Securities Purchase Agreement - TalentPoint Inc., Parthenon Investors LP, PCIP Investors
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SECURITIES PURCHASE AGREEMENT
by and among
TALENTPOINT, INC.,
and
PARTHENON INVESTORS, L.P.
PCIP INVESTORS
________________________________________
Dated as of June 13, 2000
________________________________________
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TABLE OF CONTENTS
Page
1. DEFINITIONS.................................................. 1
2. THE ISSUANCE AND SALE........................................ 2
2.1 Closing Date Issuances................................. 2
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2.2 Subsequent Issuances................................... 2
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3. THE CLOSING.................................................. 2
3.1 Time and Place of Closing.............................. 2
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3.2 Closing Date Transfers................................. 2
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4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY......... 3
4.1 Organization, Power and Standing....................... 3
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4.2 Capitalization and Investments......................... 3
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4.3 Financial Statements, etc.............................. 4
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4.4 Title to Assets........................................ 5
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4.5 Compliance with Laws, etc.............................. 5
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4.6 Non-Contravention, etc................................. 5
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4.7 Real Property.......................................... 6
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4.8 Litigation, etc........................................ 7
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4.9 Intellectual Property Rights........................... 7
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4.10 Contracts, etc......................................... 8
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4.11 Liabilities............................................ 10
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4.12 Change in Condition.................................... 10
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4.13 Insurance.............................................. 12
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4.14 Transactions with Affiliates........................... 12
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4.15 Tax Matters............................................ 12
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4.16 No Illegal Payments, etc............................... 14
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4.17 Employee Benefit Plans................................. 14
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4.18 Environmental Matters.................................. 16
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4.19 Labor Relations........................................ 16
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4.20 Government Contracts and Subcontracts.................. 16
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4.21 Officers, Directors and Employees...................... 17
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4.22 Customers and Suppliers................................ 17
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4.23 Customer Warranty Coverage............................. 17
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4.24 Key-Man Life Insurance................................. 17
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4.25 Financial Advisory, Finder's or Broker's Fees.......... 18
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4.26 No Governmental Consent or Approval Required........... 18
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4.27 Disclosure............................................. 18
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5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR............... 18
5.1 Corporate Matters ...................................... 18
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5.2 Authorization and Enforceability ....................... 18
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5.3 Non-Contravention, etc ................................. 18
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5.4 Investment Intent ...................................... 19
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5.5 Finder's or Broker's Fees .............................. 19
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6. CERTAIN AGREEMENTS OF THE PARTIES ........................... 19
6.1 Access to Premises and Information ..................... 19
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6.2 Operation of Business in the Ordinary Course ........... 20
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6.3 Certain Notices of Material Developments, etc .......... 20
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6.4 Preparation for Closing ................................ 20
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6.5 Expenses of Transaction ................................ 20
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6.6 Public Announcement .................................... 20
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6.7 Confidentiality Covenants of the Company ............... 20
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6.8 Application of Promissory Notes ........................ 21
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6.9 Allocation of Purchase Price ........................... 21
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6.10 Adjustments ............................................ 21
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6.11 Vote Required .......................................... 21
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7. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE INVESTOR........ 22
7.1 Representations, Warranties and Covenants............... 22
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7.2 No Material Adverse Change.............................. 22
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7.3 Consents, Approvals, etc................................ 22
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7.4 Litigation.............................................. 23
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7.5 Corporate Proceedings................................... 23
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7.6 Opinion of Counsel...................................... 23
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7.7 Amendment of Stockholders Agreement..................... 23
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7.8 Amendment of Registration Rights Agreement.............. 23
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8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY......... 23
8.1 Representations, Warranties and Covenants............... 23
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8.2 Consents, Approvals, etc................................ 24
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8.3 Corporate Proceedings................................... 24
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8.4 Opinion of Counsel...................................... 24
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9. INDEMNIFICATION.............................................. 24
9.1 Indemnification......................................... 24
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9.2 Limitations............................................. 25
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9.3 Nature and Survival of Claims; Time Limits.............. 25
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10. DEFINITIONS.................................................. 25
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10.1 Cross Reference Table.................................. 25
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10.2 Certain Definitions.................................... 26
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11. TERMINATION.................................................. 31
11.1 Termination of Agreement............................... 31
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11.2 Effect of Termination.................................. 32
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12. MISCELLANEOUS................................................ 32
12.1 Governing Law.......................................... 32
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12.2 Entire Agreement....................................... 33
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12.3 Amendment or Waiver.................................... 33
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12.4 Notices................................................ 33
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12.5 Survival, etc.......................................... 34
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12.6 Headings, etc.......................................... 34
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12.7 Schedules; Listed Documents, etc....................... 34
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12.8 Transfer Taxes......................................... 34
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12.9 Severability........................................... 34
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12.10 Counterparts........................................... 35
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12.11 Certain Costs and Expenses............................. 35
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12.12 Successors and Assigns................................. 35
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12.13 Set-Off................................................ 35
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12.14 Consent to Jurisdiction................................ 35
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12.15 WAIVER OF JURY TRIAL................................... 36
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EXHIBITS
Exhibit A - Form of Promissory Note
SCHEDULES
Schedule 4.1 - Foreign Qualification/Good Standing
Schedule 4.2.1 - Ownership of Shares and Interests
Schedule 4.2.2 - Contractual Obligation Respecting Capital Stock
Schedule 4.2.3 - Voting Trusts, etc.
Schedule 4.2.4 - Capital Stock of Subsidiaries
Schedule 4.2.5 - Investments
Schedule 4.3.2 - Financial Statements
Schedule 4.4. - Liens
Schedule 4.6 - Non-Contravention, etc.
Schedule 4.7.1 - Business Locations
Schedule 4.7.2 - Real Property
Schedule 4.8 - Litigation
Schedule 4.9 - Intangibles
Schedule 4.10.1 - Contractual Obligations
Schedule 4.10.2 - Breaches of Contractual Obligations
Schedule 4.11 - Liabilities
Schedule 4.12 - Change in Condition
Schedule 4.13(a) - Insurance Policies
Schedule 4.13(b) - Liability Claims
Schedule 4.14(a) - Affiliate Relationships
Schedule 4.14(b) - Affiliate Transactions
Schedule 4.14(c) - Affiliate Accounting
Schedule 4.15 - Tax Matters
Schedule 4.17 - Benefit Plans
Schedule 4.18 - Environmental Matters
Schedule 4.19 - Labor Disputes
Schedule 4.20 - Government Contracts
Schedule 4.21(a) - Employee Information
Schedule 4.21(b) - Employee Departures
Schedule 4.22 - Customers and Suppliers
Schedule 4.23 - Warranty Coverages
Schedule 4.26 - Governmental Consents
Schedule 6.3 - Contemplated Transactions
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") dated as of June 13, 2000
by and among TalentPoint, Inc., a Pennsylvania corporation ("TalentPoint" and
together with its subsidiaries, the "Company"), Parthenon Investors, L.P., a
Delaware limited partnership ("Parthenon Investors"), PCIP Investors, a Delaware
general partnership ("PCIP" and together with Parthenon Investors, the
"Investors") provides for the exercise by the Investors of warrants to purchase
certain shares of Class A Common Stock of TalentPoint, and the issuance and sale
of promissory notes by TalentPoint to the Investors. To the extent an Investor
assigns certain of its rights under this Agreement to any co-investment fund or
Affiliate, such entities, together with the Investors, will be referred to as
the "Investors."
Recitals
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WHEREAS, the Investors wish to exercise Class B Warrants (as defined in the
Class B Common Stock and Warrant Purchase Agreement dated as of December 16,
1999 among the Company, the Investors and the other parties thereto) to purchase
116,210 shares (the "Purchased Shares") of Class A Common Stock, $0.01 par
value, of TalentPoint ("Class A Common Stock") at an exercise price of $16.70
per share;
WHEREAS, pursuant to this Agreement the Company will issue and sell to the
Investors promissory notes in the aggregate principal amount of $10.0 Million
Dollars, substantially in the form attached hereto as Exhibit A (the "Notes"
and, together with the Purchased Shares, the "Purchased Securities"); and
WHEREAS, in furtherance of such transactions, the Board of Directors of
TalentPoint has by majority vote approved this Agreement and the transactions
hereinabove described.
Agreement
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Therefore, in consideration of the foregoing and the mutual agreements and
covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS.
Certain capitalized terms are used in this Agreement as specifically
defined herein. These definitions are set forth or referred to in Section 10
hereof.
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2. THE ISSUANCE AND SALE.
2.1 Closing Date Issuances. On the Closing Date (as defined in Section
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3.1 below), subject to the terms and conditions set forth in this Agreement, the
Investors will exercise Class B Warrants and purchase the Notes for an aggregate
purchase price of $10,000,000, in exchange for which TalentPoint will sell and
issue the Purchased Shares and the Notes.
2.2 Subsequent Issuances. If any amount remains outstanding under the
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Notes on the anniversary of the Closing Date, on the Business Day immediately
following such anniversary TalentPoint shall issue to the Investors 348,630
shares of Class A Common Stock (as adjusted pursuant to Section 6.10). On the
last Business Day of each of the first four calendar months following the first
anniversary of the Closing Date (and prior to the second anniversary of the
Closing Date), so long as any amount remains outstanding under the Notes on such
Business Day, TalentPoint shall issue to the Investors 58,105 shares of Class A
Common Stock (resulting in the issuance of a maximum of 232,420 shares and a
total of 581,050 shares of Class A Common Stock) under this Section 2.2 (all as
adjusted pursuant to Section 6.10).
3. THE CLOSING.
3.1 Time and Place of Closing. The closing of the purchase and sale of
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the Purchased Securities described in Section 2.1 above and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Ropes & Gray, One International Place, Boston, or such other
location as the parties may agree, at 10:00 a.m. on June 16, 2000 or if the
conditions to Closing set forth in Sections 8 and 9 hereof shall not have been
satisfied at such date, at such later time or date prior to termination of this
Agreement as the Investors may specify by not fewer than three (3) business days
prior written notice to the Company (the date on which the Closing occurs being
referred to herein as the "Closing Date").
3.2 Closing Date Transfers. At the Closing:
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3.2.1 The Investors will deliver $10,000,000 to the Company by wire
transfer of immediately available federal funds to the bank account of the
Company as directed by the Company;
3.2.2 the Investors will deliver to the Company for cancellation,
Class B Warrants for the purchase of the Purchased Shares;
3.2.3 the Company will issue to the Investors certificates
representing the Purchased Shares;
3.2.4 the Company will issue the Notes to the Investors; and
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3.2.5 the Company will issue Class B Warrants to the Investors to
purchase the remaining Class A Common Shares subject to the Class B
Warrants.
4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY.
In order to induce the Investors to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, the Company represents
and warrants to the Investors as follows:
4.1 Organization, Power and Standing. TalentPoint and each of its
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Subsidiaries is a corporation duly organized or formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation, has all requisite corporate power and authority to execute, deliver
and perform each of the Transaction Agreements to which it is a party, to carry
on the Business as currently conducted and to consummate the transactions
contemplated hereby. The Company has heretofore delivered to the Investors a
true and complete copy of (a) the Charter and By-laws of the Company and each of
its Subsidiaries, (b) the minute books of the Company and each of its
Subsidiaries and (c) the stock or other ownership interest ledger of the Company
and each of its Subsidiaries, each of which is accurate and complete through the
date hereof. The Company is duly qualified or licensed to do business as a
foreign corporation, and is in good standing as such, in each jurisdiction
listed on Schedule 4.1, and the jurisdictions so listed are the only
jurisdictions where the failure to be so qualified or licensed and in good
standing would have a Material Adverse Effect.
4.2 Capitalization and Investments.
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4.2.1 The total capital stock authorized and the capitalization of
TalentPoint is set forth on Schedule 4.2.1. All of the Class A Common
Stock will be owned of record by the Existing Stockholders on the Closing
Date in the amounts set forth with respect to such stockholders under the
heading "Class A Stock Ownership" on Schedule 4.2.1 hereto. All of the
outstanding shares of capital stock of TalentPoint are duly authorized and
validly issued, fully paid and nonassessable.
4.2.2 Except as set forth on Schedule 4.2.2, there is no Contractual
Obligation or Charter or By-law provision which obligates the Company to
issue, purchase or redeem, or make any payment in respect of, any shares of
capital stock or other securities convertible into or exchangeable for
shares of capital stock or which provides for any stock appreciation or
similar right or grants any right to share in the equity, income, revenues
or cash flow of the Company.
4.2.3 Except as set forth on Schedule 4.2.3, there are no voting
trusts, shareholder agreements, commitments, undertakings, understandings,
proxies or other restrictions to which any Existing Stockholder or the
Company is a party which directly or indirectly
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restrict or limit in any manner, or otherwise relate to, the voting, sale
or other disposition of any shares of capital stock of TalentPoint.
4.2.4 Except as disclosed on Schedule 4.2.4, all of the outstanding
shares of capital stock of the Subsidiaries of TalentPoint are duly
authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by TalentPoint free and clear of any Liens.
Except as disclosed on Schedule 4.2.4, there are no (i) outstanding options
obligating any of the Subsidiaries to issue or sell shares of capital stock
of such Subsidiary or to grant, extend or enter into any such option or
(ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company
with respect to the voting of, or the right to participate in dividends or
other earnings on, any capital stock of the Subsidiaries.
4.2.5 The Company does not have an Investment in any Person other
than Investments in (a) demand deposit or money market accounts, (b) cash
equivalents (i.e., marketable obligations issued or guaranteed by the
government of the United States that mature within 180 days of the
acquisition thereof or money market funds that invest in securities similar
to such United States government securities) and (c) Investments listed on
Schedule 4.2.5.
4.3 Financial Statements, etc.
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4.3 Financial Information. The Company has heretofore delivered to
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the Investors true and complete copies of each of the following
(collectively, the "Financial Statements"):
(a) The audited combined balance sheets of the Company as of
December 31, 1997 and 1998, and the combined statements of operations,
of stockholders' equity (deficiency), and of cash flow for the
respective fiscal years ended December 31, 1997 and 1998, together
with the notes thereto and reports thereon by Deloitte & Touche (the
"1997/1998 Year End Financials").
(b) The audited combined balance sheets of the Company as of
December 31, 1999, and the combined statements of operations, of
stockholders' equity (deficiency), and of cash flow for the fiscal
year ended December 31, 1999, together with the notes thereto and
reports thereon by PriceWaterhouse Coopers (the "1999 Year End
Financials and, together with the 1997/1998 Year End Financials, the
"Year End Financials").
(c) The unaudited combined balance sheet of the Company as of
March 31, 2000, and the related combined statements of operations, of
stockholders' equity (deficiency), and of cash flow for the three
months then ended (the "Quarterly Financials").
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(d) Monthly unaudited financial statements of the Company,
consisting of a balance sheet and related statements of earnings and
changes in retained earnings and cash flow, for each calendar month
since December 31, 1999 through April 30, 2000 (the "Interim
Financials" and together with the Year End Financials and the
Quarterly Financials, the "Financial Statements").
4.3.2 Character of Financial Information. Except as set forth on
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Schedule 4.3.2, the Financial Statements (including the notes thereto) were
prepared in accordance with GAAP consistently applied throughout the
periods specified therein. The Financial Statements are correct and
complete and present fairly, in all material respects, the financial
position and results of operations of the Company for the periods specified
therein, and are consistent with books and records of the Company subject
in the case of the Interim Financials to an absence of notes and normal
year-end adjustments which will not in the aggregate be material.
4.4 Title to Assets. The Company has good and marketable title to or, in
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the case of property held under lease or other Contractual Obligation, a valid
and Enforceable right to use, all of its properties, rights and assets, whether
real or personal and whether tangible or intangible (collectively, the
"Assets"), including without limitation all properties, rights and assets
reflected in the Balance Sheet (except for Assets which have been sold or
otherwise disposed of since the Balance Sheet Date as permitted under Section
4.12 hereof). The Assets are not subject to any Lien other than as set forth on
Schedule 4.4. The tangible Assets are in good working order, operating
condition and state of repair, ordinary wear and tear excepted. The Assets
constitute all properties, rights and assets held for, used in or necessary for
the conduct of the Business of the Company as currently conducted.
4.5 Compliance with Laws, etc. The operations of the Business as
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heretofore or currently conducted were not and are not in violation of, nor is
the Company in default or violation under, any Legal Requirement, except for
such violations or defaults as have not had and will not have in the aggregate a
Material Adverse Effect. To the Knowledge of the Company, all future
expenditures with respect to the operations of its Business as currently
conducted that are required to meet the provisions of any Legal Requirement
currently in effect (or, to the Knowledge of the Company, enacted but to take
effect in future) will not in the aggregate have a Material Adverse Effect. The
Company has been duly granted all licenses, permits, franchises and other
authorizations under any Legal Requirement necessary for the conduct of the
Business as currently conducted or currently proposed to be conducted, except
licenses, permits, franchises and other authorizations the failure of which to
have been obtained has not had and will not have in the aggregate a Material
Adverse Effect.
4.6 Non-Contravention, etc. Neither the execution and delivery of this
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Agreement nor the consummation by the Company of any of the transactions
contemplated hereby does or will constitute, result in or give rise to (a) a
breach of or a default or violation under any provision of
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the Charter or By-laws of the Company or (b), except as set forth on Schedule
4.6, (i) a breach or violation under any provision of any Contractual Obligation
of the Company, (ii) the acceleration of the time for performance of any
obligation under any such Contractual Obligation, (iii) the imposition of any
Lien upon or the forfeiture of any Asset (including, without limitation, any
Asset held under a lease or license), (iv) a requirement that any consent under,
or waiver of, any such Contractual Obligations, Charter or By-law provision be
obtained that has not already been obtained or (v) any severance payment, right
of termination, modification of terms, or any other right or cause of action
under any such Contractual Obligation or Charter or By-law provision, except in
the case of clause (b)(i) above where such breaches, defaults, events or
violation would not have a Material Adverse Effect.
4.7 Real Property.
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4.7.1 Schedule 4.7.1 sets forth a list of the addresses of each
location at which any equipment or inventory is located or where the
Company has an office or other place of business.
4.7.2 The Company does not and has never owned any real property.
Schedule 4.7.2 lists all contracts for the lease or sublease of real
property by the Company currently in effect (the "Leases"). The Company
has delivered to the Investor correct and complete copies of the Leases (as
amended to date). To the Company's Knowledge, with respect to each Lease:
(a) the Lease is legal, valid binding, enforceable, and in full
force and effect;
(b) the Lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(c) the Company is not, and, to the Company's Knowledge, no
other party to the lease or sublease is in material breach or default,
and no event has occurred which, with notice or lapse of time or both,
would constitute a material breach or default or permit termination,
modification, or acceleration thereunder or impair any right of the
Company to exercise and obtain the benefit of any options contained in
such Lease;
(d) there are no disputes, oral agreements, or forbearance
programs in effect as to the Lease;
(e) with respect to each Lease that is a sublease, the
representations and warranties set forth in subsections (a) through
(d) above are true and correct with respect to the underlying Lease;
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(f) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Lease;
or
(g) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws,
rules, and regulations.
4.8 Litigation, etc. Except as set forth on Schedule 4.8, there is no
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litigation, at law or in equity, or any proceeding before or investigation by
any Governmental Authority pending (or, to the Knowledge of the Company,
threatened) against the Company, or any basis therefor, except for such
potential litigation or proceedings which have not had and will not have in the
aggregate a Material Adverse Effect. There is no litigation at law or in
equity, or any proceeding before, or investigation by, any Governmental
Authority, pending (or, to the Knowledge of the Company, threatened) against the
Company, or any basis therefor, which seeks rescission of, seeks to enjoin the
consummation of, or otherwise relates to, this Agreement or any of the
transactions contemplated hereby. No judgment, decree or order of any
Governmental Authority (a) has been, to the Company's Knowledge, issued against
any Person (other than the Company) which has had or will have a Material
Adverse Effect or (b) has been issued against the Company.
4.9 Intellectual Property Rights. For purposes of this Agreement,
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"Intangibles" shall mean: all trade and product names; foreign letters patent,
patents, patent applications, and unpatented proprietary developmental records;
trademarks, service marks, logos and copyrights (including registrations and
applications); trade secrets, know-how and other proprietary or confidential
information; computer software; and other intangible property and rights that
are directly or indirectly owned, licensed or otherwise used by the Company.
Schedule 4.9 lists all significant Intangibles owned or used by the Company.
Except as set forth on Schedule 4.9, the Company owns or has the valid right to
use all Intangibles used in or necessary for the conduct of its Business as
presently conducted free and clear of all liens, licenses or encumbrances of any
kind. The Company has never received any charge, complaint, claim, demand, or
notice alleging any interference, infringement, misappropriation, or violation,
including any claim that the Company must license or refrain from using any
Intangibles. The use by the Company of the Intangibles does not infringe or
misappropriate and has not infringed or misappropriated any rights of any third
party, and, to the Company's Knowledge, no activity, except as set forth on
Schedule 4.9 hereto, of any third party infringes upon or misappropriates the
rights of the Company with respect to any of the Intangibles. The Company does
not own any patents, and has no pending patent applications, relating to the
Business. Except as set forth on Schedule 4.9 hereto, no other Person has any
ownership of or right to use the Intangibles (except such right to use such
Intangibles as would not have a Material Adverse Effect) or has notified the
Company in writing that it is claiming any ownership of or right to use any
Intangibles.
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4.10 Contracts, etc.
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4.10.1 Certain Contractual Obligations. Set forth on Schedule 4.10.1
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hereto is a true and complete list of all of the following Contractual
Obligations of the Company in effect as of December 16, 1999:
(a) All collective bargaining agreements and other labor
agreements, all employment or consulting agreements, and all other
plans, agreements, arrangements, practices or other Contractual
Obligations (other than any Employee Plan) which constitute
Compensation or benefits, including post retirement benefits, to any
of the officers or employees or former officers or employees (or any
spouse or family member of any such current or former officer or
employee) of the Company.
(b) All Contractual Obligations under which the Company is or
may become obligated to pay any legal, accounting, brokerage, finder's
or similar fees or expenses in connection with, or has incurred any
severance pay or special Compensation obligations which would become
payable by reason of, this Agreement or consummation of the
transactions contemplated hereby.
(c) All Contractual Obligations (including, without
limitation, options) to sell or otherwise dispose of any Assets other
than in the Ordinary Course of Business.
(d) All Contractual Obligations under which the Company has or
will after the Closing have any liability or obligation to or for the
benefit of any Existing Stockholder or any other Affiliate of the
Company.
(e) All Contractual Obligations under which the Company has
any liability or obligation for Debt or constituting or giving rise to
a Guarantee of any liability or obligation of any Person, or under
which any Person has any liability or obligation constituting or
giving rise to a Guarantee of any liability or obligation of the
Company (including, without limitation, partnership and joint venture
agreements).
(f) All Contractual Obligations, other than this Agreement,
under which the Company is or may become obligated to pay any amount
in respect of deferred or conditional purchase price, indemnification
obligations, purchase price adjustment or otherwise in connection with
any (i) acquisition or disposition of assets or securities, (ii)
merger, consolidation or other business combination, or (iii) series
or group of related transactions or events of a type specified in
subclauses (i) and (ii).
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(g) All Contractual Obligations for the sale of products or
provision of services by the Company that (i) individually involve
products or services having a value of at least $100,000, (ii) have a
term extending more than one year after the Closing Date, (iii) to
which the United States federal government or any state, local or
foreign government or any agency or department of any of the foregoing
is a party, or (iv) that renders the Company a subcontractor at any
tier to any prime Contractual Obligation to which the United States
federal government or any state, local or foreign government or any
agency or department of any of the foregoing is a party.
(h) All purchase obligations (whether or not in the Ordinary
Course of Business), which require minimum purchases by the Company.
(i) All advertising contracts.
(j) All standard forms of purchase orders and sales orders.
(k) All leases or other Contractual Obligations (including all
amendments) under which any real property or other tangible asset is
held or used by the Company.
(l) All leases or other Contractual Obligations under which the
Company is liable as lessor with respect to any real property or other
tangible asset.
(m) All licenses or other Contractual Obligations (including all
amendments) under which any Intangible is held or used by the Company.
(n) All licenses or other Contractual Obligations under which the
Company is liable as licensor with respect to any Intangibles.
(o) All Contractual Obligations under which the Company is or may
be prohibited or restricted from competing (i) in any business, (ii)
in any geographic area and/or (iii) for any current or potential
customers anywhere in the world.
(p) All Contractual Obligations (other than purchase orders or
sales orders) not required to be listed on Schedule 4.10.1 pursuant to
clauses (a) through (n) above which individually involve liabilities
of the Company in excess of $100,000.
The Company has heretofore delivered to the Investors a true and
complete copy of each of the Contractual Obligations in effect as of
December 16, 1999, or a narrative description of those Contractual
Obligations that are not in writing, listed on Schedule 4.10.1 hereto,
including, without limitation, all amendments thereto.
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4.10.2 Nature of Contracts, etc. Each Contractual Obligation to
-------------------------
which the Company is a party is, and after giving effect to the
Closing hereunder and the consummation of the transactions
contemplated hereby will be, Enforceable by the Company except for
such failures to be so Enforceable as have not had and will not have
in the aggregate a Material Adverse Effect. No breach or default by
the Company under any Contractual Obligation to which it is a party
has occurred and is continuing, and no event has occurred which with
notice or lapse of time would constitute such a breach or default or
permit termination, modification or acceleration by any other Person
under any of such contracts, other than such breaches, defaults and
events as have not had and will not have in the aggregate a Material
Adverse Effect. No breach or default by the Company under any
Contractual Obligation or Legal Requirement to which it is a party or
by which it or any of its property is bound or affected with respect
to any Government Order. To the Knowledge of the Company, except as
set forth on Schedule 4.10.2 hereto, no breach or default by any other
Person under any of the foregoing has occurred and is continuing, and
no event has occurred which with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or acceleration by the Company under any of the
foregoing, other than breaches, defaults and events which have not had
and will not have in the aggregate a Material Adverse Effect.
4.11 Liabilities. The Company does not have any liabilities or other
-----------
obligations, whether absolute, accrued, contingent, due, to become due, or
otherwise, other than: (a) obligations and liabilities of the Company set forth
on the Balance Sheet (or described specifically in the notes thereto); (b)
obligations and liabilities of the Company incurred since the Balance Sheet Date
in the Ordinary Course of Business; (c) obligations and liabilities of the
Company in respect of Contractual Obligations; and (d) other obligations and
liabilities of the Company that either individually or in the aggregate will not
exceed $25,000.
4.12 Change in Condition. From and after the Balance Sheet Date to and
-------------------
including the date hereof, the Company has conducted its Business only in the
Ordinary Course of Business and has maintained the value of its Business as a
going concern and, except as set forth on Schedule 4.12, its relationships with
customers, distributors, suppliers, vendors, employees, agents and others.
Without limiting the generality of the foregoing, except as set forth on
Schedule 4.12, which matters have not had and will not have in the aggregate a
Material Adverse Effect, since the Balance Sheet Date the Company has not:
(a) Entered into any transaction otherwise than on an arms'
length basis or any transaction with any Existing Stockholder or any
Affiliate thereof;
(b) Made any capital expenditure in excess of $100,000
individually or $500,000 in the aggregate;
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<PAGE>
(c) Incurred or otherwise become liable in respect of any Debt,
except for borrowings in the Ordinary Course of Business under the
Loan Agreement, or become liable in respect of any Guarantee;
(d) Created or suffered the imposition of any Lien (other than
capital leases, which will not have in the aggregate a Material
Adverse Effect) upon any assets, whether tangible or intangible, of
the Company;
(e) (i) Sold, leased to others or otherwise disposed of any of
its assets, (ii) entered into any Contractual Obligation relating to
(A) the purchase of any capital stock of or interest in any Person,
(B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination, (iii) canceled or
compromised any Debt or claim (other than compromises of accounts
receivable in the Ordinary Course of Business), (iv) waived or
released any right of substantial value or (v) instituted, settled or
agreed to settle any material Action;
(f) (i) Made any changes in the rate of Compensation of any
director, officer, employee, or consultant to, or agent of the
Company, except for changes in the Ordinary Course of Business to the
compensation of Persons other than directors and officers of the
Company, or (ii) paid or agreed to pay any extra Compensation to any
such Person (including, without limitation, any such payments to be
made in connection with and/or from the proceeds of the transactions
contemplated hereby);
(g) Suffered any material damage, destruction or loss (whether or
not covered by insurance) to any of its assets, whether tangible or
intangible;
(h) Made any change in its customary methods of accounting or
accounting practices, pricing policies or payment or credit practices,
or failed to pay any creditor any amount owed to such creditor when
due, or granted any extensions of credit other than in the Ordinary
Course of Business;
(i) Made any Distributions;
(j) Entered into any Contractual Obligation to do any of the
things referred to in clauses (a) through (h) above; and
(k) Suffered or incurred any Material Adverse Effect, nor any
event or events which in the aggregate will have a Material Adverse
Effect.
4.13 Insurance. Set forth on Schedule 4.13(a) is a list of all liability
---------
(including, without limitation, public liability, products liability and
automobile liability), workers' compensation,
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<PAGE>
property, casualty, directors and officers, errors and omissions and other
policies by which the Company has been insured since December 31, 1997 and, in
the case of liability policies, since December 31, 1995 (the "Insurance
Policies"), true and complete copies of which have been furnished to the
Investors. Such list includes the type of policy, form of coverage, policy
number and insurer, coverage dates, named insured, limit of liability and
deductible. Except for the matters set forth on the loss runs annexed to
Schedule 4.13(b) and the matters set forth on Schedule 4.13(b), there have been
no liability claims which have been made against the Company or, to the
Knowledge of the Company, any occurrence which may give rise to any such claim
against the Company.
4.14 Transactions with Affiliates. All of the Existing Stockholders (other
----------------------------
than the Investors and the others listed on Schedule 4.14(a)) are officers,
directors or employees of the Company. Except as set forth on Schedule 4.14(b)
(together with the Existing Stockholders, officer, director or employee
relationships described in the preceding sentence, the "Affiliate
Relationships"), none of the Affiliates of Existing Stockholders (other than the
Company) or of the Company is an officer, director, employee, consultant,
competitor, customer, distributor, supplier or vendor of the Company. During
the two-year period ending on the Closing Date, (a) the terms of the Affiliate
Relationships have not been altered in any respect which has had or will have in
the aggregate a Material Adverse Effect, and (b) except as set forth on Schedule
4.14(c), there have been no transactions between the Company, on the one hand,
and any Existing Stockholder or any Affiliate thereof, on the other hand, other
than the Affiliate Relationships and other relationships, Contractual
Obligations and transactions the termination or non-continuation of which has
not had and will not have in the aggregate a Material Adverse Effect. Except as
set forth on Schedule 4.14(d), all transactions between the Company on the one
hand, and the Existing Stockholders or any Affiliate thereof on the other hand,
which occurred during the periods covered by the Financial Statements are
reflected in the Financial Statements at amounts which do not overstate the net
worth or net income of the Company as compared with fair market values and
prices which would have been charged and paid between parties at arms' length at
the time of the entering into of the transactions in question.
4.15 Tax Matters. Except as set forth on Schedule 4.15:
----------
4.15.1 all Tax Returns that are required to have been filed by or
with respect to the Company have been duly and timely filed in accordance
with all applicable Legal Requirements and such Tax Returns are true,
correct and complete, and no claim has been made by any taxing authority in
a jurisdiction where the Company does not file Tax Returns that the Company
is or may be subject to taxation by that jurisdiction,
4.15.2 all Taxes due and payable (whether or not shown on any Tax
Return) in respect of the Company have been paid in full,
4.15.3 the liability of the Company for Taxes (a) did not, as of the
date of the most recent financial statements, exceed the accruals for Taxes
(excluding any reserve
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<PAGE>
established to reflect timing differences between book and Tax income) set
forth on the face of the Balance Sheet (rather than in any notes thereto),
and (b) will not, as of the Closing Date, exceed the accruals for Taxes
liability (excluding any reserve established to reflect timing differences
between book and Tax income) set forth on the face of the Balance Sheet
(rather than in any notes thereto),
4.15.4 except as set forth on Schedule 4.15.4, no Tax Return referred
to in Section 4.15.1 has been the subject of examination or audit by the
Internal Revenue Service ("IRS") or the appropriate state, local or foreign
taxing authority,
4.15.5 no deficiencies have been asserted or assessments made as a
result of any examinations of the Tax Returns referred to in Section 4.15.1
by the IRS and/or a state, local or foreign taxing authority,
4.15.6 there is no action, suit, proceeding, audit, claim, deficiency
or assessment pending (or, to the Knowledge of the Company, threatened)
with respect to any Taxes of the Company, and there are no Liens on or
other security interests in any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax other than
for current Taxes not yet due and payable,
4.15.7 no waivers of statutes of limitations have been given or
requested by or with respect to any Taxes of the Company,
4.15.8 no powers of attorney with respect to Taxes of the Company are
currently in force,
4.15.9 except as set forth on Schedule 4.15.9, the Company does not
have any equity interest in another entity that is classified for tax
purposes as a corporation or partnership,
4.15.10 the Company has not made nor is obligated nor is a party to
an agreement that could obligate it to make any compensation-related
payments that would not be deductible by reason of Code sections 162, 280G
or 404,
4.15.11 the Company does not have any liability for the Taxes of any
Person under Treas. Reg. (S) 1.1502-6 (and/or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise, or is a party to or bound by any Contractual Obligation
relating to any allocation or sharing of Taxes,
4.15.12 the Company has provided to the Investors true, complete, and
correct copies of all Tax Returns filed by it with taxing authorities since
December 31, 1997 and all requests for extensions or waivers and notices or
claims given or received with respect thereto,
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<PAGE>
4.15.13 the Company has withheld and paid to the IRS or the
appropriate state, local or foreign taxing authority all amounts required
to be withheld from the wages of the employees, independent contractors,
creditors, stockholders or other third parties of the Company under state
law, foreign law and the applicable provisions of the Code,
4.15.14 all contributions and other Taxes due from the Company
pursuant to any unemployment insurance or workers compensation laws and all
sales or use Taxes which are due or payable by the Company prior to the
date hereof have been paid in full and will be so paid through the Closing
Date, and
4.15.15 no consent to the application of Section 341(f) of the Code
has been made by or on behalf of the Company with regard to any assets or
property held, acquired or to be acquired by the Company.
4.16 No Illegal Payments, etc. No Existing Stockholder nor the Company,
-------------------------
nor any of their respective officers, employees or agents, has (a) directly or
indirectly given or agreed to give any gift, contribution, payment or similar
benefit to any supplier, customer, governmental employee or other Person who
was, is or may be in a position to help or hinder the Company (or assist in
connection with any actual or proposed transaction) or made or agreed to make
any contribution, or reimbursed any political gift or contribution made by any
other Person, to any candidate for federal, state, local or foreign public
office, in either case (i) which would subject the Company or the Investors to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (ii) the non-continuation of which has had or will have in the
aggregate a Material Adverse Effect, or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or records for
any purpose.
4.17 Employee Benefit Plans.
----------------------
4.17.1 Disclosure. Schedule 4.17 sets forth an accurate, current and
----------
complete list of all Plans. With respect to each Plan, the Company has
provided to the Investors accurate, current and complete copies of each of
the following: (i) where the plan has been reduced to writing, the plan
document together with all amendments; (ii) where the plan has not been
reduced to writing, a written summary of all material plan terms; (iii)
where applicable, copies of any trust agreements, custodial agreements,
insurance policies, administration agreements and similar agreements, and
investment management or investment advisory agreements; (iv) copies of any
summary plan descriptions, employee handbooks or similar employee
communications; (v) in the case of any plan, if any, that is intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
determination letter from the IRS and a copy of any request for such a
determination; (vi) in the case of any funding arrangement, if any,
intended to qualify as a VEBA under Section 501(c)(9) of the Code, a copy
of the IRS letter determining that it so qualifies; and (vii) in the case
of any plan, if any, for which Forms 5500 are required to be
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<PAGE>
filed, a copy of the three most recently filed Forms 5500, with schedules
attached. No provision of any Plan would result in any limitation on the
ability of the Company to terminate the plan.
4.17.2 No Defined Benefit Pension Plans. None of the Company nor any
--------------------------------
corporation, trust, partnership or other entity that would be considered as
a single employer with the Company under Section 4001(b)(1) of ERISA or
Sections 414(b), (c), (m) or (o) of the Code has ever maintained or been
required to contribute to any Employee Plan subject to Title IV of ERISA.
4.17.3 Plan Qualification; Plan Administration; Certain Taxes and
----------------------------------------------------------
Penalties. Each Plan that is intended to be qualified under Section 401(a)
---------
of the Code is so qualified. Each Plan, including any associated trust or
fund, has been administered in accordance with its terms and with all
applicable Legal Requirements, and nothing has occurred with respect to any
Plan that has subjected or could subject the Company to a liability under
Section 409 or Section 502 of ERISA or Chapter 43 of Subtitle D or section
6652 of the Code. Each participant directed Pension Plan is an "ERISA
Section 404(c) Plan" within the meaning of Department of Labor Regulation
Section 1.404(c)-1.
4.17.4 All Contributions and Claims and Premiums Paid. Except as set
----------------------------------------------
forth on Schedule 4.17.4, all required contributions, assessments and
premium payments on account of each Plan have been made. There are no
existing (or, to the Knowledge of the Company, threatened) lawsuits, claims
or other controversies relating to a Plan, other than routine claims for
information or benefits in the normal course. No Plan is the subject of
examination by a government agency or a participant in a government
sponsored amnesty, voluntary compliance or similar program.
4.17.5 Retiree Benefits; Certain Welfare Plans. Except as set forth
---------------------------------------
on Schedule 4.17.5, other than as required under Section 601 et seq. of
ERISA, no Plan that is a Welfare Plan provides benefits or coverage
following retirement or other termination of employment. Each welfare
benefit trust or fund that constitutes or is associated with a Plan and
that is intended to be exempt from federal income tax under Section
501(c)(9) of the Code is so exempt.
4.18 Environmental Matters. There is no Action pending or, to the
---------------------
Knowledge of the Company, threatened, against the Company in respect of (a)
noncompliance by the Company with any Environmental Law or (b) release into the
environment of any pollutant, contaminant or toxic or hazardous material,
substance or waste, whether solid, liquid or gas, (each a "Hazardous Substance")
on, at or from any property presently occupied or operated by the Company.
Except as set forth on Schedule 4.18, there has been no release or threatened
release of Hazardous Substances on, upon, into or from any site currently or
heretofore owned, leased or otherwise used by the Company, other than such
releases or threatened releases that in the aggregate have not had and will not
have a Material Adverse Effect. Except as set forth on Schedule 4.18, to the
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<PAGE>
Knowledge of the Company, there have been no Hazardous Substances generated by
the Company that have been disposed of or come to rest at any site that has been
included in any published U.S. federal, state or local "superfund" site list or
any other similar list of hazardous or toxic waste sites published by any
governmental authority in the United States. Except as set forth on Schedule
4.18, to the Knowledge of the Company, there are no underground storage tanks
located on, no polychlorinated biphenyls ("PCBs") or PCB-containing equipment
used or stored on, and no hazardous waste as defined by the Resource
Conservation and Recovery Act, as amended, stored on, any site owned or operated
by the Company, except for the storage of hazardous waste in quantities that are
used by the Company in the Ordinary Course of Business.
4.19 Labor Relations. None of the employees of the Company is represented
---------------
by a labor union, and no petition has been filed, nor has any proceeding been
instituted by any employee or group of employees with any labor relations board
or commission seeking recognition of a collective bargaining representative. To
the Knowledge of the Company, there is no organizational effort currently being
made or threatened by or on behalf of any labor union to organize any employees
of the Company, and no demand for recognition of any employees of the Company
has been made by or on behalf of any labor organization. Except as set forth on
Schedule 4.19, to the Knowledge of the Company, there is no pending or
threatened employee strike, work stoppage or labor dispute with respect to any
employees of the Company. Except as set forth on Schedule 4.19, there are no
controversies or disputes pending between the Company on the one hand and any of
its employees on the other hand before any court, commission, board, agency,
arbitrator, grievance procedure or any other forum.
4.20 Government Contracts and Subcontracts. Except as set forth on
-------------------------------------
Schedule 4.20, the Company has received no written claims, penalties, or causes
or action against the Company the basis of which is an actual or alleged
violation of, or noncompliance with, any applicable law, regulation or order (a)
related to a Contractual Obligation between the Company and the United States
federal government or any other state, local or foreign government or any
division or agency of any of the foregoing (a "Government Contract"), which
contract relates or related to the Business or (b) related to a Contractual
Obligation between the Company and any other party, which Contractual Obligation
relates or related to the Business and renders or rendered the Company a
subcontractor at any tier to a prime Contractual Obligation with the United
States federal government or any other state, local or foreign government or any
division or agency of any of the foregoing (a "Government Subcontract"). Except
as set forth on Schedule 4.20, to the Company's Knowledge, there is no
reasonable basis for any claim, penalty or cause of action against the Company
alleging a violation of, or noncompliance with, any applicable law, regulation
or order related to any Government Contract or Government Subcontract to which
the Company is a party and that relates or related to the Business, except for
such claims, penalties or causes of action as do not, in the aggregate, have a
Material Adverse Effect. For purposes of this Section 4.20, claims, penalties
and causes of action alleging a violation of, or noncompliance with, any
applicable law, regulation or order include, but are not limited to, those
purporting to be based on failure to comply with cost accounting standards,
allowable costs, allocation of costs, omissions or errors in disclosure
statements, or defective pricing.
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<PAGE>
4.21 Officers, Directors and Employees. Schedule 4.21(a) sets forth: (a)
---------------------------------
the name, title and total compensation of each officer and director of the
Company; (b) the name, title and total compensation of each other employee,
consultant, agent or other representative of the Company whose current or
committed annual rate of compensation (including bonuses and commissions)
exceeds $150,000. Except as set forth on Schedule 4.21(b), none of such persons
has stated orally or in writing that he or she will cancel or otherwise
terminate such person's relationship with the Company.
4.22 Customers and Suppliers. Except as set forth on Schedule 4.22, since
-----------------------
the Balance Sheet Date (a) no significant customer (or group of customers which
in the aggregate is significant) of the Business has given the Company notice
or, to the Knowledge of the Company, has taken any other action which has given
the Company any reason to believe that such customer (or group of customers)
will cease to purchase services or reduce significantly the amount of services
purchased from the Company and (b) no significant vendor (or group of vendors
which in the aggregate is significant) of the Business has given the Company
notice or, to the Knowledge of the Company, has taken any other action which has
given the Company any reason to believe that such vendor (or group of vendors)
will cease to supply or adversely change its price or terms to the Company of
any products or services.
4.23 Customer Warranty Coverage. Schedule 4.23 contains a complete list
--------------------------
and description of all express warranty coverages (including terms of such
coverages, expiration dates, and estimated amounts of liability) extended by
Company for repair or replacement of defective products or service related to
the Business, as of the date indicated thereon, other than those contained in
Contractual Obligations listed on Schedule 4.10.1. The Company has not received
written notice of any outstanding, pending or threatened claims based on such
warranty coverage, except as set forth on Schedule 4.23.
4.24 Key-Man Life Insurance. The Company has in place a "key-man" life
----------------------
insurance policy, in the amount of ten million ($10,000,000), on Nooruddin S.
Karsan such policy being payable to the Company.
4.25 Financial Advisory, Finder's or Broker's Fees. Except as set forth on
---------------------------------------------
Schedule 4.25, no financial advisor, finder agent or similar intermediary (a
"Financial Advisor") has acted on behalf of the Existing Stockholders or the
Company in connection with this Agreement or the transactions contemplated
hereby, and there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Existing Stockholders or the Company or on any action
taken by the Existing Stockholders or the Company.
4.26 No Governmental Consent or Approval Required. Except as disclosed on
--------------------------------------------
Schedule 4.26 and except for (a) filings required by the HSR Act, if any, and
(b) federal or state securities law filings which have been made or which will
be made in a timely manner, no
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<PAGE>
authorization, consent, approval or other order of, declaration to, or filing
with, any Governmental Authority or any other Person is required for or in
connection with the valid and lawful (i) authorization, execution and delivery
of any of the Transaction Documents by the Company or (ii) the authorization,
issuance, sale and delivery of the Purchased Securities by the Company.
4.27 Disclosure. None of this Agreement (including, without limitation,
----------
the Schedules hereto), the Financial Statements, the Draft Prospectus (taken as
a whole), or any certificate furnished or to be furnished by or on behalf of the
Company or the Existing Stockholders, contains or will contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
In order to induce the Company to enter into and perform this Agreement and
to consummate the transactions contemplated hereby, each Investor represents and
warrants, severally as to itself, to the Company as follows:
5.1 Corporate Matters. Each Investor that is not a individual is a
-----------------
corporation, limited partnership, general partnership or limited liability
company duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation, and each Investor has all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
5.2 Authorization and Enforceability. This Agreement has been duly
--------------------------------
authorized, executed and delivered by such Investor that is a party thereto, and
is Enforceable against such Investor.
5.3 Non-Contravention, etc. Neither the execution, delivery nor
-----------------------
performance of this Agreement nor the consummation of the transactions
contemplated hereby does or will constitute, result in or give rise to any
breach or violation of, or any default or right or cause of action under, any
Contractual Obligation of or the agreement of limited partnership of such
Investor or any Legal Requirement applicable to such Investor. No approval,
consent, waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority or any
other Person, including, without limitation, any party to any Contractual
Obligation of the Investor, is required to be obtained or made by or on behalf
of the Investor in connection with the execution, delivery or performance of
this Agreement and the transactions contemplated hereby by such Investor, except
for (a) filings required by the HSR Act, if any, and (b) items which shall have
been obtained or made and shall be in full force and effect at the Closing.
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<PAGE>
5.4 Investment Intent. Such Investor is acquiring the Purchased
-----------------
Securities for its own account for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof. Such Investor is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, and the Investor can bear the risk of loss of the entire value of
its investment in the Company. Such Investor acknowledges that the Purchased
Securities have not been registered or qualified under any federal or state
securities laws, and may not be offered, sold, transferred, pledged,
hypothecated or otherwise assigned unless they are registered under the
Securities Act of 1933 and any applicable "Blue Sky" laws of any state or an
exemption from such registration is available and that the Company, in issuing
the securities hereunder is relying upon, among other things, the
representations and warranties of such Investor contained in this Section 5.
Such Investor has been provided access to such information and documents
regarding the Company as the Investor has requested and has been afforded an
opportunity to ask questions of, and receive answers from, representatives of
the Company concerning the terms and conditions of this Agreement and the
Purchased Securities.
5.5 Finder's or Broker's Fees. No Financial Advisor has acted on behalf
-------------------------
of such Investor in connection with this Agreement or the transactions
contemplated hereby and there are no brokerage commissions, finders' fees, or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Investor or on any action taken
by such Investor.
6. CERTAIN AGREEMENTS OF THE PARTIES.
6.1 Access to Premises and Information. Prior to the Closing, the Company
----------------------------------
will permit the Investors and their prospective investors and lenders and their
respective authorized representatives to have full access to their premises and
documents, books and records and to make copies during normal business hours of
such financial and operating data and other information with respect to the
Company as the Investors, such investors or lenders, or any of their
representatives shall reasonably request. The Company will cause to be
delivered such additional information and copies of documents, books and records
relating to the Company as may be reasonably requested by the Investors, such
investors or lenders, or any of their representatives.
6.2 Operation of Business in the Ordinary Course. On and prior to the
--------------------------------------------
Closing Date, the Company will conduct the Business only in the Ordinary Course
of Business, and will use all commercially reasonable efforts to maintain the
value of the Business as a going concern and the relationships of the Company
with customers, suppliers, vendors, employees, agents and others. Without
limiting the generality of the foregoing, except for the transactions
specifically contemplated hereunder or as set forth on Schedule 6.2, without the
written consent of Parthenon, from and after the date hereof the Company will
conduct itself so that the Company would not be in violation of Section 4.12 of
this Agreement if such Section were applicable during the period from and after
the date hereof to and including the Closing Date.
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6.3 Certain Notices of Material Developments, etc. Prior to the Closing,
---------------------------------------------
the Company will give the Investors written notice of any material development
affecting the Business, or the financial condition or prospects of the Company;
provided, however, that no such disclosure shall be deemed to amend any Schedule
-------- -------
hereto, or prevent or cure any breach of or inaccuracy in, or disclose any
exception to, any of the representations and warranties set forth herein. Prior
to the Closing, each party will give the other prompt written notice upon
becoming aware of any breach of or inaccuracy in any representation or warranty
of such notifying party; provided, however, that no such disclosure shall be
-------- -------
deemed to amend any Schedule hereto, or prevent or cure any breach of or
inaccuracy in, or disclose any exception to, any of the representations and
warranties set forth herein.
6.4 Preparation for Closing. Each party will use all commercially
-----------------------
reasonable efforts to bring about the fulfillment of each of the conditions
precedent set forth in this Agreement and to consummate the transactions
contemplated in the Recitals.
6.5 Expenses of Transaction. All reasonable costs and expenses (including
-----------------------
legal fees and expenses) incurred by the Investors and the Company in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Company.
6.6 Public Announcement. No public announcement shall be made by any
-------------------
party with respect to the consummation of the transactions contemplated hereby
or the terms thereof without the prior consent of the Investor and the Company;
provided, however, that this Section 6.7 shall not prohibit (a) any disclosure
-------- -------
by any Investor in the ordinary course to any of its investors, (b) any
disclosure required by law, or (c) any disclosure made in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
6.7 Confidentiality Covenants of the Company. The Company will not, and
----------------------------------------
will cause its Affiliates not to, at any time after the Closing, directly or
indirectly, without the prior written consent of Parthenon, disclose or use, in
any way harmful to the Investors, or otherwise contrary to the interests of the
Investors, any confidential or proprietary information involving or relating to
any Investor; provided, however, that the information subject to the foregoing
-------- -------
provisions of this sentence shall be deemed not to include any information known
generally in the industry (other than as a result of disclosure in violation
hereof by either the Company or any such Affiliate thereof); and provided,
--------
further, that the provisions of this Section 6.8 shall not prohibit any
-------
retention of records or disclosure required by law or made in connection with
the enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
6.8 Application of Promissory Notes. Subsequent to the Closing, upon
-------------------------------
exercise of Class B Warrants by the Investors, the Investors shall have the
right to elect to pay the exercise price payable upon such exercise by
contributing to the Company an amount of principal outstanding and accrued but
unpaid interest due and owing on the Notes as of the time of
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exercise equal to the exercise price. Upon such election, the Investors shall
deliver to the Company for cancellation the Notes, and in the event that any
principal or accrued but unpaid interest thereon remains outstanding after a
portion thereof is used to pay the exercise price on the Class B Warrants, the
Company shall issue a new promissory note in a principal amount equal to the
unredeemed portion thereof and otherwise having identical terms as the Notes
delivered.
6.9 Allocation of Purchase Price. The purchase price payable by the
----------------------------
Investors hereunder for the Purchased Securities shall be allocated for federal
and state income tax purposes first to the stated exercise price of the Class B
Warrants for the Purchased Shares (e.g. $1,940,707) and second to the purchase
of the Notes (e.g. $8,059,293).
6.10 Adjustments. The class and number of any shares referred to in this
-----------
Agreement will be adjusted proportionately for any change in the class of or any
increase or decrease in the number of outstanding shares resulting from stock
splits, reverse stock splits, stock dividends, stock combinations,
consolidations, mergers, reclassifications, recapitalizations or other similar
transactions that take place after the date hereof and prior to the termination
of this Agreement.
6.11 Vote Required. Until such time as there is no amount outstanding
-------------
under the Notes, the Company may not, without the affirmative vote of at least
one Investor Director (as such term is defined in the Stockholders Agreement
dated as of December 16, 1999 among the Company, the Investors and the other
parties thereto (the "Stockholders Agreement")), issue or sell any capital
stock, notes or other securities (including securities convertible into, or
options, warrants or other rights to purchase capital stock) other than:
6.11.1 shares of capital stock issuable upon the exercise of warrants
outstanding on the date hereof;
6.11.2 shares of capital stock and options to purchase shares of
capital stock issued to employees, officers or directors pursuant to
options, warrants or rights outstanding on the date hereof or pursuant to a
plan approved by the board of directors;
6.11.3 common stock in one or more private placements, provided that
the aggregate number of shares of common stock issued, or issuable pursuant
to options or warrants in connection with such private placements, shall
not exceed 2,324,200 (as adjusted pursuant to Section 6.10);
6.11.4 notes issued pursuant to the Loan Agreement or in an amount
not to exceed $1.0 Million Dollars in any given year, or $2.5 Million
Dollars in the aggregate during the term of the Notes;
6.11.5 notes issued to exercise the Company's Call Options (as
defined in the Stockholders Agreement); and
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6.11.6 common stock issued pursuant to the Registration Statement.
7. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE INVESTORS.
The obligations of the Investors to consummate the transactions
contemplated by this Agreement and complete the Closing are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by each Investor in its sole discretion:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of the Company contained in this Agreement shall be true and correct
as of the Closing Date with the same force and effect as if made at and as of
the Closing (except that representations and warranties made as of a specific
date shall continue to be true and correct as at such date). The Company shall
have performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied prior to the Closing. The Company shall
have furnished to the Investors an unqualified certificate, dated the Closing
Date, to the effect that the conditions specified in this Section 7.1 have been
satisfied.
7.2 No Material Adverse Change. Without limiting the generality of
--------------------------
Section 7.1, since the Balance Sheet Date, no Material Adverse Effect shall have
occurred, nor shall any event or events have occurred which could reasonably be
expected in the aggregate to have a Material Adverse Effect.
7.3 Consents, Approvals, etc. To the extent required thereunder, the
-------------------------
Company shall have secured written consents or waivers under all Contractual
Obligations in a manner reasonably satisfactory in form and substance to the
Investors, necessary to permit the consummation of the transactions contemplated
hereby or otherwise reasonably requested by the Investors. The Company shall
have caused to have been obtained or made and be in full force and effect all
approvals, consents, waivers, authorizations and other orders of, and
declarations, filings, registrations, qualifications and recordings with, any
Governmental Authority (the "Government Approvals") necessary to be obtained or
made by the Company, in order to permit the consummation of the transactions
contemplated hereby or otherwise reasonably requested by the Investors.
7.4 Litigation. No action or proceeding shall have been instituted at or
----------
prior to the Closing before any court, arbitrator or other governmental body by
any Person or instituted or threatened by any Governmental Authority, relating
to this Agreement or any of the transactions contemplated hereby or against the
Company, any Existing Stockholder or any Investor, the result of which could
prevent or make illegal the consummation of any such transaction or could
otherwise have a material adverse effect on any Investor or have a Material
Adverse Effect.
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7.5 Corporate Proceedings. All corporate proceedings required to be taken
---------------------
on the part of the Company in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory to the Investors. The Investors
shall have received copies of officers' certificates, secretary's certificates,
good standing certificates, incumbency certificates and other customary closing
documents as the Investors may reasonably request in connection with the
transactions contemplated hereby.
7.6 Opinion of Counsel. The Company shall have furnished the Investors
------------------
with a favorable opinion of Pepper Hamilton, LLP in the form attached hereto as
Exhibit C.
7.7 Amendment of Stockholders Agreement. The Stockholders Agreement shall
-----------------------------------
have been amended, in form and substance reasonably satisfactory to the
Investors, to provide that the Purchased Securities shall constitute "Investor
Securities" for purposes of such Stockholders Agreement.
7.8 Amendment of Registration Rights Agreement. The Registration Rights
------------------------------------------
Agreement dated as of December 16, 1999 among the Company, the Investors and the
other parties thereto (the "Registration Rights Agreement"), shall have been
amended, in form and substance reasonably satisfactory to the Investors, to
provide that Registrable Shares shall include the Purchased Shares.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY.
The obligation of the Company to consummate the transactions contemplated
by this Agreement and complete the Closing are subject to the satisfaction, at
or prior to the Closing, of all of the following conditions, compliance with
which, or the occurrence of which, may be waived prior to the Closing in writing
by the Company in its sole discretion:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of the Investors contained in this Agreement shall be true and
correct as of the Closing with the same force and effect as if made at and as of
the Closing (except that representations and warranties made as of a specific
date shall continue to be true and correct as at such date). Each Investor
shall have performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied by such Investor at or prior to the
Closing. Each Investor shall have furnished to the Company an unqualified
certificate, dated the Closing Date, to the effect that the conditions specified
in this Section 8.1 have been satisfied.
8.2 Consents, Approvals, etc. Each Investor shall have secured written
-------------------------
consents or waivers under all Contractual Obligations of such Investor, in a
manner reasonably satisfactory in form and substance to the Company, necessary
to permit the consummation of the transactions contemplated hereby or otherwise
reasonably requested by the Company. Each Investor shall have caused to have
been obtained or made and be in full force and effect all Government Approvals
necessary to be obtained or made by such Investor, in order to permit the
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consummation of the transactions contemplated hereby or otherwise reasonably
requested by the Company.
8.3 Corporate Proceedings. All partnership or corporate proceedings
---------------------
required to be taken on the part of each Investor in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
the Company. The Company shall have received copies of officers' certificates,
secretary's certificates, good standing certificates, incumbency certificates
and other customary closing documents as the Company may reasonably request in
connection with the transactions contemplated hereby.
8.4 Opinion of Counsel. Parthenon Investors shall have furnished the
------------------
Company with a favorable opinion of Ropes & Gray in form and substance
reasonably satisfactory to the Company or its counsel.
9. INDEMNIFICATION.
9.1 Indemnification. Subject to the limitations set forth in this Section
---------------
9, the Company shall indemnify and hold harmless, to the fullest extent
permitted by law, the Investors, their officers, directors, employees, agents
and Affiliates (collectively, the "Investor Indemnitees"), from, against and in
respect of any Losses arising from or related to any of the following:
9.1.1 any breach or default in performance by the Company of any
covenant or agreement contained in this Agreement or any Transaction
Agreement; and
9.1.2 any breach of any representation or warranty made by the
Company in this Agreement, any Transaction Agreement or in any certificate,
instrument or other document delivered by or on behalf of the Company
pursuant hereto or thereto (as each such representation or warranty would
read if all qualifications as to materiality (including without limitation
in the definition of Material Adverse Effect) were deleted therefrom).
9.2 Limitations. The Company shall not have any obligation to indemnify
-----------
any Investor Indemnitee pursuant to Section 9.1 unless and until the aggregate
of all such individual Losses incurred or sustained by all Investor Indemnitees
in respect of Section 9.1 exceeds $150,000, whereupon the Company shall be
obligated in respect of all such Losses; provided, however, that the foregoing
-------- -------
limitation shall not apply to Losses arising from (a) any claim with respect to
the representations and warranties contained in Section 4.2 or (b) any claim
based upon fraud or intentional misrepresentation.
9.3 Nature and Survival of Claims; Time Limits. All representations and
------------------------------------------
warranties made herein or in any Transaction Agreement or pursuant hereto or
thereto or in connection with the transactions contemplated hereby and thereby
shall, regardless of any investigation made at
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any time by or on behalf of any party hereto or of any information any party may
have in respect thereof, survive the Closing and continue in effect until the
thirty-sixth (36th) month anniversary of the Closing Date except for
representations and warranties contained in Sections 4.2 and 5.3, which will
continue in full force and effect indefinitely, and except for the
representations and warranties contained in Section 4.5, 4.15, 4.16 and 4.17.3
which shall survive until sixty (60) days following the expiration of the
applicable statute of limitations. Any claim for indemnification pursuant to
this Section 9 as a result of any breach of representation or warranty must be
made within the period of time during which such representation or warranty
survives the Closing. Any claim described in the preceding sentence made within
the applicable time period (and, to the extent of such claim, any representation
or warranty upon which such claim is based) shall survive thereafter until such
claim is finally resolved. For purposes of this Section 9, any claim for
indemnification shall be duly made by giving written notice of such claim to the
Company. The covenants and agreements of the parties set forth in this Agreement
shall survive indefinitely.
10. DEFINITIONS.
10.1 Cross Reference Table. The following terms defined elsewhere in this
---------------------
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
Term Definition
---- ----------
"Affiliate Relationships" Section 4.14
"Agreement" Preamble
"Assets" Section 4.4
"Canceled Warrants" Recitals
"Class A Common Stock" Recitals
"Class B Warrants" Recitals
"Closing" Section 3.1
"Closing Date" Section 3.1
"Company" Preamble
"Final Termination Date" Section 11.1
"Financial Advisor" Section 4.25
"Financial Statements" Section 4.3.1
"Government Approvals" Section 7.3
"Government Contract" Section 4.20
"Government Subcontract" Section 4.20
"Hazardous Substance" Section 4.18
"Insurance Policies" Section 4.13
"Intangibles" Section 4.9
"Interim Financials" Section 4.3.1.
"Investor" Preamble
"IRS" Section 4.15.4
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<PAGE>
"Leases" Section 4.7.2
"Losses" Section 9.1
"Notes" Recitals
"Purchased Securities" Recitals
"Purchased Shares" Recitals
"Quarterly Financials" Section 4.3.1
"Registration Rights Agreement" Section 7.9
"Stockholders Agreement" Section 7.8
"Year End Financials" Section 4.3.1
"1997/1998 Year End Financials" Section 4.3.1
10.2 Certain Definitions. The following terms shall have the following
-------------------
meanings:
"Action" shall mean any action, cause of action or suit (in contract or
------
tort or otherwise), arbitration or other proceeding by or before any
Governmental Authority.
"Affiliate" shall mean, as to any specified Person at any time, (i) each
---------
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with, such specified Person at such time, (ii) each
Person who is or has been within two years prior to the time in question an
officer, director or direct or indirect beneficial holder of at least 5% of any
class of the outstanding capital stock or other equity interests of such
specified Person and the Members of the Immediate Family of each such officer,
director or holder, and (iii) each Person of which such specified Person or an
Affiliate (as defined in clauses (i) or (ii) above) thereof shall, directly or
indirectly, beneficially own at least 5% of any class of outstanding capital
stock or other evidence of beneficial interest at such time; provided, however,
-------- -------
that the Company, the Existing Stockholders and each of their Affiliates shall
be deemed not to be Affiliates of the Investor, and the Investor shall be deemed
not to be an Affiliate of the Company or the Existing Stockholders and such
Persons, for any purposes of this Agreement. With respect to any natural
Person, "Affiliate" shall also include without limitation Members of the
Immediate Family of such natural Person.
"Balance Sheet" shall mean the balance sheet dated as of the Balance Sheet
-------------
Date included in the Financial Statements.
"Balance Sheet Date" shall mean March 31, 2000.
------------------
"Business" shall mean the business of the Company, including, without
--------
limitation, as such business is reflected in the Draft Prospectus.
"By-laws" shall mean by-laws and other similar provisions (other than the
-------
Charter) relating to the management, governance or internal regulation of a
Person (other than an individual) or interpretative of the Charter of such
Person, each as from time to time in effect.
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<PAGE>
"Charter" shall mean the certificate or articles of incorporation or
-------
organization, operating agreement, statute, constitution, joint venture or
partnership agreement or articles or other charter or governing documents of any
Person (other than an individual), each as from time to time in effect.
"Class A Common Stock" shall mean the Class A Common Stock as defined in
--------------------
the Recitals hereto, such term to include any stock into which such Class A
Common Stock shall have been changed or any stock resulting from any
reclassification of such Class A Common Stock.
"Code" shall mean the federal Internal Revenue Code of 1986 or any
----
successor statute, and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any successor
section thereto, collectively and as from time to time amended and in effect.
"Compensation," as applied to any Person, shall mean all salaries,
------------
compensation, remuneration or bonuses, and all retirement, vacation, insurance
or other fringe benefits paid or provided, directly or indirectly, by the
Company to such Person or Members of the Immediate Family of such Person.
"Contractual Obligation" shall mean, with respect to any Person, any
----------------------
contract, agreement, understanding, deed, mortgage, lease, license, commitment,
undertaking, arrangement or understanding, written or oral, or other document or
instrument, excluding the Charter and By-laws of such Person, to which or by
which such Person is a party or otherwise subject or bound or to which or by
which any property or right of such Person is subject or bound.
"Debt" of any Person means all obligations of such Person (i) for borrowed
----
money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii)
for the deferred purchase price of goods or services (other than trade payables
or accruals incurred in the Ordinary Course of Business), (iv) under capital
leases and (v) in the nature of Guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.
"Distribution" shall mean, with respect to the capital stock of or other
------------
evidence of beneficial interest in any Person, (i) the declaration or payment of
any dividend on or in respect of any shares of any class of such capital stock
or beneficial interest; (ii) the purchase, redemption or other retirement of any
shares of any class of such capital stock or beneficial interest, directly, or
indirectly through a Subsidiary or otherwise; (iii) any other distribution on or
in respect of any shares of any class of such capital stock or beneficial
interest, or on or in respect of any stock appreciation or similar right, and
(iv) any payment or other transfer of all or any part of any interest in any
asset to any Affiliate, other than the Company.
"Draft Prospectus" shall mean the draft prospectus contained in the draft
----------------
Registration Statement dated June 13, 2000.
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<PAGE>
"Employee Plan" shall mean any plan, program, agreement, policy or
-------------
arrangement (a "plan"), whether or not reduced to writing, that is (i) a welfare
benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan");
(ii) a pension benefit plan within the meaning of Section 3(2) of ERISA (a
"Pension Plan"); (iii) a stock bonus, stock purchase, stock option, restricted
stock, stock appreciation right or similar equity-based plan; or (iv) any other
deferred-compensation, retirement, welfare-benefit, bonus, incentive or fringe-
benefit plan.
"Enforceable" shall mean, with respect to any Contractual Obligation stated
-----------
to be Enforceable by or against any Person, that such Contractual Obligation is
a legal, valid and binding obligation enforceable by or against such Person in
accordance with its terms, except to the extent that enforcement of the rights
and remedies created thereby is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application
affecting the rights and remedies of creditors and to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
"ERISA" shall mean the federal Employee Retirement Income Security Act of
-----
1974 or any successor statute, and the rules and regulations thereunder, and in
the case of any referenced section of any such statute, rule or regulation, any
successor section thereto, collectively and as from time to time amended and in
effect.
"Existing Stockholders" shall mean all stockholders and option holders of
---------------------
the Company at the time of the Closing.
"GAAP" shall mean United States generally accepted accounting principles as
----
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in other such
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect for the relevant time period.
"Governmental Authority" shall mean any U.S. Federal, state or local or any
----------------------
foreign government, governmental authority, regulatory or administrative agency,
board, governmental commission, court or tribunal (or any department, bureau or
division thereof) or any arbitral body.
"Government Order" shall mean any order, writ, judgment, injunction,
----------------
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Guarantee" shall mean (i) any guarantee of the payment or performance of,
---------
or any contingent obligation in respect of, any indebtedness or other obligation
of any other Person, (ii) any other arrangement whereby credit is extended to
one obligor on the basis of any promise or undertaking of another Person (A) to
pay the indebtedness of such obligor, (B) to purchase any obligation owed by
such obligor, (C) to purchase or lease assets (other than inventory in the
ordinary course of business) under circumstances that would enable such obligor
to discharge
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one or more of its obligations, or (D) to maintain the capital, working capital,
solvency or general financial condition of such obligor, and (iii) any liability
as a general partner of a partnership or as a venturer in a joint venture in
respect of indebtedness or other obligations of such partnership or venture.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"Investment" shall mean (i) any share of capital stock, partnership or
----------
other equity interest, evidence of indebtedness or other security issued by any
other Person, (ii) any loan, advance, prepayment or extension of credit to, or
contribution to the capital of, any other Person (other than the creation of
receivables which comply with the provisions of Section 4.5 hereof), (iii) any
acquisition of a business of any other entity or (iv) any commitment or option
to make any Investment.
"Knowledge" shall mean, with respect to a Person, the knowledge after
---------
reasonable inquiry of the specified Person. In the case of the knowledge of the
Company, knowledge shall include the knowledge after reasonable investigation of
Nooruddin S. Karsan, Bill Erickson, Don Volk, Elliot Clark, Kevin Hudson, Troy
Kanter, Grant Parker, and Anita Sakuru.
"Legal Requirement" shall mean any federal, state, local or foreign law,
-----------------
statute, standard, ordinance, code, order, rule, regulation, resolution or
promulgation, or any order, judgment or decree of any Governmental Authority, or
any license, franchise, permit or similar right granted under any of the
foregoing, or any similar provision having the force and effect of law.
"Lien" shall mean any mortgage, pledge, lien, security interest, charge,
----
claim, equity, encumbrance, restriction on transfer, conditional sale or other
title retention device or arrangement (including, without limitation, a capital
lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
--------
however, that the term "Lien" shall not include (i) statutory liens for Taxes to
-------
the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the use of real property if the same do not detract
from the value of such property or impair its use in the Business as currently
conducted, (iii) statutory or common law liens to secure landlords, lessors or
renters under leases or rental agreements confined to the premises rented to the
extent that no payment or performance under any such lease or rental agreement
is in arrears or is otherwise due, (iv) deposits or pledges made in connection
with, or to secure payment of, worker's compensation, unemployment insurance,
old age pension programs mandated under applicable Legal Requirements or other
social security (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, statutory or common law liens to secure
claims for labor, materials or supplies and other like liens, which secure
obligations to the extent that payment thereof is not in arrears or
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otherwise due and (vi) restrictions on transfers of securities imposed by
applicable state and federal securities laws.
"Loan Agreement" shall mean that certain Loan Agreement, dated as of
--------------
December 27, 1999, among TalentPoint Technologies, Inc., Fleet National Bank,
for itself and as agent for the other financial institutions listed thereafter
as a party thereto, as amended, supplemented or replaced from time to time, and
any credit facility refinancing such Loan Agreement.
"Material Adverse Effect" shall mean a material adverse effect on the
-----------------------
business, operations, assets, prospects, or condition, financial or otherwise,
of the Company.
"Members of the Immediate Family," with respect to any individual, shall
-------------------------------
mean each spouse, parent, aunt, uncle, brother, sister or child of such
individual, each spouse of any such Person, each child of any of the
aforementioned Persons, each trust created in whole or in part for the benefit
of one or more of the aforementioned Persons and each custodian or guardian of
any property of one or more of the aforementioned Persons.
"Ordinary Course of Business" shall mean the ordinary course of business
---------------------------
consistent with past custom and practice (including, without limitation, with
respect to quantity, timing and frequency).
"Person" shall mean any individual, partnership, corporation, limited
------
liability company, association, trust, joint venture, unincorporated
organization or other entity, and any government, governmental department or
agency or political subdivision thereof.
"Plan" shall mean any Employee Plan to which the Company contributes or is
----
obligated to contribute, or under which the Company has or may have any
liability for contributions, premiums or benefits, or which benefits any current
or former employee director or independent contractor of the Company or the
beneficiaries of any such person.
"Registration Statement" shall mean the registration statement on Form S-1
----------------------
to be filed by the Company with the United States Securities and Exchange
Commission pursuant to which the Company shall offer its common stock to the
public.
"Subsidiary" shall mean any Person of which any other specified Person
----------
shall own directly or indirectly through a Subsidiary, a nominee arrangement or
otherwise at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which any other specified
Person is a general partner or joint venturer without limited liability.
"Tax or Taxes" shall mean any foreign, federal, state or local income,
------------
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock,
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franchise, profits, withholding, social security (or similar), unemployment,
disability, real or personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Liability" shall mean any Tax or Taxes owed by the Company or by any
-------------
company acquired by the Company through merger prior to the date hereof and/or
any Tax or Taxes owed as a result of the Company's acquisition of any of the
aforementioned companies.
"Tax Return" shall mean all federal, state, local and foreign Tax returns,
----------
Tax reports, claims for refund of Tax and declarations of estimated Tax, or
other statement relating to Taxes and any schedule or attachments to any of the
foregoing.
"Transaction Agreements" shall mean this Agreement, the Notes, the
----------------------
Stockholders Agreement, the Registration Rights Agreement and the Company's
Amended and Restated Articles of Incorporation.
11. TERMINATION.
11.1 Termination of Agreement. This Agreement may be terminated by the
------------------------
parties only as provided below:
(a) Parthenon may terminate this Agreement by giving written
notice to the Company at any time prior to the Closing in the event
there has been a material breach of any representation or warranty
made by the Company in this Agreement (including, without limitation,
the Schedules hereto) or a material breach by the Company of any
covenant or agreement made in, or any duty with respect to, this
Agreement (including, without limitation, the Schedules hereto).
(b) The Company may terminate this Agreement by giving written
notice to the Investors at any time prior to the Closing in the event
there has been a material breach of any representation or warranty
made by the Investors in this Agreement (including, without
limitation, the Schedules hereto) or a material breach by the
Investors of any covenant or agreement made in, or any duty with
respect to, this Agreement (including, without limitation, the
Schedules hereto).
(c) The Investors may terminate this Agreement by giving written
notice to the Company at any time after 5:00 p.m. on July 31, 2000
(the "Final Termination Date") but prior to the Closing if the Closing
shall not have occurred by such time by reason of the failure of any
condition set forth in Section 7 hereof to be satisfied (unless the
failure results primarily from one or more breaches or violations of
this Agreement by the Investor or inaccuracies in representations of
the Investors hereunder).
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(d) The Company may terminate this Agreement by giving written
notice to the Investors at any time after 5:00 p.m. on the Final
Termination Date but prior to the Closing if the Closing shall not
have occurred by such time by reason of the failure of any condition
set forth in Section 8 hereof to be satisfied (unless the failure
results primarily from one or more breaches or violations of this
Agreement by the Company or inaccuracies in representations of the
Company hereunder).
11.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 11.1, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party; provided,
--------
however, that no termination of this Agreement shall relieve any party of
-------
liabilities in respect of any breaches or violations of this Agreement or any
duty with respect hereto by such party or any inaccuracies in any
representations by such party hereunder prior to termination.
12. MISCELLANEOUS.
12.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any other jurisdiction.
12.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties with respect to such
subject matter.
12.3 Amendment or Waiver. The parties hereto may not amend, modify or
-------------------
waive any provision of this Agreement except by a written instrument executed by
the Investor and the Company. No waiver of any provision of this Agreement (a)
shall be deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar), (b) shall constitute a continuing waiver unless
otherwise expressly provided therein or (c) shall be effective unless in
writing.
12.4 Notices. Any notices or other communications required or permitted
-------
hereunder shall be effective if in writing and delivered personally or sent by
overnight courier addressed as follows:
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If to the Company to TalentPoint, Inc.
170 South Warner Road
Wayne, PA 19087
Attention: Elliot H. Clark, Chief Operating
Officer
With a copy to: Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103-2799
Attention: Barry M. Abelson, Esquire
If to Parthenon to: Parthenon Investors, L.P.
200 State Street
Boston, MA 02109
Attention: Archie L. Jones
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Attention: Daniel S. Evans, Esquire
Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally or (b) one
business day after being sent by overnight courier, if sent by overnight
courier. Each of the parties hereto shall be entitled to specify a different
address by giving notice as aforesaid to each of the other parties hereto.
12.5 Survival, etc. All representations, warranties, covenants and
--------------
agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, the Schedules hereto), or pursuant to any
document, certificate, financial statement or other instrument referred to
herein or delivered in connection with the transactions contemplated hereby,
shall be deemed to have been material, of independent significance and relied
upon by the parties hereto, notwithstanding any investigation made by or on
behalf of any of the parties hereto or any opportunity therefor or any actual or
constructive knowledge thereby obtained, and shall survive the execution and
delivery of this Agreement and the Closing as provided herein (subject to
Section 9.3 hereof).
12.6 Headings, etc. Section and subsection headings are included solely
--------------
for convenience, are not intended to be full or accurate descriptions of the
content thereof and shall not affect the construction hereof. This Agreement
shall be deemed to express the mutual intent of the parties, and no rule of
strict construction shall be applied against any party.
12.7 Schedules; Listed Documents, etc. Neither the listing nor description
--------------------------------
of any item, matter or document in any Schedule hereto nor the furnishing or
availability for review of any document shall be construed to modify, qualify or
disclose an exception to any representation or
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warranty of any party made herein or in connection herewith, except to the
extent that such representation or warranty specifically refers to such Schedule
and such modification, qualification or exception is clearly described in such
Schedule. The parties hereto intend that each representation, warranty, covenant
and agreement contained herein shall have independent significance. If any party
has breached any representation, warranty, covenant or agreement contained
herein in any respect, the fact that there exists another representation,
warranty, covenant or agreement relating to the same subject matter (regardless
of the relative levels of specificity) which the party has not breached shall
not detract from or mitigate the fact that such party is in breach of the first
representation, warranty, covenant or agreement.
12.8 Transfer Taxes. The Company shall pay any stock transfer Taxes, real
--------------
property transfer Taxes, sales Taxes, documentary stamp Taxes, recording charges
and other similar Taxes arising under any Legal Requirement in connection with
the transactions contemplated hereby on the Closing Date.
12.9 Severability. In the event that any provision hereof would, under
------------
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted by applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
12.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
12.11 Certain Costs and Expenses. In the event that the transactions
--------------------------
contemplated by this Agreement and the other Transaction Agreements shall be
consummated, the Company agrees to pay, on demand, all future reasonable
out-of-pocket expenses and costs of the Investor (including reasonable attorney
and other professional fees and expenses) incurred in connection with its
investment in the Purchased Securities, including without limitation in
connection with (a) any amendment or waiver of, or consent under, this Agreement
or any other Transaction Agreement (whether or not the same becomes effective),
or the Investors' consideration of the same, (b) the service by employees of the
Investors on the Board of Directors of the Company or the provision of any
consulting, advisory or other services to the Company and (c) the exercise or
performance, or the preservation or enforcement, of its rights under this
Agreement or any other Transaction Agreement.
12.12 Successors and Assigns. All of the terms and provisions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
shall be deemed to be a party hereto for all purposes hereof); provided,
--------
however, that (a) no party may transfer or assign any of its rights or
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obligations hereunder without the consent of the other party, and (b) no
transfer or assignment by any party shall relieve such party of any of its
obligations hereunder, provided, further however, that each Investor may assign
-------- ------- -------
all or part of its rights hereunder to any co-investment fund or Affiliate, and
provided, further however, that effective upon or after the Closing, the Company
-------- ------- -------
may transfer or assign its rights or obligations hereunder to the lender or
lenders who provide financing in connection with the transactions contemplated
hereby. Except as expressly provided herein, this Agreement shall not confer
any right or remedy upon any Person other than the parties and their respective
transferees, successors and assigns.
12.13 Set-Off. Amounts owing by one party hereto to another party hereto
-------
under any provision of this Agreement (including without limitation Section 9)
or any other Transaction Agreement may be set-off against any amounts owing by
the second party to the first party under any provision of this Agreement
(including without limitation Section 9) or any other Transaction Agreement.
12.14 Consent to Jurisdiction. Each party to this Agreement, by its
-----------------------
execution hereof, (a) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the non-exclusive jurisdiction of the state
courts of the Commonwealth of Pennsylvania or the United States District Court
located in the District of Pennsylvania for the purpose of any action, claim,
cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Agreement or relating to the
subject matter hereof, (b) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one of
the above-named courts is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and (c) hereby agrees not to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Pennsylvania law, and agrees that service
of process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 12.4 hereof is reasonably calculated to
give actual notice.
12.15 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
--------------------
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT
TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OF ANY TRANSACTION
AGREEMENT OR THE SUBJECT MATTER HEREOF OF THEREOF OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE
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<PAGE>
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING. THE COMPANY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
INVESTORS THAT THIS SECTION 12.15 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH
THE INVESTORS ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT, THE
TRANSACTION AGREEMENTS AND ANY OTHER AGREEMENTS RELATING HERETO OR THERETO OR
CONTEMPLATED HEREBY OR THEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 12.15 WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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Exhibit 10.10
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have hereunto set their hands under seal, as of the date first above
written.
THE COMPANY: TALENTPOINT, INC.
By: /s/ Elliot Clark
------------------------------
Name: Elliot Clark
Title: Chief Operating Officer
<PAGE>
THE INVESTORS: PARTHENON INVESTORS, L.P.
By: /s/ John Rutherford
---------------------------
Name: John Rutherford
Title: Managing Director
PCIP INVESTORS, a Delaware general partnership
By: /s/ John Rutherford
---------------------------
Name: John Rutherford
Title: Partner