortgages, claims,
restrictions, charges and encumbrances (collectively, "Liens") whatsoever. The
Buyer does not assume, accept or undertake any obligations, duties, debts or
liabilities of Seller of any kind whatsoever pursuant to this Agreement or
otherwise, except that from and after the date hereof Buyer hereby agrees to
assume and to pay and discharge the following obligations and liabilities (the
"Assumed Liabilities") of Seller (to the extent Seller is not in default and
solely to the extent to be performed on or after the date hereof):
(a) All accounts payable and liabilities and obligations with
respect to the Business incurred in the normal course of business; and
(b) All liabilities and obligations arising under the
severance agreements with John Durham and David Rainwater, the
agreements with members, paragraph 7 of the Parkman Agreement, Seller's 401(k)
and Health Plans administered by Great West Insurance Company, accrued vacation
and sick leave of employees, employee bonuses which have been accrued on
Seller's April 30, 1997 balance sheet, the office lease (the "Office Lease") and
the lease for the postage meter set forth on Schedule 2.1 hereto.
2.2. Except as provided in paragraph 2.1 and notwithstanding anything
else to the contrary contained herein, Buyer is not assuming and shall not be
liable for any liabilities of Seller, including, without limitation, any
liabilities (i) under contracts and leases which shall not have been assigned to
Buyer pursuant to this Agreement (including, but not limited to, any union
agreements); (ii) for indebtedness for borrowed money; (iii) by reason of or
arising as the result of any default or breach by Seller of any contract, for
any penalty assessed against Seller under any contract or relating to or arising
out of any event occurring prior to the date hereof which with the passage of
time or after giving of notice, or both, would constitute or give rise to such a
breach, default or penalty, whether or not such contract is being assigned to
and assumed by Buyer pursuant to this Agreement; (iv) the existence of which
would constitute a breach of any representation, warranty, covenant or agreement
of Seller or the Principals contained herein; (v) to any shareholder or
affiliate of Seller or to any present or former employee, officer or director of
or consultant to Seller (or independent contractor retained by Seller),
including, without limitation, any bonuses, vacation or sick pay, any
termination or severance pay related to Seller's employees, and any post
retirement medical benefits or other compensation or benefits; (vi) relating to
the execution, delivery and consummation of this Agreement and the transactions
contemplated hereby, including, without limitation, any and all taxes incurred
as a result of the sale contemplated by this Agreement, except for any sales,
use or transfer taxes described in Section 7 hereof; (vii) for any taxes accrued
or incurred prior to the date hereof or relating to any period (or portion of a
period) prior thereto; (viii) relating to or arising out of any environmental
matter, including, without limitation, any violation of any environmental law or
any other law relating to health and safety of the public or the employees of
Seller; or (ix) relating to, or arising out of, services rendered by Seller, or
the conduct or operation of the business of Seller, prior to the date hereof.
3. PURCHASE PRICE
3.1. The total purchase price (the "Purchase Price") being paid by Buyer
for the Assets is as follows:
(a) On the date hereof, Buyer is paying to Seller $6,440,000
by means of a wire transfer in such amount to an account number and depository
designated by Seller.
(b) On the date hereof, Buyer is delivering to the Principals,
in such proportions as directed by Seller, an aggregate of 750,000 shares
(the "Shares") of Common Stock of the Buyer, par value $.01 per share (the
"Common Stock"). The Shares shall not be registered under the Securities Act of
1933, as amended (the "Securities Act"). The owners of the Shares will be
afforded registration rights pursuant to a Registration Rights Agreement (the
"Registration Rights Agreement") in substantially the form of Exhibit A
attached hereto.
3.2. On the date hereof, there is being deducted from the Purchase Price
payable pursuant to Section 3.1(a) hereof the aggregate amount of all prepaid
fees paid by members to Seller; provided, however, that to the extent Buyer does
not terminate agreements with such members and/or the fees are actually earned
by Buyer, then promptly thereafter on a monthly basis Buyer shall pay any such
amounts to Seller. All adjustments customary in acquisitions, including
utilities, compensation, rent and other items reflected on Schedule 3.2 attached
hereto, shall be apportioned between Buyer and Seller as of the date hereof.
3.3. The Purchase Price shall be allocated by Buyer to the Assets in
accordance with Buyer's determination. Each party hereto agrees to reflect the
Assets upon its books for tax reporting purposes in accordance with such
determination and to file all tax returns in accordance with and based upon such
determination.
3.4. On the date hereof, (a) the adjustments contemplated by Schedule
3.2 shall be estimated and accounted for based on such estimates and (b) the
ratio of trade accounts receivable to Assumed Liabilities shall be substantially
equivalent to the ratio of the trade accounts receivable to the Assumed
Liabilities balance as of April 30, 1997, as reflected on the balance sheet of
Seller previously provided by Seller to Buyer. Within 60 days after the date
hereof, Buyer shall prepare and furnish to Seller a statement (the "Statement")
reflecting the actual adjustments required as of the date hereof.
3.5 Seller shall have the right to review the Statement and to object to
any items contained therein within 30 days after its receipt thereof. If Seller
does not so object within 30 days, Buyer's determination shall be final and
binding on the parties. If Seller objects to any items within such 30 days,
Seller and Buyer shall consult with each other and attempt to reach an
agreement. If they are unable to reach any agreement within 60 days, the matter
shall be referred to an independent accounting firm mutually selected by Buyer
and Seller, whose determination shall be final and binding on Buyer and Seller.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PRINCIPALS
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated herein, Seller and the Principals jointly and
severally represent and warrant as follows:
4.1. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation. Seller has the
power and the authority and all licenses and permits required by federal
governmental authorities and state and local governmental authorities of the
State of Georgia to own and operate its properties and carry on its business as
now being conducted. Except for Lawyers Choice Incorporated, the Seller does not
have any subsidiaries and does not own beneficially or of record any equity
interest in any corporation, partnership or other business organization or
entity.
4.2. Seller has the corporate power and authority and the Principals
have the legal capacity to execute and perform this Agreement and all other
agreements to be entered into in connection with the transactions contemplated
hereby. All the issued and outstanding shares of capital stock of the Seller are
owned beneficially and of record by the Principals.
4.3. The execution, delivery and performance of this Agreement and all
other agreements to be entered into in connection with the transactions
contemplated hereby have been duly authorized by the Board of Directors and
shareholders of the Seller and by all necessary corporate action, and do not
violate or conflict with any provisions of the Certificate of Incorporation or
Bylaws of the Seller or any agreement, instrument, law, order or regulation to
which Seller or the Principals is a party or by which Seller or any Principal is
bound. No consent, approval or authorization of, or filing with or notification
to, any lender, security holder, governmental agency or other person or entity
is required by Seller or the Principals in connection with the execution,
delivery and performance by the Seller and the Principals of this Agreement and
the consummation of the transactions contemplated hereby.
4.4. This Agreement, and all other instruments delivered by Seller and
the Principals in connection herewith, upon delivery will have been duly
executed by the Seller or the Principals and will be legal, valid and binding
obligations of Seller and the Principals, enforceable in accordance with their
respective terms.
4.5. The Seller is the owner of and has good, valid and marketable title
to the Assets (other than those Assets which are being leased by Seller from
third parties as described on Schedule 4.5) free and clear of all Liens. The
Assets to be sold and conveyed to Buyer hereunder constitute all of the assets
used in, related to or required by Seller in the normal operation and conduct of
the Business, other than the Excluded Assets and those Assets which are leased
as set forth on Schedule 4.5. To the knowledge of Seller and the Principals, the
fixed assets included in the Assets are in good repair and operating condition.
4.6. There is no action, suit, litigation or proceeding pending, or to
the knowledge of Seller or the Principals, threatened against or relating to the
Assets or Business nor does Seller or any Principal know of any basis for any
such action, or of any governmental investigation relating to the Assets or the
Business.
4.7. There does not exist any order, writ, injunction or decree that has
been issued by, or requested of, any court or governmental agency which is
against, or binding on, Seller or any Principal which do or may adversely
affect, limit or control the Assets or Buyer's use thereof.
4.8. Seller and the Principals have obtained all required approvals or
authorizations of this Agreement and any other agreements to be entered into in
connection with the transactions contemplated hereby which are required by law
or otherwise in order to make this Agreement or any other agreements entered
into in connection with the transactions contemplated hereby binding upon Seller
and the Principals.
4.9. Except as described on Schedule 4.9 attached hereto with respect to
the "Image Maker" service mark, to the knowledge of Seller and the Principals,
the utilization of the Assets being sold and conveyed to Buyer hereunder do not
infringe upon or violate in any way the rights evidenced by any outstanding
patents, trademarks or trade names, whether registered or unregistered, held or
owned by any third parties.
4.10. Seller's relationships with its customers are in all material
respects good, and Seller and the Principals are not aware of any facts or
circumstances, other than the transactions contemplated by this Agreement, which
might alter, negate, impair or in any way adversely affect the continuity of any
such customer relationships.
4.11. Except as reserved against on its December 31, 1996 balance sheet,
the accounts receivable of Seller are actual and bona fide receivables
representing obligations for the total amount thereof which arose in the
ordinary course of business, and are collectible in full in accordance with
their terms.
4.12. There are no Liens for any federal, state, county or local
franchise, income, excise, property, business, sales, commercial rent,
employment or other taxes upon the Assets. Seller has timely filed all federal,
state, county and local franchise, income, excise, property, business, sales,
commercial rent and employment and other tax returns which are required to be
filed through the date hereof, and has paid, or will pay, all taxes which are
due and payable on or before the date hereof.
4.13. Schedule 4.13 contains a complete and accurate list of all
personnel utilized in the Business, including full and part-time persons,
in-house and outside personnel, and employees and independent contractors.
Except as specifically provided herein, Buyer will not be liable for any
existing obligations to the foregoing persons, including, but not limited to,
obligations for severance pay or other fringe benefits for such persons.
4.14. The Seller has furnished to Buyer a balance sheet of the Seller as
at December 31, 1996 (the "Balance Sheet Date"), and the related statements of
income, stockholders equity and cash flows for the year then ended, together
with the notes thereto (collectively, the "Financial Statements"), as reviewed
by independent public accountants. The Financial Statements have been prepared
in conformity with generally accepted accounting principles heretofore adopted
by, and applied consistently with the past practices of, the Seller and fairly
present the financial position, results of operations and cash flows of the
Seller as at, or for the period ended on, such date. Seller's annual revenues,
gross profit and EBITDA, determined in accordance with generally accepted
accounting principles, consistently applied, for its fiscal year ended December
31, 1996 were not less than $3,010,983, $2,926,926 and $569,957, respectively.
Since the Balance Sheet Date, (a) Seller has conducted the Business in a
consistent manner in the regular and ordinary course, (b) except for the
suspension of the Lawyers ChoiceSM program, there has not been any material
adverse change in the Business or its operations, or the financial condition of
Seller, (c) there has not been any material damage, destruction or loss
affecting the Business, (d) Seller has not sold, leased or otherwise disposed of
any of its assets which are material, individually or in the aggregate, (e)
Seller has not increased the compensation of any of its employees or paid any
bonuses, and (f) Seller has not accelerated the collection of accounts
receivable or deferred the payment of liabilities.
4.15. Each of the agreements to which Seller is a party or to which it
is subject or by which it is bound is listed on Schedule 4.15 attached hereto
(true and complete copies of which have been furnished to Buyer) and is a valid
and subsisting contract of all of the parties thereto in full force and effect
without modification. Seller has performed all obligations required to be
performed by it and is not in default under any agreement, instrument or other
document to which it is a party or to which it is subject or by which it is
bound, and no event has occurred thereunder which, with or without the lapse of
time or the giving of notice, or both, would constitute a default by it
thereunder. Except as disclosed on Schedule 4.15, no other party is in default
under any such agreement, instrument or other document. Each of the court
reporting services agreements between Seller and each of its members provides
that the agreement is terminable by Seller on 30 days prior notice and none of
such agreements has been amended to change the provisions allowing termination
on 30 days prior notice.
4.16. There are no labor strikes, disputes, slow downs, work stoppages
or other labor troubles or grievances pending or, to Seller's or the Principals'
knowledge, threatened against or involving Seller. Seller is not a party to any
union agreements. No unfair labor practice complaint before the National Labor
Relations Board, no discharge or grievance before the Equal Employment
Opportunity Commission and no complaint, charge or grievance of any nature
before any similar or comparable state, local or foreign agency, in any case
relating to Seller or the conduct of its business is pending or, to Seller's or
the Principals' knowledge, threatened.
4.17. To the knowledge of Seller and the Principals, Seller has complied
and is in compliance with all laws, orders and regulations of any federal or
State of Georgia governmental authority applicable to Seller, the Business,
assets or property or its operations, including, without limitation, laws
relating to zoning, building codes, antitrust, occupational safety and health,
environmental protection and conservation, water or air pollution, toxic and
hazardous waste and substances control, consumer product safety, product
liability, hiring, wages, hours, employee benefit plans and programs, collective
bargaining and withholding and social security taxes, except where non-
compliance would not have a material adverse effect on the Business, assets or
properties or its operations taken as a whole.
4.18. Seller and the Principals do not know of any
facts or circumstances not disclosed or otherwise known to Buyer
(other than general economic or industry conditions) which indicate that the
Assets or the future operations, profits or business of Seller may be materially
adversely affected or which
otherwise should be disclosed to Buyer in order to make any of
the representations or warranties made herein on the part of the
Seller and the Principals not misleading. No representation or warranty by
Seller or the Principals contained in this Agreement, and no statement contained
in any Schedule, Exhibit, certificate or other instrument furnished to Buyer
under or in connection with this Agreement, contains any untrue statement of any
material fact, or omits to state any material fact necessary in order to make
the statements contained herein or therein not misleading.
4.19. The Principals are acquiring the Shares for their own account and
not with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act. Each of the Principals consents to
the placement of the following legend on each certificate representing the
Shares and acknowledges that stop transfer instructions will be placed with the
Buyer's transfer agent:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER
SUCH ACT (OR AN EXEMPTION FROM SUCH REGISTRATION) IS THEN IN
EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION FROM
COUNSEL FOR THE ISSUER OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO
ACTION' LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
TO SUCH TRANSFER OR SALE."
4.20. Seller and the Principals understand that the Shares will not be
registered at the date hereof under the Securities Act for the reason that the
sale provided for in this Agreement is exempt pursuant to Section 4 of the
Securities Act and that the reliance of the Buyer on such exemption is
predicated in part on the Seller's and Principals' representations set forth
herein. Seller and the Principals represent that they are experienced in
evaluating companies such as the Buyer, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of their investment, and have the ability to suffer the total loss of
their investment in the Shares. Seller and the Principals are accredited
investors within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act. Seller and the Principals further represent that they have had
access during the course of the transaction and prior to their acquisition of
the Shares to such information relating to the Buyer as they have desired and
that they have had the opportunity to ask questions of and receive answers from
the Buyer concerning the transaction and to obtain additional information (to
the extent the Buyer possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to them or to which they had access.
Seller and the Principals understand that the Shares may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act, the Shares must be held indefinitely.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and the Principals to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer
represents and warrants as follows:
5.1. Buyer and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation. The Buyer and each of its subsidiaries has the power and the
authority and all licenses and permits required by governmental authorities to
own and operate its properties and carry on its business as now being conducted.
5.2. The Buyer has the corporate power and authority to execute and
perform this Agreement and all other agreements to be entered into in connection
with the transactions contemplated hereby.
5.3. The execution, delivery and performance of this Agreement and all
other agreements to be entered into in connection therewith have been duly
authorized by the Board of Directors of the Buyer and by all necessary corporate
action, and do not violate or conflict with any provisions of the Certificate of
Incorporation or Bylaws of the Buyer or any agreement, instrument, law or
regulation to which the Buyer is a party or by which Buyer is bound.
5.4. No approval or authorization of this Agreement or any other
agreement to be entered into in connection with the transactions contemplated by
this Agreement is required by law or otherwise in order to make this Agreement
or any other agreements entered into in connection herewith binding upon the
Buyer. Upon the execution and delivery of this Agreement and any other agreement
in connection therewith, such agreements will constitute legal, valid and
binding obligations of Buyer, enforceable in accordance with their respective
terms.
5.5. The Shares to be issued pursuant to this Agreement, when so issued,
will be duly and validly authorized and issued, fully paid and non-assessable
and Seller will acquire good and valid title thereto, free and clear of any
Liens created by the Buyer (other than restrictions arising under the Securities
Act and state securities laws).
5.6. The duly authorized capital stock of Buyer consists of 25,000,000
shares of Common Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share, of which 4,247,329 shares of Common
Stock are issued and outstanding and 15,000 shares of Preferred Stock are issued
and outstanding. All of the issued and outstanding shares of capital stock of
Buyer have been duly and validly issued, are fully paid and nonassessable and
are free of preemptive rights. None of such shares has been issued in violation
of the Securities Act or the securities or blue sky laws of any country, state,
territory or other jurisdiction (whether domestic or foreign). Except as
disclosed on Schedule 5.6 attached hereto or in Buyer's Annual Report on Form
10-KSB for the year ended December 31, 1996, there are no outstanding options,
warrants or other rights to subscribe for or purchase or otherwise acquire any
shares of capital stock (or securities directly or indirectly convertible into
or exchangeable or exercisable for shares of capital stock) of Buyer, nor,
except for potential acquisitions of, and financings related to, additional
court reporting businesses and issuance of options pursuant to Buyer's stock
option plan, any plans, contracts, agreements or commitments binding upon Buyer
providing for the issuance or granting of rights to acquire any shares of
capital stock (or securities directly or indirectly convertible into or
exchangeable or exercisable for shares of capital stock) of Buyer.
5.7. No actions, disputes or proceedings at law or in equity are pending
or, to the knowledge of Buyer, threatened, against Buyer or any of its assets or
properties which will have, in the aggregate, a material adverse affect on the
business, financial condition or operation of Buyer.
5.8. Buyer has furnished to the Seller a copy of Buyer's Annual Report
on Form 10-KSB for its fiscal year ended December 31, 1996 and a copy of Buyer's
Quarterly Report on Form 10-QSB for the fiscal period ended March 31, 1997, each
as filed with the Securities and Exchange Commission (the "SEC"). Each of the
10-KSB and the 10-QSB was prepared and filed in accordance with the rules and
regulations of the SEC. As of its date, each of the 10-KSB and the 10-QSB did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Buyer included in the 10-KSB and the
10-QSB were prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as otherwise noted in such financial
statements) and present fairly the consolidated financial condition, results of
operations and cash flows of Buyer as of the date and for the period indicated.
Since March 31, 1997, (a) Buyer has conducted its business in a manner generally
consistent with prior practice and in the ordinary course, (b) there has not
been any material adverse change in the business, operations or financial
condition of Buyer, and (c) there has not been any material damage, destruction
or loss affecting the business, assets, properties or rights of Buyer.
5.9. To the knowledge of Buyer, Buyer and its subsidiaries have complied
and are in compliance with all applicable laws, orders and regulations of any
governmental authority applicable to Buyer and its subsidiaries, including but
not limited to the provisions thereof relating to zoning, building codes,
antitrust, occupational safety and health, environmental protection and
conservation, consumer product safety, product liability, hiring, wages, hours,
collective bargaining, employment benefit plans and programs, withholding, and
social security and other taxes, except where such non-compliance would not have
a material adverse affect on Buyer and its subsidiaries taken as a whole.
5.10. The business relationships of Buyer and its subsidiaries with
their customers are in all material respects good and Buyer is not aware of any
facts or circumstances which might alter, negate, impair or in any way
materially adversely affect the continuity of any such business relationships.
5.11. No representation or warranty by Buyer contained in this
Agreement, and no statement contained in any Schedule, Exhibit, certificate or
other instrument furnished to Seller under or in connection with this Agreement,
contains any untrue statement of any material fact, or omits to state any
material fact necessary in order to make the statements contained herein or
therein not misleading.
6. CLOSING DOCUMENTS
6.1.1 Concurrently herewith, Seller shall deliver to Buyer appropriate
assignments and bills of sale with respect to the Assets being sold hereunder,
together with the following documents:
(a) An opinion dated as of the date hereof from counsel for
Seller;
(b) Certified copies of the resolutions of the Board of
Directors and shareholders of Seller authorizing and approving this Agreement;
(c) A good standing certificate dated within thirty days prior
to the date hereof, as to the due incorporation, legal existence and
qualification of Seller in the State of Georgia;
(d) Letter authorizing Buyer to endorse checks;
(e) Acknowledgment of assignment of Agreement by Buyer to its
lenders; and
(f) Consent of landlord to assignment of Office Lease.
6.1.2 Within 60 days after the date hereof, Seller shall provide to
Buyer an amendment to its Certificate of Incorporation changing its name or a
Certificate of Dissolution so that Buyer may utilize the corporate name of
Seller after the date hereof.
6.2. Concurrently herewith, Buyer shall deliver the Purchase Price,
consisting of cash and the Shares, together with the following documents:
(a) An opinion dated as of the date hereof from counsel for
Buyer;
(b) Certified copies of the resolutions of the Board of
Directors of Buyer authorizing and approving this Agreement.
(c) The Registration Rights Agreement duly executed by Buyer;
(d) Assumption Agreements duly executed by Buyer, pursuant to
which Buyer has assumed the Office Lease and the lease for the postage meter;
and
(e) Amendment (the "Amendment") to Stockholders Agreement
dated as of October 23, 1996 by and among Buyer and various of its Stockholders
relating to Board of Directors seat for John Durham.
7. COSTS
Each party covenants and agrees that it shall be responsible for and
bear its respective costs and expenses in connection with, or arising out of,
the negotiation or consummation of this Agreement and the transactions
contemplated hereby. Buyer shall be responsible for any sales, use or transfer
taxes applicable to the transactions provided for herein.
8. INDEMNIFICATION
8.1. INDEMNIFICATION BY SELLER. Subject to the limitations set forth
below, Seller and the Principals jointly and severally hereby agree to indemnify
Buyer against and hold it harmless from any and all losses, liabilities, costs,
damages, claims and expenses (including, without limitation, reasonable
attorneys fees and expenses) ("Damages") which Buyer may sustain at any time by
reason of (i) noncompliance with any bulk sales or transfer law applicable to
the transactions contemplated hereby, (ii) any liability or contract of, or
claim against, Seller, whether contingent or absolute, direct or indirect, known
or unknown, matured or unmatured (including but not limited to liabilities for
taxes), except for Assumed Liabilities, (iii) any liability or claim arising in
any way from any service rendered, or action taken by, or relating to the
operations of, Seller prior to the date hereof, except for the Assumed
Liabilities, (iv) any liability of or claim against Seller under any
environmental laws relating to any event, action or failure to act which
occurred prior to the date hereof, or (v) the breach or inaccuracy of or failure
to comply with any of the warranties, representations, conditions, covenants or
agreements of Seller or the Principals contained in this Agreement or in any
agreement or document delivered pursuant hereto or in connection herewith. If
Buyer is indemnified for any accounts receivable of Seller which are not
collected, then Buyer shall assign such accounts to Seller. Notwithstanding
anything above to the contrary:
(a) Seller and the Principals shall be required to indemnify
and hold Buyer harmless from and against only those Damages which in the
aggregate exceed $75,000.
(b) In no event shall the aggregate liability of Seller and
the Principals for Damages hereunder exceed $1,000,000, except for any
liability arising by reason of any intentional breach or misstatement or
intentional failure to comply with any of the warranties, representations,
conditions, covenants or agreements of Seller or the Principals contained in
this Agreement or any document delivered pursuant hereto or in connection
herewith.
(c) In no event shall the aggregate liability of Seller and
the Principals for Damages hereunder exceed the amount of cash paid
pursuant to Section 3.1(a) hereof and the aggregate fair market value of the
Shares received by Seller hereunder. For purposes hereof, the fair market value
of the Shares shall mean the lesser of the last sale price of a share of Buyer's
Common Stock on the Nasdaq Stock Market on (i) the date hereof or (ii) the date
or dates upon which Buyer makes any claim for indemnification hereunder.
(d) At Seller's election, Seller shall have the right to
reimburse Buyer for Damages by returning to Buyer Shares having an aggregate
fair market value equal to the amount of the Damages.
8.2. INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold Seller
and each of the Principals harmless from and against any and all Damages which
in the aggregate exceed $75,000 which Seller may sustain at any time by reason
of (i) any Assumed Liability or claim related thereto, (ii) the breach or
inaccuracy of or failure to comply with any warranties, representations,
conditions, covenants or agreements of Buyer contained in this Agreement or in
any agreement, certificate or document delivered pursuant to or in connection
with this Agreement or arising out of the closing of the transactions
contemplated hereby and (iii) any liability or claim arising in any way from any
service rendered or action taken by, or relating to the operations of, Buyer
from and after the date hereof, specifically including, but not limited to, the
termination or non-renewal by Buyer of any of the agreements with members of the
DepoNet(R) referral system for court reporters assigned by Seller to Buyer
hereunder.
8.3. PROCEDURES FOR INDEMNIFICATION. This Section 8 provides the sole
and exclusive remedies for recovery by an Indemnified Party (as defined below)
from the Indemnifying Party (as defined below) based upon the breach or
inaccuracy of or failure to comply with any of the warranties, representations,
conditions, covenants or agreements of the Indemnifying Party contained in this
Agreement or in any agreement or document delivered pursuant hereto or in
connection herewith, other than the Registration Rights Agreement and the
Amendment. In the event that any claim is asserted against any party or parties
hereto, or any party or parties hereto is made a party defendant in any action
or proceeding, and such claim, action or proceeding involves a matter which is
the subject of this indemnification, then such party or parties (collectively,
the "Indemnified Party") shall promptly give written notice to the other party
or parties hereto (collectively, the "Indemnifying Party") of such claim, action
or proceeding, specifying in reasonable detail the basis for indemnification and
providing the Indemnifying Party such information with respect thereto as
reasonably requested and such Indemnifying Party shall have the right to join in
the defense of said claim, action or proceeding at such Indemnifying Party's own
cost and expense and, if the Indemnifying Party agrees in writing to defend such
claim, then at the option of the Indemnifying Party, such Indemnifying Party may
take over the defense of such claim, action or proceeding, except that, in such
case, the Indemnified Party shall have the right to join in the defense of said
claim, action or proceeding at its own cost and expense. An Indemnified Party
shall not settle or compromise any action or proceeding without the prior
written consent of the Indemnifying Party and shall consent to any compromise or
settlement approved by the Indemnifying Party if the Indemnifying Party shall
pay or make adequate provision for the full amount thereof.
8.4. TIME LIMITATIONS. The Indemnifying Party will not have any
liability to the Indemnified Party under or in connection with this Section 8
unless written notice asserting a claim for indemnification is given to the
Indemnifying Party prior to 18 months from the date hereof.
8.5. ADDITIONAL LIMITATIONS. It is expressly understood that neither
Seller nor any of the Principals shall have any liability of any type whatsoever
to Buyer, directly or indirectly, pursuant to this Section 8 of the Agreement or
otherwise, arising from or as a result of any representation or warranty made by
Seller, or any representative of Seller, to Freed Maxick Sachs and Murphy, P.C.
("FMS&M"), in connection with FMS&M's review of the books and records of Seller,
including but not limited to the representations and warranties made by John C.
Durham and/or Michael Best in that certain letter to FMS&M dated on or about
June 12, 1997.
9. NON-COMPETITION
9.1. Each of the Seller and the Principals agrees that for the period
specified below, they will not, directly or indirectly, within a radius of 100
miles of metropolitan Atlanta, Georgia, or 100 miles surrounding Seller's
existing place of business or in any county or city in which Seller conducted
its business, including without limitation all counties and cities in which
there have been members, clients, agents, employees or independent contractors
of Seller (the "Territory"), (i) engage in any business the same as or similar
to, or engage in competition with, the Business, (ii) render services to or have
any interest, as a shareholder, owner, agent, consultant, lender or guarantor or
any other interest, in any other person engaged in the rendering of services,
which are currently being rendered by Seller in competition with the Business,
or similar services, or (iii) engage in competition with, or sell, services as
are referred to in clause (ii) of this paragraph; provided, however, that the
foregoing shall not be deemed to prevent the Seller or the Principals from
investing in securities if such class of securities in which the investment is
so made is listed on a national securities exchange, is issued by a company
registered under Section 12(g) of the Securities Exchange Act of 1934 or is
traded on the Nasdaq Stock Market or over-the-counter, so long as such
investment holdings do not, in the aggregate, constitute more than 5% of the
voting stock of any company's securities. The period for the non-compete shall
be two years from the date hereof for each of Messrs. Bird and Johnson and two
years after Mr. Durham is no longer a director of Buyer for each of Seller and
Messrs. Durham and Rainwater.
9.2. Neither Seller nor any Principal nor any affiliate of any of them,
for a period of two years from and after the date hereof, shall, directly or
indirectly, (i) hire, offer to hire, entice away, retain, employ or solicit or
attempt to solicit (either for itself or as agent for another) for employment or
induce, persuade or encourage any person to leave Buyer's employ who, prior to
the date hereof was, or during such two year period will be, employed or
retained by Buyer as a consultant, independent contractor, reporter, agent,
employee or otherwise or (ii) divert or attempt to divert from Buyer any
business whatsoever by influencing or attempting to influence any member, client
or supplier of Buyer.
9.3. Seller and the Principals acknowledge and agree that any breach of
this Section 9 is likely to result in irreparable injury to Buyer, that monetary
damages will be an inadequate remedy of such breach and that, accordingly, in
addition to any other remedy that Buyer may have, Buyer shall be entitled to
enforce the specific performance of this Section 9 and to seek both permanent
and temporary relief in the event of any breach hereof.
9.4. The parties acknowledge that the time, scope, geographic area and
other provisions of this Section 9 have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the transactions contemplated by this
Agreement. If any portion of this Section 9 shall be determined to be invalid
and unenforceable as written, each such portion shall be enforced to the extent
reasonable under the circumstances and such determination shall not affect the
validity or enforceability of the balance hereof, and such balance shall remain
in full force and effect. It is understood that Seller and the Principal are
entering into this non-competition agreement in order to induce Buyer to enter
into this Agreement.
10. BROKERS
Each party represents and warrants to the other (and agrees to indemnify
and hold harmless the other against breach of any such representation and
warranty) that it has not engaged any broker, finder or similar person or entity
in connection with the transactions provided for herein.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained herein, and all other
representations and warranties of the Seller, the Principals and Buyer contained
in the instruments executed in connection with the consummation of the
transactions provided for herein, shall survive the execution of this Agreement,
the consummation of the sale contemplated hereby and any investigation made by
any party hereto and shall terminate 18 months after the date hereof; provided,
however, that the parties shall be liable for all claims for indemnification
made in writing prior to the expiration of such 18 month period of time in
accordance with the procedures set forth in Section 8.
12. NOTICES
All notices, requests, demands, documents and other communications given
or due hereunder shall hereafter be made in writing and shall be deemed to have
been duly given when hand delivered, when received if sent by telecopier or by
same day or overnight recognized commercial courier service or three days after
being mailed by certified or registered mail, postage prepaid:
if to the Seller or Principals to:
John C. Durham
4621 Peeler Mill Court
Dunwoody, Georgia 30338
with a copy to:
William J. Cohen
Robins, Kaplan, Miller & Ciresi L.L.P.
2600 One Atlanta Plaza
950 East Paces Ferry Road, N.E.
Atlanta, Georgia 30326-1119
and if to the Buyer to:
Malcolm Elvey
Esquire Communications Ltd.
216 East 45th Street
New York, New York 10017
with a copy to:
Martin H. Neidell
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
13. COMPLETE AGREEMENT
This Agreement and the accompanying schedules and exhibits contain the
complete agreement between the parties hereto with respect to the sale
contemplated hereby and supersede all prior covenants and understandings between
the parties hereto with respect to such sale. This Agreement shall not be
amended or modified except by a writing signed by each party to be charged and
this Agreement may not be discharged except by performance in accordance with
its terms or by a writing signed by each party to be charged.
14. SEVERABILITY
In case any one or more of the provisions hereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15. WAIVER, REMEDIES
No waiver of any breach of any provision of this Agreement shall be held
to be a waiver of any other or subsequent breach, and the failure of a party to
enforce at any time any provision hereof shall not be deemed a waiver of any
right of any such party to subsequently enforce such provision or any other
provision hereunder. All remedies afforded in this Agreement shall be taken and
construed as cumulative, that is, in addition to every other remedy provided
herein or by law.
16. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. COOPERATION; COVENANTS AFTER CLOSING
Seller and the Principals will cooperate with Buyer, and Seller and the
Principals will use their best efforts to have the officers, directors and other
employees of Seller cooperate with Buyer, at Buyer's request and expense, on and
after the date hereof, in endeavoring to effect the collection of accounts
receivable owing to Seller at the date hereof which are included within the
Assets and in furnishing information, evidence, testimony and other assistance
in connection with any actions, proceedings, arrangements or disputes involving
the Business and based upon contracts, arrangements, commitments or acts of
Seller which were in effect or occurred on or prior to the date hereof. Buyer
will cooperate with Seller and use its best efforts to have the appropriate
employees of Buyer cooperate with and assist Seller in connection with the
preparation of Seller's 1997 tax returns and any audit of such returns or any
tax returns for prior years. Buyer agrees that prior to the destruction of any
business records which deal with matters prior to the date hereof and which are
transferred to Buyer pursuant to this Agreement, Buyer will advise Seller, in
writing, of such intended destruction. If, within thirty days of such notice,
Seller notifies Buyer that Seller wishes to have such records preserved, Buyer
will deliver such records to Seller, at Seller's expense. After the date hereof,
Seller will continue to pay any amounts due under the Parkman Agreement in
accordance with its terms. For as long as John Durham is a director of Buyer,
David Rainwater shall have the right to attend all meetings of the Board of
Directors of Buyer, at Buyer's expense. From and after the date hereof, Buyer,
at its sole cost and expense, will need to have prepared for it audited
financial statements of Seller for periods prior to the date hereof. Seller and
the Principals agree to cooperate with Buyer and its accountants so that such
financial statements may be prepared and will make available to Buyer and its
accountants appropriate books and records of Seller for such prior periods. In
addition, Seller and the Principals will cause to be delivered to Buyer's
accountants an appropriate representation letter signed by an officer of Seller
similar to the representation letter furnished to Buyer's accountants in
connection with the preparation of the April 30, 1997 financial statements of
Seller.
18. AUTHORIZATION; MAIL
Seller agrees that Buyer shall have the right and authority to collect
for the account of Buyer all receivables and other items which shall be
transferred to Buyer as provided herein, and to endorse with the name of Seller
any checks received on account of any such receivables or other items. Seller
agrees that it will promptly transfer and deliver to Buyer any cash or other
property that Seller may receive in respect of any such receivables or other
items. Seller authorizes and empowers Buyer from and after the date hereof (i)
to receive and open mail addressed to Seller and (ii) to deal with the contents
thereof in a reasonable manner befitting the contents, provided such mail and
the contents thereof relate to the Assets or otherwise to the Business as
conducted by Buyer or to any of the Assumed Liabilities. Seller agrees to
deliver to Buyer promptly upon receipt any mail, checks or other documents
received by it pertaining to the Assets or otherwise to the business of Seller,
as conducted by Buyer, or any of the Assumed Liabilities. Buyer agrees to
deliver to Seller promptly after receipt any mail which it receives to which it
is not entitled by reason of this Agreement or otherwise and to which Seller is
entitled.
19. FURTHER ASSURANCES
Each of the Buyer and Seller agrees at any time and from time to time
after the date hereof, upon the request of the other party, to do, execute,
acknowledge and deliver, or to cause to be done, executed, acknowledged and
delivered, all such further acts, assignments, transfers, powers of attorney and
assurances as may be required for the better assigning, transferring, conveying,
and confirming to Buyer, or to its successors and assigns, of any or all of the
Assets and to carry out the terms and conditions of this Agreement.
20. CONFIDENTIALITY
Seller and the Principals, on the one hand, and Buyer, on the other
hand, severally agree not to, directly or indirectly, without the prior written
consent of the other, use or disclose to any person, firm or corporation, any
information, trade secrets, confidential customer information, technical data or
know-how relating to the products, processes, methods, equipment or business
practices of the other.
21. BENEFIT OF PARTIES; ASSIGNMENT
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns. The
Agreement may not be assigned by Seller (except to the Principals) or by the
Principals except with the prior written consent of Buyer. On the date hereof,
Buyer may freely assign this Agreement to a wholly-owned subsidiary of Buyer;
provided, however, that Buyer shall guarantee the obligations of such
subsidiary. Buyer may also freely assign this Agreement after the date hereof,
including as collateral security to its lenders. Nothing herein contained shall
confer or is intended to confer on any third party or entity which is not a
party to this Agreement any rights under this Agreement.
22. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be entirely performed in such State.
23. ARBITRATION
Any controversy or claim arising out of or relating to the
interpretation, enforcement or breach of this Agreement or relating to the
transactions contemplated hereby (other than actions for equitable relief) shall
be resolved by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. Arbitration shall be by a single
arbitrator experienced in the matters at issue and selected by the parties in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be held in such place in Atlanta, Georgia as
may be specified by the arbitrator (or any place agreed to by the parties and
the arbitrator). The decision of the arbitrator shall be final and binding as to
any matters submitted under this Section 23; provided, however, if necessary,
such decision may be enforced in any court having jurisdiction over the subject
matter or over any of the parties to this Agreement. All costs and expenses
incurred in connection with any such arbitration proceeding (including
reasonable attorneys fees) shall be borne by the party against which the
decision is rendered. If the arbitrator's decision is a compromise, the
determination of which party shall bear the costs and expenses incurred in
connection with such arbitration proceeding shall be made by the arbitrator on
the basis of the arbitrator's assessment of the relative merits of the parties'
positions.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their authorized representatives as
of the day and year first above written.
AMERICAN NETWORK SERVICES, INC.
By:---------------------------
---------------------------
John C. Durham
-----------------------------
David Rainwater
-----------------------------
William Bird
-----------------------------
Jeff Johnson
Esquire Communications Ltd.
By:-----------------------------
Exhibit 10.3
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
THIS AMENDMENT NO 1. TO PURCHASE AGREEMENT (this "Agreement") is made as
of June 17, 1997, by and among Esquire Communications Ltd., a Delaware
corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited
Partnership, an Illinois limited partnership ("GTCR") and Antares Leveraged
Capital Corp., a Delaware corporation ("Antares" and collectively with GTCR
referred to herein collectively as the "Purchasers" or individually as a
"Purchaser"). Each capitalized term used herein which is not defined herein
shall have the meaning given to such term in the Purchase Agreement.
WHEREAS, the Company and the Purchasers are parties to a Purchase
Agreement dated as of October 23, 1996 (the "Purchase Agreement"), and
WHEREAS, the Company and the Purchasers desire to amend certain
provisions of the Purchase Agreement as set forth herein.
NOW, THEREFORE, the Parties to this Amendment hereby agree as follows:
Section 1. AMENDMENT.
(a) The first sentence of Section 1A of the Purchase Agreement is hereby
deleted in full and the following sentence inserted in lieu thereof:
"The Company shall authorize the issuance and sale to the Purchasers
of 22,500 shares of its Series A Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock"), having the rights
and preferences set forth in EXHIBIT A attached hereto."
(b) section 1C(i) is hereby deleted in full and the following paragraph
inserted in lieu thereof:
"(i) GTCR may, at its sole election, subject to clause (ii) below,
purchase from time to time prior to December 17, 1998, upon written
notice to the Company's board of directors (the "Board"), up to an
additional 15,000 shares of the Preferred Stock at a price of $1,000
per share (as adjusted from time to time as a result of stock
dividends, stock splits, recapitalizations and similar events)
(an "Additional Purchase")."
(c) The address for Stroock & Stroock & Lavan as set forth in Section 9J
shall be deleted in full and the following address inserted in lieu thereof:
"Stroock & Stroock & Lavan, LLP, 180 Maiden Lane, New York, NY 10038"
Section 2. BOARD AUTHORIZATION. On or prior to the date of this
Amendment the Company's board of directors shall have authorized the execution,
delivery and performance of this Amendment, the issuance of an additional 7,500
shares of the Preferred Stock (including without limitation, amending the
Certificate of Designation to provide for the designation of an additional 7,500
shares of the Preferred Stock), and the reservation for issuance upon conversion
of the Preferred Stock of an additional 2,500,000 shares of Common Stock.
Section 3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. This
Amendment shall become effective upon the execution of a counterpart by each of
the parties hereto.
Section 4. EFFECT OF AMENDMENT. Except as expressly amended hereby, the
Purchase Agreement, as amended hereby and otherwise as in effect immediately
prior to this Amendment, continues in full force and effect in accordance with
the original terms thereof.
Section 5. APPLICABLE LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and questions
concerning the construction, validity, interpretation and enforceability of this
Amendment shall be governed by, and construed in accordance with, the laws of
the State of Illinois, without giving effect to any choice of law or conflict of
law provisions (whether of the State of Illinois or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of Illinois.
Section 6. DESCRIPTIVE HEADINGS. The descriptive headings of this
Amendment are inserted for convenience only and do not constitute a part of this
Amendment.
Section 7. SEVERABILITY. Whenever possible, each provision of this
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first above written.
ESQUIRE COMMUNICATIONS LTD.
By:
-----------------------------
Its:
-----------------------------
GOLDER, THOMA, CRESSEY, RAUNER FUND
IV LIMITED PARTNERSHIP
By: GTCR IV, L.P.
Its: General Partner
By:
-----------------------------
Its:
-----------------------------
ANTARES LEVERAGED CAPITAL CORP.
By:
-----------------------------
Its:
-----------------------------
Exhibit 10.4
AMENDMENT NO. 1 TO
STOCKHOLDERS AGREEMENT
This AMENDMENT NO. 1 TO STOCKHOLDERS AGREEMENT (this "AMENDMENT"), dated as
of May 1, 1997, is by and among Esquire Communications Ltd., a Delaware
corporation (the "COMPANY"), and those stockholders of the Company whose
signatures appear on the signature page hereto (collectively, the
"STOCKHOLDERS") and amends that certain Stockholders Agreement (the
"Agreement"), dated as of October 23, 1996, by and among the Company and the
Stockholders. Terms defined in the Agreement shall have the same meaning when
used herein.
WHEREAS, the Stockholders and the Company wish to amend the Agreement
as set forth herein.
NOW THEREFORE, in consideration of the agreements herein contained,
the sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 1 of the Agreement is hereby amended as follows:
(a) deleting the word "seven" in Section 1(a)(i) of
the Agreement and replacing it with the word "nine";
(b) deleting Section 1(a)(ii)(B) of the Agreement in
its entirety and replacing it with the following:
"three representatives designated by the Management
Stockholders (the "MANAGEMENT STOCKHOLDERS"), determined by
vote of the Management Stockholders owning a majority of the
Stockholder Shares held by all Management Stockholders;
provided, however, that the Management Stockholders agree to
designate David Feldman ("Feldman") as one of its
representatives for so long as he may desire through the later
of (x) September 30, 1998 and (y) the date Feldman or his
affiliates ceases to own an aggregate of at least 400,000
shares of common stock of the Company (subject to adjustment
to reflect stock splits or similar events) if Feldman is not a
principal, officer, director or greater than 5% stockholder of
a competing court reporting business."
(c) deleting the first sentence of Section
1(a)(ii)(C) of the Agreement in its entirety and replacing
it with the following:
"four representatives jointly designated by GTCR and the
Management Stockholders (the "JOINT REPRESENTATIVES"), it
being agreed that Mortimer Feinberg, Andrew Garvin, David
White and Fir Geenen (collectively, the "INITIAL
REPRESENTATIVES") are acceptable to GTCR and the Management
Stockholders; provided that GTCR shall have the right at any
time (with or without cause) to remove the Initial
Representatives from the Board.".
2. RELEASE OF FELDMAN. Each of the parties to the Agreement agrees that
notwithstanding anything to the contrary contained in the Agreement, when
Feldman is no longer a director of the Company, he shall, automatically and
without any further action required to be taken, be released from the Agreement
(and the Agreement shall terminate with respect to him) and from all his rights
and obligations under the Agreement, except for any rights Feldman may have with
respect to breaches of the Agreement which may have occurred when Feldman was a
director.
3. STATEMENTS ABOUT FELDMAN. Each of the parties to the Agreement
hereby agrees not to make outside of the Company any statements which are false,
defamatory or derogatory in any material respect, either orally or in writing,
about Feldman. GTCR, upon the request of Feldman, will provide to Feldman solely
positive references for submission by Feldman to third parties and, upon
Feldman's prior written request, oral confirmation thereof.
4. APPLICABLE LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF DELAWARE.
5. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
This Amendment shall become effective upon the execution of a counterpart hereof
by the holders of a majority of the Stockholder Shares as provided for in
Section 10 of the Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Amendment to be
executed as of the day and year first written above.
ESQUIRE COMMUNICATIONS LTD.
By:
---------------------------------
Name:
Title:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GOLDER, THOMA, CRESSEY,
RAUNER, INC.
Its: General Partner
By:
---------------------------------
Its:
---------------------------------
-------------------------------------
Malcolm Elvey
-------------------------------------
David Feldman
THE SARNOFF TRUST
By:
----------------------------------
Cary A. Sarnoff, as Trustee
By:
----------------------------------
Michelle A. Sarnoff, as Trustee
ALLIED INVESTMENT CORPORATION
By:
-----------------------------------
Its:
-----------------------------------
ALLIED INVESTMENT CORPORATION II
By:
-----------------------------------
Its:
-----------------------------------
ALLIED CAPITAL CORPORATION II
By:
-----------------------------------
Its:
-----------------------------------
CMNY CAPITAL, L.P.
By:
------------------------------------
Its: General Partner
ANTARES LEVERAGED CAPITAL CORP.
By:
------------------------------------
Its:
------------------------------------
<PAGE>
AMENDMENT NO. 2 TO
STOCKHOLDERS AGREEMENT
This AMENDMENT NO. 2 TO STOCKHOLDERS AGREEMENT (this "AMENDMENT"),
dated as of June __, 1997, is by and among Esquire Communications Ltd., a
Delaware corporation (the "COMPANY"), and those stockholders of the Company
whose signatures appear on the signature page hereto (collectively, the
"STOCKHOLDERS") and amends that certain Stockholders Agreement (the
"Agreement"), dated as of October 23, 1996, as amended by Amendment No. 1 dated
as of May 1,1997, by and among the Company and the Stockholders, other than John
C. Durham. Terms defined in the Agreement shall have the same meaning when used
herein.
WHEREAS, the Stockholders and the Company wish to amend the Agreement
to add John C. Durham as a party and as otherwise set forth herein.
NOW THEREFORE, in consideration of the agreements herein contained,
the sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 1 of the Agreement is hereby amended as follows:
(a) deleting the word "nine" in Section 1(a)(i) of the Agreement
and replacing it with the word "ten" and adding the following proviso
at the end of Section 1(a)(i): "provided, that if the number of
Management Representatives is reduced from four to three pursuant to
Section 1(a)(ii)(B), then the number of authorized directors shall be
reduced from ten to nine";
(b) deleting Section 1(a)(ii)(B) of the Agreement in its entirety
and replacing it with the following:
"four representatives designated by the Management Stockholders
(the "MANAGEMENT REPRESENTATIVES"), determined by vote of the
Management Stockholders owning a majority of the Stockholder
Shares held by all Management Stockholders; provided, however,
that the Management Stockholders agree to designate (I) David
Feldman ("Feldman") as a Management Representative for so long as
he may desire through the later of (x) September 30, 1998 and (y)
the date Feldman or his affiliates ceases to own an aggregate of
at least 400,000 shares of Common Stock of the Company (subject
to adjustment to reflect stock splits or similar events) if
Feldman is not a principal, officer, director or greater than 5%
stockholder of a competing court reporting business and (II) John
C. Durham ("Durham") as a Management Representative for so long
as he may desire through the first to occur of (x) the
termination of this Agreement and (y) the date Durham ceases to
own at least 20% of the shares of Common Stock of the Company
(subject to adjustment to reflect stock splits or similar events)
acquired by him on the date hereof; provided, that if and when
Durham ceases to be a Management Representative, the number of
Management Representatives designated by the Management
Stockholders shall be reduced from four to three."
2. ADDITION AND RELEASE OF DURHAM. The Agreement is amended to add
John C. Durham as a "Stockholder" party thereto for purposes of Sections 1 and
10 of the Agreement only. Each of the parties to the Agreement agrees that
notwithstanding anything to the contrary contained in the Agreement, when Durham
is no longer a director of the Company, he shall, automatically and without any
further action required to be taken, be released from the Agreement (and the
Agreement shall terminate with respect to him) and from all his rights and
obligations under the Agreement, except for any rights Durham may have with
respect to breaches of the Agreement which may have occurred when Durham was a
director.
3. APPLICABLE LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF DELAWARE.
4. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
This Amendment shall become effective upon the execution of a counterpart hereof
by the holders of a majority of the Stockholder Shares as provided for in
Section 10 of the Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Amendment to be
executed as of the day and year first written above.
ESQUIRE COMMUNICATIONS LTD.
By:
-----------------------------------
Name:
Title:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GOLDER, THOMA, CRESSEY,
RAUNER, INC.
Its: General Partner
By:
-----------------------------------
Its:
----------------------------------
--------------------------------------
Malcolm Elvey
--------------------------------------
David Feldman
THE SARNOFF TRUST
By:
------------------------------------
Cary A. Sarnoff, as Trustee
By:
------------------------------------
Michelle A. Sarnoff, as Trustee
ALLIED INVESTMENT CORPORATION
By:
------------------------------------
Its:
------------------------------------
ALLIED INVESTMENT CORPORATION II
By:
-------------------------------------
Its:
------------------------------------
ALLIED CAPITAL CORPORATION II
By:
-------------------------------------
Its:
------------------------------------
CMNY CAPITAL, L.P.
By:
-------------------------------------
Its: General Partner
ANTARES LEVERAGED CAPITAL CORP.
By:
-------------------------------------
Its:
------------------------------------
HARLINGWOOD & COMPANY, LLC
By:
---------------------------------------
David White
--------------------------------------
John C. Durham
