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EXHIBIT 10.46
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
PROFITSOURCE CORPORATION
"BUYER"
AND
DELOITTE & TOUCHE LLP
"SELLER"
DECEMBER 14, 1998
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TABLE OF CONTENTS
Page
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1. Sale and Transfer of Assets..........................................................1
1.1. Assets........................................................................1
1.2. Liabilities...................................................................1
1.3. Closing.......................................................................2
1.4. Purchase Price................................................................2
1.5. Allocation of Purchase Price..................................................2
2. Representations and Warranties of Seller.............................................2
2.1. Organization and Authority....................................................2
2.2. Authorization of Agreement....................................................2
2.3. Acquired Assets and Assumed Liabilities......................................3
2.4. No Conflict or Violation......................................................3
2.5. Litigation....................................................................4
2.6. Brokers.......................................................................4
2.7. Operation of Business.........................................................4
3. Representations and Warranties of Buyer..............................................4
3.1. Organization and Corporate Authority..........................................4
3.2. No Conflict or Violation......................................................5
3.3. Notes.........................................................................5
3.4. Litigation....................................................................5
3.5. Brokers.......................................................................5
3.6. HSR...........................................................................5
4. Certain Understandings and Agreements of the Parties.................................6
4.1. Confidentiality...............................................................6
4.2. Restrictive Covenants.........................................................6
4.3. Taxes.........................................................................8
4.4. Access to Records and Files...................................................8
4.5. Cooperation in Litigation.....................................................8
4.6. Employment....................................................................9
4.7. Change of Name................................................................9
4.8. Further Assurances............................................................9
4.9. Services Agreement............................................................9
4.10. Termination Agreement.........................................................9
4.11. Sublease.....................................................................10
4.12. No Interest..................................................................10
4.13. Separation of Business.......................................................10
4.14. Terms of Notes...............................................................10
4.15. Association with Seller......................................................10
4.16. Acknowledgment from Participants in Consolidation Transactions...............11
4.17. Disclaimer...................................................................11
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4.18. Third Party Consents and Acquired Assets.....................................11
4.19. Accounts Receivable..........................................................12
4.20 ProfitSource Amounts.........................................................13
5. Survival; Indemnification...........................................................13
5.1. Survival.....................................................................13
5.2. Indemnification by Seller....................................................13
5.3. Indemnification by Buyer.....................................................14
5.4. Indemnification Procedure....................................................15
5.5. Payment......................................................................16
5.6. Set-off......................................................................16
5.7. Limitations..................................................................17
6. Miscellaneous.......................................................................17
6.1. Notices......................................................................17
6.2. Assignability and Parties in Interest........................................18
6.3. Governing Law................................................................18
6.4. Counterparts.................................................................18
6.5. Publicity, Client Contracts..................................................18
6.6. Complete Agreement...........................................................19
6.7. Modifications, Amendments and Waivers........................................19
6.8. Headings; References.........................................................20
6.9. Severability.................................................................20
6.10. Expenses of Transactions.....................................................20
6.11. Designated Representatives...................................................20
6.12. Enforcement of the Agreement.................................................20
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EXHIBITS
A. Form of Bill of Sale
B. Form of Assignment and Assumption Agreement
C. Form of Master Services Agreement
D. Form of Contract Rights Purchase Agreement
E. Sublease
F. Form of Note
SCHEDULES
1.1(a) Acquired Assets
Annex A Personal Property
1.1(b) Excluded Assets
1.2(a) Assumed Liabilities
1.2(b) Excluded Liabilities
1.4 Purchase Price
1.5 Allocation of Purchase Price
2 Disclosure Schedule
2.4 Disclosure Regarding Certain Material Contracts
3.4 Claims
4.19(a) Accounts Receivable
4.19(b) Transferred Accounts Receivable
4.20 ProfitSource Amounts
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of this 14th day of December, 1998 by and between Deloitte &
Touche LLP, a Delaware limited liability partnership ("SELLER"), and
ProfitSource Corporation, a Delaware corporation ("BUYER").
A. Seller, acting through its Integrated Cost Reduction
Strategies business unit ("ICRS"), is engaged in the business of disbursement
management services; account receivable management; performance learning
services; benefit funding services; and health care cost recovery services
(which business, as presently engaged in by Seller's ICRS business unit, is
referred to herein as the "BUSINESS").
B. Seller desires to sell and assign to Buyer, and Buyer desires
to purchase and assume from Seller, certain assets, rights and obligations
related to the Business on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. SALE AND TRANSFER OF ASSETS
1.1. ASSETS.
(a) Acquired Assets. On the terms set forth in this Agreement, as of the
Closing Date (as hereinafter defined) Seller, pursuant to the Bill of Sale
substantially in the form of Exhibit A (the "BILL OF SALE") conveys, transfers,
assigns, sells and delivers to Buyer, and Buyer acquires, accepts and purchases,
all of the assets, properties and rights of Seller listed on Schedule 1.1(a)
(the "ACQUIRED ASSETS").
(b) Excluded Assets. Notwithstanding anything contained in Section
1.1(a) to the contrary, Seller is not selling, and Buyer is not purchasing, any
of the assets, properties or rights listed on Schedule 1.1(b) (the "EXCLUDED
ASSETS"), all of which are retained by Seller.
1.2 LIABILITIES.
(a) Assumed Liabilities. On the terms set forth in this Agreement, as of
the Closing Date, Buyer assumes those certain liabilities and obligations of
Seller identified on Schedule 1.2(a) (the "ASSUMED LIABILITIES") pursuant to an
Assignment and Assumption Agreement substantially in the form of Exhibit B (the
"ASSUMPTION AGREEMENT").
(b) Excluded Liabilities. Notwithstanding anything contained in Section
1.2(a) to the contrary, Buyer is not assuming, and is not obligated or liable
for, any liability of Seller listed on Schedule 1.2(b) (the "EXCLUDED
LIABILITIES").
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1.3 CLOSING. The closing of the sale and purchase of the Acquired Assets
and the assumption of the Assumed Liabilities (the "CLOSING") is taking place at
the offices of Gibson, Dunn & Crutcher LLP, 4 Park Plaza, Irvine, California as
of the date hereof (the "CLOSING DATE"). From and after the Closing, Seller and
its Affiliates (as defined herein) have no interest in the Business (except for
the Excluded Assets and Excluded Liabilities) other than the right to receive
the Purchase Price (as defined herein) and the other rights provided to Seller
pursuant to this Agreement and the other Transaction Documents (as defined
herein).
1.4 PURCHASE PRICE. Concurrently herewith, Buyer is paying for the
Acquired Assets the consideration described on Schedule 1.4 (the "PURCHASE
PRICE"). Concurrently herewith, Buyer is also paying to Seller the amounts
specified on Schedule 4.20.
1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price will be allocated
for tax purposes (the "ALLOCATION") in the manner set forth on Schedule 1.5. The
Allocation will be used by the parties in preparing all applicable tax returns
and shall be binding upon the parties and upon each of their successors and
assigns, and the parties shall report the transaction herein in accordance with
the Allocation and shall not take any position or action inconsistent with the
Allocation.
2. REPRESENTATIONS AND WARRANTIES OF SELLER. Each representation and warranty
contained in this Article 2 is qualified by the disclosures made in the
disclosure schedule attached hereto as Schedule 2 (the "DISCLOSURE SCHEDULE").
This Article 2 and the Disclosure Schedule shall be read together as an
integrated provision. The Business has been managed by persons affiliated with
Buyer acting in their capacities as partners or employees of Seller or ICRS,
which persons are expected to resign from Seller to work exclusively for Buyer
following the Closing (together with all persons acting under such persons'
direction, control or supervision, the "BUYER ASSOCIATED PERSONS"). Accordingly,
the Buyer Associated Persons may have more knowledge regarding the matters
addressed in the representations and warranties of Seller herein than Seller
itself. When representations and warranties set forth in this Article 2 are
qualified by the knowledge of Seller, such representations and warranties are
given by Seller only to the extent of Seller's actual knowledge without any
obligation of inquiry and shall be deemed to be qualified in all respects by
such facts as the Buyer Associated Persons know or should know as a result of
their participation in the Business prior to the Closing. All such facts known
to the Buyer Associated Persons shall be deemed to be known by Buyer prior to
the Closing Date and to have been disclosed by Seller to Buyer as if set forth
in this Agreement or in a Schedule hereto or in any other Transaction Document.
Notwithstanding any provision of this Agreement to the contrary, Seller will not
be liable on the basis of any claim or action that disclosure provided by Seller
in connection with the transactions contemplated hereby was incomplete. Subject
to the foregoing, Seller represents and warrants to Buyer that:
2.1 ORGANIZATION AND AUTHORITY. Seller is a limited liability
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware, with, to Seller's knowledge, full power and authority
to carry on the Business as it is now and has since its organization been
conducted, and to own, lease and operate the Acquired Assets.
2.2 AUTHORIZATION OF AGREEMENT. Seller has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This
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Agreement and all other agreements and instruments executed by the parties
hereto in connection herewith (together with the schedules delivered in
connection herewith and the agreements entered into by the parties hereto in the
forms of the Exhibits hereto, collectively, the "TRANSACTION DOCUMENTS") have
(except for Transaction Documents executed and delivered solely by Buyer) been
duly and validly approved in accordance with the partnership agreement or other
governing documents of Seller and no other proceedings on the part of Seller are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the other Transaction Documents
delivered by Seller have been duly executed and delivered by Seller, have been
effectively authorized by all necessary action by Seller and constitute legal,
valid and binding obligations of Seller, except as such enforceability may be
limited by general principles of equity and bankruptcy, insolvency,
reorganization and moratorium and other similar laws relating to creditors'
rights (the "BANKRUPTCY EXCEPTION.")
2.3 ACQUIRED ASSETS AND ASSUMED LIABILITIES. Seller has taken no actions
to subject any of the Acquired Assets to any liens, mortgages, pledges, security
interests, encumbrances, prior assignments or claims of any kind other than (i)
actions that may have been taken by or with the knowledge of a Buyer Associated
Person or taken by Seller at the direction of a Buyer Associated Person or in
the performance of and consistent with duties known by one or more Buyer
Associated Persons to be performed by Seller on behalf of the Business, as to
which Seller makes no representation or warranty, (ii) Permitted Liens (as
defined in Section 3.2), (iii) the interests of lessors and licensors with
respect to leased or licensed property, and (iv) liens, mortgages, pledges,
security interests, encumbrances, prior assignments and claims in the ordinary
course which are not material. Since January 1, 1998, Seller has not
compromised, liquidated or settled any material Assumed Liability other than any
such compromise, liquidation or settlement (x) by or with the knowledge of a
Buyer Associated Person or by Seller at the direction of a Buyer Associated
Person or in the performance of and consistent with duties known by one or more
Buyer Associated Persons to be performed by Seller on behalf of the Business, as
to which Seller makes no representation or warranty or (y) in the ordinary
course of business.
2.4 NO CONFLICT OR VIOLATION. The execution, delivery and performance by
Seller of this Agreement and the other Transaction Documents delivered by Seller
and the consummation of the transactions contemplated hereby and thereby do not
and will not: (i) violate or conflict with any provision of the organizational
or governing documents of Seller; (ii) violate in any material respect any
provision or requirement of any domestic or foreign, national, state, or local
law, statute, judgment, order, writ, injunction, decree, award, rule, or
regulation of any governmental entity applicable to Seller or, to the knowledge
of Seller, the Business (except that Seller makes no representation or warranty
related to compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976 in connection with the acquisition by Buyer of the Business); (iii) to the
knowledge of Seller, violate in any material respect, result in a material
breach of, constitute (with due notice or lapse of time or both) a material
default or cause any material obligation, penalty, premium or right of
termination to arise or accrue under any material contract constituting part of
the Acquired Assets, except as specified on Schedule 2.4; (iv) to the knowledge
of Seller, result in the creation or imposition of any material lien, charge or
encumbrance of any kind whatsoever upon any of the Acquired Assets, except for
Permitted Liens; or (v) to the knowledge of Seller, result in the cancellation,
modification, revocation or suspension of any material license, permit,
certificate, franchise, authorization or approval issued
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or granted by any governmental entity to Seller in relation to the Business
(each a "LICENSE," and collectively, the "LICENSES").
2.5 LITIGATION. Except as set forth on Schedule 3.4, to Seller's
knowledge, there are no material claims, actions, suits, proceedings, labor
disputes or investigations of any nature pending or threatened by or against the
Seller, the officers, partners, employees, agents of Seller, or any of its
Affiliates directly involving, affecting or relating to the transactions
contemplated by this Agreement or the Business or any Acquired Asset. To
Seller's knowledge, neither the Business nor any of the Acquired Assets is
subject to any material order, writ, judgment, award, injunction or decree of
any governmental entity. For purposes of this Agreement, "AFFILIATE" shall have
the meaning ascribed to such term in Rule 405 under the Securities Act of 1933.
2.6 BROKERS. No broker, finder, investment banker, or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of Seller, provided that no representation is made
regarding any such broker, finder, investment banker or other person engaged or
retained by or at the direction of any Buyer Associated Person purportedly on
behalf of Seller.
2.7 OPERATION OF BUSINESS. To Seller's knowledge, prior to the Closing,
the Business has been managed by Buyer Associated Persons. Since January 1,
1998, no Seller Associated Person has made any material commitments or entered
into any material obligations that are part of the Assumed Liabilities, other
than commitments or obligations that (i) were made or entered into by a Seller
Associated Person with the knowledge of one or more Buyer Associated Persons or
in the performance of and consistent with duties known by one or more Buyer
Associated Persons to be performed by Seller on behalf of the Business or (ii)
were made or entered into in the ordinary course of business. For purposes
hereof, a "Seller Associated Person" is any officer, director, partner, employee
or agent of Seller who is not a Buyer Associated Person at the time of any
conduct, action or omission in question.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:
3.1 ORGANIZATION AND CORPORATE AUTHORITY. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority to carry on its business as it is now
and has since its organization been conducted, and to own, lease and operate its
assets. Buyer has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
Transaction Documents have (except for Transaction Documents executed and
delivered solely by Seller) been duly and validly approved in accordance with
the governing documents of Buyer and no other proceedings on the part of Buyer
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the other Transaction Documents
delivered by Buyer have been duly executed and delivered by Buyer, have been
effectively authorized by all necessary action by Buyer, and constitute legal,
valid and binding obligations of Buyer, except as such enforceability may be
limited by the Bankruptcy Exception.
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3.2 NO CONFLICT OR VIOLATION. The execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents delivered by Buyer
and the consummation of the transactions contemplated hereby and thereby do not
and will not: (i) violate or conflict with any provision of the organizational
or governing documents of Buyer; or (ii) violate in any material respect any
provision or requirement of any domestic or foreign, national, state or local
law, statute, judgment, order, writ, injunction, decree, award, rule, or
regulation of any governmental entity applicable to Buyer or its business or
assets, (iii) to the knowledge of Buyer, violate in any material respect, result
in a material breach of, constitute (with due notice or lapse of time or both) a
material default or cause any material obligation, penalty, premium or right of
termination to arise or accrue under any material contract of Buyer; (iv) to the
knowledge of Buyer, result in the creation or imposition of any material lien,
charge or encumbrance of any kind whatsoever upon any of the assets of Buyer
except for Permitted Liens; or (v) to the knowledge of Buyer, result in the
cancellation, modification, revocation or suspension of any material license,
permit, certificate, franchise, authorization, or approval issued or granted by
any governmental entity to Buyer in relation to the business of Buyer. As used
herein, "Permitted Liens" means (a) any lien or encumbrance for taxes which are
not yet due or which are being contested in good faith by appropriate
proceedings diligently prosecuted; (b) any carrier's, warehouseman's,
mechanic's, materialman's, repairman's, landlord's or any other statutory or
inchoate lien or encumbrance incidental to the ordinary conduct of the Business
which involves an obligation that is not past due or which is being contested in
good faith by appropriate proceedings diligently prosecuted; (c) any interest of
a governmental agency or instrumentality in any lawfully made pledge or deposit
under workers' compensation, unemployment insurance or other social security
statutes; (d) any interest of any person or entity with respect to a recoupment
of unearned revenues under a contingency-based engagement relating to the
Business; or (e) the Assumed Liabilities.
3.3 NOTES. Any note delivered by Buyer as part of the Purchase Price has
been duly authorized, executed and delivered, and constitutes a legal, valid and
binding obligation of Buyer, except as such enforceability may be limited by the
Bankruptcy Exception.
3.4 LITIGATION. Except as set forth on Schedule 3.4, there are no
material claims, actions, suits, proceedings, labor disputes or investigations
of any nature pending or, to the knowledge of Buyer, threatened by or against
the Buyer, the officers, directors, partners, employees, agents of Buyer, or any
of its Affiliates directly involving, affecting or relating to the transactions
contemplated by this Agreement or its business or assets. Neither Buyer nor its
business or assets is subject to any order, writ, judgment, award, injunction or
decree of any governmental entity.
3.5 BROKERS. No broker, finder, investment banker, or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon arrangements
made by or on behalf of Buyer, except for obligations of National Benefits
Consultants LLC ("NBC") to Jefferies & Company, Inc. in connection with the
Consolidation Transactions (as defined below) and financing thereof, which
obligations are being assumed by Buyer.
3.6 HSR. No filing under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 is required to be made in connection with the acquisition by Buyer
of the Business.
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4. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
4.1 CONFIDENTIALITY. Subject to Section 6.5, Buyer and Seller shall, and
shall each cause their respective Affiliates, officers, directors, employees,
agents, and advisors to keep confidential all information received in connection
with the transactions contemplated hereby, other than information that (i) was
in the public domain before the date of this Agreement or subsequently came into
the public domain other than as a result of disclosure by the party to whom the
information was delivered; or (ii) was lawfully received by a party from a third
party free of any obligation of confidence of or to such third party; or (iii)
was already in the possession of the party prior to receipt thereof, directly or
indirectly, from the other party; or (iv) is required to be disclosed in a
judicial or administrative proceeding or by law after giving the other party as
much advance notice of the possibility of such disclosure as practicable so that
the other party may attempt to protect against such disclosure; or (v) is
subsequently and independently developed by employees, consultants or agents of
the party to whom the information was delivered without reference to the
information (information of the type described in items (i), (ii), (iii), (iv)
and (v) being referred to herein as "NON-PROTECTED INFORMATION"). Seller
acknowledges that Buyer may provide information about the Business to other
participants in the Consolidation Transactions, provided that such recipients
shall agree to be bound by confidentiality restrictions as provided herein for
Seller's benefit. For purposes hereof, "CONSOLIDATION TRANSACTIONS" refers to
the acquisition by Buyer in a series of transactions, prior to or concurrent
with the Closing, of various other companies selected by Buyer in its discretion
and engaged in the business of cost reduction, cost recovery and profit
enhancement services, by means of mergers into Buyer, or acquisitions by Buyer
of all or substantially all of the assets or stock or other equity interests of
such companies.
4.2 RESTRICTIVE COVENANTS.
(a) Non-Competition. Seller recognizes that the covenants of Seller
contained in this Section 4.2(a) (the "COVENANT NOT TO COMPETE") are part of the
bargained-for consideration associated with the transactions contemplated by
this Agreement to protect the Acquired Assets acquired by Buyer, including
without limitation, the goodwill developed by Seller in the Business. Seller
shall not individually, or in concert, directly or indirectly, including without
limitation by or through any business unit or entity or third party, engage in
any business offering the services offered by ICRS at the Closing Date ("ICRS
SERVICES") for a commission or contingency-based fee, except that Seller may
continue services currently being performed by Seller other than as part of or
through the ICRS Services, and may charge for such services on a commission or
contingency basis to the extent that Seller currently charges for such services
on such a basis other than as part of or through the ICRS Services, or the laws
or regulations relating to performance of services on a commission or
contingency basis are amended, adopted or repealed to allow the provision of
such services on a commission or contingency basis.
This Covenant Not to Compete shall be limited to any county or any other
political subdivision of any state of the United States of America, where Seller
conducts the Business as of the Closing Date. This Covenant Not to Compete shall
bind Seller until the third anniversary of the Closing Date (the period until
such date being the "NON-COMPETITION PERIOD" for purposes hereof). The parties
hereto agree that the duration and area for which the Covenant Not to Compete
set forth in this Section 4.2(a) is to be effective are reasonable. If Seller
intends to
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acquire any entity which includes a business unit or entity that would compete
with Buyer by providing ICRS Services for a commission or contingency-based fee
in breach of this Covenant Not to Compete (a "COMPETING BUSINESS") within the
Non-Competition Period, Seller shall give Buyer written notice of such
acquisition. Seller shall have a period of 12 months to dispose of the Competing
Business. Notwithstanding the foregoing, however, (i) the restrictions set forth
in Section 4.2(a) will lapse and cease to bind Seller from and after any (A)
Event of Default under (and as defined in) the Note described in Schedule 1.4 or
the note payable by Buyer to Seller in connection with the transactions
contemplated by the agreement described in Section 4.10, or (B) material default
by Buyer (or any of its Affiliates) under the Sublease described in Section
4.11, which default is not cured within thirty (30) days of such default (or, if
longer, any applicable grace period under the Sublease) and (ii) inadvertent
violations by Seller of the Covenant Not to Compete will not constitute breach
of this Agreement unless such violation continues beyond six months following
Seller's receipt of written notice of such violation from Buyer, or if earlier,
six months following the date Seller's Office of the Chief Executive became
aware of such violation.
(b) Confidentiality. Seller acknowledges its intent that Seller shall
fully and effectively convey to Buyer all proprietary rights constituting
Acquired Assets to be transferred to Buyer pursuant hereto. Accordingly,
notwithstanding the expiration of the Covenant Not to Compete set forth in
Section 4.2(a), Seller shall at all times keep confidential and shall not
disclose to others any proprietary rights constituting Acquired Assets and shall
not use or permit to be used any proprietary rights constituting Acquired Assets
for any purpose other than performance of obligations to Buyer, provided that
the covenant in this Section 4.2(b) will not apply to Non-protected Information
(other than information of a type described in part (iv) of Section 4.1 that
does not become publicly available or disclosed notwithstanding disclosure in a
judicial or administrative proceeding).
(c) Non-Recruitment. For a period of five (5) years following the
Closing Date, Seller will not, directly or indirectly, solicit for employment by
Seller or its Affiliates any of Buyer's officers, directors or employees, and
Buyer and its subsidiaries will not, directly or indirectly, solicit for
employment by Buyer or its Affiliates any of Seller's partners, principals, or
employees other than Transferred Employees (as defined below). Concurrently with
the Closing, Seller has received from Enterprise Profit Solutions Corporation,
Buyer's subsidiary that will operate the Business after the Closing, a letter
acknowledging and agreeing to be bound by Sections 4.2(c) and (d).
(d) Remedies. The covenants contained in this Section 4.2 impose a
reasonable restraint on Buyer and its subsidiaries and Seller, and Buyer and
Seller each acknowledges that if it (or, in the case of Buyer, its subsidiaries)
violates any of the covenants contained in this Section 4.2 (collectively, the
"RESTRICTIVE COVENANTS"), it will be difficult to determine the resulting
damages to the other and, in addition to any other remedies the other may have,
the other shall be entitled to seek temporary injunctive relief as well as any
other remedies available to it in its discretion on a case by case basis.
Failure to seek any or all remedies in one case shall not restrict a party from
seeking any remedies in another situation, or constitute a waiver of any of its
rights.
(e) Severability and Modification of any Unenforceable Covenant. Each of
the Restrictive Covenants will be read and interpreted with every reasonable
inference given to its enforceability. However, if any term, provision or
condition of the Restrictive Covenants is held by
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a court or arbitrator to be invalid, void or unenforceable, the remainder of the
provisions thereof shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. If a court should determine any of the
Restrictive Covenants are unenforceable because of over-breadth, then the court
shall modify such covenant so as to make it enforceable to the fullest extent
the court deems reasonable and enforceable under the prevailing circumstances.
The Covenant Not to Compete shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America where the Covenant Not to Compete is intended to be effective.
4.3 TAXES.
All taxes attributable to the transfer of the Acquired Assets and Assumed
Liabilities by Seller to Buyer as contemplated by this Agreement will be paid
half by Buyer and half by Seller. Neither Buyer nor Seller makes any
representations regarding the tax consequences of the transaction contemplated
by this Agreement or the other Transaction Documents.
4.4 ACCESS TO RECORDS AND FILES. Seller shall have the right to retain
copies of financial books, records and information in its possession related to
the Business or the Acquired Assets, provided that the use by Seller of such
financial books, records and information shall be subject to Section 4.1 and
Section 4.2. Seller shall have the right for a period of three (3) years
following the Closing Date to have reasonable access to such books, records and
accounts, correspondence, production records, employment records and other
similar information as are transferred to Buyer pursuant to the terms of this
Agreement for the limited purpose of concluding its involvement in the Business
prior to the Closing Date. Buyer shall have the right for a period of three (3)
years following the Closing Date to have reasonable access to those books,
records and accounts, correspondence, and other records which are retained by
Seller pursuant to the terms of this Agreement to the extent that any of the
foregoing relate to the Business or the Acquired Assets and to the extent that
such access is required for any lawful purpose, provided that Seller shall not
be obligated to provide to Buyer any portion of any requested information or
materials not exclusively pertaining to the Business or the Acquired Assets.
4.5 COOPERATION IN LITIGATION. Each party will fully cooperate in all
reasonable respects with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such party relating to or arising out of the conduct of the
Business prior to or after the Closing Date (other than litigation between Buyer
and/or its Affiliates or assignees, on the one hand, and Seller and/or its
Affiliates or assignees, on the other hand, arising out of the transactions
contemplated by this Agreement). The party requesting such cooperation shall pay
the out-of-pocket expenses (including reasonable legal fees and disbursements)
of the party providing such cooperation and of its officers, directors,
partners, principals, employees and agents reasonably incurred in connection
with providing such cooperation, but shall not be responsible to reimburse the
party providing such cooperation for such party's time spent in such cooperation
or the salaries or costs of fringe benefits or other similar expenses paid by
the party providing such cooperation to its officers, directors, employees and
agents while assisting in the defense or prosecution of any such litigation or
proceeding.
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4.6 EMPLOYMENT.
(a) Buyer is offering employment to each employee of Seller in the Business on
the Closing Date, except for those employees identified by Chris Massey to Alan
S. Bernikow at least five days' prior to the Closing, initially on substantially
the same terms and conditions under which such employees are employed by Seller
immediately prior to the Closing. For purposes of this Agreement, each employee
of Seller in the Business on the Closing Date whose employment with Seller is
terminated on the Closing Date and who accepts employment with Buyer as a result
of the transactions contemplated by this Agreement shall be a "TRANSFERRED
EMPLOYEE," so long as such person is employed by Buyer. Subject to Section
4.6(c), all severance liabilities incurred in respect of Transferred Employees
as a result of the transactions contemplated by this Agreement or otherwise
shall be the sole responsibility of Buyer.
(b) Seller shall comply in all material respects with the health care
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") with respect to the Transferred Employees.
Buyer shall take all necessary actions to adopt and put into effect a group
health care program for the benefit of the Transferred Employees as soon as
practicable following the Closing. Buyer shall not assume, and Seller agrees to
be solely responsible for, the costs of complying with COBRA for qualifying
events arising on or prior to the Closing. Seller shall not be responsible for
the costs associated with health care coverage for any Transferred Employee,
other than as required by COBRA.
(c) Concurrently with the Closing, Seller shall pay bonuses in the aggregate
amount of Two Million Two Hundred Thousand Dollars ($2,200,000) to the
Transferred Employees set forth on a schedule to be delivered by Chris Massey to
Alan S. Bernikow at least five days' prior to the Closing.
4.7 CHANGE OF NAME. Promptly after the Closing Date Seller will
discontinue the use of the names Integrated Cost Reduction Strategies, ICRS, or
such other names confusingly similar with either of them, provided that Seller
may continue to use such names for historical reporting and informational
purposes, including, without limitation, for Seller's or its Affiliates' annual
reports, regulatory and other filings and tax returns.
4.8 FURTHER ASSURANCES. Upon the reasonable request of a party hereto at
any time after the Closing Date, the other party shall forthwith execute and
deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as the requesting
party or its counsel may reasonably request in order to perfect title of Buyer
and its successors and assigns to the Acquired Assets or otherwise to effectuate
the purposes of this Agreement.
4.9 SERVICES AGREEMENT. Concurrently with the Closing, Buyer and Seller
are entering into a master services agreement in the form of Exhibit C.
4.10 CONTRACT RIGHTS PURCHASE AGREEMENT. Concurrently with the Closing,
Buyer and Seller are entering into a contract rights purchase agreement in the
form of Exhibit D and Buyer is issuing to Seller a promissory note in connection
therewith.
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4.11 SUBLEASE. Concurrently with the Closing, Buyer (or its wholly owned
subsidiary Enterprise Profit Solutions Corporation) and Deloitte & Touche USA
LLP are entering into a sublease of the premises leased by Deloitte & Touche USA
LLP at 695 Town Center Drive, Costa Mesa, California, for use in the Business,
in the form of Exhibit E.
4.12 NO INTEREST. Buyer is a recently organized corporation formed for
the purpose of effecting the Consolidation Transactions, with the participation
of various individuals, some of whom are the Buyer Associated Persons. Seller
has no rights in or to Buyer, any equity interest therein, or debt thereof
(other than under promissory notes made by Buyer to Seller concurrently
herewith), in the business of Buyer, or the Consolidation Transactions, and the
only such rights in favor of Seller are the obligations undertaken by Buyer
pursuant to this Agreement and other Transaction Documents.
4.13 SEPARATION OF BUSINESS. Each party agrees that from and after the
Closing the Business (other than the Excluded Assets and Excluded Liabilities)
will be separated in all respects from Seller and its business and operations
and will be owned and operated exclusively by Buyer and its Affiliates. The
parties shall take any and all actions to give effect to this Section 4.13,
including, without limitation, Buyer shall return to Seller or, with Seller's
written consent, destroy all information and/or materials related to Seller or
its Affiliates or their respective businesses or operations not constituting
part of the Acquired Assets or Assumed Liabilities, which information and/or
materials is in the possession of Buyer or its Affiliates, directors, officers,
employees or agents of the Buyer Associated Persons in any form whatsoever,
whether printed, stored on computer hardware or software, diskettes or in any
other storage device or otherwise contained in or constituting part of any media
or other device.
4.14 TERMS OF NOTES. Buyer represents and warrants to and covenants with
Seller that any note delivered by Buyer as part of the Purchase Price does and
will contain economic and payment terms not less favorable to Seller than those
terms benefiting a holder of any other note issued by Buyer or its Affiliates in
connection with the Consolidation Transactions (or any of them) or any similar
transaction consummated prior to or on the Closing Date.
4.15 ASSOCIATION WITH SELLER.
(a) Buyer represents and warrants to and covenants with Seller that it has not
and will not hold itself, its Affiliates, directors, officers, employees or
agents or the Buyer Associated Persons out as partners, principals, employees,
agents or associates of Seller or any of its Affiliates, including, without
limitation, in connection with the transactions contemplated by this Agreement
or the other Transaction Documents or the Consolidation Transactions or any of
the transactions related thereto.
(b) Buyer acknowledges and agrees that the Buyer Associated Persons have not
acted and will not act on behalf of Seller or any of its Affiliates (as
partners, principals, employees, agents, associates or otherwise) in connection
with the transactions contemplated by this Agreement or the other Transaction
Documents or the Consolidation Transactions or any of the transactions related
thereto, and that the Buyer Associated Persons have acted and will act on behalf
of Buyer in connection with the foregoing transactions.
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4.16 ACKNOWLEDGMENT FROM PARTICIPANTS IN CONSOLIDATION TRANSACTIONS.
Buyer shall obtain a written acknowledgment from each person or entity
participating in any of the Consolidation Transactions or any of the
transactions related thereto substantially to the effect that such person or
entity acknowledges and agrees for the benefit of Seller and its Affiliates that
the Buyer Associated Persons have not acted and will not act on behalf of Seller
or any or its Affiliates (as partners, principals, employees, agents, associates
or otherwise) in connection with the Consolidation Transactions or any of the
transactions related thereto, and that the Buyer Associated Persons have acted
and will act on behalf of Buyer in connection with the foregoing transactions.
However, notwithstanding the foregoing, (i) the acknowledgment may be executed
on behalf of stockholders of companies, the equity interests or assets of which
are being acquired in Consolidation Transactions by their representatives
authorized to take actions on their behalf in connection with the Consolidation
Transactions pursuant to the agreements by which they are participating in the
Consolidation Transactions, and (ii) Buyer need not obtain such an
acknowledgment from minority shareholders of an entity participating in a
Consolidation Transaction who individually, directly or indirectly, own less
than ten percent (10%) of such entity's outstanding voting capital stock, and
from whom it would be impracticable to obtain such an acknowledgment, as long as
the total outstanding voting capital stock of Buyer owned by persons not
executing such an acknowledgment does not exceed ten percent (10%) of Buyer's
outstanding voting capital stock as of the Closing Date after giving effect to
the Consolidation Transactions closing concurrently with the transactions
contemplated hereby.
4.17 DISCLAIMER.
(a) ALL OF THE ACQUIRED ASSETS AND ASSUMED LIABILITIES ARE BEING SOLD
AND TRANSFERRED TO BUYER "AS IS" AND "WHERE IS" AND ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR USE OR A PARTICULAR PURPOSE, ARE EXCLUDED FROM THE SALE AND TRANSFER OF THE
ACQUIRED ASSETS AND ASSUMED LIABILITIES (EXCEPT AS EXPRESSLY SET FORTH IN
ARTICLE II, BUT SUBJECT TO SECTION 5.1). SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY NATURE WITH RESPECT TO THE ACQUIRED ASSETS OR ASSUMED
LIABILITIES (EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE II, BUT SUBJECT TO SECTION
5.1) OR THE FINANCIAL CONDITION OF THE BUSINESS, INCLUDING BUT NOT LIMITED TO
THE LEVEL OF SALES, PROFITABILITY, INCOME OR FUTURE PROSPECTS. BUYER
ACKNOWLEDGES THAT ANY FINANCIAL OR OPERATING INFORMATION OR DATA RELATING TO
SELLER'S OPERATION OF THE BUSINESS WERE PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND THAT SELLER HAS NO RESPONSIBILITY TO BUYER WITH RESPECT TO SUCH
FINANCIAL OR OPERATING INFORMATION OR DATA.
(b) Buyer acknowledges that it has had ample opportunity to inspect,
investigate and review the Acquired Assets, the Business and Seller's books and
records relating thereto and that such inspection, investigation and review have
been completed to Buyer's satisfaction.
4.18 THIRD PARTY CONSENTS AND ACQUIRED ASSETS. This Agreement shall not
constitute an agreement to assign or transfer any rights or assume any
obligations under any
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contract, lease or other agreement comprising an Acquired Asset, or any claim,
right, benefit or obligation arising thereunder or resulting therefrom, if an
attempted assignment, transfer or assumption thereof, without the required
consent of any third party, would constitute a breach thereof or would have a
material adverse effect on the rights or privileges of Seller or Buyer
thereunder. Any such assignment, transfer or assumption where a third party's
consent is required shall be made subject to such consent being obtained. If
such consent is not obtained, (i) Seller will hold such rights in trust for, and
for the benefit of, Buyer, and will cooperate with Buyer in any reasonable
arrangement necessary to provide that Buyer shall receive substantially all
beneficial interest and benefits in, to and under such Acquired Asset; and (ii)
pursuant to a mutually satisfactory written agreement, Seller will engage Buyer
to act as Seller's independent contractor to perform, and Buyer will so perform,
Seller's obligations under such contract, lease or other agreement comprising an
Acquired Asset. Each agreement specified in clause (ii) of the preceding
sentence will contain such terms and provisions as to provide for a de facto
assignment, transfer and assumption of all of the liabilities, obligations and
risks of Seller to and by Buyer under such contract, lease or other agreement.
In the event that, pursuant to a contract, lease or other agreement comprising
an Acquired Asset (i) payment for the account of Buyer is made to Seller, such
payments shall be forthwith delivered by Seller to Buyer; and (ii) payment or
satisfaction of any liability or obligation is required, Seller shall, at the
request of Buyer, pay or satisfy such liability or obligation subject to
Seller's contemporaneous receipt from Buyer of reimbursement therefor and any
costs or expenses related thereto. Notwithstanding any provision of this
Agreement or any Transaction Document to the contrary, Seller's compliance with
this Section 4.18 shall not constitute a breach of any other covenant, including
but not limited to the restrictive covenants pertaining to Seller in Section
4.2.
4.19 ACCOUNTS RECEIVABLE.
(a) Buyer and Seller (to its knowledge) acknowledge and agree that
Schedule 4.19(a) hereto identifies all accounts receivable of the Business that
have been billed to clients as of the Closing Date ("ACCOUNTS RECEIVABLE") with
a brief description of the work performed as a basis for each such Account
Receivable.
(b) The Accounts Receivable identified in Schedule 4.19(b) hereto
constitute part of the Acquired Assets (the "TRANSFERRED ACCOUNTS RECEIVABLE").
With respect to the Transferred Accounts Receivable, the parties agree as
follows: (1) Seller shall notify each payor thereof to pay such amounts
constituting part of the Transferred Accounts Receivable to Buyer; (2) if Seller
receives a payment in respect of Transferred Accounts Receivable, Seller shall
forthwith notify Buyer thereof and deliver such payment to Buyer (in any event
within 30 days following Seller's actual receipt thereof); and (3) Seller does
not warrant or guaranty collection of any of the Transferred Accounts
Receivable.
(c) With respect to the Accounts Receivable, if any, other than the
Transferred Accounts Receivable and the ProfitSource Accounts Receivable (the
"EXCLUDED ACCOUNTS RECEIVABLE"), the parties agree as follows: (1) the Excluded
Accounts Receivable constitute part of the Excluded Assets; (2) if reasonably
requested by Seller, Buyer shall notify each payor thereof to pay such amounts
constituting part of the Excluded Accounts Receivable to Seller; and (3) if
Buyer receives a payment in respect of Excluded Accounts Receivable, Buyer shall
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forthwith notify Seller thereof and deliver such payment to Seller (in any event
within 30 days following Buyer's actual receipt thereof).
4.20 PROFITSOURCE AMOUNTS. Buyer and Seller (to its knowledge)
acknowledge and agree that Schedule 4.20 hereto identifies advances by Seller to
or on behalf of Buyer and accrued charges and expenses for services provided by
Seller (including through various subsidiaries and divisions) to Buyer prior to
the Closing, all of which are payable by Buyer to Seller or its subsidiaries
(the "PROFITSOURCE AMOUNTS"). Buyer is paying to Seller concurrently with the
Closing the full amount of such ProfitSource Amounts in full satisfaction
thereof.
4.21 INDEPENDENCE ISSUES. As soon as practicable following the Closing,
Buyer shall obtain a written representation and warranty from each of its
directors and/or officers and/or stockholders holding 10% or more of the
outstanding voting capital stock of Buyer as of the Closing Date upon Closing of
the Consolidation Transactions (each, a "Related Party" and, collectively, the
"Related Parties") to Seller providing that such Related Party was not as of the
Closing Date and is not as of the date of the representation and warranty a
director, officer or stockholder holding 10% or more of the outstanding voting
capital stock of any attest client of Seller (an "Independence Issue"). If such
Related Party cannot provide such a representation and warranty, Buyer shall
cooperate with Seller, and shall cause its Related Parties to take such actions
as reasonably requested by Seller, in order to satisfactorily address and
resolve such Independence Issue.
5. SURVIVAL; INDEMNIFICATION.
5.1 SURVIVAL. The representations and warranties made in this Agreement
or in any exhibit, schedule, certificate or any other Transaction Document shall
survive any investigation made by any party hereto (with respect to Seller's
representations and warranties, subject to the other terms of this Agreement)
and the Closing of the transactions contemplated hereby until the first
anniversary of the Closing Date. As to any matter or claim which is based upon
fraud by the indemnifying party, the representations and warranties set forth in
this Agreement shall expire only upon expiration of the applicable statute of
limitations. No party will be liable to another under any warranty or
representation after the applicable expiration date of such warranty or
representation; provided however, if a claim or notice is given under this
Article 5 with respect to any representation or warranty prior to the applicable
expiration date, such claim may be pursued to resolution notwithstanding
expiration of the representation or warranty under which the claim was brought.
5.2 INDEMNIFICATION BY SELLER. Subject to the limits set forth in this
Article 5, Seller and its successors and assigns shall jointly and severally
indemnify, defend, reimburse and hold harmless Buyer and its Affiliates and
their successors and assigns, and the officers, directors, employees and agents
of any of them, from and against any and all claims, losses, damages,
liabilities, obligations, assessments, penalties and interest, demands, actions
and expenses, whether direct or indirect, known or unknown, absolute or
contingent (including, without limitation, settlement costs and any legal,
accounting and other expenses for investigating or defending any actions or
threatened actions) ("LOSSES") reasonably incurred by any such indemnitee,
arising out of or in connection with any of the following:
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(a) the operations of Seller other than the Business and the ownership or
operation of the Excluded Assets at any time before or after the Closing, except
for Assumed Liabilities;
(b) the ownership, operation or possession of the Acquired Assets or the
Business before the Closing, except for Assumed Liabilities;
(c) any material inaccuracy of any representation or warranty made by Seller in
this Agreement or any other Transaction Document delivered by Seller, subject to
the other terms of this Agreement;
(d) the material breach of any covenant, agreement or obligation of Seller
contained in this Agreement or any other Transaction Document delivered by
Seller;
(e) the Excluded Liabilities;
(f) employment or retention by Seller or its Affiliates of any persons and
termination of such employment or retention, (except for Assumed Liabilities,
including without limitation severance liabilities for which Buyer shall be
responsible pursuant to the last sentence in Section 4.6(a)); and
(g) any and all Seller Associated Persons' Conduct (as defined below) at any
time before or after the Closing.
Notwithstanding any provision of this Section 5.2 to the contrary, Seller and
its successors, assigns and Affiliates shall have no obligation or liability
with respect to any act, omission or conduct of any of the Buyer Associated
Persons in connection with the transactions contemplated by this Agreement or
the other Transaction Documents or the Consolidation Transactions or any of the
transactions related thereto ("BUYER ASSOCIATED PERSONS' CONDUCT").
5.3 INDEMNIFICATION BY BUYER. Subject to the limits set forth in this
Article 5, Buyer and its successors and assigns shall jointly and severally
indemnify, defend, reimburse and hold harmless Seller and its Affiliates and
their successors and assigns, and the officers, directors, partners, principals,
employees and agents of any of them, from and against any and all Losses
reasonably incurred by any such indemnitee, arising out of or in connection with
any of the following:
(a) the ownership, operation or possession of the Acquired Assets or the
Business after the Closing;
(b) any material inaccuracy of any representation or warranty made by Buyer in
this Agreement or any other Transaction Document delivered by Buyer;
(c) the material breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any other Transaction Document delivered by
Buyer;
(d) the Assumed Liabilities;
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(e) employment or retention by Buyer or its Affiliates of any persons and
termination of such employment or retention;
(f) the operations of Buyer other than the Business at any time before or after
the Closing;
(g) any and all Buyer Associated Persons' Conduct at any time before or after
the Closing; and
(h) the claims by Anthem Insurance Companies, Inc. described in Schedule 3.4.
Notwithstanding any provision of this Section 5.3 to the contrary, Buyer and its
successors, assigns and Affiliates shall have no obligation or liability with
respect to any act, omission or conduct of any Seller Associated Person in
connection with the transactions contemplated by this Agreement or the other
Transaction Documents or the Consolidation Transactions or any of the
transactions related thereto ("SELLER ASSOCIATED PERSONS' CONDUCT").
5.4 INDEMNIFICATION PROCEDURE.
(a) Whenever any third party claim shall arise for indemnification hereunder (a
"CLAIM"), the party entitled to indemnification (the "INDEMNITEE") shall
promptly give written notice to the party obligated to provide indemnity (the
"INDEMNITOR") with respect to the Claim after the receipt by the Indemnitee of
reliable information of the facts constituting the basis for the Claim; but the
failure to timely give such notice shall not relieve the Indemnitor from any
obligation under this Agreement, except to the extent, if any, that the
Indemnitor is materially prejudiced thereby.
(b) Upon receipt of written notice from the Indemnitee of a Claim, the
Indemnitor shall assume the defense of such Claim by providing counsel (such
counsel subject to the reasonable approval of the Indemnitee) to defend the
Indemnitee against the matter from which the Claim arose, at the Indemnitor's
sole cost, risk and expense. The Indemnitee shall cooperate in all reasonable
respects, at the Indemnitor's sole cost, risk and expense, with the Indemnitor
in the investigation, trial, defense and any appeal arising from the matter from
which the Claim arose; provided, however, that the Indemnitee may (but shall not
be obligated to) participate in (but not control) any such investigation, trial,
defense and any appeal arising in connection with the Claim at its sole cost,
risk and expense, subject to the following sentence. If the Indemnitee's
participation in any such investigation, trial, defense and any appeal arising
from such Claim relates to a legal position or defense that varies materially
from the legal positions or defenses pursued by the Indemnitor, and if the
Indemnitee reasonably believes upon the advice of counsel that the Indemnitee's
interests will be adversely and materially affected if such legal position or
defense is not pursued, the Indemnitor shall bear the sole cost, risk and
expense of the Indemnitee's separate participation, but limited to all fees,
costs and expenses of one separate counsel and appropriate local counsel for the
Indemnitee (or multiple Indemnitees). If the Indemnitee elects to so
participate, the Indemnitor shall cooperate with the Indemnitee, and the
Indemnitor shall deliver to the Indemnitee or its counsel copies of all
pleadings and other information within the Indemnitor's knowledge or possession
reasonably requested by the Indemnitee or its counsel that is relevant to the
defense of such Claim and that will not prejudice the Indemnitor's position,
claims or defenses. The Indemnitee and its counsel shall maintain
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confidentiality with respect to all such information consistent with the conduct
of a defense hereunder. The Indemnitor shall have the right to elect to settle
any claim for monetary damages only without the Indemnitee's consent, if the
settlement includes a complete release of the Indemnitee. If the settlement does
not include such a release, it will be subject to the consent of the Indemnitee.
The Indemnitor may not admit any liability of the Indemnitee or waive any of the
Indemnitee's rights without the Indemnitee's prior written consent. The
Indemnitor shall not be liable for any settlement effected without its prior
written consent. If the subject of any Claim results in a judgment or
settlement, the Indemnitor shall promptly pay such judgment or settlement.
(c) If the Indemnitor fails to assume the defense of the subject of any Claim in
accordance with the terms of Section 5.4(b), if the Indemnitor fails diligently
to prosecute such defense, if the Indemnitor has, in the Indemnitee's good faith
judgment upon the advice of counsel, a conflict of interest, or if the
Indemnitor has, in the Indemnitee's good faith judgment, insufficient resources
with which to conduct an adequate defense, the Indemnitee may defend against the
subject of the Claim, at the Indemnitor's sole cost, risk and expense, in such
manner and on such terms as the Indemnitee deems reasonably appropriate,
including, without limitation (notwithstanding the penultimate sentence of
Section 5.4(b)) settling the subject of the Claim after giving reasonable notice
to the Indemnitor. If the Indemnitee defends the subject of a Claim in
accordance with this Section, the Indemnitor shall cooperate with the Indemnitee
and its counsel, at the Indemnitor's sole cost, risk and expense, in all
reasonable respects, and shall deliver to the Indemnitee or its counsel copies
of all pleadings and other information within the Indemnitor's knowledge or
possession reasonably requested by the Indemnitee or its counsel that are
relevant to the defense of the subject of any such Claim and that will not
prejudice the Indemnitor's position, claims or defenses. The Indemnitee shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee against Losses
arising under this Agreement shall be in addition to any other obligations the
Indemnitor might otherwise have and any other rights the Indemnitee might
otherwise have.
5.5 PAYMENT. All payments owing under this Article 5 will be made
promptly as indemnifiable Losses are incurred. If the Indemnitee defends the
subject matter of any Claim in accordance with Section 5.4(c) or proceeds with
separate counsel on the Indemnitor's account in accordance with Section 5.4(b),
the expenses (including attorneys' fees) incurred by the Indemnitee shall be
paid by the Indemnitor in advance of the final disposition of such matter as
incurred by the Indemnitee, if the Indemnitee undertakes in writing to repay any
such advances in the event that it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to indemnification
under the terms of this Agreement or applicable law.
5.6 SET-OFF. In addition to any rights of set off or other rights that
any of the Indemnitees may have at common law, by statute or otherwise, each
Indemnitee shall have the right to set off any amount that is owed by such
Indemnitee to an Indemnitor against any amount otherwise payable by the
Indemnitor to the Indemnitee. Notwithstanding any provision of this Agreement to
the contrary, any amounts payable by Seller to Buyer or any of its Affiliates or
related persons first shall be satisfied by reducing, on a dollar-for-dollar
basis, first, unpaid accrued interest and
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second, unpaid principal amounts in respect of debt instruments of Buyer held by
Seller, including, without limitation, the Buyer notes constituting part of the
Purchase Price and any other Buyer note to Seller. Any such reduction shall be
deemed to be a prepayment by Buyer of such amounts.
5.7 LIMITATIONS.
(a) Notwithstanding any provision of this Agreement to the contrary, no party
shall have any obligation to indemnify any person entitled to indemnity under
this Article 5 or to pay damages in respect of claims arising under this
Agreement or any other Transaction Document unless the persons so entitled to
indemnity or recovery thereunder have suffered Losses in an aggregate amount
attributable to all Claims and damages in excess of Fifty Thousand Dollars
($50,000) (the "THRESHOLD"). Once the aggregate amount of Losses exceeds the
Threshold, persons entitled to recovery shall be entitled to recover the full
amount of all Losses, including any amounts which constituted the Threshold. No
person shall be entitled to indemnification under this Article 5 for Losses
directly or indirectly caused by a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
(b) Notwithstanding any provision of this Agreement or any Transaction Document
to the contrary, Seller's Aggregate Liability shall not exceed $4 million. For
these purposes, "Seller's Aggregate Liability" means the aggregate liability of
Seller to Buyer and the indemnified persons specified in Section 5.2 for all
claims arising under this Agreement and the other Transaction Documents, plus
the aggregate liability of Seller to Buyer and the indemnified persons specified
in Section 5.2 of the Contract Rights Purchase Agreement described in Section
4.10 for all claims arising under the Contract Rights Purchase Agreement and the
other transaction documents defined in the Contract Rights Purchase Agreement.
1. MISCELLANEOUS.
1.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given upon personal delivery
or three (3) days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, or one (1) business day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested from such service or upon receipt of electronic or other
confirmation of transmission if sent via facsimile to the parties, their
successors in interest or their assignees at the following addresses and
facsimile numbers, or at such other addresses or facsimile numbers as the
parties may designate by written notice in accordance with this Section 6.1:
If to Buyer: President
ProfitSource Corporation
695 Town Center Drive, Suite 400
Costa Mesa, California 92626
Tel: (714) 429-5500
Fax: (714) 429-5599
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With a copy to: Gibson, Dunn & Crutcher LLP
Park Plaza, Jamboree Center
Irvine, California 92614
Tel: (949) 451-3874
Fax: (949) 451-4220
Attn: Brian W. Copple
If to Seller:
Deloitte & Touche LLP
1633 Broadway
New York, New York 10019
Tel: (212) 489-1600
Fax: (212) 492-4201
Attn: Office of the General Counsel
With a copy to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Tel: (212) 715-9100
Fax: (212) 715-8000
Attn: Thomas E. Molner
1.2 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement and the
rights, interests or obligations hereunder may not be assigned by any of the
parties hereto without the written consent of the other, which consent will not
be unreasonably withheld. This Agreement shall inure to the benefit of and be
binding upon Buyer and Seller and their respective permitted successors and
assigns. Nothing in this Agreement will confer upon any person or entity not a
party to this Agreement, or the legal representatives of such person or entity,
any rights or remedies of any nature or kind whatsoever under or by reason of
this Agreement, except as provided in Sections 5.2 and 5.3.
1.3 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its choice-of-law principles.
1.4 COUNTERPARTS. Facsimile transmission of any signed original document
and/or retransmission of any signed facsimile transmission will be deemed the
same as delivery of an original. At the request of any party, the parties will
confirm facsimile transmission by signing a duplicate original document. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
1.5 PUBLICITY; CLIENT CONTRACTS.
(a) No party may, or may it permit its Affiliates to, issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of Buyer and Seller, except that, (i) Buyer may disclose details of this
Agreement to other participants in the Consolidation Transactions,
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provided that such recipients shall agree to be bound by confidentiality
restrictions as provided in Section 4.1 for Seller's benefit, (ii) Buyer and
Seller may each make such communications with employees, customers, suppliers,
lenders, lessors, shareholders, partners, principals and advisors to the extent
necessary to carry out the ordinary business of Buyer and Seller, respectively,
(iii) Buyer and Seller may each make such disclosures that are required by
applicable law, rule, regulation, professional standard or responsibility, court
order or other legal process, provided that, in any such case, the party
proposing to make such disclosure shall consult in good faith with the other
party as far in advance as practicable to such disclosure and (iv) Seller and
Buyer may advise their clients, prospective clients, vendors, suppliers and
lessors of this Agreement and the transactions contemplated hereby as required
by applicable law, rule, regulation, professional standard or responsibility or
contractual obligation or to avoid marketplace confusion.
(b) Without limiting the generality of Section 4.18, the parties acknowledge and
agree that: (i) Seller's contracts and agreements with its Business clients
constituting part of the Acquired Assets ("CLIENT CONTRACTS") are personal
service contracts; (ii) Seller's ability to assign and transfer the Client
Contracts to Buyer under this Agreement may be limited by applicable laws,
rules, regulations, professional standards or responsibilities, contractual
rights or otherwise, (iii) Seller will exercise its reasonable efforts to effect
the assignment and transfer of the Client Contracts to Buyer in accordance with
this Agreement by delivering a joint notice with Buyer to each such client
promptly following the Closing (but Seller shall not be obligated to make any
payment or concession to effect any assignment or transfer), subject to
applicable laws, rules, regulations, professional standards or responsibilities
and contractual obligations; provided, however, that Seller does not warranty or
guaranty that any Client Contract or any related Business client relationship
will be effectively assigned or transferred to Buyer and Seller will not be
liable for any failure to assign or transfer the Client Contracts (or any of
them) or the related Business client relationships (or any of them), which
failure or failures shall not constitute a breach of or default under this
Agreement or any other Transaction Document. However, failure of such transfer
will not relieve Seller of its obligations under the Covenant Not to Compete,
subject to Section 4.18.
(c) Buyer does not have the right to use the name "Deloitte", "Touche", or
"Deloitte & Touche" in any manner, except as approved in writing by Deloitte &
Touche LLP for each such use, provided that Buyer may use the name "Deloitte &
Touche LLP" to the extent necessary to carry out its legal and contractual
obligations in a public offering or private placement of Buyer's or its
Affiliates' securities or in connection with any other Buyer or Buyer Affiliate
financing transaction, in biographies of persons associated with Buyer or its
Affiliates who were formerly associated with Seller, or if agreed upon between
the parties' designated representatives pursuant to Section 6.11, in historical,
factual descriptions of the evolution of the Business.
1.6 COMPLETE AGREEMENT. This Agreement, the exhibits and schedules
hereto, and the other Transaction Documents contain the entire agreement between
the parties hereto with respect to the transactions contemplated herein and
therein and shall supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, and understandings.
1.7 MODIFICATIONS, AMENDMENTS AND WAIVERS. No amendment of this
Agreement will be effective unless in writing signed by the parties hereto. The
parties hereto shall not be
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deemed to have waived any of their respective rights hereunder unless such
waiver be in writing and signed by the party so waiving its right. No delay or
omission on the part of either party in exercising its rights hereunder shall
operate as a waiver of such right or any other right. A waiver on one occasion
shall not be construed as a bar to, or waiver of, that right or any other right
or remedy on a future occasion.
1.8 HEADINGS; REFERENCES. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References herein to Articles, Sections,
Schedules and Exhibits refer to the referenced Articles, Sections, Schedules or
Exhibits hereof, unless otherwise specified.
1.9 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal, or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality, or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal, or unenforceable in any other jurisdiction.
1.10 EXPENSES OF TRANSACTIONS. All fees, costs and expenses incurred by
Buyer in connection with the transactions contemplated by this Agreement and the
other Transaction Documents shall be borne by Buyer, and all fees, costs, and
expenses incurred by Seller in connection with the transactions contemplated by
this Agreement and the other Transaction Documents shall be borne by Seller.
1.11 DESIGNATED REPRESENTATIVES. As long as Alan S. Bernikow remains an
active partner of Seller, he, or another partner of Seller mutually acceptable
to both parties, will serve as the sole representative of Seller in any dispute
resolution discussion between the parties with respect to any disputes between
Seller and Buyer under this Agreement or any other Transaction Document. Buyer
shall appoint Chris Massey or another representative mutually acceptable to both
parties to serve as the sole representative of Buyer in any dispute resolution
discussion between the parties with respect to any disputes between Seller and
Buyer under this Agreement or any other Transaction Document.
1.12 ENFORCEMENT OF THE AGREEMENT. Seller and Buyer acknowledge that
irreparable damage may occur if any of the obligations of Seller or Buyer under
this Agreement are not performed in accordance with their specific terms or are
otherwise breached. Each of Buyer and Seller will be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement by the other and
to seek to enforce specifically the terms and provisions hereto, this being in
addition to any other remedy to which Buyer or Seller, as the case may be is
entitled at law or in equity or otherwise.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
"BUYER"
PROFITSOURCE CORPORATION,
A DELAWARE CORPORATION
By: /s/ ERIK WATTS
--------------------------------------
Name: Erik Watts
------------------------------------
Title: President
-----------------------------------
"SELLER"
DELOITTE & TOUCHE LLP,
A DELAWARE LIMITED LIABILITY PARTNERSHIP
By: /s/ ALAN S. BERNIKOW
--------------------------------------
Name: Alan S. Bernikow
------------------------------------
Title: Partner
-----------------------------------
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SCHEDULE 1.4
PURCHASE PRICE
In exchange for the Acquired Assets, (x) Buyer is paying at the
Closing an aggregate Purchase Price of Eleven Million Dollars ($11,000,000) as
described below:
(i) Buyer is delivering to Seller Seven Million U.S. Dollars
($7,000,000) in cash (the "CASH PAYMENT") by wire transfer of immediately
available funds to the account set forth below:
Bank: Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
ABA No.: 021000021
Account: Deloitte & Touche
Account No: 910-1-048362
Reference: B/O ProfitSource Corporation
Re: Asset Purchase Agreement
(ii) Buyer is delivering to Seller a promissory note of Buyer,
dated as of the Closing Date in the form of Exhibit F in the principal amount of
Four Million U.S. Dollars ($4,000,000) (the "NOTE"); and
(y) Buyer assumed from Seller the Assumed Liabilities by delivery
to Seller of the Assumption Agreement.